STPLT Indicator


So much for the renewed attack on the weak EM. Despite wobbles in the morning in DM equities they never really succumbed to any supposed correlations. Serves us right for not trusting our own beliefs that the market is getting these correlations wrong and thinking they would do so again, even temporarily. So no pull back and we had to put back on the longs we had taken off.

We are left this morning hearing the siren call of one of or favourite indicators - The STPLTI. Standing for "Short Term Pushed Long Term Indicator", this indicator is usually a precursor to shallow pocketed investors being removed from the field on stretchers. We have seen it work perfectly in Europe, where speculative positions on the imminent demise of the Euro were bundled up into old suitcases, put in the attic and reclassified as "long term". Which is all well and good if you can afford to have your positions slowly dry and decay whilst you wait for Godot, but in the real world you normally need that cash for something else so harsh truths of cash management ultimately force you to retrieve the remnants, count the cost and start again.

The same has occurred in the gold market (just read Zero Hedge comments) and we would posit is happening right now in the Bitcoin market. But this morning it's the EM market that looks like Downton Abbey on Boxing day, huge trunks being stuffed with all the short term positional Christmas joy of EM demise to be shipped either home or up to the attics because it's over in the short term but will happen again.. Sometime.

TMM aren't immune to STPLT themselves and their own portfolios contain the dusty remnants of stocks that having once been sure fire things have basically become free options with pico-deltas (all that battery technology that didn't make it). But we are all too aware that in this world of short term return measures you need very deep pockets to ride out the "one day" trade. Which of course most people haven't got. So when we hear, as we are this morning, those folks short EM (who two weeks ago were looking for imminent collapse) saying that it's now a "long term trade 'innit", we look for things to start motoring higher and we go long stretcher bearers.

Do we detect a bit of this in Europe too? OMT legality has raised its head again in a big way. Wolfy in the FT and Euro permabear Evans-Pritchard are touting it as disaster but TMM think that OMT is much like a fire extinguisher. Even if they are ruled illegal it doesn't mean that your house will catch fire in the first place nor that you wouldn't use them anyway rather than burn to death (even if the German lodger does prefer self-immolation). Others would suggest though that if it were known that the fire extinguishers may not be used then it's open house for the arsonists.

So if that were the case, the most sensible thing to do would have been for the Germans to collude quietly with Euro central command and agree not to voice any of their debate. So even if they did decide that OMT is illegal, they just wouldn't tell anyone. Just like Reagan's Star Wars, it isn't the reality, it's the possibility that breaks the back of the aggressor.

So why are the Germans being so German about it? Perhaps it's just constitutional process that has a course to take and isn't designed to upset anyone, but like that giraffe being cut up in Copenhagen Zoo in front of the kids, it's a fact of life that has shocked those that don't like to see the messy bits of reality.

Maybe it's time to just go with the flow, rather than booking a lot of space at your local storage company and hoping all those now long term positions don't end up on "Storage Wars".



"Hey Barry, I've found a long DEM/ITL from 1998!"

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17 comments

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Polemic
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February 11, 2014 at 1:13 PM ×

And today's EM essay question.

"BH closing EM fund and recent market moves. Cause or effect? Discuss"

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abee crombie
admin
February 11, 2014 at 6:39 PM ×

BH EM fund was just Geraldine going nuts. Not really the BH formula of a diversified trader pool

Thursday and Friday felt like short squeezes to me but today is just bonkers.

All clear I guess (even though its not but just back to the 2013 narrative)

So if we can hold up here in equities, how many like myself missed buying their full share of 'dip buying' capacity and will now be stuck waiting again. I can easily see another 2-3 months of slow grind before everyone is bought in and the next piece of bad news causes a roll in the market. Until then erring on JBTFD seems appropriate... arghh this bull aint easy to time

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Anonymous
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February 11, 2014 at 6:48 PM ×

Shorter Yellen: What, me Taper?

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Nico G
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February 11, 2014 at 7:40 PM ×

this is looking too easy

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Anonymous
admin
February 11, 2014 at 9:06 PM ×

beaut TMM,

one of those times to ignore the consensus and the news and watch the flows.

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Leftback
admin
February 11, 2014 at 9:13 PM ×

Conversation with self:

Right Brain: "So, Left, how about shorting/hedging some of our equity exposure overnight at this 'ere dodgy looking SPX 1825 resistance level?"

Left Brain: "What are you? fuckin' nuts, Right? Why don't you go stick yer head on the railway line out there and wait for the Amtrak Acela to go by?"

Right Brain: "Cor, Left, I'm not doing that, bloody thing goes so slowly it would probably hurt. If it ever even arrives, what with the power going off and the signals being on the blink...."

Left Brain: "You got a point, there. But we want to make money, Right? We have European, emerging market and some US dividend-paying longs that we like, Right? So, stop being a kn*b. Don't just do something, sit there."


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Anonymous
admin
February 12, 2014 at 3:10 AM ×

fourth largest China trade surplus ($31.85 Bln) over the past four years

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Anonymous
admin
February 12, 2014 at 7:53 AM ×

http://www.ft.com/cms/s/0/2452f6ce-8f2c-11e3-be85-00144feab7de.html

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Polemic
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February 12, 2014 at 8:14 AM ×

Anin.. re that ft link written by a Moore Capital strategist. Does it tell you anything new that you didnt know 2 weeks ago? Raising 1929 1998 and other disaster dates is unqualified alarmism. Finally well done for spotting a perfect example for STPLT and probable stretcher case!

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Gampopa
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February 12, 2014 at 10:00 AM ×

Polemic... Just wanted to throw in an illustration to your comment..

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Polemic
admin
February 12, 2014 at 9:12 PM ×

Yes thanks Gampopa .. Appreciated thanks. I just saw the article doing the rounds this morning in the twittersphere being held as new bear food and it annoyed me. But your frame of reference was pefect

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charles Monneron
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February 13, 2014 at 7:40 AM ×

To keep with the firefighting analogy :
I think the house is not the appropriate one. A heap of coal seems better to me : above a certain threshold, there is no need for an arsonist to ignite it, and the pile is growing (or at least becoming dryer).

Why are the Germans being so German about it ? Because it keeps their options open !
If they want to have leverage, they must be able at the same time to exit the Euro and lay the blame on non German. They will still be neighbors if it happens, and that happens the day after is important. The ideal way to do this, from a German standpoint, is to have an unassailable argument that the "others" breached their obligations first and preferably to have an ultimatum addressed to them as Sarkozy did during the crisis, except that this time, they will be ready and say "Ok we're out".
People who think that Weidmann and Merkel are actually fighting over this are naive : Everyone is playing its own role in the Kabuki Theatre.

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Anonymous
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February 13, 2014 at 8:30 AM ×

C Says
Chaps in all honesty it appears to me that you are virtually day trading with your position changes.

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Polemic
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February 13, 2014 at 9:20 AM ×

C yes we are with a chunk of it. Core views remain the same .. Eqs up . EM not as bad as the media are hyping etc . but when we enter these near panic moods ( as we saw with EM ) and 5-10% swings in normally calm stuff in the matter of a few days puching things as we see it out of line, then yes we do. Sorry.

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Polemic
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February 13, 2014 at 9:23 AM ×

Charles .. Thanks for that.

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Skippy
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February 13, 2014 at 12:13 PM ×

LB, right brain?

Resistance did indeed look stiff at 1825

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amplitudeinthehouse
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February 13, 2014 at 3:36 PM ×

Various calls abound more then ever as we push new highs..but if there's one thing I only I wish for nowadays, that is , to be officially the number one enemy of said utilities..Oh yeah!

Holiday resumes.

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