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The Two Big Summer Risks
The opiate of investors has been central bank liquidity. The degree of stimulus has been unprecedented. But, as BofAML notes, never was so much invested, by so many, on the view that the Fed would stay "behind the curve". It seems - based on gold, credit, bonds, and EM - that no longer can be guaranteed (despite the ongoing anti-Taper jawboning by every Fed head and mouth-piece). It is clear that liquidity withdrawal will not be painless and will sustain higher volatility and BofAML sees two big risks this summer - a market event and/or a macro event.
Via BofAML,
We see two big summer risks to our core view:
Market event.
A marked deleveraging of bond positions driven by private clients, a new “LTCM” or EM central banks (driven by a Chinese credit crunch), which would likely have negative knock-on effects to risk assets until policy makers could once again be forced to intervene (QE4 to save Treasuries?).
The best barometers of such risk are funding measures such as Libor and the BofAML MOVE Index.
Macro event.
Rapidly rising rates are a risk to the US housing recovery, the lynchpin of recent US macro momentum. As the chart below shows, higher mortgage rates have arrested the recent improvement in purchase mortgage applications. This bears watching in our view.
Refi activity, as would be expected, has been negatively affected, but if purchase demand falters in coming weeks, that could be a more concerning trend.
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Pm's and boats.
Gold under $1200, I'm impressed. TPTB are flexing their mussels and
they must have a plan. I think they are using gold to recapitalize the
banks, first by letting them cash in on their shorts and then, when they are all long, letting gold go to the moon.
Not just flexing their mussels, but their clams and shrimps too.
Delivery is critical but that does not seem to be a problem yet and that concerns me. Silver is wicked volatile. Let me give you a quick lesson, silver is a byproduct of copper mining for the most part. Watch copper prices and inventories.
Mussels with some white wine, garlic and cream, hit of parsley good stuff.
+55 kajillion.
Add a bottle of Muscadet, or Albarino, or Vermentino from Sicilia.
+ 10 to Citi analysts for using 'affected' properly. 'Impact' as a verb is ignurnt.
LOL
The pretend decision to go forward with a substantively meaningless Corzine civil action today was no coincidence in my view. They know something is about to happen and "they" want to say they were ahead of the curve. I don't believe in coincidences.
Any ideas on what the "something [that] is about to happen" is?
Speaking only as a student of ZH, liquidity crisis. The rise in interest rates always seems to be the Mothra to the banker Godzilla. If Credit Default Swaps default, all hell is going to break loose.
I agree, the Bond wash out will probably produce more going to Cash. Tin Foil under the Hard Hat.
it's all about china? china, china,...China! please do not be surprised that the chinese are playing the tiger[china] against the fox[ussa/japan] in a give-away gambit of faux`naif-- where world trade ebbs and flows on a river named yuan?!?
,... this pastoral bridge over the fluvial malacca-river, kwai
Ref: http://en.wikipedia.org/wiki/Gulf_of_Tonkin http://www.workers.org/2007/world/myanmar-1101/
http://en.wikipedia.org/wiki/Strait_of_Malacca http://en.wikipedia.org/wiki/Buddhism_in_Burma [@~90%] http://en.wikipedia.org/wiki/History_of_Tibet
"China lifts 17-year ban on Dalai Lama photos at Tibet monestary: group" 6/27/13 http://www.reuters.com/article/2013/06/27/us-china-tibet-idUSBRE95Q07E20130627 [100% Buddhist]
'A Global `MACRO' Event via a 'Chinese Credit Crunch ?'
thankyou Tyler jmo
I wonder how much of that EM crap the squid has on its books. no worries, if muppets don't buy the bernank will.
...if you don't pay, the market will. [/leonard smalls]
So glad I am a 'weak hand" and threw in the towel on PMs a few months ago. Gave back all my big gains on GDX and others...
OT, but that George Zimmerman was a "creepy ass cracker"...
Anyone who thinks QE is over has not been paying attention . Prepare to be whipsawed.
According to this guy it is all over anyway....
http://youtu.be/a2x6TEeknfo
"Out damn spot!","Dear how many times do I have to tell you, it is the premium over spot that is causing the blood."
i don't recall the impact in 1998. in fact as i recall the impact in 1998 was hugely bullish..."washing out the speculative" (meaning HIGHLY leveraged) "positions." the root of all market crashes is ALWAYS the same...and it is NEVER "too much liquidity" but TOO MUCH LEVERAGE. gold and silver are clearly deflating...with all the "so called miners" (who obviously spent all their money long before they opened a single mine. why run a gold mine when you joy ride around toronto in your new Ferrarai right?) ...so "who else is leveraged to the hilt"? (everybody) just because treasuries are the most shorted asset on the planet doesn't mean they're about to crash in my view. (huge short positions=leverage folks=price can move against said short levered position) but sure...the US can do better. EYE can do better...what's the problem. http://www.youtube.com/watch?v=Vr_YVQctXVg
The only risk is that investors lose faith in the rigged game, but all evidence points to the contrary.
So...I will pop a bottle of champagne if China does an en mass selling of their Treasury holdings while the FED makes an un-telegraphed 2% raise to rates.
I can dream, can't I?
A worthy dream indeed, pun not intended