Draghi's Bazooka Fired Blanks

Phoenix Capital Research's picture


Regarding the recent Central Bank coordinated intervention, the key take-away point is that the ECB and US Federal Reserve attempted “shock and awe” tactics with their latest announcements by throwing out words such as “unlimited” and “open-ended.”


The implication here was that the Central Banks would do everything they could to prop up the financial markets. However, as has been the case with every Central Bank intervention, there are unintended consequences.


The first unintended consequence concerns the fact that both programs are essentially a form of “intervention to infinite.” The problem with this is that the primary driver of stock prices over the last three years has been the anticipation of more monetary stimulus from Central Banks.


Indeed, the New York Fed itself has openly admitted that were it to remove the market moves that occurred around Fed FOMC meetings (the times when the Fed announced new programs or hinted at doing so), the S&P 500 would be at 600 today:



So, by announcing programs that will be on going in nature, both the ECB and the Fed have removed the anticipation of future Central Bank intervention from investors’ psychologies. This could become highly problematic, especially if these latest announcements turn out to be duds.


Speaking of which…


Spain’s ten-year bond yield has broken back above 6%. To see Spain’s sovereign bond yields rising like this after the ECB announced it would essentially provide “unlimited” buying as support is simply stunning. And it indicates in plain terms that the ECB’s program was in fact a dud.


This is just one example of the slew of Unintended Consequences we’re going to be facing as a result of the Central Bank’s actions. There will be others… none of them good.


On that note, the time to start preparing is now. The printers are running. The Great Currency Debasement has begun. Some folks will walk out of this mess winners. Most will walk out as losers.


At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners. We have a host of FREE Special Reports devoted to helping readers prepare for the coming Debt Implosions in both the US and Europe.


We also feature a special report devoted to inflation as well as which investments will perform best during periods of high inflation (periods like the one we’re entering).


All of this is available 100% FREE at www.gainspainscapital.com


Best Regards,


Phoenix Capital Research

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Grand Supercycle's picture


Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:




Treeplanter's picture

Graham is very good with charts, etc.  Trading? Not so much.

ROCE's picture

"At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners"


Right !!! as we can judge from the famous Euro Crisis Portfolio... 

Euro Crisis Portfolio

Contract Opened At Price Avg price Current Bid Price Return on $10K Gain/Loss SAN Sep 2012 6.000 puts 5/31/12 (11:32AM) $1.30 $0.88 $0.05 -$18,857.14 -94.29% Averaged In 7/3/12 (10:23AM) $0.45         GS Oct 2012 95.000 puts 5/31/12 (11:32AM) $9.55 $7.55 $0.34 -$19,099.34 -95.50% Averaged In 7/3/12 (10:23AM) $5.55         FXE Sep 2012 125.000 puts 5/31/12 (11:32AM) $4.65 $3.59 $0.17 -$19,051.60 -95.26% Averaged In 7/3/12 (10:23AM) $2.52         CS Sep 2012 17.000 puts 7/3/12 (10:23AM) $0.90   $0.05 -$9,444.44 -94.44% EWI Sep 2012 11.000 put 7/17/12 (3:48PM) $1.05   $0.05 -$9,523.81 -95.24% XLF Oct 2012 13.000 puts 7/30/12 (11:45AM) $0.20   $0.02 -$4,500.00 -90.00%
AT's picture

Too bad Graham Summers of Phoenix Capital Research closed all his short positions right at the top of the market!

alp's picture

:)  I like Graham's fundamental analysis and amusing writing style. But he seems to suffer from the same problem most fundamental analysts do: they believe that markets are driven by fundamental analysis and believe too much on everybody else's awareness (or intelligence) of the fundamentals.

I still hold my stance that fundamentals tend to play out its role and come true in the medium and/or long term and so it's good for the overall strategy (long term positioning) but for short term and entry/exit timing one should focus more on traditional technical analysis (volume, trend, divergence, support, resistance, etc.) and look for convergence. For instance, if there is convergence of fundamental and technical analysis, the more the better, then odds are markets will follow the path of least resistance (where there is less risk).

That said, for the very long term I think that only systematic (disciplined) and simple trend following systems hold a chance to survive (if the trader is capable to remain consistent and has a robust strategy).

WhyDoesItHurtWhen iPee's picture

pttt .......... pttt...... sputter ........ptt ......... ptt ...........