Thursday, October 13, 2011

It depends on who you listen to

Yesterday saw towel chucking on FX but equities failed to break or hold their relative range tops so Team Macro Man, thinking that upside momentum can now fade a little, has taken profit on their risk longs and is going to place stop entries to reestablish longs above yesterday's highs. One line of response we are consistently hearing on this run up of risk is that nothing has changed over the last week, the world is still a mess so we must sell all rallies. But TMM think quite a lot HAS changed over the last week

1) US does not look like it is heading for recession anymore. In fact, growth looks trend like.
2) The past few days have contradicted the survey data in Europe... it actually looks like Q3 was a quarter of growth - ie not necessarily in recession.
3) Italy in particular had vigorous IP growth in August, reducing the need for EFSF to be leveraged.
4) Merkozy agreed they need to recapitalise banks and said they will get a plan together to implement it. Acknowledging the need is a significant positive.
5) The ECB didn't need to buy many bonds last week, the private market absorbed supply from Italy.
6) The EU bank bond market has reopened... Deutsche issued 2yr paper and Bank of Ireland 3yr paper.
7) Dexia breakup burned equityholders, but not senior creditors. This was a big worry in the unsecured bond markets. Precedent set along with ECB insistence that bank bondholders do not get hit reduces the prospect of calamity.
8) Asian exports have not collapsed and have surprised to the upside in China/Korea and Taiwan. Stabilisation elsewhere (Phillipinnes isolated).
9) Policy easing in Asia. Bank Indonesia rate cut this morning along with a Chinese province easing property purchase regulations. Add to that Government agency buying Chinese bank shares on the secondary market.

So our core view remains that the background data is better than many would have us believe and that Europe is not going to implode by Christmas, though many are still strongly pushing this "recession", especially in the UK, where it is being overhyped by those with vested interests.

It is sad to say that the once mighty and trustworthy British Broadcasting Corporation is one of those and appears to be doing it's damnedest to whip up fear and financial panic amongst the population, with Radio 4 being a litany of stories focusing on social welfare cuts and public sector employees who are losing their jobs. We have expressed our ire at this before but it was whipped up again yesterday. "World at One", one of the UK's most serious news programs delved into the problem of the young unemployed and interviewed 3 recent graduates who couldn't get jobs and held them up as example of how "job creation" was a must. However the degrees these three had were in Media Communications, Broadcasting Journalism and though the final one had two business degrees he wanted to go into Market Research designing questionnaires. All were horrified that they couldn't get jobs. (click here for interviews 7min 30 onwards)

TMM didn't know whether to laugh or cry at this point. Do the BBC really think that Media Studies and Broadcasting degrees are representative of today's graduates? We'd have been much more impressed and concerned if they had unemployed graduate engineers, physicists or medics being interviewed. Or perhaps this story was coordinated with the 2000 cuts being made in their own organisation? Or perhaps, oh dear its true, the UK really is churning out a load of graduates with degrees in uselessness. The most telling comment was right at the end of the interview by one of the girls referring to a "False hope of a degree leading to a job". TMM have predicted before that the next great mis-selling scandal in the UK will be that of the student debt racked up in exchange for degrees that don't lead anywhere. All of this is most pertinent to Team Macro Man who are seeing their own offspring deciding on future further education choices and, whilst matriarchs might be insisting it's more important to be happy, this patriarch is forcefully explaining that happiness is dependent upon having a job and preferably one that they are proud of. If you doubt that then go back to the interviews above.

And finally from Guido Fawkes' great blog

A newbie MP talking to a young blonde lady. The MP says “it was nice to meet you, but I’ve got to go and show my face at the British Venture Capital Association reception”. The young lady immediately says “wow, that sounds like a very right-wing group.” The MP looks bemused, replying “I wouldn’t say that. It’s business, it’s not left-wing or right-wing. So what do you do?”The lady suddenly looks embarrassed: “I work for the BBC.” “Oh? Doing what exactly?” “I’m public affairs – it’s my job to persuade all of you lot that we’re not a bunch of raving left wingers.” “You’re not doing a very good job so far…” came the reply.

TMM still think they should set up TMM radio.


Anonymous said...

Cheers tmm. U guys have been spot on lately. Recently I noticed that whenever Europe has a big day, breaking upside resistance but then didn't close strongly, it is often a sign of a near term top. Yesterday was arguably one of those days in the stoxx futures.

But I'm still a bit worried about em .. Not leading at all

Tradebot said...

Bravo, TMM! I always found it sadly amusing that BBC and left wing media manage to demonize financial services - in their worlds activity which is speculation that is harmful for the country - while on the same hand promoting "media studies" to be something that UK should bet their future on. I guess it is always the age old traditon on betting on your own horse in the race. Hence the fake fury about "phone hacking", Mickey Mouse issue if there ever was - but the media whipped themselves into rage while the population yawned in boredom.

That is the BBC for you - empty of talent, independent thinking or editorial independence. Outside Andrew Neil and Evan Davis, it is hardly worth the bother.

and back to the markets : yes, I agree the beatyful Pippa Middleton shaped bottom in equites must have been around Oct 4th. Upwards and onwards for the risk assets, albeit not in a straight line. Caveat : just guessing here but being short would be the pain trade here.

Anonymous said...

C says'
Tmm as my favourite contrarian indicator I am heartened to see you feel so positive.After such an extreme degree of bearishness we can't dehorn more bulls until they do create a new trap.I'll be waiting for you above ;)

Polemic said...

C' I have to say I really do find it hard sometimes to get a grip on what you are thinking.. As we are your best contrarian indicators, do you mean you went short last week and are now buying as we close those longs?

Or do you mean our core feeling that we aren't about to melt is wrong?

Thorium238 said...

Degrees in uselessness! That's what you get when you expand the higher education system and simultaneously allow the expansion of useless 24 hours news coverage. And you do away with the teaching of Computer science in favour of presentation skills (ICT)! So kids waste there energy having to use crap software like MSpowerpoint instead of writing the code to create something better. While i'm on my soap box it really doesn't matter if the BBC is left wing as long as they do proper journalism and they do interviews armed with facts or opinions so they can rebut the b****cks and obfuscation coming at them from the interviewee! I would much prefer that to the dull regurgitation "reportage" that 24 hour news has created!

Leftback said...

It's an old story, but we are unlikely to see hordes of unemployed electrical engineers and pharmacologists, b/c they are useful and actually know how to do something that most people find difficult. Think!

We do produce a large number of graduates in Being Attractive and Fashionably Dressed while Smiling and Telling Lies. Sometimes referred to as Marketing, Business or Media.

The market does seem to have shifted mood from outright shorting to hedging one's long positions. Despite the excessive amount of lipstick on Jamie Dimon this morning, earnings are unlikely to point to recession. But it depends on who you listen to....

Anonymous said...

C says'
Polly,you should have difficulty understanding me otherwise C for confused would be meaningless .

"Contrarian" ,I was teasing. You were a full day in front of me nailing the last equity blowoff.
Perhaps where we differ is I'm not particular bullish above this summers ranging market and that is what i referred to when I said I would be waiting to sell.On the otherhand I'm not bearish either why I don't mind being back in at range bottoms.I think we could be around range for some time to come as the case for direction has not been really made by people lookimg up or down. I am therefore directionally 'confused' and this year that has paid well.

Amplitudeinthehouse said...

"C your not Robinson Crusoe, though I tip my off to the few around here that have caught the swings up with pinpoint accuracy...

Anonymous said...

C says'
Little more time now to clarify my views, I hope they are understandable.

I was running empty risk early in the year and went short on the you know what albeit not in the weight I might have liked because Ben was still lurking.

I exited the day prior to the August blowoff and bought back on the same day the equity I wanted to hold. I have held that throughout the summer and see no reason not to continue to do so. Blowoffs such as the one we experienced almost always result in a sideways market and I have played that using 'zones' at top and bottom end to both hedge my equity and gain from singing that range. Last short out I again exited the day prior to the blowoff that you nailed and I followed you by one day in being long equity holding and swing trade. I am reluctant to short this range in this 'top' zone this time because of the extreme bearishness we have had which has still not rebalanced sufficiently imo. I am not only not taking profit here right now I think people going short may find themselves being forced to cover buy a further break upside which will also trigger some long only systems and turn the market sentiment bullish.NO rush ,but I will sell into that and then short it as an expected failed breakout in the same way the break to the downside failed.
Hope that explains my views.

WellRed said...

Oh I like this rant!

Business school. Is that an oxymoron? I mean you have common sense by the time you show up at university, or you don't. Sure, some basic finance and accounting are probably pretty important, but the rest is pure fluff. People can walk out of the top 25 business school that I attended having taken all of 2 finance and 2 accounting classes! And they expect to be earning close to 100K at 21! FOR WHAT?

Leftback said...

"And they expect to be earning close to 100K at 21! FOR WHAT?"

Well, mainly so they can get tanked at the weekend, flash the cash, and then eventually pay off the 100k worth of loans.....

"I fancy this, I fancy that
I wanna be so flash
I give a little muscle
And I spend a little cash
But all I get is bitter and a nasty little rash"

Polemic said...

Thanks C. Actually sounds remarkably like ours. Except we were willing to cut and reset on confirmation of any break up.

OH LB .. you do really know how to hit the reminiscence nerve .. there's only one response to that
And by the time I'm sober
I've forgotten what I've had
And everybody tells me that
It's cool to be a ........

ntwsc said...

You been posing down the pub again?

Polemic said...

Yes ntwsc. So glad you knew too! Can t get it out of my head now..

Leftback said...

Here it is for the young 'uns... no reason why you shouldn't learn a bit of history here, along with the macro !

Cool For Cats

Leftback said...

That's a rich vein of nostalgia we are tapping into there, we'll have to revisit the genre at an appropriate moment!

notayesmanseconomics said...


I was interested in your two themes today as they coincided to an extent with my thoughts.

I wrote a post today referring to the "inflation,inflation,inflation" speech given by Spencer Dale of the Bank of England just over a year ago.

In many ways the speech is something of a gem and I have been trying to get the opportunity to ask him if he missed the word create from his title! Anyway the point of my message today is that inflation is not dead and we look like we are in for stagflation which is by no means the same as the collapse/deflation talk from the media.

I too am frustrated by the BBC. I watched Newsnight last night and saw Joe Lynam who was presented as the business editor present several assertions of his as facts! He then followed it up by giving us charts from Trading Economics. So not only had he not checked the raw data he was giving some free advertising away, which I thought the BBC was supposed not to do..

ntwsc said...

As for the Beeb, you already know what I think, Pol.
Hardly bother listening to R4 these days - even if it's on, I switch off.

At least the World Service is relatively uncontaminated.

For years nothing has dissuaded me from my stance that they're nothing more than a bunch of limp-wristed liberal flower-frocked milk frothers. If anything, I picture their fluffy white socks getting fluffier and their brown wholemeal buns getting wholemealier as the seasons change.
And I don't do sticky brown rice either.

Anonymous said...

So what degrees do TMM have? physics, engineering? Do as I say, not as I did!

gv said...

Everyone talks his book. The BBC does and so does TMM.
Great blog apart from the moments it gets to politics, ideology and dogma's

Polemic said...

I always find the derision of "ah you're talking your book" odd. Of course your book is going to reflect your views. Be strange if it didn't. The difference between us and the bbc is that we have a book and a view and they are meant not to.

As for dogmas, politics and ideals.. yup, it ll happen now and again but doubt we'll change.

Derwein said...

"3) Italy in particular had vigorous IP growth in August"

What does IP in "IP growth" mean?

Polemic said...

IP is Industrial Production

Anonymous said...

My physics degree give me employment opportunities now? This is interesting news. It certainly wasn't the case in the 1980s when I got it.

Anonymous said...

C says'
It's friday and I'm finished.Therefore I would like to suggest we have a stream of poopycock and roobish to dela with re education.I don't usually come across such claptrap unless I stumble by mistake upon the Telegraph bloggers comments.

"making something" is only applicable to scientists,engineers etc etc. Art ,media ,amrketing etc etc is not ergo "making something",total crapola friend.

The argument is never whether ALL of these activities have a value in our society.The argument is whether all of them really need to be learned by going through the degree route to adulthood.
Yet a wide variety of groups including corporates have conspired to make that route the preferred route by means of making it a filter by which one is either accepted ,or rejected. Ironically one of the other conspirators then came along with a govt policy which shaped education in such a way that that filter essentially lost at least some of it's value.

In trading terms therefore we have arrived at a point in time where education inthe way it has been shaped to meet career needs has been 'overbought'.From here on the degree educational route that has to all intents and purposes become as much 'right of passage' as opposed to educational will revert more to it's historic role where career needs move to the fore and filter out some people who really do have something of value to contribute other than "making something" ,but they will tend to do that perhaps by pursuing it vocationally first and educationally second.

Remember those days when we went to work in the day and studied in nightclasses etc etc.Let's welcome them back into the fold.

Corey said...

Sheesh....what are you guys complaining for, the BBC is terrific compared to NBC and Fox News which we have over here. More troubling is that one used to be able to get fairly objective view from the WSJ, but they have been all downhill since Murdoch...

Corey said...

And as a corollary, I think that is one of the reasons for the rise in popularity of certain blogs, not to be named... I'm sure I'll get some disagreement w this, but I can typically glean more information from them than a standard source (aside from the fact that the rants their are becoming more fanatical and the rubbish content markedly increasing) simply because I am well aware of their bias and therefor filter through the heaps...

Leftback said...

Education in the US is a massive bubble of gargantuan proportions. As the grinder continues to grind, forcing down US real personal incomes and state and local government spending, there must eventually be some deflation in tuition. This will lead to some wailing and gnashing of teeth from the Ivory Tower.

LB graduated with a BA in Natural Sciences. Being a stupid anorak means that all this high-falutin' macroeconomics is a bit over one's head. But one does one's best to keep up.

Anonymous said...

Weeks movers

Mervyn's teat flowing again last time i had a go

Franz and Francois hoping Merkozy's to follow

All thanks to the sky-is-falling crew.

Hopefully once sated we can all fall back into characteristic child-like slumber and allow the next generation to wake up and grow up

As for blonde BBC PR filly, fame do not mind a bit of tongue in her cheek.

Too clever by half.

Leftback said...

50% haircuts under consideration, and a pledge to "rule out restructurings in other countries..." Cough....:

Haircut, Sir?

Nemo Incognito said...

I think Peter Thiel has it pretty well pegged here on higher education.

Bottom line is, pricey liberal arts schools in the US Northeast do not stack up on a sum of the parts basis even if you do applied or physical sciences.

Amplitudeinthehouse said...

This reminds me of our BASI ( bollocks algo sentiment indicator) presently in overbought territory.

Now back to the red.

Amplitudeinthehouse said...


Amplitudeinthehouse said...


Anonymous said...

OWS, product of 'increase in inequality', says Bank of Canada Gov. Mark Carney -"Bank of Canda head calls Occupy protest 'entirely constructive" -

Anonymous said...

C says'

I've started a new movement called


This will be a global brand of course.Our retail shops will only employ people who have made so much money they never need to work again.We don't intend to actually sell anything. We're simply going to stock really expensive stuff that we can give away to people without brains or ambition. hence,the chief prerequisite for our staff will be the ability to do this and smirk without being unduly condescending. We're thinking ideally you should aim for the Hugh Bonneville circa Downton Abbey look. Caring ,but distant !
Applications on Goldleaf embossed stationary to Preoccupied 1, to arrive at any date consistent with your leisure of course.

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