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Back Then: "Regular, Frequent Corrections"; Now: "Fewer, Bigger Corrections"
With VXX touching a record low yesterday, and the equity volatility having now utterly disconnected from other asset classes...
... many have suggested that as a result of central bank suppression of risk, vol has become nothing more than a coiled spring with central banks around the global doing everything in their power to keep it in check until occasionally they lose control and vol explodes, leading to sheer market panic.
Two charts from Citi confirm just that. When looking at intraday trading ranges in the Treasury and FX market, Citi has presented what may be the best summary of the bifurcation between the "old" normal-market, and "new" centrally-planned and increasingly illiquid "market" as follows:
- back then: regular, frequent corrections
- now: fewer, bigger corrections
Visually, for bonds:
and FX:
These are just two markets where central banks have occasionally lost control over, and where volatility, as shown in the top chart, is currently elevated. Equities, the favorite asset class of central planners everywhere, continue to drift without a worry in a artificial world of their own.
What will the "bifurcation" look for stocks when inevitably, the central planners finally also lose control of their favorite asset class?
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Citi can suck a dick. The greatest potential loss during the government bailout was Citigroup, which received a grand total of $476.2 billion in cash and guarantees.
No one went to jail- pandit, rubin- All the high fliers got their bonuses after they flew the plane into the ground. Fuck them.
how the fuck can there be 'fewer, bigger corrections' when its been , what.. 5 years since a 10%er ?
We figured out we could bribe the masses with tax dollars....then we figured out we could control the markets with printed money.
We're pretty awesome!
Yes, right up until the part where the producers of real commodities no longer accept your paper/digital promises...
same as it ever was...
Reminds me of the U.S. Forest Service.
They put out every little fire, yet won't allow thinning of the forest, so the trees grow denser and denser, and then when a fire finally gets out of control , nothing remains standing, not even the larger trees that would normally survive the smaller fires.
The central planners won't lose control of the paper markets. They will however, destroy the real economy. People who think otherwise are "born every minute". There is no reality in this market. If you want to win, you have to join a team whose goal you know and whos has the most firepower, not the team that is making fact based decisions. The second you think there is something real in this market, you might as well flush your money down the toilet. If you want out, you can buy gold, but be prepared to wait a long time for this Soviet style system to implode. You can short the DOW, but you will literally have to wait for companies to die before points come off. There is no value within the matrix. You are stuck in the matrix. Use your talent to understand the game as best you can. Don't expect the free market or sanity to show up because what you are looking at has nothing to do with economics. Infinite money and leverage is betting both ways to put prices where it wants them. Infinite money can make any margin call or change any rule. And until infinite money wants the stock markets down, they are not going down, unless the entire system collapses. Even then, what you win won't be worth the paper it is printed on.
We shall see, yes, this time it is global Weimar, having said that exponential equations and moral hazard can be a real motherfucker.
Hey, the first team is on vacation for the summer.
You're going to have to be patient with the B team and scrubs.
(oh and get POTUS out of Europe stat.
Good job with Kerry.)
Sounds about right. We've traded the business cycle for the Fed cycle is all.
...or the civilization cycle.
The forest fire analogy is apt: let the deadwood burn every once in a while in small, controllable ways or experience the big, uncontrollable conflagration after its built up...
http://olduvai.ca
The adage, "Don't fight the Fed" is finally being recognized for what it is:
The futile and hubris-laden meanderings of fallible humans pretending to be infallible economic gods with billions of human lives in the balance.
Reminds me of earthquakes....many small ones ease the pressure....or one 'Big One'