Yesterday morning TMM were somewhat relieved to find Spain and Italy the focus of attention as Friday's rip higher had us feeling like passengers that had drunkenly got off the last train home a few stations early, watching it continue on up the track leaving us in the cold with a long walk to catch up. We had been thinking that HY credit was to be the populist trigger for a wobble but we are happy for an assist from any hand.
But Europe? Well as TMM says- "There are two things in life you can be sure of - "Death" and "A peripheral European country tripping over the last step up out of the darkened cellar and smashing its nose on the concrete"". Spain and Italy? TMM thank you. But special thanks has to go to Rajoy for adding a new precedent to political get out clauses with his statement that all the information that has been published by the media "is untrue - except for some things". Bet Chris Huhne wishes he'd thought of that one.
But thanks also have to go to to the supporting cast of European technicals, a monster stop-loss post NFP towel-chuck, the odd ratings company being gunned down (just when they thought they'd got away over the horizon) and an army of extrapolationists and their straight lines (did you see how many calls to new extremes came out from various research houses over the weekend? NZD/USD parity?).
Overnight falls in Asia have confirmed the globalness of this pullback but the tussel between improving ecomomic data, Spain PMIs very good, and the new euro political news has seen Europe open to a rebound. But TMM think the anatomy of a wash out will naturally see the buy-the-dippers first appear before another down move takes them out too with a collective "urghh". So with that in mind TMM are today sell-the-ralliers thinking this dip has more to it.
However though the new paradigmers have gone temporarily quiet we don't think it will be long before the bond market are belting out their new favourite tune. We've been hearing more and more of it from various sources and it's based on Prince's "1999"
Dump 'em like it's 1994
Don't worry, I won't hurt you
I only want you to buy my bonds
I was dreamin' when I bought these
Forgive me as it goes astray
But when I woke up this mornin'
Coulda sworn it was judgment day
The sky was all purple,
There were yields rising everywhere,
Tryin' to run from bond destruction,
Just gimme a price that's fair.
Cuz' they say two thousand twelve bond QE party over,
Oops, through the floor.
So tonight I'm gonna sell 'em like it's 1994.
I was dreamin' when I bought these
Thinking Fed would buy and buy 'em fast.
But QE is just a party. QE parties weren't meant to last
Growth is all around us, my mind says prepare for flight
So if I gotta deal, I'm gonna sell my bonds tonight.
Yeah, they say two thousand twelve bond QE party over,
Oops, through the floor
So tonight I'm gonna sell 'em like it's 1994
Yeah
Lemme tell ya somethin'
If you didn't come to dump them.
Don't bother knockin on my door
I got some stocks in my pocket,
And baby they're ready to roar
Yeah, everybody's got some bonds,
Watch 'em all dive late today
But before I'll let that happen,
I'll have sold my lot anyway.
Oh, they say two thousand twelve bond QE party over,
Oops, through the floor,
Were runnin' out the door (tonight I'm gonna)
So tonight we gonna (dump 'em like it's 1994)
We gonna, oww
Say it one more time
Two thousand twelve bond QE party over,
Oops, through the floor,
Were runnin out the door (tonight I'm gonna)
So tonight we gonna (dump 'em like it's 1994)
We gonna, oww
Alright, it's 1994
You say it, 1994
1994
1994 don't stop, don't stop, say it one more time
Two thousand twelve bond QE party over,
Oops, through the floor,
Yeah, yeah (tonight Im gonna)
So tonight we gonna (dump 'em like it's 1994)
We gonna, oww
Yeah, 1994 (1994)
Don'tcha wanna go (1994)
Don'tcha wanna go (1994)
We should all sell anyway (1994)
I don't wanna loss,
I'd rather give all my bonds away (1994)
Listen to what I'm tryin to say
Everybody, everybody say dump 'em
Cmon now, u say sell 'em
That's right, everybody say (dump 'em)
Cant run from the revelation, no (dump 'em)
Sell em, watch the govies fall (dump 'em)
Tell me as your rates are rising, baby sell (dump 'em)
Telephones a-ringin, broker (dump 'em)
Cmon, cmon, you sell (dump 'em)
Everybody, (dump 'em )
Sell 'em down to the ground, sell (dump 'em )
(dump them )
Come on, take my bonds, baby (dump 'em)
That's right, and go long S+P (dump 'em )
(dump 'em )
That's right (dump 'em)
Got stocks 'n' shares in my pocket man and Bonds? (dump 'em )
Oh, they've dumped right through the floor (dump 'em)
Mommy, why is everybody selling bonds?
Mommy, why is everybody selling bonds?
25 comments
Click here for commentsRajoy: "except for some things"
ReplyWasn't talking to you. Bricks now being shat along the PP food chain.
C Says'
Reply"PMI's" are useless within the context of depression like unemployment.It has been and will continue to be a political problem in Europe long past the point at which public spin tells us it's allover. You really cannot expect political stability when one central nation is printing the good life and another is printing food stamps for the 25% without work.
Merkel is alot of things,but she is no fool. She said on more than one occasion it will take years to correct European problems and if anything she was being an optimist because she was assuming that the political will could survive that long.Even if she was right there are going to be many a pressure point along the way which will result in markets carrying heavy profit to be dumped.
Complaceny on Europe remains at the top of my 'greater fools' list.
And our sell signal for this year. Hits for the phrase "great rotation" ! The internet has alot to answer for not least the promulgation of ill-thought out ideas.
ReplyI'm part of that 1st group of dip buyers, sorry. I just dont think EuroStoxx is gonna melt down all by itself while Euro and Spoos hold. It reached flat on the year yesterday.
ReplyLets see
Though I do think it is a bit early to buy HY, and I would like to see more of a flush there
C Says'
ReplyThere's going to be dip buyers right up to the first time it doesn't work out.That clearly is not yet. The question will be will you buy the next dip?Or will you tick Pavlov's box.
The dip buyers are already at it.
ReplyLB notes that US beta is having a hard time of it, especially the category we refer to as "dogsh*t" which includes retail faves like Facebook. HF punting vehicles like the XHB are bouncing more strongly, but we think this is the Exit Rally for intrepid longs in these names. So we are inclined to fade weak rallies for now.
We generally agree with TMM's thesis on bonds, but not this week, so we are taking some off our rates bets for now.
C Says
Reply"Dip buyers".I'd be surprised if they were not there.We are still in the sweet spot of the month for moneyflow. As earnings season fades out of this spot to mid month we'll get a better guage of buying urgency.
I've wanted 'stuff' rather than equity this quarter.
another reason why Spoo's are the worst product to hedge with...
ReplyCredit didn't join the party in the Bouncy House very enthusiastically today. That suggests there is more pain ahead for risk assets in the days and weeks ahead.
ReplyTMM have been dead right about US earnings not crashing in Q4, despite the GDP mini-contraction. TMM 1 Permabears 0.
ReplyBut that is ancient history now, and the market is looking at the future earnings. So the question is now whether US companies can repeat the trick in Q1? More immediately, once the Q4 earnings season is over, will the current FX regime (yen carry, $ flat) continue or will the EUR respond to gravity?
Macro never dies, it just takes 40 winks now and again....
C Says'
ReplySo we are 5 years in on a market tear which in many ways has been greeted with disblief. Yet after 5 years and more or less triple digit gains in many places the media at last decides headlines like this are the order of the day;
"The FTSE is booming and thousands of ordinary investors are looking to cash in - without paying for financial advice. Here’s how to do it.
BECOME YOUR OWN FINANCIAL ADVISER"
Deja Vu anyone?
C says'
ReplyWhen I see aleader board with 9% by midday on FTSE100 company I know it's sandpit rules times.
C Says'
ReplyLooking over a vareity of equity indices within the context of my rceent argument about the benefits of policy wars I was reminded of the cult film with the memorable line;
"There can be only one",or to paraphrase, there can be only one //at a time !
Export wars for want of a better decription are surely zero sum to a great degree are they not? For Japan,the one of the moment,there be somebody who balances the equation.
Have we entered a round robin economic world where each of the majors receives it's moment to bask in the sun of risk moneyflow?
If so,the game is purely political guessing where the next iterations are going to land.
To a lesser extent it appears sterling weakness has tied to FTSE outperformance in a way mimicing the NIK ,but of course with far less mom.DAX by contrast is a victim of the otherside of the trade via the EURO. One level down and we can see the domestic indices have outperformed the 'globals' because they don't tie to what is happening via FX and the export wars. So the FTSE250 has hit highs not achieved by it's big brother and the same is true of the Russell in the US.
All in all very interesting.
TMM,
As for 'missed buses' please recall last Autumn I fingered ther NIK had the basing stage. So feel free to empathise that I never actually climbed onboard that bus at all.Talk about the one the one that got away. I'm afraid my US small cap of choice of that time is really little cosolation.
C, I agree.
ReplyIt does all smack of that old competitive deval post we did a year or so ago re japan. Its happening. Problem seems to be making sure that your stimulus remains domestic and isnt used just to feed your competion.. will probably raise it in a post but if huge jpy liquidity just goes to overseas borrowers japan just end up with the downside of imported inflation rather than domestic growth driven inflation. Jpy funding is pretty much free money with an fx alpha sweetner and it is as free for samsung as it is sony.
Is this not the site of Macroman Designer hosiery briefs? If so where’s the catalogue? All I see here is a bunch of financial talk.
ReplyWhile I’m here I may as well let yawl know that I am the ultimate retail trader, and I’m bullish awaiting a pullback getting ready to scale in. I particularly like the US banks because I read somewhere that the Fed is recapitalizing these.
Make of this what you will.
Retail.
Anon would doubtless enjoy the Macroman calendar, in which each member of TMM poses each month in the aforementioned garments.
ReplySpeaking of competitive devaluation, the Europeans are preparing their entry for the global currency wars and FX sweepstakes, according to our beloved Euro-skeptic AEP:
Europe Drawn Into Global Currency Wars
More worringly, even the trusty (?) Smellygraph is printing articles like this one below, telling UK punters to just close their eyes and "buy shares, any shares". Because of The Great Rotation. So it doesn't matter, just buy stuff. Especially the shares that have gone up a lot 'coz they must be good.
The Great Rotation. Buy Shares, Any F*cking Shares
This, as you know, always ends well, with Peter Punter making Loadsamoney.*
* US readers: Engage irony detector here.
Speaking of FX, AUDUSD has clearly rolled over, along with emerging market bonds and equities. EURUSD is on the point of doing so, and Betty is being bashed enthusiastically.
ReplySo the question is now, how long will the yen be able to run out front in the Tour De Carry before it comes back to the peleton? Sooner or later the BoJ is going to run out of EPO. Anyone feel yennish yet?
Even as the sell side cavorts on TV and media prepares the Dow 14,000 hats for another outing, insiders are selling at a rate of 9.2 to 1, an unusually high ratio.
ReplyInsider Selling At Extreme Levels
Wow... last time I checked insider sell-to-buy was like 6-1. Otoh all stocks I monitor more closely also show heavy insider selling. Maybe those guys know something (irony off).
ReplyEddie
C Says'
ReplyWhat "those guys know something",is you sell when the price is going up,not after it has started going down and you are one amongst many trying to do the same thing.Moreover doing the same thing in a crowd of people who have no idea how to enter,or exit a market. It never tells you where a top ,or conversely a bottom is.It just tells you where the best orderly exit is.
If price going up was all there was to it we could stay in bed and let a computer it all for us.Unfortunately,for that life of ease,it really does count who is doing the buying and the selling.Thats' why info like insider buying/selling;retail activity,is important. It's not a timing tool ,but for reallocation purposes I wouldn't ignore it simply because the 'greater fool' concept of rising prices is hardly ever going to apply to the insider group.
Just keeping the keyboard lubricated, C. We like to bung loads of comments into the blog when we think we are at turns, as it keeps us properly busy and prevents us from doing daft stuff with the portfolio.
ReplyThanks C. You put in writing what I meant implicitly when I said "irony off". I also check what some of the value investing guys are doing for example. If I see big selling and the corresponding amounts of cash on their balance sheets I know it's definitly not the time to gung-ho into the market. Who am I trying to outwit guys who have been around for ages and made impressive amounts of money in their respective markets... let someone else pick up the tab.
ReplyEddie
C Says'
ReplyFor today I thought i would be fun to see ;
"The word CARNEY is thought to have become popularized around 1931 in North America, when it was first colloquially used to describe "one who works at a carnival."
Yup,still appears relevant !
And Fred Karno was a famous early 20C British theatre impresario. And Fred Karno's army is an expression still used to describe a chaotic organisation..
ReplyHave this pending, dependent on performance, for the glossary.
And those of us inclined to dust off their thermodynamics 101 memories will of course remember the Carnot cycle.
ReplyDD