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Mmmmm.... That summer 2008 feeling!
From Nic Lenoir of ICAP
Today I just want to focus on one thing and one thing only, making sure I pin the top on the S&P 500 rally started in late August as I strongly believe the next wave will take us sub 1,000 in the S&P future.
First of all our VIX reversal warning is still in effect, we still recommend to be long VIX November and December calls. I personally favor 35 and 37.5 strikes. At a cost of 1 for the November 37.5s, should we indeed go dip below 1,000 you stand to multiply your investment somewhere between 5 and 10 times.
That said, I turn to the fractal structure of the move in S&P and Eurostoxx. Both are completing an A-B-C flat correction from the lows in early July. Standard targets both indicate that we could possibly go a touch higher with a 1,160 being the C=A in S&P and 2,873 in Eurostoxx. However the price action in both is bearish here. In S&P as long as we remain below 1,138 I expect to go fill the gap at 1,105 before testing the key resistance which will be around 1,075. We have a H&S short term with neckline at 1,117 and we broke and retested as resistance the support of the latest move from 1,082 to 1,142. Similarly as long as we remain below 2,785/2,790 I expect the Eurostoxx to go test 2,577. If that breaks the bear minimum we will go challenge is 2,326, and I personally think we go sub 2,000.
An interesting observation here is to note the similarity between 2008 and now. People tout decoupling as a reason why the dollar is going to keep getting weaker and China is going to drag us from our woes... Check! Commodities like Copper etc... are going to the moon even though they might be stockpiled in large excess already in Chinese warehouses... Check! We have elections coming up so we are going to rally into the elections... Check! Most asset managers are struggling so they need to make their year and go calls to the walls into Q4... Check! And no better indicator of these similarities than the attached chart showing copper and S&P superposed: the divergence is clearly deja-vu!
You know where I stand. Keep your VIX calls on and watch closely the break of the H&S or 1,135 to sell S&P futures, with a tight stop above 1,138 should we get the blessing to sell at 1,160.
Good luck trading
Nic
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Who shut down the programs?
They're just angry today. :)
Don't forget tomorrow (Friday 09-24-2010) is another POMO pump day. This will be the test to see if the FED can keep the sellers at bay, or at least breast fed enough to close somewhat even for the day.
They definitely don't wish to go into the weekend with two days of selling.
Why do I get the feeling like we are being set up? (again...)
For me, it has been 18 months of blue balls...
I would like to see Lord Blankfein with Red balls a fire.
The bastard is America's Worst Criminal. Hand Cuffs Please.
" They definitely don't wish to go into the weekend with two days of selling"
Fuck what "they wish".
It is a giant broadening top just like 2008... They can wish and print all they want.
Update-
*** RED ALERT *** .......Yen down big,Nikkei up 3.5% woooooosh lift off, guess who .......
Ground Control to Uncle Ben
Ground Control to Masaaki Shirakawa
Take your hopium pills and put your helmet on
Ground Control to Masaaki Shirakawa
Commencing countdown, engines on
Check ignition and may Uncle Ben Sholom's love be with you ...
Ten, Nine, Eight, Seven, Six, Five,
Four, Three, Two, One, Liftoff.......................
This is Ground Control to Uncle Ben
You've really made his day ...
And the sheeple want to know whose bailout is today..
Now it's tiiiiiiiiime....mm,time to print awayyyyyy...
deja double dip.
Who's going short? If the stock market dumps, it will dump within the next two months.
What? Is this really a down day today? Not the .001% variety that was shown a couple times in the past 3 weeks.
If we hang enough Pine tree air fresheners up, do you think anyone will notice?
Pine tree air fresheners? Hell, a coupl'a tons of lime should cover the stink!
Yes, everybody knows that there will be another run to the dollar, just like 2008. Hence the bond inflows.
The summer of 2009 felt more like the summer of 2008 then this summer did and BTW, its September. Im awaiting another IMF gold sale that is supposed to drive the price down. Remeber how well that worked last year ?
Tyler, you're talking technicals again...
To predict the market, you have to ask yourself 1 question:
I don't think the market will ......
and what you don't think will happen... will happen unless you're also counting on that one.
SO, the tip of the day:
INVEST RANDOMLY
It's not Tyler it's Nic L.
Yep...
I DON'T THINK THE MARKET WILL...CRASH!
Wait, I'm already long Olives and Goat Meat from your last reco!
I need clarification on this random diversification strategy, especially if it involves other foodstuffs.
"Olives and Goat meat"! Everyone at work wonders why the hell I'm laughing out loud at the moment. +5
I'd add ouzo, then you will be diversified. Be short yachts.
What the hell is this? Is Bernanke taking a shit and not near his Bloomie? Who closed the liquidity spigot?
This...might be to suck in shorts for tomorrows POMO ramp job.
I'm long. And right, until I'm wrong.
I'm short. And wrong, until I'm right.
how was this handle still hanging around? well chosen.
POMO ramp job, eh? why do i feel like i want one of those.
It depends where you get it.
Per http://www.internettrafficreport.com/details.htm - Las Vegas was offline this afternoon. Perhaps the HFT colos moved there for the 0% state sales tax
Front Running tomorrows numbers...
Interesting that the PPT is letting the market go a bit today. The REIT's are rolling over (finally) and some outside reversals of some 52-week highs (AAPL, LVS). I'd love to see some fireworks this weekend (the bank default kind, not the ammo kind).
But Jim you promised.........
AAPL plus 5 to red in a hour. Gateway to Dell anyone?
oh that's funny robo.....you lose money.......oh hehe hehe oh oh ahahahaha ahah oh oh oh hehehehe *sarcastic laugh* *rubs salt in wounds* oh hehe hehehe hahahaha, straight down...oh hehehe hahaha.......ok I'm over it *not*
http://i25.photobucket.com/albums/c84/Image73/lol.gif
beware the guys with leverage...
Stopped out my AAPL and sold at 289. Bought for day trade at 240 but held since it went up every day. Now it's gone.
AAPL was the WORLD'S 2nd largest company for a while today overtaking PetroChina. Doesn't anyone see anything wrong with that picture? A gadget maker and potential faddish product is the #2 MARKET CAP IN THE WORLD! If that doesn't scare you, what does? When they're number 1?
Hmmm - momentum trading followed by a reality moment (before anyone else's). Not a reproducible trading "winner" I've found.
For the record I think you're making a good call there though. Windows 7 phone out in a few weeks - queue the usual "slicker vs cheaper" rivalry. Not that Apple is worth what the market says anyway, but head-winds a comin'
Got lucky. Was looking for a pop to 250ish and it just kept running. Kept saying I would keep my stop super tight. When it reversed off that high so quickly, gave me reason enough to run.
Imagine what would happen to the NAZ and SPX if AAPL suddenly dropped 10% - absolute disaster waiting to happen with such an enormous weighting in the indices.
Bought some just barely out of the money QQQQ puts today (near the highs). Only a week to run, but the premium was 'cheap'. With BIDU, NFLX, AAPL, AMZN all on a tear, it seems at the least the market will need a pause that refreshes. Plus I get a little exposure if there is a EU Black Swan. They can't be happy with their currency running a bit. Me thinks they might stir up some trouble to drive the EU/$ down.
And Go Silver!
Agreed 100%. Do yourself a favour and buy something "nice" with the gains... Ploughing it back in is how the house eventually gets you.
Better get those "Circuit Breakers" ready this is going to be an ugly close ...................
Dow Down 92.31
i felt stupid being short the last 2 days, now it's starting to look really good.
i just have a feeling we will see a big down day soon.
Any decent bit of bad news will crash the DOW by 400 or 500 points, i think.
That's the tough part of trading - the group mentality can psyche you out. The crowd always believes something unreasonable at market tops. This time it's POMO. You can see how small the effect of POMO is by how short the burst is in the morning and how no one takes the ball and keeps running it up the chart. I don't think POMO was behind the huge rally off the Dow 6500 lows. Keep in mind we haven't retraced much of that back down (yet, muahahahahaha.... :)
Hmmm ...
Fundamentals? In 2008 there were a raft of systemically important companies coming apart at the seams. Now?
The same companies are safely undead. Who is to fail and force the S&P lower?
Who are the retail 'investors' to spook? Aren't they gone already? Why would the professional traders abandon the market when waiting patiently would allow them to cash out (to the Fed's proxies) at par? The Fed itself would have to fail before this market breaks.
If there is to be a break it will be the result of energy shortages or a national default, a crisis in China or a major war. Energy shortages are baked into the cake, but not tomorrow...
i think you are right, but a mini crash is entirely possible on a bit of bad news.
a bigger crash will come from problems with ireland, portugal, spain or china.
that could happen in 2 weeks or 2 years, wish i had a better idea.
I think this time around it won't be bad economic news as much as a "surprise" currency crisis that spreads rapidly, like wildfire. And it doesn't need to start with a big or important currency. And it won't be "the end", but it will be a scare.
In 2008, currencies were still considered safe havens. Two years of insanity have dispelled that silly notion. They're all lined up like dominoes with the "safeties" left in line. There are no "safety" gaps anymore to stop an accidental trigger. Start the process and it moves quickly.
Agreed - and I think really soon... USD vs CHF crashed through its last recent low today - vs YEN only held aloft by some residual fears that the BOJ will intervene again... I reckon not at this level.
Here in the UK we have a government that is talking the talk about deficit reduction, hard choices, austerity etc... Nobody apart from a few really gets what is happening, or why it has to. Pretty soon Fred Bloggs will be scratching his head as to why petrol and food prices keep going up. And that's in a country that (at some level) is trying to sort its currency based obligations out! The US just seems to be steamrollering its way to oblivion - which is bad for all of us....
Yep. Here in the US we're shootin' the shit.
Hoo-
I would like to respectfully disagree with your assessment. It seems the Fed and the BoE are tied at the hip now with FX swaps, such that one is as the other does and nothing is as it seems.
The US is not steamrolling its way to oblivion- by itself. We are doing this to save the Bank of England and there seems no two ways about it. Notice that the Pound Sterling has become the latest "reserve" currency...at least in rounds as far as the US can prop up? Just look objectively at a chart of the pair. it has been trading like a beach ball in a crowded stadium since the crisis broke. That's not normal.
Strange things are afoot at the Circle K.
I probably wouldn't disagree - really the ongoing parity suggests its too late for either! Stirling won't be the next Swiss Franc - the housing market here (and probably nowhere else in the world!) is up near its highs.
Its an absolute farce. My only point (really) is that in the UK we have a government that is trying to walk the walk - and still the markets - and certainly the populace don't get it. The US still has to have that "public conversation" with itself - even as forlornly as the UK's.
Fred Bloggs and John Doe will still be scratching their balding heads about why petrol and bread cost twice as much next year as they did this year. They will mutter with their neighbours but never (probably ever) grasp the fact that they've been robbed. It's maybe a blessing really.
Ignorance is bliss.
('ceptin' momma don't play dat...)
Payback is a bitch. It's coming. First up, Mr. Blair...
...who may just think enough of himself (and doesn't he, really?) to squeal like a pig. This is where it gets interesting, Hoo.
:D
Not sure re Tony B. Liar., which one he'd be squealing about - there's a few too many "issues" to count this side of the pond. If he were to die horribly I'd be unsurprised. I'd be shocked - but un-saddened. Politicians lie - a given - "conviction politicians" who lie - nah.
He is a lying c*nt, and nobody likes him or the tight cabal of press-men and yes-men he called the Labour Party, any more.
Die another horrible death as did the weapons inspector? Risk it?
I don't think so. They are fairly well trapped, I'd say, unless they can pull a magical rabbit out their ass.
I have to agree, currency moves like the past few weeks will at some point trigger a bond auction failure? I have heard it said Japan has now consumed the countries entire domestic savings, would this be the reason the yen BOJ moves have looked so desperate?
The funds are there to spook, even a moderate fund is now leveraged some 6-7 times. They won't abandon the market, but change direction. Result is increased volatility. Retail investors keep on cashing out bringing a steady selling pressure.
Since most brokers give retail 3x, the brokers will get typically get 10x with PMs, even higher if they have 'special' relationships. Abandoning completely isnt the issue here, but i believe the inflow into short funds and bear ETFs will drastically outpace the plain vanilla long onlys.
Agree. The Fed has all systemically important companies in a bear hug, zombies. The Bernanke put turned out not to be enough so he upped it on Wednesday to the Bernanke Iron Butterfly spread. If things get ugly, then activate QE2. If that don't work, QEx.x. And hope that jawboning alone will light a fire.
I've said this for months: the main goal of keeping the market afloat is not so much for consumers and the little guy, the market is acting as an ATM for leveraged companies all over the economy. It's making secondary offerings, junk bond issuance and even short term CP issuance possible, all courtesy of money straight out of our pockets. It's keeping capital markets at least open and functioning, albeit dysfunctionally.
It's also helping PE exit many investments that should have been sold in 08-09...and maybe even 2011! hmmmm.....
not as much as you might think
http://www.bloomberg.com/news/2010-09-23/u-s-ipos-raise-lowest-amount-in...
Excellent Analysis and thoughts. While EWaver's are taught to believe the FED does not matter more than a couple of days. The shorts must survive another month or so of HELL. Up Yours Ben. It does matter, for now
But, WE WILL WIN in the END of the FED's Bullshit. Dam, this BeRankee guy really does stink, screwing savers.
Oh Yeah, I forgot, Up Yours Robert Prechter. Selling "Fear" when you most likely know how this goes.
I actually say you, (Robert), give Maria, (CNBC's Fat Ass), a nod and wink at the last low, pumping your site and shit.
Very good post steve. +100
Wall Street, the banksters and the whole ponzi economy want QE2. They can not wait to have it. The Bernanke put is holding the market up. The problem is that Bernanke will not use QE2 now. It will have to wait for a really rainy day. In fact, one of the Fed fukkers even said so himself about 10 days ago. (forgot link). So what will happen. The market will have to demand and throw a tantrum to get its QE2 IV push. How will they do that? IMO, by pushing the market lower until Bernanke cries out uncle and gives in to QE2.
So yes, the market will come down until Bernanke gives in. The real question is when will that occur? What is Bernanke's line in the sand? That I can not say, but I know that it is below S&P 1000. Also, Bernanke and Greenspan want to delay gold's rise (see Greenspan's recent warning on gold and central bankers). If QE2 comes out to soon, they will lose any control over gold.
In other words, the banksters need some sort of justification to monetize. So yes there will be a significant drop by March, to maybe high 800's in S&P.
Great post, that pretty much explains how I see it, too. You can't gain the confidence of the public when they know their market is only standing because of the daily juice job. With all drug addictions, it takes more and more just to sustain the previous high. Fed keeps this up and they will be the only owner of any stocks before too long.
The way I see it, it is not that easy for the Fed to implement QE. Not only is there intramural resistance via some Fed members (Hoenig and others), but there is also some resistance politically in congress. Furthermore, the Fed is aware that QE is a precarious undertaking full of moral hazard and undoable consequences. Bernanke talks a loose QE game, and I am sure he will implement QE at some point, but he knows he is playing with sulphur fire.
Frequent and willy nilly use of QE can have unwanted effects on interest rates and the price of gold. James Grant, K. Denninger and others have made a case that sufficient QE will have the unintended effect of actually raising interest rates. Who will want to buy 10 year treasuries at less than 2% when trillions of monopoly money is created in nano seconds? IMAO (in my amateur opinion), a large QE involving over 2 trillion dollars will start the leak of the Treasuries bubble and the price of PM will accelerate. When this happens smart lay people will realize how fake QE is and how fake our money is. This is why Greenspan gave the warning to fellow Central Bankers regarding the price of gold. Gold price is inversely related to the faith in fiat money. Few intelligent people really understand the danger QE brings, not to mention the public at large. When discussing QE the news media mentions that "the Fed bought so many treasuries... etc." When people read that they think that the Fed actually bought those assets with saved money! They think, wow the Federal government has a lot of money. LOL. Few know that the Fed is creating money de novo. Printing money does not even adequately describe QE. To use QE too lightly puts it at risk of it being discovered as pseudo legal counterfeiting by more and more people.
These are some of the reasons why QE will be used only as a last resource. The Fed is now talking QE to support the market. i.e. the Bernanke put. How does this affect the stock market? Sooner or later the market will get tired of QE flirting and will want the real thing and as such it will test Bernanke's line in the sand. I remember a Wall Street salesman stating that now the market has stock vigilantes, in reference to the bond vigilantes, thinly veiling threats that if QE is not launched that there will be stock selling.
Therefore I expect the market to come down.
S&P at 1123 and fading into the close. POMO better work tomorrow; the skids are already greased.
Republicans are talking today, not the Prez.
Just sayin'...
Sausagemaker
It's almost as if real people, rather than machines, are trading today..
Great day.
Yeah...no /ES short squeeze at the pivot. Wasn't expecting that. Nice day for shorts.
gotta a pop at the open, tho--didn't it.
I don't even know what that is.
Some people were born without ever living with a computer.
I was born without ever seeing a market ex hft algos
beta whore chasing = profit taking for the weekend in the Hamptons.
Of course, they have to be careful because the HFT liquidity sucking mechanism/1:1 correlation matrix could come crashing down upon their heads and end up having to work the weekend looking for coverage on the 45x leverage that suddenly happened because the market went 'ka-blooey'.
So what about checking the couch cushions, perhaps there's a couple stray quarters in there.
Caveat being, "almost" ... since the morning lows hold on SPX.
Very nice copper/SPX chart, haven't seen that before but does indeed remind me of 2008.
LOL @ idiots still monkey pumping BIDU higher. 100 P/E stock in a Chinese company. This can't possibly end in tears.
That long vix play killed me last month. I'd pay little extra for Jan and let someone realize their taxes are going up next year regardless.
You people have to understand
the depth of the politics behind the economics
and it's all about
getting ASIA to consume more
and start building the new lower cost structure in AFRICA
-think-
it's not about the next 10 days ahead
Woland
And where've you been all my life, stranger?
"D
The last (labor) frontier. May bite them in the ass unless Africans want econo boxes and teevee too? African Idol, you heard it here first.
Dave.
Don't sell that, Dave.
I can't let you do that, Dave.
only copper? i saw tin, aluminum...even lead. of course the relative value of these commodities to pretty much any economy, let alone ours, is nil. housing is dead, the autos are dead, trucking is on life support and the stimulus was the biggest dud ever. 2008 with oil shooting to $180? nope. jusssttt dont see it. i do see a government that when not trying to deny us our own oil is busy at work denying us an economy from which we can utilize this resource. interestingly "that has not prevented prices from rising" which begs the question "are we the USSA?" it sure feels like it.
There's one key difference between now and 2008: Market Fundamentalism is dead. Nobody still believes that markets are self-correcting or efficient, especially not the Fed. They believe just the opposite: markets need sustained all out intervention at times or else risk seizing up and shutting down completely. The greater fool has left the building, so anyone buying stocks has to believe that the Fed will buy when the time comes to get out. Otherwise no deal.
Notice SRS and FAZ just killing it today... yeah, banks and housing led the crash, led the recovery, and are leading once again. There was no sector rotation, because we are still in the first crash! This is such an easy tell... I made a killing in SRS today.
We are still in the first crash, the one that started in the year 2000.
True...
As far as I can see, the only reason the Dow has gone up at all is because it seems to be working on forming one of the biggest head and shoulder formations I've ever seen...
http://finance.yahoo.com/q/bc?s=^DJI&t=my&l=off&z=m&q=c&c=
with a zero-growth economy-- certainly a "zero *real* growth" economy one understands the nature of *multiple contraction* which can greatly benefit equity buyers.
by the numbers, anything that "doesn't grow" is priced at 8X earnings-- or another way of looking at it-- a 12% after-tax cash flow yield. In other words, if it doesn't grow you price the asset as if it were a "liquidation" and that's with an ERP of 600bps in place.
today's interest rate environment makes an 8X multiple a little tougher to achieve, so we're seeing companies who grow at 7-10% annually that are priced at 11-13X earnings, instead. most of what we consider owning has a growing cash yield of 3-4-5% anyway so equities are a "bond beater" by a pretty wide margin when you consider the "rising floor of inflation" which boosts replacement value of the assets.
sure it can go down, but over time inflation makes the other thing happen instead. consider it "applied wisdom" when you do it yourself, too.
Shawn Mesaros, Pamria, LLC
why buy upside on VIX though? you could be right on your directional view and make no mone yif you express it by owning VIX upside.. For the month of May which included flash crash and unravelign of the EUR, SPX realized 29.. Gunning for upside above 37 is a stretch.. We could have a slow velocity downtrade or even a May-like velocity downtrade and you won't get paid on your view despite being right
VIX is busted IMO. Another "there is no fear" mandate. The divergence to SPX is real though.
Controlled, yes, but the VIX 6 months ago was higher than any time since '02 otros de el diablo de '08. There are still some shakedowns waiting to happen, interesting to see what will happen. As the dxy has been a staple go to while the vix spikes, the dollar should be set to appreciate. If the dollar/vix got another run would gold continue to chase it? I of course think everything is chasing gold but other people will talk about "dollar strength". Lately gold has been stronger in times of flight to safety (talk about a redundancy) and so if the DXY moved to 84 how high could gold go? Last years trend of a weak dollar helping gold is still true; look for a route on the dollar to be the ultimate risk reward.
XAU is about to hit some important technical points. As we hone in on 200-210, remember that into the fall of 2008, XAU dropped like a stone from 210 to just above $60 before we had the run we have now. Risk off crushed it. I'm not saying it can't go higher, I'm just pointing out that this is an important technical barrier for it to breach and be aware of.
Valid points. I think however Nic would cash out before exp month is reached - and so here trade recommendation is medium term. Theta will eat up a bit but so long as vol rises you should be ok.
When VXX was in the 30s selling premium worked well so here (assuming mean reversion) buying some could be profitable - less risk than getting pennies for your short options.
The time of this post -- 13:25. Was that EST?
Just curious because I want the perspective of knowing when this article was written. Thanks!
I read an article in the local paper here about Tubo Timmy's mom. She lives here on Cape Cod. She said she is very proud. I wonder if she knows he is going to be the dog officer at the National Seashore soon.
Tubo Timmy is so fat.
How fat is he?
He's so fat that when he sits around the Treasury Department, he sits around the Treasury Department.
Nic you've been calling for 825 spx for a year now. Can you go away please?
At UN, French President Sarkozy Demands Financial Transaction Tax on Banks; Tobin Genie Now Out of the Bottle Worldwide; Time to Mobilize Against Finance Capital on This Issue
French President Nicolas Sarkozy has spoken the magic words: “Tax the banks,” and this is the big news from the opening day of this year’s UN General Assembly plenary session in New York. For reasons which have much to do with internal French political struggles, Sarkozy has thus placed the central question of the age on the international agenda: Who will pay the costs of the world economic depression? Will it be the bankers, speculators, derivatives mongers, asset strippers, and hedge fund hyenas who have created the current depression through the bubble economy of the last decades? Or, as the Koch-headed dupes of the Tea Party demand, will the cost of the depression be taken out of the hide of average working people around the globe under the banner of “free-market” swindles once again?
The financial transaction tax is the key to making the bankers pay for their own crimes.
“We have no right to shelter behind the economic crisis as supposed grounds for doing less,” said Sarkozy, who noted that government budgets are everywhere under tremendous pressure. “Finance has globalized, so why should we not ask finance to participate in stabilizing the world by taking a tax on each financial transaction?” “I want to tell you of my conviction that while all developed countries are in deficit, we must find new sources of financing for the struggle against poverty, for education and for the ending of the planet’s big pandemics.”1 Sarkozy stressed that he intends to campaign for the bank tax when France assumes the presidency is head of the Group of 20 and Group of Eight countries for a year, starting in November. That will keep the Tobin tax in the public eye over the next 14 months, at minimum.
What Sarkozy has thus proposed under the name of financial transaction tax is none other than the Tobin tax, the Wall Street sales tax, the securities transfer tax, or Robin Hood tax, which this website has long advocated. As Sarkozy specified, the financial transaction tax, like a sales tax, would take a small percentage of financial turnover and use the proceeds for purposes of world economic development. Naturally, the really critical questions are how big this percentage will be, who will collect it, and how it will be used. Now that Sarkozy has broached the issue before the court of world public opinion, all of these questions are very much up for debate. Sarkozy himself probably imagines the financial transaction tax as flowing into the coffers of the International Monetary Fund, where it would not be used primarily to fight world poverty, but rather to help pay off the debts of Third World countries which are beyond insolvency. Such an outcome must be opposed at all costs.
And such an outcome is far from being automatic. Now that Sarkozy has placed the question on the table, it is imperative to mobilize with all available energy and make this a far broader and deeper issue and the wily French president could ever imagine. Persons of good will must do everything possible to take control of this issue and use it to shift the world balance of political forces against finance capital and in favor of working people.
The best current estimate of the contending forces on this question would list France, Germany, Brazil, Norway, Austria, and a number of other states as supporters of a Tobin tax, with opposition coming from the usual suspects — the United States, Great Britain, and Canada, joined by China. How embarrassing for the Chinese to be seen in public in such bad company! Unless China is planning to join the English-Speaking Union, they urgently need to revise their position.
1% Financial Transfer Tax Means $10 Trillion for Development Based on Forex Alone
Concerning the potential impact of a financial transfer tax on world economic development, we can start by noting the report published by theWall Street Journal on September 1 that the Bank for International Settlements now estimates the total turnover of foreign exchange and currency markets worldwide at about $4 trillion per day.2 Using the usual estimate of 250 business days in a calendar year, this means that the total turnover of world foreign exchange in currency markets is in the neighborhood of $1,000 trillion or $1 quadrillion per year. A modest but serious financial transaction tax of 1%, a penny on each dollar, could thus initially yield $10 trillion in revenue, assuming that speculation remained at its original level, which is admittedly not the most likely scenario.
On the other hand, this same Wall Street Journal points other flows of speculative money reach need to be taxed for the general welfare. These include US stock trading, which in April 2010 averaged about $134 billion per day, or $33.5 trillion per year. Turnover on the United States Treasury securities market averaged $456 billion per day in April, which comes out to about $114 trillion per year. To these should be added the total turnover in exchange-traded derivatives like futures, options, and indices, plus the massive issuance of over-the-counter derivatives such as credit default swaps, collateralized debt obligations, structured investment vehicles, and the like. Generally, the budget deficits of world governments at all levels are closely correlated with the fact that, under financial globalization, speculative interests pay virtually no sales tax, and generally manage to escape corporate income tax as well. They are like the French nobility of the ancien régimebefore 1789, insisting on their unique privilege of immunity from most taxation.
For purposes of illustration, we can use the figure of $10 trillion of increased revenue, which looms large in comparison with the current French foreign aid budget of €10 billion, which is robust enough to make France the world’s second-largest donor in this department. Much attention has been given in recent months to the tragic floods of the Indus River Valley in Pakistan. The Indus obviously requires development along the lines of the highly successful Tennessee Valley Authority built by the New Deal in the United States, with dams for flood control, hydroelectric power, irrigation, and the eradication of malaria. Give the Indus the TVA treatment, and the threat of new floods is largely neutralized. That might cost $1 trillion, but this would represent a permanent increase in the capital stock of Pakistan, and a permanent increase in the productivity of labor. It is well-known that TVA treatment is also required for the Ganges-Brahmaputra River system, as well as for the Nile, the Congo, the Amazon, the Rio de la Plata, the Mekong, the McKenzie River in Canada, and other underdeveloped river systems. For $10 trillion, all of these could be tackled, perhaps with money left over for the Bering Strait Bridge Tunnel, the Straits of Gibraltar Bridge Tunnel, and the Italy-Sicily-Tunisia connection. Carrying out these development projects would create hundreds of millions of new productive jobs at union pay scales in the EU, the US, and Japan, putting an end to the current world economic depression. This approach obviously goes far beyond anything that Sarkozy has in mind, but it happens to represent what is urgently needed for the future of humanity on this planet.
Nobody needs to be told that Sarkozy always has ulterior motives. He wants to run for reelection in 2012, but he is deeply unpopular and faces a revolt from inside the French administrative bureaucracy, including opposition from the domestic and foreign intelligence agencies. He will be challenged from the center-right by neo-Gaullist Dominique de Villepin, and from the center-left by Dominique Strauss-Kahn, the current boss of the International Monetary Fund. Because of Strauss-Kahn’s current job, he is likely to be tasked by London and Wall Street with opposing the financial transactions tax. If Strauss-Kahn acts as the valet of London and Wall Street on the Tobin tax, that will weaken him as a French candidate.
Sarkozy took care to couch his appeal in terms of the needs of Africa, where France currently has more client states and economic interests than any other permanent member of the UN Security Council. One million African children per year die of malaria, Sarkozy pointed out, and estimated that 30 African children would die from malaria alone during the eight or nine minutes it took him to complete his speech in the UN General Assembly. Sub-Saharan Africa is in fact the poorest region of the world, meaning that Sarkozy’s political motivation happens to coincide with the exigencies of objective reality.
The demand for a financial transfer tax will also bring Sarkozy into conflict with Obama, who as a loyal Wall Street puppet is certain to reject the idea that bankers and financiers ought to pay their fair share. Sarkozy has been sniping at Obama in various forms for some time, and may have concluded that being seen in a public dispute with the feckless tenant of the White House is good politics among French voters.
It is also interesting to note that the only European measures of any importance against the exorbitant power of bankers and financiers have come in recent years from center-right politicians. German Finance Minister Wolfgang Schaüble banned naked credit default swaps on Euroland bonds and naked short sales of German stocks back in May; at that time Sarkozy was AWOL. Now Sarkozy has re-launched the Tobin tax. By contrast, socialist politicians like Zapatero of Spain, Papandreou of Greece, Socrates of Portugal, and Sigurðardóttir of Iceland have all functioned as obedient slaves of the international bankers.
Interest in a Wall Street sales tax has been growing in the United States for some time. The concept is supported in a general way by the AFL-CIO, which has however failed to give the issue any prominence in an educational way, mainly to avoid embarrassing Obama. A Tobin tax has been endorsed by a group of House Democrats around Congressman DeFazio of Oregon. Green party candidates from Laura Wells in California to Howie Hawkins in New York State are also calling for a Wall Street sales tax. Ralph Nader has recently contributed an interesting article in Counterpunch, in which he points out that New York state already has a Tobin tax capable of yielding between $15 and $20 billion per year for that cash-strapped state, but that corrupt politicians have actually refunded the money to the speculators year after year since 1978, something which is obviously blatantly illegal and a huge political scandal.3 Among economists, Robert Kuttner of the American Prospect is also a Tobin tax supporter.
In the coming lame-duck session of November and December, the two financier parties are likely to attempt an assault on Social Security, starting from the genocidal prescriptions of the Simpson-Bowles austerity commission. They will demand in effect that the Social Security cash flow be fed into the voracious jaws of the Wall Street speculators. The only way to fight this attempt effectively is to be able to offer an alternative source of the substantial revenue needed to neutralize the budget crisis of local, state, and federal government in the United States. More than any other single measure, the Tobin tax or Wall Street sales tax is that alternative source.
So yes, Sarkozy has an agenda. But it would be total knavery to refuse to engage in the struggle to tax Wall Street by pleading one’s own supposed purity, while muttering darkly about the nefarious UN, globalization, the iniquity of foreigners, and the invincibility of the new world order. We may not have many more chances of this magnitude, so it is time to get busy.
References:
1http://news.yahoo.com/s/afp/20100920/wl_afp/unsummithealthsocial
2http://online.wsj.com/article/SB10001424052748704421104575463901973510496.html?KEYWORDS=4+trillion; see also
http://www.marketwatch.com/story/daily-currency-trading-turnover-hits-4-trillion-2010-09-01
3http://www.counterpunch.org/nader08062010.html
Thank god the tea party exists.
If it didn't, we couldn't make fun of people who oppose the crony capitalist nature of the Obama administration while simultaneously we, ourselves, oppose the crony capitalist nature of the Obama administration and not see the irony of our false feelings of status from each put down.
Oh, get away from me natural ideological ally. You had red wine with fish!! You philistine!
Many thanks for the update. This could develop into something. Sometimes I wonder if Geopol is actually TD. Just a thought.
If money is taxed 1% every time it is moved, it will stop moving. This idea won't work (as projected).
Geo,
next time just write "rigeur" and post a link FFS. You have enough cred that people will click to your site.
Tobin tax is the right idea, but the wrong venue.
We should have an every-time-money-moves-tax-it structure domestically that would completely replace all other taxes at all levels.
Foreign currency exchanges only $1Q/year?
At least that much money moves INSIDE our country, and $10 Trill will actually fund our government at all levels twice over.
Not that I think they deserve a fifth of what they get already, mind you.
Yes, a bunch of margins will shrink, or disappear completely.But even in the casino, you tip your dealer.
My number is .49%. Paid by who initiates the transaction. Cash is pre-paid at .49% times its velocity, but tax free in use.
No property taxes, no capital gains, no quarterly filing, or 1099s. No tax forms at all, ever again.
Employers could give folks a raise, or hire on some extra help, not having to fork out all that FICA/UI/etc. And 99% payroll tax cut. Talk about some stimulus.
Stop taxing wages and gains, and simply and dispassionately collect a tiny little bit when currency flows.
I've counted $3.4Q in flows, but even if I double counted everything, and it was only $1.7Q, and if it slowed down by half, that would be $850T * .49% = $4.165T
And that's still over $300 billion in surplus. If we could cut a bit for a change, we could still be well on our way to funding those states that want to abolish their taxes, too. Or start getting that debt retired for good.
Something similar to what you're suggesting:
http://apttax.com/index.htm
Feige is a pretty smart guy, I met him when I was doing my undergrad work at the UW. He put it to me this way, "When you take moral/ethical arguments out of the equation and simply let the market do what it's going to do, you're able to not only tax efficiently, but also able to let the markets return to their natural, efficient state." I think pretty much everybody here could agree with that goal.
Yes. Dr. Feige is the only one who has done any work on this at all. His latest figures were for 2005.
++ on the taking ethics out of the equation. That also means getting to subtract the special interests from the tax equation, too. For me, even the 501c area of the tax code is an anathema.
Another thing I like about his take is that unless we throw out all the other taxes, we haven't really gained anything.
Warms my heart when I hear others reference the APT tax, because that site is largely inhabited by nothing but crickets. This confounds me, because I have been playing with this idea most of my life, and Dr. Feige's APT was the closest thing I could find to my own ideas. Yet when I finally find APT, there's nobody there and nothing happening.
I do, however, tend to disagree with how he's packaged it. Not such a great name, not much transparency on how he came up with the base (although the sources in his paper were invaluable), the complexity of taxing both sides of a transaction, his markdown of the estimated base by 50% is too extreme, and does little to help market the idea, and lastly that the three-phase business with the varying tax rates is overly contrived and unnecessary, IMO.
But even as he left it, it is still orders of magnitude better than anything else I've heard. I keep my hope that sharp minds like those here at ZH could chew through it and figure out how it could best be implemented with regards to trading, because that is where it would likely find the biggest opposition (by individuals, at least).
Thanks for the quote!
I think the Dow is going to hold above 10K through the end of September. I'm anticipating a pretty big ass crash after that. Like a couple of thousand points within the span of a month. The Dow has always been the driver, and the 10K line is a powerful psychological tool.
majorly intrigued by this comment on an earlier thread:
by piceridu
on Thu, 09/23/2010 - 18:41
#600305
Off topic but has anyone tried to SELL any ETF on BofA/Merrill online trading platform?
You can only BUY online and no SELLing allowed on any ETF...was told won't be fixed until April 2011.
Of course...no selling allowed, I didn't didn't get the memo...
...can anyone confirm?
Oh dear - if so.....
Possible short term top in Cramer's 4 Horsemen today (AAPL, NFLX, PCLN, BIDU).
50/50 chance that this marks an intermediate top, or just a brief correction before we blast higher.
I will assure you that if the Dow drops 1,000 points from here, we'll see 1.99% on the 10-year, given that it has already cratered by 16 bps in two days.
Financials and steel stocks look terrible, those appear to be leading the decline.
But Nike is gapping up to world record highs after hours, and other "hot stocks" really haven't cracked yet.
In fact, the IBD Top 100 did OK today, no serious technical damage. In fact, yesterday was a worse day for this group than today.
http://clearstation.etrade.com/cgi-bin/bbs?post_id=9493489
If we break below the 20-day, I'll lay out some shorts.
Otherwise, I'll stay long for now. Most of my big cap dividend stocks were up today.
It's pretty much a "Nancy Pelosi" market. It does what it is told by TPTB, not what it should be doing according to fundamentals.
LOL....
Otherwise, I'll stay long for now. Most of my big cap dividend stocks were up today.
That's the "many days I have made small gains - therefore I can't be wiped out by a big loss in one day" argument isn't it...
"Softly, softly catchee monkee", as they probably say at GS and other such c*nt-magnets.
Fuck you, fuck Cramer, and fuck the four horsemen (especially AAPL)... not necessarily in that order.
hahaha, you sound like Mel Gibson talking to his lovely russian bride.
http://www.youtube.com/user/Harshjones#p/f/7/ReAdKkM33JM
@rocky
market grinding higher. why? who knows, but maybe it's because of the total tea party sweep that's about to happen. crazy carl is only down 6 points from cuomo in the ny governors race, just for example. christine odonnel who dabbled in witchcraft in high school, said her votes in the senate will be guided by the constitution. simple. done. the winner. now if you'll excuse me, i'm going to start my new ab workout:
http://itunes.apple.com/us/app/the-situation-official-app/id392835008?mt=8
This is sick.. Gonna puke...
Post another f$&@!ing picture of pelosi and you are kapu. You have been warned.
Somebody actually buys IBD. They are always such chasers for the unloaders.
Those brains belong to a very pretty blonde. Return the original please.
Nic..You Rock!!
Chart: DX
Houston...we have liftoff.
http://99ercharts.blogspot.com/2010/09/dx_1699.html
It will cover the gap, nothing more. I am assuming that the chart is of the DXY? The Fed and others are conspiring to keep the DXY in a fairly tight range, given the extreme volatility possible.
May I ask you to please at least change the color on the price scale so that I can see what levels you're talking about? I find it interesting to see what others think but I do like to be able to read the chart! Maybe something with a light green or pale yellow background?
Thanks.
You're joking, right? The price bubble is in light green. Try the zoom function in your browser.
No joke.
But thank you just the same.
:D
Chart: 6E
Au revoir mon amour.
http://99ercharts.blogspot.com/2010/09/6e_4379.html
Imagine a may flash crash x2. Something for the bears to chew on.
You gotta figure the fund monkeys aren't going to let 8-12% rise in September slip away. They'll fade and lock in gains into the close of the month and quarter.
It was nice to see a fade into the close instead of the usual ramp up. Nice bookend kinda day.
Correlation on 10 year bond yields and SPX has blown out over past few weeks. Something has to give. Either the bond market will come apart or equities need to, to get things back on track...I'll put my chips on Mr. Bond (and er bar bell), he's usually right!
Interesting and good analysis. Let me tell ya something. As a RE Broker, there is no one buying except parasites. The schoolies are in school and now with the cold weather coming, it's hunker down time. Many many people I know, well off or in the shits, all are pulling out all the stops. Taking money out CC or HELOCS, if they can get it. People are not stupid like Barry thinks. A good majority sees the shit storm. Shorting the market is your only salvation now.
The Vix just needs one really good scare to jump huge. It exponentializes fear, but you have to be ready.
I aint buying nuttin. It's a bankster ponzi racket. The prices are too high even if the market was not being bought by the Fed and living dead zombie banksters. It's a bubble. Pop goes the weasel.
Bubble my arse. There's no 'crash' coming in the near term. The stockmarket will move higher as credit spreads tighten, as they have been since early 2009.
Money market conditions are nothing like pre-crash levels. Those of you predicting stockmarket armageddon are clueless.
But sure there'll be down days, maybe even some significant ones.
Fine conjectures everyone; but it seems you all forgot one very simple thing. 09/22/2010 is Armstrong's "high" cycle point 2010.726, day 265. Since Wall street trades on this, you need to know. As Nic says, good luck trading...
Well one thing for sure, Ireland is voting with its feet. Not good news, green shoots nor small potatoes.
http://www.theaustralian.com.au/business/news/ireland-gdp-slump-sparks-bailout-calls/story-e6frg90o-1225928686856
Good luck with that!
some of u must have read this .....interesting...2001 all over again....the PARABOLIC blow off charts are so similar: http://market-ticker.org/
Chart: 6J
Intervention...again.
http://99ercharts.blogspot.com/2010/09/6j_3903.html
MMMMMM....why do I get a feeling we are going to keep grinding higher? Buy the dips, reflate & inflate is the ultimate goal.
Goodnight:
http://www.youtube.com/watch?v=FZ6V9dQGlMY
Goodnight:
http://www.youtube.com/watch?v=FZ6V9dQGlMY
Goodnight:
http://www.youtube.com/watch?v=FZ6V9dQGlMY
SPX range 960 to 1280 with twenty percent overshoots. We are dead center. Hope that helps. <sarc off>
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