Caarmm on!

Monday, October 24, 2011

TMM came in this morning, saw Spoos up at 1240, the rally in H shares and Eur/Usd spike to 1.3950 and thought "here we go". The CFTC report is still showing large EUR/USD shorts, so there is still plenty of juice there for a continued squeeze. We were especially positive in FTSE which has so much Asian growth dependency-weighted stocks in it that it should fly after the HSBC Flash PMIs let some air (lead?) out of the China Hard Landing theory. So what has happened? Well, first off, it would appear that the early spike has faded and we are left theoretically as excited, but a bit peeved we didn't get acceleration.

Reasons to be disappointed-

1) It hasn't taken off
2) It's gone down.

Reasons to maintain our stance-

1) Europe likes filling gaps on opens - ok, you ve filled you gap, now get on with it and go up.
2) Compared to Friday, we are closer to resolution.
3) Europe issue is going to be back in a dark cupboard by Wednesday, like a bucket of horsesht on which to grow mushrooms, but it should be out of sight and, to the markets, out its ADHD mind.
4) Denial is still in the air. TMM don't think we stop going up until some respectable people (rather than us) start to say the markets are going higher.

Perhaps we are just getting too excited for anything ahead of Wednesday, but to be breaking range highs when, if this was occuring at any other time over the past 4 months, we would normally be breaking the bases, is pretty bullish.

Elsewhere, good to see Cameron winding Sarkozy up. "Here you stay out of eet" comes the Sarkozy rebuff. "My good fellow, we never had any intention of being in it, phnnarf" should have been the counter. Sarko does seem to be getting a bit snappy and angry at the moment. Oh the pressures of being a new dad married to a supermodel, not getting enough sleep whilst trying to sort out the noisy neighbours. Germany and UK spotted it and may be playing up to this weakness in French policy hoping that if they gently tease Sarkozy he'll go "off on one" to the amusement of all around, finally exploding in a Napoleonic fit of rage. "Waiter? Bring me another short dictator, this one is broken!"

But, basically, TMM think we are nearly there on Europe and really should look elsewhere for our fun. And fun there is: China has continued to bounce on OKish PMIs and bullish projections of how low inflation can go there due to base effects (some say 5% by December, TMM are not so sure). We would note that while a lot of clever people like PIMCO are coming around to the idea of slower growth in China, meaning weaker equity multiples and growth for some time, the pace of the China selloff by the markets has got to the point where there is actually a case for being long of China property bonds. With 15%+ yield "all" you have to do is not default and you'll be ok even if equity holders are hopelessly diluted over the next 5 years. Now of course the "all" is what many may already be scoffing at, but you are buying at 70 cents and 20% yield say and if credit loosens even slightly, those higher quality names will survive. Perhaps we should "buy Bonds and sell appartments"!

TMM have played the general bounce in equities and are now beginning to think there may be even better potential in corporate credit in Asia in general. Call overwriting has its appeals for those who want to cut delta and get paid some still respectably high vols into year end.

Oh dear, as we finish writing markets are grinding down again. We'll tough it out. Finally, God we love the Daily Mash and wish we had written this. Hail.

-----
Updates.

We have just seen the most splendid line appear on the wires .

EU PAPER ON EFSF SAYS AN EFSF INVESTMENT WOULD ABSORB FIRST
PROPORTION OF LOSSES INCURRED BY SPIV.

How absolutely wonderful that they call the special purpose investment vehicle a SPIV. As the OED defines a Spiv as - "A man who lives by his wits and has no regular employment; one engaging in petty blackmarket dealings and frequently characterized by flashy dress". or " A petty crook who will turn his hand to anything so long as it does not involve honest work."
That really does describe the fund so aptly.

And finally to the commenter that wanted Angela Merkel as Lady of Shallot, we won't do the whole thing as its far too long, but here's a start.

On either side of Europe lie
Yields on bonds that reach new high,
All up on "risk", not CPI,
And all pray for a bailout by
The place that just won't spend a lot.
And up and down the people go,
Gazing where the credits blow
Yet hope a lead the Germans show
So please don't say "shall-not".

Knuckles whiten, lips a quiver
Little rumours dance and shiver
Through the markets, run for ever
About the union they may sever
Will they please just spend a lot
Four bust nations yet o'er all towers
Committee rule that lost its powers,
Yet up against this mess now cowers
The Lady who "Shall not"

Posted by Polemic at 12:22 PM  

9 comments:

The china crash has only just started and you want to go long the most speculative investible assets? Asia hy is notoriously illiquid and completely prone to screwing outsiders. IE two cheap bonds, the one that survives you cant buy and is bought before you by friends and families, the one you can buy is a zero. Just getting involved in that sounds a bit school boy

Anonymous said...
2:47 PM  

http://www.piratenz.eu/movie.php?watch=margin-call

Anonymous said...
4:08 PM  

C says'
Santa is still filling up his naughty boy risk list for 2011 so unless I was paid to always be filling my risk bag of presents I'd be inclined to go looking for xmas shopping in the 2012 sales care of a Chinese new year rather than Gregorian.

Anonymous said...
4:27 PM  

Jolly rally day, there is a nasty sharp dollar rally out there somewhere, but perhaps the Eurozone will be bouyed by more currency printing after all:

New Banknote to Feature Pippa

Leftback said...
4:00 AM  

No post for tuesday.. not enough new to say and a bit busy.

Polemic said...
12:14 PM  

Very nicely done--thanks for that.

But What do I Know? said...
1:06 PM  

S&P is leading the way ... heading for 200day MA.. short it there my friends

when US retailers and tech are leading the way it tells me this is merely a santa claus rally hope.. but you do have to respect this breakout, I agree with that

abee crombie said...
2:25 PM  

Crossroads here... Europe can show the finger to the markets "crash and burn" style (aka you eat what you kill) or commit political suicide. Ironically.

Anonymous said...
3:02 PM  

We don't want to pick up pennies in front of the proverbial steamroller, but we do have just a little hedge on and some Treasuries, in case the Eurofudge™ that comes out of the factory turns to be a little bit less yummy than Mr Market was hoping for.

If we were long this market (which we are), we would be most worried about a snapback in EURUSD, and the damage the commodity complex might suffer, with attendant carnage in equities. The coming together of ECB bond buying/QE-like behavior and a decent US GDP might deliver just such a quixotic outcome.

Best regards to MM, hopefully by now awake and recuperating somewhere between the hedges, following ACL surgery. We wish him a speedy recovery.

Leftback said...
7:43 PM  

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