Reflexivity

Crypto Chaos Explained - Bitcoin Crashes As 'Cash' Tops Ether For First Time

Bitcoin collapsed overnight, trading as low as $5555 - down 30% from its highs - before bouncing back above $6000, as Bitcoin Cash soared to as high as $2450 (4 times its price on Friday), overtaking Ethereum briefly as the second largest market cap cryptocurrency. All of this chaos has left many wondering what is going on...

SocGen: "Global Earnings Are Back To 2014 Levels; Stocks Are 15% Higher"

"QE sustained equities levels in anticipation of a profit recovery, but rather than de-rating as those earnings came through, markets are simply being propelled to ever higher levels. The equity valuation problem was created during the 2011-15 era when global profits went nowhere, yet equities rose 30%."

One Hedge Fund CIO Is Shocked To Learn The Fed's Model Ignores "The Only Two Things That Matter"

“Wait, that’s not even part of your model?” asked the private sector, imagining itself in the presence of the Fed. “You seriously don’t even consider the crushing weight of the pension avalanche that is bearing down on us? You don’t even take into consideration what’s happening in China?” Silence. “Do you even understand today’s world? Pensions and China are the only two things that matter!" 

Reflexivity And Why The Fed Must Sell The Long End

"If the Fed were to just let its balance sheet 'run off', it would cause additional pressure on short-term interest rates even as policy rates are rising. It could also potentially invert or further distort the front-end of the yield curve and destabilize the money markets... It would, therefore, behoove the Fed to sell some of its longer dated Treasury holdings to steepen the yield curve."

Fasanara Capital Explains How The "Fake Market" Works In One Chart

"‘Fake Markets’ are defined as markets where the magnitude and duration of artificial flows from global Central Banks or passive investment vehicles have managed to overwhelm and narcotize data-dependency and macro factors. A stuporous state of durable, un-volatile over-valuation, arrested activity, unconsciousness produced by the influence of artificial money flows... The higher it goes, the higher it can go, as more swathes of private investors are pulled in. The more violently it can subsequently bust."

Financial Market Insurance Is Not Like Hurricane Insurance

"..the hurricane is not more or less likely to hit because more hurricane insurance has been written. In the financial markets this is not true. The more people write financial insurance, the more likely it is that a disaster will happen, because the people who know you have sold the insurance can make it happen. So you have to monitor what other people are doing.”

RBC Explains Today's Rush To BTFD

"the missile strikes change NONE of the calculus for me...Thus, the balance of risk remains in favor of upside for now until this muscle memory above (buy risk dips, sell vol) is changed... The near-to-medium-term ‘risk downside’ story to me remains largely about the rates move as ‘reflation’ has broken trend line..."