"None Of The Problems Are Solved" Despite Global 'Plunge Protection' Overnight

When many American traders went to bed last night, China was tumbling, the euro was in trouble, and US equity futures were notching lower. Then, as former fund manager Richard Breslow scoffs, it appears the world "reconsidered" and everything rallied to erase any sign of discontent or uncertainty by the time everyone woke up...

Via Bloomberg,

Apparently, the word of the day is “reconsider.”

Across a whole host of assets, we got somewhat violent moves early in the 24-hour trading cycle that managed to unwind themselves over the course of the day.

I kept being told that the euro, Chinese equities, U.S. equity futures, gold, bond yields, Eurostoxx 50, and so on, all reversed their opening, sometimes gap, moves after the market reconsidered what it all meant.

Of course, that’s being a bit too kind. It would be more accurate to say things turned around when traders actually considered things for the first time. But this all matters more than just a collection of knee-jerk reactions that have come to naught as another trading region came in.


North America isn’t being asked to break the tie and decide who was right. They are being told that they can afford to ignore the news that propelled things in the first place. After all, we’re right back where we started. No harm, no foul. That would be a mistake, as once again we keep muddling-up short-term and long-term information as if they should be discounted by the same rate and assuming we should trade without benefit of context.



Chinese equities opened lower leaving gaps from last Friday’s close.



Big swings: the Shenzhen dropped a quick 2.1% before staging a relentless rally throughout the day to finish up by 0.9%. No leap on the close, just a steady rally.



The commentary at the lows was as dire as the dismissive tone was at the close.


The PBOC proposed additional regulations to curb the run-away shadow banking industry. What was described in the morning as policies that would cause a flood of outflows from various short-term investments were later described as likely to attract foreign inflows. Wait, we’re not collapsing through the last lines of support any more? What a gift -- buy!


The message from this is that, once again, the PBOC is delivering on what they have warned about and promised to address. Perhaps instead of trying to deconstruct the “real” Chinese intentions based on outmoded epigrams, we should start to listen to what they’re actually saying. And accept that regulation isn’t bad by definition. Sometimes a healthier Main Street can actually be good for equities--the old-fashioned way. But it would be folly to decide these new regulations must not be all important because of the day’s price action.


European shares and the euro were hit early on the German coalition talks collapse.



What began as “markets are being roiled” quickly turned to markets “shrugged it off.” Hardly. They recovered on the very fortuitously timed announcement that Volkswagen was going to spend an additional EU25B over the next five years on its core brand. That’s hard and good news. May even help out with Germany’s hopelessly flat Phillips curve.



But don’t think, Chancellor Merkel on her back foot isn’t something with negative possibilities that make it foolish to dismiss. Just hard to enumerate the immediate implications.

As Breslow concludes, the mirage of markets' ignorance does not mean anything is solved.

Some of the other realities to keep factoring into your analysis and avoid being lulled into ignoring include:

  • Brexit wasn’t solved because today’s headline was upbeat, it’s serial noise;
  • you’ve no way of handicapping Nafta as each debating point is aired;
  • no one has a firm handle on the Middle-East;
  • and U.S. tax reform may end up just stoking the debate of whether a bad deal is better than no deal.

Don’t ever let someone tell you the really big news is the ones you can afford to ignore

And it appears we're gonna need more 'help'...


Urban Roman Joe Davola Mon, 11/20/2017 - 13:43 Permalink

if it's a big enough hole, you don't even notice. there isn't a sign.you can still see the starlight streaming in, it mostly looks normal. just a little lensing in the direction of the singularity. time stands still, you just hang there.until you get close enough, and then the singularity shreds you down to a subatomic mist...

In reply to by Joe Davola

chubbar dark pools of soros Mon, 11/20/2017 - 11:32 Permalink

Has anyone considered the possibility that the Central Bankers can keep this up indefinitely? Every market is a reflection of liquidity and trading programs (mostly the dark type), which can be provided/manipulated without limit by the same folks who print the money for a living. Of course they can pull liquidity just as quickly and crash the markets. The point being, these markets have little to do with what "traders" are doing and more  to do with what CBers want to happen. I wouldn't bet my last dollar that the bankers are on the side of the investors either, so really it's just gambling on what the bankers' end game is.

In reply to by dark pools of soros

HominyTwin chubbar Mon, 11/20/2017 - 11:53 Permalink

Let's say the financial system is a mostly enclosed system, like a nuclear bunker. But it can never be completely cut off from the outside world. Like a weak seal on the air filtration system of the bunker, the radiation will pour in somehow. Their system is mainly closed, and they can suppress gold, and inflate real estate and stock prices and bond prices forever. But where is the weak spot, where is the failure point? Not bond prices, not stocks, not gold. Bitcoin? Maybe, until they can get that under control and they will. Maybe oil? Can they print oil/gas to keep everyone motoring and warm?

In reply to by chubbar

lew1024 chubbar Mon, 11/20/2017 - 11:58 Permalink

What makes you think they have more control today than 2008, when it took $14T to patch up the problems?

Seems to me there are more and more of these events, so far all papered over. MSM is pollyanna, but it can't control every bit of news, and folks on the info-inference margin are exiting the market, have been doing so for a long time, more and more. Even my parents, finally.

CBs can't buy everything, and at some point everyone panics and sells.

In reply to by chubbar

Peacefulwarrior chubbar Mon, 11/20/2017 - 12:01 Permalink

You sir win the Rational thought award. There is NO choice in this deflationary environment but Moar debt and Moar accommodating distortion until "someday" it resets. And when will this date be... no one can predict this on this site. These articles will all be a waste of time unless the author knows dates of real trend change.

In reply to by chubbar

gmak Mon, 11/20/2017 - 11:32 Permalink

Big un-smart money has to buy. There aren't enough muppets lining up for them to sell to. So they swap assets among themselves.

Seasmoke Mon, 11/20/2017 - 11:44 Permalink

I just watched Gold price drop from down $10 to down $15 in one blink. Skipped right over -$11 thru $-14 like they didn't exist.

I hate to say it. But I think I'm done with Gold friends. I'm tired of the time waste. It's too much. They win. I bought for the right reasons. The past 5 years things have been as chaotic as I could have imagined and yet Gold didn't do what i expected. I feel like we were correct. But weren't paid. I feel robbed. And I have had enough of the aggravation. Game over for me. Never thought I would say that. Sad day for me. 50 ounces will be no longer mine after this week. George Soros can have them. Happy thanksgiving!!!

Quivering Lip Mon, 11/20/2017 - 11:55 Permalink

A millennial I bowl with is always asking me basically about micro cap stocks. He has another millennial buddy killing it in "the market".What I tell him is this. The first being that THE CB (there really is only one western CB) has been "printing" fiat at an insane rate for years and I don't know how it will end. The second being that he should look up the term ponzi scheme. The third being that when the "market" goes it will go fast. The fourth and last being that the last 9 years have taught me this. I KNOW NOTHING.That being said the amount of Etrade commercials I've seen in the last 6 months, coupled with the fact that the "shoeshine boys" are killing it makes me think that we're very close to a top.Then again WTF do I know.

Don Sunset Mon, 11/20/2017 - 12:22 Permalink

I couldn't believe what the PPT was doing in 2009.  I though to myself................this has got to be illegal as hell.  The markets died to me in 2009.This non-legit system has no chance of surviving and it will reset, but not before heads roll.

wdg Mon, 11/20/2017 - 12:40 Permalink

The markets...sorry I meant casinos...are rigged by the International Criminal Banking Syndicate headquartered at the Bank of International Settlements (BIS) in Basal, Switzerland. There are no markets anymore...just endemic rigging and corruption as far as the eye can see. But the sinister banksters are not all powerful and free markets will one day reassert themselves, in the near future. And when this happens, the western world will be looking at the implosion of the banking/financial/political systems which will be followed by a New Dark Age that could last decades. And there will be a fearful reckoning for the gangster elite who plundered the western world and left behind an economic and social disaster. They can run and they can build bunkers...but they cannot hide. And one day they will have to answer for their heinous crimes against humanity. Truth and morality can be suppressed in the short term but ultimately will win over unspeakable evil. 

Batman11 Mon, 11/20/2017 - 12:44 Permalink

Knowledge isn’t always a good thing.Capitalism comes along and this isn’t a problem. The aristocracy are still maintained in luxury and leisure while others do all the work.The Classical Economists come along and identify the aristocracy as economic parasites living off the hard work of others. Big problem, cured with neoclassical economics.The benefits of finance can only be maintained when no one else understands the system. Neoclassical economics doesn’t look at private debt, which is very handy.Just in case.Monetary theory has been regressing since 1856, when someone worked out how the system really worked.Credit creation theory -> fractional reserve theory -> financial intermediation theory“A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Wernerhttp://www.sciencedirect.com/science/article/pii/S1057521915001477Bank’s don’t take deposits or lend money and this quite clear in the law.https://www.youtube.com/watch?v=EC0G7pY4wRE&t=3sIf we obfuscate everything no one will work it out (but they did).Austerity doesn’t work for reasons that require the hidden knowledge of money.Richard Koo explains.https://www.youtube.com/watch?v=8YTyJzmiHGk  

zzzz88 Mon, 11/20/2017 - 13:38 Permalink

central bank criminals even do not allow a very small correction. what are they afraid of ? why they have so much fear? they hide something very big?

Lokiban Mon, 11/20/2017 - 13:49 Permalink

Plunge protection team has been working overtime since the total and utter collapse of the whole system in 2008.They will reach eventually the proverbial brick wall. We should be thankful we had a grace period of 9 years and counting but it can end anytime.

Erwin643 Mon, 11/20/2017 - 14:30 Permalink

Oh I see Tyler, it's the "Plunge Protection Team" once again.How about the S&P bouncing cleanly, and predictably off of its 10-week moving average?