Taking the Plunge.

Wednesday, October 03, 2012

Plan a) was to buy at last night's close. And we have, filling up on the small "just in case" purchases on Monday with more risk stuff. The path to getting to that "buy" though has been not quite what we were looking for so confidence isn't as great as it was when we planned plan a). But life is never easy. 

Coming in this morning it would appear that the Australian trade data has shot to the top of the gloom league and coming after the RBA rate cut, the confidence that Australia is going down the Swann(ie) appears consensual.  Our inboxes are full of  deep analytics as to why Australia is doomed, blended with a melange of charts as to why everything Australian is doomed, suffused with articles on why the RBA is so behind  (also why the AUS statistics office is so rubbish at keeping up with the times) and the whole lot bathed in a coulee of "Toldja so's" from every short term player on the street. So in TMM's eyes that is a full set.

 It s been a long time since trade data has caused such a stir and TMM look back nostalgically to the days when US trade data was the highlight of the month, as opposed to today's young upstart of NFPs.  The Australian stats was indeed a "shocker" and like the internals of much of the Aussie data, is turning sour. But despite all the shouting and shrieking this morning, Australia is not a Spain.  On the face of it 5.5% unemployment and growth within trend (for now) hardly deserves some of the current calls for interest rates to fall as far as 2 to 2.5% which is effectively zero real rates.

 The global risk platform doesn't look as though it's falling apart either and it would appear that the World ex Aus is not really that stressed today with European equities doing ok and even the Aussie favourite diggers Rio and BHP up from last night's closes.  So if the Aud selling is not on global functions and it's solely local "It's rates mate" and future outlook, then why is AUD/NZD higher?  For the NZD to take more of a bath overnight when the news is meant to be Aussiecentric smacks of something being out of line.  TMM will do something suicidal and buy some AUD here with tight stops as we anticipate, once again, short term positions being taken on long term views  being taken out to the old ball mill to be scrunched. And if they aren't by tomorrow ? But then hey,  its a tight stop. We can wear it. Not very macro, but then we get the feeling there aren't many folks out there putting on really long term views and hanging on to them. 

It's October and historically a time for grief and like a frightened cat on a hot tin knife edge playing tennis with hand grenades against a canine Federer wearing a tee shirt with "Don't Look Now" written on it being served balls by red cloaked dwarfs whilst Kruger chants  "One, Two, Freddy's Coming For You"... we are pretty scared.

Especially as it's gone so  so..   so... quiet..

Posted by Polemic at 2:01 PM  

18 comments:

LB notes that there is at present nothing wrong with Australia that can't be cured by Voldemort cutting RRR and cranking up the Caterpillar machines to start building some more empty cities, and don't put it past 'em to give the system a poke this weekend after a week of Shanghai being closed. In the longer term, Aussie housing will be a weight that will drag down AUD and the banks. But that train's not here yet.

LB also thinks that all kinds of small bears will be predicting (ad betting on) the usual NFP disappointment on Friday after the ADP today. Since these numbers correlate like West Ham winning and the price of lettuce, any such wagers carry a degree of risk. It wouldn't be the biggest shocker of all time if the BLS printed a nice big positive number this week, as Big Ears continues to extend his lead over Mr Baseball Glove.

One of the risks that isn't being talked about much lately is Rate Risk. You know, the thing that everyone starts yapping about immediately after the 50 milliseconds it takes for a decent set of jobs data to produce a +50 bp spike in the 10 year. Now if you add on the other unthinkables, like Spain and Germany holding hands nicely, US being threatened again with a downgrade to AA, and maybe the aforementioned Voldemort sticking his oar into the stimulus flow, then maybe a rates melt-up isn't quite as remote as some might think. Anyway, nobody (and I mean nobody) likes this trade much right here, right now, although everyone wants in on it later. So LB is playing a few lottery tickets betting that US and German rates at the long end will be significantly higher in November, December and January. As for equities, we are long Europe and emerging markets and would nibble on any decent sized dips.

Leftback said...
3:40 PM  

anyone here follow the aggs... soya getting interesting, from what I read supply demand imbalance still out there

I dont understand AUD but seems to me now is a pretty bearish time and we are still above parity with USD. Not sure where it will trade if there is ever good news. Not my trade.

abee crombie said...
6:09 PM  

good level to get into aussie here imho. Can't see USD moving anywhere but down in the medium term, when the Fed is a seller, and a seller for an indefinite period.

Anonymous said...
12:59 AM  

C says,
UK equity in a broad sense finely balanced now,ut I suspect it will follow wherever the US goes and immediately the chances have increased of a short squeeze so i will revert to flat at open and see what transpires this week.

Anonymous said...
7:20 AM  

Big Ears put on a very lame performance last night, he looked half asleep, and The Glove wiped the floor with him. Wonder if Old Big Ears has his BLS elves cooking up an October surprise for tomorrow?

Ooooo, they wouldn't, would they? You think?

Leftback said...
5:13 PM  

What's up with WTI see-saw?

Anonymous said...
7:09 PM  

With regard to the ags:

From my experience, it's best to buy them when net speculative positions are low or even short because everyone is expecting a bumber crop like at the end of last year. Then you get some weather optionality working for you.

Buying them now after a major drought is like buying put options after a major market crash that's making headlines every day. It might work, but usually not much or not at all.

Gnome of Zurich said...
8:15 AM  

Amps is starting to see this weeks NFP developing into a true handicap race..... our loyal punters here at TMM may remember the payrolls system we posted during the previous qe run-ups (weeklies) obviously this is conducive to tactical positions only.Amps is on standby over the next couple weeks...

The only trade I have left is taking Germany to the races..FUCKIN OATH

amplitudeinthehouse said...
12:22 PM  

Ooooo, the BLS says unemployment is 7.9%. That's lower than 8%, which Big Ears stated was his first term target. We are SHOCKED at the timing of this statistic, one month before the election. SHOCKED.

The NFP number was +114k. Which is, obviously, crap. The interesting thing is the movement in rates, with the 10y already moving out +5bps. Germany and UK 10s also moved out +8 bps. Does anyone smell burning?

This early reaction in itself is interesting, because it begs the question, exactly how miserable did the market think this report was going to be? It also raises another interesting question. How weak is the conviction among Treasury/bund/gilt longs if a soggy jobs number can move rates HIGHER? One wonders what would be the effect of any positive economic surprise anywhere across the globe? I guess that's not possible......

Leftback said...
1:55 PM  

@LB,

As per Marketwatch, that jobless rate is 7.8%. http://www.marketwatch.com

Also, Jack Welch(GE) tweets,"Chicago guys' conspiracy behind drop in U.S. jobless rate".

Anonymous said...
2:32 PM  

Yes, 7.8%. Jack Welch, hilarious. Pot calling the kettle black. It's not as though Neutron Jack ever had the boys in Fraudfield, CT massage the GE earnings report.

In addition, he is an odious little toad who was a decent golfer but, like Trump, was infamous for years for giving himself gimme putts from 50 feet....

(LB looks into the sky for black helicopters....)

Leftback said...
3:20 PM  

Ol' dirty bastard says...

Funny stuff, that US statistics of Greek origin. When I look at the U-6 Unemployment rate it is still unchanged... at 14.7%. What a difference a few part time and marginally attached workers make.

Anonymous said...
4:31 PM  

I think CR made a good point about the employment report. NFP, which is the establishment survey may be underestimated the birth death of businesses especially if housing and construction are coming back. The household survey was up 200+ and labour force participation up as well. cant make a trend out of 1 month but hard to find negative with this employment report.

Long end looks like the place to be to play this, though call in equities, though the move isnt really substantial (yet)

abee crombie said...
6:42 PM  

The long end might indeed be the place to play it, US equities don't seem that exciting to me (slow grind up the likely trajectory), but you can build in some leverage to make getting short the long bond amusing in a variety of ways. Looking at UK and German 10y, they moved in unison with US, while Italy came in 20 bps. Could it be that the same large players all smell the same relief move coming?

LB, modest as ever at the end of this week, is considering changing his moniker to God of Rates, or something like that. (Bond King was taken). Suggestions on a postcard, please. Keep it clean...

Leftback said...
9:09 PM  

Another one of these "sell into the morning pop" sessions that our very own C from C likes so much.

Anonymous said...
8:59 AM  

TMM - did your stops go off in your AUD long? Was the sell off really related to Jack Welch?

Anonymous said...
6:08 AM  

Looking thru the week-head form guide and noticed that Spain is long odds at the end of week meet to break into the OMT piggy bank...why go to the effort of bringing in the help of others to put together a rescue fund if it's going to sit there and rot...might as well throw the fund in jail and throw away the fuckin key.........................been here before

amplitudeinthehouse said...
3:20 PM  

....addendum


Just in case anyone find this weeks market uneventful...don't despair, come and immerse yourself into my realm of emptiness and amusement all roll into an lovely non-duality shit-sandwich at the local theater...

https://www.youtube.com/watch?v=X8Y1xLKHECQ

amplitudeinthehouse said...
4:13 PM  

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