This page has been archived and commenting is disabled.

Does This Look Like An Accidental Relationship To You?

Tyler Durden's picture




 

Submitted by Ben Hunt via Salient Partners Epsilon Theory blog,

I figure not one Epsilon Theory reader in a thousand has seen “Suddenly, Last Summer”, but let me tell you … it’s got everything. Katherine Hepburn in a phenomenal performance as bizarro Aunt Vi. Elizabeth Taylor cavorting in the surf. Montgomery Clift. Lobotomies. Pedophilia. Cannibalism. Honestly, it’s kind of what you would expect if Gore Vidal took a Tennessee Williams script and just went gonzo with it. Which, in fact, is exactly what happened.
 
The subtext, as with so much of Southern Gothic in general and Tennessee Williams in particular, is mendacity and its crushing psychological damage.
I found this quote, where Katherine Hepburn is trying to convince Montgomery Clift to lobotomize Elizabeth Taylor so that she’d forget her former life and be less fearful and anxious … less volatile, in other words … to be an eerily apt description of what Central Bankers have tried to do with markets.
 
We endured an event last summer that, just as in the movie, ultimately brings all the mendacity out of the shadows and into the open. When Yellen declared last summer that the Fed had now firmly embraced a tightening bias, followed by the rest of the world declaring that they were doubling down on extraordinary monetary policy easing, the entire world was set on a path where all of the political fragmentation – all of the deep fissures within and between countries – would be inexorably revealed. Suddenly last summer, the mask of global monetary policy cooperation was ripped away, and the investment world will never be the same.
 
Here are two Bloomberg charts that show what I mean. On the top is a 5-year chart of DXY – the trade-weighted dollar index. On the bottom is a 5-year chart of WTI crude oil spot prices. Does this look like an accidental relationship to you? Can we just stop with all the hand-wringing about how there’s suddenly too much oil in the world, or how the Saudis are trying to crush US shale production, or any of the other spurious supply-and-demand “explanations” for why oil prices have collapsed? Seriously. Can we just stop?
 
Monetary policy divergence manifests itself first in currencies, because currencies aren’t an asset class at all, but a political construction that represents and symbolizes monetary policy. Then the divergence manifests itself in those asset classes, like commodities, that have no internal dynamics or cash flows and are thus only slightly removed in their construction and meaning from however they’re priced in this currency or that. From there the divergence spreads like a cancer (or like a cure for cancer, depending on your perspective) into commodity-sensitive real-world companies and national economies. Eventually – and this is the Big Point – the divergence spreads into everything, everywhere. Some things will go up, and some things will go down. But the days of ALL financial assets inflating in lock-step … the days of everything, everywhere going up together … that’s over.
 
For a lot of active investment managers, this is great news.
 
For a lot of politicians and central bankersparticularly the weaker ones, either in resources or in willpower (yes, I’m looking at you, Alexis Tsipras) – this is terrible news.
 
For investors? Well, it’s a mixed bag. Certainly it’s a more difficult bag, where so many of the learned behaviors of the past five years that worked so well in an environment of monetary policy coordination will fail miserably in an environment of monetary policy competition. But it beats getting a lobotomy. I think. We’ll see.
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 07/30/2015 - 18:40 | 6373067 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

So...BTFATH?

Thu, 07/30/2015 - 18:42 | 6373075 Right-on Left-off
Right-on Left-off's picture

.... or BTFD.  All depends on what vehicle you're looking at.

Thu, 07/30/2015 - 20:32 | 6373410 erikaappleihzyjtyeg
erikaappleihzyjtyeg's picture

....or which way you are facing

Fri, 07/31/2015 - 06:27 | 6374561 Manthong
Manthong's picture

I vote for the lobotomy..

all this crud just too hard to take.

Thu, 07/30/2015 - 18:42 | 6373076 Squid Viscous
Squid Viscous's picture

2008 all over again

Thu, 07/30/2015 - 18:43 | 6373079 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

When the "click" gets their "buy signal", they'll deploy their free/cheap fiat reserve war chest and gobble up commodities & distressed assets. 

Once they've blown their wad into the economy acquiring hard assets, they'll bide their time waiting on the wad to wend its way through the system,

picking up velocity, priming the pump---till the "sell signal" is given.  Wax on , wax off.  Riding the wave of credit boom manipulation through the ages.

Inflation & disinflation, the millstones used to grind our bones to make their bread.

Thu, 07/30/2015 - 18:50 | 6373098 ted41776
ted41776's picture

what could possibly go wrong?

Thu, 07/30/2015 - 19:27 | 6373199 Bluntly Put
Bluntly Put's picture

QE4, negative interest rates, bail-ins and a ban of physical cash?

Thu, 07/30/2015 - 19:46 | 6373101 Ham-bone
Ham-bone's picture

Seriously...For investors? Well, it’s a mixed bag

Sorry but simply ridiculous conclusions...

For a slightly simpler correlation...but this isn't likely to end up a "mixed bag" for investors

http://econimica.blogspot.com/2015/06/0ne-simple-chart-explains-great.html

Thu, 07/30/2015 - 18:53 | 6373105 SSRI Junkie
SSRI Junkie's picture

Pounding the real assets (commodities, things that are produced through labor) and pumping the ethereal (paper, faux production out of nothing).

Thu, 07/30/2015 - 19:02 | 6373130 falak pema
falak pema's picture

I love this inverted reasoning of going from life and human sentiment to the realm of monetary and financial shenanigans.

We live in an upside down world. The larger angle of life becomes "lobotomised" into studying greed is good type narrow band thinking. The ethics of life are focussed  in order to examine the ethics of material gain in market mechanisms which are skewed like southern mendacious mindsets of inbred culture. 

Very quaint. But then the world is a stage and the market is a page of it. Tennessee Gekko. 

Thu, 07/30/2015 - 19:07 | 6373140 kchrisc
kchrisc's picture

Nothing is rigged, because everything is not nothing.

Liberty is a demand. Tyranny is submission..

 

Can you rig what has already been stolen?!

Thu, 07/30/2015 - 19:17 | 6373172 All is chosen
All is chosen's picture

For the first time I can now see the value of banging rocks together.

Thu, 07/30/2015 - 19:23 | 6373184 stant
stant's picture

Look out etrade baby your worth more in a real market

Thu, 07/30/2015 - 20:18 | 6373359 starman
starman's picture

Freedom and liberty!  

Thu, 07/30/2015 - 20:24 | 6373387 Westcoastliberal
Westcoastliberal's picture

Here's Martha Davis & the Motels version: "Suddenly Last Summer"

https://www.youtube.com/watch?v=sB7_xkQiLPw

Thu, 07/30/2015 - 22:03 | 6373723 aerohelo
aerohelo's picture

I'd rather have a bottle in front of me than a frontal lobotomy.

Thu, 07/30/2015 - 22:20 | 6373769 ebworthen
ebworthen's picture

"...or like a cure for cancer, depending upon your perspective..."

I know persuasive writing requires some concessions, but that one is too much.  It's a fucking cancer, growth where it shouldn't be for the wrong reasons, marching the patient towards death.

Fri, 07/31/2015 - 05:14 | 6374507 BitchezGonnaBitch
BitchezGonnaBitch's picture

We had to kill the patient to save the cancer... Not the first time either. 

Thu, 07/30/2015 - 22:49 | 6373846 PoasterToaster
PoasterToaster's picture

This is one of the best articles that has been put up on ZH lately.  It really gets at the heart of the issue.

People think the fiat currency is "money", which allows the owner of the monopoly on printing "money' to do no end of mischief.  As long as people believe that pieces of paper are "money", monetary policy can be used to socially engineer desirable outcomes for the ruling class.

What happens when people are pushed out of the system due to lack of access to currency through slave work (what we call "jobs")?  What happens when we pass the 100 million mark of people that have left the country (in terms of labor and trade, not physically) the Ruling Class has created, forced out by the attempt to create artificial scarcity?  Sooner or later the loss of faith will be catastrophic to the State.

Despite what the US Oligarchy thinks, they cannot weather that storm.

Thu, 07/30/2015 - 22:55 | 6373865 Totentänzerlied
Totentänzerlied's picture

According to this writer, physics and geology are "spurious."

The correlation is no accident, but the author has failed utterly to grasp their relationship.

Do NOT follow this link or you will be banned from the site!