Thursday, April 19, 2012
First TMM would like to thank the wonderful folks of Cyprus for their hospitality, fantastic go-karting facilities, interesting beverages (we imagine that a few local producers are retiring to Monaco after our custom) and their UK weather, imported especially to make us feel at home. Special Cyprus weather. We will be back - or at least our teenage children probably will be. So now we are back on planet "caffeine free" let's look at what's been going on.
Before our departure to overcast climes last week, we mentioned the 2 wobbles and a hope in the triumvirate of global economics so it's worth seeing how things have changed. The most obvious thing that greets us is that China is no longer on the front page of "Bear Weekly". Now this, of course, suits TMM who have been long of H-Shares for the past 3 weeks and we have no plans to change that position. The US picture, post the NFPs, had appeared to have also stabilised and despite a shake down in AAPL things are noisy but flattish, having said that, the Philly Fed and Housing Data is not helpful.
But China and the US appear to have been shoulder barged out of the way by Spain. Poor Spain, doing an impression of a Wildebeest at a crocodiles' pool party, with even Argentina tearing off a limb whilst it's underwater. That move by Argentina should make for some interesting politics. Perhaps the UK should hire Repsol to explore for reserves off the Falklands. That could even end up with the Royal Navy and the Spanish Armada on the same side.
But back to Spain, or now Europe. because after the sort of OK-ish Spanish auctions we thought there would be two options - Buy some carry and wait for the next event date for there is nothing that kills a bear more than nothing happening OR decide that whatever happens, this is just can kicking and so refer back to the holy bible of Euro2010/11 for guidance "For was it not writ that should the Spanish yields hit 6% we should trash Italian stocks, start rumours of French downgrades and argue that the German population will not support the rescue of Spain"?
TMM do prefer scenario 1. What do Europe sellers expect to happen? To TMM it would appear that the only scenario that supports selling right now is one where Spain crashes, doesn't receive assistance, defaults and the Euro and then Europe break up. Now call us picky but though that indeed is one potential outcome there are a lot of other scenarios and most of them involve some internal resolve, even if it does involve printing your amount of money. Elections may change the leaders of some countries but as the UK Con/Lib coalition is finding out, they are but the tip of the iceberg of the machine that is government. There is enough mass below the waterline that knows where its true interests lie to stymie any threats to them. Yes Minister indeed.
Having piled back into equities last week the current mood should be considered as red flags to us and we really ought to run with the pack, chop the longs, swing short and whip up the doom. Instead though TMM have decided to do the reverse and have broken the glass on the cabinet containing their Kevlar Gloves and bought some Spanish stocks of international appearance ( braced for comments). Hold on tight !!