Tuesday, May 01, 2012

T'was a Dark and Stormy Night

We've been playing Battleships with the RBA - RBA's go. -50bp. Booosh. Hit...... Battleship AND Destroyer. Otherwise known as our short Aus bills and long Aud/Cad positions. Holed, but we still have steerage and the main engine is still running, just. Man the pumps. What a bunch of W&^ers.

 Aud/Usd is 100pts lower, Aud/Cad is back to its lows of a few days ago, eur/aud is breaking higher (but then we do have euro relief going on too). Rates market moved sharply and is pricing more than 25bp of further cuts combined for the next two meetings.

That RBA rate cut has really focused minds over what's going on out there. There has been a massive positional and mood bias, mostly from US leverage that a) China is heading for a hard landing and that b) Australia's two speed economy and constant deficits leave it highly geared and more and more dependant upon the China dream paying for local excesses. Because of that AUS has been a favourite short since the beginning of Feb, when the China fears really started, as Aus was seen as the vulnerable high beta. So today's RBA cut could be seen as the final justification that those shorts have needed. Toldja so! Particularly from that McCrann man. Uuuurgh.

But the China part of the Aus trade may not be paying off as fast as many had hoped. PMI this morning at a smidge under expected is no calamity and, to us, points to flat to up, rather than down the tubes (before anyone starts, we are NOT of the opinion that the official PMIs are rigged).

Is Aus going to tank from here? TMM still think not and rather than abandoning their AUD/CAD ship they prefer to man the pumps and bail like hell. Unfortunately their Aus bills position has already sunk below the waves.

It's meant to be a holiday today, but TMM haven't had much fun either at work or outside. As the media headlines proclaim "This is the wettest drought on record in the UK". With hosepipe bans still in effect, TMM are waiting to hear back from their local water authority as to whether they are also banned from using them to pump the floods out of their houses.

Elsewhere TMM have permanently  switched off the BBC Radio 4 Today program in the mornings and are bearing up to "easy listening" instead.  We suppose that with the Leveson enquiry nailing the Murdoch empire and the BBC's natural bias melded with some of the most embarrassingly twisted economic "analysis", we shouldn't be surprised at the minutiae of political issues being dragged out as headline stories. TMM are waiting for the headline news that Tories are guilty of human genocide because it hasn't been proven that they are not and some email is found saying " I'll kill whoever said that"  in some ministerial hard drive. BBC - GET A LIFE. Or rather get some journalists who have some understanding of the real world.

We do feel that mankind is being poorly served by politicians who have studied nothing other than politics, being reported upon by journalists who have studied nothing other than journalism. Team Macro Man have suggested before that politicians should  only be eligible for election having spent at least 10 years in a "proper job" but we would now like to extend that stipulation to encompass journalists.


Anonymous said...

Ah, but is macro punting all that proper either? We're all just mucking about in absurdity and as Hendry said, there are no rules.

Polemic said...

Anon.. completely correct macro punting doesn't count either.. and as I've had on my blogger profile since I started this - I "still wonder what I'll do when I have to get a proper job".

abee crombie said...

for all the bearishness on china, RBA cutting rates, base metal stocks under preforming, you would think that the AUD would be a lot lower.. below 1.00 USD at least.
The fact that it isnt perhaps suggests something

I think china equities are a better buy than AUD at this point. Less downside 'stop' drops IMHO

Interesting CB moves in Mexico as well. currency wars heating up!

Polemic said...

And any comments about "well a journo obviously knows more re rba than pro macro punters, so how does that fit in" will be deleted!!! :-)

Leftback said...

RBA -50bps - reflects a feeling that all is not well Down Under, especially with Aus banks looking nervously at the housing market.

LB also leaking under the waterline, hedged into the ISM number and still cautious ahead of the latest ADP/NFP lottery. We are a bit range bound here, so it makes some technical sense to hedge.

It is shocking, shocking news to find out that Rupert Murdoch isn't a jolly nice chap and thoroughly decent businessman. Who would ever have guessed? The political climate seems ripe for some more kabuki theatre of this nature in Washington. The lawyers will love it.

abee crombie said...

well that was a nice, rip your face off, rally post ISM. Ah 1st of the month price action. Machine glory!

Could be a nice entry point if one is worried about jobs. Better yet, let it drift back up to 1420 so I can short more

ntwsc said...

Aghhh this morning's Pinky and Perky show was the absolute end. Trouble is I couldn't not fall asleep to the World Service.

Trouble also is, the radio's probably bust now anyway.

ntwsc said...

Twaughtie: So there are only 100 pairs of endangered blackcock left in the British Isles? [you get the gist]

Eminent bird bloke: Err noo, actually there are still around 500 pairs of endangered blackcock left in the British Isles.

Twaughtie: Well what's 400 pairs of blackcock between friends?

It got worse.

Polemic said...

ntwsc - that point after the 400 grouse comment was EXACTLY when I switched off.

Anonymous said...

How's this from former Cdn CB, David Dodge:

"Monetary policy should not be used to tackle housing bubble: David Dodge".


Mark Carney is threating(jawboning) higher int. rates to curb speculation...if that's going to work.

Anonymous said...

RBA atypically behind the curve -50bp was an admission that they should have gone last month (yes they wanted to wait for CPI, but they already had more than enough reasons)

AUD stronger than it should be due to large international insto bond buying (4 handle in 10y bonds anyone? nb: not a 4 handle anymore...) remember the AUD is generally quoted versus the USD, who are effectively running negative interest rates

not surprised we aren't lower (aud), but was surprised we didn't make a higher high (1.15-1.20)

Aussie Bonds

redrut said...

Agree about this news being good for the short AUDUSDers...

I am one of the clan, but I have recognised that my good fortune has not come from my original investment thesis...

Sometimes you can just get lucky, and you will look like a plonker if you can't admit that!!

I will be paying close attention to the trade figures from Australia, as well as miners results to determine what is happening w.r.t the China/Aussie connection


Anonymous said...

live in Vancouver, still dont understand how the hell we continue on chugging along.

How can a country like Canada keep running a trade deficit, a consumption boom and two raging housing bubbles in Toronto and Vancouver for 4 years now?

But I guess if all of China wants to launder their money somewhere and Singapore and Hong Kong are just a bit too close to the comrades back home stashing it all in Vancouver condos that are built for 200k and sold for 900k is the ticket. Should have gone into luxury realestate and car leasing with a Chinese speaking partner!

Steve said...

I've been short this thing for a while and like most high-cost negative carry trades have made little if any money. It's all about China to me, and since I can't trade it, AUD and HG seem like decent proxies.

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