Wednesday, September 21, 2011

And the Winners are..

The Asian contagion deleveraging trade rolls on. We've seen more selloff in FX (though less violent) and a widening of local FX bonds' spread to treasuries. To date it appears to be the worst in the most liquid and crowded macro trades with Korea taking the brunt and Indo/Phils relatively tame thus far. Per everyone's NEER model for Sing Dollar and the like, this could still go some way and TMM aren't stepping in front of it all just yet - when Indo cash gets moving it really moves.

Europe continues to try and flog its copies of the "Big Issue" around the world. Brazil has chucked in a sympathy $10bil which in Euro spending terms wouldn't even buy a cup of tea. The Japanese are offering to buy some more EFSF, but, however, not sovereign debt. Much like "Look, I'll give you it for a sandwich, as long as you promise not to spend it on booze". Sure guv'nor.. 'course I won't. Meanwhile, the French banks burn.

But today it feels as though the market is trying to take a break from the stream of Euro-headline watching and is using FOMC as the excuse. That suits TMM just fine and gives us a moment to consider an outstanding issue. Last week we asked for suggestions to be added to the Glossary of TMMIsms. As with all competition announcements, there will be tears. Tears of joy, tears of disappointment and tears of boredom. After a week of fierce debate the panel has decided that the following, chosen from a very strong field, will be added to the TMM glossary to be found top right of this page.

Honorary mention first goes to "EUROs" offered by "the Original"

EUROs - Convergence Unravelling, Non Taxpaying Spivs.

Now whilst this is a beautifully crafted expression it is pretty hard to use without causing too much confusion and, as this is a family-friendly blog, we will save it for the HBO/Cinemax Film release of "Macro (mother****er) Man" starring Samuel L. Jackson and Al Pacino.  

But the winners are-

MBA - Mindlessly Bullish Analyst. To be used in the hushed tones of Test Match Special, "Oooh that's a ripper from the MBAs at Banca Indebta".

This entry struck a cord and appears to fit Asian analysts particularly well. Education and blinkered bullishness is a dangerous combination.

RORO - Risk On Risk Off.

So obvious we wonder if it hasn't been used elsewhere already, but so apt in these current "RORO" markets. Lovely play against the "Roll On, Roll Off" original term which is exactly what this new RORO reflects.

MTMB - Mark to Make Believe. An accounting technique perfected by French and other European banks during the sovereign debt crisis, which ignores conservative accounting principles and practices market pricing by a range of obfuscation including "hold to maturity" accounts, secret internal valuation models, conveniently excluding Greek government bond holdings maturing later than 2020 from the hallucinogenic 21% haircut because they are excluded from the PSI etc.

 A well-crafted description of a function we all know far too well.

BOLIVIAN - Balls Out Long, Infinite Var, It's A No-brainer. As in "We are going Bolivian, can't lose."

A much, much better description of a trade that has us SEWCPS (so excited, we can't pee straight). We anticipate this entry getting a lot of use in future posts, though not always in a complimentary manner.

PISN - Price is News.

Now here we want to be a little devious and ask the creator (Corey) if we may shorten it to PIN. In doing so we can open up a subclass of TMMisms, such as "PINball" - Price is News, having a ball; "Hear a PIN Drop" - suspect an oncoming fall that is self-fulfilling on price panic; "PIN Money" - money made on a no-news move (large hedge fund manipulating stuff, perhaps). And if only a small amount is made perhaps it could be called a PINnickle?

And finally to the overall winner. In TMM's eyes this encapsulates form, functionality and craziness in a way that still makes them chortle - The link provided sealed it.

Vengabus - A trade/idea that has everyone jumping on board and becomes immensely popular, but is destined to return to the obscurity from whence it came leaving everyone scratching their head as to how, being so terrible, it ever got the amount of traction it did in the first place. As in, is the driver of the Euro Vengabus falling asleep at the wheel? The GGUF Vengabus seems to have gone into reverse gear.  

The idea of a Vengabus led TMM to ask themselves what Venga actually is. We suggest that "Venga" is "an asset value's sensitivity to something no one was talking about 3 months ago". This could lead it to become a tradable value in its own right. We anticipate the likes of "where are you seeing the Venga on that basis swap?" or "see how the Venga has changed on copper to China off balance sheet financing? Think it's probably peaked now that Ambrose Evans-Pritchard is talking about it" being heard across dealing rooms of the future.

Congratulations to the winners in meph (twice), bcordischi, Corey and to the Anon, whose winning entry surely means he or she should step forward to accept the glory. However we hope it doesn't lead to  a Spartacus moment ..  Who is Anon?  I'm Anon .. no, I'M Anon.. no I'M Anon.

23 comments:

Anonymous said...

C says'
While most people seem fixated on either the US Fed ,or Europe what I look at has for awhile been telling me that the next unwind is the 'Asian' growth trade. In terms of relative strength it's not yet taken one for the team and got with the plot for global growth.Imminent I think.

Secret--Sauce said...

Bolivian hands down my fav, as in "time to go Bolivian Greek CDS as ISDA General Counsel Geen say voluntary restructuring is not a credit event." Long frog banks also lookin' a wee bit more interesting, n'est-ce pas?

WellRed said...

Glad to see Bolivian on the list. Amazing.

Leftback said...

BOLIVIAN was inspired. Congrats to all the mnemonicists and neologians. The competition was acronymically shagtastic.

abee crombie said...

nice picks for the winners. I agree.

Any more 'color' on what some of the emerging mkt paper is, so i can look at on my bberg?

What is the best way to follow those markets? are the bberg CDS OK? I heard they are usually way off.

Anonymous said...

Go Bucky Go. Twisting Time is Here.

abee crombie said...

wow so i looked at the currencies and the bonds of the emerging markets... I finally understand Senior Macro... arriba!

es un poco loco, mang

Anonymous said...

VengaBoy says...
I feel I should put together some soppy acceptence post thanking family and friends and pointing out the strength of the competition. Certainly to beat such heavyweights as BOLIVIAN has me feeling humbled and undeserving.

Anonymous said...

TMM, LB, anyone:

Shouldn't this Twist creat credit demand from India since local int. rates have risen?

Corey said...

Well I can finally rest easy. TMM did a fine job drawing out the suspense keeping us waiting, but hey, something this important does take a little time to get it right. Congrats to everyone. Please feel free to use PISN however you wish. I was thinking more the PISN the day away, but its your blog, I'm just happy to contribute.

Anonymous said...

http://blogs.ft.com/beyond-brics/2011/09/21/imf-risks-in-em-corporate-bonds/

Anonymous said...

C says'
I think my shopping is about to get a lot cheaper and yes I'm in the market to doa West/East swap/^ Pork chops for 6lbs of Copper.How do I say that in Mandarin?

Anonymous said...

C says'
In similar vein buy Dental stocks because chewing on copper plays havoc with thse bridges.

DDHumberside said...

Increasing amounts of rear discomfort in the DGDF vengabus, it seems.

And poor Anna Lee once again being misled by yet another empty promise of Ray Financement. He is not leaving his wife A. Kitty anytime soon... Live your life Anna, he's not gonna come...

Skippy said...

A fairly brutal liquidation sale out here in Asia today, particularly in the extremely crowded trades like Indonesia.

I also wonder out loud whether Mrs Watenabe is contributing to the vicious unwind in EM? The cold steel of the 'double-decker'long BRL on top of equities must be painful.

Anonymous said...

C says'
"Imminent" takes on a literal interpretation. This has been taking shape for sometime ,the Asian/Growth unwind,it just needed The Fed to supply the trigger.

Petulant markets don't like being disappointed,but a message to the politicians has been sent.

CV said...

Welcome to the new acronyms, I am sure they will have a nice time in TMM land. They are a bit advanced some of them though. Non regular readers will certainly be more confused than not ... anyway.

A message has indeed been sent CfromC. And this is extraordinary since the Fed did not actually disappoint, or did it ?

But chaps, let us not get carried away. Surely, commodities are having a howler today but on spoos I see the low end of a choppy range moving UP with that 50dma being a nice resistance level so far.

On the economy, macroeconomic indicators can really only surprise to the upside at this point or so I would expect. However, the coincident data sends a clear message of very low growth and possibly a recession so, half full or half empty?

As for Asia, well ... to high hopes for decoupling I guess.

So, am I a buyer of this dip? Well, haven't decided yet. It might just get a bit colder here. Intra day lows are 1065, no ;)

Claus

Leftback said...

Always good to see goldbugs, DGDFers and mindless commodity longs take a good spanking. Today is why we have avoided banks, miners, drillers, and other HF-owned reflation vehicles, except for crafty short-term punts and squeezes.

It's all about Bucky, you can bet the FOMC swap lines will be busy, Bernanke knows how to avoid 2008 redux even if Tricky doesn't. having hiked into a recession AGAIN...!

Secret-Sauce or anyone else, are you in Asia time zone? What does Japan think about China slowdown? Soft or hard landing?

Bad day but happy to have raised cash earlier in the week. A silver short is helping to ease the pain.

CV said...

The walls at my office are whispering about margin calls a couple of big flying HFs in NYC?

Anyone?

Leftback said...

Claus,

Chinese data kicked this off and the Euro PMI piled on. C from C's point on Asian EMs is well taken.

You have to figure that somewhere in the leveraged commodity/EM/DGDF community, there is always someone who has been spectacularly stupid and now they are hurting. A peek at the rare earth stocks (MCP, REE) might reveal some immediate sources of pain.

In addition to that, you have people like Paulson who must be close to liquidation of some of his funds, having had a couple of spectacular blowups (BAC and SinoForest) and also owns GLD (which is selling off!). Bad luck, mate!

It is actually good to see the vanity plays (NFLX) take a tremendous beating lately. That should drive out investors who think they know about cool tech stocks but in reality have trouble detecting ulnar-gluteus maximus differences.

The yield differential between dividend stocks and the 10y is pretty amazing here. What we have to determine is whether it is 2008 redux, this guy thinks it is:

http://seekingalpha.com/article/295291-22-reasons-the-s-p-500-is-headed-below-1-050?source=yahoo

Or have CBs learned the value of $ swap lines and covert liquidity operations? We think that they have and that China will be an active participant this time.

Anonymous said...

C says'
Claus I would forget technicals and such like here they are meaningless. You're really lookinga process in motion of which Asia and all things growth is simply another dominoe falling and frankly I can see no reward worth the overall risk..if you can't sell it then step aside.
I said awhile back if the dollar get's trending then goodbye positions that have been built on the back of it's weakness. In all that read stupid people hoarding copper and thinking they can use it has collateral for long term assets like property etc etc. In a temporary fashion any of this stuff can work ,but in the sense that none of it makes good financial sense as we know it then you always know it is going to fail badly it's just a question of when. If this mess started in the West it's an unfortunate fact that the East has learned too well from us in how not to perform. Now we will see the results of that.Copper just is not a substsitute for Weetabix ,or Noodles when you are hungry and neither does Copper wait around long enough in price to wrok out when you're trying to adjust postion on something as illiquid as property!! T'is stupidity of the grossest kind.

Nemo Incognito said...

Thanks for the points all - yes EM is just a shitshow.... but some of this has been well flagged for a while and the FX moves have been something we've kind of expected to see for a while (BRL - expected, SGD - not so much). One thing to note is that when the MAS gets moving its normally v scary because they see the end demand / exports weaken before the RBA has a clue. This could get worse, though looking at RSIs on copper etc it feels like we are ripe for a squeeze, or a China stimulus package. Take your pick but I can't stay short here.

As someone who primarily does corporates with macro overlay I can say that corporate credit out in Asia has been, is, and continues to be total bollocks. If you buy bonds in Asia at par you are a goose and the trading in LDK's CNH high yields are case in point there.

Sometimes its just easier to delever, keep your fraud / single name shorts and defensive / workout longs and make some popcorn to watch the fireworks.

CV said...

Good points LB and CC. As for copper, this might of course be the famous collateral unwind we are seeing, but unless China decides to engage in uber self-hatred, the market is in fundamental deficit for 2011.

Obviously, there are too high hopes for stimulus in China and especially now as it seems the authorities are about to make an example with local property developers. Besides, inflation in EM (china and India) is still an issue so there won't be much help from the east in the near term. UNLESS of course, the market goes 2008 on us ... I agree with LB here.

As for bucky, I agree CC. It was always going to reset the whole thing.

Claus