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These Are The Two Most Crowded Trades As We Enter 2015

Tyler Durden's picture




 

One of the conventionally accepted reasons for the unprecedented hedge fund underperformance in 2014 was that the vast majority of the "smart money" left 2013 and entered 2014, just as the 10Y looked set to decisively break out above 3%, long equities, expressed primarily via the Nikkei which went nowhere for most of the year until in November the BOJ boosted its QE once more, sending the Nikkei surging but long after most stop losses had been triggered to the downside, and short the 10 Year Treasury. The reason: everyone, and certainly every commission- or CNBC appearance-paid pundit, was convinced that this year is when the long overdue and much delayed global recovery would finally take place, pushing inflation and long-end yields higher. Not only did that not happen but virtually the entire world's official economic data, except that of the US, has suffered, an unprecedented for the "recovery cycle" slowdown.

Still, that appears to not have made the tiniest impression on hedge funds, who for the second year in a row are not only massively short the 10Y, but in fact as the latest CFTC net spec data shows, are even shorter than they were a year ago, when the 10 Year was trading about 100 bps wider. Worse: as the chart below shows the only time in history when specs were shorter the 10Y was five years ago, in early 2010. What happened then was that the 10Y went from 4% to 2.5% in the span of just a few months, facilitated largely by one of the biggest short squeezes in 10 Year history.

 

The 10 Year is currently trading at 1.95%: a comparable short squeeze now to that that took place in 2010 would send the 10 Year yield crashing to level where the German Bund is trading now.

Will that happen, and how much more pain can hedge funds absorb before they get a collective tap on the shoulder, we don't know. We do know, however, that the unprecedented bearish sentiment toward 10Y US Treasuries among the speculative community makes it one of the two most crowded trades going into 2015.

What about the second trade?

For the answer we go back to a post, or rather an image we put up in late September of last year "Summarizing The "Long Dollar Trade" In One Chart." The trade in question was the long-USD trade, and the "chart" was the following:

 

If we had to update where this trade has gone in the past 4 months again in just one chart, the result would be the following:

 

In short: just as hedge funds have nothing but hatred and loathing (and certainly fear) for the 10 Year, they have nothing but admiration, love and the most epic bandwagoning in history when it comes to the US Dollar.

This is how Credit Suisse just summarized what is going on with the USD trade:

In FX, aggregate spec positioning in the USD kicked off 2015 with a bang, rising 2pp to 53% of OI, reaching new multi-year highs.

As the following chart shows,the net spec poisition as a % of open interest has never been higher in the USD in the past 5 years...

 

... Even as sentiment toward virtually every other currency is plumbing unseen levels

 

Which brings us to the logical conclusion, that while being short the 10 Year is one of the two most crowded trades as we enter 2015, being long the US Dollar is the other most popular trade among the smart money.

How will this all play out, and will 2015 be a year of double max pain as the TSY short squeeze finally arrives and the USD bandwagon collapses? That too we can not answer as of yet, however, we will recall a very prophetic warning by SocGen's Michala Marcussen, who back then - long before the complete collapse in crude oil, warned about the strong dollar paradox.

It was as follows:

Recent currency movements have triggered nostalgia of the pre-crisis world when dollar strength was synonymous with a prosperous global economy. Hope today is that a strong dollar will cap US inflation, delay Fed tightening and boost exports to the US. To make an impact on US inflation significant enough to slow the Fed, we estimate, however, that EUR/USD would drop to 1.10, USD/JPY to 120 and USD/CNY to 6.50 to significantly shift Fed expectations. To our minds, moreover, such a scenario would only materialise if the growth gap between the US and the other major economies were to widen further.

Should recent dollar appreciation, moreover, breed complacency amongst policymakers elsewhere, this risk scenario could become a very painful reality. The paradox is thus that a strong dollar tantrum could be a more worrying scenario than a Fed tightening tantrum.

1. Dollar not yet strong enough to delay the Fed

Dollar close to long run average: Recent dollar movements have been sharper-than-expected and several crosses (including EUR/USD, USD/JPY and USD/GBP) are now at levels that we had initially only expected to see early next year. For all the speed of movement, however, the dollar does not yet qualify as “strong”. Trade-weighted, the dollar is still just below the long run average. Moreover, on the type of horizons that matter for economics, dollar appreciation remains modest; the trade weighted dollar is up just 2% year-to-date over the 2013 average. Looking ahead, we expect further dollar gains and by mid-2015, we look for a gain of just over 6% on a full year basis.

US growing well above trend potential: The US economy is on course 3%+ growth rates over the coming quarters, well above the 2.2% at which we estimate trend potential. This week’s numerous data releases, including the key September employment report (we look for +260K on non-farm payrolls) should confirm firm US growth. With each batch of robust data taking the Fed a step closer to the exit, the debate now is just how much dollar appreciation it would take to delay the Fed.

The CNY has appreciated (!) against the US dollar: As a rule of thumb, using the OECD growth model, a 10% appreciation of the trade-weighted dollar cuts 0.5pp from GDP growth and 0.3pp from CPI inflation in the first year after the shock. Two points merit note, however. Firstly, by country, we find that China has tended to exert the most significant influence on US import prices. Since this latest dollar rally began in the early summer, the CNY has been one of the rare currencies to appreciate (!) against the dollar, albeit by a modest 1%. Secondly, we note that the narrowing energy deficit, as the result of the shale revolution, suggests reduced elasticities over time.

Taking account of these points, we find that to significantly delay Fed rate hikes, we would need to see an additional 10% appreciation of the trade weighted dollar relative to our baseline. That would entail EUR/USD at 1.10, USD/JPY at 120 and USD/CNY at 6.50 (and would require other major currencies such as the CAD and MXP to also depreciate significantly). Such a scenario, however, is most likely if growth disappoints materially in the other major economies relative to our baseline scenario. A significantly weaker outlook for the main trading partners of the US would it itself be a cause for the Fed to delay.

2. A worrying trend on growth gaps ... and capital flows

Several EM economies set to growth at a slower pace than the US: While the consensus growth outlook for the US has improved further in recent months, the opposite has been true for several other major economies, including the euro area, Japan and China. Moreover, our own forecasts remain generally below consensus with the exception of the US, where we are above. This view underpins our expectation of further dollar appreciation. Today, moreover, several EM economies are growing at a slower pace than the US. This is a notable difference from the pre-crisis era and has several implications. First, this lower global growth configuration is one reason why we believe that elasticities linking currency depreciation to growth may now be lower. The correlation between commodity prices and the dollar has also shifted. Finally, we note that capital flows are now moving in a very different pattern.

Dollar and commodities: The link between the dollar and commodity prices has seen several shifts over time. Already prior to the latest moves in currency markets, commodity prices were trending lower in parallel with Chinese growth forecasts. More recently, it seems that dollar depreciation may have been an additional factor driving prices lower. For commodity importers, this is helpful; for exporters, this marks yet a headwind.

Fed tightening may be a better scenario than a very strong dollar: Pre-crisis, in a simplified summary, the strong dollar can be described as having been driven by a global savings glut (mainly from the official sector in emerging economies) seeking a home in US Treasuries and, at the same time, US investors seeking risky capital abroad to profit from strong EM growth. It is also worth recalling that QE1 drove the dollar stronger and supported risky US assets as Treasuries rallied. QE2, on the other hand, saw dollar depreciation as US investors sought return in higher yielding asset abroad, and notably in emerging economies. As discussed above, we believe that a significant appreciation of the dollar relative to our baseline would be consistent with much weaker growth elsewhere.

In such a scenario, dollar would equate to further capital outflows, placing further pressure on already vulnerable economies. Indeed, a “dollar tantrum” scenario could well prove more painful than a “Fed tightening tantrum”, assuming the later comes with better growth in the rest of the world.

 

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Sat, 01/10/2015 - 09:44 | 5645379 actionjacksonbrownie
actionjacksonbrownie's picture

Almost no one is long Gold *wink*

Sat, 01/10/2015 - 10:09 | 5645416 Semi-employed W...
Semi-employed White Guy's picture

And since when has that mattered?

Sat, 01/10/2015 - 13:37 | 5645832 lakecity55
lakecity55's picture

"Thanks to the Baltic Dry Index at historic lows, the crash of Asteroid QE46667 into the Pacific resulted in very few ships being lost."

Sat, 01/10/2015 - 11:31 | 5645563 Bullionaire
Bullionaire's picture

Heckuva job, Brownie...except that gold ain't a trade:

"Buying gold is just buying a put against the idiocy of the political cycle. It's that simple."

Kyle Bass

Sat, 01/10/2015 - 12:53 | 5645749 actionjacksonbrownie
actionjacksonbrownie's picture

Here's a gold trade for ya...

 

Last week I posted a chart here and asked the question "does anyone see an opportunity here?" No advice was posted - just that simple question. If anyone else saw what I saw, then they are up 30% since I made that post.

 

As long as TPTB will allow me to "trade" digital gains for physical D'or, I will continue to "trade" gold.

Sat, 01/10/2015 - 13:31 | 5645818 KnuckleDragger-X
KnuckleDragger-X's picture

And in the long run you'll win...one way or another." Full faith and credit" does not work if you have no faith and they have no credit. Pm's all the way.

Sat, 01/10/2015 - 14:25 | 5645956 AGuy
AGuy's picture

"And in the long run you'll win...one way or another."

 

Everybody will lose when the dollar craps out. Holding PMs just makes you lose less that the rest.

Sat, 01/10/2015 - 17:27 | 5646465 cnmcdee
cnmcdee's picture

People keep slamming gold, it will not pay now but it will pay huge in Mid 2015 when the structured collapse begins.

Consider Today :

1. Bonds pay 0%, Gold is artifically suppressed in face of huge Russian and Chinese demand, Market is only return.

Mid 2015 or around thereabouts (September when Shemitah Year completes and market tanks  - as usual)  Please understand historically 100% of the Shemitah years have predicated market collapses and recessions without exception.  For proof of this I recommend Johnathan Cahns book 'The Shemitah Year : long title...'  We are in one now and it will complete on September 13th, 2015.

When stock market tanks what happens?

2. Bonds pay 0% Market pays  NEGATIVE 25%,  and causes Citibank derivative exposure collapse. Following comes the  'bail-in' and 'Obama Freeze.' Not only are people loosing big in the stock market but now bank bail-in's  have just confiscated peoples wealth to bail out Citibank derivative exposure and contagion spread to all markets.

If you think this won't happen why have they just legislated it into law?  Think for a while about that.

AT THAT POINT - your options will be A. Stay in the market / banking and loose 25% in investments AND have sizeable portions of your investments and 401k's frozen, or pull out and DELINK from the US dollar. People EN MASSE are going to realize the only escape vehicle will be away from the US dollar into physical.

So those who are whining that Gold is a bad investment, just hold and wait you will make a huge return by the end of 2015.

Sat, 01/10/2015 - 16:30 | 5646282 Bloppy
Bloppy's picture

Yen was very strong yesterday vs dollar - a few days in a row of that would crush stocks, Fed or no Fed.

 

Krauthammer: jihad now in dangerous 'third stage' -- are we paying attention or watching cat videos?

http://tinyurl.com/ptucuv9

Sat, 01/10/2015 - 11:35 | 5645572 Bullionaire
Bullionaire's picture

And now it's time to play PIMP MY BLOG!

Sat, 01/10/2015 - 09:46 | 5645384 Bill of Rights
Bill of Rights's picture

Some folks will get heartburn.

Sat, 01/10/2015 - 10:09 | 5645414 Ralph Spoilsport
Ralph Spoilsport's picture

We short squeezed some folks.

Sat, 01/10/2015 - 12:38 | 5645710 disabledvet
disabledvet's picture

That should be almost impossible in treasuries. Solomon Brothers did try and corner the market in the 80's though.

Sat, 01/10/2015 - 13:36 | 5645830 KnuckleDragger-X
KnuckleDragger-X's picture

Soloman didn't have supercomputers and a captive market and while I think your right the big players have been doing things the last few years that I used to think were impossible.

Sat, 01/10/2015 - 14:09 | 5645920 Beam Me Up Scotty
Beam Me Up Scotty's picture

The Fed has EVERY market cornered.  Just sayin....

Sat, 01/10/2015 - 15:53 | 5646085 GotNuttin'todo
GotNuttin'todo's picture

Agree. How do you short squeeze two of the biggest markets in the world? You might knock them down for a few days but these markets are going where they are going. We are not talkin' Lulu lemon here.

And maybe I am missing something. "Everyone" is long the USD as the USD goes up - makes some sense. But 10Y Treasuries are close to making new highs, so why is "everyone" short?

Sat, 01/10/2015 - 09:48 | 5645387 trader1
Sat, 01/10/2015 - 09:54 | 5645392 wmbz
wmbz's picture

I guess in the world of fiat toilet paper the U.S. dollar is looked at as 4ply compared to the lesser 2ply brands out there.

BTW did the monkey lose his hammer? Au&Ag going up?

Sat, 01/10/2015 - 10:39 | 5645473 El Oregonian
El Oregonian's picture

"Don't squeeze the Carmen"

(Carmen Segarra)

Sat, 01/10/2015 - 10:49 | 5645492 Bossman1967
Bossman1967's picture

no way watch the AU monday and we should be talking about France anyway the terrorists are comming.

sarc

Sat, 01/10/2015 - 10:06 | 5645410 Smiley
Smiley's picture

It would seem 2 goals are being reached for simultaneously and we will accept the one that happens first:  Either we crash the dollar and things get cheap to make in the US again, or we implode the rest of the world and reappoint ourselves as master consumers of the planet once again.

Sat, 01/10/2015 - 10:39 | 5645470 post turtle saver
post turtle saver's picture

a US dollar now buys twice as much oil as it did 6-7 months ago... it will be the latter

Sat, 01/10/2015 - 11:42 | 5645545 weburke
weburke's picture

methinks you may be right. the third world is in the gravitation of the 4th world black hole. The printing of money is losing its gravity effects more and more, which is tragic for billions. The despair or gloom is there, as ziggy marley sees as he tries to cheer up his audience in the third/fourth world  

https://www.youtube.com/watch?v=p8eVH_yXq-Q

Sat, 01/10/2015 - 11:33 | 5645564 Smiley
Smiley's picture

The world professes to not trust the evil US, yet fall over themselves to PAY for our promise notes:  Freedom and independence appear to be overvalued commodities in this market cycle.

Sat, 01/10/2015 - 11:44 | 5645585 Winston Churchill
Winston Churchill's picture

Or the dollar is rising because the RoW is unwinding their USD exposure, having

to buy USD to close their positions.

Economics are counter intuitive most of the time, which without real world experience,

passes by the PhD's at the helm.

Sat, 01/10/2015 - 14:49 | 5646001 Pool Shark
Pool Shark's picture

 

 

I suspect turtle and weburke are correct:

The 3rd world is scrambling for US$ not to close-out positions, but to abandon their own sinking currencies: Europe is falling into recession, OPEC countries (other than the Saudis) are watching their currencies collapse along with the price of oil (Venezuela anyone?), Argentina is in default, Japan is purposely destroying the Yen, raw commodity-exporting countries (Australia) are seeing their own currencies decline, and Russians are bailing out of the crashing Ruble, etc...

 

Not that the US$ is strong; it's merely the healthiest horse at the glue factory. It will remain alive at least until all the other horses have been slaughtered.

 

[PS: I'm still long Cash, Bonds & Gold. Note: "Cash" = FRN's held in my greasy little sausage-like fingers...]

Sat, 01/10/2015 - 10:08 | 5645413 Semi-employed W...
Semi-employed White Guy's picture

Yes, but people on ZH have been perma-bears saying go long,long long on gold, silver and oil.  I did the latter two and got my ass handed to me.  Not sure what to do now.  One thing is for sure, as Keynes did NOT say:

The market can remain irrational longer than you can remain solvent.

Sat, 01/10/2015 - 10:15 | 5645425 Ralph Spoilsport
Ralph Spoilsport's picture

No, people on ZH say buy gold and silver and hold on to it. It's only a loss if you sell it. Buying fizz is insurance, not an "investment strategy".

Sat, 01/10/2015 - 11:27 | 5645555 philosophers bone
philosophers bone's picture

Kills me when people try to argue that the "markets" have proven the the long-term PM, Oil thesis wrong.  The thesis not only remains intact, but is stronger than ever.  The last few years have proven that the "markets" cannot survive on their own And for anyone who thinks the Fed has ended QE, please call up the chart showing the correlation between the Fed Balance Sheet and the S&P. 

Sat, 01/10/2015 - 12:43 | 5645722 Bay of Pigs
Bay of Pigs's picture

Exactly. The "strong dollar" mantra is easily explained as is the continuing manipulation of gold. It was featured here just last month and is one of the best articles in the history of this site, imo.

http://www.zerohedge.com/news/2014-12-04/inside-look-shocking-role-gold-...

 

Sat, 01/10/2015 - 16:08 | 5646226 daveO
daveO's picture

It's a 'must read' that I missed the first time. Thanks for reposting.

 Here's a portion that rang a bell with me. 

  • Given sufficient financial firepower, the trading of paper gold instruments can override underlying supply and demand trends for actual physical bullion, unless or until there is a limitation in the supply of paper gold OR a problem emerges in delivering sufficient physical bullion;

  • This happened in April 2013, when the banksters met with B. Hussein and, apparently, asked him for some/all of the US's remaining stash. 
  • Since they aren't doing the same thing now, I wonder if they've already squandered it all. We know he couldn't safely refuse, if they asked for more. Maybe (and I've had this thought a couple times lately) they intend to crash the Chinese/Indian economies and force gold back out, at cheaper prices no less! A strong enough dollar will eventually accomplish that. 
Sat, 01/10/2015 - 12:21 | 5645667 GodHelpAmerica
GodHelpAmerica's picture

You do realize that most markets now are taking hits. Even the economic bulls are taking it on the chin now. Precious metals and commodites were first, but now energy, corp bonds, real estate, small and mid caps are joining the bear camp. 

Not coincedentally the only two markets which are closes to fed (positive) manipulation--large cap US stocks (the indexes), and the government bond market--remain in robust bull markets. 

The good news for precious metals, is that since they were one of the first to fall, they will likely be the first to turn around.

Sat, 01/10/2015 - 12:25 | 5645436 Pee Wee
Pee Wee's picture

Nice try, Tyler.  This is the golden goose.

Sat, 01/10/2015 - 12:47 | 5645731 MrPalladium
MrPalladium's picture

"Anyone not long USD"

Sorry, but in order to be "long dollars" you have to be short some other currency or long the UUP (long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc) - not exactly an optimal selection of currencies to short!

Merely holding dollars against food, utility bills, and other necessities is a guaranteed loser over time.

I have been long the YCS - double JPY:USD (short the yen against the dollar) until Jan 2 and looking to get 

back in if it touches the 50 dma, presumably completing a three wave short term correction.

Try to post something informative and helpful for change!

 

Sat, 01/10/2015 - 10:27 | 5645444 Herdee
Herdee's picture

The economic scenario is also causing distortions once again in credit ratings.We see the American company Fitch come out with its ratings downgrade of Russia but if you look at a lot of other countries associated with the EU,Russia actually looks pretty good in comparison.Russia is in a lot better debt position than most in the G20.

Sat, 01/10/2015 - 10:28 | 5645449 all-priced-in
all-priced-in's picture

I am not very sophisticated - so maybe someone can help me understand -

 

How can "everyone" be long or short something?

 

If I am long something - doesn't someone else have to be short?

If I am short something - doesn't someone else need to be long?

 

 

Sat, 01/10/2015 - 10:37 | 5645468 NoWayJose
NoWayJose's picture

In a real market you would be correct. However, you are in a world where the 'other someone' is likely a Central Bank, or a Bernie Madoff, or an empty warehouse full of missing gold in China, or an unbacked naked derivative sale from a TBTF bank.

Sat, 01/10/2015 - 11:14 | 5645532 all-priced-in
all-priced-in's picture

Even a with a naked derivative the bank is still "on the other side". At least as long as they have the ability to cover their losses.

 

Same thing with a central bank or a Bernie Madoff.

 

 

Say I am short 10 year US treasuries - and interest rates drop down to .5% - I have a loss - but if no one is on the other side of the trade who gets the gain?

 

Or if I am short the 10 year and interest rates go to 5% - can I have a gain if no one is on the other side of my trade?

 

Sort of like when the CNBC folks claim there are more buyers than sellers -- or more sellers than buyers

 

Can't be right - because you can't sell unless someone else is buying - and you can't buy unless someone else is selling.

 

What am I missing?

 

 

Sat, 01/10/2015 - 11:26 | 5645557 tok1
tok1's picture

Your right every short contract has a long against it. They are saying
speculators are very short. Which means another group of futures players are equivelant long . It could be made up of hedgers ( banks) and long term
Investors ect .. Usually speculators are quickest to cover .

If you look at recent comment, it seems fixed income funds ( Pimco / Double line) have been saying they are bullish so they are the likely longs .

Sat, 01/10/2015 - 11:51 | 5645605 Ginsengbull
Ginsengbull's picture

We don't know who is on the other side.

 

The other side knows who we are. They know who the insiders are.

 

It's a rigged game, and the dealer always wins.

Sat, 01/10/2015 - 13:57 | 5645893 Augustus
Augustus's picture

API,

Don't ask those hard logical questions.  You are disturbing the conspiracy theory of economics.

Just one example from this group of resposnes:  How can the quantity of gold being held by investors decline?  What happened to that gold so that the amount held by investors now is less than two years ago?  Did it go back into the mine?

Certainly the quantity of oil held can change as it is used and replaced.  Reduce useage and increase production increases the quantity that must be held in storage.  However since the gold is not consumed in the way oil is, the amount held by investors will will only slightly increase as there is always new mining production.

 

The idea presented here that simply holding an increasing quantity of gold is a way to certain wealth is nonsense.  It is just another commodity but it does not spoil in storage.  However, every commodity faces the problem of having to be sold to generate the revenue to pay the living expenses, whether that is just utilities and eggs or if it includes yachts and airplanes.  When it comes time to "show me the money" that stash of gold acquired at $1,800 or silver acguired at $35 could have hedged someone into starvation.

Sat, 01/10/2015 - 10:32 | 5645451 NoWayJose
NoWayJose's picture

The US cannot afford to pay the interest on $18 Trillion in debt so interest rates will NEVER rise (like in Japan). Instead the US will simply print MOAR dollars and the Fed will buy every bond the US issues. The Fed will never raise rates beyond 1%. How this leads to a stronger US Dollar is the fallacy. Ask the Japs if they should have bought gold when the yen was one of the strongest currencies and USDJPY was 75. Or ask Argentinians, Ukrainians, Venezuelans, Hungarians, Vietnamese, Russians, etc.

Sat, 01/10/2015 - 10:44 | 5645482 post turtle saver
post turtle saver's picture

you have to have resources to pull off certain strategies... Japan was buying oil with USDJPY 75 to keep their export engine miracle running at the time... their factories didn't burn gold, dismaying I know...

I know this may seem strange, but if the Fed won't raise rates and is a guaranteed buyer of US bonds, isn't that basically saying the USD is a "sure thing"? I really don't know the answer to that but it's food for thought...

Sat, 01/10/2015 - 11:18 | 5645537 rejected
rejected's picture

Looking at the Japanese miricle today gold might have been a better buy.

Also, When one goes to the backroom to print up money to buy something, I'm not at all sure it would be the real thing either. We used to call it counterfeiting... which was illegal.

Sat, 01/10/2015 - 15:02 | 5646045 Pool Shark
Pool Shark's picture

 

 

Jose:

Funny you should mention it, since in 2014, Gold only lost ground against the US$. In all other major currencies, Gold was up for the year. So, yeah; if you traded any currency (other than US$'s) for gold a year ago; then you came out ahead.

Intresting to consider that with the current strength of the US$, it might be time to trade some for Gold...

 

Sat, 01/10/2015 - 11:15 | 5645535 TCA
TCA's picture

Since the vast majority of money is created as debt in a fractional reserve banking system, it can only be loaned into existence (barring an intervention such as a 10,000 tax credit to everyone).  The consumer is already buried with debt and is unable to take more on.  As such, it doesn't matter if more is "printed".  No one can accept it.  Cash is king in such a scenario.  That's where we are right now and moving forward.

Sat, 01/10/2015 - 13:58 | 5645573 weburke
weburke's picture

..

Sat, 01/10/2015 - 13:02 | 5645765 Livermore Legend
Livermore Legend's picture

"......the vast majority of money is created as debt in a fractional reserve banking system, it can only be loaned into existence....

Indeed.....

And Most Importantly, "Debt" is not True Money, but rather an Obligation Between Parties, which can be Extinguished as easily as it came into being..... 

The True Money is US Bills, which equal a FIRST in Line Direct Claim of that Social Security/Tax ID Number on the Fisc of the United States........

ALL other "Assets" can be Encumbered in some form or another, and therefore do NOT constitute True Money.....

"Cash is King"........

Correct on All Counts.......

Sun, 01/11/2015 - 01:30 | 5647617 Seer
Seer's picture

Yep, there's credit destruction going on.  Actual physical of anything, even if it's those funky FRNs, is still NOT bytes and bits in some spreadsheet that's in the process of being zeroed out.

Sat, 01/10/2015 - 14:01 | 5645902 lakecity55
lakecity55's picture

"Professor, the US Fed has now decided to buy all its bonds as did Japan. If the central bank buys everything it issues, isn't that like...communism or something?"

 

Sat, 01/10/2015 - 10:55 | 5645498 q99x2
q99x2's picture

BTFD Its FED software stupid.

Sat, 01/10/2015 - 10:58 | 5645505 TCA
TCA's picture

Sorry hyperinflationists.  We're at the beginning of a global deflationary spiral.  Short the dollar at your own peril.

Sat, 01/10/2015 - 12:24 | 5645657 Renfield
Renfield's picture

Many hyperinflations come out of a strong deflationary episode.

As Churchill said above, the USD could be rising b/c people are unwinding. In a hyperinflationary scenario, this would be a USD rise to nowhere.

http://www.zerohedge.com/news/2015-01-10/these-are-two-most-crowded-trad...

ETA: If I've learned nothing else here, it's to be cautious in predictions. I think we're in a de-dollarisation terminal event, which could look like hyperinflation. Then again, in a world like this anything is possible and maybe it'll just keep going higher and higher until it's avoided altogether. For all I know TPTB may surprise us all, a big superduper SDR hands-around-the-world global digital currency, backed by a world oligarchy of Putin, Xi, Saud and the IMF, all NSA-enforced and co-operative. Do I think that's likely? No, but what events of late years have seemed likely since QE started?

Sat, 01/10/2015 - 13:56 | 5645883 lakecity55
lakecity55's picture

Yep. The dollar has higher to go.

We have no panic yet.

What effect will the attacks in Paris do to the markets next week?
What effect will there be after an attack on US soil? The current border policy allows for this to happen.

About 10 years ago I was working in the Sonora desert. I was 10 miles from the Border. I was approached by a State Trooper. He noticed my open-carry and said it was not a bad idea. After examining my retired credentials, he took me to the squad car and showed me a picture of a patch ripped off a jacket. He said, "This is a Hamas insignia. It was ripped off right before the guy crossed the border."

"So... you mean we have been infiltrated?"
"What do you think?" was his reply.

It would seem over the last years since 2001, within the last year or so there has been increased activity by terrorists. It would make sense that they will pull off an operation in the US with many casualties as possible. Then the Feds can clamp down again.

"When guns are Outlawed, only Terrorists will have Guns."

 

Sat, 01/10/2015 - 14:13 | 5645930 devo
devo's picture

Beginning? Been living it for almost 15 years, and they are fighting it with printing, and will continue to do so. Stocks aren't going down because qe4 is (a) alive just underground in Holland or some other subsidiary and (b) will be announced to the public soon.

Sat, 01/10/2015 - 11:03 | 5645515 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

Reminds me of this: http://en.wikipedia.org/wiki/Ashtabula_River_Railroad_Disaster

 

good Luck everyone.

Sat, 01/10/2015 - 11:04 | 5645522 buzzsaw99
buzzsaw99's picture

q: how much does a ticket to ride on the short ust-bond train cost?

a: you can't afford it.

Sat, 01/10/2015 - 11:22 | 5645547 Soul Glow
Soul Glow's picture

It is the perfect time for oil producing nation-states to dump their overpriced dollars.

Sat, 01/10/2015 - 12:04 | 5645640 Solarman
Solarman's picture

That is the problem, they can't.  They hold too much U.S. dollar debt. They actually need more dollars.

Sat, 01/10/2015 - 15:16 | 5645751 Bay of Pigs
Bay of Pigs's picture

So that's why China and Russia (among others) are dumping trade in USD and switching to rubles and yuan?

What do you mean "they can't"? They certainly can, and are, doing it.

Sat, 01/10/2015 - 15:27 | 5646109 Augustus
Augustus's picture

Dump Dollars and buy what?

You make the assertion that the USD is overpriced.  IF USD is overpriced, why does it continue to become more overpriced in relation to other currencies?

Perhaps the suggesstion is to convert the currency to something physical?  Or something with earning power?

Every investor everywhere in all currencies face that decision every day.  They hold the currency until they find something that seems attractive to buy.

Sun, 01/11/2015 - 01:39 | 5647631 Seer
Seer's picture

"Perhaps the suggesstion is to convert the currency to something physical?  Or something with earning power?"

And There is the ONLY reason to hang on to something- you hold in order to deploy at a later date, if, that is, you don't have something available for swapping it with now.

"Every investor everywhere in all currencies face that decision every day.  They hold the currency until they find something that seems attractive to buy."

And it's really that simple!  However, coming up is a MAJOR paradigm shift, one in which our very notion of "investing" is going to be turned upside down.  The ONLY thing that one ought to be looking to shoot for is something that buys them into anything productive that is likely going to be a continued demand: I went with food because... Food, Shelter and Water- things that everyone needs (yeah, not exactly a get-rich-quick scheme, but then again the future ain't going to be about getting rich, it's going to be about pure survival).

Sat, 01/10/2015 - 11:25 | 5645550 Bell's 2 hearted
Bell's 2 hearted's picture

well, they got half of it right

 

correct answer:

 

long US$

 

long treasury bonds

Sat, 01/10/2015 - 11:43 | 5645584 jack stephan
jack stephan's picture

As the light changed from red to green to yellow and back to red again, I sat there thinking about life. Was it nothing more than a bunch of honking and yelling Sometimes it seemed that way.

Sun, 01/11/2015 - 14:25 | 5648637 Seer
Seer's picture

Perhaps now you're understanding why there's the phrase "road to hell?"

Sat, 01/10/2015 - 11:44 | 5645586 carefreemanjoe
carefreemanjoe's picture

Isn't LONG US Equity been the most crowded trade since the last few years? and that ride is still going on nice and strong!

Sat, 01/10/2015 - 11:44 | 5645588 carefreemanjoe
carefreemanjoe's picture

Isn't LONG US Equity been the most crowded trade since the last few years? and that ride is still going on nice and strong!

Sat, 01/10/2015 - 11:56 | 5645613 Clint Liquor
Clint Liquor's picture

No, it hasn't. Volume during the last 2,000 pt rise has been nothing short of pathetic. Also, retail has only joined in at the margin. Remember all that 'money on the sidelines' CNBC was bitching about?

Sat, 01/10/2015 - 13:46 | 5645859 lakecity55
lakecity55's picture

This retail is out, except for 2 mining stocks.

I am sitting in cash looking for more land.

It's getting too dangerous, IMO....

Sat, 01/10/2015 - 12:00 | 5645628 eucalyptus
eucalyptus's picture

Caught 10% in two months in TLO.

Current portfolio:cash, long aapl, long tlo spdr, long gold.

That's what the economy has been reduced to.

Sat, 01/10/2015 - 12:21 | 5645674 max2205
max2205's picture

This time the entire world blows up without anyone escaping

Sat, 01/10/2015 - 12:51 | 5645744 Bangalore Torpedo
Bangalore Torpedo's picture

I know that Indians (the other ones) are notoriously cheap, but friggen please, just pay the admission to the Magic Kingdom for Krissakes.

Sat, 01/10/2015 - 13:32 | 5645817 lakecity55
lakecity55's picture

Just figure out what the market would do before 2008. Then, reverse it and bet on that.

 

"Bizarro Bourse."

(2 superheroes fly above business district)

Superman: "What is that, Bizarro Superman? It looks like people are giving money away."

Bizarro Superman: "It are the Bizarro stock market. Is place to lose money easy."

 

Sat, 01/10/2015 - 13:45 | 5645856 BouncingCat
BouncingCat's picture

Isn't that the Disneyland/world monorail?

I knew Disney prices were high, but, sheesh!

Sat, 01/10/2015 - 14:13 | 5645935 Obama LaForge
Obama LaForge's picture

USD is going up, but so is gold, somehow. Can someone explain how this is possible? Is it that the other currencies are in ashes, and they're all rushing to buy gold? Is it Greece?

Sat, 01/10/2015 - 15:41 | 5646143 dumbStruck
dumbStruck's picture

Maybe the historic correlation between the greenback and gold is breaking down. there used to be a close relation between the two but has been less and less over the years, lots of countries are now increasing their holdings of gold and some are no longer using the greenback much for international trade. While one would expect with all the printing going on that inflation would take off like crazy, we live in a world of competitive devaluation. So all curency's are moving against each other by a combination of people's belief in their relative value and the actual quanity of money printing being done in each country. In the end the true value of a fiat manifests itself one way or the other i.e. goes to zero but in the meantime currencies can and do vary, the level of volatily between currencies being I believe a function of the sheer volume of printing going on. Gold is a currency and like the others it's perceived value flucuates. however unlike the others it's value never can go to zero. At some point the dance of confusion will end and gold will be one of the last things standing, along with silver or anything else of less than zero. Everything else happening while the dance of currency confusion is going on, whether or not the U.S. dollar is up or down in comparison with gold or whatever, is but a distraction. Eventually gold will be going up relentlessly irregardless of what the current fad amoung other currencies happens to be. Of course a big part of gold's grotesque performance has been the total manipulation thats been going on since time began, but that's a whole new paragraph to have to  write !

Sat, 01/10/2015 - 17:37 | 5646527 GotNuttin'todo
GotNuttin'todo's picture

The correlation is not that strong. Pull up a chart of Gold:USD over the past 100 years. The gold promoters want you to think the relationship holds but it is more complex than that. My guess is the USD will go up for a few years - it is just time. Gold will test its lows this year and into mid 2016 and maybe go lower. But at some point over the next decade the jig is up on the USD too and then gold will go to new highs. These things take time to develop. The day-to-day moves are just noise. Just my 2c worth.

Sat, 01/10/2015 - 15:12 | 5646074 Consuelo
Consuelo's picture

"US growing well above trend potential: The US economy is on course 3%+ growth rates over the coming quarters, well above the 2.2% at which we estimate trend potential. This week’s numerous data releases, including the key September employment report (we look for +260K on non-farm payrolls) should confirm firm US growth."

I am reminded of what a 'contributor' to this blog mentioned the other day in a back & forth over 'government data' interpretations & so forth.   Paraphrasing: 'Government numbers are what influence investor decisions and the market, so that is what we use...'

Good luck out there...

Sat, 01/10/2015 - 15:43 | 5646146 Barnaby
Barnaby's picture

Hedge has new meaning today. I know this doesn't follow the 4-step roadmap to profit, but here goes:

1. Buy crypto now while it's slammed;

2. Buy American Funds;

3. Profit.

Ask your local adviser for details. If your Ed Jones guy shits on crypto, fire him.

Sat, 01/10/2015 - 16:21 | 5646258 Ewtman
Ewtman's picture

The dollar is getting ready to take a multi-month break from its juggernaut run of the past seven months or so. The 10 YR yield is about to skyrocket upward sending prices falling and surprising just about everybody in the process...

 

USD

http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...

10 YR UST -  folllow the blue route

http://www.globaldeflationnews.com/10-year-u-s-treasury-index-yieldellio...

Sat, 01/10/2015 - 16:27 | 5646272 Mi Naem
Mi Naem's picture

The important question is: How come all these folks are wearing their jammies to work? 

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2...

Dress-Down-Friday, maybe? 

Sat, 01/10/2015 - 16:35 | 5646300 CHX
CHX's picture

Fiat paper games are the most crowded trade, even in precious metals. Get fizz and sleep well.

Sat, 01/10/2015 - 18:57 | 5646706 Uranus Hertz
Uranus Hertz's picture

Unless the fed is killed this will all happen, and much worse.

Sorry

Sat, 01/10/2015 - 19:42 | 5646834 Fuku Ben
Fuku Ben's picture

Those are both horizontal. One should be vertical. Maybe the space shuttle blasting off. And the hitchhiking marshmallows getting burnt to a crisp as they plummet into the fiery pits of hell of the rocket booster fire. While they attempt to ride the multi-billion dollar phallic symbol as it ascends to make it all the way to heaven

https://www.youtube.com/watch?v=_KDHi-1sUEU

After all sex, death and $ symbols pretty much sum up the current temporary situation in the capital I

https://www.youtube.com/watch?v=Wc1RfFYxZ2I

Don't funny cartoon messages make the death and destruction seem so much more palatable

http://wp.newrepublic.com/wp-content/uploads/2015/01/B6v4-ByIEAAcl4w-624...

Sat, 01/10/2015 - 20:18 | 5646935 Uranus Hertz
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