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It Is NOT Priced-In, Stupid!
Submitted by David Stockman via Contra Corner blog,
Among all the mindless blather served up by the talking heads of bubblevision is the recurrent claim that “its all priced-in”. That is, there is no danger of a serious market correction because anything which might imply trouble ahead—-such as weak domestic growth, stalling world trade or Grexit——is already embodied in stock market prices.
Yep, those soaring averages are already fully risk-adjusted!
So the “oxi” that came screaming unexpectedly out of Greece Sunday evening will undoubtedly be explained away before the NYSE closes on Monday. Nothing to see here, it will be argued. Today’s plunge is just another opportunity for those who get it to “buy-the-dip”.
And they might well be right in the very short-run. But this time the outbreak of volatility is different. This time the dip buyers will be carried out on their shields.
Here’s why. The whole priced-in meme presumes that nothing has really changed in the financial markets during the last three decades. The latter is still just the timeless machinery of capitalist price discovery at work. Traders and investors in their tens-of-thousands are purportedly diligently engaged in sifting, sorting, dissecting and discounting the massive, continuous flows of incoming information that bears on future corporate profits and the present value thereof.
That presumption is dead wrong. The age of Keynesian central banking has destroyed all the essential elements upon which vibrant, honest price discovery depends. These include short-sellers which insure disciplined two-way markets; carry costs which are high enough to discourage rampant leveraged speculation; money market uncertainty that is palpable enough to inhibit massive yield curve arbitrage; option costs which are burdensome enough to deny fast money gamblers access to cheap downside portfolio insurance; and flexible, mobilized interest rates which enable imbalances of supply and demand for investable funds to be decisively cleared.
Not one of these conditions any longer exists. The shorts are dead, money markets interest rates are pegged and frozen, downside puts are practically free and carry trade gambling is biblical in extent and magnitude.
So a vibrant market of atomized competition in the gathering and assessment of information relevant to the honest pricing of financial assets has been replaced by what amounts to caribou soccer. That is, the game that six-year old boys and girls play when the chase the soccer ball around the field in one concentrated, squealing pack.
The soccer ball in this instance, alas, is the central banks. Until Sunday the herd of speculators was in full rampage chasing the liquidity, word clouds and promises of free money and market “puts” with blind, unflinching confidence.
The only thing in this utterly broken “market” which was really priced-in, therefore, was an unshakeable confidence that any disturbance to the upward march of asset prices would be quickly, decisively and reliably countermanded by central bank action. But now an altogether different kind of disturbance has erupted. It is one that does not emanate from short-term “price action” of the market or an unexpected macroeconomic hiccup or lend itself to another central bank hat trick.
Instead, the Greferendum amounts to a giant fracture in the apparatus of state power on which the entire rotten regime of financialization is anchored. That is, falsified financial prices, massive, fraudulent monetization of the public debt and egregious and continuous bailouts of private speculator losses, mistakes and reckless gambling sprees.
What has transpired in a relative heartbeat is that one of the four central banks of the world that matter is suddenly on the ropes. In the hours and days ahead, the ECB will be battered by desperate actions emanating from Athens, as it struggles with a violent meltdown of its banking and payments system; and it will be simultaneously stymied and paralyzed by an outbreak of public confusion, contention and recrimination among the politicians and apparatchiks who run the machinery of the Eurozone and ECB superstate.
Yes, the Fed will reconfirm its hundreds of billions of dollar swap lines with the ECB, and the BOJ and the Peoples Printing Press of China will redouble their efforts to prop-up their own faltering stock markets and to contain the “contagion” emanating from the Eurozone.
But this time there is a decent chance that even the concerted central banks of the world will not be able to contain the panic. That’s because the blind confidence of the caribou soccer players will be sorely tested by the possibility that the ECB will be exposed as impotent in the face of a cascading crisis in the euro debt markets.
Here are the tells. If the Syriza government has any sense it will nationalize the Greek banking system immediately; replace the head of the Greek central bank with a pliant ally; refuse to heed any ECB call for collection of the dubious collateral that stands behind its $120 billion in ELA and other advances; and print ten euro notes until the plates on the Greek central bank’s printing presses literally melts-down.
If the Greeks seize their banking system and monetary machinery from their ECB suzerains in this manner—- out of desperate need to stop the asphyxiation of their economy—– those actions will trigger, in turn, pandemonium in the PIIGS bond markets. From there it would be only a short step to an existential crisis in Frankfurt and unprecedented, fractious conflict between Berlin, Paris, Rome and Madrid.
Either all of the Eurozone governments fall in line almost instantly in favor of a massive up-sizing of the ECBs bond buying campaign to stop the run on peripheral bond markets, or the Draghi “whatever it takes” miracle will be obliterated in a selling stampede that will expose the naked truth. Namely, that the whole thing since mid-2012 was a front-runners con job in which the ECB temporarily rented speculator balance sheets in order to prime the PIIGS bond buying pump, thereby luring the infinitely stupid and gullible managers of bank, insurance and mutual fund portfolios into loading up on the drastically over-valued public debt of the Eurozone’s fiscal cripples.
Needless to say, there is likely to emerge a flurry of leaks and trial balloons from the desperate precincts of Brussels, Berlin and Frankfurt. These will be designed to encourage the Greeks to leave their banking system hostage to “cooperation” with their paymasters, and to persuade traders that Draghi has been greenlighted to buy up the PIIGS debt hand-over-fist——-and to do so without regard to the pro-rata capital key under which the current program is straight-jacketed.
But that assumes that the Germans, Dutch and Finns capitulate to an open-ended and frenzied bond-buying campaign that would make the BOJ’s current madness look tame by comparison. Yet if they do, its only a matter of time before the euro goes into a terminal tail-spin. And if they don’t, collapsing euro debt prices will infect the entire global bond market in a tidal wave of contagion.
Either way, its not priced-in. That’s been the real stupid trade all along.
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bubblevision LOL
CNBS!
It Is Time, Texas!...Operation Texas> www.OpTexas.org
Unecessary, Texas and California are already independent from an economic standpoint.
Did anyone notice the huge spike at 1207 off the retest of the days low that. In that one minute the S&P regained half of the days losses. If that doesn't have PPT written all over it I don't know what does.
As I type this the S&P is only down 3 pts and it's only 1. Still have the notorious 330 ramp coming as well. Who knows, they very well may manage to coax it into the green today.
"If the Syriza government has any sense..."
Not a bet I'd take anytime soon.
Time to vote --- up arrow or down
<--"Free markets" will be allowed to reassert themselves resulting in a "crash" and it's time to sell
<--Markets will rise so long as central control is maintained...markets are simply propagandist tools for TPTB any longer...it's never going to be time to sell
Do I pay off my last $9k in credit card debt... Or make the min payment and BTFD???
Decisions decisions...
Another monster box sounds sexy
BTFD
What's the bail-in price on doomsday?
Can we get one more market crash so CNBC and Cramer finally go under?
It's hard to price in stupid.
This time is different. John Law/Charles Ponzi/Bernie Madoff all agree.
Let's be clear, there is not, nor will there ever be a monetary, fiscal, economic or political solution to resource scarcity. Enough already with the infinite eCONomic growth bullshit. Economically greece is fucked, but for the love of mike let them be fucked by their own hand at least and tell all these rent-seeking parasites to fuck off already.
Which resource is scarce?
Brains.
Damn near non-existent.
several are getting there, but consumable calories is the important one. Now get those fusion reactors online ASAP so we can have some real growth...
Sorry, I don't consider increasing the amount of useless paper-pushing as "GDP positive" like the government does.
f dot d. Work. Energy is the ability to do work. I wish people would understand this simple concept.
Enjoy $2.60/gal gas while you can, I say. I've been doing some hikes to places I've always wanted to be able to say I've been. I think this will be my next one:
http://www.climb.mountains.com/Classic_Peaks_files/New_Mexico_Classics_f...
http://www.ppihc.com/
Something in the US that really is World Class.
I probably won't make it up to Pike's Peak. But this one I can do.
https://www.youtube.com/watch?v=Wdj1XIv7wi8
Debt Free Currency
Sorry, we already have ZIRP going on 7 years now. Who controls the currency is the important bit, that and maintaining the rule of law, NOT MEN.
Sound Economic Theory & Fundamentals are sorely lacking to the point of scarcity IMO. Macroprudential Policy is sorely lacking and scarce too.
Enjoying all the great comments. Yes, rewarding bad behavior will continue to result in bad more behavior.
common sense?
Amen!
Kinda like a president that passes gay marriage and he is not gay.
Manipulated markets are incapable of properly discounting risk and that's the whole idea!
China just got Japan'ed.
That's what JPM loves about interrelated, international issues, they can be factored precisely, often to 8 decimal places, into their models, so they know exactly which SPY levels to buy or sell. Someone must've had a circular reference in Excel, 'cause we're back above the 200.
If someone at Morgan doesn't fix that circular reference quick, we'll be back to Unch in $RUT. (They keep clicking F9, oblivious ...)
this market is just a 10-15% correction in the dxy from turning around.
.
"There are none so blind as those who will not see"
Everything is always priced in - until it's not priced in.
volatility breakout does look different. Monthly chart pattern hasn't looked like this in years.
What I see from the market today is a morning sell-off, followed by the computers doing a low volume walk-up.
Nothing to see here. This is how normal markets react. Price is ALWAYS determined by computer program and NOT supply and demand.
It must suck to KNOW that you're smarter than the bubblevision talking heads, have a better understanding of the national and international economic situation, a better awareness of the unsustainability of the situation, and yet STILL get your ass handed to you, day after day, as the bubbleheads gloat and the Wall Street traders, who do nothing more than create dips to buy and then buy those dips, celebrate yet another extension of their record winning streak by rolling hookers in bollinger and blow.
Fuck ... everyone is hoping that NOW is the time that we/they\everyone suffers .... fuck ... go down ... crash ... and we will be right!!!!
If they create zillions of more currency digits, then it isn't priced in yet.
Oil And Copper Plunge Monday; World’s Biggest Economies Are In Trouble
TND Guest Contributor: Dave Kranzler
China, the EU and the United States. The economic engines of the world. China’s Shanghai Stock Exchange Composite index has plunged 27% since June 5th. It’s down 3.3% as I write this. Despite the political rhetoric and Wall Street propaganda, the U.S. and European economies are in recession. There’s no reason to wait for an official declaration of this in the United States because the majority of the economic reports for at least the last six months have been negative to highly negative.
Full story: http://thenewsdoctors.com/?p=478968
GOD DAMN ITALIAN COUNTERFEITERS.....
YOU'VE RUINED OUR ENTIRE PONZI SCHEME!
dow went from minus 200 to minus 50....did I miss something? Everything is fixed again? Somebody tell me something, tv's are on sale at walmart and the sale ends tomorrow...should I buy the tv dip down?
They may or may not get carried out on their shields, Tyler.
Explain to me please how markets that are controlled and manipulated by entities able to call into existentce in microseconds infinite amounts of ones and zeroes can do anything except what these masters of the universe direct them to do?
The markets will crash when TPTB make it so.
The stupidity is faith in a government and/or banking elite to know better about anything. This stupidity continues with faith in manipulated or un-manipulated markets to know anything.
To trust is to allow others to think for you. The prophets speak for their pay masters.
"...thereby luring the infinitely stupid and gullible managers of bank, insurance and mutual fund portfolios into loading up on the drastically over-valued public debt..."
C'mon Bob Brinker --- tell us how it's all overblown, ignore the noise and just keep 'dollar-cost-averaging'...
I have rarely seen 75% drops priced into markets....
“This time the dip buyers will be carried out on their shields.”
Well… yes, they will get “carried out on their shields” (or some other similar fate); but… no, not “this time”.
I’d say we have another 6-8 years before “this time” arrives.
You see, they (criminal and useless classes) first have to finish their replica of Manhattan’s financial district, then move their operations to Red China.
According to their literature, their replica is scheduled for completion 2019 (one and two); but, since there are a number of bureaucratic offices involved, I figure we should expect delays of a couple of years for construction and for setup time for their new useless idiots to learn necessary routines of fleecing the public.
When this is all completed, then they will slam the dollar, which will have planetary consequences – not to mention the annihilation of America and its ideals; it will be the culmination of an operation begun shortly before the so-called Treaty of Peace of 1783.
Between now and completion of their replica, they will do everything possible to prolong the financial hoax; and, with a public desperate to believe fairy tales and other lies, and, with an unlimited supply of baseless money, the hoax should be well within their power to prolong.
Gotta agree with the author, Mr Stockman here........
MMT https://www.youtube.com/watch?v=IRkZN27Hp_k
Or economics 404?
Janet didn't price it in? Well, she had other things on her mind.
"JBTDYFI"
http://www.zerohedge.com/news/2015-01-29/janet-yellen-saves-day-stocks-s...
BULL$HIT lying fuckers. I just fell on the floor.
So, there is a "Decent Chance" not even CB's can contain this?
Hedge much?
The Central Banks own this. It's all denominated in their private currencies.
The decent chance is, it will remain irrational longer than you can remain sane,,,or solvent.
Taurus KEPD 350 cruise missile hits Greek Central Bank Mint, 17 printery workers killed, 38 injured.
(pretend it's a Geoffrey Robertson "Hypothetical")
So selling At The Money calls for two weeks out should provide more than enough FRNs for me to buy my wished-for Outer Banks beach House, some more .22 LR, another trebuchet that can handle 200 pound loads, and an apartment on the Seine for my French mistress, n'est ce pas?
everything except the most essential
is always already priced in. then the
truth, the unspeakably simple, opens
it's eyes and awakens. a faulty valve here,
a missing drop of oil there and suddenly
the entire "thing" is just worthless.
dead, left for scrap and spare parts
or worse, elemental recycling. deconstruction
as far as the eye can see.
For the common benefit, here is a 101 lesson in statistics: you can't price in both a good and a bad outcome in the same number. The market will move depending on the actual outcome.
For the common benefit, here is a 101 lesson in statistics: you can't price in both a good and a bad outcome in the same number. The market will move depending on the actual outcome.
For the common benefit, here is a 101 lesson in statistics: you can't price in both a good and a bad outcome in the same number. The market will move depending on the actual outcome.