There used to be an advert in UK for the TSB (a nice old-fashioned bank, pre short-term money days, now part of Lloyds) which went: "The bank that likes to say... YES".
My how times have changed. Now every time S&P open their mouths TMM think their advert should be "S&P, the ratings agency that likes to say... Fuck you".
This morning we woke to the Econo-lovvies (media folk with pretence to financial reportage) on the Radio and TV wetting themselves over the latest S&P downgrades. We were expecting to see flames on the horizon as we approached the City. Not surprisingly the world is still alive despite some quanto-suits stating the obvious. TMM, however would like to look at it through rose tinted specs as a S+P negative watch on core Europe serves to (i) force Germany/Netherlands/Finland off their high ground, (ii) exerts more pressure on policymakers into Thursday/Friday - which can only be a good thing, and (iii) irritatingly, means that UK economic policy is yet again validated, remaining the only "large" country with a AAA not on negative watch. Whowuddathoughtit. Finally (iv) We've seen this movie before in August and the World did not end - there is no shock value now.
But if a AAA rating is going to be as rare as a bull in a zero hedge shop, then as Alphaville point out, its going to make Basle III a touch difficult for the banks as they rush into the small amount that is left. TMM find it most ironic that the UK deficit ends up being funded by European bank capital at ludicrously low rates all because of Global regulation.
With everything resting on the outcome of this week's meetings there is really little else left to say. TMM, as noted in yesterdays comments, threw some VaR behind their "no-commentometer" and bought some risk correlators on the London open.
13 comments
Click here for commentsC says'
Replysee it much the same way myself.They've clearly timed the statement to indicate loudly that they are focussed on political risk and as such the Eurocrats are in the lineup now for whatever happens to ratings from here.If they needed any further incentive to stop squabbling about self interest goals then this is not a bad geeup.
Should they fail abysmally agian this week we do at least now have an alternative .Kepler-22b the only truly safe haven left.
UK TORY GOVERNMENT FTW
ReplyGET A GRIP LEFTIES
You seem to think that basil 3.0 is set in stone. Perhaps the addition of a slaughtered piglet would change the spices in that recipe.
ReplyStagflation vindicated? Questionable. -3% real yield on the 10-year is pretty grotesque. Then again a good bout of 5% inflation would do wonders for aggregate debt/gdp in the euro zone as well, so maybe Mervflation is the way to go.
ReplyNot sure what the cut-off for large economies is, but might want to look at Canada/Australia's economic policy: throw Kyoto protocol out the window and shamelessly exploit natural resources. Works pretty well for the both of them...
Spot on Secret-Sauce. Doesn't need a piglet, though. Just a whole bunch of banks shoring up capital in anticipation of the day they might lend money again. Pro-cyclicality at its finest.
ReplyAll we need are odds on a B3 stillbirth.
Or the Viz ad for "Gnat West".
ReplyOh! And this just in.
Replybtw, while I might be inclined to second the "buy a little risk for me" sentiment at this juncture, I do note that for all our attempts to quantify and manage risk, or at least correctly identify ebb and flow, it has the tendency to rear its ugly quarters unexpectedly in unexpected quarters, e.g. RTSI$.
ReplyTMM, your tactic of "price is news" trade is at its most important stage this year methinks, throw in trendfollowers now that price & averages is having a retest through the 200 daily( pretty hard put down size last time after a 20%+rally before hand) , the herdfollowers of bailout packages, EOY catchup managers, and stops above galore..
ReplyThe Macro data shouldn't carry this very far up at these levels even with CB help..so if the break up happens there"ll be a retest..that would mean that theres been real selling in to it.....nothing like 2010 to moon FED trade..thats about time things become very interesting with 4q earnings and macro data.
Sidelines or tightly hedged is a good bet for now....but any sign of exhaustion after the 9th , then I'm going after betty in spades.
I just bout forgot..yeah...exactly FUCK YOU!...from a wannabe independent trader.
TMM, give us your take on China
ReplyC says'
ReplyI could see some form of topping in early 2011 because we had two issues coinciding.US Fed slackening off in QE and Eurodebt. A perfect storm if you like.Against that corps had done a much better job of managing their performance and arguably that's continued all year even though events have been against them in the second half.
Now the problem I still have with getting uber bear is simple.It is unheard of to be so near a prior top with so many people not fully invested.I don't recall a past occurence of this.Tops are formed when investment flows are fully committed,the last fool is already in,the last guy with the ability to get a mortgage is in etc.Right now though we have a frightening positioning of people either in cash ,or gvt bonds throwing out negative real rates of return. If we are therefore near a top with this position in play we are making history.I'll go with the higher probability that we are not.
C says'
ReplyI should add for context I am very conservative so when i remove my hedges that either says' I'm completely nuts and have lost the plot ,or I am being as objective as usual and analysing moneyflow and sentiment to find the 'pain' trade.
"TMM find it most ironic that the UK deficit ends up being funded by European bank capital at ludicrously low rates all because of Global regulation."
ReplyHow is that? And who takes the fx-risk? Is it GBP/EUR or EUR/GBP bet?