Flight to Safety

Are Central Banks Setting Each Other Up?

There are times you try to connect the dots. There are others where those connections warrant adorning your trusted tin-foiled cap of choice; for you just can’t get there unless you do. This I believe is one of those times. And if correct? What at first might appear apocryphal, may in fact, be down right apocalyptic. And besides, what good is a tin-foil capped conspiracy theory anyhow if it doesn’t have the potential for doom, correct?  The implications for everything we now take for granted such as: money, enterprise, global commerce, and a whole lot more may be far closer to a “Minsky moment” than any of us dared to imagine.

Most Shorted Stocks Suddenly Spike As Biotechs Soar

At 1245ET, someone decided that the shorts had done enough damage and investors suddenly rushed "flight to safety"-like for the GPROs, TWTRs, FITs, and Biotechs of the world. This unleashed a massive short-squeeze among the "most shorted" stocks...

Frontrunning: January 14

  • Islamic State launches militant assault on Indonesia's capital (Reuters)
  • Three winners emerge in $1.6 billion Powerball jackpot (Reuters)
  • European Stocks Tumble, Credit Markets Weaken on Growth Concern (BBG)
  • Stocks and commodity currencies floored by new oil plunge (Reuters)
  • China Bear Market Looms as PBOC Fails to Stop Flight to Safety (BBG)
  • Anxious phone calls, tense moments before Iran's Supreme Leader okayed U.S. sailors' release (Reuters)

"Buy The Dips! What Could Possibly Go Wrong?" Axel Merk Warns "A Hell Of A Lot"

The lack of fear in risky assets is another way of saying that risk premia have been low, or as we also like to put it, that complacency has been high. Not fully appreciative of this inherent risk, it seems many investors have refrained from rebalancing their portfolios, and bought the dips instead. We believe the Fed’s efforts to engineer an exit from its ultra-low monetary policy should get risk premia to rise once again, that if fear should come back to the market, volatility should rise, creating headwinds to ‘risky’ assets, including equities. That said, this isn’t an overnight process, as the ‘buy the dip’ mentality has taken years to be established. Conversely, it may take months, if not years, for investors to shift focus to capital preservation, i.e. to sell into rallies instead.

Global Stocks Slide, Futures Drop After Turkey Shoots Down Russian Warplane

It had been a relatively quiet session overnight when as reported previously, the geopolitical situation in the middle east changed dramatically in a moment, when NATO-member country Turkey downed a Russian fighter jet allegedly over Turkish territory even though the plane crashed in Syria, and whose pilots may have been captured by local rebel forces. The news promptly slammed Turkish assets and FX, sending the Lira tumbling, pushing lower European stocks and US equity futures while sending 2 Year German Bunds to record negative yields.

Stocks Jump On Hope For More Central Bank Intervention After Japan's Quintuple Recession, Syrian Strikes

As so often happens in these upside down days, was the best thing that could happen to the market, because another economic slowdown means the BOJ, even without sellers of JGBs, will have no choice but to expand its "stimulus" program (the same one that led Japan to its current predicament of course) and buy up if not government bonds, then corporate bonds, more ETFs (of which it already own 50%) and ultimately stocks. Because there is nothing better for the richest asset owners than total economic collapse.

Dow Drops 140 Points, Bonds & Bullion Pop As Markets Open

As futures markets reopen, a flight to safety bid is evident with gold ($1090) and bonds bid as US equity futures extend Friday's losses (erasing half of the October surge gains). The Dollar is modestly bid against the euro (EURUSD 1.06 handle looms) and oil is holding slightly in the green (war premium)...