It's How You Tell 'Em



TMM had another bout of road rage this morning. Fortunately the cause and target of the rage wasn't another road user, rather the quality of news reportage emanating from their car radio on the way to work. Don't worry, TMM are calm level headed rational beings who are not inclined to go "Falling Down" on you, but the last 36 hours exposure to mainstream reporting got us pretty close. TMM's poor car radio is beginning to resemble an old dog toy having been bombarded and cratered with any loose object to be found in the door pocket.

We weren't in the best of moods to start with, having endured a day of "Europe is Doomed" being boomed at us from every Orwellian speaker lodged in our hi-tech lives. This was followed on return home by a Channel 4 News story of 17 year olds falling down a legal loophole in UK police stations. A very valid subject and one that needs to be discussed, but preferably discussed by experts. We say experts, because radio and TV news programs have developed the appalling habit of interviewing victims (or the relatives of victims if the victims are deceased) as if they were the experts.

Whilst we understand that victims have certainly experienced the consequences of whatever they have suffered they are rarely expert into the causes (just as if TMM wander into the road after a beer and get hit by a bus it doesn't make us experts in bus mechanics, rubber friction coefficients, traffic law or alcohol/neurone transmission mechanisms). Unsurprisingly such an interview results in an emotion laden, one sided tragedy with little true insight to the issues. But then it gets worse, having used psychological anchoring to pin the listener or viewer to this base norm of expertise, the journalist will then most likely swing to a higher authority on the issue, normally with great gravitas. However, far from being an expert, this is just another journalist, introduced as "our legal/business/foreign correspondent" or some such.

TMM are opined that journalists are there to report, not give opinion as their opinion on non-journalistic issues is of as much or little importance as any other non-expert.

Financial punditry has been full of it too. The BBC have elevated (up their own elevator of self-promotion) the likes of journalist Robert Peston to "financial guru" and their economics editor, journalist Stephanie Flanders, to "Keansian" level. CNBC is also clearly full of anchors quizzing sub reporters and interviewing their own anchors to pad out the usual faces of punditry.

This evening we got around to searching to see if anyone else has remarked on this annoying trend and unsurprisingly found we aren't alone, and found much better analysis of what we are talking about. Interestingly we found this post by blogger George Snell makes the point very well, after he originally commented on the issue here, where he mentions the dangers of the Echo Chamber, "where journalists simply rely on each other for perspectives on the news. The insular mentality of “It must be true because I heard it from another journalist.”"

David Donovan, goes further here citing cases in Australia and points to the high frequency of journalists appearing on Q+A sessions and even analyses journalist's twitter profiles concluding that "Australia’s haughty "hackus majesticus" (with a few exceptions) typically only follow other members of the same, or similar, species."

So why is TMM veering away from markets into the state of journalism? Well because we feel that this style of reporting not only annoys us immensely, it is undermining information quality not only of main stream press but also in markets. We all know how fast a piece of information can go around a market (especially in todays "cut and paste" world) and we also know that each participant in the market, certainly on the sell side, will look for any form of corroboration of a news item, idea or interpretation of a news item before sending it on, reinforced, down the next wire.

Bloomberg and Reuters headlines are never challenged and whilst they stay just facts or quotes all well and good. But the problem creeps in when a market moves and a reason is required. As any journalist, analyst or sell side sales jockey knows, when asked why something has happened a reason has to be found, even if the most apt answer is "I dunno". Of course most market moves are basically down to "some one/people sold/bought a large amount of it" from there on it's normally a guess as to why they did that. Any sensible player in the market that has just sold or bought a large amount will actually be wanting both his actions and his motives kept as quiet as possible so will be reluctant to shed light on the issue. But the game of hunt is on and correlation is the usual weapon employed.

This example of journo-escalation is of course completely fictitious and bears no resemblance to reality or real characters.

Harry Hedge-Fund - "Close my gold short out, I'm off skiing and cant be bothered to watch it".

Soon on US Financial TV -

Rick Spleen - "Gold has seen a big rally today, let's hear from our correspondent Jeff on the floor (note being on the floor implies he works on the floor - wrong) - Hi Jeff I see that gold has gone up today. What's moved it?"

Jeff Epiglotis - Hi Rick yes, stocks fell in europe as the dollar fell as NFP printed low as the sun rose in the east and gold is up. But let's hear more from our economics correspondent, Scott?

Scott Tibia - Hi yes I agree with Jeff, European stocks fell and so gold went up. Here is a graph.

Rick Spleen - So there you have it. Everyone we have spoken to tells us that gold went up because of European concerns.

Next morning on UK's BBC Radio 4 Today program -
John H - Gold has risen overnight, a traditional measure of confidence in governments. Does this reflect on the UK government's economic policy? Lets hear from our own Robert P.

Robert P - Weeeell, It looks as though gold, a traditional indicator of financial stress, has risen overnight in the US and our contacts there tell us it's due to concerns over Europe where the Italian elections are in turmoil with a rise in the popularity of anti-government parties. Which could be considered similar to the rise of UKIP in the UK. But let's hear from our economics editor Stephanie

Stephanie - Yes it's true that UKIP has garnered a greater share of the vote in the UK implying government policy is receiving a resounding vote of no confidence. Gold prices traditionally reflect confidence in both governments and the value of their money, which of course is currently being devalued in the UK through QE. The rally in the gold price is therefore consistent with markets losing faith in Osborne's policies and in the government's current economic policy of cuts and austerity.

And from there on the self-feeding frenzy of speculation/fact conversion  picks up with the press quoting the BBC and then sell side cut and pasting these press links on to buy side. "Facts" have grown to fit any particular view without one "expert" being involved.

It is at this point that TMM's car radio receives another packet of mints in the tuner.

* Foot note , they've just done it again - Radio 4 - Rocket launcher found in Northern ireland - Interview with random folk in street "its terrible",  followed by an expert - the Sunday Times Security correspondent. 
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Anonymous
admin
February 27, 2013 at 11:58 PM ×

Nick Davies' 'Flat Earth News' is a really good account of how the quality of news journalism has steadily gone to pot, for anyone interested.

As for that 17yr old suicide the guy clearly had bigger issues, pinning it on an "anomaly in the legal system" (aka the law) seems like a misuse of energy. Just sayin.

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Hotairmail
admin
February 28, 2013 at 12:27 AM ×

I've actually given up on the broadcast news after being an addict for decades. However, for several years prior to my conversion I used to play a game of 'spot the overseas correspondent' and try and work out how far they are from the action and what distance that would relate to from me in England.

e.g. our Zimbabwe reporter reporting from South Africa - doesn't sound too bad, but the city is key in judging distance here. Harare to Cape Town is 1,560 miles!

The key obviously is to report from somewhere the audience would consider to be 'like' the country being reported on despite being hopelessly as far away from the action as London is from Tripoli 1,448 miles.

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Anonymous
admin
February 28, 2013 at 12:29 AM ×

Isnt the dilution of expertise in the main channels (MSM) a direct consequence of the dispersion of media?

With many portable, easy to use and reactive formats (blogtweetc...), knowledge/expertise has been scattered around (as well as split in many very specialized subfields, as division of labour always does) and, zero sum game and all that, what used to be the central (and generalist) points (tv, print, beeb) is the secular loser relevance wise.

Really not that different from for example music labels not discovering anything these days (garage kids dont sent them tapes). Just using their last strong skill (mass distrib) to validate after the fact.

Unlikely to change, methinks.

Just my late, fuzzy 2c.

DD

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Anonymous
admin
February 28, 2013 at 7:28 AM ×

DD,

I think you nailed it. The number of media outlets, be it blogs, tweets, webpages, whatever increases but the number of "events" happening does not. Everybody has to fill his hole, though, so the whole thing has to become self-referencing at some point.

My all-time favorite btw are Bloomberg headlines containing the word "as":

Stocks go up as the sun shines in UK
Gold drops to a 17-day low as we went for a piss
Coincidence is not causation as we just found out

They use it as a means to connect otherwise unrelated events. Gives the impression of wisdom and insight, of course, while the guy (or gal) writing it gets paid by the line.

Bottom line: tighten your filters and don't get dragged away…

Eddie

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Anonymous
admin
February 28, 2013 at 8:22 AM ×

C says
The record keeps repeating.Pre month end shake out met by end of month and start of month moneyflow risk on squeezes the shorts in the shake out.
I oft get the feeeling that markets function like Mallory rather than Hillary.
I am referring to the fact that "because it's there" (a previous high S&P 1576) it must be climbed.
Only afterwards does Hillary become relevant.That is "having reached the summit how do we get to the bottom safely?".

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Nico G
admin
February 28, 2013 at 8:46 AM ×

this financial editorial pollution is actually a necessary evil once you've understood which sources benefit your trading and match your timeframe (you are one of them)

... and which sources are malignant. Mainstream financial media seems mostly aimed at brainwashing retail, weak hands so that smart money can stuff them when need be

granted this age of 'too much information' is confusing. But you need to do your selective homework both at work (finance) and at large (culture)

good culture should be shared by all, so seeing Vollmann and Katie Price on one same bookshelf is wrond and absurd (and infuriating)

..whereas trading profits in essence can't, so astute information selection benefits good traders while bad sources mass-produce losers. It's part of the game

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Anonymous
admin
February 28, 2013 at 9:51 AM ×

C says
I'm going on strike,because I'm sure TMM are telling me I write crap polluting the bloggosphere.
I sahll fill my time henceforth buring banners and campaigning for El Grillo...power to the people!

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Anonymous
admin
February 28, 2013 at 10:01 AM ×

C says
Nico,
On a serious note I absolutely delight in your comment,"so astute information selection benefits good traders while bad sources mass-produce losers. It's part of the game"

Except it isn't really a game.It's an inherent differentiator for intelligence. In fact I think we could almost call it a working definition of intelligence.

I have tried to instill in my daughter the idea that truly intelligent behaviour arises out of the ability to think critically. That is, the intelligent person has found a way in which to filter the vast array of information with which they are presented, and then has acquired the skillset to analyse it in a reasoned manner.

Hence,as you put it "good" outcomes are a function of the above.

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Anonymous
admin
February 28, 2013 at 10:05 AM ×

Eddie
I am not only referring to the number of outlets (rising) vs. amount of content (roughly stable).

It's also that the very specialization (or dispersion) of content is the reason the generalists can no longer make sense.

The time you spend reading gardening blogs, taking foodie pictures or making 70s pop culture driven macro trading jokes is time taken away from using the "generalists" who then turn around and cater for those who are left watching and reading them.

That's also why assigning intent ("brainwashing retail") is dangerous. What else are they supposed to do really? Perhaps they do what they do because there is no one left to watch the "good stuff" through these channels.

Anyway. Back to your regular programme.

DD

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Anonymous
admin
February 28, 2013 at 11:58 AM ×

C Says'
Bored.Tell story, Europe.

Years ago I ran a partnership.We placed highly paid specialists more or less globally ,but Europe was a big market for us. We did most of the intermediary functions for these people so you got to know a lot about trying to enter and work in many cuntries.

Italy..."Pietro we have Mr X 6 months contract Rome need to register tax etc etc.Discuss the umbrella etc etc".
"Mr C ,you wanna pay tax.Why you wanna pay tax?".
"Pietro we want to observe and comply with the legalities.Serve our clients interests".
"Mr C,he come.He work.He go. Simple hey".

France..."Phillipe we have Mr X in Paris 6 months we need to register etc etc etc"
"Mr C we have to contact the Dept X;Y:Z;No, he can't work any other way than this..Take about 4 weeks minimum.Setup costs about arm and leg".

I actually remember having conversations with people about France and I would say, have you no other offers.Have you thought about not working and taking an holiday for a few weeks.See what comes up interim.

The moral of the short story is I really get how hard Europe is to sort out.The structural diversity and the underlying problems that need reform.The accrued level of economic malaise, and it's variability across the zone. I just don't know how you really go about bringing conversity into that region,because conversity was never there to begin with.What monetary policy can actually embrace doing that. I don't know,but my friend El Grillo does ;)

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Anonymous
admin
February 28, 2013 at 11:59 AM ×

ooh freudian slip in there.

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Anonymous
admin
February 28, 2013 at 1:16 PM ×

C says
DD
To see why AUD "sticky" have a look at FTAlphaville today to see who appears to be holding it. Clue,look at the number of European nations involved.
I guess in what is a relatively small pot it doesn't take that much extra interest to keep the level up.

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Anonymous
admin
February 28, 2013 at 1:19 PM ×

Trouble is are we as bad as journalists? I agree with you, I tell the bloke beside me who also agrees, etc.. When what we are discussing is a profession we are not in (journalism).

Seems to me the news media have worked out something: it makes us watch TV news / buy newspapers and its cheap to produce. Equals profit. We should be proud of their business accumen. But what it points us towards is not letting our markets be driven by what journalists write and say - they are talking their "book".

Those of us with kids know that the days of ITV News, Channel 4 exposes, Time leaders being relevant are passed. They are not seen as the route by which younger generations consume news.

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abee crombie
admin
February 28, 2013 at 1:49 PM ×

Pol, if you think its bad in the UK, try listening to the media in the US.

had to stop listening to the radio as all they did was call obama a terrorist

even more funny to hear them talk about how all the big hedge fund guys are still buying Gold now.

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Anonymous
admin
February 28, 2013 at 1:55 PM ×

And another thing ......

My rage at the radio was over Centrica / British Gas profits. Totally cxxp journalism.

John H: "You are making too much profit, in this time of austerity you should you not be charging your customers less".

A: "We have to make a profit and pay dividends because we have to invest"

STOP. Correction.

A: "Oh give me strength! So you want me to base my charges for my product on the basis of the personal finances of my XX million customers? So I can charge Rupert Sphincter more the day after he gets a pay rise but drop them when he gets made unemployed? Are you proposing I set up a means testing department. Or is it more generic? I should price according to my social conscience? So maybe we should give 20% of our profit to sub saharan Africa, who deserve it more than our UK customers, and ask our regulator to allow us to increase charges to cover the costs? - JOHN! WE ARE NOT THE &%$*ING GOVERNMENT!

I run a business, so do Tesco's, so does BP, so do Vodafone. They don't offer free phone calls, or free food or free petrol because times are tough. And we are not going to provide free gas. Nor are you John H going to reduce your salary voluntarily, or the BBC reduce its license fee, or politicians vote for a pay cut, or [UK] trade unions offer to work 5 hours a week longer for the same pay. Maybe we should switch to your Economics Correspondent and ask him how long he thinks I will keep my job if I cut prices to make my customers happy.

John H: But your a monopoly ....

A: I know. And the Governments that the electorate have successively elected over the last 30 years have appointed a Regulator to control my pricing. Government set the rules John, I follow them - if you dont like the rules then elect another Government who can change them. ButI think you will find there is not much appetite to go back to State owned and run utilities, oil companies, transport, car manufacturing, coal mining (enuff Ed).

So if you don't mind I am late for a meeting with my Regulator - they at least employ some real economists.


Give me strength

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Anonymous
admin
February 28, 2013 at 2:32 PM ×

El Grillo,
He say we have to understand how to differentiate between investigate journalism (analysis) and that which is there explicitly to sell news.They are not going to be aimed at the same target audience. 1901

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rp
admin
February 28, 2013 at 2:43 PM ×

Too right anon 1:55, according to the general media profits are immoral in this country. Have you noticed even when they show lottery winners on TV, they only show the fat ones.

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Leftback
admin
February 28, 2013 at 2:44 PM ×

Yes, LB can identify with that. It is mostly Bolleaux on the news over here too. Past experience suggests by the time they get the story straight the move is over.

We just watch it with the sound down and look at the macro data stuff at the top of the screen, b/c once you see the characters come on, you already know what they are going to say. I mean, if good ole Gary Shilling comes on, is he going to advocate buying emerging market equities?

Occasionally we might turn the sound up, but mainly when they bring on some new FX totty we haven't seen before. Because, you know, we have a bit of a weakness for FX discussions.

Price is News. So ignore the news, and just watch the prices.

Now, for example, if LB's fund, "Falling Knife Total Return" was to sell its stake in a Baltimore based asset manager and focus on credit markets, the headline on Bloombags might read:

FKTR To Drop TROW, Eyes Wider Spread.

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Anonymous
admin
February 28, 2013 at 3:59 PM ×

One last thought before I ask my Doctor for some more happy pills

The cynic in me would say that why protect Centrica/British Gas from a media onslaught. If they are stupid enough to reduce gas prices in the face of this pressure then my gas bills will come down. But you know what. I have a few principles. And actions based upon poor economics are poor.

We need strong businesses in this country that invest in infrastructure, employ more people and reward shareholders. The news and media industry is not going to produce jobs and wealth to help this economy recover. And nor are politicians.

It never ceases to amaze me that the air time dedictaed to those who consume our wealth is not balanced with that afforded to those that create it.

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Anonymous
admin
February 28, 2013 at 4:30 PM ×

El Grillo he say,
The cure for a higher price is a higher price,and not a subsidy although here in Italy Fellatio is a legitimate tax deductible expense in public office.

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Anonymous
admin
February 28, 2013 at 5:38 PM ×

C Says'
When is good economic news not market good? When in relative global terms it makes you have to consider what a strong dollar world might look like.Consequences such as global sales in B/S dollars ,and indeed dollar denominated assets in general.

Last year that question made me think I wanted to own US domestic equity rather than global blue chips.That would still be an appealing view if they had not made such appreciation already to give rise to the view is it now priced in.and indeed will a 2013 of slight fiscal contraction not make some issues with further immediate advances.

I still like that idea for the future all other things being equal,but it's one of those I would want to come back on a buy low basis.

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Anonymous
admin
February 28, 2013 at 5:41 PM ×

anon 3.59, unfortunately you lost me at "wealth creators", which I find to be an even more irritating meme than champagne socialists' profit outrage

C, thanks for the AUD link. Most frustrating position in ages. I like the plain wrong variety of moves the other way from your wishes 1000x better than this sticky slow mo stuff. Killing me. Up or down but just go somewhere already!

DD

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Anonymous
admin
February 28, 2013 at 6:12 PM ×

C says
DD ,
That's why I plumped first for the £/AUD play.because it has shown more movement than the US$ play which I still think will come,but needs a trigger of some kind to get it going.

I also struggle with the "wealth creator" expression. It's like considering a market in which there can only ever be a buyer and no seller.

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Anonymous
admin
February 28, 2013 at 6:19 PM ×

C says
I want to nominate this guy

http://www.marketwatch.com/story/uk-is-sprinting-toward-junk-bond-status-2013-02-27

for LB's "knob of the week award".

Thought it was topical whilst TMM were on the subject of media 'junk'

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Anonymous
admin
February 28, 2013 at 6:19 PM ×

C says
I want to nominate this guy

http://www.marketwatch.com/story/uk-is-sprinting-toward-junk-bond-status-2013-02-27

for LB's "knob of the week award".

Thought it was topical whilst TMM were on the subject of media 'junk'

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Jill
admin
February 28, 2013 at 6:37 PM ×

"The Swiss-based company {Via Mat International} said it will no longer offer to store gold outside of the U.S. to private clients with potential U.S. tax liability, starting from the middle of 2013. The company attributed the decision to regulatory changes without specifying exactly what regulations led to the decision."

http://tinyurl.com/ct6rzuy

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Leftback
admin
February 28, 2013 at 6:43 PM ×

Quality nomination, C.

Indeed, Matthew Lynn is already a 2013 multiple recipient of the prestigious Knob Of The Week award, and in fact must be close to entering the Knob Hall of Fame on the first ballot at this point.

LB's current market trading status can be summarized as "doing dick". Low volume trading days in the absence of FX correlations usually send us to the sidelines these days, which saves time, money and aggravation.

Also gives us time to do some writing and polish the steel toe caps on our Doc Martens...

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Anonymous
admin
February 28, 2013 at 7:01 PM ×

C says'
"doing dick".
It's why why I'm posting so much.I've nearly run my legs off,287kms in 12 days so now I'm going for typists elbow ,or whatever it is as my knees are shagged as Austin P would say. Hope the markets give me something to do before I run out of body parts to ruin.

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Leftback
admin
February 28, 2013 at 7:05 PM ×

Most of us have our own proprietary versions of this that involve some kind of ratio (TIP/TLT, XLY/XLP) etc. This is the Fusion IQ RORO index.

RORO Index

The graph reveals an outstanding truism. Sell In May. Or in this case, March...?

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Leftback
admin
February 28, 2013 at 7:17 PM ×

US equity investors seem to be betting that:

1) DC will do a last minute sequester fix.
2) Even if they don't, the sequester will do dick.
3) Even if it is bad, Bernanke will do more QE.
4) Even if he doesn't, Tooth Fairy has their back.
5) Easter Bunny is the next back-up plan.

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Anonymous
admin
February 28, 2013 at 8:20 PM ×

I am not involved (I have never understood them) but there are some ugly charts in shiny metals as of the past month or so.

Is there a taker for the kind of size some late entrant tourists will have to unwind once/if the move gets really uncomfortable?

Hmmm ... I wish I had the guts (and the mandate) because this is one that might go much much further than consensus thinks if it really has turned.

DD

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Nico G
admin
March 1, 2013 at 7:06 AM ×

"Price is News. So ignore the news, and just watch the prices."

simply but brilliantly put

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Anonymous
admin
March 1, 2013 at 9:10 AM ×

El Grillo he says'
Bravo my UKippy friends.Together we return power to the people!!
Together we burn public expense receipts!! Together we give the people what they want!! Together we watch the disaster when we have finally given the people what they want!! The moral of that take my UKippy friends is that people always know what they want,but often never know what they need and is in their best interests.

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Anonymous
admin
March 1, 2013 at 10:45 AM ×

Note to self: next time you want to express a strong dollar view, don't try and be a smartass, leave the commodity currencies to the grownups, and just bash betty.
DD

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Anonymous
admin
March 1, 2013 at 12:27 PM ×

C says
I think you can be patient with this one.It hasn't broke yet,but I would say the odds favour it breaking in your favour when it does.Your problem in bashing Betty is I suspect Betty will revert to being sandwich filler between risk off and the Eurozone risk.
Just because UKippy gave her a bit of a flip won't count for much past the mom reaction.El Grillo will trump UKippy with a little help from US castration ,or whatever they call it.

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rp
admin
March 1, 2013 at 1:18 PM ×

Yes, sequestration makes me think of that thing they do to stallions which is quite sad.

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CV
admin
March 1, 2013 at 3:14 PM ×

Slam dunk for US economic data recently, but Spoos not having. Reverse 2012?

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boo boo bear
admin
March 1, 2013 at 3:38 PM ×

Gee i don't know if this was the best short Yogi

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Yogi Bear
admin
March 1, 2013 at 3:59 PM ×

booboo bear:

Today is March 1, mutual funds have fresh cash. It is also a Friday, and all Fridays in 2013 have been up. But don't worry, b/c this is a Mickey Mouse rally driven by mindless dip buyers, totally uncoupled from a frankly bearish FX backdrop.

So you can sit down and have a picnic, watch the show (preferably with the sound down) and then pick up a load of cheap options into the close, then we can get all bearish again on Monday morning.

Yogi

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Anonymous
admin
March 1, 2013 at 4:37 PM ×

El Grillo he say,
"again on Monday morning"...bear power to the people only on Wednesday morning by true democratic consensus.We have sex on Mon and Tues.

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Leftback
admin
March 1, 2013 at 5:04 PM ×

Big Ears has pulled off another splendid piece of political alchemy. Despite the fact that the Sequester was at least partly his own idea, he is at this point managing to pin the blame for it on the hapless elephants, who at this point can hardly manage to take a dump without missing the pot.

Because of this, and the fact that he is clearly enjoying poking them up the arse with a stick about the Sequester every 5 minutes, it looks as though he is willing to let the thing go into effect for a few weeks, so he can point at the elephants and say, "they did it", before riding in on a donkey later on this Spring to cut the head off the ugly Sequester and save the day.....

Decreases in consumer spending and cap ex by US corporates seem to be not unlikely consequences of renewed fiscal uncertainty in DC. It's not the policy, per se, it's not knowing what the f*cking policy is that's a problem. Given the economic data around the world, it's not exactly party time.

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Anonymous
admin
March 1, 2013 at 5:24 PM ×

Morgan Stanley: we expect the ECB to leave interest rates unchanged

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Leftback
admin
March 1, 2013 at 5:30 PM ×

The macro backdrop is really quite bearish here. FX and credit pointing one way, US equities singing their own tune, even though EMs and Europe rolled over ages ago. We have seen this movie before.

Defensive Rotation Well Underway?

As Bespoke points out above, the defensive sectors are starting to outperform (XLU, XLP) were strong in Feb, while the reflation trades (XLB and XLE) were weak. Even bonds were up in February...

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Leftback
admin
March 1, 2013 at 5:38 PM ×

Anyone else noticed Latin America has been trading like crap lately? PBR going down for ever, Brazilian utilities beaten down, TEO and YPF cliff diving this week, AMX looks horrible. At some point there will be some great opportunities. But is there a lot of credit stress in these markets, lurking beneath the surface? EMB still rolling over. Dollar denominated debt seems like such a great idea until the dollar surges....

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boo boo bear
admin
March 1, 2013 at 7:27 PM ×

Maybe you're right yogi, after all its nearly spring and these spoo j3 1470 puts look much tastier than berries.

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Leftback
admin
March 1, 2013 at 8:06 PM ×

Yabba dabba doo....!!!

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Anonymous
admin
March 1, 2013 at 8:29 PM ×

Speaking of puts, I am talking myself into small caps going back to the Jan 1st breakout. Say, May IWM 85s.
DD

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Leftback
admin
March 1, 2013 at 9:42 PM ×

Yes, we did something of a similar nature today, it's probably a better time to have a swing at the small caps just now, given that the defensive rotation has appeared during February.

We would like to remind regular readers of MM of Mrs Watanabe, the perenially poor punter of FX. We realize that this is going to be controversial, (and we are going to get some flak for this) wonder whether this might be a decent time for a few tiny but crafty and highly leveraged contrarian punts on USDJPY? Yes, We Are Yennish. Sorry Mrs Watanabe. Just as you joined the party....

Our reasoning is thus. BUCKY has had a fantastic run up these last few weeks, and although we are bullish USD this year, we think that he might be a bit exhausted and need to take a wee nap here ("he's tired and he wants to go to bed, for a rest").

Furthermore, even the most rabid of Europhiles must admit that punters are not going to be flocking to the common currency unless Dr Aghi is willing to give them a few more peeks at the fearsome bazooka he is supposed to be carrying under his toga. So two of the majors are out of gas, and Sterling is clearly on the ropes as well.

Commodity currencies, meanwhile, continue to have as much fun as Rafa Benitez at home games, on growing evidence that China isn't actually growing at 16% annually or whatever it is the Politburo claims. So it is about time for AUDJPY to unwind some more, and probably take some of those emerging Asian currencies down with it.

Looking at Japan itself, one can only admire the impressive results achieved by a combination of BoJ and Abenomic Jawboning, in the absence of any real actions. So while they may well intend to do it, and probably will do it, the market might be forgiven for asking, "where's the beef"? In fact, with grain and wheat prices in Japan sky-rocketing, only Abe and BoJ voting members will be able to have any Kobe beef, and even the Udon may soon be out of reach for poor old Watanabe-san and his FX punting missus. Food inflation is spiking.

So we are sorry, once again, Mrs Watanabe. We know you are recently long the Dong, the Won, and the Kiwi. But we think it's a-baht time for a little retracement, and as you know, the unexpected carry unwind can be a bit naughty.

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Anonymous
admin
March 1, 2013 at 10:31 PM ×

Mrs Watanabe, with some help from leveraged yen carry punters aka DXJ tourists. From 0.5 to 4b AuM in six weeks. Not sure all the late entrants have the testicular fortitude to hold the "hedge" when those +2% O/N jumps start changing signs.

On this note Deltaneutral Gammagreed Partners wish you a happy weekend, and some spring volatility.

DD

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Anonymous
admin
March 1, 2013 at 11:19 PM ×

good luck guys, this probably is the big one for this year. Also I have recently started to look at agri side and this is fun, have never seen such high low moves before intraday, popper punters they are those farmers. Nick

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Anonymous
admin
March 2, 2013 at 8:12 AM ×

C Says
I love the guy,Warren Buffet,
"The risks of being out of the game are huge compared to the risks of being in it."

However,I would early love the opportunity to discuss this with him. For example,would he be so full of conviction f he did not have an ongoing dep pool of ready cash every year flowing into his investment armoury.One that enabled him to considr timing to be immaterial ,because it was alwasy present and able to buy any drawdown of any size.
Would he be as full of conviction if he ever had to provide for his lifestyle by realising income from his invetsment vehicle.That is, in his case of Berkshire means having to pay a dividend.
The combination of never having to realise income and always being able to fund fresh investment make his position if not unique,then highly unusual.For most of the rest of the universe of mere mortals they really are not in a position to live with the consequences of his rather sanguine philosophy.

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Anonymous
admin
March 2, 2013 at 9:22 AM ×

C Says
I find the attempts to qunatify the effects of US castration to be borderine funny. That is,because they zero in bedget factors.They completely misunderstand a little thing called confidence.Be that confidence to consume ,or to invest.
Post 2101 election the Uk got a govt that said it wanted to cut debt by a mixture of spending an taxes.It took alittle time ,but UK growth fell away as the effects on confidence permeated itself to recipients.
We've seen much the same thing act out in Europe,but of course with more dire effects.
US castration promises the same unless someone can show me why the issue will resolve differently in that country.
I reiterate that policies like these are about much more than known budgetary effects.It's behavioural as well in that it does effect consumption and investment decisions.I suspect if you could really quantify both the first order and second order effects then you might be less likely to enact policy in the same way,but maybe not.Afterall the FED policy might be about economic activity factors,but the fiscal policy is actually about how the benefits of economic activity are going to be distributed and that political populism first and progressive economics second.

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Leftback
admin
March 4, 2013 at 3:16 AM ×

A few notes while the UK-based readership are sleeping (assuming C does, in fact, sleep).

Below, courtesy of HSBC and ZH, the Idiot's Guide to trading USDJPY in 2013 (and as Polemic has often pointed out, if you have ever tried to trade USDJPY you often feel like an idiot):

JPY Decision Tree

LB woud like to apologize to anyone who is long USDJPY and who he may have recently likened to Mrs Watanabe. The loser of the upcoming FX lottery will be forced to watch their favorite teams play while wearing a facsimile of Mrs Watanabe's kimono.

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Leftback
admin
March 4, 2013 at 3:26 AM ×

Here is a quick update on trading in Chinese property developers overnight. Our correspondent here has a succinct commentary:

Chinese Property Stocks

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Leftback
admin
March 4, 2013 at 3:42 AM ×

..and finally, something that has been mentioned here a few times as a potential FX game changer in the future. Thought it might be good to take a look at the data:

US Oil Production Soaring

New York signing out for the evening...

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Anonymous
admin
March 4, 2013 at 7:19 AM ×

Yoorp signing in ... and we already like what Chinese data has done to our favourite victim, the AUD.

Most of exposure is in June, but we have some Marchs as well, and would really like this move to get traction, pronto.

DD

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amplitudeinthehouse
admin
March 4, 2013 at 7:53 AM ×

Just a quick note...going back to the Dollar threshold values we use in relation to the WTI , it's getting close to capitulation for the latter...One other thing, how many of you would be surprised to see a short period of market movement that's referred to as the 'sweet spot' before a final conclusion to the 2013 rotation debate..


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Anonymous
admin
March 4, 2013 at 8:49 AM ×

C Says
Miners not lagging anymore.Outright not wanted.As appealing as bank debt in 2008.
Bye bye beta.
Yield....Insurers replaced banking as THE sector ...not anymore.
Bye bye yield

Bye bye beta and yield then..
Bye bye sweet spot.

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Anonymous
admin
March 4, 2013 at 8:54 AM ×

A little comment from Buttonwood about the old lady and what she did to the pound lately.

Sterling: You can fool some of the people....

Eddie

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Anonymous
admin
March 4, 2013 at 9:43 AM ×

C says'
The Uk policy mix has been different to say the US and Europe. We've been collectively (fiscal+monetary) tighter and looser respectively. It's important to keep that view in trying to assess the policy outcome achieved. The Uk isn't going to conjure up much much better growth than Europe AND pay down it's debt faster.Unrealistic outcome .It's the mix that counts and on balance the Uk is probably less tragic than European you know where when it comes to the mix of growth and debt and the fture pathway for it.
The view that counts is one of relativity simply because money has to go somewhere and decisions on the issue are always relative.Uk doesn't have to look as though it is doing the best.it just has to look better than enough other places. As for the £ that was and continues to be very much a relative issue,but you know how it goes. When the £ goes weak people find allsorts of bullshit to write to account for it.Converse also being true.

The investment world continues to be a place assessable only on a least worst basis and frankly there is little sign that that is changing any time soon. Hence ,playing it as a swing theme of transient nature mean reverting in sentiment and price has not been an unrewarding approach.

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Leftback
admin
March 4, 2013 at 2:47 PM ×

Just when you think the miners are beaten, bloodied and battered, we wake up and they are being whipped, hogtied and dragged once again on Chinese data. The beatings will continue until morale improves....

By the way, the JGB 10y isn't behaving in the way that most of the hyperinflationary JPY bears would predict. Instead it is behaving in the usual way predicted by models of extreme QE/liquidity trap. The Widowmaker is once again leaving wives without husbands, children without fathers, mothers without sons. Short JPY has been working but short JGB has been losing money big time.

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Anonymous
admin
March 4, 2013 at 3:07 PM ×

nice post...amusingly an invite to the DB Inflation Conference has just popped into my inbox, featuring "industry experts and market participants, including keynote speaker Stephanie
Flanders the BBC’s Economics Editor "

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Anonymous
admin
March 4, 2013 at 3:30 PM ×

Jenny Scott was slightly more digestable, didn't Flanders get the post through a relative? Paul Mason is sometimes OK, he does some good videos but the content is poor. Channel 4 is terrible for economics coverage. Some of the interviews they do come across as being slightly left of Trotsky.

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Leftback
admin
March 4, 2013 at 3:31 PM ×

The chart for JGB 10y is something to behold. 62 bps on the 10y is really remarkable. Even for a student of Japanese economic decline and BoJ policy, it is a complete head shaker.

If USDJPY is really going to 125, JGB holders are really really screwed. Which is why, in fact, we don't think that it will. Rumours of Japanese currency collapse and hyperinflationary crises have been greatly exaggerated, at least for the immediate future.

The big exporters have had their shot in the arm and now it is time for the BoJ to cease jawboning and get back to mild deflation in order to control the price of the mighty udon. We think JGB/JPY shorts are going to get burned. Again....

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Leftback
admin
March 4, 2013 at 3:37 PM ×

Whatever happened to Leon Trotsky? He got an ice pick...

No More Heroes

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Anonymous
admin
March 4, 2013 at 3:58 PM ×

C Says
"Icepick" might be preferable to death by a thousand cuts. I refer to ;
A spokesman for the Spanish tax authority said the globalisation of financial activity and increasing problems with fraud made it necessary “to establish a specific obligation of information on assets located abroad”.

Sunshine's never been more expensive.People bought Spain,and since have watched and ongoing train wreck to the value of the asset purchased.An ongong crossborder FX boomerang on the income they generate from what was their host country.Now of course in the reach for revenue assets and income have no hiding place.

A bottled tan looks a lot cheaper.

I nearly went that route once upon a time then decided I didn't mind the rain,and besides when I really thought about it I decided cross border risk is a potential bottomless pit whetehr that's a sinkhole under your Floridan bedroom ,or the equivalent pain that falls upon the spanish plains.

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Anonymous
admin
March 4, 2013 at 6:45 PM ×

C says
UK equity was more than a little defensive bias today.Problem I have with that is that I don't think these defensives are priced particularly attractively in themselves so it smacks to me of the kind of autopilot manoeuvre learned during an apprenticeship on how to counter market volatility 101.

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Anonymous
admin
March 4, 2013 at 8:21 PM ×

Our obsession du jour continues, with a spectacular textbook gap fill (and failure thereof) in AUD.

It is days (and weeks, and months) like this that one is often reminded of physics 101 courses, and the transformation of potential energy in kinetic energy.

(as we have said before we do think the same of the yellow and grey shiny things, but alas, we will not be involved in this)

DD

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Anonymous
admin
March 4, 2013 at 9:52 PM ×

Quick single stock commercial break in the middle of your regular macro programme ... We are astounded by the price of AAPL puts. Now, we have been decidedly adding that same side of the convexity trade in recent weeks (although not in that particular vehicle) ... and of course, those ex momo stocks can spiral out of control much more forcefully than one thought possible ... but when we see the 9m ATM puts on the forbidden fruit cost north of 50$ (!!), we would like to think that the most likely to make money on this one is not the one buying the insurance.

But we have been wrong before.

DD

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Anonymous
admin
March 4, 2013 at 11:53 PM ×

C Says
US looks like a short squeeze setup albeit with matters still range bound it may still be Mr Whippy having fun.

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Anonymous
admin
March 5, 2013 at 8:35 AM ×

C Says
A squeeze and I think we have one tends to suggest the UK FTSE will resolve itself to the upside from a range of consolidation.
So far taking a high cash position has cost little.Former high holding of corporate debt was trend following and as it stands the exit on that still appeasr correct.However,playing mean reversion on equity I suspect may now result in at least temporary underperformance.Unfortunately,that will have to be the way it is as I don't judge that current valuations are sufficiently attractive when weighed against the risk to price from political considerations.
On the positive side I have remained disciplined. The short setup for equity I have been looking for on a timeline basis has not been realised and I have not yet been tempted into the market to join Mssrs Whippy.

In short ;) we still look imo to be stretching for a Mallory solution to return rather than the Hillary approach.

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Anonymous
admin
March 5, 2013 at 9:54 AM ×

well ... so much for gap fill rejection I guess.

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Anonymous
admin
March 5, 2013 at 10:19 AM ×

C Says

"so much for gap fill rejection I guess"
T'is what it t'is as always.Can't always get it right so I don't focus on that.Focus on maintaining a disciplined approach.In the long run this makes the return.I can't catch every winner.

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Anonymous
admin
March 5, 2013 at 10:24 AM ×

Agreed. But it goes back to a point I made late last week. I much prefer when I get it plain wrong (like, late to the 2009 bus for instance), than something like this where you feel like you *get* it, but it does not translate into price action.

Much easier (for me at least) to not hold positions too dearly when they are more clearly moronic in the first place.

DD

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Anonymous
admin
March 5, 2013 at 12:11 PM ×

C Says
DD,it could change in a day and you could end up right.Seasonality for moneyflow is still in the rightplace to be supportive albeit as I say we've seen plenty of markets like this that seem unstoppably bullish then bang.

Soothing noisies from Europe, couple of bank meetings due up,employment numbers blah. Extreme bullish sentiment ,but still apparently enough latitude to scoop the smallest dips.
Hard data that does not really justify some of that bullish intent ,but soothing noises valued more. You have to decide which bus you like best,the stinky data, or the noises.
I've been on what appeared to be the wrong bus before and still eventually ended up at the right destination for whatever that is worth.

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Anonymous
admin
March 5, 2013 at 1:48 PM ×

haha reminds me of Automan from the simpsons "...and now i DRIVE the bus".

Slow moving car crash in these equities i might sell some more and do one to rio.

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abee crombie
admin
March 5, 2013 at 1:59 PM ×

me thinking of getting really involved in AAPL here. Such a 180 in perception.

Spoos going to get all time high it seems

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Leftback
admin
March 5, 2013 at 2:52 PM ×

Keep the sound turned down, guys, and pay attention to the fact that commodities have been crushed for weeks, FX remains bearish despite a modest bounce in AUD and EUR, and the credit markets show a degree of caution that is inconsistent with the happy clappy action in equities.

Limit the front month exposure, don't look at the P/L every 5 minutes and keep your eyes on the ball.... real data out tomorrow.

Just reached new highs on the Dow, apparently. The party hats will be out again later.

Markets peak on good news....

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Leftback
admin
March 5, 2013 at 3:28 PM ×

General media euphoria, while the bond markets are almost completely unmoved, as though the equity market was something taking place on another planet.

Which in many ways, at this point, it is....

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Leftback
admin
March 5, 2013 at 4:08 PM ×

It is a real party hat day on CNBC. Oddly reminiscent of 2007 in some ways. Not a cloud in the investment sky as the balloons float higher on a layer of hot air, optimism and easy money.

We are, of course, Not Listening, but the presenters are clearly having fun, and there seems to be a general spirit of genial bear-baiting. Volatility sellers continuing to sell. Danger signs flashing.

Tomorrow features factory orders, ADP employment number and the Beige Book, so we may have a brief intrusion from the “real economy”. At some point, Macro may begin to matter, but we know not when.

It is hard to figure out when the payroll tax changes and the sequester might begin to show up in the form of a hiring freeze, but it’s best to remember at times like these that jobs are always a lagging indicator. Retail sales and credit spreads will be the canary in the coal mine.

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JBTFD
admin
March 5, 2013 at 4:21 PM ×

blah blah facts schmachts.

I wasn't able to buy the dip so i'm just going to buy here, looks as good as any place. I am a genius, and a courageous one at that, when i buy the market can only go up. Warren Buffet is so hot, i hope he comes to Butlins this year.

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abee crombie
admin
March 5, 2013 at 4:35 PM ×

I agree LB.

But its interesting to feel the psychology going on now. When the market goes down, everyone is gloomy and you can usually find someone/thing to blame. But when the markets are going up and YOU are missing out, you feel like a real schmuck.

I lightening up here but I still think it might take a few weeks before we have another sell off. Maybe when EuroStoxx makes new highs!

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Leftback
admin
March 5, 2013 at 5:32 PM ×

"No Market For Old Men" (i.e. anyone over 25). We could use that as a title for a post...

We do have a fair amount of longs (Europe and US divis), so we are not missing out completely, and we are somewhat immune to the performance anxiety. Our benchmark is 0.5 (SPY + AGG), which is a bit less demanding than 3 x (QLD) and helps maintain one's sanity. It's amazing how well you can sleep on a consistent basis if your benchmark doesn't force you to chase at exactly the wrong moment. We all make mistakes, but the trick is to avoid the really really big ones.

After a few cycles in this business you do learn to tune out the media at moments like this. Ignore all the blokes who are long LNKD, NFLX and FB. Not surprisingly, given the dominance of momentum trades, margin debt is currently extremely high. As TMM would say, it has become really spivvy.

Looking around at the more experienced among the ranks of professional investors, you can see many of the long only equity shops are rotating into the usual areas associated with defensive portfolio management. Those with memories of 2000 and 2007 don't necessarily buy into today's media picture of this being a "reasonably valued" equity market.

The picture being relayed by wise heads in the credit market is even more bearish, with the 10y steadfastly refusing to budge from the 1,90 area and being championed by many of the same PMs who were avoiding USTs like the plague in November. If yields are a poll on US economic growth, then there may indeed be trouble ahead.

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Anonymous
admin
March 5, 2013 at 5:34 PM ×

C Says
Can't comment on elsewhere,but here in the Uk I still see plenty of evidence that the market keeps going because it is getting a healthy leg up from shorties. You just don't tend to get numbers like some of these unless there is a fair amount of cover buying going on.
So despite the bullish sentiment extremes we've still got the shorties in there digging holes too early.

I thought if I didn't get a sell setup worth note in Feb then I might get held out until the next QTR moneyflow subsided in April. As it stands that looks more likely than not.

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Anonymous
admin
March 5, 2013 at 5:38 PM ×

LB agreed

The fact that our pants are so tense is I would say, a good sign (most turns induce such feelings).

Rode the longs as we should have done, reduced exposure as we should have done, avoided outright shorts for the most part, and accumulated cheap convexity where available.

The portfolio bleeds a bit, but reasonably so, especially in light of what happens if we are right.

But we cant help it, discipline is hard at times like this. Amygdala 2013 I suppose.

DD

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abee crombie
admin
March 5, 2013 at 7:37 PM ×

Trannies leading the way! and the stinker JNJ is having a great 2013 so far too. Rotation rotation.

Besides JCP, and GDX I cant seem to find much that is down lately!

Agg's maybe?

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Anonymous
admin
March 5, 2013 at 7:37 PM ×

http://www.bloomberg.com/video/dow-dropping-to-5-000-starting-this-year-nenner-dOIoxWrvQdS0sjm5jxjk9Q.html

A little too bearish for me :), but I'm not going to laugh because every mofo in the media was laughing their asses off at bearish folk in 2007. You can see the smirks on their faces. They haven't learned a goddamned thing. Even if he's a nut be a bit humble because you never know.

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abee crombie
admin
March 5, 2013 at 7:39 PM ×

From BCA

All of this suggests that the world economy will probably continue to operate at a pace that closes the output gap very slowly. This assessment is supported by the global inflation picture, which is either low or falling.
Under this scenario, monetary policy will stay ultra easy and both nominal and real interest rates must stay low. Periodic currency realignments not only redistribute growth among nations but also become a key barometer of relative monetary stance.
This creates a “sweet spot” for equity investors – modest growth, low inflation and negative real rates will support corporate earnings and embolden risk taking. (tweet this!)

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Anonymous
admin
March 6, 2013 at 9:42 AM ×

C Says
When you look over asset group across the world it's likely the central banks have won the war of attrition on winkling out the so called animal spirits.Whether they were hedgies desperate to play catchup after underperforming ,or simply risk averse cash holders. I see little eviudence they were bondholders indeed depending on the bonds in question they're still holding solid.Only my opinion ,but in the vicinity of old highs I'm not sure some of those are going to reduce their allocation at this point.
Credit spreads tend to reflect a prortionate response down the risk spectrum without seeing anything dramatic there.
In the UK I'm watching the credit spectrum and stuff like utilities to see how they respond to upward moves in equity.As timing goes one shouldn't hold breath looking for sudden change .It's the emerging pattern of behaviour over months that is useful to guage where one thinks we are in terms of market exposure.
What I will say is much is made about the risk of bonds to interest rate rises.However,the case is when risk markets get near completion in terms of leverage then the risk of rate rises,or policy normalisation in this case will imo be more ,or less systemic.

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Leftback
admin
March 6, 2013 at 2:38 PM ×

So much media noise lately over here it is more and more difficult to see actual data. ADP at +198k, but we always have to bear in mind employment is a lagging indicator. Factory orders at 10am here, it will be interesting to see at what point the US corporate outlook for weak demand in 2013 (which is almost consensus at this point) is reflected in the data.

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Anonymous
admin
March 6, 2013 at 2:44 PM ×

Right LB. Bear in mind that employment usually rises up to 6 months after a recession already started. At some point you can use it to confirm your theories, nothing more nothing less.

As a sidenote, is anyone else looking at the U-6 unemployment rate ? It remains stubbornly high at around 14.4% compared to +/- 8% in 2007. Where have all the consumers gone ? Maybe this is part of the answer.

Eddie

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Leftback
admin
March 6, 2013 at 3:35 PM ×

Loads of overt bear baiting in the media today. CNBC were baiting Jeff Kleintop, who is hardly a permabear. Even Tom Keane, who should know better, was at it on Bloombags this morning.

Talk about correlation is timely today. Guys coming on TV and saying correlation is declining, which is good, means people are stock picking. To me, it says two things: a lot of the pros are out, sitting on the sidelines, and FX/macro is quiet, as it often is as we grind through a turn.

If you look at a lot of the stocks making a move this week, there's no doubt we are witnessing the quintessential Dash for Trash that we have often seen towards the latter stages of the various QE-inspired bull runs. Watching the monoline insurers go vertical this week was one of those eyebrow-raising moments, for sure...

Crude falling again today (WTI), this is going to become a trend, as a secular decline in domestic demand meets a steady increase in US domestic supply. This stealthy change in energy policy is going to hang a lot of permabulls and Peak Oilers out to dry.

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Anonymous
admin
March 6, 2013 at 3:45 PM ×

Talking about peak oil, I found this to be an interesting read:

Oil: The Next Revolution

Eddie

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Leftback
admin
March 6, 2013 at 3:48 PM ×

A simple piece here from Michael Gayed, making several valid points about recent market dynamics.

Invisible Gorillas

Most fundamental of all, as he points out, is that we are seeing the yield curve flatten, when in a real recovery we should be seeing the curve scream steeper. This goes hand in hand with the rotation by many PMs into defensive sectors. The usual reflation trade leaders, materials and energy, have all been taken out and shot.

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Polemic
admin
March 6, 2013 at 3:57 PM ×

Still not in on this up leg. Am i mistaken in thinking the mid week in March tends to mark market turns?

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Leftback
admin
March 6, 2013 at 3:58 PM ×

Thanks Eddie, that's a good read. One of the factors mentioned in there is China.

Not many people have commented on this in the media, but the most recent pollution season in Beijing was appalling and worthy of comparison to the smogs of Dickensian London. The politburo recently noted that they would pay more attention to the health of the population and the environment and pursue cleaner energy solutions. If this is more than words, then coal and oil consumption in China may no longer be a growth story. The US coal companies may be in for a long period of lower demand.

It's instructive, by the way, that Japan has almost no energy of its own, and yet its currency was able to climb during the last decade or so. Now think about the US with its energy reserves, and the idea of the much-touted Dollar Collapse/Peak Oil scenario starts to look more than a little silly.

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Anonymous
admin
March 6, 2013 at 4:10 PM ×

C Says
You want to find tomorrows underperformers look for yesterdaus outperformers in many instances. Doing this is easy. Keep a casual count of the number of new funds being by sector.Couple of years back big trend was "we now offer a commodity fund" ...bump!
About same time Absolute Return became quite De Jour ...

In essence it is typically always backward looking stuff. Suppose we culd have thrown in hte "BRICS" as well.

So let's play the game ,what will be todays De Jour theme thereby becoming tomorrows underperformer?.

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Leftback
admin
March 6, 2013 at 4:13 PM ×

Not entirely wedded to the Japanese model, here, but US yields show no indication whatsoever that we are anywhere near "escape velocity", defined as 3-4% annual growth, that would be sufficient to power a break above the "event horizon" at 4% on the 10y, in order to break free from the intense gravitation pull of the "black hole" and avoid falling back into the QE Liquidity Trap.

A quick reminder is appropriate, therefore, that Japan had many many failed rallies in the 90s, some of which are illustrated below. The 2000 breakdown was associated with a global slowdown and would have been especially nauseating to late arriving Nikkei longs:

Japan's Roller Coaster Ride Through the 90s

Certainly would have been advantageous to have been wearing protection when the 2000 global slowdown caught up with the Nikkei, administering a 60% haircut to those who thought Japan had turned the corner. I am sure they were all wearing party hats in Tokyo in the Spring of 2000.....

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abee crombie
admin
March 6, 2013 at 4:17 PM ×

CS Fear Barometer hitting highs, again

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Anonymous
admin
March 6, 2013 at 5:08 PM ×

I'm not a technical analyst and don't normally give it much credence, but does anyone of that bent see the bullish flag on the ftse daily chart? Going back to mid-Jan.

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Leftback
admin
March 6, 2013 at 5:28 PM ×

Here is the article on Wen Jiabao's outgoing address. Unlike Western leaders speeches, these are not usually used to jawbone or curry favor with the populace. They are probably serious about this, and not just because of airborne pollution. China has as many coastal cities in danger from rising seas as the US.

China Pollution Risk

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Leftback
admin
March 6, 2013 at 5:48 PM ×

Next time you're having a bad day and YTD you are under-performing your benchmark, your least favorite trader colleague and your mom's neighbor's 15 year old kid, don't feel so bad. You could be this guy... or his investors.

Andy Zaky

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Anonymous
admin
March 6, 2013 at 6:18 PM ×

C,

although I risk being boring... lemme throw REITs and REIT ETFs into the ring. Not entirely new, but quite en vouge these days (and trading way above what I would consider a reasonable price...).

Eddie

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rp
admin
March 6, 2013 at 6:37 PM ×

@ LB 5:28
Haha "we're going all in", this guy belongs on the starship enterprise with all the other space cadets.

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Anonymous
admin
March 6, 2013 at 7:12 PM ×

C Says
So LB what's the magic number this week?

I'm going with 90k just because I'm bored and an employment nuke is all that stands between me a future featuring endless Rorschach tests....!
"What is this Mr C?...it's a Bull Market .It must be ,everythings a Bull market."

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Anonymous
admin
March 6, 2013 at 7:18 PM ×

http://www.thereformedbroker.com/

Should I tell him he's talking crap?. Hello,"Euphoria" my boy knows no natioality.Just because your mutal funds think US equity is shite does not mean that the "Euphoria" over US assets in general isn't happening.It just means your it's being generated from elsewhere. Why would that be? Because half the rest of the world appears to be sucking to a greater degree than ther US at present who have a more benevolent attitiude to debt forgiveness.See Euorpe et al.

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Leftback
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March 6, 2013 at 7:51 PM ×

Eddie,

REITs often have a brief heyday late in the bull run, as the mainstream equity market stutters and the unwary punters wander in haplessly seeking "high yield", usually just before an equity offering dilutes them or there is some other plunge based on the prospect of higher rates or the reality of highly compressed interest rate spreads, etc. A great strategy has been to wait for the annual dump and Buy on Panics.

We are long some REITs from December, and will hold them, especially the preferreds, but we have bought some protection on one or two that look as though they may be pregnant with another bolus of new shares, TWO being a case in point.

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March 6, 2013 at 8:10 PM ×

C,

OK, let's play NFP bingo. The BBG consensus number is +171, range is +130 to +225k, and I think the whisper number will have been raised today to be closer to +200 to +225 after ADP, which has been a little more accurate of late. As you know, LB thinks the attention to these numbers is silly, b/c they are all like the alcohol content of Budweiser, f***ing close to zero.

I am adding to fixed income positions today. Because they are cheaper than yesterday and I think the story is intact, at least for the present swing trade. So bond longs are saying, in effect, that the chance of the BLS print being a big f***ing +250k or more is close to zero, so there is no way I am going to be blown out by a massive rate spike.

Yeah, probably inclined to take the under this month, I will have a punt at +137 just for a larf.

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March 6, 2013 at 8:49 PM ×

Yield Watch and P/E Data, for those who have an interest in such things on dull days.

P/E and Yield Data

One might ponder the Russell trading at P/E 32 trailing earnings. Yield on IWM 1.83%, versus the 10y UST yielding 1.94% today.

Not to worry though, "earnings growth forecast" leads to a forward estimate for P/E of 16 (estimates from Laszlo Birinyi).

Really? So either earnings double in the R2000 or prices double? What kind of gulás are you selling me here?

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Anonymous
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March 6, 2013 at 9:38 PM ×

LB 5.48 that's an absolutely insane story.

I was already floored by the 700 suscribers at 200$ per, monthly.

But then the morphing it all into a 10m leveraged single-stock hedge fund is ... wow. The Great Rotation, I guess.

It goes without saying, but people never ever learn, don't they.

DD

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Anonymous
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March 7, 2013 at 7:24 AM ×

LB,

you are overly pessimistic. The Russell 2000 P/E came down from 42 (based on TTM earnings). This is clearly a bullish signal. Irony off.

I loaded up some apples lately. Wouldn't have touched them with a 10" pole at 600+, but now they look reasonably healthy.

Eddie

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March 7, 2013 at 7:43 AM ×

LB (once more, what a pity that you can't edit posts),

re REITs: that is pretty much what I suspected. High dividend yield in a yield starved world... what a source of happiness for unknowing punters. Until something happens that you didn't have on your radar screen because it didn't happen during the last 3 years or so... this ain't no market for young men.

Eddie

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Anonymous
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March 7, 2013 at 8:57 AM ×

"Fiscal conservatism and monetary activism". The UK electorate has greater patience than its european brethren, but you still have to wonder, how long till someone makes a coherent pitch that this is asset financing via real income destruction and starts grabbing votes from those on the wrong side of that swap. Or did the DM really manage to convince everyone that "QE kills pensioners".

This is why I struggle with Betty. Ripe for a bounce and probably over-hated, but I just can't see that policy mix as a stable LT equilibrium.

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March 7, 2013 at 9:55 AM ×

C says
Anon,
"asset financing via real income destruction "...ssshh, please! How much is it worth for you to keep quiet?

As for Betty I think we need to quantify what "long term " means and form some global context around a conclusion.
As I am fond of pointing out it's always "relative". Betty actually as been doing a not bad job at sandwich filling between currency hegmony and fragile European risk.
My one critique is we didn't capitalise on the opportunity of this situation and maximise it.Fortunately,you do sometimes get a second bite at opportuntity that has gone begging.Let us hope and pray that we do not at this juncture hamstring ourselves by tripping up politically.Giving in to popular tunes so to speak.

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Anonymous
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March 7, 2013 at 10:12 AM ×

C says
Limit order knife catch morning.Caught to one decimal place and for my next trick I shall be employing the services of Beppe The Clown !

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Anonymous
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March 7, 2013 at 10:15 AM ×

C, what I meant in my anon comment is that is (or at least I find it) a very difficult task to figure out how long the costs of that "sandwich filling" positioning are going to be tolerated.

Put it this way. If currency independence is the differentiating factor between UK and EU (in terms of soothing the pain for the man in the street), I have no reason to doubt it will be used.

It's not a particular strong belief. But reasonable doubt and all that, I'd rather stay out.

DD

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March 7, 2013 at 2:13 PM ×

C says
DD
My earlier comment was hardly comprehensive.
There are various factors beyond the simple issue of a currency that indepedent from Europe.Indeed that's been the case for a long time now.

Everytime a major wealth entity buys a UK denominated asset we might ask the question why?

In general,it's an investment in one or more of the following; political stability;geographical placement;securing the distribtion chain.
Currency in a sense is only a timing opportunity to buy one of the above.

Everytime that opportunity is taken by a Russian,or Arab buying UK property they are in effect swapping risk in their host country in favour of accepting the perception of lower risk in the UK.

When Norway swap energy for gas and uses some portion to buy an income producing asset in the Uk they are securing the future of their distribution chain. Same issue when the Chinese buy a water company in the UK.

The Uk makes a good cash cow,or safety deposit box for risk. If I had core concern over that it would be that we might in 2015 get a further Labour govt that sacrificed what we have tp sell in favour of some ridiculous populism policy.

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March 7, 2013 at 2:51 PM ×

C, Your last paragraph is what I was going for. I am surprised the public is not ripe yet for a proper anti cash cow platform (in light of my earlier "asset financing" comment).

It's probably a longer term concern as you point out, as 2015 is a long way away. But I am sure not going to try and time that.

DD

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Anonymous
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March 7, 2013 at 3:09 PM ×

C says
DD
I guess I don't share your sense of acute risk ,because I have had so long to get to know and understand my fellow UK residents.
Whilst they are always game for the popular message (typcally, give you some tax back mister)they have historically been far too thick to really understand the underlying economics involved.

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rp
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March 7, 2013 at 3:36 PM ×

Agree with C
The main reason is that the vast majority of the UK electorate don't understand QE, let alone its redistributive implications. They would rather 'bash the bankers'. The ones who scream the loudest are always the nutters, which disengages any sound-minded majority from the argument.

I'm sure there's a deeper root cause for the stickiness of the British public, that cause (or a mixture of them) can probably be found in the essays of George Orwell. The AV refurendum says it all, the electorate was scared off of the fairer more democratic system ... because they were sold on the idea that it would be too complicated. The handful of boroughs where the yes campaign won a majority were areas dominated by students.

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rp
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March 7, 2013 at 4:18 PM ×

While i'm at it, prediction for tomorrow: NFP comes in way above expected something like +250k, the unemployment figure ticks lower, equities snap higher as the machines pile in, then it fades back to flat. Then at the end of the day an exhausted and overworked Reuters man copy pastes some stuff together with the headline that equities give back gains because all of a sudden mr. market becomes scared that the QE party might be over sooner rather than later. Because the market just thinks like that, like 'oh i've left the gas on'.

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Anonymous
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March 7, 2013 at 4:46 PM ×

What the public doesn't get or doesn't want to get is that there's no way main street gets out of this mess without the fat cats getting theirs (and more) too. The French saying 'plus ca change' has never been more apropos.

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Anonymous
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March 7, 2013 at 5:04 PM ×

Gentlemen,

fully agreed. The trick is not to let main street know that they are screwed (beyond what they have to bear anyway, think of youth unemployment in Spain and Greece... that stuff keeps me awake at night).

Eddie

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March 7, 2013 at 6:31 PM ×

Even fat cats get eaten by a coyote if they hang around the trash cans* late at night. Longs in this market may meet a similar fate, as some of the items on the menu don't look very nutritious.

Did anyone else notice recent buyers of MGIC (MTG) were immediately diluted by a share offering, just days after that dog had jumped 20%? Momos beware. The Dash for Trash can come back to haunt you.

*Rubbish bins for our UK audience.

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Anonymous
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March 7, 2013 at 6:40 PM ×

Says
Anon 6.31,
I think you'll find most of us here have already capitalised gains to a degree that we look like Garfield having Lasagne fed to him intravenously.D for T is under observation.

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Anonymous
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March 7, 2013 at 6:42 PM ×

Ok my eyesights going...LB is anon ...surely a sign to retire for a glass.

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March 7, 2013 at 7:09 PM ×

Or perhaps a pair of glasses?

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March 7, 2013 at 8:11 PM ×

Just a chance we get a hot number tomorrow, but if so it will be the last one for a while. We have had several years where Jan-Mar jobs look good and then by Apr-May it was already back to 0-50k. New job creation depends in large part on new small businesses and there are few.

Similar caveats apply to all of the last three 'US housing recoveries'. Higher mean house prices recently may simply reflect a skew in the data from a few short sales going on in that Jumbo mortgage price band that had been completely dead for years. As for inventory, that's always been the easiest data point of all for the NAR to manipulate. Shadow inventory is still out there.

For all we know, the US may even be in a mild 2 or 3 quarter recession (-0.2% or so) that began as long ago as September. If that's the case, then we are heading for an Earnings Cliff ahead. The mid-market retail emporia in LB's neck of the woods are empty and a lot of people just don't buy anything at all unless it is on sale, even groceries. Wages remain low for those who have jobs, and they are crimped by holiday debt, gas prices and payroll tax.

This latter observation doesn't apply to the denizens of the neighboring Republic of Hedgeistan, but then that's not real America.

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March 7, 2013 at 8:31 PM ×

An amusement of pure quality for readers of MM and fans of certain bearish yet obsessively gold buggering blogs everywhere....

Cassandra Does ZH

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Anonymous
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March 7, 2013 at 8:44 PM ×

Cassandra is pretty good with stuff like this. The insider trading ones are classic.

As for shiny metals, I have said this before but I think there is an Edward the Second moment waiting to happen. Especially on bullish macro momentum - jobs are great - housing is back - why do we need QE again?

One could argue that if you are afraid of the big bad sustainable bull, it might be cheaper to position for that move than to chase momo and D for T.

Personally we will do neither.

DD

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March 13, 2013 at 3:26 PM ×

That's also why assigning intent ("brainwashing retail") is dangerous. What else are they supposed to do really? Perhaps they do what they do because there is no one left to watch the "good stuff" through these channels.

Media Monitoring

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