Monday, 28 November 2016
Less of moor, more of less.
I've returned from my self-imposed solitude in the wilds of England. If you want to find a place in the world where normal physics doesn’t seem to work, other than the Japanese economy, try the moorlands of England where water resolutely refuses to run downhill, instead producing hanging gardens of bog. I always thought that bogs occurred in hollows, not on 30% inclines on the sides of mountains. But I have found that setting off into the wilds in drizzle and mist is more invigorating to the soul than a sun lounger on the beach of a tropical 6-star resort. And a damn sight cheaper. But the moorlands and ancient stone pubs with fires that haven’t been extinguished for 160 years, that reek of apple-wood fumes, ancient ales and a long dead wet dog, have left me cleansed of the ways of the markets. I have had the metaphorical biro of destiny inserted into my reset button of reality. I have been left off for five minutes and then restarted. I have had my factory settings restored. I have been machine rebooted, had my hard-drive reformatted and even had my screen returned to an Apple store in Exeter, only to find it still in Exeter due to an Apple policy of not being able to know how to use a post office.
Sorry, my lyrical metaphors were starting to show signs of the return of my core operating system of bitterness and resentment there. I must be getting back to normal. Yes Apple store in Exeter, your cheery and right-on tee-shirted beardy youthful front-end enthusiasm has failed to cover the fact that you are run by a despotic corporate megathon and you are unable to act as independent agents to the great machine by popping down to a post office and sending my repaired machine the 200 miles to where I now sit having failed to have it ready by the promised time.
Oh well. Markets. What’s been happening then? Let's start with my cheeky short in the Dow. Stopped at the highs. Don't you love it? Right and what about all those positions I closed. USDTRY, much higher. damn. USDJPY much higher damn. FTSE - higher good. BTPs - was stopped on the pop higher. Damn but no worries really. GBP - hasn’t really done anything. Oil - one of the few I kept . .Up! Thank goodness we have a winner. The others were opportunity cost rather than real cost and a profit is a profit as we used to say. Though nowadays a profit is something that is worth staying very quiet about or someone else will want it.
I remain pretty clueless as to what to do at these levels. I'm sure that if I dig deeper tomorrow into the minutiae I will find something to get overexcited about and end up losing money on, but the bigger picture seems pretty balanced. As balanced as a marble on a pyramid. The feeling I expressed in my last post is still applicable. The market thinks it knows what will happen next though, in reality, we are at one of the greatest unknowns we have had for a while.
Brexit - Unknown. In fact, it reminds me of how I used to study. Have a vague idea of what I was going to do but get a little bit worried that I didn’t know where to start and that then built into a rising panic of time constraints that made it even harder to start until all of a sudden there I was in the exam not having done any work and not wearing my trousers. Or was that a dream I had last night? Either way, it’s the same madness.
Trumpton - Unknown, but probably pretty clear to me that he is going to be much more moderate than at first feared. Probably the biggest threat to his welfare won’t be from the liberal lot protesting his extremes, but right wing extremists protesting his liberal betrayal.
Frankreich - That Fillon fellow is a right Thatcherite isn’t he? I almost choked on my croissant when I read about his proposals. Cop a load of THIS. It's straight out of current Tory party policy, though I am not quite sure how his wishes for French immigrant limitation fits with his eager support for the EU. I thought that was the major sticking point on Brexit. I’m none the less having my fiver bet on him in the next elections and though I have done well on my Brexit and Trump bets I am not going for the Le Pen triple. But whoever wins it looks as though there will be more pressure on the old EU guard to change. I wonder if the UK can procrastinate long enough over Brexit to see the EU change into what the UK wanted in the first place, so we can then stay.
Italy - Nothing to add on the referendum. It’s been well discussed.
Japan - running according to plan. Waiting for the fiscal stimulus to hit via the pegged JGB door. Funny how the market reacts completely differently to the chances of Trump going big on fiscal stimulus than they do to Abe.
Emerging markets in general - It's traditional that January sees an irrational fear that emerging markets are going to blow up for them only to rebound in March. The Trump effect has brought this somewhat forward. The impact of strong dollar, trade barriers and a potentially rising USD interest rate have seen this trusty triumvirate of woes cause a slide in EM bonds, equities and FX. However, two things. First, I doubt that the reality of Brexit and Trumpism is going to be as bad in reality as currently feared and second, more importantly, no matter how protective a policy is designed to be it will not make the cost of labour cheaper in the DM countries relative to the EM ones. In fact, in restricting immigration, those who would have moved from EM to DM as smart labour are now going to have to be paid to remain in their country of origin to produce that good that your local folks really can’t do without but are too proud to make themselves for 50c an hour. I am looking to buy EM again. I haven’t done enough work on it yet, having only just returned, but probably anything other than Turkey.
Cuba - '90-year-old man dies of old age’ is hardly much of a headline, but once again everyone appears to wait until someone dies before outpouring their feelings towards them. Why? I’m sure the person who is dead would have benefitted more from hearing them when they were alive. There is no trade in Cuba other than buying everything they are allowed to sell you before they are allowed to sell it to you.
Other stuff - I’m only just getting back up to the slow speed I normally run at, give me a chance, but overall I am still looking to fade the Trump bump. And, as usual, I've committed the trading crime of repositioning my last stopped trade. Short Dow.
Right, I'm down from the moors and back to the big smoke of London and all them there bright lights and fancy folk with their fancy ways...