"The DryShips Market" - What Comes Next Is Anyone's Guess

Tyler Durden's picture

Authored by Mark St.Cyr,

Since we are in the Thanksgiving lull of the “markets.” I wanted to express something that takes place in my own head around these times. Where I (and believe others) may also share some of the same conflicted feelings as we not only try to give thanks, we simultaneously ponder thoughts to what the future might portend, and how we are going to move with it. For in the game of business as is life: the decision process never rests.

I used the term “conflicted” for a reason. If you’re anything like me (and I believe we’re all the same, it’s only how we deal with things that makes all the difference) they run the gamut from not just the good or bad, but some may range from the exuberantly spectacular – to the down right terrifying.

Then last, but certainly not least, buffeted with either a single-minded focus – to outright scatter-brained confusion, notwithstanding the myriad of combinations of some, if not all of them at once.

Nobody knows what the future may portend. Everything (and I do mean everything) is a best guess with whatever evidence you have at your disposal; a willingness to believe in your gut, and your abilities; and the willingness and fortitude to live with/by your decisions. That sounds simple enough, yes. However, it’s in the application, and the willingness of follow through, which makes all the difference. That’s the hard part.

So why am I making these observations today one might ask? Well, it all started the other day when I received a note from a colleague questioning my thoughts after they read the following headline. To wit:

Traders Are Now 100% Sure The Fed Hikes Rates In December

Their question? “Have you rethought your call about the Fed. in December? It would seem you’re not just in the minority: you are the minority!”

It’s a fair question, as well as a point. However, with that said: No. (as I’ve previously stated I’m currently 85/15 favoring that they won’t.)

This isn’t some form of relentless death-grip to be contrarian just for the sake of it. Far from it. Rather, I am becoming even more steadfast in that position based on what I believe or “see” as compelling evidence that the Fed., regardless of what it may want to do, will have their hands tied (once again) by “international developments.” e.g. China.

Whether or not that turns out to be correct is anyone’s guess. For it is all guessing, no matter who says differently.

Yet, here is where a “spectacular” bull____ run up in “markets” may turn into a truly “terrifying” off-a-cliff stampede should just one metric change. That metric? The Yuan.

As I sit here today typing, the Chinese currency is not only still in free fall, it is resting precariously so close to the “cliffs edge” (e.g. 7.00 USD/CNY) if it falls over – it will take all markets with it. Emphasis on all. For if one thinks Aug. of 2015 was scary? Let me use this for analogy:

Aug. 2015 will look like a kiddie rollercoaster as compared to what the “markets” newest amusement park has constructed in the last few weeks if it all goes awry. And China – not the Fed. – is the one contemplating on whether or not it will open sooner, rather than later. And the clock is ticking.

Dec. 14th is the Fed’s stated “grand opening.” i.e., (they’re really, really, really going to “do it” this time) Any day in between now and then – is China’s to decide. In other words: whether to preempt or not. Or stated differently: Whatever China decides it will, or won’t do during this period dictates what the Fed. will, or won’t be able to do. Period.

If you think China is going to sit idly by so the Fed. can just raise rates, to then watch their currency tumble into oblivion forced by circumstances not of their own volition, causing capital outflows of historic proportions, which may, or may not exacerbate civil unrest within its borders, when it has (as in knows precisely the mechanism as to manipulate a possible delay to their own benefit) I believe is fool-hearty at best, willingly blind at worst.

Since I used the term “amusement” and “rollercoaster” for an analogy, let me use a current chart (or charts) to express precisely what I’m speaking to. For there seems to be quite a lot of P.T. Barnum-ing when it comes to describing these “markets” post U.S. election. And it’s not just the main-stream media, but also every next in rotation fund manager, or Ivory Towered economist who can get to a microphone or camera. And be careful not to get in their way – for you will be trampled upon. So here’s that chart. To wit:

DryShips™ stock chart from about 2 weeks ago

DryShips stock chart from about 2 weeks ago

The problem? Again, to wit:

Here they are as of the Thursday's close

Here they are as of the Wednesday’s close

Much like you have seen the U.S. markets with its most nascent accent, so too was DryShips.

For all intents and purposes this company was at one time regarded and held as the be-all, tell-all, bellwether (especially for one CNBC™ buy,buy,buy king) for global trade. And when the “markets” displayed a “Trump winning means we’re building again!” Everything jumped in unison to match what the so-called “smart crowd” was touting as more causation, rather than correlation. i.e., “The markets are a forward-looking indicator. So get on the bandwagon quick before it passes you by!”

As I’ve said many times before: “Beware when everyone’s on the bandwagon – except the band.”

And it would seem that’s precisely what a lot of people noticed (or at least recognized one mother of a short squeeze for what it was) and thought better of it. Sadly, for those who bought into that whole “causation” premise that was being touted across the financial/business media at large and did the whole “Buy,buy, buy!” thing? You have my sympathies – once again.

So here we are, and one needs to ponder which way, or view, is the correct one?

Here’s what I know: Nobody knows. And I mean just that: no – body.

It’s all a best guess scenario regardless of who says different. All you can do is try to decipher clues from the clutter as best you can, make a decision as to what you believe is the most probable outcome if correct, put yourself in the best place as to if it works in your favor (or if your proved to be right) you can, at the least, benefit from it. Whether benefit means capitalize, or alleviate any potential harm. Then, and most importantly – live with, and by, your decisions.

You can always reevaluate and adjust going forward.

I say this because I’ve been there. I’ve made some bad decisions, (actually more like terrible) and some good ones. Many of those decisions were in direct opposition to people (and what seemed to be the world-at-large) who were touted to be smarter, more experienced, better looking (much better actually) more seasoned, better educated, and with far more money or wealth than I ever had. That, and a whole lot more.

I have stood in the face of all of that saying : “What makes you so right?” And then demanded they either give a cogent argument, or, just shut up and go away. Especially when it has come down to business and/or life decisions. More often than not, the “cogent” part never materialized. My record (I’m proud to say) of right or wrong stands on its own. Yes, warts and all.

You find out as one moves along in life more things are based on “because I said/think so” rather than anything resembling a real thought process. You need to research, evaluate, then decide for yourself. Then, let the chips fall where they may.

That isn’t always easy. (Trust me, I know!) But it is the only way.

So once again, who knows what will happen from here, but I’ll end all this using a video link and song that pretty much sums up my stand today as my battle cry in response to my colleague’s inquiry to what I think may, or may not think happen as it pertains to the Fed.

I believe it fits today as it did for me back long ago. Where I remember and give thanks during this holiday time. For it wasn’t all that long ago when it wasn’t only myself contemplating going up against a world that said “What makes you think you can? ” as to try and grasp the “brass ring” of life. But also, for few friends of mine that were facing the same issues, at the same time. I know because we discussed them. (you can read a little about that here, and here if you wish)

The song and video title says it all, “I Stand Alone” And the name of those friends? They’re known as Godsmack.

What comes next? Again, nobody knows for sure. All I know is the clock is now ticking into December 14th, that is irrefutable. That, and believing the “alarm” doesn’t go off before, and is totally under the Fed’s purview, is the only thing which everyone seems complacent in. Which to my mind – is just plain nuts.

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Deplorable's picture

Fed Credibility leaves a lot to  be desired:

January 27th - No Fed Rate Increase in January, as expected, but its statement suggested that future rate increases are likely.

March 16th - The Federal Reserves stands pat at its March meeting but stress it is prepared to raise interest rates in April.

April 27th - The Federal Reserve did not raise its key interest rate on Wednesday but its leaders signaled that they may raise rates at their upcoming meeting in June.

June 15th - The Federal Reserve left interest rates unchanged on Wednesday even as it said that the labor market has “strengthened” and growth of economic activity has picked up, implying a rate hike as soon as July.

July 27th - The Federal Reserve's monetary policy committee said Wednesday that it left its interest rate target unchanged as expected, but is likely hike rates at their next meeting in September.

September 21st - The Federal Reserve holds interest rates steady and indicates that moderate US economic growth would allow it to tighten its policy this year as early as next months meeting.

November 2nd -The Federal Reserve kept interest rates unchanged on Wednesday in its last policy decision before the U.S. election, but signaled it could hike in December as the economy gathers momentum and inflation picks up

November 21st - Traders Are Now 100% Sure The Fed Hikes Rates In December.

Spigot's picture

Precisely! Nothing better than a well worn pattern :-)

bonderøven-farm ass's picture

I'll put up a wooden nickel against a Fed rate hike....

Snaffew's picture

word...errr---i mean broken word

SheHunter's picture

Where did I read Mr. Yellen will raise 25 pts in Dec. because of her real concern of the extent to which the fed is 'losing face'.

rccalhoun's picture

hillary wins--no rate hike

trump wins---automatic rate hikes

wisehiney's picture

This has all been a magnificent out of position squeeze.

Whipsaws will never stop any more.

Markets will scream from one extreme to another.

And then back again.

The entire world is trying to sqeeze one last drop of juice out of this old dry lemon.

Hang on tight.

NoDebt's picture

All alpha eventually becomes beta.

 

wisehiney's picture

HA!

Saw this just after my "castrated bull" post.

El Oregonian's picture

There was a chain grocery markets known as AlphaBeta... It went bankrupt... Tick-tock, baby... It's only a matter of time.

SheHunter's picture

DRYS used to be one hell of a day trade.  That stock and I swapped way many shares back and forth.  It is one relationship I still sometimes miss.

Justin Case's picture

It resembles what we see in motorcycle racing, termed as a "high speed wobble" The wobble intencifies in seconds and ususally gets high sided. Everything is good and looking in control and then it isn't.

The financail system is globally interconnected with many different financial instruments that the FED can't even decifer. They use the miniscule rate hike as a test balloon to see if it sets off anything, so they can respond and contain it. They crossed the rubicon of printing currency to prosperity. In all the history of currency failures, it was for exactly the same reason in all cases, exactly what the FED has embarked on, money printing. History is littered with currency failures and the results of hyper-inflation as the faith in paper money is lost. Currencies have an average life span of 60 years, give or take a few years as they try to prevent the collapse by changing monetary policies, to try and prevent the inevitable.

Merica and the USD are on the death bed. They have the life support system still hooked up to the cadaver to give the illusion that the patient is still alive and will eventually recover. It is only a matter of when not if the USD collapses. It is going to be a cataclysmic financial global event. Some countries have taken out insurance on currency failure. Their vaults are holding money in the event that currency becomes worthless.  

 

High sides video compilation for those that don't know the term.

https://youtu.be/QtpjIVhYHJU

 

NoDebt's picture

That the Fed will do a quarter point again in December, as they did last December, is not what I see as the problem in the current "crowd logic".  It's that they think they're going to follow through with 2-3 more of them in 2017.  

We'll see QE4 before we see a Fed Funds rate over 1%.

 

 

dimwitted economist's picture

We're Fucked...

These God Damn Morons are LOST...

illuminatus's picture

Yes we are fucked  but not because they are morons that are lost, but because they keep on fucking us.

Spigot's picture

Not really lost. More like playing the tune they are being told to play. The facade of the "Fed" as some kind of independent and dispassionate agency of Financial Wisdom is in fact simply an arm of the very financial players they claim to be playing opposite. It's starting to become apparent that the action is even less real than World Wide Wrestling.

LetThemEatRand's picture

The Fed doesn't need to raise rates, given that rates have already gone up due to the coordinated action of the "bond vigilantes" who are trying to ensure that Trump cannot print money to create jobs.  But I think the Fed WILL raise rates, for the same reason.   

illuminatus's picture

My prediction is they raise by 1/2%. The bond is tanking anyway and by raising 1/2 they regain some credibility keep inflation bottled up a bit longer.

in4mayshun's picture

Half a percent will send the real estate market to the woodshed. Like "No Debt" said, QE4 will soon be on its way.

Justin Case's picture

Their entire mandate has been to increase inflation. They are terrified of deflation. The whole house of cards of over inflated asset values would super nova in a deflationary spiral. US debt would implode or the dollar would collapse in a hyper-inflationary blow-off as it returns to it's intrinsic value. With controlled inflation the debt burden, consumer and FED, is easier to manage as it's inflated away. There are limits to everything though. These people that are running the monetary circus are no geniuses either. This whole chapter started 1913 and is now coming to an ugly end. The 25 year bond bubble will also meet the pin.

wisehiney's picture

When speaking of a bull, if I remember correctly, the term is castrated rather than neutered.

Anyhow, I am betting that is what these rising rates have done to El Toro.

Lorca's Novena's picture

Pump and Dump! Anyways, the BDI has always been the go to for dry shipping right? Record low sales this year, people staying at home, etc... kind of a no brainer? Maybe we can use the dry shippers for shipping out all of this russian fake news?

Yen Cross's picture

 I might have to add to my eur/usd position.

  What a fucking joke, DoW ES NDQ futures went "full retard"

  My US based tradingF/X is ZIRPED, but I still have my other ICON accounts open.

 Black FRYday?

Justin Case's picture

The FED wants to normalize, but I don't think they can. The option they are playing is "Rates will rise" again, but reality is that they can't. It's been far too long and the impact even a quarter at a time may not be an orderly liquidation of over leveraged assets.

The latest from John Williams’ http://www.shadowstats.com/

- Gains in and Upside Revisions to October Durable Goods Data Reflected Surging, Irregular Commercial Aircraft Orders (up 94%) or Inflation (up 0.4%)

- Going into Fourth-Quarter 2016, Downwardly-Revised Real Durable Goods Orders, Ex-Commercial Aircraft, Contracted Year-to-Year and Quarter-to-Quarter

- That Signaled Continued, Broad Economic Downturn

- October Automobile Orders and Shipments Turned Down and Revised Lower in September

- Home-Sales Activity Continued in Broad, Non-Recovering Stagnation

- Monthly Decline in October New-Home Sales Was Muted by Prior-Period Downside Revisions, Still Down by 59% (-59%) from Pre-Recession High

- Strongest Since 2007, October Existing-Home Sales Still Were Down by 23% (-23%) from Pre-Recession Peak

- Proportions of All-Cash Sales and Sales in Foreclosure Increased in the Month

“No. 850: October Durable Goods Orders, New- and Existing-Home Sales “

http://www.shadowstats.com/

Snaffew's picture

what difference does a Fed move make now anyways?  Real rates have clocked up a full percent on the 10 and 30 yr treasuries over the last few weeks.  The Fed would only be playing catch up and would still be way, way behind the curve.

Justin Case's picture

It can cause a global financial collapse that they won't be able to contain, like Lehman. Lehman was a tiny player in it, but it panicked the FED to stop the landslide before it spread. The $700 quadrillion of unknown derivatives is thee financial WMD that they won't be able to contain, once they set off. The hint of rates rising already is affecting the bond markets. There is about $7 trilion in zero rate bonds to deal with as well. That's also a test balloon to see the market reaction. This is like the bomb squad trying to defuse a unknow trype of explosive device. Getting ahead of the curve might just be the fuse lighting.

sinbad2's picture

The Yuan is not falling, the US dollar is rising. If you compare Yuan to Euro, China's largest trading partner, the Yuan has been trading in the same band all year.

China will welcome the rising dollar, and sell, increasing US dollar liquidity.

koda's picture

Heads I win and tails you lose. My gut tells me that the Fed will pull the trigger and raise rates by 25 points.

coast's picture

 all ya have to do is listen to george soros...the satan tells the plans...this was a video from years ago, and here is the truth before your very eyes...I need not zerohedge or infowars, and WRH is a total clusterfuck, I just need to spend the nest week, reading zybrinski, and goerge soros and I will see the future...I am so tired of these websites,

ie: if I would have turned off my internet, except the above mentioned george and zybrinski and that IMF lady taling about the magic 7, I would have learned more than any of these stupid websites...dvid icke is also very good...

https://www.youtube.com/watch?v=TOjckJWqb0A

hedgiex's picture

Quote: If you think China is going to sit idly by so the Fed. can just raise rates, to then watch their currency tumble into oblivion forced by circumstances not of their own volition.Unquote

Really ? the Yuan tumble was forced by circumstances and not of China's Ponzi that markets bet on. They have already intervened to in the past several months to defend the Yuan. The efforts collapse because global markets do not pay obeisance to what they are used to domestically. 

Quote: Whatever China decides it will, or won’t do during this period dictates what the Fed. will, or won’t be able to do. Period. Unquote

What can the great Ponzi (China) do to arrest the rise of the US$ ? Sell its $ try holdings and print Yuan to absord it.  Global markets are ready for this juice. 

If China wants to play a significant role in influencing the existing global markets, they are exposing their domestic financial infrastructures still not reformed to cope with global investment fund flows to blow their dream to have a long soft landing. Nevertheless, cheer them on not to be a "chicken" and go fight the $ hegemony. 

 

buzzy_the_pirate_dog's picture

kinda silly.  Daytraders ran it up, many banked, thank you, many were left holding the bag.  Don't read too much into it.  EVERY DAY some stawks get bot up, and crash...called daytraders...move on

GoldenDonuts's picture

Dec 4 comes before Dec 14 and if the Italians vote the wrong way things could get interesting.

g'kar's picture

Now would be a good time to nuke all central banks worldwide...unfortunately they control all the nukes

Old Pecksniff's picture

Slap tariffs on Chinese goods.

Justin Case's picture

Don't f**k with yoar mortage holder.

China has been stalking up on money b/c they know that the US currency is returning to it's intrinsic value. History shows that the average life span of currencies is 60 yrs. and merica is there. It has reached it's expiry date.

If you haven't listened to Michael Hudson, then you don't know anything about economics.

brushhog's picture

"It’s all a best guess scenario regardless of who says different. All you can do is try to decipher clues from the clutter as best you can, make a decision as to what you believe is the most probable outcome if correct, put yourself in the best place as to if it works in your favor (or if your proved to be right) you can, at the least, benefit from it...."

That sounds like a gamblers strategy. Doesnt it make more sense to alleviate that risk through diversification? This stuff has all been thought about before, we are not unique in our attempts to profit in a fluctuating market. The solution has been around for a century, it's called DIVERSIFICATION.

You have some stocks, some bonds, some gold, some real estate, cash, fine art, food, equipment...whatever. Try to caste your net as wide as possible and cover as many asset classes as you can.

SheHunter's picture

El Kudos for this article ZH.  I miss the days when ZH was a financial blog first with politics taking a second seat.

BullyBearish's picture

Timing?  From the master:

 

Old Baron Rothschild's recipe for wealth winning applies with greater force than ever to speculation. Somebody asked him if making money in the Bourse was not a very difficult matter, and he replied that, on the contrary, he thought it was very easy. "That is because you are so rich," objected the interviewer. "Not at all. I have found an easy way and I stick to it. I simply cannot help making money. I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon."

Fed-up with being Sick and Tired's picture

There is something in this, from Rosthschilds.  However, I have a way of NOT PICKING BOTTOMS OR TOPS...but I instead look for momentum turning events.   In this DRYSHIPS chart, clearly there is no way you can tell anything from a week's moves in a focused manner.  ZOOM OUT.

bada boom's picture

I 'invested' and bought 10,000 shares at average price of $90 share.  Thought it was going to $200. Should I wait until it comes back or sell now?  Thanks for the advice...

Yours sincerely,

Market Stooge

 

Where are the investigators...

That's right watching porn.  Now available on CNN.

Lorca's Novena's picture

If they decide to do another reverse split soon (they did 3 this year so far) you may see a spike to that level... 

mo mule's picture

I really have no idea.  But if I were Yellen, what with the 10yr approaching 3% I'd raise a half point, yes a full .5%. they got to try and get ahead of the inflation that China is sending our way.  No guts, none, the central bankers haven't a clue what to do, so we will be lucky to see a quarter. lol

Herdee's picture

So, with the uncertainty in Europe I'm supposed to go long EUR in the the hope that those morons know what they're doing? Kinda doubt it. The way I see it is that everyone is paronoid around the globe that the new Administration will drastically lower Corporate tax rates along with dramatically lowering the tax for money returning to the United States. It's called business and now you have a businessman running the country not another government hack. There's a bubble in China, so where will the money flee to? Of course, Trump knows everyone looks to America for safety in times of trouble. In other words, when the investing public doesn't want the uncertainty of European socialism, emerging market uncertainty and Chinese communism, arab- go knows what, and all going bust, what would you do with your money? Of course you would, you'd put it in American Dollars and tell the rest of the fools to go screw themselves. Trump holds all the cards now.