UK Plc and its subsidiary RBS

ERRATA: it turns out that DJ got the below wrong. the revision was not to -1.5%, but to 1.5%.
Infuriating. So a minor slowdown, within noise, which is actually quite encouraging for the good old UK manufacturing sector. Still, the market was spooked. But maybe it was something else. RBS ended down nearly 8%.
Now need to check the German number... was that wrong too?


ORIGINAL POST:

"LONDON (Dow Jones)-- U.K. manufacturing output  ... [and Industrial production too]

The September data was revised to show a 1.5% monthly decline and a 9.8% year-on-year fall after originally being reported as rising 1.7% on the month and declining 9.3% in year-on-year terms...

This is a pretty serious revision. From positive to negative.

We are seeing details of the stuff that RBS is going into the bas assets APS scheme. Lots of funny names there.

After some thought, it make sense that one of the most rumoured is not there. More than one source spread gossips  that RBS was short puts on at least one of the Ponzi funds that got in the news, and moved them into the bad bank. But even if this were the case, they would have been marked to zero by now, the loss would have already been taken, and so there would be no need to include them into the APS.

So overall, nothing really surprising from RBS, as it was already known that RBS survives only because of government support.

On the other hand, the manufacturing news, combined with disappointing retail sales, are more interesting, and even if they clash with rising housing prices, it is sad to admit that they make the haruspex feel very, very decrepit: once again, he cannot change his mind, he has to remain sclerotically convinced that the UK is going down the drain, the sterling is trash, and BoE rates will remain at .5% for longer than priced by the STIRS market  (not to mention reserve rates probably going negatives). Even after moving up 10% today, the dec10 shortsterling STIR is trading at 98.22 - that means libor 3month at 1.78% in dec10. If it suits you, sir... if not, the dec10 call strike 99 on it is the thing to have (the haruspex might have grabbed a few last week - see disclaimers).

Overall, there is a sadness in the air. The haruspex wants to show that he is still mentally flexible, one of those young chicken that end up with spilt interiora on the arae.
He is still pondering Friday's payroll surprise in the US. But looking doubtful there.

So what can be done?

Reverse the habit of a lifetime. Sell premium, for once...  Express more aggressively the view that the Eurostoxx will pin around 2900 on expiry date, 18 dec09. 4 in 5 chances of making some money, limited  down side. Maybe it is boredom taking over here? see updated positions, and lexicon, if needed.

As we go to press: Germany industrial numbers for Oct are coming out, a bit of a shocker there. Month on month was expected positive, while it has turned out to be, you guessed it... right size, but opposite sign.