Beta Has Officially Overflowed: Safety And Risk Now Chased With Equal Reckless Abandon
Over the past week investors have been chasing risk and safety with comparable zeal. Seems like someone has discovered the granddaddy of all pair trades: long bonds and long stocks 1:1. The parking of "other people's money" will never be the same again.
(6 votes)
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on Thu, 09/10/2009 - 14:43
#65239
excess liquidity at work.
excess liquidity + broken economy = Zimbabwe.
on Thu, 09/10/2009 - 15:07
#65406
The more and more credit that gets destroyed gives the Fed the excuse to create more and more base money. Talk about a slipperly slope...
on Thu, 09/10/2009 - 14:12
#65252
100% correct. There is enough cash floating around for everyone
on Thu, 09/10/2009 - 14:13
#65256
This sort of thing is supposed to be impossible right?
on Thu, 09/10/2009 - 14:14
#65257
Why can't I post anything?
on Thu, 09/10/2009 - 14:16
#65263
This is a carry trade where US$ is borrowed at close to zero percent and used to buy everything else.
Watch how long term Treasury bonds are gaining while dollar is dropping.
on Thu, 09/10/2009 - 14:17
#65265
Not at all surprised. Friday night I ran into an acquaintance who works as a financial advisor. I hadn't seen him for months, so I asked what he thought of the markets. He said, "oh, things are great now". So, I asked him how so and he cited the indices rising. So, I countered with questions about the S&P trailing P/E being north of 100, increased delinquencies on prime mortgages, rising unemployment, etc. He said, and I sh!t you not, "You're trying to be too rational, the markets are always irrational. You need to relax and go with the flow." These are the people to whom others entrust their life savings. I guess you don't have to be too concerned about being rational when you are spending other peoples' money. That certainly explains why politicians and bankers are so tight - that's what they have in common. Of course, petty criminals are in the same category. That's all I need to know. I may NEVER buy back into the markets. These idiots are destroying the institutions of capital formation and in the process, they will strangle capitalism.
on Thu, 09/10/2009 - 14:26
#65300
You've got be kidding, right ????
Your acquaintance is doing exactly the right thing. He's maximizing gains for his clients.
You are probably misinterpreting his comment about going "with the flow" as taking undue risks. That may not be the case at all.
If you think that buying and holding is going to pay for your retirement, you've got a very cold shower coming your way.
Discard your silly fears and biases and learn to trade.
on Thu, 09/10/2009 - 15:02
#65393
Remember from the history books how America was once called the Arsenal of Democracy? Because of parasite 'traders' like yourself, we are now the Amway of the Emerging Markets world, our precious capital wasted on Ponzi schemes and paper profits and not a whit in the real world. So it has been, scams and schemes to loot our children's future. But it will not always be thus. So remember: when the real CHANGE comes, the collaborators who worked against the general good, the parasites that stood between America, the industrial power, and the opportunity for a majority to live a good middle-class life, these collaborators and traitors will be dealt with accordingly. The rolls will be checked and the names found and there will be no place on this planet for them to hide.
Only blood conquers money.
on Thu, 09/10/2009 - 15:14
#65425
No - the laws of natural selection will ensure that fools like yourself, those who both refuse or cannot adapt to the real world, will be quickly removed from the gene pool.
on Thu, 09/10/2009 - 16:54
#65553
Well then I guess we'd better remove you first.
Only blood conquers money.
on Thu, 09/10/2009 - 17:22
#65585
Oh come on, Mr. Bloodbath - is that the best you can do?
Go ahead - give it another try. This time make it intelligent at least.
on Fri, 09/11/2009 - 12:20
#66393
I'm sorry, what part did you not understand? We don't want your money, we don't want your success, we want your head on a stick. Can you short vengeance? Can you hedge rage? Oh, it will be a bloodbath, a glorious one, because only blood conquers money.
Death to the Banksters.
Death to the parasites.
Death.
on Thu, 09/10/2009 - 15:14
#65422
Not kidding at all. So great, let's assume his trades have been perfectly efficient. He's gotten his clients a 50% ride up, after sending them on a 50% ride down. They're still down 25% from where they were over a year ago. Perhaps he's even done a little better than that. I doubt it, since he had no quantitative values at his disposal. I'm sure there are good traders/managers out there - I just don't think he is one of them.
I smartened up to the fallacy of buy/hold about five years ago. After the crash last fall, I traded in and out of some commodities and financials and have made back most of what I lost. I lost money listening to financial advisors. I made it back by trading myself. That said, I know how much I don't know and am not willing to put that money at risk of what I expect will be another major down leg in this market.
As far as "discarding silly fears and biases" - seriously? Show me solid earnings growth somewhere or sustainable profitability from cost reductions (not one time benefits), where is the string of earnings coming from to justify a 128X trailing P/E on the S&P 500? I would contend that my fears are justified and objectively found. It's my opinion that the Pollyannas are the ones with flimsy, silly, wishful biases.
on Thu, 09/10/2009 - 15:38
#65463
Yes, listening to financial advisors is generally unwise. The financial advice industry is dominated by fraud and complacency.
If you really believe that current levels are too high (for whatever reason), why not sell short, or or use inverse funds, or buy puts?
If your portfolio is always long, then the markets will easily take your money.
If you persist in believing in fundamentals then you will miss opportunities that are staring right at you.
These are the biases that should be discarded.
on Thu, 09/10/2009 - 14:45
#65348
Most financial advisors are idiots from what I have found. They don't understand basic economics. I have had to wrestle a few of them away from my relatives' money. It is difficult, they are leeches of the worst kind.
on Thu, 09/10/2009 - 14:21
#65279
the markets are not the economy
on Thu, 09/10/2009 - 14:22
#65285
Nova
Sad to say there are fools in advisors clothing. Many have no clue nor do they want to have a notion of reality.
on Thu, 09/10/2009 - 14:22
#65288
Long underwear cause eventually people will be crapping their pants when this thing turns
on Thu, 09/10/2009 - 14:45
#65346
Long guillotines cause eventually heads will (literally) roll when this thing turns.
on Thu, 09/10/2009 - 14:23
#65289
I'm just wondering where the dollar fall stops. Maybe I'm wrong but it seems the market going up is directly tied to the dollars fall. When that stops who knows.
on Thu, 09/10/2009 - 14:23
#65290
Dollar Destruction at work...everything goes higher. How low can the .DXY creep in a quiet fashion before it sets off a careening free fall into uncharted territory?
on Thu, 09/10/2009 - 14:54
#65367
Below about 72 we are in uncharted territory. Between here and 72 -- not much support, but USDX could turn on a dime when the equity markets crash.
on Thu, 09/10/2009 - 14:25
#65295
Nov, you're correct. But, lets take the counter trade. Short or flat out of the market for the last 6 months. Guess who gets called the asshole because you're paying attention to the fundamentals. I was told once told by a friend that's a broker: He said, "I'll never get fired for being long, I will get fired for missing a move and being worse than another broker." FWIW
on Thu, 09/10/2009 - 14:29
#65305
click ads if you think we'll get a ramp.
click ads if you think we tank out.
on Thu, 09/10/2009 - 14:30
#65306
bilge
on Thu, 09/10/2009 - 14:33
#65318
wow, check out the enormous volumes on spx......... must be all those traders back after labor day. you know, sammy from sheepshead bay and joe from brooklyn
on Thu, 09/10/2009 - 14:35
#65324
As a trader, the market is always right. As an investor, the market is always wrong (per George Soros)
on Thu, 09/10/2009 - 14:35
#65325
As a trader, the market is always right. As an investor, the market is always wrong (per George Soros)
on Thu, 09/10/2009 - 14:35
#65326
The bloody things are literally SCREAMING manipulation. I'll prefer death to putting my money in either stocks, bonds or USDs.
on Thu, 09/10/2009 - 14:41
#65341
BTW, guess who can go long both stocks and bonds at the same time - that's right folks - it's the Fed. Unfortunately, they can't get the stupid dollar to cooperate and rise as well. Dollar, Stocks and Bonds all rising together- now that would be some accomplishment.
on Thu, 09/10/2009 - 14:52
#65363
Bernanke is pushing this further than I ever thought he would. FFS, I'm actually starting to think that these assholes aren't even gonna *try* to defend the dollar.
That's gonna suck for my positioning.
You speak Mandarin yet?
on Thu, 09/10/2009 - 17:44
#65602
You can't outrun the Chinese. They can put more manpower into something than you can and still get plenty of beauty sleep. America will back off and try to stuff healthcare through or get too cocky and sent to liquidators. The dollar will rise again outgas and sink back into the debths like corpses do.
on Thu, 09/10/2009 - 21:51
#65803
He has to push it. I said this back in March, I will say it again - the MBS market will be his Waterloo. He has no choice but to keep pumping liquidity into that market, there are no buyers for agency MBS at a level that keeps the housing market from further cratering. Here is the scenario:
1. Fannie and Freddie still don't have full faith and credit backing, because that would require the government to take their 1.4T of debt on balance sheet. The national debt ceiling would have to rise a lot. Not gonna happen.
2. With no full faith and credit, the market clearing price of agency MBS is at least 50bps wider than today, and possibly 100bps wider, with a lot more volatility.
3. The psychology of 6% mortgage rates will kill any activity in the mortgage market. The banks get hurt both ways - less GOS revenue from originations, and further deterioration of the mortgage portfolios.
4. Fannie and Freddie reform is not coming for at least another year.
5. Bernanke has to continue buying MBS, probably for another year.
6. This will tank the dollar. Ultimately it will collapse. Not just decline in value versus the yen, euro, etc. Collapse.
on Thu, 09/10/2009 - 14:54
#65370
Exactly the dilemma (or is that trilemma). Is this kind of gaming of the system going to create a liquidity freeze for capital markets if people choose to sit on their hands and not play? Is that even an option, considering my money market fund is likely investing in short duration treasuries? Stocks look like a bubble. Bonds look like a bubble. Gold looks bubbly. The dollar is getting trashed. Property values are falling. There are no good options. It looks like a massive game of freaking musical chairs. Except when the music stops there may only be chairs for a small fraction of the players. Putting money to work in these markets is kind of like the bad sci fi B-movie "Robot Monster" who tries to reconcile "must" and "cannot" imperatives. Eventually, your head explodes. http://www.youtube.com/watch?v=Rjn3AzOk0Bo
on Thu, 09/10/2009 - 15:07
#65405
S'alrite, it's just the Lost Generation starting. Lots of scurrying and squirming but it won't matter. None of these asset classes will be seeing real returns (long term) for decades.
Paraphrasing Franklin, "you retire with only what you actually save, ma'am...if you can keep it".
There is a season, churn, churn, churn
The pros go with the flow and collect the dough from you x's and o's until OOPS she blows
on Thu, 09/10/2009 - 16:05
#65493
I do not understand why this is not understood.
1) Bernake has been doing QE which keeps yields down. big example today. on the 30 year hopefully he will have shot his load soon and that will be it. this helps the long bond.
2) this also kills the dollar, because who wants to invest in a currency that doesn't pay nearly as much as it it loosing in value. so you have inflation trade. it is a strange example of manipulation in the markets, but of course the Ft doesn't believe me when I explain this.
3) I don't knw how much more QE big ben has, but there will be ample monye for the street to invest after the tax payer own all their crappy mortgages. I'm not sure how long this will be going on, but I have a top estimage for the Sand p of about 110
4) I posted a few days ago that there was a big buy signal
on Fri, 09/11/2009 - 04:51
#65952
Weren't bonds and equities both in secular bull market from 1982 on, with only periodic losses or correlation?