Guest post by Peter Tchir.
I remain short. I am flat Spain, Italy, and banks. I am short U.S. stocks here. I like CDS, but think IG18 will drift back to over 100 before it can take another leg tighter.
I think so much has been priced in from the ECB, that we face some disappointment as more plans get leaked or opposition becomes more vocal. I believe the ECB will do something that is sufficient to change the dynamics in Europe for a period of time, but think they are constrained enough, that the market may underestimate their plan. The market will view it as insufficient. LTRO1 remains a prime example. Everyone bought the rumor, sold the news, and then decided they better actually buy the news.
What concerns me most about being short, is that it seems very crowded. Not only is it crowded, but many bears (or underweight bulls) are pointing to the same things as reasons to be short, and some of those reasons don’t seem right to me. Here are 4 things too many people seem to be focused on and drawing potentially the wrong conclusions from, and why I don’t think any pullback at this stage will be meaningful and why I will be looking to cover and get long again on a relatively minor move.