Better to be lucky...

Thursday, December 01, 2011

Well, TMM recently noted that they're gaining faith in "Luck" and that new faith was rewarded yesterday. Despite getting the China PMI call wrong, TMM really didn't care as the confluence of the PBoC's RRR cut, a globally coordinated policy response and strong US data resulted in their being greeted by a 7% up move in H-Shares. We might de-weight our PMI model yet increase that of our "no-commentometer" after another uncanny call from it. As the old trading adage goes, better lucky than smart and TMM are generally in better moods today.

So what happened? Well just read a screen to see what happened, perhaps we should ask WHY it happened. If you were to believe Forbes then it was to prevent the imminent meltdown of someone (or all) of the financial markets. Now TMM have indeed heard whispers that funding was going to the wire but for an article in Forbes based on nothing more than "The only explanation for the massive action is that central banks were concerned about a pending failure that is not publically known", to TMM is like saying that lightening proves the existence of Thor. So why did this story get such widespread press? Because it was in Forbes? Or because the author was well known for being inside the loop? TMM were left scratching their heads, as the author and his piece seem worthy of little more than "Seeking Alpha". Perhaps it was indicative of an afternoon full of denial as to the stickiness of the actions and the permanence of the market responses but this feeling that the captain on the bridge avoided an iceberg whilst we dined is the prevalent one this morning.

TMM for their part think that yesterday's actions firmly demonstrated to markets that global policymakers are nothing like as divided as they have appeared to be. Indeed, in our opinion, it seemed almost like G20 coordinated easing when adding in Brazilian Celic rate cuts. While one can certainly make the case that it may have been responsive to "something really bad about to happen", there is also an argument to be made that central banks would not fire such an important gun without knowing that a decision had been made upon the central policy problem (Europe) and was imminent. This view is supported both by Monti and Schaeuble's comments referring to Merkozy proposals being imminent and the expansion of IMF resources either via bilateral loans or the ECB.

We also saw the headline about the "FSA instructing UK banks to prepare for Euro break-up" as another reason to believe a break-up really will happen. TMM do not see this as a rare example of FSA foresight, but rather a class piece of arse covering such that SHOULD Europe break up (no probabilities attached) the FSA will been seen to have given warning and will be blameless. Exactly as your local rail company does in making announcements such as "Platforms can become slippery when wet". It doesn't mean you will slip, but if you do, it isn't their fault.

But this morning the mood appears to have carried through and despite the ballistic performance of European bonds (France most noticeably) the tone of chat is still firmly in the "sell this rally" camp. But to TMM it feels as though yesterdays moves were missed by many with the market still firmly positioned in the Eurobear camp which leaves plenty of squeeze room ahead.

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TMM have been wracking their brains as to what to do about the appeal target. First thoughts were we leave it at 2k despite such a stonking response from you all and let the out-performance be testament and target in itself. We also felt that moving it higher would be a typically underhand example of an analyst moving a target to match market. BUT, the fact that the widget on the main page refuses to show over 100% despite currently being at 140% has lead us to raise the target to £3500. Thank you all so much so far for your support. We have been stunned. A huge thanks to the 66 of you who have so far contributed for your support.

If this post helped you, please help them. TMM's Xmas Charity Appeal:

https://www.justgiving.com/tmm

Posted by Polemic at 12:30 PM  

17 comments:

Agreed completely. Just looking at one's IB/email/twitter feed shows just how few believe this rally will last. But there must be more coordination in the cards considering the political risk of any and all actions and market risk of inaction. Did Fed get assurance that ECB will cut to 50% asap before agreeing to extend swap lines? Possibly.
The stage is set, now just up to policymakers to get behind the momentum. If not and they again assume that they have gained the upper hand and can rest, the market will punish them. IMO, an unlikely outcome. Just a matter of timing before another major, positive headline hits.

Here's to looking for further attractive entries for your 'risk-on' trades. If any upside momentum holds, there's going to be a lot of market-chasing by the managed money crowd into year end. Behind a benchmark/peer anyone?

willem said...
2:26 PM  

50 bps

willem said...
2:27 PM  

Gammableeder.. re your comment against your kind donation.. you are SO right and we were in fact discussing using that as well, but our blithering was getting a bit protracted. But u are spot on. Growth growth growth please.. but not in your pay.

(can see his ref to sales targets on the giving site).

Polemic said...
2:33 PM  

Willem. I think you phrased that better than we did in the post. Thank you.

Polemic said...
2:36 PM  

To me it increases the probability of political inaction. Why would the CBs step in if a more permanent solution was just around the corner? Agree that ECB will cut. Another example of CBs doing the lifting for the politicos.

As for luck, you must be irish.

Corey said...
2:36 PM  

+1 for use of the under-used word "stonking".

Looking for December market to be wedged in between the 50 DMA and the 200 DMA, so you would buy one and sell the other or generally buzz around like a blue-arsed fly trying to catch up. Or if you are beating your benchmark, you can just sit back and have a cuppa and have a larf. [Smirk]

Saul Bollox said...
3:18 PM  

Agree with Willem on ECB rate cut upcoming as we retrace the steps of the 2008 US banking crisis, and that will of course include some kind of bank recapitalization. Now, will this be done by bailouts or nationalization? The answer is a bit of both, and it will be different in different countries. As usual, the holders of common equity will suffer more dilution than holders of bank debt, and we are likely to see a lot more of both issued in 2012.

My guess is in Jan and Feb this market will be a bit of a dog until finally they decide Greece has gone tits up and it all gets a bit TEOTWAWKI again. Once commodities melt down with a firmer dollar, BB will start the QE3 engines, 2009 style.

Leftback said...
3:20 PM  

truth be told they tried to camp base on eurusd at 1.33 with this swap line temptation but either we like it or not bid is 1.35 and i dont see any reason for people to change their bearishness on euro...

its not like we are breaking new highs above 1.60 with the salvation army entry on boot camp yesterday is it?

www.4xforecasts.com

4Xforecasts said...
3:31 PM  

EURUSD is still headed for a date with 1.20, and that's actually beneficial to the exporting countries, whether Mangler wants to admit it or not.

The speculations continue over at "the blog that shall not be named" on the likely beneficiaries of the cheaper swap lines. CA and DB being named as the Usual Suspects of those who, you know, didn't actually need Eurodollars, honest, guv:

Which Bank Wasn't in Trouble?

Leftback said...
3:48 PM  

Coincidentally, I read just yesterday on another trading forum that a cunning trader said that "luck is all we need to trade this market (other things such as FA/TA, money management are just useless...)"

I wonder what will happen when the sophisticated type began to see the market as unreasonable and random.

Will the market reverse to some sense, whatever that is? or remain to be a guessing game for another few days.

Anonymous said...
4:22 PM  

C says'
Much as I would love to believe in Santa I would put it this way.
I know 1+1=2.
I do not now that a central bank put stopping shorts getting momentum = a reason to buy past the point at which shorts have successfully covered except sufficiently to convince people that Sanat really does exist. All I can say and I need the acronym because this is toom uch like hard work...IWBWAFY...see me in xmas stocking where you can be sure I will have eaten ALL of your chocolate ;)

Anonymous said...
4:52 PM  

Sarko speaking, apparently unaware of TMM STFU policy?

Saul Bollox said...
6:02 PM  

Brazilian Selic and not Celic.
TMM buoyed by LUCK ... Hmmmm ....

Anonymous said...
6:23 PM  

Market to be contained between the 50 DMA at 1210 and the 200 DMA at 1265 looks like a good bet, absent some earth-shattering development. Not a lot of energy out there for large scale moves now, and there can't be too many shorts to burn.

Tomorrow's US jobs number now expected to be +150k or better, so a miss in either direction might see the SPX nudge one end of the above range, but a monster move seems unlikely. Treasuries will probably be bid tomorrow into the weekend, unless they print something huge like >250k.

We are filling in here on the graveyard shift, b/c TMM are probably down the boozer now.

Leftback said...
8:18 PM  

for all the rally in the past 2 -3 days, Bank debt, in US or EU is still trading poorly (though better in US after today)


where's buffett?

abee crombie said...
9:29 PM  

Good on ya Leftie.

Intrigued I was this morning to read that Mervie reportedly bagged the call to initiate yesterday's CB flanking.

ntwsc said...
10:22 PM  

LB as spot on as usual.. yup. Down the boozer.

Polemic said...
11:29 PM  

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