Wednesday, September 01, 2010
Here endeth the Summer. We hope you have enjoyed your break in the market's road side service station, because it's time to climb back on board before heading back out onto the highway. Remember, tiredness kills. Unfortunately too many Macro punters, instead of sitting back and sipping overpriced "beverage-like products" surrounded by screaming kids have been out playing with the traffic and come off worst. Or have done a Druckenmiller and sneaked off through the emergency exit never to reappear. I bet the SNB LLC, looking at eur/chf sub 1.30 wish they could make such a clean exit. Imagine the headline - "SNB hand back 280Bio Euro to investors, who say 'hang on, we gave you CHF...'"
Anyway, back the middle of July we asked where you thought various prices would be at the end of August to see if our "high short term volatility but within a summer range" theory fitted with your own. And here are the results:
> 1.3350 16.9%
1.2950 - 1.3350 20.6%
1.2550 - 1.2950 31.8% Plurality WIN
less than 1.2550 30.8%
Where will Gold be end of August
> 1350 4% (13 votes)
1250 - 1350 12% (41 votes)
1150 - 1250 42% (139 votes) Plurality WIN (just)
1050 - 1150 27%
less than 1050 15%
Where will SP500 be at the end of August
> 1170 4.7%
1120 - 1170 13.5%
1020 - 1120 42.9% Plurality WIN
970 - 1020 25.9%
less than 970 12.9%
How flat will the 2s/10s US spread be
> 2.60 4.9%
2.40 - 2.60 16.6%
2.20 - 2.40 31.3%
2.00 - 2.20 27.5% Nailbiter around 2.00, but the only one the plurality lost on
less than 2.00 19.6%
You are a clever lot.
But now we face September. The Kevs and Trevs are returning to their trading desks and looking for something to play with. TMM are looking forward to a resumption of the old themes, particularly Europe. The US may be in a mess, but the news flow on Europe should start to pick up again re civil strife and strikes as the summer ends and workers return to errr.. strike. Whilst it would appear that there have been some tacit agreements in some countries not to stuff tourism through strikes, let's be honest, there isn't much point in striking, while you are on holiday yourself and there aren't many more psychologically grim times than finding yourself in September with the grey grind to winter ahead of you. Perfect set up for a bout of "Sod this, let's smash a few windows". And of course the Universities go back soon too. History shows that if a European student stands a chance of getting a First in anything, its going to be in rioting.
But the dirty great fly in the ointment is the current sentiment indicators, which are mostly looking as though the world is pricing in a deflationary disaster and the spring has so much bad news hanging on it, it is going to take a very heavy new weight to get it to stretch much further. Apart from UK fund managers who look as though they are going back into equities. So far today European PMIs are trying to be that weight and even the bullet proof Norwegian safe haven has seen a knock. But not much selloff.
So the plan is to get back on board the bus and pile on short term risk - equities, short USTs (oooerrr) and for an esoteric, long nok/chf. BUT, with a finger hovering over the big red bail out button on the first sniff of trouble and reverse the lot. In fact, the tightest spring is probably wound up in eur/jpy especially if the BoJ jump in chasing it up rather than trying to catch it as it falls (a la SNB). The risk reversals look interesting too. As for our AUD negativity the other day, that remains in the medium term despite shorter term bounces.
Good luck and all aboard, only 115 shopping days left to Christmas…