Tuesday, April 16, 2013

Observations from Camp TMM

- Nikkei did not fall despite Usd/Jpy pull back and the US falls.

- Asian Markets did not really fall despite US and European actions. 

- So this is not a global relinked "risk off" move and still sits within "positional" explanations.

- Gold has bounced though the bounce is still ex-feline. 

- Some of TMM have been doing some company visits downunder and keep hearing that "winter is coming" from mining guys. We aren't sure if this something to do with "Game of Thrones" or just a southern hemisphere reverse seasons thing or whether this is just a reflection of mining contractors' order books.

- Aud is looking as sick as a dawwg (our cross hairs are back on it). 

- Not much real news, with Price is News starting to dominate. 

- Boston - really terrible and hopefully an isolated event. 

- China is slowing but not crashing. 

- Jim Reid has devoted 50 odd pages to showing that historical returns to high yield at these spreads are really bad. Thanks Jim, we know. Now what is the catalyst?

- Soft ZEW result is already in the price. 

- John Sweeney's BBC Panorama program about North Korea didn't tell us anything new or actionable and in TMM's eyes was a journalistic self-indulgence that, having used LSE students as cover,  puts future acedemic research in dangerous lands at risk. TMM wonder if, like they do with dodgy banks, it's time to split the BBC into a "Good BBC " and a "Bad BBC".   

- A recent dreadful dining experience has spawned a new entry for the TMM glossary:- 

Aqua Nueva - A distillation of pure arrogance and appalling service containing no spirit whatsoever served in a glitzy shallow vessel to the detriment of the recipient.  As in  "The Eurogroup served Aqua Nueva to Cyprus". Like the London restaurant with the same name and dreadful attributes, to be avoided at all costs. 

- John Sweeney = Aqua Nueva


Anonymous said...

C Says
I do wonder how much of this action is Japanese displacement,because there are some odd interplays going on out there.You know that "sideways" puke.
Moreover,responses to Japanese policy are already on their way from Korea and I dare say that won't be the last.

I can't see otherwise how we are getting relative strength in Europe/UK fx and associated.

Something ironic if the Euro and £ rally back up to say 1.35 and 1.565 because of "sideways" squirt. Albeit sets up another decent swing trade.

maximm said...

Aqua Neueva - Any place with a poor imitation Prince logo and rubbish genero-chill-house on it's website was always going to be bad.

Leftback said...

After yesterday's dump (into which we sold our April puts), we now return you to your regularly scheduled program of vol selling and squeezing. Would not be surprised to see the VIX retrace to 12-13 as expiration approaches.

Re:FX, it is a bit odd there was no follow through, in AUD for example. Perhaps the FED was active selling dollars overnight. Swap lines are there to be used, and are an efficient way of damping down any market panic in response to any kind of event.

A lot of sitting and chart gazing ahead for us here while the market digests yesterday's action.

Anonymous said...

Fwiw Aqua has really gone down the tubes in the 2 yrs I've been going. A lovely terrace for a drink, decent food but generally a wannabe eurotrash crowd and very overpriced joint. Problem is there's a dearth of outdoor drinking spots in soho - any tips?
Cheers to some warm evenings,

Leftback said...

Late arriving shorties are now getting an unscheduled visit from the Proctologist. Yesterday's vol spike was the exit signal for the smarter Bears to take the money and run. Only a slow evisceration lies ahead today for the remaining ursines. How many times have we seen vol sold remorselessly into expiration? Anyone still short today may as well put their old man in a sausage grinder and turn the handle. About as much fun....

Anonymous said...

LB, I am actually surprised to see such a relatively small PM bounce after that life-altering two-day move. Probably further room below, we'd say.

Re AUD, the more we think of it, the more we believe that this is going to be an epic move once it gets started. "Triple-A with yield" is going to sound incredibly awesome when RBA uses the room they have to cut to support the fx-impaired parts of the economy. One should continue to happily pay theta and roll costs on that one. It will probably be well worth it in the end.


Anonymous said...

Also, regarding vol. We know we have said this before, but the Pavlovian sell vol / buy XIV / VXX puts response after every and any vol spike is begging for a raucous shakeout at some point.

We certainly do not claim to be vol term structure experts and will absolutely not try to time this, but contango tourists *will* receive a spanking one of these days.


abee crombie said...

welcome back S&P monkey. we knew we couldnt keep you away for long

Lame duck bounce in gold, miners nothing. But Oil and the AUD/CAD are the markets that really matter

go with what works (until it doesnt)

Leftback said...

A good day not to bend over in front of steamrollers. Let the monkeys press the lever, pellets are back.

Anonymous said...

Classic moment with the Reinhart/Rogoff Excel mishap.

Austerity trade unraveling faster than PMs (perhaps not unrelated, if you are into social mood and all that).


Leftback said...

..and down the stretch they come..... and it's another win for....

Vol Sellers by a nose, with Momo Monkey a close second, and Dead Cat Gold coming in third a length behind.

All fairly predictable. There's another race to look forward to tomorrow. We enjoyed doing nothing today. The gold miners continued to dribble downwards, and FCX couldn't hold an early gain. Approaching capitulation in the materials and miners space. Hold that Kevlar....

Anonymous said...

C Says'
This mornings awful pun focusses upon how Europe really is a car crash.Car manufacturers must surely agree by now.

I see Swann thinks Euro policy is "mindless austerity" and we appear to have minor a French rebellion in the wings of the same ilk.
I think our Word of the Year Award must surely to go to "Austerity".A fitting successor to last years much reviled "Bankster" which when spotted had us swiftly moving along to the next topic on the grounds that it's presence signifies the absence of intelligence life as we know it.

I read the US market is fine as FED policy will be spotted well in advance. Word to that expert it is not monetray policy you need to be watching for. The damage can just as well come out of fiscal policy as Europe is demonstrating so well.Moreover the current US noises on fiscal are not heartening.Surely they cannot be so stupid as to do a Eurozone ?

Cutting thorugh the crap the US rally was not confirmed by the BP's so still topping for me.

Earnings continue to show companies working that bottomline ,but the topline is still the problem and it reflects a world still slowing.Still paying down debt ,or doing a Eurozone.The question remains then what are you willing to pay for that yield when real growth is so hard to find? Factor in what you like for the miss ,but when they happen they get ripped.

Anonymous said...

C Says
So far this season we kicked off with the Banks taking one for the team after a Cypriot owngoal. Miners/PM/Ind Met are filling the net for the team from multiple strikes.It would seem inequitable if at some point our Oil/Energy friends didn't throw in a fumble as well.

Leftback said...

Monkey is going to barf up yesterday's banana pellets when he sees this lot....

A big week for fibo retracement artists.

Anonymous said...

C Says
Nice timing !!


Now about that junk ?

Leftback said...

All a bit pear-shaped today. Likely this move down will stop at or above the 50dma, say around SPX 1542, before the vol sellers return to their posts. We didn't get long or add shorts yesterday so we are mainly just watching. Stocks starting to catch down to commodities and yields, at last?

In the mean time, punters please do carry on selling the Loonie and the Aussie!

Leftback said...

AAPL being shellacked and heading for its date with $360 where it becomes a "value stock" with a 3% divvy. To those who bought it as a $720 growth stock, Tough Titty. Probably AAPL is owned by some of the same leveraged HFs that took it up the Gary on the plunge in GLD and GDX earlier this week.

At a guess......

Leftback said...

The ricin in the mail to the Capitol stuff really sounds more like some domestic nut-jobs than Al-Qaeda. The Atlanta Olympics bomb was a domestic nut-job. But WTF knows? The anthrax thing was never really solved, but domestic nut-jobs were prime suspects. Anyway it is all a bit RISK OFF.

Anonymous said...

odds of end of month bounce >1600? Seems that's the pain trade right here.

Leftback said...

Yeah. Wouldn't be surprised by a relief rally.

Energy has been absolutely and totally obliterated, crude in the dumpster at $86. XLE on the 200dma. Long energy and short Treasuries, for a reversal swing trade?

WellRed said...


Going back to your earlier comment, I don't think that is a correct interpretation of the purpose or use of the Fed's USD swap lines. A foreign CB has to request cash to loan to their domestic FIs in a dollar crunch situation in order for those swap lines to be activated. We are not seeing that out there right now so when they publish the numbers, I'd bet dollars to donuts that they are flat (at zero).

As for AAPL, I have hated it for a long time, but I will be buying if it reaches that $360 threshold (depending on the rate of descent at the time).

Anonymous said...

I see a lot of people waiting for 350-360 on the fruit, which of course means...

Leftback said...

WR, agreed in general and thanks, LB may have been talking through an alternate orifice there. But we did wonder if they did it "overnight" sometimes, covertly, when events happen and then swiftly undo it? Not wearing tin foil hat... just asking.

Likewise, we are a non-fruit owner and avid fruit watcher. We like some value. In fact, we nibbled today on some beaten and flogged emerging market utilities and energy companies, which landed softly in the Kevlar gloves™, at least so far.

WellRed said...


It's possible that they conduct overnight swap operations to manage the dollar, but it strikes me as very unlikely. Particularly given the political environment re: the Bernank (admittedly less hostile than it was, but still no love, especially from the lunatic fringe - er Right wing). It is my view that a credible "USD manipulation" charge would rally enough opposition to severely curtail their operational flexibility. From where I am standing, the benefit is seriously outweighed by the risk of being caught..

Anonymous said...

C Says
Breadth still down obviously.Technically if the market is trong you won't get equity going ex div being dumped as strong as say Resolution yesterday.Just one example of many this year.Pharma and Utility leading strongly on the FTSE reinforces the defensive nature of the market when the Pharma is being bought as though it was sovereign really.
On the plus side small cap still showing relatively strength so we are not into snowball territory yet.

Europe looks like a summer of problems. Germany election and Merkel playing to the crowd doesn't offer much shelter against any of the many issues that are on the horizon. I don't see Germany either benefitting from the Japan/Asia monetary stance. That continues to make the Euro stronger than they need. Indeed I keep coming back to my old film extract "there can be only one". Meaning that in the zero sum game for exports the loosest monetray policy heads the field albeit Japan looks like the UK stagflation on steroids going forward. That is, a lot more import iflation than export growth resulting in still very low growth.This has not done a wonderful job on the UK and I don't see it functioning better in Japan unless they do a better job than Merv in targetting it.That said anyone should do a better job than Merv.
Until breadth resolves I continue to see topping rather than consolidation in this rally from last year.

Anonymous said...

C Says
I've been watching with interest the US energy 'boom'.Coming as it does with increasing momentum into a slowing economic context I've been puzzled why oil inparticular as stayed so high.I conjecture that this is some kind of behavioural overhang.That market has enjoyed a so called risk premium for so long it apears reluctant to join the rest of the world in reality not unlike our banking bonuses that have only gradually had their deathgrip released by perfomance pressure.
Interesting interplay now though with OPEC,Russia,LA and now US raising the competitive stakes.
Without some unforeseen economic boost that looks deflationary to me.Is that going to be the earnings 'miss' sector to watch?

Anonymous said...

C Says
Awhile ago I was thinking about TBTF ,and I wondered actually if we were not now in a world where TBTS was more appropriate. I am referring to too big to succeed.

That highlights the huge companies of the previous cycle that enjoyed mega market shares and product saturation. How hard is it for them to grow topline in a world where China and Brics cojoin the developed world into a lower global growth trend? Where investment of previius cycles in found to be nnow facing a situation of oversupply. That's the idea.

I came to this idea when I was thinking about Tescos.How hard it is for a company that enjoyed a growth price premium when in fact it had really become more like a cash cow.How smaller,nimbler companies were biting away at them year on year riding consumer trends for today not yesterday.

This also reflects my view that policies focussed upon exports have had their day in this cycle. The one's that will work the best are those that focus on resolving domestic issues and creating domestic growth. That was my view last Autumn when I thought US small caps was a better trade than multi's.I expect that to remain the case for small caps in general. Policy aimed at them is the trigger to watch for.

Small and nimble.Current not archaic.Organic not buy out.