Wednesday, August 15, 2012

Thinking Aloud.

UK - More data that flies in the face of the growth figures of the ONS. Some component of Okun's Law doesn't add up and, as the market is becoming more aware, it's the growth side. So despite the UK press deriding the government for lower growth levels than Europe it would appear that we are in for a pretty good bounce in growth figures  - or further dismissal of ONS reliability. TMM are beginning to think that the ONS should open source all their data so that people can do their own analysis as the ONS are so useless at it.

Aus - Aud appears to be the new Tabloid trade with a the only disagreement being what to short it against. GBP, EUR and CAD being favourites, but TMM are slightly concerned that too many short term specs have piled in leaving them vulnerable to a squeeze from ongoing reserve manager purchases. We'll wait for a rally to sell into and we may just pick NZD to sell it against. 

Equities - Technicals look as though we are rolling over on many counts and with the market driven by models we wouldn't be surprised if that function dominates, though we are looking for much more upside there could be a couple of days of bear food. 

Oil -  Toit as a Toiger. So our oil mates tell us. Slow down in production in Brent soon adding to price hikes but our normal premise of oil being the "govnor" would lead us to believe its a pre-emptive growth trade rather than middle east warning, though indeed Syria is turning into the thunderdome for extremists to punch it out in. On that point, USD/ILS? Two days of rallies unwinding fast and oh look at that - a double soothsayer sell . 

Greece - Unlike last year where TMM found a population in denial this year there appeared to be more of an acceptance of the situation and, dare we say it some, humility. Good to see more local goods on the shelves even if the price of olives is still more than at top end supermarkets in London. And butter at E4.30 for 250 grams? Glad to see opportunism is alive and well. TMM are going to arb Lidl against Fiskardo supermarkets.    

US data -  Back to the QE trade. Inflation weak + weak Empire manufacturing = QE3 chance heightened = sell Usd/Jpy and buy gold.  Buy equities too but with technical signals pointing lower we end up flat ...Blaaaa. 

Assumption day in Europe - As TMM love to tell their juniors - "Assumption is the mother of all f**k  ups". If only the market would take heed.

Back to sleep.

16 comments:

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Anonymous said...

C says'
Given we are thinking aloud I am not inclined to start making any significant analysis of markets prior to a September reset. Until that time I am inclined to view pricing as being set in the playground,or by boxes neither of which has anything to do with fundamentals and everything to do with momentum.

Polemic said...

Yes C

And as humans and news are lacking its an algo and technical market.. so more weight should be applied to watching techs for short term moves.. momentum to upside in eqs is fading and we would expect model trades to start to lighten up longs - that price feedback to feed more selling. Just thinking out loud.. well and also buying shorter dated downside spx strikes against core longs!

Jill said...

For those who trade commodity futures
with U.S. brokers:

You no longer have the protection of U.S. Courts. This federal appeals court ruling is now law. There is no such thing as segregated customer funds. Once you give a financial institution your money, it is no longer yours, and you have no legal claim or legal recourse to it when it is stolen...

http://tinyurl.com/9s3ucwn

"That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud' its customers."

U.S. Circuit Judge John D. Tinder

Jill said...

Link to Sentinel Appeals Court decision:

http://tinyurl.com/bna7uow

Leftback said...

Spain continues to melt up quietly, making money for us every day. Watch out for signs of clueless herds of punters arriving in Pamplona and lighten when they start entering?

Philly Fed was interpreted as a +ve ∂ in p(QE3), market took out my strong dollar hedge today. Despite a little bump today, the "safe haven" fixed income plays (US 10y, bunds, gilts) has become a genuine pain trade. Drip drip drip as Tsy longs continue to exsanguinate. What levels do we need to see before punters exit equities for the safety plays again? 2.00% 10y? 3.00% 30y?

abee crombie said...

meh melt up mode....everyone just doing the same, no need to get aggresive at this point.... and technicals not looking so bearish to me if we can hold todays gains

my spanish stuff is working as well, but still down bc of the eur currency exposure.. blah

Anonymous said...

Per the QE question, how to reconcile "inflation weak" with ever rising breakeven rates? Look where the 5/10 year breakeven was pre J.Hole August 2010 versus where it's at now, for instance...

Leftback said...

Anon, bear in mind that most of TMM live in the UK, where 4-5%/yr inflation is more common of late than it is in the US, hence the 1.9-2.2% break-evens are viewed through a slightly different prism...

Of course the question is, how does it look through Uncle Ben's prism? Break-evens might have to collapse very suddenly from here to trigger the unleashing of QE3 in September, and the only possible cause for a quick 50-75 bps drop would have to be a Europanique of monumental proportions.

It is, as they say, in the realm of the possible....

Anonymous said...

Can Ben justify QE3 with the SPX at 1420? We're approaching all time highs but we need more stimulus? What am I missing?

Anonymous said...

On the UK: what if growth is just completely unreliable due to holidays and events vs better headline but slightly bullsh1t employment data due to environment of uk cost of living, impacts on disposable income, growing necessity of black market to make ends meet? Or does the breakdown of employment data actually show the increases are in well-paid secure jobs, rather than lower-paid, self-employed, internships, no-contract, short-term, training schemes? Doubt it. This country needs some serious deflation in life’s basics.

Anonymous said...

C says'
Anon 11.12
"Doubt it. This country needs some serious deflation in life’s basics."
No chance.
Successive Uk govts didn't have a long term energy policy worth calling one and as such they have arrived at a position of zero leverage.Future energy costs have only one way to go because of this.
We also import around 40% of our food,ditto.
Meanwhile the BOE keeps sufficiently loose that under normal circumstances the purhcasing power of our £ would go in the opposite direction. In a sense we're damned lucky the Eurozone is where it is otherwise our currency would have dived and our imported "basics" would be through the roof even more than they have been.
The equation is for along time we ploughed the proceeds of easy monetary policy into bricks and mortar enjoying the fruits of imported deflation and had no care whatsoever for investing in the "basics" of energy,agriculture,utility infrstructure etc etc.
We're now on the flipside of that record and it is no accident that the outperforming UK equities have been associated with the very sectors that we opted to ignore investing in for so long.

Anonymous said...

C, agreed and it’s all coming together around the same time – energy, demographics, finances, environmental, social pressures. Point being there's no need to entertain a false dialogue of pretending not to understand why the UK is stagnating or how stats may not add up across increasingly disparate domestic groups and interests.

Anon 11:12

Anonymous said...

Also, does anybody know of any attempts to quantify the number and effects of job losses in financial and related services vs their uptakes in other professions, unemployment or, as I suspect has a big impact, near zero 'self-employment' earnings/non consideration at all in the stats due to personal financial resources and savings in excess of benefits caps?

amplitudeinthehouse said...


The Thunderdome strolls through Mulholland Drive

The summer holidays couldn't come quicker enough for Chancellor Merkel, this also evoked trading participants around the globe to taking their annual holidays, leaving the markets in an illiquid mode...

However, there was a small group of informed locals from Mulholland Drive that had reported that there was a whisper going around that this summer wasn't like any other that they could remember.The rumor was that draghi had placed a put under the market in the absence of the Chancellor...therefore leaving traders in a btfd mode.

Now, Merkel isn't a stranger to how the worlds market network operates, due to her trading days in Asia, this being case, she needed to know what was happening on a monetary level...in case someone breaks into the printing room.

The last time Merkel was in discussion with her market contact was when drinking at the nightclub, Parsimonious. The Chancellor was informed that a trading team named "The Thunderdomes" were coming to LA for a weekend of R&R before scattering in different directions on a global scale. Merkel had heard about this team from back in her old trading days, and knew this team only meet together all at once if they had a plunge coming down the pipeline.

Merkel, didn't have the slightest interest in leaving her summer Mulholland Drive lifesytle....at this point she decided to call Draghi and asked him to remain in the current monetary policy status quo ,as she felt The Thunderdomes were future bidders and , therefore there was no point in firing the bazooka until there was significant volatility in the market.

The following week the market had taken a step back and took the bad-good data releases in a non-plussed manner as it seemed the rumor of The Thunderdomes being prepared to hit the bid had become widespread, this had an corollary effect on the market that left the price action on markets worldwide in a no-mans-land zone.

When The Thunderdomes quant got back from a three day bender and plugged in his trading program , he soon come to realize that there was not point in proceeding with the plan at hand, as it had become obviously clear by now the markets risk to reward ratio had deteriorated beyond belief.

In the brightness of the morning sun, The Thunderdomes head trader meet with his fellow quant at a beach house that was own by one of the teams investors to discuss why they couldn't make a move on the market...after some gesticulating from both traders that was seen taken place on the balcony from a distance, the quant threw his program on the table that was in front of them both, and was thought to have said " I want no part of this" ..." This Mulholland Drive lifestyle is infecting my programs beta-coefficients...and I won't be making any risk-reward-bets till were back in Asia"

abee crombie said...

another hedgie says audios, Brevan Howards' Rokos

Markets just too hard to play and moves are not what one expects

Thanks uncle ben and cousin draghi