Wednesday, August 31, 2011
TMM get the feeling that the market is very well positioned for more bad news, which in the big macro scheme of things is just fine. The US economy is pretty screwed and until the great reckoning of wealth and cost rebalancing between East and West occurs, it will continue to be so. But we can't play a 10yr view everyday or this blog would become very dull with daily posts just saying "Still f**ked". Perhaps we should have a system of long term macro flags along our banner showing the 10 yr view which we hoist and rarely change.
But in the shorter term run of things, where we have to earn a dividend to pay the costs of our daily lives, we can't afford to just sit and wait for the great "F**ked trade" to pay off and that is actually the problem with playing the markets. The table is not level and the need to make a daily crust just to survive, or even to pay for all the infrastructure needed to trade makes the whole game biased against the player. As costs of entry are going up through taxes and regulation whilst the pot of returns is falling - dividends and bond coupons are effectively the only money coming into the game when interest rates are effectively zero with other returns just one side of a zero sum game. With this happening perhaps we should look for the amount of life that the financial ecosystem can support to fall, which is just what you want if you are a western government determined to rebalance power away from the evil banker and speculator. But as the financial pond dries up the fish within it start flapping and thrashing trying to survive. The UK banks are today protesting against being allowed to die (or be sliced up alive) and smaller investors are desperately looking for yield on their investments. In the big picture this is probably a good thing. You can't have a country running on the gains it hopes to make at a Casino despite the Equity bubbles and Housing bubbles doing their best to prove otherwise. Of course owning the Casino is a different matter altogether, and the major financial centres of the world have brought disproportionate wealth into their domicile economies. Unfortunately in London's case Vince Cable doesn't seem to see it that way and is determined to go Holy and upset the tables of the money lenders, no matter what revenue they may bring into the local economy.
The financial blogosphere is also doing its best to whip up action and, similarly to the main stream press, appears to thrive most on sensationalism and bad news sensationalism in particular (Hero Zedge - looking at you). The same signals are being picked up in TMM's IB chat indicator, with banks providing about a 20/1 ratio of bad news headlines to good. And that isn't just because there ARE 20 to 1 bad to good news stories out there. We mention this because we have noticed a trend in this blog's comments. Currently if we mention anything bearish the comments are alive and buzzing and article referral is rife. If we mention anything bullish and the markets then fall the comments are again rife (normally with goading). However if, like yesterday, we mention a bullish tone and the markets stay flat or creep up, then their is relative silence. Now is this an indicator of market positioning or not? Or just a reflection on the lack of any mention of anything frighteningly terrible?
So here is today's news:-
- UK August weather was unsettled and the coolest since 1993.
- No riots in the UK today, despite no action yet being taken to change society.
- Seismic activity around the world didn't cause any disasters.
- Italian unemployment came out at 8% exactly where forecast.
- The equity markets moved a little bit higher.
- The Eurocrats have not issued conflicting statements today.
- Libya is about to be reunified under a new leadership.
- The London Olympic construction is ahead of plan and on budget.
- Bill Gross didn't surprise the market when he used nonsensical and factually inaccurate analogy.
- No Republican contender has vowed to open a can of whoop ass on the Beard.
- The Oil price is virtually unchanged from where it was the day the FOMC announced QE2.
- Arsenal are still useless.
- Pro Farmer came out with a constructive 148 bushels per acre for this years corn crop. bang in-line with what was the most accurate reflection of their ear counts in the seven states they covered.
- TMM have a nice cup of tea, with a biscuit.
And finally, news from a year ago. 30th August was the start of a 6 month equity rally.
Lets see if that lot lights up the blogosphere!