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Action Over; Reaction About To Commence

Tyler Durden's picture





 

Via Mark J. Grant, author of Out of the Box,

“Knowledge is a weapon. If you wish to participate in the Great Game; be formidably armed!”
 
                       -The Wizard
 
The one thing that all of us know, surely all of us must know at least this, is that markets do not go forever in one direction. I am not speaking here of the pecularities of a day or of trying to eke out some trade but of shifts in circumstances and sentiments that sets the direction upon a new course. Sometimes the tide going out is stumbled upon as there is more sand than before on the beach and sometimes it is revealed by certain indicators such as when the 50 and 200 day moving averages break-out of their ranges. This occurred yesterday for the ten year Treasury which is the third time it has happened in the last three years. The first two times there was a break-out to the upside which helped to fuel a massive rally in Treasuries and other fixed income securities but now we have broken out in the other direction which may cause any number of unsavory occurrences. The first would be higher yields and lower prices for Treasuries and then for other bonds with the second being a reversal in equities as stocks generally lag bonds when a reversal is in process and then it may well be commodities that take the next hit and so the dominos proffer their usual effect. Now may be a very good time to take some profits, I suggest it, as I have suggested before, and to have a little extra cash in your sock drawer. Timing is always part of the larger question and the money that you have made may be the money that you have lost in the twinkling of the some Fate’s eye.
 
“We give advice, but we cannot give the wisdom to profit by it.”
 
               -Francois de la Rochefoucauld
 
We live in a world recently comprised of three basic tenets; postpone, make up facts to suit the goals of some nation or nations and throw money at anything that moves. This is an inherently unstable construct and yet that is what our brilliant leaders have embraced. I will tell you this; when chicanery is trotted out as truth, when liabilities are not counted, when losses are termed investments, when the only answer to anything is the printing of more small pieces of green and blue paper then trouble is approaching with a capital “T” and the future is a bleak cloud of foreboding. There are some that think my musings pessimistic; they are not. “Preservation of Capital,” Grant’s first ten rules written once and reiterated nine times thereafter are cast in stone because that is exactly where they should be cast. Almost four decades on Wall Street allows one to capture a little wisdom perhaps and whatever I have captured, judge me as you like, leads me to be the bearer of forecoming news which, without a lot of confusing statements, is the following: “We are going down.”
 
Money has flowed. It has propped up every asset class on the planet. Nothing was exempted or spared and if you were on the right side of this trade, in any security, you have benefited handsomely from the collusion of the central banks. A little analysis however indicates this is all about to change. Let me first differentiate the situation that separates America from Europe. The methodology for the Fed has been to buy the sovereign debt of the United States and so monetize what the Treasury has printed which has lowered yields and been a benefit to the government at the expense of investors except the ones that were already fully invested. Then the Fed started with mortgage backed securities which further benefited fixed income investors and also helped with the housing problem as Real Estate stabilized and then rebounded. Then, in Europe, we have a very different scenario.
 
The European Central Bank has bought not just the debt of the sovereign nations in their care but also massive amounts of loans, securitizations, bank debt and Real Estate loans. Then it is not just the ECB that has participated in this program but the central banks of every nation in Europe. Nothing is counted accurately, 80% of all assets are classified “risk free,” and virtually nothing is marked-to-market. All good, all fine except that these loans and securitizations are failing and the losses are going to be massive. The amount of debt resting upon the financial condition of Greece, Portugal, Cyprus, Spain and Ireland is going to come to the fore and the results will nothing like you have seen before and certainly nothing that is generally expected. Long experience in the Great Game has taught me that you may ignore what you like, not count what you do not wish to count, pull the wool over the eyes of the sheep for a time, sometimes a long time, but there does come a day, there does come a time when the Day of Reckoning arrives and it will be a bloody affair.
 
The world has engaged in a game of smoke and mirrors where the reflections in some Swarovski crystal have been thought of as reality. We play to win and not to be right and certainly not to be either judge or jury and so we have ridden the steed given to us but I am afraid the bend in the racetrack ahead is a U-turn and woe to those who do not recognize the distinctive features. Since the financial crisis of 2008/2009 it has been a “Mad, Mad World” but we all played the hand we were dealt. For every action, as Newton famously pointed out, there is a reaction and I predict “action over and reaction about to commence.”
 
“Excess generally causes reaction, and produces a change in the opposite direction, whether it be in the seasons, or in individuals, or in governments.”
 
                 -Plato

 


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Tue, 01/29/2013 - 09:37 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

markets do not go forever in one direction

 

Don't fight the printer.

Tue, 01/29/2013 - 09:43 | Link to Comment TotalCarp
TotalCarp's picture

Another morning, another nugget from Capt. Obvious. Water is wet.

Seriously, Mr Grant, how about you start writing once a week and perhaps something that you havent said the day before. 

 

Tue, 01/29/2013 - 09:55 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

 

Water is wet.

 

As surely as Water will wet us, as surely as Fire will burn, The Gods of the Copybook Headings with terror and slaughter return!

 

Repetition is good......it's done for a reason.

Tue, 01/29/2013 - 10:32 | Link to Comment icanhasbailout
icanhasbailout's picture

 

Repetition is good......it's done for a reason.

Wed, 01/30/2013 - 01:36 | Link to Comment TheMerryPrankster
TheMerryPrankster's picture

Ya gotta keep repeating the propaganda. - George Bush jr. 200?

Tue, 01/29/2013 - 12:50 | Link to Comment rotagen
rotagen's picture

"Financial Media" boneheads and their crystal balls.  This guy knows its "smoke and mirrors", seems to know that money and central banks are phony scams, yet engages in prophetizing.  Alacadabra Alacazam, I could make an argument from personal observations that the economy/market is going higher...notwithstanding the absolute lack of any relationship between the 2 - booga booga alacazombie I say.

Tue, 01/29/2013 - 09:39 | Link to Comment Catch-22
Catch-22's picture

Anyone remembers, “Who is Zero Hedge, and why should we care?” a Canadian article from The Globe And Mail penned a year ago…

A hatchet job to discredit the prescient Tyler who dared question the health of Canadian banks…

Well, “… TD Bank, Scotia, CIBC, BeeMo, National and Desjardins had their long-term ratings zapped by Moody’s. The reasons sounded ominous. The move came because of our ongoing concerns that the Canadian banks’ exposure to the increasingly indebted Canadian consumer and elevated housing prices leaves them more vulnerable to unpredictable downside risks facing the Canadian economy than in the past.”

 

Tyler  “24”

The Globe And Mail  “0”

 

http://www.theglobeandmail.com/report-on-business/streetwise/who-is-zero...

http://www.zerohedge.com/news/next-domino-fall-canada

 

 

Tue, 01/29/2013 - 09:46 | Link to Comment TotalCarp
TotalCarp's picture

Indeed, i would like to politely request that most people that call themselves "journalists" these days eat sh1t and die. As last time one of that profession did not just regurgitate the party line was probably 30 years ago.. maybe more.

One may disagree with some of the opinions and views on this site but at least one actually is provoked to use ones brain here. Good job Tyler(s)

Tue, 01/29/2013 - 09:49 | Link to Comment BLOTTO
BLOTTO's picture

Real journalism is dead. Im not sure if it even ever existed.

.

Also, RY was down graded last year as the 1st of the Big 4.

Tue, 01/29/2013 - 09:54 | Link to Comment semperfi
semperfi's picture

Today's journalists are simply closet neo-marxists.  Come out of the closet fuckers.

Tue, 01/29/2013 - 10:11 | Link to Comment Spastica Rex
Spastica Rex's picture

They are courtiers and courtesans. Royal boot lickers, not Marxists.

Tue, 01/29/2013 - 10:52 | Link to Comment UnRealized Reality
UnRealized Reality's picture

LOL, I remember a time when it was said this is NOT journalism, it's a BLOG and promptly deleted the post. It was also said that everything WILL go to zero, without exception. Now that views change so does the site to keep the sheep happy and the clicks going. Sounds a little like hypocrites, just saying.

Tue, 01/29/2013 - 11:45 | Link to Comment edifice
edifice's picture

Like I've said before, it's infotainment. Just come for the laughs.

Tue, 01/29/2013 - 12:01 | Link to Comment TotalCarp
TotalCarp's picture

Ha i have never claimed this is journalism either. 

What i wonder tho is if you think its so silly why are you spending your time reading all this - an posting?? go back to NY Times, suck off Krugman and be happy.  

Tue, 01/29/2013 - 14:05 | Link to Comment UnRealized Reality
UnRealized Reality's picture

Your funny, There is no difference in info. ZH and MSM give the same Info. Go check. ZH just makes it seem there's a difference. But if it makes you all warm and fuzzy being here, knot yourself out.

Tue, 01/29/2013 - 15:44 | Link to Comment mkhs
mkhs's picture

Well, there does seem to be a wee bit of a time difference.

Tue, 01/29/2013 - 09:40 | Link to Comment LongSoupLine
LongSoupLine's picture

Like I've said many times...

You can't put frosting on a steaming pile of shit and call it a cake.

Tue, 01/29/2013 - 09:43 | Link to Comment francis_sawyer
francis_sawyer's picture

Doesn't stop you from feeding it to the proles though...

Tue, 01/29/2013 - 10:01 | Link to Comment ejmoosa
ejmoosa's picture

Sure you can.

And there will be a group of fools that support it's creator, eat it and tell us how wonderful it is.

Have you not been watching the MSM the last 4 years?

Tue, 01/29/2013 - 10:14 | Link to Comment lunaticfringe
lunaticfringe's picture

Let them eat cake! Minus the frosting!

Tue, 01/29/2013 - 10:23 | Link to Comment Vooter
Vooter's picture

A trillion flies would beg to differ!

Tue, 01/29/2013 - 11:43 | Link to Comment lincolnsteffens
lincolnsteffens's picture

I think it was some famous poet who said "A skunk cabbage by any other name would still smell

as odoriferous."

Tue, 01/29/2013 - 09:40 | Link to Comment cossack55
cossack55's picture

Perhaps if they change the color of the fiat.  Quick, send a color wheel to the ECB and the Fed.  Sorry Japan, too late.

Tue, 01/29/2013 - 09:46 | Link to Comment q99x2
q99x2's picture

Get your student loans while they last. Granny's about to be expelled.

Tue, 01/29/2013 - 09:47 | Link to Comment BandGap
BandGap's picture

I had a bad hangover one time and slept in late in college. Friends came by and convinced me to go to a baseball double header with them. So, with an empty stomach and a severe case of the stupids, I trotted off with them. Four hours later I had consumed several portions of nachos with copious amounts of jalapenos and the requisite amount of beer.

I think I have a feeling what is heading our way.

Tue, 01/29/2013 - 10:21 | Link to Comment Vooter
Vooter's picture

Oh, lord, do I remember those days. And while the hangover analogy is perfect, the POSTPONING of the hangover via continued alcohol consumption is even more perfect....

Tue, 01/29/2013 - 09:47 | Link to Comment NEOSERF
NEOSERF's picture

Off topic but if Cushing is full, NG rigs are plummeting as Cushing is full, NG prices are at $3, WHY is oil hovering at $100???...It should be at $50...Bernank effect?

“In 2011, production increased 21 percent beyond 2010, and production in 2010 was up 17 percent year-over-year,” he said.

Despite lower oil prices toward the end of 2012, Texas producers continued their focus on crude oil instead of natural gas, he said. Natural gas prices were even lower. Consequently, roughly 80 percent of active drilling rigs targeted oil-rich prospects instead of gas plays, he said.

“It wasn’t so long ago that the U.S. and Texas were in the throes of a brutal, unflinching production decline that was thought to be permanent,” he said. “This dramatic reversal in U.S. and Texas crude oil production simply would not have happened absent the sharp rise in price from the $20 to $30 range 10 years ago to the $100 range today.”

Tue, 01/29/2013 - 09:53 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Many reasons, mostly to do with the numerous commercial fates of oil.  Natural gas can be used as a feedstock for a couple commodity chemical production pathways, that's about it.  Oil on the other hand, is a feedstock for essentially everything in the modern "plastic" society.

It's that, or something big is about to go down.  War is the other obvious reason.

Tue, 01/29/2013 - 10:03 | Link to Comment Being Free
Being Free's picture

"WHY is oil hovering at $100???..."

The measuring benchmark is warped

Tue, 01/29/2013 - 10:57 | Link to Comment illyia
illyia's picture

I would argue that it is a political expedient, hinging largely on the Saudis (and other ME "allies") need to meet basic national requirements in a sea of Arab Spring.

I would place the price of oil squarely on the page with Au.

Tue, 01/29/2013 - 13:58 | Link to Comment trav777
trav777's picture

supply is tighter than they're saying because production is not as high as advertised.

Cushing is irrelevant.

Was Prudhoe a "reversal" in US oil production?

Tue, 01/29/2013 - 09:51 | Link to Comment semperfi
semperfi's picture

"these loans and securitizations are failing and the losses are going to be massive."

I call bullshit.  Maybe in a world where laws still apply.  Maybe in the old world that wasn't centrally planned/administered.  But in the new normal of money printing on demand, there will be no losses - otherwise we would have already seen massive losses.  Wake up dude and smell the ink.

Tue, 01/29/2013 - 09:57 | Link to Comment LawsofPhysics
LawsofPhysics's picture

exactly.  losses for whom exactly.  Certainly not for the relative few who proffitted from creating the whole fucking mess.  Start executing the perps (starting with Joh Corzine) and watch confidence and market for true price discovery return overnight.

Tue, 01/29/2013 - 10:15 | Link to Comment Vooter
Vooter's picture

So printing money, then, is the answer to all of the world's financial problems? We're good to go now?

Tue, 01/29/2013 - 09:51 | Link to Comment SelfGov
SelfGov's picture

So you're saying we're now on the far side of Hubbert's curve? What a fun ride this will be.

 

<-- puts arms up and screams.

Tue, 01/29/2013 - 09:51 | Link to Comment bigbwana
bigbwana's picture

This compelling documentary exposes the NWO and their evil plans to enslave the world. Pass it on. Time to go viral. Time to stop those who would rule us mercilessly with an iron fist.

THRIVE is the name. (Google)

Tue, 01/29/2013 - 11:34 | Link to Comment Ralph Spoilsport
Ralph Spoilsport's picture

THRIVE is jive. Are you their new fundraiser?

Tue, 01/29/2013 - 09:55 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

To the Author - 

"Now may be a very good time to take some profits, I suggest it, as I have suggested before, and to have a little extra cash in your sock drawer. Timing is always part of the larger question and the money that you have made may be the money that you have lost in the twinkling of the some Fate’s eye."

 

dude i stoppped reading at that point....Quit encouraging people to feed this corrupt banker controlled casino which is one of the pillars of power they have used to usurp the republic  & fleece the ignorant populace!!!!

FUCK THE MARKET AND ALL DEBT COUPON DOLLAR DERIVATIVE SCAMS!!

you should be encouraging the citizenry to move away from the sociopaths debt based currency plantation to the freedom gained by accumulating both of the only 2 forms of real money....PHYSICAL GOLD & SILVER ONLY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 http://www.youtube.com/watch?v=hh-xQbfOoFI 

Tue, 01/29/2013 - 09:59 | Link to Comment Michelle
Michelle's picture

Notice he didn't say BTFD!

Tue, 01/29/2013 - 10:05 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

Notice he didnt say shun the Fraud Market  - period!

Tue, 01/29/2013 - 10:11 | Link to Comment Michelle
Michelle's picture

The Pavlov dogs will be buying the dip since the central banks have conditioned them to do so whereas I took profits last week and have hedges in place for the first time in four years. Capital preservation baby!

Tue, 01/29/2013 - 10:19 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

"Capital preservation baby!"

man listen to urself....

what exactly r u preserving again????

a worthless piece of green shit u have been told is money thqats lost 98% of its purchasing power????

why does a 1964 kennedy 50 peice have more purchasing power than a $10 debt coupon Federal Reserve Note?????

anwer correctly and ur training will be complete...

leave the banker matrix baby!!

Tue, 01/29/2013 - 10:37 | Link to Comment Michelle
Michelle's picture

When the central banks started buying gold with their deep pockets coupled with my understanding of the greater fool theory, that's a big signal what action to take.

Tue, 01/29/2013 - 10:47 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

"When the central banks started buying gold with their deep pockets coupled with my understanding of the greater fool theory, that's a big signal what action to take."

1) central bankers r sociopaths, not to be confused with fools...

2) there r only 2 forms of real money - Gold & Silver - 5000 years of historical fact gots my back.

a gift from the mouth of a money changer circa 1991- who was John Exeter???

 

"Moneychanger: What particular signs currently make you think we’re getting close to the collapse of the debt pyramid?

Exter: The most important one is this flight to currency. It is bigger than anything I expected right now. We are still having troubles with banks, thrifts, insurance companies, and others, which will cause more people to move down to Treasury bills and currency. At some point they will go to gold. We’re at the threshold of that point. When they go to gold instead of currency or Treasury bills, the price of gold will take off. It will be a bandwagon everyone will want to get on. Then even those who have bought currency will see how foolish they were and that gold is far better to hold than currency, that it is the best store of value money man has ever found. It’s stupid for people to hold currency. The Fed can simply print all they want at very low cost. Paper money is as abundant as leaves on trees."

 

 


Tue, 01/29/2013 - 10:23 | Link to Comment eddiebe
eddiebe's picture

Of course there will be a major reckoning. The great question is when. At least in regards to currency and the precious metals, the printers are in firm control and the great masses washed and unwashed appear to me completely enthralled.

Tue, 01/29/2013 - 10:24 | Link to Comment I need more cowbell
I need more cowbell's picture

" markets do not go forever in one direction"

Yeah I rememeber markets....

Tue, 01/29/2013 - 10:28 | Link to Comment El Hosel
El Hosel's picture

Yeah Markets... those were the days.  Fuk Yu New normal

Tue, 01/29/2013 - 11:42 | Link to Comment edifice
edifice's picture

They do go forever in one direction... In Bizarro World...

Tue, 01/29/2013 - 12:05 | Link to Comment joego1
joego1's picture

For me seeing Apple take a hit was a hint of things to come. They can play currency war games until a real war comes along and they start actually shooting over resources because everyone calls bullshit on fake money.

Tue, 01/29/2013 - 12:35 | Link to Comment CaptainSpaulding
CaptainSpaulding's picture

" A fool chatters, But it is the wise man that listens"

   -Chiun, Remo Williams... The adventure begins

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