Wednesday, May 26, 2010

Reasons to be cheerful 1, 2, 3...?

Due to the restrictions of a monster hangover and the ability to only be able to focus by closing one eye, this is being rationed to bullet points.


Reasons to be cheerful 1, 2, 3...


Cash:
  • Libor destressing - EDM0 has bounced, Whites-Reds steepening, EURUSD basis sharply tighter.
  • $5.4bn taken in ECB's USD FX Swap lines, by just three bidders. Clearly yesterday's rumours about a certain Mediterranean bank were untrue.

Equities:

  • Hammer in candlestick on US stocks (compare with 5th feb low) and failure to breach and hold the year's lows.
  • 89% of stocks in the S&P500 being more than one standard deviation below their 50day moving average.
  • Island reversal in Eurostoxx against the May 7th lows.
  • Even Marc Faber saying its a buy.

FX:

  • EURNOK falling.
  • USDSEK soothsayer technical sell, GBPJPY soothsayer technical buy.
  • Corporates returning to put on long term hedges in non-USDs.

Policymakers:

  • Relative silence on the European front (Mangler been bound and gagged).
  • The US is clearly pissed off with EU policy incompetence.
  • Geithner called for a Eurozone bank stress test (swearing on the phone call between Obama & Mangler?!). Important as Fed/Treasury think US Stress Tests were point at which they "won the war" re: market confidence.
  • Joint US/German press conference announced for tomorrow - policymaking is finally being internationally coordinated.
  • Italy followed Spain, Portugal & Greece in enacting a deeper fiscal austerity plan.
  • Barney Frank has killed the Swap Desk provisions in the Financial Regulation Bill.

The Economy:

  • Background data continues to be good (although no effect from the recent panic has fed through yet).
  • Consumer Expectations component of US Consumer Confidence points to robust growth in PCE(chart below, PCE yoy lagged 6months).


Reasons to be miserable 1, 2, 3...

  • The bounces in risky-FX have been tepid.
  • Read any recent press piece.
  • Europe is still a complete mess.
  • Credit/Equity pipeline a potential supply overhang.
  • Someone has handed German regulators a loaded machine gun.
  • Going to ban people with "fat fingers" next?
  • Monster hangover from last night.
  • Living in the UK.

Care to add your own reasons to be cheerful or miserable in the comments?

13 comments:

Charles Butler said...

Noting the disproportionate size of your cheerful list, it's worth remarking how difficult it is for the press and many (most) widely-read bloggers to give up on the disaster angle.

Can we guess at the dent economic growth would make in Roubini's appearance fee?

Michael said...

I assume your Marc Faber reference was referring to him saying stocks were oversold here rather than his comments that there is another 10-15% of downside here.

saltcafe said...

I'm not quite sure as to what's wrong with London now. I was there on Monday and it was quite sunny and pleasant!

Richard said...

Well the weather in Greece and Spain is nice too .......

Oliver said...

Just wanted to applaud you guys who have taken over the blog. Don't mistake the lack of comments as a bearish indicator.

Look what happened to Chris Evans on R2...

Oliver said...

... and I'll add that the price action in EUR/USD and DXY is broadly similar to the equities examples you make as a reason to be cheerful.

FX said...

Partial to your cheerful list, for the moment anyway, reason being it will give me some time away from the screen to catch up on other duties.

Now, that I don't like to stay away to long from the market, due to reasons only a trader would know , my return should be conducive to the next leg "down".

scharfy said...

This blog hasn't missed a beat.

ming said...

i, like others, commend you for the continued stellar market commentary. tell me, am i crazy to think that our recent 'risk off' head-to-the-sidelines trade along with a modestly favorable fix in $ 3m libor may present a short-run normalization and thus decent risk/reward to be short volatility at present levels...playing on the view that markets will remain quiet -- perhaps into the world cup -- similar to the way it traded during the beijing olympics. in the second scene of the play, the world cup ends and fear and loathing reconvenes with a resumption of long vol. plays as we come down from our footie hysteria only to realize that nothing has been fixed and both bank and sovereign risk remain. am i out of my mind?

Leftback said...

Cheerful:

3-day weekend coming up in the US.
Stochastic claims number may "improve" Thursday.
Europe not about to collapse before the weekend.
England can win when playing badly.
Capello played Crouch against small Mexico team.

Miserable:

European debt and bank bogeyman under the bed.
Major European bank failures still ahead.
Deflationary pressure still strong in US.
Double dip US recession almost inevitable.
Son of Stimulus and QE2 unlikely until too late.

Tyler said...

aw come on lb...so much cold water!

but yes, I am watching BEBANKS Index. sitting at support right now but if that breaks down...look out below.

odjros said...

Thanks again for keeping this blog going ..really appreciate effort ...one question to all..

Do you seriously think that $ libor 3m fixes reflect any reality?

Ie say I am Bancaja di Salerno e Genoa or Landesbank of low Prussia saddled wit 1 ton of Btpei asw ...

where do I pay 3m $ cash?

oxon said...

It's so refreshing to read this blog.
@Charles: "Can we guess at the dent economic growth would make in Roubini's appearance fee?" Haha this is spot on, that's exactly what I thought about quite a few fashionable doomsayers recently. The thing I don't understand is, most news on the real economy is positive, solid bluechip stocks are trading on p/es under 10, you get plausible dividend yields north of 5%, and everyone says stocks should continue tanking?