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When Draghi Speaks, Sell Bunds; When He Shuts Up, Buy 'Em Back

Tyler Durden's picture




 

Via Bill Blain of MINT Partners,

The markets mood is shifting from certainty to uncertainty. I've noticed over the last few days clients are less and less sure of their ground. Too much attention on 'end of the world' analyst reports and press drivel. Much of the wibble seems due to doubts whether QE3 will work and what hope is there for global economies, but we're also getting more concern about coming trials like 'The US Fiscal Cliff' as the 'Next Insurmountable' market threat, and the combination of recent Bundesbank snapping at the ECB plus Spain et al. triggering another round of Euro-wobble.

Just to add a seasoning of my own doubts even the mighty new issue market seems to be stalling. If a safe names like the EIB only got a slightly oversubscribed deal done, while a new Deutsch Hypothek struggled over the start line too tight even for domestic buyers then you have to worry. If the mighty new issue stream is drying up (unlike the British weather).. then heaven help us all

Get over it... Uncertainty and greedy borrowers are fact. I would simply point out that volatility looks awfully low, and its maybe time to take a view going long increased vol. The final quarter of 2012 never promised anything except likely excitement.

As Jimbo often reminds us: No point in worrying about it today when you're going to have to worry about it when it happens tomorrow... On the other hand, fore-warned is never a bad thing.

The risk the US will grind to a sickening full stop if/when Obama beats Romney and the Republicans stay in control of the senate seems exaggerated. Its fuelled by political scaremongering: Elect Romney or well shut-down America is the Republicans subliminal message, being delivered by purveyors of right wing thought across the States. As has been shown before, a grid-lock ratings cut is immaterial to the US bond market. And while compromises may be last minute, its unlikely the US will enact automatic budget shutdown triggering deeper recession. Get over it.

Unfortunately pragmatism and Europe are words seldom used together. So its entirely likely the Bundesbank will continue to behave like a scolded toddler stomping its little feet and moaning about the ECB not playing by its rules. But Germans believe the Bundesbank is a raging rock of Teutonic stability in the crazy madness that is Europe, so politically Merkel can't simply tell Axel and chums to shut the **** up and get over it its getting too electorally sensitive.

So despite more soothing words from Draghi, Europe is wobbling. The consensus is shaky. Spain doubts are mounting with the threat we previewed last week of regional independence demands growing. Meanwhile the Greeks are revolting (ba-boom), and they are going to demonstrate on the streets while staging a national strike.

The unpalatable truth about a stable Europe is it takes all its many and diverse participants to be singing off the same hymn sheet. Unfortunately they aren't. The different objectives and aims of each group are becoming increasingly apparent; chancers like Catalunya using weakness to further separatist goals, or technocrats using crisis to further their divine mission to correct foolish political mistakes, etc etc etc.

The Bottom line remains if the Euro can be held together, then Italy and Spain bond yields will tighten. Simple. Unfortunately, the tensions inherent in the system threaten to pull it apart. A brief study of history will show conflict and naked self-interest are the only permanent features inherent to any human system. Name me an alliance, an empire, a union, a nation or any large political unit that has, at some point, not tried to pull itself apart? At the other end of the same scale I'm sure I'm not the only human economic actor who joined in fiscal matrimony with another only to see it collapse in the acrimony of the divorce courts! (Ah still bitter after all these years)

So I'm still betting against the ability of Europe's talented Eurocrats to solve the complexity of the European Gordian debt knot...

Meanwhile.. the global recession gets deeper. Yesterday the slowing European economy caused Volvo to acknowledge slowing truck demand.. Who could have predicted that (US Readers Sarcasm Alert!) And its going to get worse.

A couple of months ago I cautioned the Bo Xilai scandal in China could have dramatic knock on effects on both Europe's luxury good market and German precision engineering. Its certainly not fashionable to be part of the China conspicuous consumption society any more. That means a check to the market in premium wine sloshed down with coke, expensive BMWs and Porsches, and any watch as long as its blingy.

I read in y'days IHT the China government will impose Frugal Working Style rules from Oct 1 banning civil servants from accepting banquets, cars and other expensive gifts. So forget that Ferrari for planning permission, luxury watches in return for an intro, or even a place for the kids at expensive US universities from now on Chinas bureaucrats are going to have to explain how they can afford it. All of which kills the previous German car metric that German exports of premium Mercs to Shenzen were price insensitive. Sell Sell Sell.

And this month's prize for noticing the Titantic has sunk - FT front page reported Bunds have been higher (shock horror) on the back of Swiss Central Bank buying with all the Euros they bought to protect the CHF. Really, Wowser.. and if SNB eases up its buying or changes CHF target.. GUESS WHAT

 

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Wed, 09/26/2012 - 08:35 | 2831346 GetZeeGold
GetZeeGold's picture

 

 

Bullshit....those guys are dead broke. What the hell are they selling?

 

Wed, 09/26/2012 - 08:39 | 2831355 Overflow-admin
Overflow-admin's picture

They are selling only dreams.

Wed, 09/26/2012 - 08:40 | 2831365 GetZeeGold
GetZeeGold's picture

 

 

Going long candy-cane and rainbows.

 

 

Wed, 09/26/2012 - 08:38 | 2831351 slaughterer
slaughterer's picture

"ECB money should be fought for in a European monetary soccer tournament."  (Rajoy, 27 Sept. 2012)

Wed, 09/26/2012 - 08:51 | 2831397 timbo_em
timbo_em's picture

And when Rajoy says soccer he means fútbol/football. 

Wed, 09/26/2012 - 09:08 | 2831461 slaughterer
slaughterer's picture

Pronounced: fooocchhhaaayybell

Wed, 09/26/2012 - 08:39 | 2831357 ohhhhhbaaaaahhh...
ohhhhhbaaaaahhhhhhhhhmaaaaaahhhhh's picture

Better yet, buy metals either way. 

Wed, 09/26/2012 - 08:49 | 2831386 GetZeeGold
GetZeeGold's picture

 

 

Blue Light special. Finally the government is working for me.

 

Thanks Barry......keep it up and I might vote for you.

 

Hey.....anything's possible.

 

Wed, 09/26/2012 - 08:41 | 2831368 zorba THE GREEK
zorba THE GREEK's picture

Zorba's advice: When Central Bankers speak, buy precious metals, when they 

shut up, buy more precious metals.

Wed, 09/26/2012 - 08:44 | 2831375 HD
HD's picture

Not to go off subject but CNBC has the headline, "US Stocks Seen Higher; Housing Data Eyed" for more than 90 minutes while futures are red. Either they are beyond lazy are engaging in some mild propaganda...

Wed, 09/26/2012 - 08:47 | 2831384 slaughterer
slaughterer's picture

CNBC is a notoriously lazy website manager.    They pay more attention to their TV production.  

Wed, 09/26/2012 - 08:50 | 2831391 HD
HD's picture

"They pay more attention to their TV production"

   Considering their unending ratings decline that is both funny and sad.

Wed, 09/26/2012 - 08:52 | 2831402 slaughterer
slaughterer's picture

CNBC should make the hot chicks go topless and Cramer wear bondage.  Bring in quaity guests like Justin Bieber and Lady GaGa to ask for their investment advice.  

Wed, 09/26/2012 - 09:10 | 2831473 HD
HD's picture

If by bondage you mean a ball gag in Cramer's mouth - I agree.  As to your second statement here is Kim Kardashian "interviewed" by Maria Bartiromo.

 http://video.cnbc.com/gallery/?video=3000114044

Wed, 09/26/2012 - 08:47 | 2831385 timbo_em
timbo_em's picture

Axel stopped working for the Bundesbank in April last year.

Wed, 09/26/2012 - 08:51 | 2831398 lailapa
lailapa's picture

The end of the world is near... The ten plagues of Pharaoh “have been brought upon” the USA.

From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007

http://eamb-ydrohoos.blogspot.gr/2010/02/ten-plagues-of-pharaoh.html

Authored by Panagiotis Traianou

Wed, 09/26/2012 - 08:54 | 2831408 LawsofPhysics
LawsofPhysics's picture

Fine, bring it.  My soul is prepared (in more ways than one), how about yours?

Wed, 09/26/2012 - 09:41 | 2831587 richard in norway
richard in norway's picture

you are a sick puppy

Wed, 09/26/2012 - 09:01 | 2831421 Grand Supercycle
Grand Supercycle's picture

IMPENDING SELL OFF...

Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:

SPX, DOW, NASDAQ, NZDUSD, GBPUSD, AUDUSD, COPPER, CRUDE, GOLD, SILVER. [USD strength will return]

http://www.zerohedge.com/news/2012-12-24/market-analysis

http://trader618.com

Wed, 09/26/2012 - 09:06 | 2831450 slaughterer
slaughterer's picture

DXY kissed 80 this morning and is going down now: that was the dead cat bounce level for the USD.  The QEternity commodity super-rally begins today.  Buy the open.   Get the rally monkey out.  

Wed, 09/26/2012 - 10:02 | 2831675 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

We could test 81.5 on the DXY but only before Oct 1oth.  On Oct 10th the QEX program will begin at which point everyone who has dollars should have traded out of them.

Wed, 09/26/2012 - 09:08 | 2831457 new game
new game's picture

pithy! will we be able to afford coke again?

oh so interesting, the manipulation will never end.

CHF is the market saying run, run take cover; wonder if this flow isn't, in the end, finding its way to gold(end of rainbow-oh yea).

all so simple-follow the best returns, best they be physical...

Wed, 09/26/2012 - 09:08 | 2831462 disabledvet
disabledvet's picture

Greedy borrowers? M2 is at RECORD lows. The hilarity is that the banks think this is a good thing! They NEED borrowers to recapitalize. Schoolteachers sound like a good start. Public one's? Even better. How about a mass hiring event? "The State asks every able bodied man bring himself and his lawnmower to such and such. We'll pay you and thus give you a work history such that you can get another job." What else? Oh, yeah..."we'll provide the fuel...for free." I mean what is an Army of unemployed other than a failure of imagination?

Wed, 09/26/2012 - 09:41 | 2831588 Invisible Hand
Invisible Hand's picture

Regardless of who wins the presidential election in November, who controls the House and Senate, certain facts are going to become increasingly apparent to our rulers.

Basically, the US can follow one or two extreme paths (or more likely a blending of the two paths).

1. Open monetization of public debt (Fed, state and local).  You can argue that we are approaching this point but it is not understood by that average American that this is happening.  When it is understood, the SHTF.

2. Shrink government to the fraction of the economy that can be supported long term.  You can argue about what that percentage may be but it is obvious (to me at least) that it is less than current levels.

Romney may tend toward Option 2 (remains to be seen if his actions follow his words.  Obama, based on past performance, tends toward Option 1.

Either way, government will shrink in absolute if not relative terms (assuming we don't have a full on Socialist system imposed on us, not impossible, but not easy either)  because the dollar (and economic activity) collapses or because we attempt to get our fiscal house in order which will also decrease economic activity albeit in a healthy, though painful, manner.

The US is like Greece in that we are at, or nearing, the limits of fiscal irresponsibility.  We are unlike Greece in that we have no Germany to pay our bills and allow us to put off a reckoning.

The limited options (and some of the consequences or rulers' choices) are clear.  What they will choose to do, and the time frame of the pain that follows is not clear to me.  However, the fact that no one can, or will, bailout the US makes it appear that things will, once the process starts, move much more quickly in the US than in Europe.

Wed, 09/26/2012 - 09:58 | 2831649 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

THE EUROZONE CRISIS IS BACK!  TAKE YOUR EYES OFF THE FED'S PROGRAM!  

They will only be buying (at least) $40B worth of MBS/month then fractionally reserve and rehypothicate them meaning a creation of $1T/month unsterilized!

THE EUROZONE CRISIS IS BACK!!

And don't ask if it ever left, just remember it is back....

....now move along....

Wed, 09/26/2012 - 10:08 | 2831714 elwu
elwu's picture

"(Bundesbank) so politically Merkel can't simply tell Axel and chums to shut the **** up"

Guys, you fell out of time?

Axel left Bundesbank office in April last year.

It is Jens since then, not Axel anymore.

Wed, 09/26/2012 - 10:33 | 2831856 falak pema
falak pema's picture

Blain the nihilist. Put the blame on human desire to avoid pain and try and achieve consensus. 

You are a shill and a shrill one at that.

For bad mouthing 3000 years of western civilization that has opposed "logic of reason" to logic of "grab as grab can". 

Markets of our age are as destructive as cancer. Don't make them into your idol; they are the Golden Calf of corrupt Mammon.

Not that I like biblical references.

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