One Trader's Dire Warning For Markets: "There's No Way To Know Where This Will Lead"

Tyler Durden's picture

We’re nearly two months into the new year and one of the defining themes for markets thus far has been the extent to which investors have seemingly woken up to the fact that central bankers are not, in fact, omnipotent.

That rather unpleasant revelation has in turn caused some to reconsider the wisdom of the policies that drove stocks to nosebleed levels off the 2009 lows. That is, if it’s now clear that ZIRP, NIRP, and QE have failed when it comes to stimulating global demand and trade and reinvigorating the inflationary impulse, one is left to wonder what happens when the world careens back into recession against a backdrop of extreme capital misallocation and exhausted counter-cyclical policy maneuverability.

What happens, for instance, if stocks begin to crash and authorities are powerless to arrest the slide because rates have hit the lower bound and there are no more monetizable bonds? Do all DM central banks simply go “full-Kuroda”/ “full-Chinese national team” and provide daily plunge protection? Which brings up another point: the BoJ, the SNB, and Norway’s $830 billion SWF are big holders of equities. What happens when the value of those stakes plunges?

Here to ponder those questions and more is Bloomberg’s Richard Breslow.

*  *  *

From Richard Breslow

“Moral hazard” has become a hackneyed phrase when warning about asset prices, investor behavior and quantitative easing. In fact, money managers have been merely doing the bidding of policy makers. Doing God’s work and making a buck, too. Now that seems like a plan. The lack of downside risk, which has perverted the normal functioning of markets, has been a vital element of the wealth effect strategy.

  • If putting risk back into risk management were the only challenge for policy normalization it would be hard enough. It takes only days or weeks to form a habit: they’ve had us hooked on the juice for seven years. But there is a much more systemic problem our leaders have created. Sovereign wealth funds have taken to plowing the people’s money into those same assets
  • How does the calculus change, or not, when considering that Norway is the largest shareholder in Switzerland’s second- biggest bank? The Swiss apparently love Apple and Exxon. The Japanese are itching to get in at these levels
  • Should regulators be reclassified as activist investors? Will there be a new concept for tax authorities of “earnings after taxes, dividends and appreciation?” It can be acronymized to TADA. How appropriate
  • There is no way to know where this will all lead. These aren’t holdings that run down over time. Too big to fail needs to be reconsidered. Desirability of oil prices up or down for national accounts takes on an interesting ambiguity. Indeed the mere concept of economic gain for a country becomes clouded when it ceases to strictly refer to GDP
  • Last week, the world was coming to an end. Today, I have sitting in my inbox messages imploring buy at market, you can’t afford to miss the rally. The market rally has been accompanied with assurances that central banks are back, indeed ready once again to do whatever it takes. So goes the sovereign wealth fund, so goes the nation. WIRP at zero, hurrah
  • There has been a simple justification driving the reach for yield. It is for the people. The ethos of central banks as traders is now firmly entrenched. It may appear that it is working, but it isn’t a coincidence that so many languages include the phrase, “it just isn’t done”

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tall Tom's picture

They have switched from omnipotence mode to an on impotence mode.


Where is the financial Viagra?

zuuma's picture

whatever happens next, DON'T BUY GOLD!





remain calm's picture

Yellen took it, and her penis is so engorged that she has no blood flow to her brain and this is the reason she is behaving like a 19 year old boy and just wants to fuck anybody and everybody.

Ghost of PartysOver's picture


Did you folks catch this.  Your Federal Gov't at work.

And just think of the trillion or so dollars out there to be jailed then collected.  This is not going to end well.


Neil Patrick Harris's picture

Once these markets crash and all the TBTF banks get another bailout, the kids are going to start breaking stuff in the streets. This is an attempt to collect whatever they can before they are forced to placate the masses with student debt renegotiation.

Tall Tom's picture

I am an inmate in my open air prison.


The Custodial State guards me and sanctions me if or when I step out of line.


I am under surveilance constantly. There are cameras tracking my movements.


They want me as their Tax Slave and will move me to a higher security facility if I do not comply.


Aren't you in your open air prison too? How did you escape?

ExcapedPOI's picture

I'm all for jailing people for defaulting on loans.

Let's just start with those who default on the biggest loans.  Only logical right?

Wait... I forgot it wasn't about logic for a second there!

WillyGroper's picture


I posted the other day about the LEO equipped plate readers connected to a real time data base with outstanding tickets, etc. (soon debt)...well, guess the debt part is here.

LEO equipped with card readers so you can pay on the spot plus 25% pirate booty for him.

Keeping Murika safe.

JRobby's picture

Most logical explanation I have heard yet. Because this is an insane shit show starring the washout loser clowns of economics

new game's picture

yea mon, blood flow, ha, should you or i be looking in the streets?

PatriotFirst1776's picture

I know what you're trying to say, but please keep "penises" out of this. To imply that Yellin HAS a penis, belittles the stature of penises everywhere. This reminds me of the old joke of the little girl and little boy having an argument as to importance of each other's individual "junk" (so to speak). In the end, the little girl points to her junk and says, "My mommy says with this (she points to her junk), I can get as many of those (points to his junk) as I want". My feeling is that the blood flows from Yellin's brain to her lower colon and produces large amounts of swamp gas that once inhaled, inhibits her ability to think. Such a vile and never-ending cycle. I just can NOT accept the fact that Janet Yellin is the best we can do with or without a penis.......just saying.....

Durrmockracy's picture
Durrmockracy (not verified) zuuma Feb 16, 2016 11:35 AM

...nah, at this point I'm even hitting up the pawn shops for scrap.  I don't trust having gold & silver in the mail as this thing comes down.  People are going to look back 5 yrs from now and wish they had bought up every last gram.

Tall Tom's picture

Do not forget the Saturday Garage Sales, Thrift Stores, and your Coin Shops.


Also buy up Old Coins.


If it is not out...ASK THEM. They will get it for you.

jaxville's picture

I have several clients who do just that.  Once you have an eye for it things can get quite lucrative. 

 A few months back one of our clients sold us a solid 14K cigarette case that he bought for $5 at a thrift shop.  It had no marks and our payout to him was over $2,000. 

  Do be careful buying jewellery.  Garage sales and flea markets are a good way for unscrupulous folks to unload fake jewellery.  Most gold plated stuff is easy to spot but there is stuff out there meant to deceive dealers.  It has the right look and feel.  Examine the findings closely.  Typically the clasp is the giveaway but not always.

Durrmockracy's picture
Durrmockracy (not verified) jaxville Feb 16, 2016 12:08 PM

Clasps are usually ferromagnetic so don't be too worried about them.  I always keep a magnet on me in case a good deal pops up.  Helps to learn some basic stamps too, stay away from EPS and such....

Tall Tom's picture

Yeah I forgot that in my list. I have a decent Rare Earth Magnet on my two pound keychain...seriously.


(And...before the lecture...My car's ignition does not fail. I have been driving the same car for the past nine years. In fact the only time that I ever had an ignition switch fail was when there were just three keys on my keychain.)

Tall Tom's picture

I take an Acid Test Kit with me...


Along with a Jeweler's Loupe. a Diamond Tester, a Moissanite Tester, and a Dichroscope, and a Digital Scale.


Construction is important. Generally if it is thick it it not authentic.


Thin, folded, and hollow are really good signs.


I pay fair as I like repeat customers so I am competitive with the Pawn Shops.


But to the novice it is best that you do not pay more than a couple of dollars for an item.


If you make a mistake then it does not harm you as your gains will overwhelm your losses.


Identifying marks...




 8K  333

 9K  375

10K  417

12K  500 ***Note...Most 12K will have a GF following it which means Gold Filled. Pay as if it were Sterling Silver.

14K  585

18K  750

21K  916


The above marks may be followed by a T or a P. Of course KT means Karat and KP means Karat Plum.








Sterling 950





Coin Silver








Also look for the Lion Passant (Lion passive, lying down). The Thistle, and many other hallmarks.


Happy hunting.


Tall Tom's picture

Yeah. Stay away from that Silver too.


Why it is just a vestige of barbaric times.

Tall Tom's picture

That sounds good.


Now I have to go to the store, damn it.

gm_general's picture

I think the red pill has the opposite effect!

KnuckleDragger-X's picture

Moral hazards require morals and I don't see any. Magical bullshit got us here and there's no way out, except through the bottom. It's going to be a rough ride for everybody.....

Tall Tom's picture

Yes. We are passing through the financial colon to be flushed down the Toilet Bowl.


The ride through the sewers of the abyss just does not read as too appealing to me.

buzzsaw99's picture

Do all DM central banks simply go “full-Kuroda”/ “full-Chinese national team” and provide daily plunge protection?

duh. you answered your own rhetorical question.

J Jason Djfmam's picture

Problem this> Any lose, all lose.

CHX's picture

Problem this> Any of the 0.1% lose, all lose. Fixed.

LawsofPhysics's picture

Bullshit !!  The world has in fact seen the outcome of such "let the majority eat cake" monetary experiments!!!!  the only difference now is that this is being done on a global scale.

hedge accorrdingly.

Seasmoke's picture

I've been trying to hedge accordingly for 5 years. But it's doesn't seem to be working. No matter what. Almost feels like ZERO ways to HEDGE. Go Figure. 

Amish Hacker's picture

When CBs buy bonds, they can pretend there are never any real losses, because they can just "hold to maturity."

But when CBs pile into shares of Apple near the top, it's a lot harder to pretend those losses aren't real.

Bill of Rights's picture

Problem with these pricks is they want us to borrow but it's just not attractive enough , thry want their cake and eat it to... To bad pricks drown .

Banks get negitive zero rates we get mid 3"s at best screw that.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Bill of Rights Feb 16, 2016 11:38 AM

Loan rates need to move negative as well.  Interest rates are a reflection of the growth prospects of an economy, central bankers moving to negative rates are telling us growth is over.  Even at zero interest rates why would you purchase equipment if you are a business that you know you will need to find the cash for in a few years and the asset you buy will be worth less due to deflation rather than just depreciation?  With negative interest rates yes the bank would be paying you to take a loan but you still need to repay the principle in the future.  Ultimately this will be the path that loans will go if central bankers refuse to let the economy flush and crash so that market prices can be established correctly.

bshirley1968's picture

I am not a technical "tea leaf" reader by any means.  But it seems to me the DJIA has just formed a classic, ominous "head and shoulders" pattern.  That is sure to send the technical trading sheeple over the edge once they see it.

I can't see anything positive here for markets and definitely not the economy.  The only thing I can imagine the market has going for it, is the fact that EVEYBODY seems to see it and know it.  Usually that is when it does the opposite, but this is more than market "sentiment", it is actual numbers based in-the-tank fundumental carnage.  Will be interesting to see if they can hold it here.  I was thinking they would wait until closer to Nov to let it go, but they truly may have lost control and the wheels may come off sooner than they hoped.

Wild Theories's picture

I hear some techies say the shampoo pattern is already complete, we are simply awaiting the conditioner lather before rinsing off.

GreatUncle's picture

Gold / silver, such a barbarous relic lasted a few thousand years don't you know.

Fiat, lol only a couple of hundred years and it is in the s%^t.

So what has stood the test of time?

assistedliving's picture

why Breslow is no longer a trader but an author who works for

Bloomberg.  smart man

Quinvarius's picture

Yes we do know what will happen.  Panic leading to money printing.  The are not going to just let the stock market go down.  DC is full of degenerates that care only about the stock market.

amanfromMars's picture

Methinks this is the more pertinent question and APT ACTive current position for futures trojan horse trading ......Should regulators be reclassified as hactivist investors?

inosent's picture

"There's No Way To Know Where This Will Lead " ... probably to new all time highs later on this year. I only say that because it has been long time since I felt the hot wind of intense bearishness, and it has been roiling for a while now, yet SP still trading @1875 or so (at the time of this post). Right now, sellers have the floor, so it is up to them to deliver the package, but so far, looks like nobody is home at the lows to keep the 'blood bath' going - except a lot of buyers, who, btw, have been making a ton doing so all year long.

With this kind of set up and all this negativity, by now any thought of grabbing the perfect short *above* the 6/2015 high is long gone. With this much seasoning underneath, a break will be explosive, 20,000 (DOW) will break, and so many traders will be looking at the chart wondering why they did not get long.

Anybody who is willing to eat a few bucks will just sit long w/stops underneath, the potential for explosive buying above the all time highs is very very very high right now. Trading means you can lose $$, that us why in a trade like this there has to be stops. If the seller's get lucky, you have to let it go. But I have seen bears huffing and puffing for the last 20 years, and it is my view that the failure to clip above that 2015 high sometime in the first 2 weeks of July 2015 pretty much tells the whole story.

All this flailing away underneath is noise. The sell *would* have had an edge *if* 6/15 broke in 7/15 and *then* sold off. But if DOW 20k is in the cards, my guess is that it is, the selling is going to dry up 'down' here. The paradigm shifts, the voodoo slips, like a vapor, out the window, and the disaster you expected never really materialized.

assistedliving's picture

insolent or insolvent....just joshin u man.  

your read is as good as any and certainly contrary to this board.  my bet is thru the volatility/noise we grind up/down but mostly down.  bascially short squeeze after short squeeze until short exhaustion and then we form another base.  

cant seem to find what the catalyst might be for another bull except coordinated, W/W CB easing en masse...DOW 20K is a ballsy call i'll say that

VAD's picture

Fuck the system.  Kill it til it's dead.

Wild Theories's picture

Too big to fail will have only one result: drag everyone in, then fail.

the only variable is time.