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Market Commentary From Russ Certo On Complacency, "Year End Illiquidity In The New Year" And Risk Correlation

Tyler Durden's picture





 

From Russ Certo of Gleacher

All I needed to see was Jim Cramer on the tape this morning vehemently defending equity returns and risk asset performance.  Seems to be quite a bit of complacency in markets and assumption of risk.  I understand that given govt. policies, over time, risk assets ARE the place to be and serve to be the effective storehouse of quite predictable policies by governments and policy makers.  If there is no guarantee of past performance in investment returns, one can consider near guarantee of tendency of governments to devalue debts through currency markets, entitlement cutbacks and more. 

That being said, complacency looms.  And after big moves in markets.  Of particular note is emerging markets and commodity markets.  We are all aware of near all time or all time highs in bevy of Asian or emerging currencies vs. USD and more industrialized G3.  Consider that years ago, pundits argued that different seasoned metro real estate markets WEREN’T correlated and there was an agnosticism to leverage, hot money flows, and risk. 

Not making some grandiose thematic market call here but the funny bone is tingling and the antennas are up ESPECIALLY as I see crude down 2.5% today, despite the near apostolic fanfare in the press recently in the likes of upward growth projections, upward earnings revisions and equity calls. 

Why today would gold reverse by $40?  And silver down 4$ and the entire complex go for sale.  Why is the Swiss Franc off near 2% in a loss of quality flight?  Why are all things risk correlated?  Is it that UK surprised with largest manufacturing increase since early 90s and we, therefore, don’t need simulative central bank policies?  Is it a significant risk reduction in front of the FOMC minutes at 2pm today?   I dunno. 

But I find the timing of flows to be interesting nevertheless.  Mind you, the Fed appears to have been backtracking on QE2 since late November in a variety of explicit, implicit and decidedly coordinated uncoordinated snippet communications which removed CERTAINTY of scope and timing of QE2.  If central banks were taking punch out of the bowl or markets anticipated such, why wouldn’t curves be flatter today?  Or why would Tip breakevens show relative strength in tips which bucks the commodity plays?  And why would Treasury belly outperform, particularly since we have a refunding announcement of 3yrs, 10yrs, and 30yrs on Thursday.   Bond is piggy.  I dunno but what’s up with the reversal in markets?  Feels like year end illiquidity in the new year. 

Stay tuned.  Russ

 


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Tue, 01/04/2011 - 12:47 | Link to Comment SheepDog-One
SheepDog-One's picture

Market a bit complacent today as Bloomby declares 'The 2011 rally is taking a 'pause' today' in their new wonderful headline.

Tue, 01/04/2011 - 13:01 | Link to Comment unwashedmass
unwashedmass's picture

oh, please, could we stop pretending that gold and silver trade freely?

they are down today in a JPM engineered slaughter. simple. the CTFC has turned away, and its game on for these guys. take advantage, buy some now at support.

Tue, 01/04/2011 - 13:12 | Link to Comment Stuart
Stuart's picture

+100

Tue, 01/04/2011 - 14:15 | Link to Comment Turd Ferguson
Tue, 01/04/2011 - 14:29 | Link to Comment Eternal Student
Eternal Student's picture

Thanks, Turd. And many, many thanks for your blog. It was because of reading it that I was able to expect a big downturn this week, as I posted about here yesterday.

And thanks to Blythe, too. I've held off recently on buying more silver. Which is a little hard to do when the price keeps going up. Now I'm back in the game!

Tue, 01/04/2011 - 13:15 | Link to Comment razorthin
razorthin's picture

Good advice.  SLV 20 Day EMA support is 28.80 and hasn't been breeched the entire uptrend since August.  Watch closely.

Tue, 01/04/2011 - 21:17 | Link to Comment thefedisscam
thefedisscam's picture

SLV 20 Day EMA was bleached for one day around Nov. 16, just like today

http://stockcharts.com/h-sc/ui?s=SLV&p=D&yr=0&mn=3&dy=0&id=p19582630026

Tue, 01/04/2011 - 13:57 | Link to Comment Larry Darrell
Larry Darrell's picture

Agree.  A good shaking out of the weak hands happening.  I use these kinds of days to visit my local shop and up my physical holdings.  Smallish as they are, this kind of day lets me add at a discount.

Tue, 01/04/2011 - 14:12 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

Damn, and I bought 10 maples yesterday when it was up in $31 range. Oh well, I suppose in the smaller quantities I'm buying at, it doesn't really matter. It certainly won't stop me. I'm tempted to go back to the shop!

Tue, 01/04/2011 - 14:12 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

dig that 10% vig

Tue, 01/04/2011 - 18:20 | Link to Comment Kina
Kina's picture

CTFC

 

Is just another name for bankster-mole.

Tue, 01/04/2011 - 12:51 | Link to Comment Cdad
Cdad's picture

Why today would gold reverse by $40?  And silver down 4$ and the entire complex go for sale.  Why is the Swiss Franc off near 2% in a loss of quality flight?  Why are all things risk correlated?

Asked and answered already...in Frontrunning thread [where I am currently 9/10 today]. 

Criminal syndicate Wall Street bankers MUST DESTROY AVERAGE JOE'S CONFIDENCE IN PRECIOUS METALS.  This is how the syndicate forces allocation of capital into areas that they have front run with the aide of Ben Bernanke.  Pretty simple, actually. 

The same has been happening in the bond market...where Average Joe had put his money after the 2008 stock market collapse.

Tue, 01/04/2011 - 12:54 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Otherwise known as a "crowded" trade.

Tue, 01/04/2011 - 12:53 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

 

Jim Cramer
Gold's Run Is Hardly Done
5:20 AM EST
Take advantage of the lull in gold because it has yet... More 

 

 

http://www.indexindicators.com/charts/sp500-vs-put-call-ratio-total-1d-sma-params-2y-x-x-10ma/

Tue, 01/04/2011 - 12:55 | Link to Comment SheepDog-One
SheepDog-One's picture

Great, Cramer now gives gold the Fredo kiss of death...final nail in the coffin thanks a lot Cramer ya bald bastard.

Tue, 01/04/2011 - 13:02 | Link to Comment gmrpeabody
gmrpeabody's picture

I added to my gold hedge ystry. But I will start adding to my PM positions add these levels. Nothing has changed to my eye.

Tue, 01/04/2011 - 13:05 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

"Nothing has changed to my eye"

--Moe Green's last words

Tue, 01/04/2011 - 13:16 | Link to Comment ATG
Tue, 01/04/2011 - 13:44 | Link to Comment Alex De Large
Alex De Large's picture

Nice

Tue, 01/04/2011 - 14:04 | Link to Comment NoQuitInMe1
NoQuitInMe1's picture

Sorry, but NOTHING has changed...

Tue, 01/04/2011 - 14:07 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

I'd say gold down $44 is a change

Tue, 01/04/2011 - 12:54 | Link to Comment RobotTrader
RobotTrader's picture

Funny how commodity sell offs, are always a full blown panic chain selling event as everyone instantly decides to flee back into dollars and U.S. Treasuries.

However, the banks are still resilient, no worries whatsoever.

Banks are usually the first, not the last sector to sell off if the market is going to roll over.  But worth keeping an eye on.

Tue, 01/04/2011 - 13:08 | Link to Comment Cdad
Cdad's picture

Banks are usually the first, not the last sector to sell off if the market is going to roll over. 

That is absolute bunk WHEN the banks were the last sector to rally [on short covering mind you]. 

Profit taking in those places where the criminal syndicate Wall Street bankers are thickest will be the first to go...which by the way has been happening for about three weeks now.  Check your "leadership stocks" for example.  Watch CAT today, as another.  How about commodities...uh huh.

Also, PMs and bonds would move lower prior to banks because the criminal syndicate is trying to redirect those funds into bank stocks.  Duh.

Seriously, Robo, you are going to need to find a new gig.

 

Tue, 01/04/2011 - 13:21 | Link to Comment SheepDog-One
SheepDog-One's picture

I dont think theyll be too successful trying to chase people out of their PM holdings. When people finally go to gold and silver, they know things are bad and are not looking for a 'swing trade' for the day in gold.

They dont trust stock markets anymore no matter how much they mash down PM's which I dont think will be very much at all. Trying to create a stampede back into stocks? I highly doubt that will happen.

Like last weeks suggestion that the 'smart money has been selling for 30 weeks straight, and a slight inflow last week indicates the smart money is buying back in...well then they werent very 'smart' at all selling low and buying the top. Bunch of nonsense is all it is.

Tue, 01/04/2011 - 13:52 | Link to Comment Cdad
Cdad's picture

Dog,

I think you should prepare for a pretty serious bear raid on your PMs.  You have to understand that this is not about the fundamentals for gold changing...but rather about how the criminal syndicate known as Wall Street operates.  Keep in mind that your primary competitor is Ben Bernanke...and he needs you to buy banker products.  He will come hard after you.

I would advise hedging on the upticks.

 

Tue, 01/04/2011 - 16:32 | Link to Comment -Michelle-
-Michelle-'s picture

I will prepare for a serious PM bear raid by putting aside FRNs to buy said PMs during said raid.

Tue, 01/04/2011 - 17:07 | Link to Comment Cdad
Cdad's picture

So will I...as I am not in the PMs at this time.  Dog is in the PMs however, which is why I recommended hedging his bets.

Accumulating PMs as they fall is a perfectly logical way to approach what should be some maddening gold and silver price action...brought to you by the criminal syndicate known as Wall Street.

Tue, 01/04/2011 - 17:24 | Link to Comment gmrpeabody
gmrpeabody's picture

+1000  BINGO!

Tue, 01/04/2011 - 13:22 | Link to Comment Minyan Vince
Minyan Vince's picture

RT-

seriously...why would you show a 9 day chart of RKH to "prove" your point about bank stocks being "healthy"? I suggest you take a look at the KRE since oh say April 2010 and let me know how that is not higher today yet the S&P is...I believe they call that a bearish divergence but alas I'm not a robot or a trader

Tue, 01/04/2011 - 13:02 | Link to Comment bob_dabolina
bob_dabolina's picture

A mechanism has been installed into the market in which the FED cannot stop printing money to support one asset class or another.

The price of so many assets are artifically high that when you remove the device that is the FED the assets will sell off. The FED is now a permanent mechanism in the market.

Tue, 01/04/2011 - 13:04 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Just wish the Fed wasn't supporting Chinese housing.

Tue, 01/04/2011 - 13:05 | Link to Comment RobotTrader
RobotTrader's picture

XRT and GDX both getting destroyed today.

That's something different.

Tue, 01/04/2011 - 13:08 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

I told you yesterday it was coming but your were too busy with AAPL's "world record" highs.

Duh.

 

Tue, 01/04/2011 - 13:36 | Link to Comment SheepDog-One
SheepDog-One's picture

Apple puked up its early gains from open today.

Tue, 01/04/2011 - 13:08 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Funny how commodity sell offs, are always a buying opportunity for investors who understand the big picture.  More gold, more silver, more miners. 

Tue, 01/04/2011 - 13:07 | Link to Comment Tic tock
Tic tock's picture

Actually, with sovereigns in effective default, what is the point of the major commercials anymore? a fifth wheel.

Tue, 01/04/2011 - 13:18 | Link to Comment ATG
Tue, 01/04/2011 - 13:21 | Link to Comment TruthInSunshine
TruthInSunshine's picture

I've said it consistently and all along; QE is now causing too much political pressure for Obama.

The 2nd, most recent appearance of The Ben Bernank, otherwise known as Ben Quivering-Lip Shyster Bernank should have been the visual cue.

You can send Americans' kids into battle, risking their lives for all sorts of tenuous - and some may claim unethical - reasons; but damnit, watch out for the great public bitchslap if gas, grocery and utility bills rise like they have over the last 24 months.

There's a super-cycle election in 2012, for those keeping score, and monetary policy has to be adjusted, bare minimum, 6 months ahead of any desired impact on inflation, by conventional economic gospel.

Tue, 01/04/2011 - 13:19 | Link to Comment Ragnarok
Ragnarok's picture

How's Spanish debt today?

Tue, 01/04/2011 - 13:31 | Link to Comment Ragnarok
Ragnarok's picture

Thanks.

Tue, 01/04/2011 - 13:20 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture
My response to your New Years Eve Poll: by bunkermeatheadp...
on Fri, 12/31/2010 - 10:07
#839401

 

My prediction for 2011 is that Bernanke will try a little headfake the first half of the year by declaring "Mission Accomplished" around $150 billion shy of the planned QE2.

This would have the temporary effect of taking the wind out Ron Paul's momentum just as he is getting started. PM's will take a hit, and the mainstream media will declare goldbugs insane.

The TBTF banks will profit on their PM shorts thanks to the inside info of the planned Mission Accomplished announcement by the Fed.

This will be followed by another engineered financial crisis that will call for QE3 in the late fall, sending PMs through the roof by December 2011.

 

by Cult_of_Reason
on Fri, 12/31/2010 - 11:17
#839546


It will be $300B.

by bunkermeatheadp...
on Fri, 12/31/2010 - 13:16
#839899


I am assuming you meant that "Mission Accomplished" would be declared $300 billion shy of QE2.

So I thought about this assertion for a moment, and it makes sense. Bernanke will announce Mission Accomplished in January, $300 billion shy of QE2, which is why Obama has postponed his budget announce to February.

For financial stocks: a December to Rembember, but a January to be Wary.

Tue, 01/04/2011 - 13:38 | Link to Comment SheepDog-One
SheepDog-One's picture

The problem with that theory is theres no room to coast along for months, they need daily $10 billion POMO mainline injections or its all toast.

Tue, 01/04/2011 - 14:54 | Link to Comment Hephasteus
Hephasteus's picture

They are financial doctors and they have troubled assets.

"A day without stealing is a day without healing."

Tue, 01/04/2011 - 13:24 | Link to Comment duo
duo's picture

Flood in Oz causes XAD to crash vs JPY (due to shutdown of coal, iron ore, and food exports).  Based on correlation, we have 20 more SPX points to go.  Gray swan indeed.

Tue, 01/04/2011 - 13:27 | Link to Comment antidisestablis...
antidisestablishmentarianismishness's picture

Gee, I dunno, maybe the Carlos Slim fantasy performed exactly as it was intended.

Tue, 01/04/2011 - 13:27 | Link to Comment RobotTrader
RobotTrader's picture

Full blown crash in Russell 2000.

Tue, 01/04/2011 - 20:25 | Link to Comment Art Vandelay
Art Vandelay's picture

Robo, IWM is the R2K; IWN (shown here) is the R2K value component only. Just saying...

Tue, 01/04/2011 - 13:28 | Link to Comment lsbumblebee
lsbumblebee's picture

Kitco's buying back their bullion.

Shit Nadler. What's up?

http://www.kitco.com/pr/1037/article_12292010104026.pdf

Tue, 01/04/2011 - 13:33 | Link to Comment Ragnarok
Ragnarok's picture

WE BUY GOLD! means there is more room to run.

Tue, 01/04/2011 - 13:31 | Link to Comment RobotTrader
RobotTrader's picture

Outright crash in crude oil.

So much for Peak Oil.

Tue, 01/04/2011 - 13:52 | Link to Comment TruthInSunshine
TruthInSunshine's picture

You know what, Robo, I am not convinced of 'Peak Oil,' either (I'm not saying it's valid or not; just that I am skeptical).

But the difference between you and I is that I don't intentionally throw useless one-liners out there, based on something fundamentally meaningless as an intra-day movement in the price of an asset (when other assets are getting hit, also), and declare that it means that a comprehensive theory has been disproven.

In other words, you troll magnificently.

You can hate me all you want for pointing out the obviousness of your tactics and modus operandi, but you threw it across the plate like a bulbous grapefruit, and I can't resist that during batting practice.

Tue, 01/04/2011 - 17:32 | Link to Comment gmrpeabody
gmrpeabody's picture

He doesn't hate you, he craves the attention you give him.

Tue, 01/04/2011 - 13:40 | Link to Comment SheepDog-One
SheepDog-One's picture

Probably see oil at $93 by close the way things run these days.

Tue, 01/04/2011 - 13:34 | Link to Comment TradingJoe
TradingJoe's picture

Agree with all, but, it's not just yet "happening"! Russell 2000 (IWM) has to hit at least 82, better 85 then we have the black/gray/yellow etc Swan! Today's just a warm up so wait for a nice little upward move, in which you guys get your PUTs, I did last week, I believe I wrote that in another thread already, and then watch!!! This is to sucker in the "last one standing", of course nobody will be that stupid, or?! Well, trading "politics" has been fun so far!

Tue, 01/04/2011 - 13:42 | Link to Comment RobotTrader
RobotTrader's picture

Here comes the margin man, on his way to Sharon, CT

Tue, 01/04/2011 - 13:53 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

The difference between you and me is I called this on Friday AND Monday and you post it on Tuesday.

Tue, 01/04/2011 - 14:51 | Link to Comment Maiden Lane
Maiden Lane's picture

Will you call it when they shoot back up also? (beforehand of course)

Tue, 01/04/2011 - 15:36 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

I sure will.

Tue, 01/04/2011 - 13:45 | Link to Comment uno
uno's picture

Could be front running of the cme raising margin requirements again for silver.

That caused the last couple sell offs.

Tue, 01/04/2011 - 13:49 | Link to Comment icm63
icm63's picture

I made the call that GOLD was done at XMAS

http://chart.ly/tlrgjyk

Gann tools do work !

Tue, 01/04/2011 - 14:23 | Link to Comment Hephasteus
Hephasteus's picture

Enjoy it. It'll last this week and then nothing will be able to stop it. Either gold goes to 1650 before spring or the national debt goes to 16 trillion. Either way you're fucked.

Tue, 01/04/2011 - 13:48 | Link to Comment Saxxon
Saxxon's picture

How long must I see that cocksucking face everywhere I look?  ZH please take it down.

Just a little PM profit-taking.  No game change.  This happens every so often.  I can recall many in the past ten years.

 

Tue, 01/04/2011 - 14:31 | Link to Comment Threeggg
Threeggg's picture

These manipulations 50 - 100 dollar a-day swings were forecasted by many Precious experts.

Jim Sinclair being the most noted.

So strap on your panties or sell your position because there is no crying over GOLD

There are buyers in the EU today anyway !

http://finance.yahoo.com/news/Inflation-Jumps-in-nytimes-130499028.html?x=0&sec=topStories&pos=7&asset=&ccode=

Buckup !

Tue, 01/04/2011 - 14:45 | Link to Comment KickIce
KickIce's picture

This is pure and simple an assault on commodities.  As long as they can keep the dollar relatively strong, food and energy prices in check and American Idol on the idiot box the majority of the sheeple won't care how much money they print.

Tue, 01/04/2011 - 15:10 | Link to Comment cocoablini
cocoablini's picture

old is going to have it's volatile days, and today is indicative of a full government slamdown to keep the door open for JP Morgan to close its short positions.
There was no reason for paper COMEX gold to drop today, unless:
1) the banks know a risk run is imminent and they need to go to cash before crash 2.0. Or as it has been said, MR. MARGIN IS SQUEEZING
2) For some reason, JP has to get out of its position really fast and they need to shake the soft hands out
3) Frontrunners are being told that the FED will raise interest rates a la Paul Volker and the new smart money regime is back.

Number 3 being the only long term threat to gold.

The GOLDBUGS will shakeout early as their dogma suggests that gold is only good in high inflationary, commodity bull runs.

But, as seen in the past, gold=MONEY and the best money in deflations too.The goldbugs always shake out in a panic thinking gold is a commodity.

Gold will have its volatile days, but if anyone thinks SMART MONEY policy is coming to Ben Bernanke and Obama anytime soon is crazy

 

 

 

 

Tue, 01/04/2011 - 15:14 | Link to Comment cocoablini
cocoablini's picture

The DXY is not up substantially-so I would suspect this is a JP slamdown to cover positions. Even if the economy was in recovery(get real) the price of gold should not be affected as the recovery would require a high level of inflation and at that point the gold bugs would swarm in.

So, are the goldbugs getting scared of deflation all of a sudden?

Or, are people running from the Tsunami of higher interest rates and a collapse in the economy, in which case PAPER COMEX GOLD PRICES WOULD EASILY GET HAMMERED.

COMEX paper futures=garbage. Just try and buy gold for that price

Tue, 01/04/2011 - 17:26 | Link to Comment Jasper M
Jasper M's picture

I would offer that today's market action, and similar events, are not signs of complacency.

That assignment stems from the notion that PM and oil trades are always 'fear' trades. Right now, artificially cheap money has spawned immense participation by speculators, who where buying these items on Greed, not fear. Thus, this sell off, a reversal of trend, is the result of a reversal of thinking. It is a function of their fear, not complacency. 

And well placed fear, I think. When all these leveraged PM participants start getting margin calls, the rush for the exits is going to be a thing to behold.

Disclosure: Sold my Au, and some of my Ag, Dec. 7

Wed, 01/05/2011 - 03:12 | Link to Comment vainamoinen
vainamoinen's picture

Good comment Jasper M - - -

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