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Early Morning Thoughts
From Nic Lenoir of ICAP
Good morning,
Markets this morning are a bit rattled by more sovereign woes out of Europe. EURUSD has retraced almost a figure from the highs yesterday down now at 1.2265. This was mainly triggered by talks of general strikes in Spain as mr. Zapatero announced an overhaul of labor laws. Strikes, riots, car burning, eventually looting and possible insurrection are all very likely outcome in Spain, Greece, Portugal, France, and Italy as governments are trying to figure out how to balance their check books. They will not succeed in the end and either the Euro area will partially break up, or the Eurozone will be simply disbanded. The only thing that can delay the crisis is for European politicians to stop talking. Otherwise since there is no solution every thing they say will be analyzed, criticized, proven stupid, and the market will sell EURUSD and PIIGS debt.
The key thing I will focus on today in the markets in terms of technicals is the 10Y US Treasury future. The range for the triangle in 10s is 119-26 to 120-12, if we break out the subsequent move will be significant. Overall this whole mess we are in is a debt problem. Yesterday we had a break out in equities, commodities and FX, but it is a debt and hence fixed income problem. Let us see what the fixed income market tells us. With EDU1 trading 99.69 it is saying deflation, and 10s running up have been telling us we are far from being out of the woods. In the end, the Fixed Income market usually knows best, let's see what it has to say.
Good luck trading,
Nic
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Always love reading your stuff Nic. Thanks for taking the time....
Ditto!
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Such simple and eloquent words, Nic.
It's the debt, stupid.
well put: Thanks Nick
"Strikes, riots, car burning, eventually looting and possible insurrection are all very likely outcome in Spain, Greece, Portugal, France, and Italy..."
How long before this hits the united states? God, Guns, and Gold seem to be once again the mantra to live by. I am so glad I have my benelli M4.
"They" have been burning cars for years in France. Anything less than 50 per night or so doesn't make the news. Occasionally when they burn a few hundred in a night it gets international coverage. This burning is done by badly specified "youths", typically 2nd or 3rd generation of unspecified immigrants who lived in "sensitive" quarters of cities.
I.E. a big underclass with lots of children per family in France, and I gather in quite a lot of the other PIIGS countries, are already prone to breaking and burning stuff now. But attention, this anger isn't just economic or marxiost in nature, there is an islamic cultural identity being reclaimed, and they are the fastest growing minority population by a long shot.
You lost me with the race card... As far as I can tell, not even a fraction of one percent of muslims are violent. There are bad apples in every culture. Christians call it HOLY war, Muslims call it JIHAD, etc...
All religion is idiotic. Believe in god...sure.. but religion is the word of man, not god.
If you follow the money, you can always find the reason for strife... religion gives the cover for the atrocity.
ZH is obviously dedicated to following the money, so lets leave the religious crap out of it.
From the europeans point of view, not mine, the problematic religion is correlated with race to the point that the word "racisme" in France includes bias against Islam and or Muslims. For what its worth, the car burning in France is done by children of such immigrants, French citizens to whom the word "francais" is an insult to be thrown in disgust. The Muslim identifications they harbor are probably more of the cultural variety than any sort of strict piety. By cultural identifications I mean their sense of who they are, and core islamic values such as strictly controlling girls and women, you know, just half of the population so no big deal, by constant surveillance and intervention by their male relatives. They don't have to practice Islam to believe and practice that critical part of Islam. For the rest, they can and do drink and smoke weed and deal hash and steal. No problem.
I remember when "francais" catholics burned witches at the Inquisition...
You were alive then too? We should get together sometime. When people ask me how it was back then, I tell them it was indeed just like the Rennaissance Faire back then, with face painting for kids, minstrels, glass blowing, jousting, falconry shows, those misting things to cool you off, big turkey legs to eat with your hands, and of course the torture and witch burning.
"ZH is obviously dedicated to following the money, so lets leave the religious crap out of it."
The point is, there are already riots in Europe pretty regularly. This demographic issue is a core component of Europe's future. Fast growing, anti-occidental, anti-capitalist, poorly educated, already rioting in nihilistic fashion....and poor...and partially islamic in their identity. There is a pretty high correlation between islam and poverty worldwide, and it is growing fast in Europe.
You should try some yoga or meditations. Good for relaxation and also your wet dreams will magically disappear. And remember, smoking weed is a big NO-NO. Now get off my lawn!
Wishful thinking much, kaiten?
The social upheaval facing Europe is not going to be limited to old school 70's or 80's era striking by farmers or train drivers or trash collectors over pay or working conditions. There's a giant new element to it, a large youthful underclass with a very different culture. An exit a la Japan...shared decline over decades...isn't going to work for any of these countries because they are far too culturally hetergeneous now. There are too many sides able to point to an "other", a "them". Some parts of Europe will probably revert to form in at least one way: There aren't enought joooos left there for up and coming demagogues to portray as scapegoats. So far there's a lot of bitching about international forces, speculators, "globalism", international finance and so on(proxies for jews for some of the fringe), and they may well go to town against capitalism, markets, and free trade to a greater degree than they have so far. But they may also get riled up about the foreigners amongst them, and drop the PC veneer for something quite a lot more muscular.
In any case, these are little discussed dimensions of the current European woes that don't go away by wishing them away, with your yoga and meditation. Shit is going to get real, as another poster here often points out.
Exactly. We can either call it wishful thinking or just wet-dreams. Anyway, as I said a bit of relaxation, taking break with that harmful weed-smoking and it should go away. Although you already seemed to be in an advanced stage so I´m not quite sure. Or perhaps try a psychoanalyst. They are all very good at phobias. Dont worry, your euro-phobia won´t hunt you all your life. Just a bit of courage and you´ll make it. Best of luck, you´ll need it.
Won't happen here - everyone's in line waiting for an iPhone. Too busy to care about anything else.
"Too busy to care about anything else." :)
Way too true. But... what about the 20% sitting at home without a job?
Except for the Great Society entering it's third generation. How much longer will American Idol and flat-screens and Big Macs keep them from rioting?
Will food stamps be augmented with EBT's for electronics, clothes, and fast food?
Told you guys to re-short EUR around 1.2318 yesterday, oh yea!
8 pips. I piss 8 pips.
The fed would be delighted to sell hard into any rise in the long end so they can raise cash to buy SPY. I suspect the oil market is the one to watch.
Nice words...but the guy is dead wrong on the EUR and further he is working with ICAP a behemoth that is f..ing everyone in the $ Swap market.
I wish the new legislation will "kill that cat"
ICAP is a broker - the price they do deals at is the price two counterparties agree to trade through them at. ICAP have NO influence over the price, they just care about volume and market share. So they may be able to f... other brokers, but thats all.
yeah, yeah....
Do you believe that yourself? So the JPM, C, BoFA, Goldman, WF, DB and RBS should not influence the ICAP? Give me a break....look at what happened 5 min ago....when the tried to set up the interest rates again....
i believe the disbandment of EU when I see it, so far the ECB is winning, Merckel in Germany is as popular as the last whore on the St. Pauli street in Hamburg and she keeps governing like there is no tomorrow, I dont believe government fall until I see it, and when they fall, the once that arises, the one that promises real changes is just another agent of the jew banker... remember the german nazi propaganda movie called jud suss (Jew Suss)...i have no home, my home is here and everywhere, I am the international banker
http://www.youtube.com/watch?v=QY_9BmesFu0
Keep watching the bond market, as I said to naufalsanaullah's excellent charts here earlier today
http://www.zerohedge.com/article/risk-appetite-brings-sp-back-above-200d...
In equities, I'm also watching DAX approaching the support of its 10 day uptrend, check the hourly chart for that one.
Generally, a lot of protection was bought at lower levels and is now almost all worthless. I think this means market makers are short gamma at lower strikes, if we do start a serious move down then it could accelerate as these market makers rehedge their gamma. I think thats why they are supporting the market around these levels.
If this protection rolls to July after Fridays expiries, we could see a serious move down on Friday afternoon.
My thoughts too - and suspect vol is going to be marked up pronto once the expiring contracts go off the board. This is when the Deta1 desks have to prove their worth!
Leo, oh Leo. Where art thou great and knowledgable Leo. I am lost in a fog of confusion, oh great Leo. Thou stated a great rally was upon us, so I bought Chinese solars and now my anus hurts.
Say bye bye to that 200DMA again.
He was nearly right:
German solar shares rose after Obama's speech fanned hopes for legislation in the United States that would help boost alternative energy uptake in the world's largest economy.
http://af.reuters.com/article/energyOilNews/idAFN1526123620100616?pageNumber=2&virtualBrandChannel=0