Monday, February 07, 2011
Posted by Polemic on Monday, February 07, 2011 with 9 comments
Do we turn left and take the short thought path which takes us to the Middle East blowing up big time and a global energy winter that will make the 1970s look like nirvana? Or do we press ahead down our current path of analysing the normal diet of Eurowoes, US QE3/growth/Asia/inflation/trade etc? Because it just feels like a complete waste of time trying to micro-adjust our views on the world if within 3 months we have the Egyptian Eurovision song contest group, the Brotherhood of Man, doing an Ayatollah Khomeini and taking Egypt all Iranian. Have you seen the stock of weapons that Egypt has? 1000+ M1 Abrams's. And who knows how many jets etc. We hope the US remembered to fit them with some sort of remotely activated immobilisers. If they can do it with cars, it would make sense to do it with the weapons of death and destruction you hand out around the world.
- Hey Mo, call your Albanian mate to get me M1 goin', cos it's immobilised, innit
- Sure mate, as soon as he's finished on this AMG S65 in Chelsea, innit
The market appears to be in a similar position having got bored of the short term Egyptian story. TV pictures from Tahrir Square are showing crowds of friendly people waving at the cameras, which is more like a cross between a Live Aid concert and your local farmer's market than the path to Middle East Hell. So short term we are back to the basics.
The first thing we note is the MRSA like resistance of the equity markets. They appear to be thriving, unscathed by the recent anti-equities dousings of Egypt, the NFPs and bond yields. Which makes us think they will scream 2% higher today as the negative news flow pauses. And what of the UST yields? They are now looking a little bit toppy and though we are not donning the Kevlar hand protectors just yet, we are unlocking the glove box. The strangest pair to start motoring has been XAU/EUR. Of course, we could argue that the Middle East picture means that Gold goes up AND USD goes up on safe haven play, but these sorts of moves in Gold AND Euro, rather than being reserved for Eurowoes as normal, look more like a direct response to European rate moves. As for those Eurowoes, the STFU policy is working well and we still don’t see any specific worries appearing for at least another couple of weeks (apart from those German factory figures) and we hold on to our summer of 2010 theory. We have to say though, even though that model of ours says eur/usd looks cheap, recent moves in rate differentials and marginal credit widening make it less attractive. Darn...
So as for calls for today, we leave it up to you... Please pick a number form list A, a time frame from list B and an asset class from list C.
A - 1.3890, 3.7%, 12.98, 35bp, Parity, 8678, 3.1415, 0
B - Tonight, never, 3rd may, 4th July, St Swithins day, the 85th of Julember
C - EUR/USD, SPX, Indonesian palm oil, French spreads and pates, Pi
Of course you are welcome to add your own. Good luck and see you at the top.
Oh, and one last thing... It appears that our views on Zimbabwean Economics and The Merve's Gaucho Grill have been taken up by UK football