Tuesday, 17 January 2017

The end of the land of the free.



Mrs May has been top of the headlines as The Economist cover once again proved a negative indicator.


The weekend saw leaks of her statement with screams of terror from the usual sources as they sherry picked (like 'cherry picked' but in otherwise genteel front parlours) the headlines pointing towards a harder Brexit. With this came the knee-jerk narrative to sell GBP because that's what the simple programming that is currently being applied demands. This made two assumptions. First that May really is going to sacrifice all ties and the second that the result of a hard Brexit means that GBP should be yet weaker (weaker than the 15%-20% it has already fallen). GBP fell to 1.19something on Asia open only to recover and then languish around 1.2040ish for the rest of the day. This morning's commentary was that she has leaked her speech to prevent a market meltdown. But today saw GBP rally 3% to levels higher than where it was on Friday. What a complete and utter waste of time listening to the garbage on the wires. The only headline worth its salt would be

 **GBP RALLIES THE MOST SINCE THE LAST TIME EVERYONE SAID IT WOULD FALL**
but you just don’t see that,

I have come to the simple conclusion that the reason that the commentary is so wrong is because very, very few of those commenting actually trade the thing. The reason prices move is because people buy or sell in differing ratios upsetting the equilibrium of the assumed fair price. The reasons that people trade is hugely complex. The drivers behind the individual trading decisions can vary massively. Commentators can not accurately define why GBP is lower or higher unless they have actually spoken to a person who has traded it. Here I am not talking about an FX salesperson who has transacted a trade for someone else, nor even a spot FX trader (who manages flow but rarely knows the ‘why’)  but the fund manager, central bank, sovereign wealth fund  manager, hedge fund or real money PM, or collection of electrons in an algorithm who actually decided to swing the bat. And funnily enough, practically none of them will ever a) want to tell you b) want the fact that they have traded be known in the first place.

As my friend JG said 
"Herewith, the slime trail ident of a clueless commentariat, machines and dickheads".


False news, bullshit, selective reporting to fit agendas and so on. It’s a theme throughout politics, markets, social media and, currently, life in general. Why is it so? Because we are awash with free stuff. Said to be free, but not free. The quality of free stuff is currently so low that I am predicting a backlash against ‘free’*. The easiest form of marketing includes the words ‘new' and ‘free, but 'free' has moved on from 'free’ apps just stealing all your personal data to data that is completely fallacious. Which leads me to believe that the days of ‘free' are near an end. It has started already with many once free publications going subscription and many good bloggers either trying to charge, throwing in the towel or moving to a broader platform that provides an income (e.g. the excellent Macro Man).

Information has a hierarchy of value. Untruth, Opinion, Truth. As with any commodity, the value of which will be defined by supply and demand. As scarcity drives up prices so it will be that the price consumers are willing to pay for truth will increase. I am now willing to pay for verified news that comes with a guarantee rather than a disclaimer.

Ok rant over, back to financial markets.

My mythical turn date is effectively upon us. The first option expiries of the year combined with Trump's inauguration speech. As expiries are tomorrow, I have taken the liberty of front running the Trump speech by putting on a selection of trend reversal positions. Mostly through options as volatility has been crushed. FX, apart from obstinate dabbles in GBP, I have left alone as the dollar has already turned (I do love the EUR/USD 1.1000 magnet, it’s such a parity-party pooper). In equity indices, the FTSE has been in my bag for a few days now but I have added Dax puts, spread over the next 4 months, to back my views that although Europe has growth,  growth is actually going to be a problem with regards to arguments over ECB policy. And for a narrative twist, I am going to invoke my first rule of narrative "Change the subject before they notice you are wrong”. So if I am looking for a turn in markets against the recent narrative then, rather than deny the narrative, the subject will change. Wrong on the market responses to Brexit news? Wrong on market responses to Trump? Then change the subject and Europe is there ready as it's been out of the limelight since Italy didn’t  last blow up.

Emerging markets is where I really should be playing as they have been doing so well, but I am loath to. I'm more willing to wear a downdraft there. My bĂȘte noire of TRY is still proving that political upheaval and fundamental realignment of the political seismic plates swamps charts, oversoldness and historical value measures. The only EM counter-trend trade I have put on is long Mexico ETFs.

Oil is a toughie here. A downdraft in risk should see oil lower too. Add that to the well noted positional excesses and I should really be getting out. But I am still hanging on in there with dodgy oil stocks. I know there a hundred reasons to sell it but I’m going to hang on for $65. Commodities, in general, are frothy but I am looking at them returning to favour as part of the super-cycle.


I only have one comment on the World Economic Forum - The World Economic Forum is now like the Glastonbury festival, where those who go, go to be seen to be going; the headline acts are past their prime; their old songs are nostalgic but their new ones are solely self-indulgent; but, more importantly, it isn’t the performers who set the trends these days - it’s the crowd.



* I include this post as an example of free stuff which is opinion rather than truth and has little value or cannot be verified as true. Read the disclaimer! 

15 comments:

Nico G said...

do you know how they call a fierce Polemic bearish campaign? a Pol Put !

you gotta welcome fake news once in a while, just to screw algo robots otherwise they'd win 100% of the time instead of the current 99%. Historic end of week in the making, the increasing apprehension worldwide is palpable

Democrat portfolio managers and other Hollywood invested royalites should cash in on the 'Obama rally' and not be caught making money on a Trump trade right? right.

After Trump called US equities a big fat ugly bubble last summer, and after he claimed the 10% bounce post election on his own merit i can't wait for his next 'i told you so'

checkmate said...

Re you sterling comments and news. I see it like this . The spec otherwise known as 'turnips' are working off the 'news'. The commercials are working off the fundamentals and macro. Eventually , we know how that story works out every time.

As for 'news' it's done me a lot of favours ,but hardly ever for it's veracity. 'News' and most of what passes for media communication of one sort or another is mindless nonsense excluding that which is mindless nonsense aimed at people which cannot tell the difference between information and noise designed purposefully to achieve a particular end.

Philip said...

How Trump reacts to a 10% fall in equities will be interesting, maybe blame specs like Erdogan ? I suspect he will disown the market at that point or try and talk it back up.......

Polemic said...

the Pol Put is in play Nico.
Checkmate, tbh its just another input that one needs to model and sometimes it negatively correlates
Philip - He'll tell everyone he was short

Nick said...

The problem is that even paid for news and analysis providers have an agenda. FT used to be ok in terms of balanced coverage but now it is worse than the Economist, and that is saying something. Moreover I have a suspicion that even comments attached to the articles of the FT are heavily moderated. Time for a regulatory crack down, what else can work?

Going South said...

"I am now willing to pay for verified news that comes with a guarantee rather than a disclaimer."

You make a number of great points in this piece, but I'd also be interested in what sources you consider worth paying for. As Nick has already noted, the FT and the Economist seem to just be sources for the establishment official spin... what Ben Hunt calls "fiat news". I can see that it's worth paying for good data and good analysis, but presumably these come at a much heftier price tag than a humble FT subscription.

Going South said...

A clarification from my previous comment...
Information clearly has value. Once it's been more widely disseminated and turned into part of the narrative, it's become "news".

checkmate said...

Did you read the Davos speech? May opens her mouth and once again you wonder do they have any idea what they are doing ,or is it intended to read like delusional crap?
Too many implicit contradictions to bother working out which parts are genuine policy and which are political spin. If this is 'news' I'm inclined to think you would get poor in a hurry trying to act upon it.
I'm not a believer in paid for analysis if only because in my experience I have found that it is difficult to find anyone who bats above random chance in producing useful analysis. I temper that with the thought that now and then someone keys off on an issue I have overlooked , or missed. That's happened more in the last couple of years so either the event horizon is getting more complex ,or I'm losing my focus.

Al said...

Totally agree. When I was in management at a bank it used to be one of my totems "there is a heavy price to pay for free".

Lots and lots of examples like "Freeserve" once one of the biggest ISP's in the UK. Basically, if something is free, it will either annoy you in underhand ways (advertising, stealing data etc etc) or the service will gradually turn to shit as they lack the funds to invest.

I always tried to get peope to think like Germans. Not free. Not cheap. Just excellent quality that makes people want not to waste their time on alternatives. Easy, repeat business. Fair price, cost plus, not exhorbitant. It makes you think differently about how you shop. Don't be a 'mug' but don't chase the lowest price and false dawns. Companies have to make money in order to invest. It is part of the equation.

Sadly, I don't think we're anywhere near the end of this though. As people struggle more, they look to save money and shop around. The market is increasingly gravitating to two extremes as we see only too plainly in the supermarket arena. And access to macroman and the Bloomberg subscription. ;-)

Great blog post by the way.

Polemic said...

Nick and Going South .. it sort of transcends which service I am willing to pay for out of current media/information providers. I d like to see something else set up that based upon guaranteed truth and balance. I dot actually know how, but it would invoke AI's great comment about the way Germans do things which I think is a great point. Great quality and simple margin and is anathema to the business styles of plenty of Anglo get rich quick schemes (part of the mittelstadt, long term family owned rather than shareholder/Venture cap instant greed mentality?)

reuters is still bestir streaming clear 'stuff. Bloomberg has gone down the foul route of the rest of the media where opinion is starting to swamp pure fact. Just look at al the 'x as y'.. so an dos thinks/says headlines. Bloomberg started as a brilliant analytical tool plus hard data /headlines. It's turning into the financial daily mail/cnbc

I would pay for a reuters radio of finance.
I would pay for a newspaper of headlines from around the world, delocalised. It wold have a couple of lines and a scanable internet link to background if I needed it

I would pay for - an email system that was secure and didn't pry. I would pay to send emails if it meant that anyone sending me an email had to pay too. We could net off an 'approved' list. Would kill spam in an instant.

I would pay for concierge services for car insurance, utilities and all the other things that I have to put out to completion each year as companies rip you on auto renewals - this is interesting https://flipper.community

I would pay for a social media services, german style, that offered the service without raping me of my informational dignity and carried no adverts.
On that subject loved this article about how brand engagement on social media doesn't work - adverts do. http://adcontrarian.blogspot.co.uk

I would pay for an ad free environment.

So where does this blog fit? Ad free yes.. free yes.. but of course the cost is being polluted by my interpretations of the world which is me imposing my will upon you. So not really free.





Polemic said...

btw .. sorry for typos.. using my phone - and my eyes are still adjusting to their new lenses making near end a bit smeary still

checkmate said...

"UK will be bottom of Brussels trade queue, warns EU trade chief"
"Corporation tax will be at the forefront of UK fiscal policy" warns UK !
Checkmate :)

Anonymous said...

Pol -

Rss is likely not what you are after, and yes, the instant you give AI a chance to be "intelligent," for you it will suck your data right into the Big Brain, but perhaps something along these lines -

http://www.techlicious.com/guide/the-best-news-aggregation-sites/

I've used NetNewsWire on the mac side for quite a while - does what it does quite well...

Great post, btw

Polemic said...

Thanks anon. Will check that out.

Polemic said...

Oh and Checkmate, UK will be top of teh US's trade queue. That should ruffle a few EU commission feathers.