No end in sight

7 min read

TGINTA – Thank God It’s Not Thursday again… I found it hard to put my finger on what felt so horrible about yesterday until I spoke to a senior private wealth manager who at no time in our conversation mentioned the words “buying opportunity”.

We big beasts of the wholesale market who measure daily P&Ls in magnitudes equivalent to many wealth managers’ assets under management have always somehow looked down on the lowly fellows who buy clips of main index stocks by the thousand and not by the million. While they were on holidays with the kids in Florida for two weeks, we had been to New York and back three times, to Paris twice and were patting ourselves on the back for having a junior to do Milan and Düsseldorf.

And yet, every time there has been a market crash or some other black swan event, it has been the private wealth management community that has been the rat up the drainpipe picking up the bargains. 1987 wiped out the small investor – Ossie Gruebel made his reputation by standing on the trading floor of CSFB instructing his traders to buy everything the panicking private client advisers were selling and not to sell anything to the Street – but lessons were learnt and from then on whenever the market went into free-fall, Jonny Retail was there filling his boots. Petty retail is the buyer of last resort.

Anyhow, my stockbroker friend was showing no sign of wanting to buy the weakness and when I hear that I prick up my ears. This has nothing to do with our own fatuous day-by-day “risk on/risk off” nonsense; this is an investment adviser who is loath to put fresh money to work because he can’t see the horizon. Who could disagree with him? Slightly mixing my metaphors, the white noise being generated at present is deafening. My chap was not the only person I spoke to yesterday who felt somewhat at sea. Tactical trading, so goes the consensus, is difficult; strategic investing nigh-on impossible. Perhaps it’s time for the venerable Wall Street Journal to bring back the chimpanzee and the dart board with which it entertained us in the late 1980s.

June tightening

Bill Dudley of the New York Fed and vice chairman of the FOMC added credibility to the June/July tightening scenario at a press briefing yesterday when he said “If I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation”. He added that the Brexit referendum – does anyone know whether BoAML ever withdrew the ruling that the term “Brexit” was not to be used? – might influence the timing of a rate hike. I’m glad to find that I’m not the only one to have noticed the proximity of the FOMC meeting on June 15 to the referendum date of June 23 which is why, just to remind, I have consistently argued for July 27 as the best date for the Fed to pull the trigger.

June is certainly not off the table but a summer rate rise has been signalled as clearly as is possible. Whether it actually happens in June or July is, in the greater scheme, not relevant. Ahead of the legendary tightening of February 4 1994, Alan Greenspan said something to the effect of an impending shift in monetary policy having been so well signalled that only a fool would not have begun to position accordingly. Market response and the subsequent head-long panic that lasted until well into the autumn of that year showed quite clearly just how many fools there seem to be in our business. The blind bid for the long Dell reassures my faith that, despite the profusion of CFAs and PhDs and Moore’s Law on computing power and AI, not much has changed in the past 22 years.

Meanwhile, the muppet-in-chief, Jean-Claude Juncker, has had a moment of lucidity and, so I hear, has convinced the Commission to defer the imposition of sanctions on Spain for missing its budget targets. Since the original publication of the Maastricht criteria in 1991 – deficit/GDP ratio of no more than 3% - I have struggled to see the purpose of imposing fines on transgressors. Why would one add to an already excessive deficit by imposing a cash fine? Isn’t that like the frustrated mother of a crying child in the supermarket who is shaking it while demanding that it shut up? Alas, Spain, Portugal and Italy are all trying to find a way through the fiscal maze and are, there’s no secret there, failing miserably. The price of not controlling one’s own currency and hence inflation is higher than the idealists of Maastricht could have foreseen. Benoit Coeure’s recent assertion that “it is in principle possible” to cut the deposit rate further can only be of scant comfort.

So there we are – TGIF. Markets will surely rebound somewhat from yesterday’s lows. The Dow, having been down by some 180 points in the morning closed down a mere 91.22 points or 0.52%, much better than Europe had done with the Dax losing 1.48% and the FTSE 1.82%. Whoever was sitting on their hands yesterday would probably be well advised not to change position.

Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful weekend. Sadly the weather forecast is not looking brilliant which will be a shame for Mr PC “Jonsey” Jones who has flown home from Hong Kong to marry the utterly delightful and fragrant Mrs PC Jones to be. Somehow I have wangled an invitation to the event so this weekend the gardening gear will be swapped for the morning suit as I replace a little weeding with a large wedding. In the old days, nobody would have dared to get married on Cup Final Saturday. Now I’m not sure anybody other than ManU and Crystal Palace fans even care…. It’s not even a 3 o’clock kick-off. Does the EU get blamed for that as well?