Friday, September 10, 2010

Can't Pick Out The Tune From the Noise

We would like to think that the tune is

But trying to pick it out with so many instruments all playing out of tune is getting tough. In today's orchestra we have :-

Slightly better US figs - causing a squeeze on bond bubbles and associated rates trades -

Banks reserve requirements and the DB issue ( Postbank just an excuse? ) - rolls onto good bank vs bad bank spreads opening and may be a catalyst for Euro woes but not yet.

Chase the trend - cash coming into the system and going to equities to start but how much "follow the leader" to come. Bond-> equity switches being now cited.

Commodities - appear bullet proof BUT? Interesting soothsayer turns signals in Gold and an Ags ETF we follow. Gold is having its UST support rug pulled from underneath it .. Watch out belooooowwww....!!

Silver - "Silver foil" beanies are recommended for some of the stories circulating in this market. The media, having got bored of telling everyone Gold is going to 1500, has decided to ramp this instead. Apparently its going to moon. Hohum

Japan - becoming an issue of its own without the usual jpy strength worries. There is a Europe link via a load of shiiite in yen structures owned by Euro peripheral CBs, which though THEY don’t mark to market, the counterparties that sold it to them have to hedge increasing counterpart credit risk against them as they go further underwater.

Political -- US mid terms, US losing control of the world and their own odd pastor (If they can tell Europe to STFU how hard is it to "persuade" one of their own to do the same). Australian ones a mess but no one cares. UK eyes on coalition rifts (As they did so well during the summer recess we suggest extending it to 360 days a year). The China-US trade politic is the Mammoth in the closet.

China - China: Steel mills and aluminium rationalizing at a steady clip thanks to hopeless overcapacity and generally hopelessness of state capitalism. But don't worry folks, it looks like Huiyuan juice is having the rug pulled out from under it by creditors (state owned banks) so it can be bailed out / acquired by a state owned fund (whisper is CICC). Let this be a lesson folks: if China can't create national champions it will nationalize them. NB: if this happens short Coca-Cola. Every industry globally that has gone up against its Chinese credit subsidized counterpart has got flattened or at least taken a few hits. Just ask Alcoa, US Steel, Q-Cells in Germany etc If history is any guide we can expect the cost of OJ to collapse


Gods Country - Ain't Australia great !!!! Yeah yeah shut up….. Or buy us a beer.

Canada - Quietly smug.

Greece - Budget deficit officially shrinks but comments by Papaconskrauts'n'eu re Greek bonds being "a great investment opportunity" = "great runner, one careful lady owner".


CHF - Doing a Mr Creosote at last… A HF may have taken the initial blame for lift off but bond moves once again the real cause.
(Chart Eur/chf USTs)

EM Asia - still overloaded and due its own Mr Creosote.


Our mood -

Grumpy undertones with a light motif overplayed in the cadences. We are still sitting here happily watching the uplift in mood, squeeze recent trends and start to suck more folks in. But still sitting ready to short once everyone has jumped or forced back in. The real test will be the last week of September but beginning of October when it can all go horribly wrong again.

But waiting for something to happen these past few days is a bit like staying home and waiting for the satellite repair man. Or more accurately - like tantric sex.

You stay in all day and nobody comes ..

4 comments:

Dee said...

"Gold is having its UST support rug pulled from underneath it .. Watch out belooooowwww....!!"

I'm sorry, I'm clueless -- would you explain the bit about the US Treasuries support?

Thanks!

Nic said...

Tantric sex ;) Good One

Canada is way too smug IMHO ...

FX said...

Well!PoLIMEC,it seems we're now in the meat of the Ascot program.

Our Socialist jockey been given the inside run, obviously the European Mares jockey has to keep a straight line.

Don't see another suitable race at this level in the near future.

Been well supported too,though,checking the past form of the punters involved in this horse , you'd let it find its stride, say, within nine strides once we straighten up (now) if it will hit the line with gutso.

We'll see what happens huh?

pin said...

>>EURCHF link to US 10-yr Tsy yields

I can see the strong correlation since the end of April/2010. That being said correlation does not mean causation.

I suspect all we are seeing here is an artifact of the risk-off theme i.e. increase in capital flows into bonds pushing down yields and causing risk assets to sell off (pushing CHF higher). This is the case for so many other risk assets. How is the EURCHF rate anything special?

If there is a more direct link I would greatly appreciate someone to correct me and provide details. Thanks for the education.