Monday, April 18, 2011

Bunker mentality

TMM have probably done their views on European debt to death over the past 2 days so even though it looks like the market is on a Euro-Zombie hunt, all it has come up with is that Greece may restructure. About as impressive as going tiger hunting and coming back with a pack of bacon from Tesco. With the Easter holidays kicking off this week, it doesn’t feel as though anyone really wants to do anything they don’t have to but the sales forces have gone into overdrive trying to tip clients into panic mode again. Which is all getting a bit wearing.

If the brokers had their way today you would see everyone heading for the bunkers again. Which made TMM wonder where you get them from. We haven't seen them in the local home and garden DIY stores alongside the sheds and pergolas but imagine there is some huge international trade in these things that we just aren't aware of. If there is should we expect Bloomberg coverage to pick up to keep bunker speculators informed? We would look forward to stories along the following lines.


Bunker sales have rallied strongly, say the International Bunker Sales Consortium. Like for like sales for Q1 2011 rose 57% on new orders from Libya, Cote D'Ivoire, Greece and Portugal.

Herman von Duckencover from SchnellfurdasBunker Gmbh said that German bunkers were a natural choice for most buyers given their proven track record and expertise with poured concrete technology. German Premier Mangler Merkel, speaking at the German Bunker Manufacturers Conference somewhere underneath Berlin said "Bunker technology is the future. Germany plans for bunker development and manufacture to be responsible for 23% of GDP by 2013" Bunker analyst, Runin Hide, said "The secondary benefits are already being seen. Hamburg has taken orders for 4 specialist Bunker Transport Ships totaling 1 Megatonne capacity and Piraeus has already seen the start of a major port redevelopment to allow for the delivery of new mega-bunkers for Athens.

Spain says its future needs are adequately supplied through an exclusivity agreement with China, though China refused to comment. Libya's plans to join the secondary market have been delayed by blocking by the out going presidency of the reforms needed to allow the export of second hand bunkers.

Next weeks G20 summit is expected to discuss North Korean bunker market manipulation. The US is particularly concerned that bunker hoarding by the people's democratic republic has led to price disparities that have disadvantaged western bunker manufacturers. A communique is expected calling upon North Korea to free up its Bunker market. Official figures are unavailable as to the bunker reserves held by the country but officials estimate that they control up to 30% of the market.

The US are particularly keen to open the global bunker markets in readiness for the release of their Californian made electric bunker. With an expected range of at least 30 days on a supply of batteries originally designed to power electric toothbrushes, the Terre-slurp B is seen to compete with Krupps Gross-ferkoffen-Bunker which runs on traditional materials. Meanwhile Fiat has introduced a new convertible bunker that looses its roof in just 15 seconds.

For today at least TMM are ignoring the sirens and are going to relax in the run up to the holidays.


CV said...

Does CNN money count?

The future is closer than you think :)


LB said...

More than a few punters in the fetal position down in the bunker this morning, TMM. Perhaps they knew something? We are laughing our socks off today, as we are heavily in cash.

LB would like to offer that if he knew Goldman's trading positions at the Friday close he could predict the tenor of Jan Hatzius' weekend economic forecasts, not to mention the likelihood of sundry credit rating downgrades 5 minutes before the market opens. Incredibly amusing stuff. Cynical, moi?

Well, let's see who's right about the SPX 1295-1300 range now that we are in that twilight zone. In the black corner, we have TMM, LB and many others who have flagged this as a strong support zone. In the red corner, we have Right Field and others who have proposed a deeper correction into the SPX 1250-1260 area.

Let's see which of these scenarios plays out as punters absorb lower growth forecasts, government debt downgrades and not especially impressive US earnings reports.

Full marks to Polemic for calling the USDJPY retracement from 85. Me, I am just going to watch the yen and do some nibbling until the USDJPY turns decisively upwards, we are going to hand off the carry trade to our friends in Tokyo before long.

Skippy said...

Given the rating agencies are often reverse indicators, will this latest news mark the trough in the dollar?

Does it reduce the odds of further monetary terrorism and irresponsible fiscal policy in the United States?

Does the dollar start to rally for the "wrong" reasons (fiscal tightening, deflation) and a 1937 redux?

Is the 30-year cheap at these levels?

CV said...

Good played LB, my EM longs are getting cold steeled today but they are coming down from above and I did have the small foresight to cover some of my long risk with a long USD position a week ago as well as I am long the Japs (which I don't see getting bombarded further into oblivion but we'll see).

The SPY will be interesting, I am tracking a global mean reversion portfolio and it is currently flagging the US and the Japs as underperformers (and thus buys), but the SP500 is coming to this point from such an impressive streak.

Could that support zone be a maginot line swiftly flanked by the Blitz of Chinese tightening and the end of QE2?

Of course, the Squid was cued in here but don't hate the player hate the game and all :).

Another more general theme I am pondering after the market too such a dim eye to rising COSTS at Google is whether inflation, liquidity and mo money in general are now seen as negative(!) for risk in which case you would want to buy any dip on cooling measures in Asia and beyond?

Inquiring, nah speculating minds would like to know :)


Right Field said...

Came across this and thought it would be worth passing on as an fyi only and not an opinion.

from dow jones: In January 1996, Moody’s had put the U.S. on negative watch only to remove the tag by March 1996 after the government managed to raise the debt ceiling. 2s-10s steepened from 50 bp to about 84 bp over a 2 week period... but by the end of feb, the curve flattened to 65bp

the S&P 500 rallied the entire time

attached is an old article from 96 discussing the outlook change. much of the political rhetoric very similar to what we're hearng today re: debt ceiling

Right Field said...

One observation: The House passed Rep. Ryan’s 6 trillion budget last week. Consensus is that it will be dead on arrival in the Senate and becomes symbolic in nature. I would argue that no one is really prepared for VERY deep cuts driven by the GOP here. Point being, it is not in the DNA of Wall Street to think Republicans will force a growth scare as they are pro-business and lower taxes. Stated another way, people wont be able to get their hands around the fact that Republicans will force a backtracking in Equity prices due to less gov’t spending even though this is supportive of fiscal imbalances and positive UST prices on the margin. The Democrats are the ones supposed to be anti-business and growth… one of situations that if you are an Equity investor, you better be careful for what everyone else is wishing for….

Nemo Incognito said...

What a clusterfuck... few comments:

1) If you want fiscal consolidation this is how to get it. Amazing to see USTs at the long end bounce so quickly - essentially everyone expected this sometime and figures that this will force Congress to close the gap. Next big event is if/when that happens.
2) Commods and metals and mining ETFs keep sliding. Get used to it - China is tightening hard and the US isn't far behind it on the fiscal front.
3) Gold and silver are running hard but if you get serious fiscal consolidation and/or if Josef Ackermann gets a letter from Doctor F.U. of Dublin then some serious deflationary forces are in the offing. Watch out for those irish deposits getting sold - when that happens Ireland can light up Deutsche Bank and Commerzbank faster than a post box in Knightsbridge in the mid 80s.

Right Field said...

I dont know this person but found his comment about the GOP interesting...

John Taylor, CEO of FX Concepts, a currency trading firm with $8 billion under management says "We'll be in a recession by the end of the year. Three reasons: QE2 will end, Republicans are running the House, and the price of gas is heading up."

Right Field said...

A new Theme? US CPI was more benign than expected last week, a lot of people speculated/modeled a larger YoY move given we came from flat/negative level. There was a well timed FT piece last week (Thurs I think) about the Fed claiming they are not responsible for inflation or higher commodity prices, weak article I know but was published. Noted hawks are backtracking now from their inflation calls, to what degree is debatable but a potential step-change is a clear talking point in my conversations with other professionals as many are hawks keep highlighting core inflation now. Either way, more are printing out Fed speech schedules for this week. Add in the growth d/g by both the street and to a degree the Fed now, debt ceiling raised resulting in stronger fiscal house in order (UST’s higher in price arguement), poor US earnings potential and the remaining short base (smaller for sure but still existent) in UST’s 5’s and 10’s and it is becoming easier for some to argue against higher yields in the long-end. Would be ironic if a noted west coast investor was forced cover a position and add duration because he shorted the lows… Am I crazy for thinking 2.90-3.10% in UST 10 yrs by Sept now?

Leftback said...

RF, I am laughing, b/c I can't argue with you. I have been beating the slow growth "New Normal" drum here for a few months now as the reflation rave has continued. Yes, recession in the US is likely by the end of the year and certainly Q1 2012, as an underlying deflation is revealed by the termination of Qe2. A crisis in something (munis?) will be the trigger for Qe3 in March 2012.

I am also laughing b/c this move in bonds is the market move from my May playbook and it arrived early, in April ! So I'm not positioned exactly the way I would like. Still on days like today, not being slaughtered feels like killing it.

Finally I am laughing at the thought of a West Coast investor covering short positions...