Sunday, January 30, 2011
Well, well, well, its been an eventful few months and aside from the ongoing messy situations in Pakistan and North Korea it appears that Twitter and Facebook have accidentally put the entire Arab world in play. Mark Zuckerberg, what hast thou wrought? The Armchair Generals are back, and most amusingly of all given that they are
a) almost all on the sellside and therefore
b) their employers block all social media at the office
Its even harder to take them seriously given that the best on the ground coverage comes from stuff like this (note, translated):
All the people are in Liberation Square. Kebab business off the hook. - Abduls_Kebabs, Thu 12:36 via IPhone
Got overexcited and threw a kebab at the police. Felt good. Mubarak Resign! - Abduls_Kebabs, Thu 20:36 via IPhone
WTF my Kebab Stand is on fire! - Abduls_Kebabs, Fri 01:22 via IPhone
Ok fuck it I'm getting in on this Molotov cocktail thing. Next up - plasma TV 4 free. - Abduls_Kebabs, Fri 03:48 via IPhone
All TMM can say is that they are quickly getting into Twitter and Weibo - Reuters and Bloomberg just aren't fast enough anymore. Nemo is here and others may follow. With the madness raging on in Cairo TMM were a bit too busy at the end of the week trying to work out how to play this and getting trades done to post but here it is. Given that we are already on the long oil bandwagon that is more or less taken care of so our thoughts as to how things might evolve in rates and FX was more of interest. For some quite astute commentary on oil and the Suez Crisis, go here.
Firstly, how bad rioting resulting in government getting turfed out is really determined by 1) how long it goes on for and 2) who the viable alternatives are. In countries like Thailand the pluto-clepto-crat prime minister Thaksin getting booted doesn't really help political stability but it's not as if there aren't a number of viable alternatives. The kind of disaster zone that ensues when a dictator withdraws and there is a power vacuum has plenty of nasty precedents in places like Indonesia circa 1998 which really makes one worry about what is going on in Egypt. Egypt does have some civil society that could vaguely form a caretaker government in a lead up to elections but many places don't and also have the same simmering pot of political resentment. We are of course, referring to Saudi Arabia who as of late last week did not seem to be having much go on in CDS land which TMM find odd.
Centamin but TMM view the Saudi Riyal as a decent bet too. If the problem is food inflation and you have truly enormous FX reserves a one-off revaluation is a good way to cut inflation very quickly in the short term -- and when the political landscape is moving as fast as you can Tweet the short term is all you've got. Long SAR, long Saudi CDS would seem to be a good way to sleep well and get paid at this point.
In the interim, the broader picture is as such (according to what we've heard): if Saudi goes you simply can't own enough 5 delta oil calls and 5 delta spoos puts because it will completely screw up the oil market and likely spill over into Iraq, Jordan, you name it - banks aren't the only thing that can be TBTF. If Iran goes that isn't necessarily a bad thing - TMM are generally not pro-Islamic state - but you can bet that before Ahmadinejad goes he will angry up his proxies in Lebanon to try to create an external drama to distract the populace. At any sign of trouble in Iran getting short all things Israel does not seem that silly at all.