So much for the renewed attack on the weak EM. Despite wobbles in the morning in DM equities they never really succumbed to any supposed correlations. Serves us right for not trusting our own beliefs that the market is getting these correlations wrong and thinking they would do so again, even temporarily. So no pull back and we had to put back on the longs we had taken off.
We are left this morning hearing the siren call of one of or favourite indicators - The STPLTI. Standing for "Short Term Pushed Long Term Indicator", this indicator is usually a precursor to shallow pocketed investors being removed from the field on stretchers. We have seen it work perfectly in Europe, where speculative positions on the imminent demise of the Euro were bundled up into old suitcases, put in the attic and reclassified as "long term". Which is all well and good if you can afford to have your positions slowly dry and decay whilst you wait for Godot, but in the real world you normally need that cash for something else so harsh truths of cash management ultimately force you to retrieve the remnants, count the cost and start again.
The same has occurred in the gold market (just read Zero Hedge comments) and we would posit is happening right now in the Bitcoin market. But this morning it's the EM market that looks like Downton Abbey on Boxing day, huge trunks being stuffed with all the short term positional Christmas joy of EM demise to be shipped either home or up to the attics because it's over in the short term but will happen again.. Sometime.
TMM aren't immune to STPLT themselves and their own portfolios contain the dusty remnants of stocks that having once been sure fire things have basically become free options with pico-deltas (all that battery technology that didn't make it). But we are all too aware that in this world of short term return measures you need very deep pockets to ride out the "one day" trade. Which of course most people haven't got. So when we hear, as we are this morning, those folks short EM (who two weeks ago were looking for imminent collapse) saying that it's now a "long term trade 'innit", we look for things to start motoring higher and we go long stretcher bearers.
Do we detect a bit of this in Europe too? OMT legality has raised its head again in a big way. Wolfy in the FT and Euro permabear Evans-Pritchard are touting it as disaster but TMM think that OMT is much like a fire extinguisher. Even if they are ruled illegal it doesn't mean that your house will catch fire in the first place nor that you wouldn't use them anyway rather than burn to death (even if the German lodger does prefer self-immolation). Others would suggest though that if it were known that the fire extinguishers may not be used then it's open house for the arsonists.
So if that were the case, the most sensible thing to do would have been for the Germans to collude quietly with Euro central command and agree not to voice any of their debate. So even if they did decide that OMT is illegal, they just wouldn't tell anyone. Just like Reagan's Star Wars, it isn't the reality, it's the possibility that breaks the back of the aggressor.
So why are the Germans being so German about it? Perhaps it's just constitutional process that has a course to take and isn't designed to upset anyone, but like that giraffe being cut up in Copenhagen Zoo in front of the kids, it's a fact of life that has shocked those that don't like to see the messy bits of reality.
Maybe it's time to just go with the flow, rather than booking a lot of space at your local storage company and hoping all those now long term positions don't end up on "Storage Wars".
"Hey Barry, I've found a long DEM/ITL from 1998!"
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