Wednesday, 7 October 2015

The Battle of 1995.

Continuing from yesterday's post on 'Pain in the Hedge’ there have been lots of blow outs of popular shorts and as expected oil things were the most ramped. The likes of bombed out Tullow and Premier Oil are up 50% from a few days ago but even large corporates are on the move in dramatic style. Rio Tinto has busted a lot higher (+8% today). That is impressive for a very large corp that represents everything that is currently meant to be doom - EM, funding, China and commodities and growth. Arcelor is also up 7%. European steel up? It would be an absolute tragedy if SSI, the owners of the UK’s Redcar steel works, have stopped-lossed out off 1,500 UK steel jobs at the very base.

The idea that shorts are causing pain and a good indication of positioning to add to all the other exchange data we see, is a nice chart courtesy of Martin Edlund at Nordea. Macro performance vs MSCI World.  This was part of a piece by him actually questioning how long this rally can go on but it illustrates the point I want to make.

Though we are having spectacular rebounds in popular shorts, I feel that resolution of whether we are going further up or down will come in the form of 'The battle of 1995’. This isn’t the year 1995 but the SP500 level that has proven so tenacious recently. It falsely broke on FOMC day (not for long) and sees clusters of various technical levels, the most basic of which is seen here.

The macro outlook may not have changed and look rubbish but the price has and, as ever, money management rules married to price make people do things they really don’t want to or believe is right.

On a different note, it looks as though my car will be recalled by VW. My questions are 1) will any changes effect the performance and economy? 2) If they do so detrimentally do I HAVE to comply with the recall?

So far friends have advised me that the answers are 1) yes and 2) no. If this is the case and I am a typical customer then this recall is gong to cost VW a lot less than predicted as the number of no-shows will be huge. The only thing that would make me get it changed is if my insurance company started differentiating between fixed and unfixed cars or some idiot in government decided my car was no longer road legal though it produces less emissions than the 1985 school bus next to me. Or the Highways Maintenance truck that I was behind last week that had a vat of boiling tar on the back emitting more black smoke than Mount Pinatubo.

And finally finally, I gather that the UK prime minister has announced a project to build more affordable housing. It is to made available to those under 40. AGEIST! The further problem is that affordable housing is traditionally completely rubbish. Tiny shoeboxes that are destined to become tomorrow's slums that any occupant aspires to leave asap. So here's a plan. Instead of building shoeboxes crammed together in maximum density the government should build thousands of spacious 5 bedroom houses each in their own 1/4 of an acre. Affordable? Well they would be if the government built enough of them to drive down prices.  Not enough land? Errr.

Pick a green bit.
if you can find one.

End of day update at 21.15 BST - Well fancy that. The SPX closed at, you guessed it, 1995. The battle rages on.


Unclear Wessels said...

I know you jest, BUT... Picking a green bit that's not already used for farming or some other sort of useful human activity, and is meaningfully connected to the rest of the country is a much harder proposition. Spreading out demand to areas with existing cheaper supply is surely an easier strategy. Compare working remotely today with a decade ago -- it's already shifting norms -- yourself included, I believe. Better trains and fibre is what is needed, to shift mid-to-high earners away from London, not crappy new shoeboxes inside or near the M25. I suppose the argument would then go that these mid-to-high-earning shiftees will in turn price out the locals in their new locales, but it would at least encourage building houses in locations that are already connected and stand a chance of still being actually affordable when built.

The Bankster said...

In the US the answers are probably Yes and No. Even safety recalls are optional! But states may decide that your car can't pass annual inspection.