"it may make sense to stay invested, but we have reached a point where protection against an untidy denouement to the present market phase should be built into the construction of a portfolio. It is not enough to rely on a protection that will be executed in response to price signals."
As the "Big Mac Index" is to global purchase price parity levels of inflation, so when it comes to the state of the "recovery" if not for everyone, then certainly for the 0.1%, there is no better metric than the "Porsche Indicator." Recall: "Porsche Reports Record Sales in 2013; 21 Percent Increase Over 2012" which certainly didn't come on the back of yet another year of declines in real incomes for the middle class (spoiler alert: it came on the back of some $10 trillion in liquidty injections by the world's central banks). Yet one place where the "Porsche" recovery forgot to make landfall, is none other than the biggest casualty of Europe's artificial monetary, political and wealth-transferring union: insolvent Greece.
China warns "the outside world doesn't get it, we do," in a statement related to the "stealth QE" they unleashed yesterday, noting investorsd "do not realize that today's Chinese economy is moving towards "new normal" in the process," and "need to accept the volatility of economic data," during this transition. Crucially, PBOC adviser Chen Yulu clarifies what Western central banks simply cannot grasp: "Hoping for stimulus policies in the face of increased economic pressure is short-sighted and does no good to long-term economic development," warning investors should not expect "strong stimulus." Wall Street is less than exuberant about the liquidity injection, as the impact on real economy may be limited due to lenders' risk aversion.
It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines - the longest stretch since 2001 - and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; "paltry" considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the "recovery" rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen's news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.
This is where our economies are perverted. It’s the final excesses and steps of a broke society. It’s madness to the power of infinity. The only thing that’s certain is that in the end, your money will all be gone. That’s how Mario Draghi ‘saves’ the EU for a few more weeks, and that’s how the big boys of finance squeeze more from what little you have left (which is already much less than you think). A world headed for nowhere.
While some are shocked by Calpers' decision to abandon hedge funds as an investment class (the first of many such "exits"), there really should be no surprise here. As we have said year after year after year (and so on), it was only a matter of time before limited partners said "enough" and stopped paying 2 and 20 to overpaid asset managers in a world in which central banks have "guaranteed" there is no longer any risk, just to underperform the market for a whopping 6 years in a row now. And to showcase where Calpers decision came from here are just two charts.
In our era of omnipotent central banks worshipped by the Status Quo, we have a goddess of financial transitions--Janus Yellen, the two-faced chair/deity of the Federal Reserve - to usher in the Great Transition from risk-on to risk-off.
While Janet Yellen and her band of money printers work themselves into a tizzy over whether two buzz words - “considerable time” - should be dropped from their post-meeting word cloud, they might be better advised to just read the newspapers. This morning’s WSJ brings word that the lending boom which our monetary central planners are eager to stimulate is apparently off-to-the-races. Well, sort of. The item in question is a $122 billion globally syndicated loan to facilitate an M&A deal between the world’s two largest beer companies - AB InBev with a 20% global market share and SABMiller with 10%.
Generally since 1999, and especially since 2008, the financial world has been dominated by Keynesian lunacy. Collectively, Central Banks have cut interest rates over 500 times and printed more than $12 trillion combating a brief 9-12 month period of deflation.
So why does it matter if the gold price is rigged? A freely-determined gold price is central to ensuring that reality and not financial bubbles guides us in our financial and economic activities. Suppressing the gold price is rather like turning off a fire alarm because you can’t stand the noise.
While we doubt the pope is much of a trader, based on his latest comments, speaking during a visit to Italy's largest military cemetery, where he was commemorating the centenary of World War I and where he said that a "piecemeal" World War III may have already begun, we assume he too would join the confusion of the BIS and every other carbon-based life form, wondering how it is possible that risk assets are at all time highs which the world is not only teetering on the edge of a new global conflict but may have already in fact entered it. Oh wait, the central banks, never mind.
"Low Volatility Everywhere" - BIS Sounds Alarm Alert On Pervasive Complacency Masking Systemic ShocksSubmitted by Tyler Durden on 09/14/2014 12:14 -0400
"After the spell of volatility in early August, the search for yield – a dominant theme in financial markets since mid-2012 – returned in full force. Volatility fell back to exceptional lows across virtually all asset classes, and risk premia remained compressed. By fostering risk-taking and the search for yield, accommodative monetary policies thus continued to support elevated asset price valuations and exceptionally subdued volatility."
Forget the noise... it's time to back up the truck.
Q. What are traders talking about at the present time here at the New York Stock Exchange?
Cashin: We are concerned about two questions. First, how will the Fed do in keeping money reasonably easy without causing inflation? Second, where do we stand with the current geopolitical challenges? For now, these challenges seem to be short term concerns. But should we begin to see a financial contagion and pressure building on banks in Europe, perhaps out of the Ukraine situation, things could theoretically turn into what I call a «Lehman moment». That is when markets come under pressure but seem to be under control, and then things change suddenly.
The US economy is dead. The Fed has known this for a long time, but pumped it up to where it is now to draw in all the greater fools, the so-called big investors who have made money like honey from QE and ZIRP. They are the greater fools. The American real economy ceased being a consideration long ago. We’re in for big surprises, and they won’t be pretty, they’ll be pretty nasty. There are far too many people who think of themselves as smart who don’t see the difference between a theater play and a reality show. The Fed will raise rates because that will make the biggest banks the most money. There’s nothing else that matters. The Fed can’t revive the US economy, that’s just a foolish notion. But it can suck a lot of wealth out of it.