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.------------------------------------------------------------------------------------
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.
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