Wednesday, April 13, 2011
Quote of the day .. *TEPCO PRESIDENT: MUST RETHINK PLANS TO EXPAND GLOBALLY.
No kidding - just as Australia looks to be passing a carbon tax that will bury one of their larger Australian assets, a brown coal power station that kicks out more carbon per MW than any other power source. Sometimes you just can't get a break.
Anyone got any conviction out there? Feels to us as if the market is floating around weightless and unable to grab hold of anything? Just like inside one of those parabolic-flying-Zero-G-simulating planes? The sort of feeling you get as you go over the crest of a roller-coaster? If so we know what happens next. The inflation expectation trade that we mentioned yesterday is picking up more interest today as we are beginning to detect price falls in unexpected places like China. Headline data from here is starting to trend downwards but how much of this is seasonal and due to some fairly heavy handed persuasion to cap prices from the government is anyone's guess. All we know is that if veggie prices are down ~15% in Heilongjiang those cabbage speculators got stopped out.
The one place that isn't seeing price falls is Silver, but we really are no good at it and would appreciate any guidance. While ETF oz are up the ETF action (see below) can't account for half of what one is seeing in open interest or volume trading on Comex.
Its recent moves appears to be driven by the new Far East mania for "things" as "things" are harder to make and more durable than bits of paper. But just because they are harder to make does not make them any more valuable at the end of the day. TMM find it hard to make a hand crafted jug out of used Nicorette gum, though they did manage it once, but that doesn’t mean that Nicorette crafted crockery will be the next big inflation hedge. Just as Tulips weren't, though TMM are planning on opening a florists in Shanghai. TMM find silver particularly hard to understand because so much of it is produced as as by product of other metals not least of all gold - in general, there is more of this stuff around than people generally know what to do with but we are hearing anecdotal purchases in China of 250 koz. Spillover from a now heavily regulated property sector? TMM thinks so - and thus we are not stepping in front of this freight train just yet.
There does seem to be a collective move ex-China though to "Bunker Hunt" Silver and TMM had a quick look at what happened then. The first thing they noticed was the general topicality of the man having discovered that he also played a very significant role in opening up the Libyan oil fields, which Colonel G would later nationalise. The second thing we noticed was that his ultimate down fall in cornering the market was marked by the the implementation of "Silver rule 7" blowing him up through margin calls. Another casualty of leverage. So why Silver? We only need to look at the Gold/silver ratio to realise that this is beyond the precious metals general move.
Once again, like the Nasdaq in early 1999 this is one of many things that look entirely out of kilter and yet it is not something TMM would endorse fading just yet - for that we'd need to see some breakdown in autocorrelation, which we will discuss tomorrow.