Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."
"I’m tired of being outraged!"
Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
While Kyle Bass once remarked that "the brevity of financial memory is about two years," it appears for today's energy stock traders the period of goldfish-like memory is a mere two days... As the following chart suggests, the 'bounce' in XLE - the S&P Energy Sector ETF - is entirely decoupled from credit's uglier-and-uglier reality (just as it did on Tuesday, only to crash again yesterday). Trade accordingly...
At the latest ECB press conference Draghi said that. “The monetary policy team had this week discussed buying all assets except gold”; qualifying a claim by fellow member Yves Mersch two weeks ago that gold bullion could be included.” If central bankers truly believed in sound monetary policy the headline would have said “We’ll buy all your gold”. That would have propelled both gold and the European equity markets upwards. As it is markets on the continent get cheaper as the good doctor fiddles.
ECB head Mario Draghi made it clear where the real battle is taking place in the world this morning. When asked what form QE would take, his response was to the point... "On what sorts of assets should be included in QE... we discussed all assets BUT gold" and gold dropped, right on cue.
"Gold Is A 6,000 Year Old Bubble" - Citi's Dutch Strategist Throws Up All Over Gold, Days After Dutch Gold RepatriationSubmitted by Tyler Durden on 11/27/2014 17:40 -0500
"Gold is the world’s most persistent bubble: 6,000 years old and going strong" - Citigroup's Willem Buiter.
Dear Willem, thank you for that valiant effort. After reading a few thousands words of shallow propaganda we understand your "confusion": our advice, if you want to understand what gold really is, read the following from Kyle Bass: "Buying gold is just buying a put against the idiocy of the political cycle. It's That Simple." Because if there is a bubble that is even bigger and longer than the "6000-year-old gold bubble" it is that of human corruption, greed, and idiocy. And that doesn't even include the stupidity of those who don't grasp this simple truth.
Stability is a myth yet it’s what we humans strive for...
Day after day, well-dressed talking heads are paraded on business media and proclaim how cheap Japan is, how Abenomics will work (he promise... if it doesn't we'll have to question everything we believe in), how GDP is backward-looking (so ignore it... and every other economic indicator), and how being long Japanese stocks (of course, hedged back to dollars because you don't want to take the currency risk that Abe is creating) is a "no brainer." The problem with that strategy is... in 2014, the JPY-hedged Japanese stock market investor in the US has not had a daily close in the green year-to-date and is down over 5% for the year... but it gets worse.
As Kyle Bass once eloquently noted, the brevity of financial memory is about two years; and nowhere is that more clear than in the explosive resurgence of demand for new subprime-mortgage-backed products. As Scotsman Guide reports, some subprime lenders are reporting strong investor appetite for the once-reviled mortgage products (for borrowers with credit scores as low as 500 and with debt-to-income (DTI) ratios as high as 50 percent). "It's out of control; it seems like there’s 10 times the amount of demand to buy this paper as there are borrowers that want the loans," said one lender. As Bass may have also said "proceed with caution."
Kuroda has fired the shot that looks likely to trigger the next phase of the crazy monetary experiment we’ve all been living in for the last five years. Unfortunately, the next phase is where things start to get nasty. Just because equity markets cheered the latest sugar rush he guaranteed them should not make smart investors lower their guard — quite the opposite, in fact. Colonel Kuroda has gone up-country into the Heart of Darkness, and all we can do is await the Apocalypse now.
Though, if history is anything to go by, it offers a potential for outsized returns
The trend is your friend... until it becomes a Venezuelan hyperinflation melt-up...
Because nothing says economic strength like nominal equity market gains... as Kyle Bass warned in the past - beware the 'nominal' stock market cheerleaders.
Following investors who came to prominence together with Kyle Bass after shorting the sub-prime market in 2007
The Japanese Yen's real effective exchange rate (REER) has collapsed to the weakest since 1982, according to Mitsubishi UFJ Morgan Stanley Securities. Simply put, REER is a trade-weighted measure of Yen strength (or weakness) against, in this case, 59 trading partners; and as the nation posts an unprecedented 27th straight month of trade deficits, Bloomberg reports MUFJ indicates "a structural shift" has taken place. As MUFJ chief FX strategist warns, "If the trade deficit doesn’t noticeably narrow from here, the yen’s real effective rate could fall to levels never seen before," and, ominously, "from a supply and demand perspective, yen selling for foreign currency by Japanese importers will just continue endlessly." And Japan becomes Venezuela...