24th October 2011: Gambling on the Euro Roulette Wheel
Quote of the Day:
The Euro is either Strong or Gone…
Kit Juckes – Societe General Economist / FX research
Macro Overview
- Mr Juckes could not have given a more concise analysis of the Euro’s predicament. The US Dollar remains structurally impaired so the outcomes for the Euro are quite binary: if the politicians get it right the Euro will go to the moon. If they don’t, the Euro is dead. This ties in with my macro view on the Euro and long-dated wide straddle trade idea on the Euro.
- Paul Donovan, another economist I love listening to, also agreed in his daily comment that the Euro had a binary outcome. I quote his satirically facetious remark:
This weekend, the “glittering wonder” that is the Euro was treated to a plethora of discussions and back-room chat, as the thirteenth summit of the crisis got underway. One has to ask: how many summits does it take before the crisis loses its of urgency?
- ZeroHedge reports the Head of China Sovereign Wealth Fund says that Europeans are “Lazy” and “Entitled” and should work longer and harder like the Chinese do. Amen!
Market Overview
- Strong market as people predict that the European leaders will come up with a plan that the market can actually (a) digest and (b) find attractive. That’s quite a big ask – especially with respect to (a). It’s already sounding complicated and we have not heard anything yet. I think the market may not react on the EU situation until after the weekend – it’ll take a lot to digest and work through the consequences. In the meantime, the US GDP number may dominate how the week closes.
- Chart of the Day, think of a stock with 100 bil market cap which just hit new all time highs and is up … you won’t get it trust me… the answer is: Macdonald’s.
Chart of the Day
Macdonald's - 1000% over 20 years (Source: Bloomberg)
Events
Macro Events:
Update:
- Everyone talking about the HSBC Flash PMI as if this was a mainstream data point. The market rallied because it wanted to – get over it.
- What fell under the radar was that Taiwanese Industrial Production was terrible – hit the lowest level since The Great Recession in 2008/9.
Alerts:
- New Zealand Inflation
- US Consumer Confidence (this is a lagging indicator – I’m expecting it better than expected)
- Spanish PPI
Corporate Events:
Results:
- 3M [MMM], Amazon [AMZN], ARM [ARM LN], BP [BP/ LN], Canon [7751 JT], Coach [COH], Deutsche Bank [DBK GR], Nidec [6594 JO], Novartis [NOVN VX], UBS [UBSN VX], UPS [UPS] Volvo [VOLVB SS]
Dividends:
- Tata Consultancy [TCS IN]
Reading, Links:
Binary Euro:
