Archive - Aug 23, 2015 - Story

But... but... pension funds are "allowed" to buy stocks. Judging by the first few minutes of trading in the first thing to open this evening on the mainland, the CSI 300 Index Futures which immediately tumbled by 4% to 3340, China's attempt to deflect attention from the fact that it did not do a 50-100 bps RRR cut is not doing too well.

Moments ago, without any specific catalyst, US equity futures just plunged when in thin, illiquid tape, a seller took out about 30 consecutive bid levels and as of last check, the ES was down as much as -48 to just 1923, or 2.5%, after being down a modest -13 minutes ago.

Three weeks ago, "something just snapped." Now, it is getting worse by the day.

Remember trade #2 from Goldman's list of top trade recommendations for 2015, the one which said "10-year US Treasuries  above 3% but not below 2% in  mid-2015, through cap and floor spreads at zero cost."  Um, yeah.... well, moments ago the 10Y just dropped below 2% for the first time since April.

"Clearly, markets have lost faith in the ability of unorthodox monetary policies to kick start the economy over time. This also fits the findings of academic literature suggestion diminishing returns from subsequent rounds of QE."

"The head of a Chinese exchange that trades minor metals was captured by angry investors in a dawn raid and turned over to Shanghai police, as the investors attempted to force the authorities to investigate why their funds have been frozen."

After the Bloomberg commodity index crashed overnight, having tumbled for each of the past 4 years, this happened: BLOOMBERG COMMODITY INDEX SLIDES TO LOWEST LEVEL SINCE 1999

Said otherwise, the lowest level in the 21s centiry.  Yup, rate hike any minute now.

Anyone who listens to a mainstream media pundit, talking head, or spokes bimbo deserves the reaming they are going to receive.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

Moments ago, the $40 support level for oil finally snapped and with its so did Gartman's oil stop loss level, which means Gartman is now stopped out. Normally this would mean going long, however in this case China has yet to open and following the disappointment of no RRR-cut, tonight's commodity carnage may just be beginning.

"It is an old saying in commodities that the best cure for low prices is low prices. Market participants are now asking how much further prices need to fall and how long they need to stay there to bring supply and demand back in to balance and halt the price declines across a broad swathe of different raw materials markets. The fear is that just as the upside of the supercycle brought an unprecedented and long period of historical price highs, the plunge to the downside is shaping up to be equally dramatic and may yet have a way to run."

What makes a market is having differing opinions at nearly all times. It is therefore educational for people caught off guard last week to see -once more- that markets can drop at a savage speed (as opposed to the overall magnitude), regardless of whatever foggy economic situation we are in (or market participants believe them to be).

Stocks aren’t quite as immune to financial disruption in the middle of 2015 as they had been previously. We are starting to see the legend of QE fade into nothing more than memory, exposing all these “markets” to the very real dangers of the fundamental economy, globally, that never joined the hype. Does that mean QE4,5, or 6? It might, but at this point is there any illusion left?

On Friday, ahead of the closing stock rout, we forecast that the biggest risk for anyone staying long over the weekend was a disappointment out of China, where the sellside had gotten so excited that a 50-100bps RRR cut was imminent, that the lack of one would surely send futures sliding. Sure enough, as we noted earlier today, much to everyone's surprise and disappointment, the PBOC did nothing (for reasons we speculated upon earlier). Which bring us to this evening's S&P futures, which opened for trading minutes ago, and as expected, gapped by over 0.6% after the Chinese disappointment, down 13 points to 1958 and looking quite heavy.

But they said "it" didn't matter?

The world’s poorest countries are not characterized by naive trust in capitalism, but by utter distrust, which leads to heavy government intervention and regulation of business. Under such conditions, capitalism does not thrive and economies remain poor. Pope Francis is right to focus attention on the plight of the world’s poorest. Their misery, however, is not the consequence of unbridled capitalism, but of a capitalism that has been bridled in just the wrong way.