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Poor Cheshire Is Off His Tea
From Mark Grant, author of Out of the box, and onto Wall Street
“The entire world is falling to ruins and poor Cheshire's off his tea.”
-The Mad Hatter
“Out of the Box” follows a different course. It is written expressly for large financial institutions and is not distributed to the public. The main concern of my commentary is to help you avoid those places of danger where points or scores of points may be lost with a single mis-step. I do not suggest specific securities and while there may be an asset class, such as bonds linked to Inflation, where I think there is opportunity; my commentary is not trying to sell you anything. Further my group works with our clients, we trade bonds ourselves so that we follow the very old school principle that we work with people and we do not trade against them. I have no idea what my firm owns in their inventory and whatever we are long or short in our trading positions makes not one whit of difference to me. It has been said to me often enough that my commentary often sounds negative or full of gloom but this is not the case. I am trying to warn you, to provide an outside view of “Watch Out” so that Alice’s rabbit hole is a place that you may avoid visiting and be healthier as the result of not holding any meetings with the Mad Hatter. I can tell you that he is a distinctly unpleasant fellow and possible interactions with him can result in the infamous pronouncement of the Red Queen and one doesn’t want to lose one’s head afterall.
"Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"
-The Red Queen
I am the keynote speaker later today at The American Bankers Association Conference for Bank Directors. The topic is Europe and how Europe will affect the American Banks. Now some of the effects are fairly straightforward such as counterparty risk with larger banks and their exposure to Europe and then exposure to the American divisions of the large international banks. The identification of further crises in Europe will be part of my presentation but then I will discuss the divergence between Treasuries and credit assets and the widening in spreads that I see forthcoming as Quantitative Easing has ended for the moment and as the solvency issues in Europe worsen as the Continent heads into a protracted recession. The flood of money from the Fed drove every asset class higher in price and then when the Fed stopped their gift giving we had seen a marked decline in equities and a widening of spreads in every other asset class and while the Fed might do one more QE as a bid to help him that cannot be named get re-elected; that will not take place for months if it happens at all. What we have witnessed in Europe is a time horizon of about three months where liquidity drove up prices and then a serious back-up as the funds were placed and the river began to run dry. You may recall that I was out 15 minutes after the Fed announced no new monetary easing suggesting that you may wish to take some profits because I know how this game gets played out and the markets have been on the dole with the Fed for four years and when the hand-out ends; Jack Sprat is no longer the recipient of any fat. As a matter of fact old Jack Sprat is now on the lean and the lack of dietary supplements always has a pronounced effect.
Forthcoming
The Wizard predicts it will be Greece, Portugal and Ireland all back at the trough in 2012 and Spain lining up for its first feeding. Italy remains a question mark but with a real debt to GDP ratio of 200% the structural issues will not be overcome by anything that Mr. Monti has proposed to date. As we all focus on the sovereigns in the last few days I point out that the European banks are down around 2%-4.5% in Germany, Italy and Spain today while the largest bank in Portugal has seen its share price drop 15% this morning. You may ignore the ugliness and the markets may ignore it for this or that day but the European ugliness is not going away and I would be a seller on any pop in equities or risk assets because the European landscape is a quite Bleak House.
“The only relevant test of the validity of a hypothesis is comparison of prediction with experience.”
-Milton Friedman
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Good shit!
I been running twice as fast, and I'm still not getting anywhere.
We don't know what's happening.....but it looks bad.
All you need to know is PM's, Food and guns, everything else is a crap shoot!
And hillbillies inherit the earth.
That would be a quantum improvement over the CB scum.
Garlic planting hillbillies :-)
We haven't heard the last of Greece...and that rascal France is an up and comer in the flat broke department.
Yea, its all in worse shape than before bailouts, and lifespan for 'bailout effectiveness' is now about 1 month. Place your bets accordingly, whatever.
Suck my cock Bernanke......EASE - y.
suck your own cock, sounds like you need a little fun.
Initial Jobless almost 400K?
Mark Grant: 'Hey, look at Europe"
Broken record-itis.
How much further down the rabbit hole will we fall before it falls apart, and ends in a pool of tears?
Does it matter?
this is politically managed and not a rabbit hole but a sewer
yes it matters, we shouldn't let other people drag us down their holes
Stop Paying Your Taxes
cut the suckers off
"I am the keynote speaker later today at The American Bankers Association Conference for Bank Directors. The topic is Europe and how Europe will affect the American Banks. Now some of the effects are fairly straightforward such as counterparty risk with larger banks and their exposure to Europe and then exposure to the American divisions of the large international banks. The identification of further crises in Europe will be part of my presentation but then I will discuss the divergence between Treasuries and credit assets and the widening in spreads that I see forthcoming as Quantitative Easing has ended for the moment and as the solvency issues in Europe worsen as the Continent heads into a protracted recession."
first. there are no American Banks distinct from European Banks.
there is THE BANK. singular. one. always.
second, to call credit an "asset" is to be a fool. it is not an asset. it is a debt. it is a paper debt.
paper is valueless. as defined in Modern Money Mechanics by the Fed itself.
to be talking about life and trading and vibrancy in terms of negative paper is to be talking death and foolishness continuously.
to read from and drink with and hang out with people who are engaged in such practice is to yourself be in that practice. "you can't roll with the hogs without getting pig shit on you."
see, choose, smile.
The market only cares about Google's earnings after the bell. Blow away the expectations and the market may surge 10% on Friday.
Did the US government use shell corporations to purchase large stocks of aluminum to alow Alcoa to show a surprise profit? In the central planned world of today you can't say no.
For three years the hurdle has been lowered to the ground so massive "surprise" beats could rally the market. A miss wasonly allowed when a setup for QE was needed. Expectations for earnings this quarter based on the movement of stock price are sky high. Based on its stock pice Apple needs what, $70 a share to justify the move?
Q1 2012 was insanity cubed.
I don't think I want to see the insanity post QE3. $1800 Priceline, $900 Chipotle, $2500 Apple?
One thing is for certain QE3 will put the labor participation rate of the US under 50%.
You're probably right. But who the hell knows what the labour partipation rate is now, let alone what 50% means? Other than those on ZH and other such websites, the morons you meet every day think unemployment is falling, growth is exponential and the good times are back.
Who gives the 50% not in the participation rate a voice?
Great avatar! Too bad we don't have a "way back machine"!
This market is a joke. It has been a joke for the last 3 years. No wonder retail has been exiting. QE, the snake oil of the 21st century.
Who is this wizard you talk about?