Friday Ramblings

Continued good jobless data has reset USD and US mood in general and there has been a proliferation of US Jobs analysis resulting in line-drawing that extends to 6% unemployment levels after further +200k NFPs. The USD/JPY break was perhaps the sound of the market cracking as this weight was added to that of Abe and EU policy moves and clues.  Whilst everything US is indeed looking better than a lot of everything else, it may be getting a bit short term extended. 

AUD appears to be on the receiving end of Soros / CB de-diversification / pick your bogeyman. Either way we are pleased, but note the sensitivity of Aussie inflation to imported goods prices. You can only make money on bills and AUD up to a point. We will add that the USD/JPY break has pulled many USD crosses through short term targets and though we expect AUD to underperform we are lightening our AUD/USD shorts at this level looking for a bounce to resell on.

Schauble's talk of loosening his garrotte of austerity around the throats of periphery pre-G7 (why are they holding at a public hotel rather than at "Chequers"?) may just be pre-talk camaraderie, but there is a theme.  Despite weak Italian data we see the Eur/Usd down move abating as growth prospects balance the -ve rate fears and instant USD effect.  It's still actually in a range.  

Equities in general - Towel chucking from perma-bears, yield calcs on zero cost funding and much much more continue to fuel the boom. We have a piece prepared on background "why buy equities long-term" but its such a common call we are caught behind the curve. We are dip buyers like the rest of the planet. Meanwhile, make us a price on how long it will be before regular daytime TV features stock trading programs again. 

TMM note the mad rush into "safe" assets like XLP, XLU, and the like. TMM have more to say on this at a later point but suffice to say all low volatility dividend payers are not created equal - we will revisit this soon. 

Tesla has proven that there's bad investment advice, then there's the advice you get from Sarah Palin. TMM think ultimately better battery technology is a great leveller in EVs much like cheap polysilicon was for solar. TMM think the Suntech chart from 2007 may be instructive here. Some of us were long but are no longer. Tesla worth more than Fiat? Short term that price action has got "dotcom" written all over it. 

On general asset price rises - QE is fuelling asset price rises but doing little  for income. In fact income ratios are falling as asset prices rise. Great for holders of capital but until they withdraw it to spend, the gap of wealth between poor and rich continues. QE has to reach income before it works. TMM have been wondering if just bypassing all the links and handing £5000 to every head of population would be quicker and benefit the poor over the rich.

Commodities:- TMM note that while equities are now trading on concerns of QE, zero financing etc much as commodities did in 2009, commodities are now trading on FUNDAMENTALS. Fancy that. Note crosses like Palladium / Silver - the former will stop being produced at these prices as every South African mine goes under, the latter falling due to structurally declining demand trends ex hoarding which also happens to be going backwards. Its a pity all those commodity funds are getting redeemed just at the time having any expertise has value but that's life with hedge fund allocators we suppose.

TMM are also wondering if speculation can hold inflation lower than it where it naturally should be. As the speculative drive into commodities, especially oil, seven years ago drove up actual inflation, perhaps the expectation of no/low inflation drives speculative positions into short commodity trades that feed through into real low inflation. If so, they are winding up a coil for a sharper snap back in inflation when the time comes.

Finally for all those long Nikkei / yen hedged - Been a good ride hasn't it? But crowing demands beer buying for the house