Two weeks of nothing??? … and some links

Tuesday 05OCT2010 0035GMT

So, what happens in the ES market when I go away for a couple of weeks?

Long story short … not much.

While I was away for a couple of weeks I didn’t completely tune out from the markets, I kept up some reading on developments (not as much reading as I normally do, but still a good amount) and then coming back into it I basically reached a conclusion, which is: for a market that has had some good news and, more noticeably, an absence of really bad news (as opposed to a few weeks back when the world was appearing to end (again)), why hasn’t it continued higher? That is, the market response to a relatively benign environment (perma-bears, just retract those claws a little, I said relatively, OK, not that we are swimming in an abundance of economic ambrosia) has been muted, lackluster, uninspiring … I am searching for the right adjectives …

So, I thought I was pretty clever seeing this response and was ready to pontificate on it on this here blog when I came across this article on Business Insider:
Nomura Joins Goldman In Saying QE Is Priced In, That It’s No Longer Safe To Buy Treasuries http://www.businessinsider.com/nomura-joins-goldman-in-saying-qe-is-priced-in-that-its-no-longer-safe-to-buy-treasuries-2010-10?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29
So, once again I am behind the curve LOL. While the article is about Treasury pricing, the point is relevant to the equity markets too, maybe QE2 is priced in and that’s why we have stalled around these 1135-45-ish levels?

Maybe this reaction/response is entirely appropriate (those that think market prices are always correct must, of course, by definition, agree)? Maybe muted, lackluster and uninspiring really is the new up?

Anyway, I am feeling a bit lazy (or, more kindly, am just getting back into it) so these impressions will have to do for market thoughts. And I wanted to do a post with some links in it … so here they are.

One topic sure to bring out a rant from me is China’s currency policy. I am in the camp that believes the holding down of the value of the Yuan is a mercantilist policy that continues to benefit China at the expense of their trading partners. I would like to see continued appreciation of the Yuan, but would be even happier to see it freely floating (or what passes for a free float in this imperfect world). I can link to various articles etc. supporting my view … but how boring is that, instead I want to link to some articles that challenge my view and , well, that really make me think and have to reconsider my ideas.

3 articles from the Carpe Diem blog, one of my favourite blogs.

Stronger Yuan Will NOT Bring Jobs Back to the U.S.
http://mjperry.blogspot.com/2010/10/strong-renminbi-will-not-bring-jobs.html

China’s Currency Policy is the Greatest Anti-Poverty Program in America, Why Should We Complain?
http://mjperry.blogspot.com/2010/10/chinas-currency-policy-is-greatest-anti.html

Increases in U.S. Worker Productivity, More Than China’s Currency, Responsible for Loss of U.S. Jobs

http://mjperry.blogspot.com/2010/10/instead-of-legislating-appreciation-of.html

While I am on China, interesting article re the ‘rare earths’ kerfuffle being played out at present:

China thinks it can withhold its exports of obscure but important minerals to get its way with its neighbors. Why it picked the wrong weapon.
http://www.foreignpolicy.com/articles/2010/09/29/you-dont-bring-a-praseodymium-knife-to-a-gunfight?page=full

Ok, enough China.

The Flash Crash. There is a lot being written about the SEC report. I am not going to add to it (but I read it with incredulity …). Well, maybe I will add a little …

Lets imagine a bunch of thugs plot to cause a petrol (gasoline for our American friends) tanker to run off the road and overturn, quickly moving in to steal some of the petrol, while other passers-by, not originally involved in the plot, also rush in to steal some of the petrol spewing out of the overturned tanker. A lot of petrol gets stolen, but in the pandemonium there is plenty spilling out over the road and spreading all over the place. Someone wanders by, stops for a look and lights up a cigarette … boom … So, what caused the explosion? The SEC report blamed the dude lighting up the ciggy …

The comparison is not really fair (those traders acting within the rules, rules which contribute to market instability and volatitlty, well, those traders are nothing like petrol-tanker hijackers) but until I can come with a better one it will have to do.

Anyways, Zero Hedge has continuing series of posts talking about ‘mini’ crashes in various stocks. I am not a big fan of Zero Hedge, the apocalyptic tone of the blog I find tedious and tiresome but nevertheless I scroll through it each day for 2 reasons: 1. They do have some great articles from time-to-time and 2. It provides me with a perspective I find challenges me and may therefore be helpful (like taking horrible-tasting medicine).

Today’s Flash Crash In Century Aluminum Stunningly NOT Brought To You By Waddell & Reed
http://www.zerohedge.com/article/todays-flash-crash-century-aluminum-stunningly-not-brought-you-waddell-reed?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Thankfully, Zero Hedge finish this piece with something I can disagree with … the capitals are theirs, not mine:

THIS IS NO LONGER A MARKET WHERE ANYONE HAS EVEN A REMOTELY FAIR CHANCE OF MAKING MONEY: THIS IS, FOR LACK OF A BETTER WORD, SEC-ENDORSED BULLSHIT, IN WHICH THE DEREGULATION OF MARKET STRUCTURE ALLOWS FLASH CRASHES TO NOW BE A DAILY OCCURRENCE. TAKE YOUR MONEY AND RUN NOW.

That first line is rubbish, there is PLENTY (capitals, mine) of money being made running these sort of moves.

Another article, another useful perspective, this time found on The Big Picture blog:
Waddell Stupidity Caused Crash
http://www.ritholtz.com/blog/2010/10/waddell-stupidity-caused-crash/

Speaking of The Big Picture, and after all these serious issues, have a break with a four and a half minute History of Hip Hop, good fun!
Fallon/Timberlake: Hip Hop History Lesson
http://www.ritholtz.com/blog/2010/10/fallontimberlake-hip-hop-history-lesson/

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