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Crude Plunges
Has the time, when the end of QE is ultimately priced in, finally arrived? Following another steep sell off in silver, matched only by the decimation in Chinese stocks, it appears margin calls have finally come to crude, which just plunged by $2 in seconds. And if the answer is yes, is this the expected rotation from the inflationary to deflationary mood which is so very critical for Bernanke to launch his third and final QEasing episode? Expect a major spike in real vol (not VIX) here if we have finally come to the inflection point.
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Now we can enjoy the classic, frustrating spectacle of "price stickiness" in gasoline... zooms up when WTI/Brent goes up, goes down SLOWLY when crude goes down. FYI long term trend in crude UP UP UP, dollar DOWN DOWN DOWN.
Ok we need Phil Gramm about now.
Does it get any better?
We are about to change the economy from low frequency dc to high frequency ac, because that is the only way to bring this baby through 0 volts in the neutral line, and everyone has had three years to prepare, yet I am still getting threats from individual sexists (do not be disobedient to my God … or else) who have never seen economic change in their lives, who are all about to get whiplash, most of whom are going to lose everything and have no adaptive skills with which to recover. They are all going to be toast. The Ryan bill is more extend and pretend, and we are all done with extend and pretend. Yes, volatility, as perceived by the sub-humans, is about to go through the roof. For Congress, it’s going to be a hard landing. For those who have been preparing, it’s going to be a fast take-off.
You never know who is going to be the boss tomorrow, so you might want to show a little respect, but then again that’s old school thinking, isn’t it?
What can I say, but have a nice day? Thanks for flying.
If you are truly a mega bear, you expect the Tea Party to prevent Q3. The tidal wave of collapsing loan convenants and margin calls will do two things:
1) Create huge demand for US dollars to cover loan calls, globally, to the point where the FED will have to fire up the inter governmental bank swap lines.
2) Crash the price of precious metels as investors sell the only thing they own with value to cover margin calls. Can you say sub $1000. The height of the rise subsequent to the bottom will make the current high look like an abyss.
Fasten yours seat bealts. Yahoo yes. Hell-billy Yes. Hank3 rules.
It all depends on several things like:
1. How long between QE2 and QE3.
2. Flight to quality means flight to $. This was true the last time. What if this doesn't happen?
3. You assume that precious metals will be sold. Again this happened the last time, but has the market's perception of the end game changed?
PS. The "Tea Party" isn't jacksquat.
It will not be flight. Flight implies a choice. There will be no choice. If your $US loan is called due to covenant breach you will need $US to cover the call. All the bluster about yen and euro denominated loans is just that bluster. Most of the laons out there across the globe are in $US.
Isn't it the prerogative of the Fed just to do QE ad infinitum without an announcement accompanied by the Prince Of Denmark's March on the trumpet every time they do?
Didn't they stop publishing M3 and all its secrets therein? Why in the name of heaven would they want you to continue making all your QE jokes? And bring the world's attention to the unstoppable creation of dollars by America's own 'Sorcerer's Apprentice'.