The T Report: The Further Away From Equities The Less Excited You Are

Yesterday’s reversal in stocks was quite amazing.  Not only was it large, but it came later in the day than usual as stocks as continued to test their “Europe went home” price and it was hard to figure out what rumor actually was the catalyst for the turnaround.  The “credit” ETF’s followed nicely, and HYG and JNK managed to claw their way back to unchanged.  The CDS indices bounced, but still ended the day wider.

So basically stocks did well, the ETF’s which are a hybrid, tracked stocks, CDS, where the hedgers play, didn’t respond as strongly.  We are seeing a similar pattern this morning, where stock futures are firm and feel well supported, but credit is tentatively participating in the rally.

Treasuries also have remained strong, signaling either front running of QEX, or along the lines with the CDS market, a reluctance to believe the hype.

The data has been mediocre if not bad, globally.  Even the jobs story took its first sucker punch of the year with a big revision and a miss.   It is getting harder to point out what drives stocks higher if Europe gets itself fixed.

Europe getting fixed is still a long way from happening.  Another garbage headline about huge firewall.  To get a big number, they ignore what is already committed, pretend that more is actual capital than it really is, and choose to ignore that to get to a big number, you need Spain and Italy to participate, but the only reason you need a big number, is protect against Spain and Italy.  It just doesn’t work in practice.  Have you ever bet a $1 million dollars with a 7 year old?  Well I have, and I’m pretty sure my son isn’t going to pay me J  Treat this latest firewall more like a silly number on a bet with a kid than something like the LTRO which really did infuse liquidity into the system.

In addition to making silly bets with children, I swear I will lose 20 pounds by memorial day.  I will go to the gym for 3 hours a day and focus less time on the steam room and more actually working out.  If you believe that, I have a Spanish budget for you.  The chances that Spain meets their budget goal is less than the chances that they even go through the motions of trying to meet it, which are less than the odds of me spending 3 hours a week in the gym, let alone per day.

It’s a Friday, it’s quarter end, the weather is great, who knows what the market will do, but relying solely on central banks and promises that will never be kept and ignoring some tough data seems to be a tough way to make a living.