Wednesday, July 04, 2012

Glacial Interest

Having returned from various sunny climes TMM are still trying to overcome a state of chilledness that is positively glacial. We have slowed to an imperceptible crawl of decision making where deciding between a tea or a coffee has taken most of the morning.

What a week to miss. Keen non-glacial firebrands would say we missed a scorcher, but TMM are very happy not to have been here and to instead only now return to what has rapidly become a very quiet market where the US vacations today have stalled things to a crawl. Interesting that the US is celebrating independence from a far off government that imposed unfair and undemocratic laws and impositions.  Ooooh, where do we start with that idea and Europe at the moment? 

As for Europe, it would appear that last week's Euro summit was the equivalent to the Eurocrats chucking a smoke grenade at the market and legging it. TMM wonder if this is a rerun of 2010, with an implementation of the tried and trusted STFU policy which managed to deflect attention away from Europe and back on to the US. It does appear that we have returned to a "no news is good news" mode and there really is very little to add to the basic macro arguments that have been the debate ad nauseam over the last two months.  In the meantime we don't think the market is anywhere near cleared out in its anti Euro trades and, despite falling implied volatilities, is still very skewed.  

US -  Data data everywhere and not a thing to think. Sorry we are not yet in the zone and dissociating local issues from Euro induced global malaise is for later.

PMIs - Well fancy that. The figures come out just where they are suddenly expected to be 10 minutes before their release. 

Vols -  Cor they are low. What's all that about then? Massive squeeze in the "blow up" vol longs? Desperation in fund land for some premium? a REAL thought that things are steadying? Doubt the last one as the chatter is still "well if it hasn't happened yet, it will soon".

Equities  - New recent highs. QE3 some say and looking at discretionary spending component vs main index there is indeed a lag and the gold outperformance is also pointing to a QE3 bias, but we maintain our general favour of equities over bonds and commodities

IT depts. - Returns to work always appear to involve delousing the boxes under the desks that for some reason go on a password change frenzy combined with an obviously AI evolved ambition to be done with mankind in "The Matrix" fashion. This of course requires a few calls to the IT department. which has led TMM to suggest that IT depts are  replaced  with a large sign stating - "Log On - Log Off".  IT depts. are challenging London Public Transport workers in TMMs league of piss take "got you by the goolies" jobs. 

Barclays -  TMM are looking forward to a Gladiatorial conflict today .. "My name is Maximus Possible Profitus, commander of the Armies of 5 North Colonnade, General of the LIBOR Legions, loyal servant to the true emperor, Marcus Agius. Father to a murdered business model,  husband to a murdered derivatives desk. And I will have my vengence, in this life or the next"

Back tomorrow with a more detailed look at the energy and power sector.


abee crombie said...

hold the line Maximus!

FX land, especially the EM land seems to have calmed down a bit as well, as country specifics seem to matter a bit more than last month

if equities are the rudder steering the global risk appetite then Q2 earnings should be big

so far in equity land, from my vantage, what is working is not the kind of stuff that is going to lead a big run up

new lows euro....hmmm

Leftback said...

Classic Sell The News morning....

More Euro bargains will be out there today and tomorrow for dumpster diving enthusiasts.

SPX likely to be puked back down to the 50 dma before rising from the ashes next week - once we see earnings are not actually that horrific - and the Wizard is still waiting in the wings.

Anonymous said...

C says'
Personally on days like this I much prefer to study where the markets close and how. The old sell the news can some times be nothing more than a shake out that leads on to cover buying etc etc.

Leftback said...

We have the Kevlar gloves and chain mail clothing ready but we haven't yet donned them. It is, after all, a bit steamy in New York this time of the year.

More to the point we don't want to get our digits or other extremities sliced off, so we will watch for a while, until the EURUSD knife has clearly stopped its descent.

The other critical index for us is Spanish and Italian 10s, so we have half an eye on those yield levels that have proved to be a profitable entry point in the past.

The good part about our current strategy is that we don't have to play Non Farm Payroll bingo this week, which suits us fine, as the US market remains massively uninteresting and the difference between 98,000 and 102,000 jobs created means sweet FA in economic terms, really.

Glendokid said...

I spent 30 years as an IT manager and have to say that your analysis is spot on for most IT depts. Service and Organization are two words they never use in the same sentence. And they don't seem to realize that security is their responsibility, not yours. e.g. that passwords shouldn't be the method of authentication in a financial setting.

Leftback said...

It has been quite instructive to look at recent Chinese data on electricity use to determine whether China is really growing as fast as its fearless leaders would have us believe. There is now little doubt that China is growing much slower than the 8% official data, (aka PRC Porkies).

A quick reminder using energy consumption data that the US economy is really absolutely pants, and that the recovery continues to be very weak indeed. Americans don't drive to jobs they don't have, nor do they if they have become self-employed PJ-wearing "consultants" who "work from home" on their "new start-up business" (the latest socially acceptable form of unemployment for a generation that is used to getting medals for participation).

US Gasoline Sales

So if you'd like to hold long USD positions b/c of a weaker Euro, or as a safe haven, that's fine. But if you think every USD surge reflects a stronger US economy then I have some very depressed small towns to show you. As for China, even 4% growth looks good in a 1% world, so the emerging markets are probably worth a look.

Anonymous said...

C says'
and my last take on today is that the search and hunger for yield is not dissipating,it's growing, so be very careful what you try to get short on. Will they get burned,who knows,who cares at this point.The point is the message from CB's of low and lower interest rates for ever longer 'extended periods' is still converting moneyflow.

Anonymous said...

C says'
and my last take on today is that the search and hunger for yield is not dissipating,it's growing, so be very careful what you try to get short on. Will they get burned,who knows,who cares at this point.The point is the message from CB's of low and lower interest rates for ever longer 'extended periods' is still converting moneyflow.

Anonymous said...

In market terms this appears to be a good juncture to selectively bank some profit and flatten the portfolio for a couple of weeks.Weeks in which I shall endeavour to slum it and search out the real depths of European austerity and recession as seen along the Via Tornabuoni and the Via della Vigna . This will be a test fit for the SAS wending one's wife hopefully past the 4 digit price tags searching forlornly for a Primark.

Arrivederci !

abee crombie said...

Off topic...

1)Agg market has taken a real pop. Hot weather in USA = potential problem in EM

2)Housing in the US is doing well, but its still pretty hard to get a loan... it amazes me that now in Canada, Indonesia and others you need min 30% down, and yet their markets continue to go nutty. I guess credit become secondary to the self sustaining nature of the trend .. or really there is just that much money out there

Leftback said...

Predictably lousy US data, Spanish 10y kissing 7%. Negative Schatz again and Denmark in NIRP (negative interest rate policy). More selling.

The stage remains set for further reflationary interventions. So it is finally BOLIVIAN time for LB. The European Kevlar gloves were on again this morning as we piled into some yield.

For those of a technical disposition, we point out that the XLE has made a series of higher lows, and that a variety of charts - EEM, EUFN and the IBEX, to name but three, are all exhibiting what must be interpreted as bullish formations.

SPX still has time to touch its 50 dma today or Monday before we begin the earnings grind. We like to look at SPX as a barometer but have no interest in the US market at these levels - not with the economy at stall speed, fiscal cliff issues in the air and Republicans bent on damaging the economy as much as possible to prevent Obama's re-election.

Anonymous said...

LB, following on from a comment on another post, what's your take on Basel 3?

Leftback said...

Anon - I thought Basel 3 Man U 3 was a good one, but Basel 2 Man U 1 was even better.....