It was a slam dunk. Safest trade around. Long dollar, short Euro. Janet was going to tighten and Mario, despite facing criticism by many including me was adopting the "anything it takes" Mario posture of years past and was about to open the floodgates again.
Now the spooky thing about trading currencies is that the movement within the market is generally quite small and as a result the big players are generally geared up to their eyeballs because it's the only way to make real money. If you get it wrong you can also lose real money but this trade has been a slam dunk for months. Except it wasn't.
I called Mad Max this morning. He answered the phone with "(*#%&&^R$#@YH*)^%#@@%&(!!!.
"Long and wrong, Max?"
"Not me but ______ and _______ and ______ just got killed. I don't touch that stuff any more."
"So why the bad language?
"Because, Charlie, it's like the bas----- set us up. Nobody saw this coming; everything that was said pointed in the other direction. Draghi, who actually had some credibility..."
"Because he did everything you guys wanted..."
"So what? He's got nothin' now! NOTHIN!" The ECB's a *&%$#% joke; the Fed's a *&%$#% freak show. Draghi gets a call from Yellen asking him to cover her ass and he spits out all he's been sayin' for months. Charlie, it traded on a almost 4% move! You know what a 4% move in currencies is! There are guys who have NEVER seen a 4% move in their lives! I bet they're laughing their asses off!
"You really think Janet called Mario?"
"HELL,YES! Why else would this happen! You got another theory?"
I didn't and I didn't stay on the phone much longer with Max. I sure as heck didn't want to tell him that I was secretly pleased about being wrong in yesterday's column and that a little cooperation between central banks might not all be a bad thing, but Max is right in one respect; back in the old days when market activity in a currency was headed in a direction the governing central bank didn't like, you would often see a little"shock to the senses" to indicate displeasure. Fair nix, Gov, but this smacks far more of pure politics than monetary activism and I suspect a lot of people got burned badly.
Max is also right in believing that credibility was the real loser today...to the extent that is that there is any left to lose. The problem is there are very few institutions left to hold this thing together in case of another major risk event. So it would be nice to have around a smart person with a bit of grey hair to whom one could turn for some sage advice. From the market's standpoint, one of those types just took a big hit today. Too bad.
Ah, well, onward and upward. Let us see what tomorrow brings by way of reflective reaction. And let us see if I can get the smile off my face...God it was fun to watch!
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