Friday Questions

Friday, May 11, 2012

"The world was darkling. The very air seemed brown, and all things about were black and grey and shadowless; there was a great stillness. No shape of cloud could be seen unless it were far away westward, where the furthest groping fingers of the great gloom still crawled onwards and a little light leaked through them. Overhead there hung a heavy roof, sombre and featureless, and light seemed rather to be failing than growing" J.R.R. Tolkien

Despite the sun finally appearing over London today (actually as we write it's gone again) the financial scene does feel very Tolkienesque especially in Europe where, if they were to reshoot the film, we would suggest the following cast :

The Ring - the Euro
Sauron - Weidmann
Saruman - Scheuble
Mordor - Germany
Mount Doom - Bundesbank
The Nazgul - Bond Vigilantes
Gollum - Greece
Gandalf - Draghi
Frodo - European Economy
Bilbo Baggins - Trichet
Gimli - Merkle
Pippin - Hollande

Elsewhere, we really couldn't decide which picture of an exploding whale to paste in so instead pick your favourite here.

Once again we wheel out our favourite trading aphorism "If you want a hedge, go to a garden centre". $2bio is really not a lot to a bank of their size and though the world's media, Volker advocates and all of JPM's competition are expressing a level of schadenfreude that is verging on Milibandesque, unless there is a systemic threat to the system - which we really don't see despite the disasternista's "but what ifs" - this is localised issue and not worthy of shellacking the whole US market and certainly not global stocks.

There is one upside to the event - the resurgence of the word "Egregious" According to the OED, "Egregious" is defined as "towering above the flock", "Prominent, projecting", and yet it can mean "remarkable" in a good sense or "remarkable" in a bad sense. We look forward to this word rocketing up the management bullshit charts as it basically means "wow that's big" but with no admission of failure.

TMM have to rush off now, but leave you with some questions for the weekend -

Can the catch all "unwinding inflation hedges" be used to describe recent market moves, especially in commodities and gold?

Gold. 1480 or 1680 first? We have learned not to mention this relic and have stayed clear of its debate for the last 18 months having found the subject more touchy than Great Aunt Maud's crack habit. So lets just ask - 1480 or 1680 first?

Are Greek politics modelled on Monty Python's "Life of Brian"? We've already had the "what did the Romans Europeans do for us?" scene and have now moved on to the confusing list of popular people's parties.

What yield would you have to be offered to eagerly buy Spanish 10yr basef on current information? (Expecting more than "any price lower than market bid" thank you)

Is "Sum of the Parts" analysis more relevant now as this isn't a global crisis but a set of local issues that can be arb'ed on the global stage. Eg.TEF?

Are we mad to think the best fx trade here is to buy aud/jpy?

Will Spanish banks morph into a single EIB/EFSF backed people's popular post office?

Should TMM walk away from the 20% deposit they paid on their Greek summer holiday? Yes, Greece again. The family like it.

Posted by Polemic at 2:00 PM  

16 comments:

I tend to agree with Macro Man on the Milibandesque schauenfreunde on JPM. Dimon might be a bit of flashy , but generally he has outperformed his peers albeit the level of competition is LOW. When the chips were down during 2008, he did offer $2 per share for Bear , with Fed backstop while the more gullibe fools like Kenny Lewis paid real money for basket case like ML. TMM is right about $2bn being peanuts, especially given that the loss will be partially offset by other areas in the bank. I don't like financials, but if I had to choose , I would pick JPM over the rest [as a long term punt].

Tradebot said...
3:05 PM  

Aud/JPY eh ... I like that punt. What about the mighty CAD will it break lower against the bucky or just swing back?


Greece will be fine for a holiday ... but bring cash

CV said...
5:03 PM  

1) yep

2) your lower band

3) your extrapolating, this is not a good sign.

4) 6 3\4

5) In for Yennish a dollar ... in for a Yennish pound.

6) your prior extrapolation isn't a good sign.

7) when it hits 6 3\4

8) beats me!

Amplitudeinthehouse said...
5:11 PM  

now that all the momo guys are out of gold (and maybe aapl) who knows. The fundamental case still makes sense, more than ever and I dont see why the gnomes in zurich would rather own the pound but hey markets dont always make sense

i'll take 1680 first

abee crombie said...
5:19 PM  

I like AUDJPY and short USDZAR. Rand has been taken out behind the woodshed recently.

The drum was beating loud out here in Asia today for "imminent" policy easing in China. I suspect something will be announced over the weekend.

Skippy said...
5:31 PM  

It makes you wonder when the only case for actually buying anything is imminent policy easing...name a country/central bank after the tone. The only problem is that fundamentals are deteriorating fast - like in China or in Italy for that matter. So place your bets on easing and how long the sugar rush will last this time - 3-4 months like the last LTRO or maybe even shorter? Or maybe the easing requires another 20% drop from here?

Anonymous said...
5:44 PM  

Since the guys on the other side of the Whale trade are quite likely to be other large banks, the $2B JPM loss is indeed a complete non-event for markets in general. LB does think that Dimon has been a sanctimonious and hypocritical prick during the various crises, and hopes that the media fawning over "St. Jamie" will cease. although it's not like he did a Corzine and blew up his own firm. At the very least his beatification will now have to be delayed.

In other news, Spain is still attached to Europe at the Pyrenees, and ES 10y hasn't gone vertical. In addition, the Chinese data hasn't triggered any actual selling. We think there is ample reason to remain optimistic and bullish European and Asian equities for the time being.

Leftback said...
5:48 PM  

CHK cliff diving. The preferreds are plummeting as well, they are probably gone for a Burton. No Kevlar for me on this one. It smells like a latrine.

The US has so many dodgy operators.... it's enough to make you go long Greece. Well, almost.

Leftback said...
9:02 PM  

last time we had a ramp up after a bit better number in the US was on ISM, the next three days were ugly.. kinda same thing happened after Michigan today.

CHK is f-ed, but cheers for the heads up

Took some HYG short ... getting very nervous. This market looks ripe for dump.... knowing exactly that I bought too much spec stuff waiting for a bounce and that I will puke it out at the worst time

abee crombie said...
9:45 PM  

Greek politics are modelled on Yugoslavia.

Buy the 10 and keep it. CPI+390.

But... look for your opportunity in the 2- or 3-yr or, since we're talking intervention in one form or another, the steepener. Today's news that briefly (ever ever so briefly briefly) knocked 7% off SAN added 15 to the short yield - and it stuck. The 10 went up 6 and gave half back. 375 for the 2 is approaching nosebleed territory,

The local banks still have at least 100 bn of the Feb LTRO lying around. Though they have sworn that they've had enough of Spanish guvvies, take it with a grain of salt and keep in mind that they previously bought letras way in excess of their actual proportion of outstanding.

One hopes they turn into the post office. Staff cutbacks and going to a bank is like registering at Roach Motel.

Charles Butler said...
9:47 PM  

Oh yes, and 9 weeks without an ECB bond purchase. Sad, isn't it? The whole thing reduced to betting drivers at Yonkers.

Charles Butler said...
10:39 PM  

LB CHK may smell like a latrine, and its management may be sh-t, but it's assets are not.

Anonymous said...
2:25 AM  

I am BOSIVIAN AUD/JPY, and intend to stay that way as long as the trend remains intact.

Anonymous said...
5:29 AM  

I find the market fascination with bunds et al somewhat bizarre...and this is coming from a deflationist (former). Stocks simply look so much better.

What is the view on Chinese stocks....they gone sideways since 2007, albeit in a wide, but narrowing range. Is FCSS LN an cheap way to play given it is at a 6 ish % discoun to NAV?

Religious gold stocks - various back of envelope pricing measures suggest they are best value since nov 2008. Yet, the metal has consolidated for 1 year...opportunity or value trap?

jPY - will BoJ try harder to destroy it? Is it a great short? Was the bottom in last year?

Anonymous said...
8:51 AM  

All the smart (dumb?) money in natgas land is on DVN (full disc: I own DVN), and has so far been proven right.

CHK is a mess good assets or not. Buy-out target? I read somewhere that Sinopec are having a sniff.

Claus

CV said...
11:17 AM  

Gold may well be a 'relic', but create-as-much-as-you-like-and-price-it-however-you-fancy 'paper' money is just a 40-year old experiment. How well d'ya think it's going?? Still, low-/mid-1400s look likely before a rerun through the highs.

SteveH said...
1:05 AM  

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