Cudmore: "It's Now A Matter Of When, Not If, Markets Break Down"

Tyler Durden's picture

After yesterday's sudden last hour swoon, in which the DJIA tumbled over 200 points after the FOMC Minutes, the biggest intraday reversal in 14 months, suddenly the bears - especially those who until recently were on the fences - are getting more vocal, such as Mark Cudmore, Bloomberg's former FX trader who this morning writes that "it’s now a matter of when, not if, markets break down into a proper bout of risk-aversion." As for timing, he sayd that "we’re debating the hour rather than the week."

His full note:

The Markets Have Made Their Negative Feelings Clear

It’s now a matter of when, not if, markets break down into a proper bout of risk-aversion. As for timing, we’re debating the hour rather than the week.

The catalyst might be headlines from the Trump-Xi summit, or the ECB’s comments, or it might be the labor report tomorrow, or something else entirely. It doesn’t matter. Markets have made clear which way they want to go, they just haven’t picked which catalyst they’ll blame.

It’s not about where assets are priced today -- the key levels have still not broken -- it’s the path they followed to arrive there. After the strong ADP jobs report, equities rallied, Treasuries fell, the yen slumped, etc. The moves were powerful enough to squeeze out weak risk-asset bears and breed complacency among bulls.

Then the Fed minutes were delivered. The reversals were sharp and just at the moment when nobody was thinking of the downside to risk assets. This means the market will have to chase these moves. But not aggressively quite yet -- most traders will now be nervously watching the ranges and counting on them to hold again.

The key remains the 2.3% yield level in 10-year Treasuries. With the Fed intimating that balance sheet reduction may come sooner than investors expected, thereby potentially reducing the pace of rate hikes, that market is fundamentally fragile as well.

It’s tempting to argue that, no matter all that has been thrown at markets in recent months -- from a Fed hike to the failure of the health-care bill -- the ranges still hold. It’s this attitude that has only raised their relevance and increased the likely volatility when they cleanly break.

I’d be surprised if the levels survive Thursday, let alone until the weekend. The tide has already turned and we’re soon going to see who is swimming naked.

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WernerHeisenberg's picture
It's Now A Matter Of When, Not If, the nuclear trigger gets pulled ... and markets won't matter any more.  Thank you neocons and your satanic death cult.
GUS100CORRINA's picture

Title: Cudmore: "It's Now A Matter Of When, Not If, Markets Break Down"

My Response: I completely agree. This has been my position for last 4 years. Earnings have been flat since 2014! So with earnings flat, why in the HELL did the market go up? One reason: To make OBOZO look good in office.

Because the Republican Majority has failed to seize opportunity to deal with HEALTHCARE and TAX REFORM, the long overdue MARKET VALUATION RESET TO FAIR VALUE should begin anyday now and may have already begun.

Below is real economic data from a truthful source.

“No. 878: February Trade Deficit, Construction Spending, Updated Consumer Liquidity”

Posted April 5th, 2017 at 10:49 AM (CST)

The latest from John Williams’

– Sharp Narrowing in February 2017 Trade Deficit Reflected Plunging Imports of Consumer Goods, Such as Autos and Cell Phones 

– Declining Consumer Demand and/or a One-Time Reporting Aberration? 

– First-Quarter 2017 Real Merchandise-Trade Is on Track for Worst Deficit Since Third-Quarter 2007 

– Despite a Nominal 0.8% Monthly Gain in February Construction Spending, Inflation-Adjusted Activity Remained in Stagnant Non-Recovery, Headed for First-Quarter 2017 Quarterly and Annual Contractions 

– Consumers Face Continuing Income and Credit Stresses, Amidst Mixed Optimism

VinceFostersGhost's picture



I don't think the heavy stuff is gonna come down for quite a while....

Tarzan's picture

So, Is Goldman Sach's alum Cohn trying to bring back the Glass-Steagall Act?


Cohn, the ex-Goldman Sachs Group Inc. executive who is now advising President Donald Trump, said he generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans, according to the people, who heard his comments.

The remarks surprised some senators and congressional aides who attended the Wednesday meeting, as they didn’t expect a former top Wall Street executive to speak favorably of proposals that would force banks to dramatically rethink how they do business.

Yet Cohn’s comments echo what Trump and Republican lawmakers have previously said about wanting to bring back the Glass-Steagall Act


Who knows what to think anymore.  Only God knows how long they can string this out.  I know one thing, America will default soon, then all bets are off... The chaos that will ensue will ungulf us all, and there's just no way any of us can imagine the shit storm that's coming.


space shitle's picture
space shitle (not verified) Tarzan Apr 6, 2017 6:23 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

kahplunk's picture

7k/mo smoking pole on web cams

Winston Churchill's picture

Hard work at $0.75 per pole.

Extra large tips though.

Government needs you to pay taxes's picture

Ball washing, I hear, is an excellent way to make an extra $0.25 per pole.

Ghost of PartysOver's picture

It is getting a little tense.  I did not see Ryan's crap coming yesterday.  His presser seemed to be a power play against Trump more than anything else.  Not sure what to make of it.  I am sure congress is going to get an ear full over the next two weeks including the wacko progressives invading the town halls.  With RyanCare and Tax Reform off the front page we are back to SpyGate which is more intriguing but much less important (Healthcare and Tax Reform are whats going to save the country, not locking a few mutants up).  And the Drama continues.  Be nimble, be quick, employ logic not emotion when making decision.

JRobby's picture

Earnings have been flat since 2011


nmewn's picture

So by neocons you mean like the folkz desperately searching for Russians under every bed at Trump Tower or what?

JRobby's picture

They want war

They want war

They want war

They want war

They want war


The coming financial crisis is the protected story line

Fisherman Blue's picture

The silly fools at the FED have no idea what they are doing. They print fake money and dilute the common mans labor, that's what they do ,that's all they do.

Arnold's picture

Plan the work, work the plan.
We, the basic consumer, were never in the plan.
Also, they have never said it was a good plan.

Antifaschistische's picture

So,  you're saying, they are constantly virtually lowering the cost of labor.  While the labor stats actually show incomes rising, it's not enough to make up for the dilution from the Fed....but the sheeple feel better, and that keeps them from recognizing the smoke and mirror routine.


bobsmith5's picture

No, he is not saying they constantly lower the cost of labor, but that the value of the currency that the labor is paid buys less and less because of inflation.

The cost of labor can even decrease from the employers standpoint, but the purchasing power of an employees paycheck can have less purchasing power.

JRobby's picture

They know exactly what they are doing. They will drain liquidity from the system with the new "balance sheet initiative".

The liquidity provided by QE were the blood transfusions that they stopped. Now they start sucking the blood out.


BigFatUglyBubble's picture

I'm swimming with my iron codpiece on.

Arnold's picture

Funny you should mention that.

Someone handed the office boss a grinder yesterday, just make sparks, you know.
I used the spade I was leaning on to cover the parts I could not afford to lose.

The old twig and berries do not stand well against a shattered wheel.

UncleChopChop's picture

i've just assumed that those same users of artificial mechanisms which have engineered this 'melt-up' will be the ones to simplly decide when they want TO crash it? all they have to do is withdraw from 'the market' and down it goes. 

until they decide it's "time" though, any valuation metrics are irrelevant. we are so far from 'fundamental value' that graham and dodd can eat a bag of dicks

jamesmmu's picture

timing is very important tho. 

charlie303's picture
charlie303 (not verified) jamesmmu Apr 6, 2017 5:43 AM

Oh yes!

Last of the Middle Class's picture

After the summer break, I'm thinking. When it becomes apparent Christmas is going to be shit for a lot of retailers and they realize everyone in the US paying $1000/mo health care premium is NOT a good thing. Even though it covers having dick replaced with a brand spanking new vagina. The Fed is already using banker speak (The market is high) for pulling the rug out from under Trump. If you want to see collusion, see who makes money on the short side. It's coming.

gatorengineer's picture

I completely agree but it has been ""on order"" for 8 years...  Delivery must be by the USPS.

Kefeer's picture

It can go on for much longer; they only need to cover the interest on the debt-promises. 

We have a long-time (i.e 15-20 years) before TPB are forced to make a change.  Meanwhile the wars and rumors of wars and general unrest will grow and the love of many will continue to grow cold as societies self-destruct morally - then the CHTF.

Houses Depreciate's picture

I don't believe there is another 15-20 years before economy accelerating job creating price declines.

ronaldwilsonreagan's picture

We have Donald Dumb Fuck to blame that is all that matters. Nobody wants to be the captain of a sinking ship that is why he is there:) 

indygo55's picture

Give me a fucking break! Where have you been for the last 8 years, or is it the last 16 years? Trump did this? Are you stupid or blind? Or maybe a Snow Flake?

Glad 2B Gone's picture

For Trump, it would be good if the markets crapped out sooner than later.  He will then be able to get his infrastructure spending and tax reform and likely healthcare reform programs passed and put in place to help in the new recovery to MAGA

Spifflove's picture

I may be wrong but I think he was trying to say they have a scapegoat and he just needs to be in office long enough to own the collapse.

charlie303's picture
charlie303 (not verified) Apr 6, 2017 5:42 AM

Government debt is the problem, Bond market to collapse.
I am still agreeing with Martin Armstrong, Dow Jones to 23,000 as Europe goes down first and the money flows into USA.

dimwitted economist's picture

This stock market will NEVER go Down. ever.



just keep buying...

buzzsaw99's picture

you should write for bloomturd.

CJgipper's picture

You You really think the fed and PPT is going to stop buying stocks and giving free loans to companies to buy their own stocks?  Pensions would implode around the country.   They are NOT going to allow more than a 10% decline before EXTREME measures are silently implemented to ramp it back up.

buzzsaw99's picture

this is TEH FUNNY. r u sure it wasn't written by phoenix capital? any minute now. i'm super cereal you guys...

Enceladus's picture

It does sound like a Phoenix Cap piece.or it was written by me in July 2010

SheepDog-One's picture

Central banks will pull the rug out when it's most beneficial to them.

Kefeer's picture

Yep - and we the sheep are no longer self-sufficient by any stretch of the imagination.  Many laws prevent the attempt to become so; thus the purpose of the EPA and FDA and DEA.

Kefeer's picture

Why do bears keep underestimating the power of the Central Banks to manipulate all things financial?

It goes up until they are ready for a replacement scheme and not before that.  The bankers will always be protecting themselves and will not spare a single sheep.  They buy out or single-out anyone in their way.  They control the US Military, the world's Gestapo and Imperial Praetorian Guard.

JRobby's picture

They will drain liquidity from the system with the new "balance sheet initiative".

The liquidity provided by QE were the blood transfusions that they stopped. Now they start sucking the blood out.

indygo55's picture

Is it the "no shit Sherlock" moment or is it the "Captain Obvious" moment for us here at ZH? 

Iconoclast's picture

It requires more than a single black swan event to break this market, it'd need a flock of crack head black swans, all off their heads like the birds in a Hitchcock film.

So where's the flock coming from; China, a derivatives time bomb, junk bond explosion, where is the event horizon, leading to the destruction of the circa 45trillion brought into existence as fresh debt since 2009?

Moreover, how do we know it can't be fixed again through bailouts, MOAR QE and NIRP? A 30% correction only takes us back to circa 13,500 on the DJIA, meh.

JBilyj's picture

Guarantee a fat finger makes the narket roar back today, btfd...

red1chief's picture

I think Mr. Cudmore is wrong, given the still-high liquidity and overall Fed attitude regarding asset price support. But I certainly respect someone who sticks his neck out, and if he is right one of the best calls of the current century.

silverer's picture

Well, the markets have already broken down. They are no longer functioning as "markets", because real price discovery is no longer taking place and hasn't been for a while. The real question is: when will the broken down brains of investors realize the markets are broken?

Non-Corporate Entity's picture

Every time I drop a large oak or maple tree on my farm people freak out. The landscape they were used to changes, squirrels and birds lose their homes, all the debris makes the forest ugly, blah-bla-bla...

Then a few months later everyone's happy again. Five trees flourish in its spot, creating more homes for wildlife, wood debris breaks down and feeds the earth, landscape beauty comes all seems to work out when nature runs its course. Perhaps Trump has been encouraging us to plant trees to prepare for the next round of fallen oaks? Just thinking out loud here.

LittleMaestro's picture

Almost all of the optimism in stocks since the election has been based on the belief that govenment would come to its senses once an outsider was in the White House. The system is broken beyond repair. It doesn't work. They couldn't even keep the one promise of repealing Obamacare. Give them more time, you say? Fair enough. It may yet happen. But the cold reality is setting in that Congress is as dysfunctional as ever.