Many investors today are not very familiar with market history and tend to live only in the day-to-day mainstream narrative while watching little red and green graphs move up and down. This is not so much an issue in a relatively stable economic environment. The problem is, today we live in the most unstable economic conditions possible.
Indeed, what party other than the BOJ could be buying negative coupon debt? The answer is exactly why the coming financial crash will be so severe and long-lasting. To wit, it is front-runners expecting to cop a capital gain, and then get out before the house of cards collapses. That’s what might otherwise be called an ambush. The trillions of speculator dollars crowded into trades of this type throughout the global financial markets will never get through the narrow door of liquidity that remains in the casinos. The dotcom and the post-Lehman meltdowns were only the rehearsal.
Bears Exit Hibernation As Rally Fizzles On Dismal Chinese Trade Data; Commodities Slide; Gold HigherSubmitted by Tyler Durden on 03/08/2016 07:49 -0400
Those algos who scrambled to paint yesterday's closing tape with that last second VIX slam sending the S&P back over 2,000, forgot one thing - the same thing that China also ignored - central bankers can not print trade, something we have repeated since 2011. The world got a harsh reminder of this last night when China reported the third largest drop in exports in history, which crashed by over 25%, the third biggest drop on record, and no, it was not just the base effect from last February's spike, as otherwise the combined January-February data would offset each other, instead it was a joint disaster, meaning one can't blame the Lunar New Year either. In short, one can't really blame anything aside from the real culprit: despite all the lipstick that has been put on it, global trade is grinding to a halt.
The effects of all this fundamental dishonesty have thundered through our national life to the degree that American society is now divided into the swindlers and the swindled, loosing the monster of collective Id known as Trump on the public. This is what comes of attempting to divorce truth from reality, which has been the principal business of American life for several decades now. When truth and reality become de-linked, a society literally doesn’t know what it is doing.
Shortly after JPMorgan's historically correct forecasters unleashed their "short stocks" prognostication, we joked that if only Goldman would go "long" the S&P500, then the confusion about what is really going on would be eliminated instantly. And so the alarm bells on this bounce should be ringing loud and clear as Goldman just told its portfolio manager clients that "S&P 500 calls are more attractive now than at any time on record."
'Efficient' markets at their very best once again. Following a 19% spike overnight, analysts and traders alike are stunned by "the departure from fundamentals" as "the iron ore and steel markets have gone berserk." On the heels of home price surges, sent soaring after government suggestions that they will support growth, "investors are expecting further monetary easing by the Chinese government to boost steel demand," but as Bloomberg notes there has been no "corresponding increase in physical orders."
“It’s better to be out of a bull market, than fully invested in a bear market.”
"We are in the bottom of the 8th or 9th inning, and unless the Fed steps in to add liquidity to the market, which seems unlikely, I don’t expect extra innings... there is no question that the bubble will burst, resulting in a mini or not-so-mini credit crisis."
US financials are tumbling after The Fed proposed a rule that would limit banks with $500 bln or more of assets from having net credit exposure to a “major counterparty” in excess of 15% of the lender’s tier 1 capital. Bloomberg reports that The Fed's governors plan to vote today on the proposal. The implications of this are significant in that it will force some banks to unwind exposures and delever against one another (most notably with potential affect the repo market which governs much of the liquidity transmission mechanisms). Guggenheim's Jaret Seiberg warns the proposal is likely to be "stringent," though less onerous than the Dec 2011 proposal... which Goldman Sachs more specifically warned that it could destroy 300,000 jobs.
"...the GOP establishment’s putative “jobs” candidate from 2012 was never really a businessman at all. Willard M. Romney is no expert on shiny things on a hill. The country would be far better served if he would get his dimming light back under a bushel where it belongs."
There is an odd feeling of Deja QEu this morning, when with two hours to go until the February payrolls, global stocks are modestly higher, US equity futures are likewise slightly higher on the back of a weaker dollar (or perhaps stronger Euro following a Market News report according to which the ECB may disappoint, more on that shortly), but it is gold that is breaking out, and after entering a bull market yesterday when it rallied 20% from its December lows gold has continued to surge, rising as high as @1,274 in early trading a price last seen in January 2015.
Goldman plans to eliminate more than 5% of traders and salespeople in its fixed-income business, cutting deeper into those operations than an annual companywide cull that has already begun. Furthermore, according to a notice filed on the DOL's WARN website, Goldman announced that it would terminate 43 workers, with the layoffs set to occur between May 9, and July 1.
“The Brazilian economic downturn took a real turn for the worse in February," according to Markit's Composite PMI, which collapsed to record lows at 39.0. Despite a slightly less bad than expected GDP print this morning (stil down a record 5.89% YoY), hope was quickly extinguished as PMIs showed economic activity continuing to contract at a record pace, job losses accelerating, and manufacturing's collapse accelerating. As Market sums up, "With the global economy also showing signs of slowing, which will impact on external demand, it looks as if the downturn is set to continue to run its course in the coming months."
"central bankers seem ever intent on going lower, ignorant in my view of the harm being done to a classical economic model that has driven prosperity – until it reached a negative interest rate dead end and could drive no more."