This page has been archived and commenting is disabled.
From Risk-Free Return To Return-Free Risk Overnight
Central Banks' extreme interventionist policies (whether direct money-printing or indirect subordination of existing risk-takers) has left an investing public with a very different risk-reward environment (and very different forecast distributions for future outcomes) as we pointed out earlier. As Matt King of Citigroup notes, the 'risk-on risk-off' environment is here to stay meaning the traditional safety of bonds now offers even less upside and more downside (thanks to subordination) and equities or higher-beta more upside (thanks to central banker puts under asset markets). This helps explain the portfolio-rebalancing effect of QE et al. However, this leads to a focus on high-beta momentum with a growing chasm between price and value - and more likelihood of catastrophic loss when risk-goes-off (as liquidity spigots are closed however temporarily). Efficient frontiers are now not so efficient with marginal returns now perceived as accelerating for incremental risk-taking as the Fed has your back. This means market-cap weighted indices will naturally favor the highest-beta (much more volatile) names that will suffer the most when risk re-appears - so focus on equal-weighted or fundamental-weighted indices for risk-balanced-return. Trying to be long the tails is key as central bankers repress normal investors away from core safety leaving behind the precipice of over-invested, over-risk-stuffed momentum chasers holding the bag.
How Forecasts Have Changed - the distribution of growth probabilities has changed dramatically...
And to repress investors from worrying about these tails, central banks have printed money to nominally raise asset prices and have 'supported' debtors by subordinating existing creditors...this has increased upside for equity holders (as the central bank put seems prevalent) and increased downside for bond holders (as whatever support is provided seems to subordinate existing holders in order to avoid an actual restructuring)...
Which turns the efficient-frontier on its head - with upside from taking more and more risk an accelerating function as opposed to decaying option - i.e. investors are expecting exponentially higher marginal returns for taking on linearly more risk - since the Fed has their back. It seems being long the tails is a more balanced strategy than it used to be...
Source: Citi
»
- 10417 reads
- Printer-friendly version
- Send to friend
- advertisements -
probability? definitely maybe. technical predictions are useless in a managed market.
so true, until managing the unmanageable becomes a reality at which point there'll be even less reason to use technicals and charts....
It's impossible to know where the market is going in the short-term.
Have Ben "The Relic" Bernanke shave his beard and watch the market purge!
managed market is hardly a market, probably maybe every move has Fed's ears attached to it covered with white noise from HFT algos.
Does this mean BTFD??
Of course it does. Always BTFD!
just look at the 3:00-3:30 ramp. Business as usual. Come back to the tables folks, everyone is winning. BlackJacks all around.
TECHNICAL ANALYSIS IS DEAD.....
I don't know why investors & traders still put any worth in TECHNICAL ANALYSIS. For short term moves, it is completely worthless. I don't even try to make guesses on where silver, gold or oil is heading anymore. Even the best get bottom calling wrong. Jim Sincliar called a bottom in gold at $1630 range on April 2 interview on KWN (he stated this bottom took place 2 weeks ago). Today he says this manipulation and move was so easy to see. He says too different things within two days. That being said, Jim is still one of the good guys in a sea of GARBAGE... especially WALL STREET.
I put a chart together as it pertains to the LONG TERM TREND in SILVER compared to the increase of the Money Supply. When we take out all the volatility.... silver is performing just fine. You can take a look at this at TF Metal Report at the link below:
http://www.tfmetalsreport.com/comment/150493#comment-150493
First of all Jim Sinclair isn't a technical analyst. Second are you a technical analyst; do you even know what priciples TA is built upon?
Third, why don't you follow these links to some guys that seem to make good use of technical analysis in gold and bonds? Check out their Bond charts comparison - awesome - and it's been sitting on the net for weeks now.
http://eideticresearch.com/uploads/2/8/3/4/2834543/t-bonds_now_and_then.pdf
http://eideticresearch.com/uploads/2/8/3/4/2834543/tbonds12v96_2.pdf
http://eideticresearch.com/uploads/2/8/3/4/2834543/gold_-_when_channels_fail_2-6-2012.pdf
Buy Palm oil plantations
+1
If you are up to speed on disease risk, yes, go long your very own palm oil plantation. CR and DR come to mind as good places to start your research for plantation purchase. Emission controls in the future should be another consideration. The palm oil plants at La Romana DR and the one north of Quepos CR come to mind. Foul sooty black smoke day and night. Nasty extraction plants, but cheap to operate. Staple ingredient in the ever more popular flavored coffee creamers. That being said there are many old plantations filled with ALL dead palm trees from 'the plague'.
How about: "no risk, no return" - the new paradigm?
I don't see AAPL on those graphs, is it somewhere between gold and cash?
But I thought AAPL was GLD!
Thanks, Shiti.
There is a certain clarity gained by following ZH over time.
BTFD bitchez!
"Overnight" being the operative word. (All the intersting stuff happens after hours.)
They ain't done yet.
You'll notice the magic mystical carpet ride back to SPX 1,4000, right?
There's more bullshit in the back of trick yet to be pulled out.
right New york Fed buying the close so Bob Pissdick will tell me how bullish...
Nice graphs. Now pay attention and BTFD. Can't you see the move already? This dip was just to position the smart money for the "blowout" NFP report. And trust me, it is going to be a doozie. Real? Well of course not. Does it matter? Well of course not.
S&P 1500 soon; DOW 14K before June.
Haters gonna hate! And this place called america is gonna hate if and only if you interrupt their "prime time" TV watchin!
Theyre going to have to face the fact that retail is not coming back to buy their top, not at 13,000, or 14,000.
Or, the NFP report may be the perfect diving board to set off the 'crisis' that they say they need. Well I sure as hell wouldnt be front running it myself anyway.
NFP will dissapoint, seasons were way out of whack this year. Feb got a normal adjustment when it should not have since Feb weather was really May this year.
I thought the risk-free return was the Bernanke put on equities and the Bernanke call on precious metals. It has worked well for quite a while.
A lot of words to simply say, "timing is everything". Well, at least if you make your living buying and selling.
Absolute madness. Been in these markets a long time and this is truly a broken market.
Yep wheres the crisis wheres the need for printing QE? Oh I guess theyll just price it in yet again on a rumor...works just as well or better than the real thing after all.
Thank heavens this pumping the "markets" up does not involve reckless printing.
Those are three of the most opaque and confusing graphics ever presented on ZH. String theory is elementary compared to them.
Yeah I really have no idea what theyre supposed to mean.
This market shit's getting too complicated for me. Back to my day job as a computer scientist.