Busy Bounce day - quick thoughts

Busy day but mood has improved at camp TMM as there are signs that the storm is subsiding. But here are a real mish mash of thoughts.

- Chinese stock turns -6% to flat. Monstrous great "hammer" on the candlestick charts. Can't see that being overcome on the downside for a while. Similar patterns all over the place.

- FED First attempt to rein in the runaway herd. Fisher/Kocherlakota (axalotl? strange fish theme?)

- FED comment as heard by markets reminds us of this Far Side cartoon


(just substitute "Tapering" for "Ginger")

- Turnaround Tuesday? US has turned any minor rally that has started in European time. First time for an abatement? 

- BUT - 10y yields, once they hit their highs, may not come back that much.  Maybe 20bps or less...  The front end might but the 10 yr is seeing a fundamental repricing.

- Draghi is under pressure, Coeure comments reiterate easy policy needs - heightens differences and undermines Euro.

- Chinese saying they may release the liquidity noose, but no idea how fast or how many casualties.

- Bradley ... OOOOH !!  Forgive TMM a bit of their own witchcraft now and again, but to suddenly notice that Bradley and his amazing Siderograph call this years big trend turn as last weekend has us going OOOOH. Especially as this is the biggest for a few years. As ever, there is something for everyone here as timing is plus or minus a few days so it could encompass the turn last Wednesday night OR it could mean we bounce after this sell off. But way, take it as a free gift to back whichever view you fancy. We’ll take an up move. 

- FX sell offs stopped yesterday leaving other underlying assets to continue their falls. Sign of first hedges done and second stage underlying asset unwind taking over = panic over, near completion of first wave? 

- Many things don't fit the normal RORO trade, as this is possie liquidation rather than classic risk off. It's positional risk off not traditional macro risk off.

- Are we seeing 5 minute macro putting on the 3 year trades again (compare with JPY and Nikkei over shoot and pull back)?

-  US data coming out strong this afternoon. Unaffected so far re post FED asset price moves as all pre FED readings.

-  How much asset price damage is needed to trigger feedback -> Confidence -> Economy slipping down again? Need to see post Fed confidence samples. 

- TMM feel like the matador in today’s press - Gored again after having just returned to long equities.

Beatings Will Continue Until Morale Improves

The debate over the efficacy of austerity as part of the adjustment programs for economically suffering nations has long been the debate (and indeed a banner) of many with their own political or academic agendas.  But austerity has rarely been discussed in the context of monetary policy in the age of QE and negative rates (mostly real, but occasionally nominal). Yet there have been a couple of triggers to change that and the markets have spent the last 36 hours adjusting to the potential arrival of monetary austerity.

But there is austerity and then there is austerity. Just as there is "being restrained" and "being given a severe beating and sent tumbling down the stairs". TMM believe that the modus operandi is, simply: "the beatings will continue until morale improves".

1) FOMC beatings - There is no easy way out of QE. No matter how far off actual rate rises may be, the Fed statement and Bernanke's presser have dished out a severe beating to equity and bond holders, with commodity and gold bulls ending up as collateral damage.  Ironically the only beneficiary across every class has been the supposedly worthless paper currency called the US dollar, which has gone up against EVERYTHING.  The baton passing of global QE saw it move from US action, to European talk (no trousers), to Japan action  and when Japan appeared to drop it recently, the world hoped that the US would pick it up again.  But Ben ain't playing anymore and the baton is lying in the dirt, leaving the markets now sure that the game is over.  US don't want to inject as they feel that a) they ve done enough to bail out the world and b) they don't have to do it as much as the others, given the relative health of the US economy (here's looking at you, Mario).  The result of this particular beating is the particularly eye-watering move in many things, but, most notably, US real yields.



2) PBOC beating - Meanwhile China is not just refusing to play ball, but instead actively turning the screws.  The downturn in economic data would traditionally suggest that rate cuts or some other form of easing would be imminent, but rates are pushing higher with 1 week hitting a  rather unfortunate 30% intraday. Hopeful reasoning is that this is a short term technical situation and will pass (these things do happen occasionally in other money markets).  But TMM are of the opinion that this is a predictive "ducking stool" remedy being dished out by the authorities on quasi-financial institutions. Hold them under water long enough, let the weak drown, rescue those you want, who will be indebted to you politically.  And those that survive? Well, they can be branded as witches anyway should the political need arise. Whilst this may be sound domestic medicine in the long run, the timing, coinciding with a market worrying about global liquidity reduction, is far from helpful.  TMM won't stick any charts here, as there's been enough ink spilled on this particular subject, with charts galore.

3) Carry Monkey beating - Rather than a cause, this is as much an effect, but it's an effect that becomes a cause due to feedback loops, so though the beating may have started with a basic whipping from funding concerns, it has exploded into an orgy of autoflagellation.  Exiting through doors the size of diffraction gratings has left many trapped inside.  Now while carry monkeys have proliferated and have infested pretty much all corners of the market, juicy EM has been one of their favorite haunts.  It's, therefore, not too surprising that there's been a bit of a curious incident of "get me the hell out of this mess".



4)  Hedge fund beating - Consequences of consequences have seen EM hedge fund teams shown the door. Apocryphal stories of dedicated funds having most of their capital redeemed and the more public release of famous hedge fund managers from even more famous hedge funds shows that the beatings have become fatal to careers.  But, really, this is EM and the famous dictum of "you live by the sword, you die by the sword" very much applies.

While beatings can be expected to improve morale in the long-term in places like US and China, there is one area where they might just have the opposite effect: Europe.  Draghi should be sh*tting himself.  We are experiencing a tightening in global liquidity when Europe, with its staggering unemployment, lukewarm economic performance and dangerously low inflation, needs all the help it can get.  To add insult to injury, ECB-specific liquidity has been dropping steadily through a combination of LTRO repayments and rising autonomous factors.  We're now fast approaching the magical €200bn barrier, where it just might start affecting EONIA (a topic in and of itself).



Global liquidity abundance has been a huge assist to Europe, doing much of the heavy lifting, leaving Dr Aghi free to crow about the success of his OMT invisible bazooka.  As we have said before, the Europeans, once cattle prodded off their domestic agenda behinds, are capable of cobbling together rescue programs when they all feel jointly threatened, but being adaptive enough in policy between the extremes of "all OK" and  "end of the world"  has never been their forte.  As we have witnessed recently, the ECB appears to be contained within traditional fences policed by the Herr Weidmann and his buddies.  Interestingly enough, in the latest bout of EM-a-geddon, European periphery has been suffering somewhat with both Italy and Spain creeping towards 5% in 10y.  Whether this is enough, together with the latest headlines out of Greece and Cyprus, to produce some sort of a response, remains to be seen.

So Dr Aghi, the stock markets you last referred to as a sign of policy success have dumped, your peripheral bond yields are motoring higher again and the market is looking under the stones for euro specific woes (Greek politics, Cypriot banks, etc).

So whatcha going to do now, son?

Thank You Letter to Uncle Ben.

Dear Uncle  Ben

   Thank you very much for the lovely present that you gave me for my birthday. It was so delightful and will come in very useful. I can just imagine you asking the shopkeeper for the least garish or outrageous statement they had as your intentions to please are nothing but honourable.  For this I would like to say a very, very big thank you.  

When I unwrapped your gift in front of the family I was delighted with your choice of calming words associated with steady growth, but unfortunately at the mention of "tapering" my bonds instantly spewed their guts up all over the floor. Still, these things happen and it could have just been a bad portfolio adjustment they had the night before. It was only when your mentioning of  target unemployment rates coincided with our emerging market portfolio re-enacting that scene from Alien where the hero's chest explodes, that we wondered if something might be more generally amiss.  However we put this notion aside as our European equities looked just fine. 

Until this morning, that is, as when they woke they had blood pissing from every orifice. At first we thought that they had caught Ebola and so took them to the Hospital for Tropical Medicine where the doctors were baffled. But when we mentioned the symptoms suffered by our USTs, emerging market portfolios and, as we had since discovered, the hang drawing and quartering of our Aussie dollar, they became concerned and called us aside. 

Now this might appear a little speculative, but they suggested that there is a small chance that the cause of all the calamities our family has suffered over the last 24 hours may in fact be associated with your very generous present. Far be it for me to cast aspersions, but I thought it only wise and fair, despite my own faith in your kindness, to pass these concerns on to you should you be thinking of presenting any similar statements in the near future. 

Best wishes and thank you again

Your very needy nephew 

Mickey Long. 

PS . My dad says  "If that ()&^""£ ever tries a dumb %RS^ trick like that again he can take himself and his mortgaged country and stick it up his QE *&%£" no matter how cheap his shale gas is. Does he know how long it took me to build that Indonesian corp bond position?"  I'm not sure what a lot of the long words mean but he and his portfolio went very red and he has passed out on the sofa unrousable, even by the wild cheering coming from Mr Shorty next door.

Prayer for the Day

Prayer for the day -

Our Ben,
Who art in heaven,
Hallowed Be-nanke,
Thy auctions come,
Thy Bill's be done,
In Twos as they are in Sevens,
Give us this day our daily Fed,
And forgive us our Treasuries,
As we forgive those that default against us,
And lead us not into recession,
And deliver us from deflation,
For thine is the borrowing, the easing, and the printing,
For ever and ever.
Amen.

We first posted here :- Order of Service, but so apt for today we had to reuse.

Buy, Buy, Miss the Rally and Die.

Team Macro Man turn to Don McLean to describe this year's trading.




A long long time ago
I can still remember
How the market used to make me smile
And I knew if I just bought bonds
I'd make some money being long
And maybe I'd be happy for a while
But Fed tapering made me shiver
with every ten year note delivered
Bad news in every headline
I couldn't buy one more time
I can't remember if I cried
When I saw punters swept out with the tide
Something broke me deep inside
The day the market died

So buy, buy, miss the rally and die.
I've waited for the data but the data weren't high
Talk the good old Fed's tapering QE's a lie
I'm singing this'll be the day that I buy
This'll be the day that I buy.

Did you write to Hilsenrath
And do you lunch on the Grapes of Wrath?
If Bernanke tells you so?
Now do you believe in Spooz and Blues?
Can I hedge by selling lots of 2's
And...can Aussie escape the noose?
Well I know that you're long dollar/yen
'Cause at 101 I stopped you in
You bought some RKOs.
Man both of those got hosed.
I was long the Nikkei, short the swiss.
With a dual digi, couldn't miss,
But I saw my p/l had pissed
The day the market died
We started singing

Buy, buy, miss the rally and die.
I've waited for the data but the data weren't high
Talk the good old Fed's tapering QE's a lie
I'm singing this'll be the day that I buy
This'll be the day that I buy.

Now for 5 years we have been repressed
And frankly I have been so depressed
But that's not how it used to be
When markets set the price of rates
And hedge funds didn't put up gates
And no one ever heard of Fed QE
Oh and when Bill Gross got the big bone,
He rang the Fed up on the phone
"Look I can't sell MBS
...come on, Ben, just buy the rest!"
And while Obama read a book on Marx
The people stormed Zucotti park,
And we sang dirges in the dark
The day the market died
And started singing

Buy, buy, miss the rally and die.
I've waited for the data but the data weren't high
Talk the good old Fed's tapering QE's a lie
I'm singing this'll be the day that I buy
This'll be the day that I buy

Helter skelter in a summer swelter,
My Bunds were saved with a put spread shelter.
One-four-five and falling fast...
And ten years blew through two-oh-eight,
I tried to fix my mortgage rate,
But the bank told me I'd have to wait.
Now the pre-Fed air was laced with doom
As the CIO cleaned out the room
We all got up to trade
Oh, but not a buy was made.
'Cause when I tried to receive DI's,
The trader wouldn't make my size.
And I couldn't beleive my eyes,
The day the market died

Buy, buy, miss the rally and die.
I've waited for the data but the data weren't high
Talk the good old Fed's tapering QE's a lie
I'm singing this'll be the day that I buy
This'll be the day that I buy

And there we were, all in one trade
Abenomics rules, our year is made
With no need to think again.
Moves were nimble, charts were sick,
Japan trades on the candlestick
And trends are Kuroda's only friend
And as I watched those JGBs
I felt a tremble in my knees
No angel born in hell
Could tell me when to sell
And as the stops were triggered in the night
In some sort of sacrificial rite,
I saw Schauble laughing with delight
The day the market died
And he was singing

Buy, buy, miss the rally and die.
I've waited for the data but the data weren't high
Talk the good old Fed's tapering QE's a lie
I'm singing this'll be the day that I buy
This'll be the day that I buy

I met a girl who sold the Blues,
And I asked her for some happy news
She just stopped out and went away
And I went down and sold some VIX,
Going back to my old tricks,
But my broker said that model wouldn't play
And in the street the traders teemed,
The brokers cried, and the journos dreamed,
But not a word was spoken,
The IB chat was broken
And the three men that I want gone
Draghi, Ben, Kuroda-san
They all agreed their work was done
The day the market died
So I'm left singing

Buy, buy, miss the rally and die.
I've waited for the data but the data weren't high
Talk the good old Fed's tapering QE's a lie
I'm singing this'll be the day that I buy
This'll be the day that I buy.

Kevlar gloves in AUD/JPY

Thought of the day -  "The Market giveth and the Market inserts red hot pokers before dicing you into small chunks and spreading your remains to the four corners of the earth"

We know it's hard but we will try to move away from Emergegeddon for a moment, though we are fully aware of its dominant influences, to wonder about the JPY again.

Abe's bungee rope better hold as the asset plummet off the bridge is getting close to the critical point.  TMM admit to being disappointed that there hasn't been anything more concrete from the Wizard and our fear that the spread between future expectations and reality would collapse has materialised. But though the percentage numbers being cited for falls is impressive, TMM like to look at the other axis of time when looking at corrections to longer term plays and on that measure we are only back to March on NKY. Oscillations around the mean of a reality maybe, but with confidence the key we do wonder what is needed to turn the short term tide?  A friend of a friend of Kuroda whispering about burning JGBs perhaps?

Whilst we think that the Wizard of Abe's road to growth is long and tortuous and we are not sure it will ultimately reach the intended destination (debated before),  the Wizard's horizon is long-term so he won't be chucking in the towel as swiftly as we have seen from money managers in this last move down.  So feeling that the market is back either at (or below) the reality/expectation line, TMM are donning their Kevlar gloves and are looking to re-enter the Abe trade. But where? Nikkei? A bit maybe. but selling JPY currency again?  Yes, but what should we sell it against? 

USD? We are afraid that USD is about to remain soft as tapering is pushed further back across the table as markets and hence confidence falls (we think all this media talk blaming all the market falls on Bernanke's tapering certainty is the wrong way around) and we invoke our ISM rule of FED action. This leaves USD vulnerable. 

EUR? Though we like Europe and the Euro in the medium term, once the German court case is behind us Dr Aghi can put down his Teutonic Monetary dictionary, stop talking German and revert to speaking Italian again, resulting in an overtly dovish Dr Aghi at the next ECB. This should temporarily undermine the Euro FX though give European assets a lift. So let's pass on Euro.

GBP? It's had a good run up already and is at risk of being Carneyised despite gently improving data so we'll avoid that too. 

Now, here's a brave call. Aud. Our longer term outlook towards it remains bleak but we are watching with interest as there are a few signs that there may be a shorter term turn due. Despite an appalling jump lower in everything Chinese on its reopen, the Japan exit tsunami and the continued Emergegeddon, AUD/USD is about 200pts off its base of 2 days ago. High intraday volatility is also often a sign of a turn. As there is nothing that TMM like more than batting against a consensus, especially one that has moved so far already, despite our longer term fears towards Aus which remain intact,  we chose to hold out our Kevlar gloved hands towards AUD/JPY and buy here.

TMM ft Emerging Market Fund Manager.

Continuing with the Emerging Market rave, eat your heart out "Swedish House Mafia ft Tinie Tempah with your Miami to Ibiza. 



Here's Team Macro Man ft. Emerging Market Fund Manager with 

Manilla to Floripa 

He says he likes my Sharpe but wants it USD
I stay up all night watching SGD
He says he loves my trades as I lift CLP
And buy EM rated just Baa3
Earned my black BM with its COE
But Muddy asks what's hidin' in my SCB
I say ha! Wear your shorts and prep your DIP
Trading EM bonds is simple yield carry.

But Ohh ! Scream one! Everybody! Get out of your positions! 
Pay attention and listen,     
We're trying to get this out in one print, 
So lets try and make that happen
Sell now! Action!                                    

Hit the CME, they like my dealing fee
Tripped out of THB, caught nasty VND.
I'm out on PHP and Taiwan CNT.
Raving at TMM, London to NYC
Now looking for my visa and my Visa 
Where's my driver? Can't cut it finer.  
I'm up to my neck with the Korean regulator

You can find me on the table full of vodka and tequila  
Surrounded by investors and they couldn't look much meaner.
Wake up in the morning with a Senate spawned subpoena
With a book like LTCM, It couldn't get much bleaker.

Patriot Act may get me or they catch me through FISA
'Cuz thats standard procedure from Manilla to Floripa.

TMM's Essential Mix: Emerging Markets

Coming live to you from Tanjong Beach Club in Singapore TMM, described as "the Swedish House Mafia of macro - minus the musical talent or good looks" will be bringing their mix of emerging market breaks  - mostly of the fixed income variety.

And breaks are what TMM are seeing out here. More "going Pete Tong" than TMM. The emerging markets selloff which started out all groovy and house music  (you know, gradual normalization of policy, markets with bad fundamentals doing vastly worse than those with good fundamentals ) but has instead turned into something that sounds like a Skrillex set with a bunch of scratched records. In short order we've seen a lot of EMFX blowup from ZAR to IDR. Now some people have observed that this is partly due to some forced deleveraging by CTAs and the like which should, all things being said, be temporary. Swap spreads should not be blowing out if the problem is the local markets as opposed to banks as in 2008. The problem is that this selloff appears to be gathering pace and, with an acute lack of risk appetite at dealers, it is hard to say where things are going to clear if redemptions come.

In addition, we are seeing some truly daft behavior from central banks most notably Bank Indonesia which is engaging in QE in a market with 6% inflation, good growth and no incipient signs of a credit slowdown. If the recent price action is the best they can do with regards to stabilization it is tantamount to waving a red cape at the likes of Druckenmiller and Scott Bessent at Soros both who a) know this game and b) won it last time.

In that context TMM are finding things fairly hairy out here. The possible good news would be measures to slow credit growth in places like Thailand where it appears to be going into the condo market more than anything else or, perhaps some of that long awaited reform in India. Or, perhaps, some real SOE reform in China. Instead when TMM talk to strategists pushing us to cover shorts in this space we find ourselves glazing over, imaginging we are talking to Vladimir and Estragon and in all fairness the daydream is not far from reality. 

To that end, TMM are pretty happy staying underweight to short particularly in yield proxy equities and yield sensitive names.

Now, there is something TMM need to consider here and that is the underlying assumption of this whole market - decoupling, which ended *Really* badly last time. TMM are looking at USTs and equities and wondering just whether the rest of the world has given much thought to how likely a taper is given the S&P 500s international earnings and what they might look like if things got ugly.  

EM isn't a rounding error any more and with US tech services at risk from foreign reactions to FISA and the Patriot act the risk reward does seem to be changing fast.

Chapter 9 - Monetary Medicine.

In the style of one of Team Macro Man's favorite Larson cartoons on Equine Medicine, one of our Macro Minors has created the Ben version.

Central Bankers and their Big Brass Balls.

A couple of weeks ago the world seemed pretty sure of how Ben, Abe and Dr. Aghi were playing their hands.

Ben's crowd were going to be tapering off on QE whilst Abe was going to do the heavy lifting from here on out and Dr. Aghi, having surgically removed the tail risk, was on look out and even preparing the ground for further easing and potentially negative interest rates to counter a dire European outlook. To that effect the obvious trades were to be long USD/JPY and Nikkei, gently short Euro, be long Euro Equities and to be starting to lighten up on US equities.

Then things started to go a little off course. US data become steadily poor enough for tapering of QE to be reconsidered and see the dreadful term "detapering" introduced - Here we would like to remind you of TMM's rule of ISMs - "Every time the ISM dips below 50, the Fed follows with an ease (rates or QE) "



To this end equities stopped sliding (temporarily) and started to respond inversely to bad US economic news and the Usd started to drift off, most noticeably in that most QE of crosses, Usd/Jpy.

But hope was at hand as the market waited for Abe to come to the rescue with Arrow 3, which was becoming all the more important because shake-downs in everything "Abish", though still being termed "healthy and corrective profit taking", were just starting to introduce elements of doubt as to the immediacy and uni-directionality of Jpy and Nikkei. If this slippage hadn't started occurring probably less necessity would have been attached to the potency of his 3rd arrow comments but as it was, the market didn't get a speech worthy of a Churchill or Eisenhower and as TMM alluded to in the last post, have started to worry that the all powerful Wizard may just be a small man playing around with levers, smoke and mirrors. So down we went again in Nikkei and USd/Jpy, already weak, was given another kicking.

But on the sidelines something else was happening. Carry trades in general had started to catch fire and the lack of guaranteed Japanese action set that nightclub without adequate fire exits that TMM have been warning about for a while, High Yield Emerging Market, alight and the few exits were getting more than a little busy.

So it now fell to the ECB where Dr Aghi's reputation for cool creativity has remained at "David Bowie" levels.

However expectations for a dovish ECB were smashed today. In particular, Draghi’s statement that “price developments should remain in line with price stability” sounded neutral and this sent EUR carry trades, especially Euribor contracts, south sharply, with a concurrent rally in the EUR. Meanwhile this was like a bucket of petrol over EM Bonds and the slits of exits couldn't cope. Italy and Spain were caught in the ECB / EM crossfire and both 10yrs put on 20+bp.

With it now looking as though the QE baton has been passed back to the US, Usd/Jpy and associated NKY then melted in the flames.

No wonder we have had such large movements with perception of CB policy in all three major areas changing within the space of a few days, leaving people worrying that Abe might not be Superman, Dr Aghi might not be Super Mario and Popeye Bernanke may have to go back on the Spinach.

But lets look at them one by one, first the ECB.

Now, TMM is puzzled by Draghi’s statement. Because despite Draghi’s proclamations, EU Inflation expectations are NOT close to the ECB mandate. Below is a chart of 5y EU inflation expectations. We are now at levels from last summer, and before that 2010. At 1.5% for 5 years, TMM thinks any rational observer would conclude that the ECB is missing its inflation target of ‘close to, but below 2%’ by a sizable margin.



A possible explanation is that the ECB is trying to exert pressure on EU politicians to continue fiscal reform efforts, which has eased of late. In the final paragraph of Draghi’s statement, he said: “the Governing Council considers it very important that decisions by the European Council to extend the time frame for the correction of excessive fiscal deficits should remain reserved for exceptional circumstances”. Whilst TMM remain comfortable that data in Europe IS bottoming and that tail risk is not there (despite the sudden resurgence in European periphery yields), perhaps we should be concerned that the ECB, without immediate emergencies (tail risk) to deal with could be back to operating within their normal confines of inflation targeting and, comparatively to OMT swift action, may be perceived to be becoming sluggish in response.

As one wit posted to us.. "*S+P DOWNGRADES DRAGHI BAZOOKA TO WATER PISTOL"

But TMM think that the usual oscillation in expectation and outcome for ECB meetings will result in a swing at the next event with Draghi producing a "more Dovish than expected" result.

So what about Abe? It's all about confidence and TMM have been wondering just how much of the past few months rallies in Nikkei and USD/JPY have been the result of expectation and how much due to real action. Because if he lets this one slip and confidence of success vanishes, then so will the expectation and we will retrace all of that component. Which we feel is most of it. So with that in mind TMM really don' t think he will drop the ball right now and he will put on a show next week.

And the US? We have been throwing around all sorts of arguments and analogies, most of them medical ranging from tearing off the plaster of QE as quickly and painlessly as possible, to continued methadone prescription, to amputation and stem cell therapy. Once again, as with Japan, it all rests on continued confidence and here we have a balance between confidence in the continued supply of liquidity if the economy needs it against confidence in long term Fed policy, the two being slightly different. The other point of confidence is who follows whom. the market the fed, the fed the data, the market the data or the Fed the market. We would prefer to think that the Fed will, as they keep stating "do what is necessary" (as the ECB also keep saying) to which point they will try and play the Goldilocks scenario of just the right amount for any situation.

We would like to remain confident that despite the wild oscillations in central bank expectations the central bank Governors are indeed Governors - Those big Brass Balled governors on the steam engine of the World's economy and they can’t afford to choke off what confidence may finally have emerged.



One could argue that if this is the case then the medium term outlook for equities is pretty flat as the governor functions operate, so selling 1650 straddles in S+P, particularly during this recent high vol may not be as mad as it may currently appear.

The fly in our ointment is Emerging Market fixed income, where positions are being burned alive. Could this become contagious? Well the most encouraging sign we have is that the countries suffering bond grief, such as Mexico actually had positive out comes in equities as that was happening. We are positioned for more grief in the likes of Indonesia and other structurally worrisome emerging markets that have been recipients of blind yield hunting, but don't think that the developed markets, with their brass balled governors are going to fall. In fact European equities are tempting us again.

Finally, to cap off a week of mayhem, we have the NFP lottery today. TMM won't put in a prediction other than to suggest it will "surprise".

The Wizard of Abe

Reaction to Abe's Third Arrow has been one of disappointment. Whilst we see him continuing to throw everything at it we are concerned that impressions are everything and if the market detects cracks in either policy or commitment the fall out will be huge and not limited to Japan.

The market discovers the true Wizard of Abe