Tuesday, February 21, 2012
Do you think Juncker was singing David Bowie's "Cat People" after last night's Greek negotiations?
Still this pulsing night
A plague I call a heartbeat
Just be still with me
Ya wouldn't believe what I've been thru
You've been so long
Well it's been so long
And I've been putting out fire
Putting out fire
Which is basically the sum of it, but, as we have pointed out before, the fight has moved one level lower down and now it's between the Greek Parliament and the Greek people, rather than between Europe and the Greek Parliament. What is obvious, though, is the ridiculous nature of what the negotiations have revolved around: the reduction of debt/GDP from 129% to 120.5% by 2020. That's eight years away in an environment where one can't even forecast GDP to the nearest 3% in any 3month period. What is the point? Well, we know the point, it's to keep the rule setters up north happy, but to Team Macro Man it's just another classy example of Benchmarks being Bollox. But in the short term it does move the boiling cauldron of Greek carcass stock to the back burner, where it can continue to simmer whilst the market tries to decide what's next to prepare in the recipe of Global Macro.
Team Macro Man are not that bothered by G20, but instead are looking through to next week's LTRO, which they see as a bit of a landmark event and as the potential catalyst for a change in trend (or at least a shake down). Readers will know that TMM have been believers that the LTRO is a powerful tool that is effectively decoupling bank risk from peripheral sovereign risk and so creating a fire break between a perceived default and the real economy via banks. However that doesn't mean that the short term response need be positive.
China - On simmer at the moment, but the market may well try and bring it to the boil again and it will get more airtime in the coming weeks. But unless it falls over completely (which we are NOT expecting) there is little risk of any Asian wobble being anything more than corrective. Of course this will probably lead to the overly long spec positions in AUD being unwound with associated screams of anguish and pain, but the background longer-term is not unconstructive and with ref to our Equity calls for 2012 we are looking at ASX shorts instead.
But back to the short term, it feels as though everyone wants to "sell the fact" but rather than jump on that bandwagon we would rather fade today's dips saving our ammo for next week post LTRO.