The REAL Big Story for Financial Markets Today… Which No One is Talking About

Phoenix Capital Research's picture

You have to
read between the lines on this one.


commentators realize what the BIG story is for the financial markets today. The
BIG story is not the mortgage fraud, the corruption, or the computerized
trading (although the last one dominates US stock markets’ daily action).


No, the big
story is the monetary actions of the massively indebted US vs. the credit
cooling China.


while Bailout Ben Bernanke and several his cronies at the Federal Reserve have
been braying for additional QE and currency weakness, China has been
aggressively restricting credit lending, raising interest rates, and generally
making moves to cool its overheated system.


In plain
terms, this is a conflict between the world’s old superpower (its largest
debtor nation) and its rising new superpower (its largest creditor nation). It
represents the largest conflict in global financial markets as well as THE most
significant development to watch for those looking to successfully trade the


forget, this was ALSO the big story dominating the financial markets in 2008 as
well. I know, the banking Crisis took the headlines. But it was China’s
stockpiling of commodities that created the massive “inflation trade” imbalance
which saw oil at $150 a barrel, commodities across the board exploding higher,
and the US Dollar hitting a 20 year low.


Remember how
that played out when the trend reversed? Commodities and equities collapsed
across the board as the US Dollar exploded higher. This, in turn, kicked off
the Dollar short-covering explosire, which began the chain of events leading
into the Autumn of 2008.


consider that we are in precisely the same environment today. Once again, talk
of the US Dollar collapsing is everywhere.  The whole world is piling into commodities, especially Gold.
And US traders are actually MORE bearish on the US Dollar today than they were
in 2008.


The reason I
bring all of this up is that I am beginning to pick up on signs that the US and
China may in fact be trying to reach some kind of backroom deal on the
“currency” issue. Given the current lopsided balance of the financial markets,
you can imagine the impact this deal would have if my suspicions prove correct.


Let me


As you no
doubt are aware, over the last six months, the US has routinely vilified China
as been a currency manipulator and the source of our financial and economic
woes. China, in turn, has responded to these claims by pointing out that the US
Federal Reserve is damaging the world financial balance… while also making
veiled threats of the dreaded “nuclear” option (China actively dumping US


essentially is an oversimplified version of the dialogue occurring between the
two countries for most of 2010. Then, suddenly, the US does a 180 with Treasury
Secretary Tim Geithner stating that the world currencies are “roughly in
alignment” and that there is no need to “devalue the Dollar” but to maintain a
“strong Dollar” policy.


these comments are coming from one of the biggest stooges in history. But they
DO represent a sudden dramatic change in Geithner’s rhetoric. And given their
close proximity in timing to China’s first interest rate hike in three years, I
can’t help but wonder if something is going on “behind the scenes” between the
US and China which most analysts (AND the markets) are not discounting.


Indeed, the
US Dollar is giving hints of this, 
putting in what could be a potential bottom and reversal. Of course, it
could be a GIANT head-fake, but the bounce from the multi-year trend line is
something we need to take seriously in the context of Geithner’s and China’s
recent statements/ moves.



Have China
and the US struck a “backroom” deal in which the US will drop the anti-China
rhetoric and make moves to potentially halt a collapse in the US currency in
order to calm its largest creditor (and THE one player whose moves ALL US bond
holders are watching closely)?


If so, then
the lopsided inflation trade could be in for a SEVERE reversal which would see
commodities and stocks collapsing as the US Dollar rallied a la 2008. Could
Gold and Copper be telling us this is the case? Both commodities are seen as
terrific discounters of future inflation. And both have reversed as of late and
look to be potentially correcting.


Right now,
all of the above is mere conjecture based on me noting a sudden change in the
mood between China and the US. We’ll only know for sure on November 3 when the
US Federal Reserve announces whether it will be implementing a MASSIVELY
anti-Dollar QE 2 program or something smaller and less destructive.


If it’s the
latter, then you can bet that the US financial markets will undergo a SEVERE
mood change and reversal. Remember, ALL of the actions since mid-August has
been fueled by speculation that the Fed is going to issue a HUGE QE 2 program
on  November 3. If traders are
disappointed and the Fed announces something small or doesn’t announce anything
at all, then my theory of a China/ US deal gains a lot of weight… and the
markets are in for a rude surprise.






PS. If
you’re worried about the future of the stock market and have yet to take steps
to prepare for the Second Round of the Financial Crisis… I highly suggest you
download my FREE Special Report specifying exactly how to prepare for what’s to


I call it The Financial Crisis “Round Two” Survival
. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).


Again, this
is all 100% FREE. To pick up your copy today, got to
and click on FREE REPORTS.





Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ebworthen's picture

"Of course, you know that this means WAR!?!?"

Yes, dear reader, stage is being set for WW III in the Pacific and Asia, or over the oil fields; only a matter of time.

BigDuke6's picture

If you want to put a price on gold if things go to stink then nowadays, with most of the big gold deposits known, should be similar to the 1500's before the south american finds.


Gold then was worth approx $2500.

Bit of trivia for ya'll.

Bartanist's picture

I could have gotten this mainstream, braindead article off od CNBC.


So, it was China's oil demand that brought oil to $150/bbl? And of course the demand has now dropped to roughly 1/2 of what it was when oil was %150. Give me a brain-dead break! You gave us the CNBS story. It is a LIE!!

Oil went to $150 becaue Goldman was manipulating the market and was driving Semgroup into bankruptcy because Semgroup had the audacity to hedge the oil in their pipelines.

lolmaster's picture

please, T3 is a terminally retarded stunt man. he doesn't even get to read the script. BB goes all in Nov 3rd.

snowball777's picture

Posit: POMO is an opportunity for the Chi-com to unload a significant portion of their treasuries onto Bennie and the Jets.

Once that's complete, he can take the dollar back into the toilet and debase to his heart's content without starting WWIII.

Japan can come too.

laosuwan's picture

Correct. The one thing you can be sure of is that whatever the chinese do they have thought it through five steps ahead. Bump up the value of the dollar and sell it, bump up treasuries, sell them, shock the price of gold, buy in physical, bump up the yuan with higher rates and buy commodities. Basically, follow the chinese and wait a year, you win. Aside from oil and commodities, does the rest of the world have anything of value to the chinese? I think they are heading towards an inward phase where the rest of the world does not matter, is just a resource to harvest, and they totally focus on developing a self succient domestic economy. And they can do it if they figure out how to get enough fresh water.  

scammed's picture

JimWillie reported a few months ago that 'The Dirty Dozen' were moving on the LBMA
& Comex, taking delivery of long gold contracts. Ya know JPM was huge short.

Has a deal been made with these folks to 'cool it'?  The take down this week makes me think so.....

zen0's picture

Chinese policy makers read ZH also. Chinese refer to China as the Middle Kingdom, because it is the center of the world.

The four directions emmanate from it, and it is the 5th direction.

lolmaster's picture

huh, i prefer "the Hive"

Kina's picture

Ahh one can hope the AUD will go to 67c again as before...good for my gold and silver and will be ahead of any drop in gold.

All_Is_Well's picture


Is there any way I can trade in my USD's for CNY's so I can get %5.56 interest on my money?


Geronimo66's picture

To ease or not to ease.

Its my gut feeling that there wont be QE II as most of us expect. We well be in for a big surprise. Question is of the world is ready for to rumble for this Rubble Trouble.

Just want to have it said.

Mr.Kowalski's picture

Helicopter Ben will not disappoint; a trillion to begin with, with the authorization to do double that should "the need arise". Bank of America will survive, though the vaults will be a tad lighter; the Fraudclosure thing will take years to untangle. Equities will stay around current levels.. but commodities will soar, hitting the serfs hardest.. but who cares about them anyways; they exist solely to provide their betters with wealth.  

ATG's picture

Bravo essay except for speculating on back room deals.

Deflationary monetary and inflationary historical evidence clear for all to see:[1][id]=BASE&s[1][transformation]=pc1

US Treasurers touted strong fiat currency before Hamilton and the Continental redemption scam for his NY Bank clients.

Ben Franklin actually accomplished strong currency keeping the colonial paper money supply steady until Brits counterfeited the Continental.

Since then, including 1913, Strong Dollar Policy = diplomatic code for Look out below.

Maybe this time will truly be different as debt default deflation drives up demand for dollars and Benny doesn't dare fly his helicopter over anyone but Fed banks.

Rather ironic Fed refuses full audit to maintain its independence while playing politics with the Tu 2 Nov 2010 election...

Patrick Bateman's picture

The Fed will absolutely do QE2 without a doubt. Has anyone on here seen the movie "The Money Masters"? The whole world trades commodities with the US dollar, or better to say the "Federal Reserve Note". They want to hyper inflate to destroy the currency, they do not want the currency preserved through deflation because the crash of the US will give every reason to resort to a one world currency. When you control the money supply of the entire world you are king. Through inflation and deflation you can do whatever the fuck you want. It's not how much "money" you have, it's who controls the money supply. Think about it.

ATG's picture

The Illuminati theory around since at least 1776 and still not come to pass...

dogboy12's picture

The most interesting point is how many responses seem to think that any reduction in QE2 would be horrific or virtually impossible.  Seems people have bought into the sales pitch.

Krugman says we need $8-10 trillion in QE.  Doesn't matter what comes out, it's not going to be enough to sustain this market. 

treemagnet's picture

anybody think this MERS issue may be partly resonsible for the change in tone?  This fraudclosure thing has deep roots - its gonna take a lot of fresh paper to soak up that mess!  Maybe China called us out and we promised to buy more trinkets and shit.

Buck Johnson's picture

I think your spot on.  When this story started to get traction a few weeks ago, people thought it was just robosigning and thats it (dumb americans).  Not pension funds and central banks and other financial institutions are seeing that their bonds may have been fraudulently put together.  And even now, some bond holders may have the same asset backing their bond that 3 or 6 bond holders might have.  The chinese don't have to dump, but only say they want to investigate to see if their bonds (the chinese have both US treasuries and Mortgage/debt bonds also) weren't done fraudulently.  By them doing that it would put the US bond market into deep freeze, nobody would buy bonds until things are sorted out.  For Tim to flip a 180 tells me that behind the scenes something was said and this situation just helped China's side without using the nuclear option.


max2205's picture

Qe2= mbs buys. That's it. It's all for the banks period

Silver et all will collapse q4

Panafrican Funktron Robot's picture

A reversal towards a strong dollar policy would make sense insofar as locking in gains on the wealth transfer.  The recent reverse repo was an interesting indicator.  Basic point here, the QE going on since 2008 was the mechanism to transfer wealth, but the catalyst was a strong dollar completely fucking shit up.  Shit gets fucked again through the strong dollar, rinse/repeat.  In other words, I think QE will get turned back on again, but I think it first gets turned off.   

dot_bust's picture

The most likely scenario is that Bank of America will collapse and start to suck the rest of the stock market down with it. After the Dow drops a few thousand points in one day, Bernanke will come rushing out and say that QE II must be done to stop the market from dropping.

Besides, while everyone is waiting for QE II, it has already begun. The POMOs are QE II.

Financial_Guardian_Angel's picture

QE II is a waste and everyone is just starting to understand that. The Chinese don't wan.t it and it won't do the US any favors either.

The POMOs are method of treading water--buying more MBS or UST to replace the ones that have paid off. It's like eating shit, crapping it out and then eating it again.

China is getting serious and expects us to do the same. With the elections and the FOMC meeting coming so close together in November, one thing is for sure: close your eyes and open wide, cause Benny's got a big surprise...

How about it WBonzai7? Got a visual for this?

RoRoTrader's picture

william banzi7 can probably put out some visuals to convey the meaning of 'back room talks'

RoRoTrader's picture

QE or not to QE?

Marc Faber thinks QE is for real and that stocks will rise in price as governments print (governments as in plural - the ECB has been printing surrepitiously), and the USD will reverse higher as interest rates start to rise.

Who really knows, but it is hard to imagine the FED has spent so much 'capital' from POMOs to public relations to have the equity markets fall off a cliff post Nov 3.

Maybe the FED will have its cake and........until then keep it simple and trade price.


the grateful unemployed's picture

maybe the Fed will bake its cake and eat it too..

do you think the bulls know they are in a trap? I mean with volume nothing, how much can you unload in a hurry? similar story with companies who borrow money to buy their own shares? where does that take you, 100% of your own float, then what. go private, after you have overpaid yourself with debt, in order to buy your own company? the real bithch is that the true currency, collateral currency is being debased, so people have no incentive to work or save. makes for an interesting society.

meanwhile go cash, go short, and go off the grid, and beat the rush

RoRoTrader's picture

Put another way, everything is possible and nothing impossible.

SheepDog-One's picture

Oh ok. Well seems to me the bottom line is Bernanke has gotten his big market pump by promising Q/E and tagging that promise to every bit of bad news for 2 months. What were the rumor amounts discussed back then? $5 to $7 trillion dollars? Looks to me theyre trying to back peddle wildly on it now, so either Ben coughs up 5-7 trillion or we're in for at least -1,400 DOW points real quick, and probably far more since this whole monstrosity since the DOW 6,500 days has been built on toothpick legs.

RoRoTrader's picture

That's just it. What is the runnup since Aug 31 or so worth in terms of price? Who really knows? This market has gone higher and higher so what's to say the Dow cannot break 11,200 and return to previous unimagined highs?

There is already a potential double top at that price. What if the FED comes with a big number and it breaks 11,200. The Nasdaq 100 is already back to 2100 which is a spit shot from the 2007 highs. Is it a short at that price or maybe it's on its way up to 2500 for all I fucking know.

Why not the Dow and the S&P too?

The DAX at 6600 has broken resistance decisively from its range top around 6200/50 yet the European banks are supposed to be mired in shit and the ECB are in love with Irish bonds like Catholic priest lust for alter boys.

I don't know and I don't think many others know either.

I am trying to trade what I see and be on the right side of price and manage the risk appropriately. So far, the technical analysts have gotten it wrong, wrong and wrong at every resistance level while ZH has been pounding it home every fucking day that POMO is a free pass for retail traders to frontrun the market. Even Nic Lenoir called the turn on Aug 30 and closed short positions. The only difference with NL has been repeated attempts to call and short false tops.

Love it or hate it, RobotTrader has called this market consistently also since the turn of Tuesday, Aug 31.

Techincals look nice but the FED trumps, and I doubt the FED will be bringing a knife to a tire iron fight unless Bullard is packing for a long trip on a one way ticket of no return.

How long that trading opportunity continues to last is also speculation.

I definitely agree that one of the risks to trading the intervention is the risk that the music suddenly stops and prices plummet, but no doubt Bernanke is very well aware of that risk also........not to mention the mob that may suddenly gather outside of the Federal Reserve offices.

Just because I trade it does not mean I agree with the manipulation. I don't agree with it at all and I think it is criminal but until 'people' beyond this blog and others like it take responsibility for the democracy there ain't no fucking substantive change and/or reform coming down the pike any time soon.

The possibility of volatility with wider price swings into the the Nov 2 and 3 FOMC is a thought that has crossed my mind as risk to be looking out for.

GoinFawr's picture

Love it or hate it, RobotTrader has called this market consistently also since the turn of Tuesday, Aug 31.

Uh mb in hindsight, Robo is quick on the draw there, I'll give it that, acolyte.

eg. Robo was pimping aapl the Friday before it flash crashed following which he/she immediately flipped faster than you can say "flop". That's easy to see for anyone who wishes to check.

'Costanza' -ing Robo's trades can likely get you stuffed with more fiat dough bitz (if that is what you like) from what I've seen.


RoRoTrader's picture

Sorry, I didn't mean to piss you off there GF........just making a simple point about consistent calls, short and/or long.......aka known as being on thre right side of price discovery, however that happens to happen.

Just out of curiosity and guessing from your moniker Goin nowhere you have been around, so then where the fuck have you been on price direction?........can't really remember, not that it matters.

While we are on the subject want to share your thoughts for ZH's consistent POMO calls while you are at it asshole?

GoinFawr's picture

Piss me off?  Heh, no need to apologize: you obviously don't have the skillset. On the other hand, if you were trying to bore me to tears; well, there you're a true pro, mission accomplished. It really isn't all that hard to tell who the angry one is here; zzzzzzzzzzz.

 As for consistent calls before the facts, rather than immediately following them ("Oceania has always been at war with Eastasia" style); have a look before you leap, it's bound to save you breaking your neck from the whiplash of being shown-up. IE My moniker suits my profile quite nicely, thanks for asking.

RoRoTrader's picture

If you can't close then don't open a conversation with trite or condescending remarks, asshole. There was nothing in my posts that invited a stupid comment from you infering some negative connotation.

If you have a problem grasping the concept of price discovery and risk transfer or an impartial observation about consistent market direction calls then stuff it.

As for the moniker you are right, like Goin Nowhere fast, Goin Wherever.

Goin goin gone........Has Been.

If you dislike Robot so much then you must have the same opinion about the consistent calls by ZH to frontrun the markets on the POMO schedule too, right?

And, what do you trade?.......nickles, dimes and bubblegum.

GoinFawr's picture

Hah, don't blame me for your laziness. I'm certainly not here to hold your hand, so please stop begging, saddo.

 Indeud: Bonne chance getting any useful information out of anyone with such a charming demeanour. I suggest some anger mgt. training might assist you in achieving your life goal of not sucking quite so much.

"If you have a problem grasping the concept of price discovery and risk transfer or an impartial observation about consistent market direction calls then stuff it."

<Snort!> What, does Robo give you a penny for every one like that? Heh, I'm surprised you can still type with your tongue so far up his/her ass, polyp tickler.


RoRoTrader's picture

Goin Where?.......You are trying to hide your ignorance and insecurity behind insulting language.......

Besides informative posts as far as I can tell Robot is not selling a service, at least on Zero Hedge and if so, much like other contributors then I would want to know about it.

Aside from your obviuos disdain for Robot, you still have not answered the question about the steady drumbeat from ZH to frontrun the market on every POMO, and quite a few to date over the past months just in case you missed that.

Translated loosely for someone like you it tells that RISK is skewed to shorting so obviously be on the BUY side since debasement of the reserve currency means that everything priced in USD must go up as the dollar goes down.

Follow that So Fawr?.......hope so because it is pretty simple.

Back to that question you seem to insist on avoiding; One more time, what is the difference between what Robot has been calling since Aug 31 when shorts were closed and ZH, except Robot has been more specific in selection vs the broader application of ZH's being on the opposite side of the dollar by frontrunning POMOs?

Have a nice day.

GoinFawr's picture

Yawn. If you have to ask...

"Aside from your obviuos disdain for Robot, you still have not answered the question about the steady drumbeat from ZH to frontrun the market on every POMO, and quite a few to date over the past months just in case you missed that"

So you're saying Rbot is ZH and at the core of every bit of useful info. you can find here? Interesting. Is that like a Taoist thing? If so: that's really deep, man. Wrong too, though. You need to check posting timing with a modicum of diligence, R-acolyte. Flip-flopping is weak, but ok as long as the bandwagoner can admit they were wrong in the first place. Guess who's hero may have been stringing them along? Hint: you might need a mirror to figure it out.

FWIW I never once said every call Robo made has been completely off, but there have been some real egregious doozies that might bear repeating but shouldn't need to be, so on balance... And yes: I mean since Aug.31 too.

Robo does post some decent 'blue' pics, no doubt. Cartoons need some work, mind you.

 And you find my language offensive? That's rich; I'm surprised you aren't afraid of eating with those filthy fingers of yours after mashing out expletives on your KB continually.  Your skin isn't all that thick, is it? Your head on the other hand...

Bonne Chance!

GoinFawr's picture

"...oh I get it; it's very clever. How's that going for you, being clever?"

Roro: Great...

"Well keep it up then!" -TD

RockTime's picture

Good article. Interesting observations about the directionaly change in commodities - the response from Gold is definitely disproportionale to a tiny blip (yet) in USD. Of course, this could be just a usual supression by the Fed and London goons. Copper did not come down much at all though -- off less than 1% from the 60-day high as of now... so, not sure about that one as an indicator.

I do agree though with the assumption that some backroom talks might be underway. If I were Chinese, I would not tolerate your biggest debtor openly devaluing the debt you gave the guy.  If I were that guy (US) I would not be so gungho about rattling the Chinese either... Apart from numerous voices from pretty smart people that QE2, 3, ...n is basically idiocy and will create nothing but pain and starvation for retirees, small businesses, and consumers (via pork and wheat going up 200% instead of "just" 50-100% as recently), US should also not be too cowboy about a bazooka that China is holding now -- $900Bn in USTs. Even a whif of Chinese being ready to dump will create an avalance and then the trivial stuff like the value of the USD or Stock Market or even whether it is the Blues or the Reds (both are fucking corrupt) or the Checkered gain the seats on the Hill will be the least of the US problems...

SheepDog-One's picture

Instead of 'Q/E' Im now just saying 'magical pixie dust', both the same effectiveness and worth.

SheepDog-One's picture

Get ready for massive 'terrorist attacks' soon, thats their only way out.

Al Gorerhythm's picture

Terrorists crash their Vespas into 33 Liberty. Multi-story bank buildings all round the world, collapse into their own footprint.

SheHunter's picture

Yeah and those without Vespas let their dogs lift their leg on the outside of the banks.  Anazingly, the urine acts as a catalyst invoking entire multi- stories to soundlessly collapse into a clean footprint.  Debris is quickly and quietly packaged and shipped overseas for use in recycled products.  Widowers and orphans are provided large settlements in exchange for remaining silent and asking no questions.  Citizens across the continent become angry and unified for a moment before their learned millisecond attention span switches their focus back to Dancing with the Stars, sugar products and cheap brew.