Tuesday, March 20, 2012

Didn't Happen Happenings

After unanimous agreement TMM have decided that given a choice between doing what they are currently doing and skipping hand in hand with a loved one through woods dappled with spring sunshine then they would be out through the emergency exit and down the stairs (walking, not running, holding the hand rail and in single file as per health and safety instructions) and bounding liberated as washing-powder advert people, across over-verdant grass towards a wood that would be straight out of an AA Milne book. BUT unfortunately they haven't got that choice and instead are watching stuff happen that isn't happening.

First out of the "didn't happen happenings" blocks was China. Well China DID happen, but a coup and the complete collapse of their internal political machine didn't. If the People's Republic wanted to completely discredit "The Epoch" then this morning's shenanigans was a class act. Rumours of gunfire linked to a story written in Washington 12 hours earlier and a general Asian equity slide congealed into a brief "coup in China" flurry. Now TMM are certainly not in the position to know any more about the internal bitch-fights within the People's Party than anyone else, but they do know a market needing a story when they see one. Whatever may happen in the future, for now The Epoch appears to have moved swiftly from "interesting insight into internal Chinese politics for western observers" to "Falun Gong sponsored dodgy rag with a mission, to be taken with a pinch of salt".

Sovereign CDS that did not happen. TMM have been in the bunker for a while waiting for reinforcements to support their core belief that Sovereign CDS is a rubbish product and so are pleased to see today two stories (here and here) that got our full support. So we are very comfortable in re-announcing that the happening of sovereign CDS as a product fit for purpose did not happen.

Next on the didn't happen list, but OK, may be on the yet to happen list, is a large market sell off. This morning might have looked like it is, or was, but TMM will not happily admit that a real pull back (that they DO want) is underway until we have a day that sees the US SELL rather than buy back any previous sessions sell offs. A trend that have been so prevalent for the past few weeks. TMM are being buffeted by cross winds of technicals vs long term fundamentals. The Soothsayer is screaming sell in Spooz and its correlated FX crosses and it looks as though we have a combined asset move. So although we would love to see a good old fashioned turnaround Tuesday we can't believe it has happened... yet.

Now this we really wish had happened but didn't - Being held in our short USDJPY positions, short FTSE positions and some stuff that is so RV complex you really don't want to know. We thought it had happened, but in fact it hadn't happened. We were stopped at a catalogue of "are you sure it was really there" rates that have us licking our wounds, cursing illiquid products, re-entering at cost and magnanimously blaming ourselves because we are obviously Muppets.

And finally, footballer Fabrice Muamba who effectively happened to die on the soccer pitch last Saturday. A miracle of survival, circumstance and modern medicine have combined miraculously to result in it not happening. Extraordinary.


Amplitudeinthehouse said...

Agree,still has that Yennish feel to it.

Noticed that QE1 peaked at 15fwd earnings...QE2 peaked at a touch over 13fwd earnings...and now we're trading at around the 13fwd again.

Glad to be just an short-term macro-trader.

Who can blame anyone having a go at trading,seriously..it's enough to turn you into a hipster!!


Leftback said...

I am not sure if anyone knows how it's possible that Mr. Muamba is still with us, but it is undoubtedly a wonderful thing.

TMM getting Yennish? Oo er.... the screens, nurse!

LB has been looking around at the Pink Flamingo landscape. Anyone got any decent nominations?

We just ended a successful Bug Hunt, and we reckon the Emerging Markups might be standing on one leg....

abee crombie said...

not really a pink elephant, but short india, auz sub bank deb

I'm looking for AAPL or something housing for a tell on the downside. Neither can pull back and I feel have a lot of lemmings witih em now

gutted I missed the rates move as well.. i punched out 1 day too early. Schatz was (and still is) giving it away

Anonymous said...

Your belief in "The Epoch" in the first place stuns me. It shows that market desperately looks for some kind of excuse to drop.

Leftback said...

It all feels like it's getting a bit RORO again, doesn't it? Traditional correlations seem to be slowly re-asserting themselves.

US has that Teflon feel at the moment, the best trades are probably elsewhere as long as punters continue to sip the Decoupling Kool Aid. Anyway, the flamingos probably are out there in the Emerging Markups and commodity arena.

The EU PMI data tomorrow might upset a lot of apple carts.

1) European equities.
2) Brent - Germany is a consumer of oil as a starting point for chemical synthesis.
3) Energy stocks.
4) India and China - Europe is a major customer.
5) All emerging markets, on 3) B, R and 4) I, C.
6) Miners.
7) AUDUSD and AUDJPY. B/c of 7.
8) Nikkei, b/c of JPY carry unwind.

Leftback said...

Can TMM please comment on this at some point?:

Call For LTRO Exit Plans

Given that it is only about 5 minutes since everyone was screaming TOEOTWAWKI, and that this state of affairs is quite likely to be revisited should Spanish yields continue to rise, what exactly do TMM think of this bit of EU jawboning? Obviously, YGTBFKM if you think anyone will exit LTRO quickly.

Perhaps a bit of this is going on:

"On behalf of our taxpayers and electorates we are forced to posture and to act as though we are pretty disgusted by the obscene amounts of money you chaps have made since we gave you a massive pile of free taxpayer money.

We know you are going to turn the profits from this binge into massive banker bonii and this will be spent very largely on buying châteaux, cocaine and Serbian/Latvian hookers. Which is all well and good, and in keeping with tradition, but we are forced to posture here and announce very sternly that you'd better not EVER ask us for another one, you greedy manipulative lying bastards."

That pretty much paraphrases taxpayer/politician response to the US TARP, which is an almost exact parallel to the LTRO.

Here's the flow diagram for those who would like to play the bailout game at home.

Buy trash, buy more trash with leverage until liquidity is tight, then Short the Trash, Short Banks, Short your own bank, and (PIGS version) Short your own govies if you feel like it, Precipitate Crisis. Visit government threatening TEOTWAWKI.

(A bailout occurs here)

Receive free money, carry trades, buy your own bank equity, (PIGS version) buy your own govies back cheap, announce "green shoots", pay extra big bonii, dilute punters by new bank debt/equity issuance, results in economic stagnation, high unemployment...... new crisis....

(this cycle may be repeated infinitely until taxpayers no longer fall for it).

abee crombie said...

europe sells off, and Sgt Slaughter USA buys em back


I havent seen a whole lot of Dr Copper vs S&P charts in a while. Perhaps bulls just dont care..its funny bc growth stocks have been doing well in the run up, even though global growth isnt..

Interesting article about Margins from J Monitor at GMO...

Gold below 1600 gotta trigger some sells in trend following systems I would think. Getting close!

Leftback said...

Now I am really feeling yennish, TMM! I hereby nominate Yen shorts as the FLAMINGO du JOUR.

Mainstream Media John-John Notices the Yen Carry Trade

This guy has JUST noticed there is an ACTIVE yen carry trade. Blue Peter badge for this lad.

Time for JPY to rally, perhaps? It only had to move down 10% for the guys in the clown suits to notice and inform the investing public.....

WellRed said...

Does anyoen else get the impression that the tone out of China is deteriorating?

Bought some TLT on the cheap, and starting to have a closer look at VXX. If the term structure of VIX furtures keeps flattening, that will surely be the trade of the summer.

WellRed said...

Also, today's underperformance of financials and AAPL's sell-off into the close were two rare sightings in markets today..

Polemic said...

With you on the Yen LB, Especially aud/jpy.

as for the LTRO, perhaps they should go "Osborne" and do what he did in the UK budget using bank levies as a counter to any benefits the banks get through hand-outs to corporate world in general.

As for what happens at the end of LTRO, if it threatens to be as bad as what LTRO prevented, then I reckon they WILL do it again. (But it won't be).

Amplitudeinthehouse said...

Wot ya gonna do when the PMI come chasing after you!!

Leftback said...

"Truth is, I thought it mattered.
I thought that macro mattered.
But does it? Bollocks!
Not compared to how sentiment matters."

"Here comes the daylight, here comes my job
Uptown in the penthouse or downtown with the mob
Here comes the night time, here comes my role
Goodbye to the pavement, hello to my soul"

Steve said...

Liked those PMIs That's what I call a "miss"

AAPL: Flat on the day. Life is good.

Steve said...

Sounds like the Germans are irritated at LTRO (they never would have done it) but hey: Under New Management.

Plus, it's not like they can call back the loans, 3 yrs is 3 yrs. It's a bit late for buyer's remorse.

Leftback said...

Let's review our recent flamingo lists:

1) European equities. CHECK
2) Brent - CHECK
3) Energy stocks. CHECK
4) India and China - CHECK.
5) All emerging markets, CHECK
6) Miners. CHECK
8) Nikkei, not yet.... can't win em all !

The winner of the flamingo hunt is: abee crombie, as India is being incinerated today. EPI down 3.59%.
A case of fizzy pop and a Blue Peter badge to you.

abee crombie said...

now that we got our mini sell off (3 down days in Spoos), the question is do you buy it back yet or wait... ugh I hate hedging. Its always easy to put it on, impossible to tell when to take it off.

Re: Vxx etf and the term structure. Its almost as bad as UNG. While shorter term stucture has come in, I still see big time decay in 1&2 month contracts.. or am I missing something WellRead

Intrinsic said...

souwith VXX ET, you really have to get the timinig right, if not. Look what happens 3 month, 1yr and even 2 years back.

On the short side, it is a great product. On the long side, tricky at best.

WellRed said...

RE: VXX. Timing is everything. Wait for VIX at 15 and term structure flattish (say 5-10% implied depreciation/month). VIX is around the right level. Term structure needs to flatten. Then it's time to pull the trigger.