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Early March Lows Taken Out, As Carry Inverts
What is uglier than a bunch of momentum chasing quants fleeing in "orderly" fashion from a burning theater: a bunch of prop carry traders doing the same, especially once they have been informed the margin calls are coming in. Now that the fate of the eurozone is sealed, save for 6-9 months of political rhetoric as those responsible for the single biggest monetary failure in recent decades finally realize the folly of their "all for one, and one for all" ways, the question of how Bernanke will export dollar weakness abroad, and thus boost the Export-led renaissance, becomes very glaring. We expect American politicians to learn nothing from the European debacle, and to double their efforts for a CNY revaluation as US exports now become even more expensive, which will achieve nothing, but merely antagonize China potentially to its breaking point, and throw the world in a trade vacuum. But at least China has the worker, the resources and the middle class to be self sustainable for much, much longer than the US possibly can. And don't forget all those Treasuries that China can and will sell in the open market. The endgame is approaching.
In other news, are people really surprised by what is happening today? This has been the most artificial, engineered, convictionless meltup seen in US equities since 1932. The only way it could have been validated is if someone were to prove that central planning, contrary to infinite examples proving otherwise, actually does work. Our ony question, when this is all over, is whether Princeton University will issue a public apology to all of mankind, due to the destruction of unprecedented amounts of wealth by its "erudite" alumni who never took a second to consider if the holy grail economic theory they all took for gospel just may have been the blatant fraud it has been all along...
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beauty's in the eye of the beholder TD.
We can live beside the ocean
Leave the fire behind
Swim out past the breakers
Watch the world die
A BRIEF WORD FROM THE GIPPER:
http://williambanzai7.blogspot.com/2010/05/one-from-gipper.html
Your blogspot spam is getting tiresome.
This is one of those days when I will go against a Daily red candle. ES will have a lot of resistance levels to break through on its way up. My guess is that the big W5 of the move up from early Feb is underway. I have no idea how far it will get. It may get some momentum from short squeezes. Usually, when you have selling climaxes such as we have seen with high volume during this W4 correction, it represents contracts going from weak hands to strong hands. The strong hands are long, and the weak hands may be short and capitulate when they see their shorts failing. At least, that’s the story I see with a market like this.
I'm sorry. What did you say?
Everyone is watching the EUR, but USD falling relatively to JPY, causing unwinding of the carry trade.
Is it me or this site nowadays akin to watching pr0n but with financial benefit and no mess?
Depends on your lubricant.
Nothing is "...akin to watching pr0n..."
*sings* "The internet is really, really great!"
Speaking of which, I just lost my load. DJI down -600+.
More bad news for Japan. How do you devalue when the guy next to you is imploding.
We can wave goodbye to the 1147 level on the way down like we did Harry the Wanker's 1175.
HA! 1175 ... He is never going to live that one down.
Bye Harry, thanks for the memories.
On that note, 1140 has been breached.
US is a far bigger consumption than China. It is agreed.
Still, how can China have more resources than the US or enough resources to last longer than the US when the US has a global access to the world resources and only has to emit credits to get resources?
That, despite the incredible advantage, the US is running aground does not mean others can last longer than the US.
Their savings rate is 50%. Our savings rate is in the negative, deeply when you consider /not/ paying your mortgage <> saving. Consumption drives 70% of GDP, and given the positive-correlation between changes in personal consumption and business investment, arguably makes up more than that. This means ~80% of the US economy is tapped out, pedal firmly pressed against floorboard, she can'ah take'ah nooo more, cap'ain. Either production shifts here and new wealth is created, we start ripping apart landscape in search of precious resources, we start auctioning off federal land to anyone willing to hold their nose long enough to bid, we open our borders and officially become the world's largest migrant colony just to capture the additional purchasing power, or eBay starts a sovereign-auction section where, you too, can become the king of your own domain.
Either way, these are not overnight transformations to the US (or any) economy. While we've been exporting dollars in exchange for goods and services, we've also been exporting jobs (next imports /decreases/ GDP). This in and of itself isn't bad, even good considering that's one of the pillars of a functioning capitalist economy - freeing of resources so as to avoid adverse selection and mis-allocation of capital. What is bad is the fact that while we've been giving them dollars for goods and services, they turn around and use it to buy Treasuries and other vehicles of sovereign funding, the proceeds of which are used to provide a whole host of services /including/ support for those newly or about-to-be displaced (either explicitly through social welfare or implicitly through regulatory hurdles, political favor, tarrifs/trade barriers, subsidies etc), rather than retraining them for skills they might actually need/use or creating an environment that might foster their status as "employed". It took the better part of 30 years to see personal computers and the internet hit "mainstream". Cell phones roughly the same time upon launch, 20-25 years. Capital investment takes years, if not decades, be it for people, buildings, production facilities, homes, or otherwise. Even with a blank check, a billion people, and the free world turning its cheek to how exactly it might accomplish it, it's taken China since the early 80s to get where it is today. Now because of the million different reasons why, the remaining 20-25% of our economy that is the indebted heft of our government has effectively crowded out any hope for their return or any usefullness to anyone other than rubber dogpoo and vomit manufacturers, either through outright placating cradle-to-grave, insane levels of taxation/regulation, or being priced out of the market so as to maintain the "favorable trade status".
So what's the TL, DR? There are only so many levers you can pull. The only thing left for us to do is admit we're fucked, back up, and punt.
"But at least China has the worker, the resources and the middle class to be self sustainable for much, much longer than the US possibly can."
Just because you have workers and resources don't mean anything, once the US goes it's over. When the US goes that's it. The US has plenty of resources and workers, nobody wants them. The US had plenty of workers in the 30s and plenty of resources, so what, it collapsed.
You think it's going to be bad here, wait till you see Asia, those Chinese tanks were not built to invade other countries, they were built to keep their people in line.
Having resources means crap when the credit market gets blown up and demand shrinks drastically.
Agreed. Not much value in Chinese office buildings or factories without Europeans and Americans to sell to. Chinese consumer still has no buying power, left somewhere between being so poor that he would work to over throw the oppressive communist regime and being so well off he would demand freedom in all life choices rather than just economic.
Nice post.
At the end of the line it's based on the USD and the credit expansion of the US, just like it was the UK last time. China is the present day 1930s US. You run out of credit expansion, you run out of people to sell your junk to.
Asia will be huge mess, as will be most of the world. Last place I would want to be is on continent with nearly 4 billion other people when this collapses. No way jose.
Amen! Your singing to the choir now. Give me good old rural USA where a cowboy can survive.
i see you at 400 in 2016.....
DOW or SnP?
I think DOW...
Seriously guys, stop it. Have you seen the economic indicators? Ha!24
But they got a prestigious degree....they are the elite. The elite is never wrong. Ha ha.
If you're going to build a house, especially a 100 room one for a single family, you shouldn't do it on quicksand, on a loan from China, backstopped by the Federal Reserve, through (insert any crap bank here).
Now that China's #1 trading partner is having their currency devalued (against their dollar peg), looks like those cheap chinese imports are just going to get more and more expensive. But hey, they have enough money for higher priced imports AND their bank bailouts right?
C'mon Brazil, your carry trade is the only thing keeping everything together. Even then it's doing a horrible job. Perhaps 99 percent interest rates for the Inter-Alpha group of banks will make it work?
It sounds bad if I say "sweet!!" ?
I am curious. I ask this question to you all as a business hobbyist (read: I do not work in the finance field but enjoy financial issues). What tools/instruments do you use to short the market? I am not a sophisticated investor but my money is mainly tied up in mutual funds that short the market (e.g. - DXSSX, DSESX, etc). Also, I do not borrow to invest or will risk any position where I will can theoretically end up owing more than what I put in.)
mainly ETF's. Lots of 'em out there. Try leveraged if you think you're up to it, but be careful and know what you're taking on.
Still afraid of China I see.
Let them give back Tibet or see the error of their ways.
What gets hammered in a deflation world.
Production. Inventory. Over capacity.
All currently made in CHINA.
And Everything sold there in China by Walmart.
Soon to be made in Mexico & South America when the bottom is found.
Flipped out of my longs, went short.
good to see you join the dark side, cl :-p.
Hey - I hope you see this. I appreciate your 'contrarian' opinion in the bear cave even if it does irritate at times :) - I also hope you can catch the ride whichever way it goes.
Market down another 2.2%. It's really starting to remind me of the opening drop before the crash. The question is, who's got the stones to hold their shorts. Is this market gonna drop 70% as another huge dollar squeeze happens?
But at least China has the worker, the resources and the middle class to be self sustainable for much, much longer than the US possibly can.
I have to take some issue with this. I believe America's workers, those who have jobs at least, to be some of the most loyal hard working drones in the world. The US actually has a middle class, unlike China, even though it is heading the way of the poverty line. The US from an energy, education, innovation, and defensible position standpoint are head and shoulders more sustainable than China. China is a country held together by bailing wire, duct tape, an authoritarian regime, and a big army. China is a demographic nightmare, and when the attempts at reflation die out, their country is going to implode.
The US is one good revolution, reset button push, away from being one of the best places to be in the world again. Of course we have some financial terrorists and corrupt politicians to put in jail and string from light posts first, lets not get ahead of ourselves.
Your comment deserves a comment: You are right, of course. Note that there were no flames. When you talk up the people you get a sympathetic ear. In the U. S. there is no stigma for being in the "middle class". In many other countries there just IS no middle class. That reset button you speak of better get activated soon or we shall be without a middle class as well!
Happy black Thursday, everyone...!
Harry Wanger, may you burn in hell...
Easy now - Harry is a putz who is already suffering for being a boring sunshiney AAPL polisher :D
If you go out in the woods today, You'd better not go alone. It's lovely out in the woods today, But safer to stay at home.
For every bear that ever there was Will gather there for certain, because Today's the day the teddy bears have their picnic
They're not waiting for rallies anymore. Selling on the bid near the lows.
There's the smell of fear in the air. And it's not irrational. The specter of class warfare breaking out in Thailand, Kyrghizatan and now Greece is spooking the friends of the Banksters and their cronies. How far behind can Spain be with 20% unemployment? And Italy, Portugal famous hotbeds?
The Banksters made a big mistake in 2009: they ignored the political dimension and consequences of their actions. Their game was exposed. Their flaunting of the laws was in full evidence. Now the reaction.
Anybody hear from Harry Wanger today? Oh well....
hehe
So what the hell is lighting the fire under gold? It should be getting slammed if the margin calls are really coming in.
Most of the gold going to European buyers.
is it just me, or is todays action how GS is going to cover that fine.
Bailout
Shhh, he is mental masterbating and is about to go apeshit...
I'm on stockcharts.com hitting refresh over and over and over again on the DOW chart... when I started typing it had lost 800bps, it's now down over 900bps.
**Edit: Back up to 600pts down now. Short covering?
KaBooom!!! Glad I went short last week.
Dow plunges 1000 points in two minutes, recovers 650 by close. CNBS pundit says Halley's Comet was the real trigger for Wall Street's wild ride today. "The system worked fine. You saw how strong we came back during the afternoon session. It was that silly old celestial body sneaking around again and poking into everyone's business!" said the clueless Maria Buttaroma, host of Mainstream Media Market Wrap.
Who was it that scanned in the text/graphs of the ELLIOT WAVE Theory along with commentary by Bob Prechter and then uploaded to the SKYNET BOTS RUNNING THE ALGO & QUANT Program Trades for the Stock Markets ?? That part about Primary Wave 3 Down being sharp & dramatic was interpreted by SKYNET with no ambivalence !! :)
Prechter always said, put in some absurdly low limit bids for downdrafts like this, you just might get filled ;)
Yes ! It finally happened.
Predicted on this site many months ago
black boxes, Algo's and HFT went nuts
and cascaded the market down
with no time for humans to react
if they would even want to.
"Wall street has become dangerous for investors"
Forget about fat fingers and other silly excuses.
Milliseconds timeframe trading is simply toxic.
So, as a result of this "glitch," "fat finger" or whatever silly excuse the NYSE puts forth going forward, will everyone who got stopped out, as a result, get their positions back?
Conversely, will all those who profited from buy to cover limit orders get their trades busted?
Someone leaked the unemployment rate for tomorrow to one of the bigs today, my guess 10.2%. PPPT stepped in just before the fuse blew. The unemployment rate was leaked early today and in the past. Get ready for a wild ride.
Your info comes from.....? Links please?
MAY 1st:
"The weekly DOW chart shows an expanding wedge indicating a significant move is probable... this remains an overbought bear market rally and the uptrend could falter at any time.
http://www.zerohedge.com/forum/latest-market-outlook-0#comment-326767