A Beer on Merve

Merve the Swerve says something and the market decides to listen - this time. As we know, the market should have given up listening to Merve months ago and so really should ignore his last pompous departure monologues. But his comments appear to have landed on a market as short as GBP as they are confident that Jpy will fall. Which is quite a lot.

The resultant move in GBP has therefore solicited cries of "squeeze" rather than a volte-face.   But considering that the original move down is based on expectation of a volte-face on BoE policy then any volte-face on the volte-face should be considered as a double volte-face which, like a double negative, is a nothing. Dales comments this morning are hardly supportive of a new regime

BANK OF ENGLAND'S DALE SAYS TALK THAT CENTRAL BANKS SHOULD FOCUS MORE ON GROWTH IS "DANGEROUS"

BOE'S DALE SEES "CONSIDERABLE FLEXIBILITY" IN CURRENT INFLATION TARGETING REGIME TO SUPPORT OUTPUT, JOBS

BOE'S DALE - UNCLEAR THAT BOE COULD SIGNIFICANTLY BOOST ECONOMIC GROWTH WITHOUT GENERATING INFLATION

So perhaps the original premise of GBP going yennish, so beloved by 5 minute macro, is indeed seeing a classic squeeze. Playing cable on long term arguments is fine if you have deep pockets, but to paraphrase a "bearish website", "In a long enough time frame volatility on Cable moves to zero". Ok that isn't quite right but some members of TMM have been around for a while and mentally map cable as "1.70 plus or minus a bit".  Considering all the momentous events that have occurred globally and selectively to the US and UK over the past 25 years cable really is a mean reversion specialist.


So much for "trending to the outright forward" so beloved by various FX models.

The real widow maker in the short GBP basket has been Eur/GBP which has gone nowhere since the start of Feb when the mood of GBP bearishness really got underway. Which just highlights how messy Euro is in its own quiet way.

In general FX is in squeeze mode within a pretty dull background (if you strip out gbp and jpy) and we remain short of AUD/USD and AUD/ZAR  re. the post of couple of days ago. Though we have been accused of complicating the AUD trade by using ZAR as a counter, considering the whiplash in USD over the past few days, we suggest that using ZAR instead of USD in this environment may have actually have simplified it. And added some carry. ,

We are going to be away for a few days sliding down Alpine hills so will probably not be back until the end of next week. But this reminds us:- The TMM holiday FX indicator. "GBP will always base the moment we make our last purchase on a foreign holiday". For once we may have to thank Merve for something. A free beer.
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admin
March 15, 2013 at 1:43 PM ×

Lucky beggar, the only sliding down going on here in NY is in the portfolio, where each week of late we seem to be unerringly short the wrong instrument....

Of interest to Fed watchers and others, US inflation data comes in "hottest in three years", and what does the 10y do? The yield drops...

Reverse logic in the wonderful world of ZIRP.

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Leftback
admin
March 15, 2013 at 4:33 PM ×

A topical warning as we approach St Patrick's Day... the evils of alcohol and what it does to Neurone Transmission, among other things. Very interesting, I'm sure, for those who understand such things.

What St Paddy's Drinking Does To You

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Anonymous
admin
March 15, 2013 at 5:33 PM ×

LB, your link had some interesting side effects:

All The Reasons Pot Is Good For You

:-)

Eddie

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Leftback
admin
March 15, 2013 at 6:35 PM ×

No worries about market multiples or US corporate earnings. Not now that Mila Kunis is long equities...

Mila Kunis Buying Stocks

Reminds me of Gisele wanting to be paid in Euros. In any case, I am sure earnings have nothing to do with it. Bill Miller said stocks are "cheap" today as well.

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Anonymous
admin
March 15, 2013 at 7:07 PM ×

C says'
Bill M is a great trend follower wihtout a doubt,but I could argue he was also a one trick pony.That is,credit expansion equals great news for banks (his favourite) now follow that trend until it explodes then have a couple of crap years wash and repeat.
You could say he a trend follower of Fed interventionist policy which has always favoured the intermediaries straight up.

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Leftback
admin
March 15, 2013 at 7:16 PM ×

Everyone's a raving genius when the market is up every day. Bill Miller got pantsed like everyone else when the music stopped in 2008. In fact you could say he dropped TROW...

Bear capitulation?

II Bears At 20%

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Leftback
admin
March 15, 2013 at 7:33 PM ×

In other action, the US 10y responded to the "hot inflation news" today by.... falling from 2.05% to below 2.00% !!!

Curious action considering all of the evidence for a "strong US economic recovery" and the "fears of overheating", as investors rush to buy "cheap stocks" and flee "big losses in bonds" as interest rates are expected to "spike sharply".....

Irony off. The confidence number did its usual thing today of reflecting the spike in gasoline prices. Demand destruction can be assumed to be very close behind. This is becoming an annual Rite of Spring.

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Anonymous
admin
March 16, 2013 at 9:55 AM ×

C Says'
http://uk.reuters.com/article/2013/03/16/uk-eurozone-cyprus-idUKBRE92F02P20130316

That will have dropped a bomb on some people I can think of. A veritable first of actually nailing depositors no less.Unheard of outside of 'leper' economies.

So to take an example;your uk expat dodges some uk tax by retiring to Cyprus with the usual "my local taxes are tiny" remark. Let's say he's got 100k in deposits and coughs nearly 10k on his hit then all he's done is payback on his lower taxes for the medium term.

There will be similar hit's occurring in Spain etc. It's really no accident that many of these debt problems occur in countries that purport to have some 'tax' advantage. Indeed I'd rephrase that to read that they don't have a tax system fit for the purpose of underwriting the social services they are supplying so that over time they will simply accrue a financial problem that will eventually need correcting.The big question is who bears the cost of such a correction? In the case of Cyrpus I wouldn't have given them a DM until they'd written off every creditor senior,or otherwise.Cyprus
has been extremely naughty for a long.Whatever the public stories,they really barely scratch the surface in Cyprus.
time.

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Anonymous
admin
March 16, 2013 at 4:39 PM ×

Probably quite a few angry Russians this morning.

DD

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Black Ink
admin
March 21, 2013 at 11:27 AM ×

Short AUD. Are you sure MM?

LNG to become export star as iron ore export growth slows
BY:BARRY FITZGERALD From: The Australian March

The Federal government's chief commodity forecaster has joined the chorus in calling the peak in the value of mineral commodity exports, with energy exports set to become more important thanks to the $200 billion liquefied natural gas (LNG) export investment boom.

The Bureau of Resources and Energy Economics (BREE) now estimates export earnings from the resources sector will slide by 3.4 per cent from $192.6 billion in 2011-12 to $186 billion in 2012-13.

The fall is due to a combination of lower commodity prices and the revenue-sapping effects of the strong dollar offsetting the benefits of volume increases.....

Source: http://www.theaustralian.com.au/business/mining-energy/bree-increases-forecast-for-resource-export-earnings-in-2012-13/story-e6frg9df-1226601320108

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Black Ink
admin
March 21, 2013 at 12:36 PM ×

O and one other thing. Australia guarantees deposits of up to AUD250,000.

Source: Australian Government: Guarantee Scheme for Large Deposits and Wholesale Funding

http://www.guaranteescheme.gov.au/

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