Tuesday, October 05, 2010

Kerv Flattening

TMM are back from the weekend and for those of us who look at all things EM, and particularly Asia, there isn't much to say except that we are seeing more of the same. The Hot Money Shuffle (unrelated to a similar-sounding Rolling Stones song) is in full effect: "Fund Flows YTD flat to China? Get me a stick of HSCEI. Indonesia busting through all time highs? Call in the droids CTAs."

The question is "Where does it all end?". Even the great and good of investing like Jeremy Grantham are calling for an EM bubble and to date we're well on track. All the hallmarks of a great bubble in Southeast Asia are here: hard to borrow stocks, poor-ish liquidity in futures for some markets and valuations which are getting toppy, but as it's hard to call a turn there are few sellers apart from insiders. All the more, TMM are having a hard time identifying the fatal flaw here - as much as many of us are natural contrarians, it's never a good idea to step in front of a bus if you're nowhere near the bus stop. Readers are welcome to suggest how this all ends out here because we are out of ideas.

Instead, we leave you with yet another compelling bull market case for Asia, this time in Airlines. TMM is not alone in complaining about airlines in the US and Europe, and after seeing this video of a Cebu Air flight safety demo we feel entirely justified in doing so. If you look on Bloomberg, the company is pending listing, leading some to the logical conclusion that this is a killer viral marketing campaign. Despite TMM's fairly bullish views on oil and particularly Tapis its hard not to buy in - airlines are 80% macro risks and 20% marketing and these guys seem to have the latter down pat: Which is more than we can say for JetBlue.

And finally, to the title of our post... TMM has to hand it to the French, handing Jerome Kervial a EUR 4.9bn fine and five years in jail. He must be thinking to himself "Sacre Bleu! I should've waited to write my book until after declaring bankruptcy". We are referring Mr Brown's Gold trading to the same court hoping for a similar punishment.

9 comments:

abee crombie said...

amazing video!

agreed with the EM asia analysis. Fundamentally they are a great story.

I have been waiting for a china crash for the past year (thank you chanos et all) which makes sense but doesnt look like it will be a binary event. Until that happens I cant see what really goes wrong

Aside from some overheating/inflation, which looks like it is starting to happen but I think it can go a long way still

Disclosure: I am the worst timer

scharfy said...

Look at that Aussie run...

Nic said...

French media said Kerviel is earning about €2,300 a month as a computer consultant, according to the Associated Press. Repayment rate: Nearly 178,000 years.
The UK may take longer to recover Brown's gold trade.

P2 said...

and the run on copper, now > 8200,
being very much a proxy for the $/Eu rate

P2 said...

copper now being less than 10% away from its all time high (jul '08)8900.
Imagine crude oil is in that range, then it should be today > 130/bbl.

The industry view being now that Cu will see new highs next year, ie > 10,000.

GSachs mega bullish with 11,000 as their Q4-11 f'cast.

Jochum said...

It's all a ploy to transfer the 4.9 bio loss to Accounts Receivable on SocGens balance sheet.

Leftback said...

Excellent.

One assumes that there is personalized dancing in the first class cabin.

Poor Jérome. if he was an American CEO he would be sitting on a beach somewhere with a couple of flight attendants. He should have got in touch with the Fabulous Fab and had himself tried in the US, where he would have been awarded damages for emotional trauma. We can't have unhappy bankers....

ismr said...

Recent cover issue of The Economist : "India to outpace China's economy soon."

The difference from 2008 is that its ALL bonus driven now.

Eddie Bravo said...

Also note Garuda is trying to IPO in Indo as well. I had similar thoughts as well that airline IPOs would be good forward leading indicators to call tops on Asian markets, but airline IPOs in the region don't show that really.
One thing that may overwhelm everyhting is just general level of equity issuance coming down the tube.
Have a read on this citi report here
http://www.scribd.com/doc/38931019/10-09-20-Citi-AlkaSeltzer-Anyone