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"I'm A Tad Worried At The Market's Complacency"

Tyler Durden's picture




 

Submitted by Bill Blain via Mint Partners,

“I may be wrong, but I’d say you’re lucky to be alive and I think we might say the same for the rest of Southern California….”

As some wit in the West End pointed out.. the New Greek Finance Minister is very aptly named: “Mr That’s-a-lot-of-loss”

...

As I return to the office after a proper breakfast in the West End, I’m a tad worried about the market’s complacency. Euro’s took a soft shoeing through Tuesday but it reversed along with peripheries on apparent rumours of accelerated ECB QE buying. The flight to quality has benefited Bunds, Gilts and Treasuries, but stock markets continue soft on the diminishing hopes that a messy Greek Divorce, Grexit and Default can be contained.

Yet… With this brewing crisis around Greece, the fact the Shanghai stock market is exposing all kinds of uncomfortable truths about China, (for instance, the lack of competitiveness, overleverage, massive over-expectations in valuations, the failure of the stock market as “bread and circuses” for the middle classes, and the fears of the party at a troublesome time), and the big bond reversal in the last quarter… and its perhaps surprising that things aren’t a whole lot worse. It’s no wonder global commodity markets are flimsier than a chocolate tea-pot. The first half of the year was pretty torrid… but it could still prove pleasant  compared to what may be coming.

I’m wondering if Global Markets are poised on the edge of the precipice about to take a step forward?

My mind keeps wandering back the few weeks before the Lehman crisis erupted. No one could quite believe it could ever happen. But having observed the growing crisis as Northern Rock wobbled in 2007, the big banks suffering, and watched how quickly a quietus was delivered to Bear Stearns, it came as little shock to my team and I as we traded bank paper in extremis as Lehman went to the wall. In hindsight it became blindingly obvious to everyone. The sheer complexity of modern finance was exposed.

And, remember, Lehman was a crisis contained. It could have been a billion times worse if all the US banks had gone down dragging the whole global economy not to its knees, but six-feet under. Only prompt and decisive action by the US followed by others stopped the Global Financial Crisis becoming a Global Financial Extinction Event. Overly dramatic perhaps.. but without strong leadership the Global Financial Crisis of 2008 could have been much much worse.

Some regular Porridge correspondents have commented that I’ve been blasé about the threat of a new financial catastrophe – which is probably because I’m suffering a surfeit of happiness since I married my sweetheart Nicky. Personally, I want to believe than nobody would be so stupid as to let it happen again..

But I am increasingly worried it could happen. That doesn’t mean I’m a bear.. I’m just saying perhaps it’s time to trim and reef the sails, and batten the hatches lest it get rough in coming days.

The factor that really worries me this time is Leadership and the lack thereof.

When Mr Junker tells me the EU has a plan for GREXIT – I am thinking he’s a truly crap poker player.. Liar, Liar, pants on fire.. At the end of last year I surveyed the porridge readership for “no-see-ems” and both China and Greece figured on the lists. I am not convinced the convoluted and bureaucratically top heavy institutions of the EU and ECB will prove “fit for purpose” as Greece unfolds in coming days.

We’re facing a potential catastrophe in a worst case Greek Scenario – that a messy Greek default and Grexit could spark a recapitalisation of the ECB, call on guarantees for the EFSF and a host of other knock-ons including most of non-core Europe concluding the Euro simply ain’t worth the trouble. I fear I’m waiting in vain for some European hero to emerge who can guide us to a satisfactory conclusion … it aint Junker, and it’s not Draghi’s job.

I am even more worried the Chinese stock crash could escalate out of markets and into a China Syndrome pitting the populace and an increasingly dictatorial Party at odds. Histories of communist society are rich with crisis, purges and coups covered up with pogroms against rich farmers, the middle classes, and profiteers as cultural revolution. China’s fading stock market frenzy, following the property crash, the growing realisation they’ve made the country an environmental disaster zone, and the realisation it’s a country that’s grown middle aged before it got rich are massive challenges for the party to overcome.. Bread and Circuses won’t cover it...

Meanwhile, my eye was drawn to the  Junk market y’day after Bank America suggested large swathes of the junk market are poorly positioned to meet a Fed rate hike later this year/early next. Not a bad point.. the bulk of junk debt has more than 4 years to run. BoA also point out the credit metrics, which have been unexpectedly resilient in the wake of the global credit crisis, are starting to turn negative with downgrades outrunning upgrades by 2:1!

Suddenly folk are asking if low hi-yield returns make sense any more… If the only reason to hold junk is because there is no immediate pressure on the Fed to hike rates – that sounds like a high-risk parking trade…. So I remind everyone of my short the HY market via ETFs – a trade I called last year.. far too early.. but it’s a trade which the time will come!

 

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Wed, 07/08/2015 - 11:32 | 6284916 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

In a word, no. The markets are not on the edge or complacent.  No need to worry, we've seen this hundreds of times before in the last 4 years. This article is stupid and in the new normal makes no sense.

Wed, 07/08/2015 - 11:38 | 6284975 in4mayshun
in4mayshun's picture

Oh ya, this is totally normal, like the fact that the NYSE is currently broken and showing "no quotation." I hope you forgot the "sarc" tag.

Wed, 07/08/2015 - 11:43 | 6285016 FrankieGoesToHo...
FrankieGoesToHollywood's picture

I agree with the OP.  Show me where incidents (since the start of the new normal), like the ones in the article did not result in the dow going green?

Wed, 07/08/2015 - 11:39 | 6284980 VinceFostersGhost
VinceFostersGhost's picture

 

 

Got my normalcy bias cranked up to 11.....and my block is a rockin.

Wed, 07/08/2015 - 11:39 | 6284981 kliguy38
kliguy38's picture

Agree......just put all of YOUR money in and don't worry the Fed/gov has your back ......they wouldn't buggar you would they now?

Wed, 07/08/2015 - 11:33 | 6284927 aliki
aliki's picture

not steve liesman - he is currently telling you why his all-american survey is indicating its at an all-time high for awesomeness time to invest in U.S. stocks. - makes me feel good that im all cash from everything ive made the last 15 years, less monthly contributions from paychecks going forward.

Wed, 07/08/2015 - 11:37 | 6284964 Temporalist
Temporalist's picture

I invested in Steve Liesmans' Shit Polish - Guaranteed to make your turd sparkle! (also puts a high sheen on bald pates)

Wed, 07/08/2015 - 11:34 | 6284935 swanpoint
swanpoint's picture

Worried!

Wed, 07/08/2015 - 11:37 | 6284946 NoDebt
NoDebt's picture

"And, remember, Lehman was a crisis contained. It could have been a billion times worse if all the US banks had gone down dragging the whole global economy not to its knees, but six-feet under. Only prompt and decisive action by the US followed by others stopped the Global Financial Crisis becoming a Global Financial Extinction Event. Overly dramatic perhaps.. but without strong leadership the Global Financial Crisis of 2008 could have been much much worse."

Ka-FLUSH!  And we're done with this article.  Don't forget to wipe.

OK, maybe I'm being a little "overly dramatic" myself, but when I hear the words "strong leadership" used instead of "monetary CYA", "illegal bailouts" or "outright theft", I tend to get a bit grumpy.

 

Wed, 07/08/2015 - 12:38 | 6285545 One Day Only
One Day Only's picture

Not to mention the "six feet under" comment.  That's a bit hyperbolic.  Sure, the mega-corps may have suffered a great deal if the mega-banks quit functioning, but the economy would still chug along.  Would it get ugly for a time while people adjusted to becoming more regional or local, absolutely.  But to claim that the world economy would die is absurd.  That's where I stopped reading too.

Wed, 07/08/2015 - 11:37 | 6284961 youngman
youngman's picture

If China craters....its the world....they are the only economy in the world right now....they make our crap...and they buy our crap....just think GM....or Apple....they could lose 30% of their sales....not good...

Wed, 07/08/2015 - 11:37 | 6284969 youngman
youngman's picture

Bt the way..the NYSE is down....all down.....dont panic...

Wed, 07/08/2015 - 11:43 | 6284989 yogibear
yogibear's picture

Yep, so many people think stocks will just keep going up. Haven't heard anyone countering. 

Say any hint of bearishness and your delegated to being a lunatic. 

 

Wed, 07/08/2015 - 11:41 | 6284996 Turdy Brown
Turdy Brown's picture

"Only prompt and decisive action by the US followed by others stopped the Global Financial Crisis becoming a Global Financial Extinction Event. Overly dramatic perhaps.. but without strong leadership the Global Financial Crisis of 2008 could have been much much worse."

Really?  Can you please enlighten us unwashed masses about this "strong leadership" that you are speaking about?  Are you referring to the big banks being bailed out with taxpayer moeny? Or, perhaps you are referring to Paulson putting a gun to Congress's head? Or, maybe you are referring to AIG being bailed out?  Are these some examples of "strong leadership" that you are referring to? 

Dumb dick!

Wed, 07/08/2015 - 11:44 | 6285024 Turdy Brown
Turdy Brown's picture

NoDebt, read your post after i posted.  You said it much better than me. 

Wed, 07/08/2015 - 11:45 | 6285050 I Write Code
I Write Code's picture

The world markets are more chaotic now than anything since 2008, in fact this looks worse.  And yes, there is even less leadership now, this is The Obamanation.  Where's Hank Paulson when you need him, LOL?

Wed, 07/08/2015 - 11:49 | 6285083 Dead Canary
Dead Canary's picture

Yea, the market's hanging on like a real trooper. Thanx everyone. Thanx for believing. Believing in the Fed bullshit. You guy's are great!

Wed, 07/08/2015 - 12:03 | 6285245 Element
Element's picture

Someone get that guy a dick.

Put on a cowboy hat and ride it down.

Wed, 07/08/2015 - 12:47 | 6285628 csmith
csmith's picture

Greek Finance Minister is very aptly named: “Mr That’s-a-lot-of-loss”

What's your name again?

Ivana Humpalot...

Wed, 07/08/2015 - 12:56 | 6285725 Dead Canary
Dead Canary's picture

Vladimir Getchuroxov

Wed, 07/08/2015 - 17:08 | 6287272 Youri Carma
Youri Carma's picture

The financial Crisis of 2008 should have been much worse.

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