CPI shows fundamentals haven't changed - it's just been position

And relax
Thursday, November 18, 2010
Aaaand relax. Ok guys that was a good workout, well done. Now do some stretches, cool down and take a break.


US

DXY failure at top of downtrend from June.
The Fed model still very cheap.
CPI yesterday shows fundamentals haven't changed - it's just been positioning.

Europe

The news-fires in the boilers of euro-gloom need more fuel, and it isn't coming today.
Spanish auctions have gone very well, although it seems that local banks are the main buyers. The Irish trade we suppose. It makes sense if you are a local bank as the only way the sovereign goes down is because you have gone under first.

Commodities

Bullish oil data yesterday with a massive draw.
Gold - made of rubber today.

Equities

Fidelity's junk bond king allocating out of High Yield into equities.
GM IPO out of the way so less equity supply.

Asia

China is toning down the possibility of higher rates as it looks like they are applying supply side measures rather than monetary tightening.
Korea capital controls are less than expected and, as the Won is the macro darling, its rally has handed out some decent profit to the street.

Markets

Open interest falls (5yr note future down 9% since QE2 day) suggest CTAs have by and large cut their positions now.
Volatilties are off in most option markets.
The market feels a lot more clean - last few days were serious pain for the kermit and momentum money.

Austerity Weddings

Remember that all of this is due to the announcement that the future King, Prince William, will be marrying Kate Middleton. If you read the UK press you would believe that UK GDP will exceed that of China due to a "feel good factor" the nation is about to enjoy that will make the consumption of recreational drugs redundant. We are buying tressle table and bunting manufacturers as the UK turns into one great street party, although we recommend the royal couple take advantage of the current half price champagne offer at Morrison and gets the wedding dress order sent before the real inflationary pain kicks in in January.


So... It’s a pause, maybe with Thanksgiving coming up next week this "pause" may stretch to a "respite" amongst the usual risk suspects. However there might be a new game developing ready to bite Mr Market on the bum.

A confluence of news has led to some ugly moves in Munis, but so far there has been limited contagion. However, TMM are watching the Muni->Notes->EM bonds-> mess linkage carefully