Thursday, February 03, 2011

What can we say?

Today kicked off with TMM mulling over what to really say, whether it is just lugubriousness on returning from holidays or just because they haven't really anything to add to their previous stated views on the world we don’t know.

So far our expectations of the Euro story panning out in a similar fashion to last summer during a STFU respite in the run up to any EFSF announcements are holding true. The Euro news flow has turned vaguely positive re growth and it still feels like folks are fighting the tape yet our own model is still suggesting EURUSD has room to move above 1.4300 (See chart below: EURUSD - orange, model - white). We are not anticipating Mr T and the A Team deviating from the general message of last month. "Viiigiiiilence"...

The UK has been back in play with this morning's PMI (see chart below of Composite PMI - orange line vs q/q GDP - white line) completing a full set of bullish data that challenges the Q4 GDP readings to the point that we believe:

3PMI + Bob Crow + IDS wages - Q4 GDP = + I %

The BoE is likely to be faced with the prospect of inflation being above target at the two year horizon. They may try and wait for the Spring wage round, but we still think that 5bps priced in for a move next week is too little. A 25bp hike next week would do little to hurt the UK consumer, who hasn't been able to borrow anywhere near the Base Rate for years, and would alleviate some of the internal pressure the BoE is under. TMM bet that the Economics PhD community will start to come out over the next day or two changing their rate calls, making March 2011 Short Sterling look like a sell.

Meanwhile we have the Egypt function festering like an unburst boil in the background. Having totally screwed those playing the normal panic trades we are left with the short term market trying to play it like a live televised football match with every new skirmish producing short term responses depending on the direction of play. In normal conflict it's pretty clear which side is which, but the cunning plan to dress Mubarak supporters in the same strip as the away team has caused the casual observer some confusion.

Like all reality TV, the televising of running social unrest does seem to over hype the viewer's reactions and emotions. It would be interesting to know how Egyptian's responded to the recent images in London of the student riots when government buildings were occupied, the police attacked and the Royal Family being mobbed to the point where weapons were very nearly drawn. Did they think that England was going to turn to anarchy and hence trade on the consequences of UK Nukes falling into student hands? We, of course, just considered the whole event as student hijinks.

We feel that a solution cannot be far away when we see this headline that has just popped up:

*PAPANDREOU SAYS GREECE READY TO HELP EGYPT MOVE TO DEMOCRACY

What are they going to do? Send the Ptolemy family in again?

15 comments:

zen said...

Hilarious.... but UK students didn’t have camels?
and I’m one of the few who has life time tracker locked in at June 07 levels, one of my better trades but still the bank won’t give me a unwind price? Myself aside it does make sense for the BoE to raise... but what will the tabloids use for headlines?

Anonymous said...

I thought that nobody seriously believed that ECB was going to raise rate and acted tough. Does the news of the dropping retail sales really have such great impacts? It looks like that the fear for PIIGS began to build its case again.

Leftback said...

Egyptian riots so far are less violent than a typical Istanbul match between Galatasaray and Fenerbah├že, and about as tradable.

Leftback said...

Didn't mean to be flippant about Egypt, I am actually very concerned that the ruling class are going to massacre their own citizenry.

Gold and rice are going parabolic, for slightly different reasons. Someone is going to hit the brakes on hot money flows to curb the speculation and my money is on India and China having to take the lead.

CV said...

India has already corrected a lot and may be the proverbial canary in the coalmine, but it IS very different from China with a rather large and growing external deficit.

Yet, we will see ... looks like the goldies may be strapping in for another upleg ... 1450 anyone?!

Claus

Leftback said...

Claus

I am not getting in front of the golden steamroller once it gets going. China and India seem completely out of steam and EMs have been lagging for weeks.

Assuming that the smart money is already on its way out of there, how long before the dumb money managers start wondering what it is they actually own?

CV said...

Agreed LB,

This could all get very ugly in EM. As for the the goldbugs, they are probably getting a joyride again, it will end when it ends .. but now is not it I think.

Claus

FX said...

Quite week there ,TMM, being NFP week, your usually immersing us with your incredulous discourse in relation of thee above conclusiveness.

Anyway pal, watchout for the third team wont ya, I can hear'em from here.

Leftback said...

Another triumph for trickle down economics today. Surely only a matter of time before Obanana goes on TV to announce it is Morning in America.

LB thinks that after the D wave (deflation), we are now almost at the top of the R wave (reflation), with the A wave (austerilization) dead ahead of us. The S train (stagflation) has been delayed due to weather.

Sounds like more than one central banker agrees with a slow growth scenario:

http://www.bloomberg.com/news/2011-02-04/ecb-s-nowotny-lets-cat-out-of-bag-with-2012-inflation-forecast-of-1-8-.html

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Anonymous said...

1.43? As you wish, but if you would be kind enough to time-stamp your prediction rather than forecast without a sell-by date, that would be really brave. Otherwise you are just one among the the PhD (permanent head damaged) crowd, except of course we all know you had not been studious in your teenage years :) Oh, and why is EUR/USD = 1.43 any different from saying "Don't fight the Fed"? Brit Hedgie = PhD, love to write a few hundred words when a simple "Our fund's strategy is: Don't fight the Fed" suffices. Good luck to your investors dude.

Nemo Incognito said...

Call me crazy but I think we need to go back to non-Anon postings. It appears this blog still gets a few visits from the sorts of people who have enormous balls when posting anonymously but can't seem to bring themselves to be so tough when they have a username.

Wouldn't you say so, Anon 1:28am?

Anonymous said...

Given that you did ask I'call you crazy then. One anon poster goes a bit wobbly and your skin is so thin you want to shut up shop to outsiders? Always thought you were 'tougher' than that ,perhpas it was 'a bad day at the office'?

With the compliments of a different anon poster.

Polemic said...

Don't worry. It has been a delight to re-open up the comments box to a wider readership and we are certainly not going to be fazed by someone being kind enough to share their opinion, even if they do veer a wee bit off track. If we banned personal vitriol, where would we stand with half of our postings!

We don't keep up this hobby to be right or pretend we are any better than anyone else at guessing where the random walks end. All we are doing is sharing our thoughts on how we might get there and hoping that the comments we get back in return are useful enough to challenge or support those ideas. The day it stops being fun is when we pull the plug stick to the day jobs. So please.. If you are reading this blog thinking that we ought to be lynched for showing an internal model we run suggesting that eur/usd "should" be around 1.4300 but then having the audacity not to timestamp when that should occur, then perhaps you are muddling us up with a one of those huge fee charging research companies. In which case, you have 2 options, send us a cheque for the huuuuge equivalent fees and feel free to rant on at us for not providing you with the elixir to life you think you bought, or, please accept our existing MM guarantee bannered across the top of the blog "

SATISFACTION GUARANTEED OR YOUR MONEY BACK

Right, wishing you all a mellow Sunday afternoon as I try and dream up some load of old bollocks for tomorrows post ..
Any suggestions?

best regards to all ( including anon 1.28am)
Polemic

Jim said...

Another triumph for trickle down economics today. Surely only a matter of time before Obanana goes on TV to announce it is Morning in America.

LB thinks that after the D wave (deflation), we are now almost at the top of the R wave (reflation), with the A wave (austerilization) dead ahead of us. The S train (stagflation) has been delayed due to weather.

Sounds like more than one central banker agrees with a slow growth scenario:

http://www.bloomberg.com/news/2011-02-04/ecb-s-nowotny-lets-cat-out-of-bag-with-2012-inflation-forecast-of-1-8-.html


Love it, nice job