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Citi On Bubbles, Broken Feedback Loops, & Bricks-On-Elastic
Normally, prices are self-limiting, notes Citi's Matt King: yields rise - inflows hit - prices rise - yields drop - outflows hit - price drops, and back to yields rising. But, it appears for now that we are in a positive feedback (or hyperbolic) loop, where - thanks to central banks pushing too much money to chase too few assets - prices rising implores inflows creates "higher returns" which in turn encourages more inflows (as risk is ignored). King's analogy for this precaiorus situation is pulling a brick with a piece of elastic - nothing happens for a long time... and then - all of a sudden - woosh. Ring any bells?
Normally, price movements are self-limiting (a negative feedback loop)...
But as Matt King explains...
Bubbles, however, behave differently...
The question is - obviously - which process are we following in which asset class?
Interconnections make for stickiness - but also fragility...
But everyone is looking at inflows...
Market movements have become much more correlated with positions...
So what happens when the flows taper? Or when markets start to turn down (stocks) or up (Treasuries)?
And that disilusionment is starting one asset at a time...
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Avoid the wobble, ride the SNAP!
YOMOMMA says: "BTFD!!"
SHE'S A BAD MAMA JAMA / Carl Carlton
http://www.youtube.com/watch?v=6QIw1BQIvT4 (4:32)
Anita Ward - Ring My Bell
http://www.youtube.com/watch?v=URAqnM1PP5E (3:30)
Ratt - Round And Round (Official Video)
http://www.youtube.com/watch?v=0u8teXR8VE4 (4:25)
hinder binder
Here's a feedback loop.
Live, It's Saturday Night at Operation American Spring in DC:
http://bit.ly/1kcHKhv
don't believe that it's inflow. more likely just low volume algorithmic circle jerking. you know he ain't messin' when he brings the wesson.
I agree with this.
This would have been a great article if written...last year.
The last chart is dispositive in my view and seems to augur well for Bill Gross and the Bond Kings.
We've already had a huge move higher in Entergy...a pick of mine from last year. Utilities in general have had a spectacular run now...both YTD and since financial apocalypse.
I just think "buy low/sell high" is everywhere and always The Rage...the high fliers have gotten hammered. Let's just "peace out" for the rest of the summer and see what wildness the Fall brings.
Looks like the first thing everyone sells is gold. Nice F'n ZH post.
Here's what happens when the Fed pulls the punch bowl and the bid on financial assets begins to thin... the excess capital starts to leak into the real economy and prices of goods and services sky rocket. Those who rode the paper asset bubble don't feel the strain of higher prices, because they are cash-rich and ahead of the "game". For everyone else, well, there's... there is... there's....