Tuesday, March 15, 2011
TMM are really busy this morning trying to juggle falling knives with their hands whilst helping the market kick other things off cliffs with their feet. This is a good old fashioned position liquidation day with all the associated nightmares. For RV players, things that should correlate suddenly don't and for macro players things that shouldn’t correlate suddenly do.
Whilst the debate rages as to how the Japanese disaster will manifest itself as ripples of the, now financial, tsunami refract around the world, TMM are left in money management mode. Thinking about the next big trade is being swamped by protecting what we have.
Despite the temptation to look at the Japanese situation and directly extrapolate every function to justify meltdowns in everything else, we would rather see this event as a tipping point. We have been concerned for some time (and started playing for) a global growth shock, but were never really sure what would catalyse it. So perhaps the Japanese disaster is that tipping point in a super-critical market that has been leveraged via sentiment towards the inflationary growth story funded ultimately by cheap QE.
TMM have just finished reading a book by one of their mates and find the subject so very apt for today. As its forward pointed out:
"We live in a bewildering world of change, which splits naturally into steady progress punctuated by sudden disruptions - the two speed world. Steady progress ensures the survival of our species, but it is the disruptions that move us to a new level. Both types of change, slow and rapid, are important, because they mould and shape our lives, but because of their widely divergent characteristics it is sometimes difficult to recognise a major life-changer until it is too late. Even if we do spot the upheaval, we cannot deal with a change unless we understand it".
Loath as we are to be seen promoting books "Two Speed World" is an interesting view of the behavioural issues involved in explosive and gradual change.
It's been a long night and we have yet to see the US response to this sell off, so if we were to don Kevlar gloves then it would have to wait until tomorrow at least.
As for trades? You could go Long Tuna, Short Zirconium !