Volatility

How many of us are bored to tears with the Fed’s Hamlet act on raising rates, and yet have been staring at this debate for so long that we have convinced ourselves that we have a meaningful view on what will transpire, even though it’s a decision where we have zero investing edge and unknowable risk/reward odds. The hardest thing in the world for talented people is to avoid turning a low edge and odds opportunity into an unreasonably high conviction bet simply because we want it so badly and have analyzed the situation so smartly. In both poker and investing, we brutally overestimate the edge and odds associated with merely ordinary opportunities once we’ve been forced by circumstances to sit on our hands for a while. Investment discipline suffers under the weight of dullness and low conviction in at least four distinct ways here in the Golden Age of the Central Banker...

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"The system failed in 2008/09 and rather than allow a proper creative destruction cleansing, policy makers have been aggressively propping it up ever since.  We think the end game is that when the next global recession hits, then QE/zero rate world will be re-appraised."

Gold in Q3: USD -4.5%, EUR -2.4%, GBP +1.5%, CHF +2.4%, CAD +4.6%. Global stocks fall 5% to 13% - Stocks face worst quarter since 2011 over fears for global economy

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With the fiscal picture looking increasingly precarious and confidence collapsing, we bring you the latest from the frontlines of the EM meltdown. In short, Brazil is falling apart at the seams. Now, who wants tickets to the 2016 Olympic Games in Rio?

Courtesy of JPM we find something curious: it is no longer the Fed, nor its capital markets proxy, Citadel, nor even the banks or hedge funds that are the primary sellers of volatility. It is retail investors themselves!

In a tragic, if very odd coincidence, a day after we postulated that the real "commodity-trader" risk may not be Glencore after all, but its just as vast, if even more levered competitor, Trafigura, moments ago the privately-held company (with publicly traded bonds), announced that its founder and biggest shareholder, french billionaire Claude Dauphin has died at the age of 64.

"financial markets are NOT yet pricing for a recession, rather they are merely flirting with the idea. I suspect this largely reflects faith/hope in policymakers within market participants. The events of the past few weeks, both going into and after the most recent BOJ and FOMC meetings, should give those heavily invested in policymaker faith/hope a lot of food for thought...  the next Fed “put” is not likely until the S&P 500 is trading in the 1500s at least (so more likely to be a Q1 2016 item rather than Q4 2015); and in terms of what the Fed could do, clearly QE4 has to be in the Fed’s toolkit"

USDJPY is tumbling, cracking back below the 120.00 tractor beam (and catching down to Nikkei 225's decoupling). EURUSD is also plunging, down 100 pips in the last few hours... it appears it is not just EM FX that is seeing volatility increase as The Majors start flip-flopping ahead of Friday's payrolls data..

Terrible economic news is wonderful news for markets, all over again, and with the worst S&P500 quarter since 2011 set to close today, some horribly "great" news is just what the window-dressing hedge funds, most of whom are deeply underperforming the broader market (not to mention Dennis Gartman) ordered.

Asian markets are bouncing modestly off a weak US session, buoyed by more unbelievable propaganda from Japan. Abe's proclamations that "deflationary mindset" has been shrugged off was met with calls for more stimulus, more debt monetization, and an admission by Etsuro Honda (Abe's closest adviser) that Japan "is not growing positively" and more QE is required despite trillions of Yen in money-printing having failed miserably, warning that raising taxes to pay for extra budget "would be suicidal." Japanese data was a disaster with factory output unexpectedly dropping 0.5% and retail trade missing. Markets are relatively stable at the open as China margin debt drop sto a 9-month low. PBOC strengthened the Yuan fix for the 3rd day in a row to its strongest in 3 weeks.

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We call on central banks to abolish their zero interest rate policy (ZIRP) framework before more harm is done. In our assessment, ZIRP is bad for all stakeholders and may even lead to war.