TMM really don't have that much to say about markets. The NFPs nailed the lid down on US QE and enough has been written on that to sink a battleship, but to TMM the most interesting sign was the lift of equities while bonds were falling. The positives of growth are outshining the negatives of rates moves.
The "Short GBP, long FTSE" trade was given a boost today by the UK data kicking the crutch from the mighty Pound as we emerged from an Asian market already pretty buoyed. Even the hobbled AUD is looking perkier than it has for a while and the ASX is doing OK. As much a case of positioning rather than long term macro, as we can also see with gold's rally. So far so good with core positions all moving in the right direction. Even our "Central banker's brass balls" short 1650 SPX straddles are looking good again. But despite the rallies, today appears to be losing some steam and we may be near a short term top before we leg higher again. TMM's mystical mid July turn date is nearly upon us again. Having said that EM is looking like a buy again. But let's talk about something else -
Robert Peston's hysterical program about algo trading last night on BBC Radio 4 (listen here) has convinced TMM that -
a) The introduction to the program should be used as the case study at a master class on propaganda as it employed every emotional manipulator and anchoring devise it could to portray algos as, well, evil.
b) In popularist opinion algo trading is to markets what GM is to food.
It's new, it's machines, its a Frankenstein, we don't understand it so it must be the Devil's work. So working on that premise perhaps there is room in the market for the equivalent of "Organic Food". A bespoke market set up and certified "algorithm free". As we know Organic has always commanded a premium over other foods (despite the savings on pesticides and fertilisers) so it would be interesting to test the boundary between ethics and price in the real world pitting the two against each other. TMM would imagine that it would not be long before, as has happened in the food world, austerity sees a gentle swing back to the cheapest product and to heck which type of financial horsemeat it's made of. In the meantime though, the establishment of no algo zones may just be what many banks need and could be their last "Himalayan Pink Salt" on the road to disintermediation.
Prices made by humans, for humans and yes, we will be able to detect the automated tones.
Broker "Hello, Sweetpea Organic Brokers"
Caller "Hello, I would like a price in EDU3 1000 lots please"
Broker "Are you a human?
Caller "10100111010110111010101... oh bugger"
Broker - "Goodbye"
With the current mood of populace so anti-banks the regulators and politicians could easily be swung behind the introduction of Organic trading with the enforcement of strict standards. We are already seeing product health warnings on financial products stretching to 3 pages (have you ever read the disclaimers on the research you get?) so how about a more simple labelling system for the financially illiterate.
"Every 100k of this product contains 9k of unleveraged direction, 50k of risk and 38k of margin. A total 1200% of your daily allowance".
But we wonder if under this new organic purity, precious unadulterated products should be sold in stores that may be tainted with by their own reputations. Libor being set by the NYSE Euronext is like vegan certified lentil bakes being sold in McDonalds. Handing the setting of a sacrosanct London based fix to a US based organisation that has a history of selliing early release of data to the highest bidder (NYSE) or cannot settle anything properly (our own experience of LIFFE) smacks of a commercialism that undermines the purity of the product. What's wrong with the BoE doing it? They are, by comparison, the equivalent of the Harrod's food hall.
If you want it to remain Organic then don't sell it in a chemical plant. Come to TMM's Sweetpea Organic Brokerage instead.