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- Jan 8, 2020 8:15am Jan 8, 2020 8:15am
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- Post #7,502
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- Jan 12, 2020 2:04pm Jan 12, 2020 2:04pm
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- Post #7,503
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- Jan 12, 2020 2:06pm Jan 12, 2020 2:06pm
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- Post #7,504
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- Jan 12, 2020 6:40pm Jan 12, 2020 6:40pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
Two days after we reported that a disturbance may be brewing below the surface of the repo market again, after the first oversubscribed term repo in over three weeks, when on Jan 7 the Fed received $41.1BN in submissions for its $35BN two week repo, we got another indication just how strong the market's addition to the Fed's easy repo money has become, when moments ago the Fed announced that its latest 2-week term repo operation was also almost oversubscribed, as $34.3BN in securities ($23.3BN in TSYs, $11BN in MBS) were submitted for today's $35 billion operation, as dealers continue to scramble to the Fed for liquidity which they are no longer using for merely "regulatory" year-end purposes (since it is no longer year-end obviously), but are instead using it to pump markets directly.
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Today's operation, which was just shy of the maximum $35BN allowed, was the second highest term repo since Dec 16, and suggests that as repos are now maturing at a rapid burst (as we noted last week in "Mark Your Calendar: Next Week The Fed's Liquidity Drain Begins"), dealers remain as desperate as ever to roll this liquidity into newer term operations.
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And just in case there was any doubt that the liquidity shortage isn't getting better, moments later the Fed announced that in its daily Overnight repo operation, it also accepted $48.825BN in securities ($24.2BN TSYs, $24.625BN in MBS)...
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... for a total liquidity injection of just over $83 billion!
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The latest repo operations also confirmed what we discussed overnight in "Top Repo Expert Warns Fed Is Now Trapped: "It Will Take Pain To Wean The Repo Market Off Easy Cash"" in which we noted that according to Curvature Securities' repo expert Scott Skyrm, something appears amiss as the total overnight and term Fed RP operations on Friday were greater than on year end! On year-end, the Fed had pumped a total of $255.95 billion into the market verses $258.9 billion on Friday.
https://zh-prod-1cc738ca-7d3b-4a72-b...201.8.2020.jpg
The problem, as Skyrm explained, is that the market had gotten addicted to the easy Fed liquidity unleashed in September (via temporary repo ops), and then again in October (via permanent T-Bill purchases): "it's easy to see how the Repo market can get addicted to easy cash from the Fed when the stop-out rates for the RP operations are 1.55% - behind the offered side of the market." But, as the repo strategist added, as the Fed keeps injecting cash, the market gets used to it.
Which is great in the short-term as it sends risk assets soaring, but become a major issue over the long-term: "The long-term problem is that the some investor cash (real money cash) that was once going into the Repo market is now going elsewhere", Skyrm explains.
Indeed, the problem is that repo rates are trading in the lower end of the fed funds target range. When GC rates were higher in the range, Repo general collateral, as an investment, was more competitive than other overnight rates. But now that cash has gone to other markets.
In short, just as the market got addicted to QE and the result was a 20% drop in the S&P in late 2018 when markets freaked out about Quantitative Tightening, the Fed's shrinking balance sheet, and declining liquidity, Skyrm cautions that "it will take pain to wean the Repo market off of cheap Fed cash" since "it's a circle" which can be described as follows:
For the Fed to end daily RP ops, they need outside cash to come back into the Repo market. For the Repo market to attract cash, Repo rates need to move higher. For rates to move higher, the Fed needs to stop RP ops.
The problem is that stopping RP ops could spark another repo market crisis, especially with $259BN in liquidity pumped currently - more than at year end - via Repo. It also means that the Fed is now unilaterally blowing a market bubble with its repo and "NOT QE" injections, and yet the longer it does so the more impossible it becomes for the Fed to extricate itself from the liquidity pathway without causing a crash.
Or stated simply, the longer the Fed avoids pulling the repo liquidity band-aid, the bigger the market fall when (if) it finally does. The question then becomes whether Powell can keep pushing on the repo string until the November election, because a market crash in the months preceding it, especially since it will be of the Fed's own doing, will result in a very angry president.
- Post #7,505
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- Jan 13, 2020 7:38am Jan 13, 2020 7:38am
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
Posted Jan 13, 2020 by Martin Armstrong
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It is stunning how after more than three months, the analysis on the repo market is still nowhere close to reality. I believe that those in the trenches are, like me, afraid to really explain what is taking place for fear they will be blamed for creating a financial panic.
The popular explanation in September was repeated by the Wall Street Journal: “For one, Monday marked the deadline for companies to submit their quarterly federal tax payments.” This was standard analysis put out by the countless pundits the press rely upon and they have to come up with some explanation and quick. When analysts spout out their explanations to mainstream media it is because they are trying to get business. People have often asked me why I do not do mainstream media interviews. First, I do not need the business. Secondly, when you have real clients, they prefer to pay for information and do not want it on the front pages of newspapers for free. They appreciate analysis that is exclusive rather than as common as dirt. Hence, the analysis put out in the press about the Repo Crisis is coming from people who have no real clients in the area and lack the expertise in the field to start with.
Not even the central banks understood what was going on because even they tend to be domestically oriented. Despite the obvious fact that we live in a global economy, all the economic theories, analysis, and experience have been domestically focused. Unless someone has been in the trenches globally, they will never see the wildcard coming from external sources. Hence, we get the calls to explain things ONLY because they know all the other major institutions are also coming to us as some sort of the central point of reference.
The question that is now dominating everyone’s inquiries, can the Fed exit the repo market after being the dominant source of liquidity for more than three months? What will it take for the Federal Reserve to withdraw from its daily liquidity operations in this $2.2 trillion market for repurchase agreements (repos)?
All I am prepared to say publicly is that the solution is beyond the powers of all the central banks combined. The solution is not attainable without political concessions, which politically are just off the table. This is going to require a major reform that is unlikely to take place and will not even be recognized until the crisis erupts on a much larger scale.
Categories: Interest Rates
Tags: Federal Reserve, repo crisis
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- Jan 13, 2020 8:21am Jan 13, 2020 8:21am
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
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- Jan 13, 2020 8:24am Jan 13, 2020 8:24am
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- Post #7,508
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- Jan 13, 2020 9:45am Jan 13, 2020 9:45am
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- Post #7,509
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- Edited 2:15pm Jan 13, 2020 9:50am | Edited 2:15pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
MONDAY, JANUARY 13, 2020
Knowledge and Understanding in Trading
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I've been teaching myself new approaches to trading and have learned many valuable lessons in the process.
One of the most significant changes I've made is trading from a place of understanding rather than a place of knowledge.
As the quote suggests, knowing something and understanding it are quite different things. I know a number of people, but I would not be so presumptuous as to pretend that I understand all of them. Similarly, I might know a Bible passage or a poem, but that doesn't necessarily mean I understand them.
Much of what is taught in trader education is knowledge. It might be knowledge about fundamental factors that influence the stock market, such as interest rates. It might be knowledge about chart patterns, trends, and indicators. It might be knowledge about potential catalyst events, such as shifts in monetary or fiscal policies. From their knowledge, traders typically attempt to make predictions, such as whether the market will go up or down. Sometimes the predictions made from the pieces of knowledge are quantified through backtests. This is common among many of the services that I recently highlighted.
This knowledge-prediction paradigm of trading is what I have found to be limited. "X is occurring; therefore the market should do Y" does not necessarily reflect any understanding of why that relationship might hold. When we look for X-Y patterns in markets, it becomes easy to reach for so many patterns that the relationships we trade are spurious and not meaningful. That is how overfitting occurs in backtests, for example. We test so many combinations of variables that eventually we find the 1 in 20 that is significant at the p<.05 level!
In science, we first observe nature and develop theories about what is occurring and why. Theory building is the hallmark of understanding: a theory represents causal thinking, not just correlational thought. "The market is going higher because we've formed a certain candlestick pattern on a chart" does not capture anything of a causal nature. Conversely, if we look at the expansion of the Federal Reserve's balance sheet and their stance on rates and hypothesize that excess funds in a low rate environment will spur speculative activity, that could represent part of understanding of why we're in a bull market. Or if I break down volume that is transacted at market bid and offer prices and notice that institutions are predominantly lifting offers across different time frames, this could represent an understanding of market participant behavior and a theory of why we're seeing a market trend.
To be sure, once the scientist has a promising theory, it's important to put the ideas to the test--and that is where prediction comes in. Ideally, a trade is a test of a market hypothesis derived from a trader's understanding. When well-constructed trades are working out, they add confidence to our theory. When they don't work out, they may lead us to revise our theory. Ideally, our trading is our way of testing our understanding of the market.
Too often, however, traders assemble knowledge and immediately want to create trades out of what they have learned. Bypassing the process of understanding leads to a shallow perspective on market behavior--one that does not merit true conviction. Genuine conviction comes from deep understanding, not simple correlations and patterns. "There is nothing so practical as a good theory," psychologist Kurt Lewin observed. What traders need are frameworks for understanding how markets behave and why, not mere "setups" for the next trade.
Further Reading:
Market Profile as a Fresh Perspective on Markets
TraderFeed Home Page and Index
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- Jan 13, 2020 10:23am Jan 13, 2020 10:23am
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- Post #7,511
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- Jan 13, 2020 2:11pm Jan 13, 2020 2:11pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
January 13, 2020
Pelosi Threatens “One Way Or Another” Trump Will Not Be President Much Longer As Feared Assassin Freed
By: Sorcha Faal, and as reported to her Western Subscribers
A heavily redacted highly-classified “Of Special Importance” new Foreign Intelligence Service (SVR) report circulating in the Kremlin today is expressing grave concerns over a shocking warning just issued by retired top CIA operative Kevin Shipp—who during his spy career was assigned as a protective agent for the Director of the Central Intelligence Agency and was the team leader protecting sensitive CIA assets from assassination—and who has just alerted the world that the Deep State “is in a state of shock” and “getting desperate to stop President Donald Trump” because “for the first time in their careers, they can be prosecuted for what they have done”—a fearful assassination warning near immediately followed yesterday by Democrat Party House Speaker Nancy Pelosi granting a rare nationwide televised interview wherein she ominously declared to her socialist forces “One Way Or Another, Trump Will Not Be President in Ten Months”—an unmistakable threat issued during the same week a supposedly disgraced former US Marine named Brandon Magnan was captured while penetrating multiple levels security protecting President Trump—but for this criminal offense committed against the life of Trump by a man having been previously convicted of multiple felonies, saw him stunningly being immediately released on bond—an outrage equaled in scope and magnitude with “the unidentified man with him” penetrating Trump’s security disappearing into a black hole of silence never to be heard or spoken about again. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]
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According to the very sparse unredacted portions of this highly-classified SVR report permitted to be discussed among various Kremlin ministries, the former Committee for State Security (KGB) maintained a massive database on United States’ military and intelligence agency assassination plots, plans and techniques—some of which were revealed to the American people in 1975 by what was known as the Church Committee—which was a US Senate investigation into their nation’s assassination activities that exposed attempts to assassinate foreign leaders, including Patrice Lumumba of Zaire, Rafael Trujillo of the Dominican Republic, Ngo Dinh Diem of Vietnam, General René Schneider of Chile and Fidel Castro of Cuba—but whose most shocking revelation was that the CIA had developed a poison that caused the victim to have an immediate heart attack—and as described in all of its horrors:
This poison could be frozen into the shape of a dart and then fired at high speed from a pistol.
The gun was capable of shooting the icy projectile with enough speed that the dart would go right through the clothes of the target and leave just a tiny red mark.
Once in the body the poison would melt and be absorbed into the blood and cause a heart attack!
The poison was developed to be undetectable by modern autopsy procedures.
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United States Senator Frank Church (left) displays CIA gun able to induce heart attacks.
The first knowledge by the KGB that the CIA was developing their heart attack gun, this report notes, was obtained in November-1959—and whose most unlikely source of information about was gained from their interrogation of a supposedly disgraced US Marine who had just defected to the Soviet Union—who described during his interrogation how the CIA selected US military personal to be covert assassins—but who first publically discredited these soldier-assassins so no links could ever be established between them and the CIA—knowledge this former US Marine claimed was true as the CIA had tried to recruit him to be an assassin—which was why he defected in the first place—a defection, however, this former US Marine relinquished three years later, in May-1962, when he and his newly married Russian wife went to the US Embassy in Moscow and were given money to return to the United States—a fateful decision as 18-months later, in November-1963, this former US Marine was made the patsy-assassin of President John F. Kennedy—and who today is known as the late and murdered before he could talk Lee Harvey Oswald.
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CIA patsy-assassin Lee Harvey Oswald tells the truth—then gets murdered.
By using the information obtained by the KGB in their interrogation of former US Marine patsy-assassin Lee Harvey Oswald, this report continues, SVR intelligence analysts have long maintained an extensive database on US military personal discredited and forced to leave service, most particularly those rated as expert marksmen who the CIA would recruit into their covert assassination programme—one of whom was US Marine Corporal Brandon Magnan—who, on 12 March 2010, was sentenced by court martial for committing felony sex crimes against those under his command—and who also, at approximately 15:00 hrs local time (3pm) on 6 January 2020, successfully passed two security checkpoints manned by US Secret Service and Palm Beach County Sheriff’s deputies while driving his maroon Honda Pilot with an unnamed male passenger towards the Marine One helicopter President Trump was about to board—a successful invasion of the unprecedented security controls that surround Trump at all times that Magnan accomplished by identifying himself as a member of the Marine Corps helicopter squadron and his presenting security officers credentials with Marine Corps seals—an invasion plot to get close to Trump only stopped when a real member of the Marine One helicopter squadron noted what was occurring and sounded the alert that Magnan’s credentials were fake “based on numerous factors”—thus leading to SVR intelligence analysts expressing their incredulity as to why this obvious CIA patsy-assassin was near immediately set free—as well as their racing the clock to identify the “unnamed male passenger” who penetrated Trump’s security, too.
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Suspected CIA patsy-assassin former US Marine Brandon Magnan (left) shockingly released on bond after penetrating Marine One (right) security protecting President Donald Trump.
As to why President Trump needs to be assassinated by his Deep State enemies, this report concludes, is because with each passing day he becomes more unbeatable—most particularly because he has arrayed against him a socialist Democrat Party who this week will hold a debate that on its stage will have more billionaires than black people—and will also see on it former socialist Vice President Joe Biden whose living room rallies more resemble funerals because barely any voters attend them—as well as socialist US Senator Elizabeth Warren who has just gone “PURE UNFILTERED CRAZY” with her call to ban all construction of new homes in America and ban energy mining and drilling for oil and gas—bans one would think Warren wants to protect her nation’s unspoiled lands so the American people can enjoy them—but is wrong thinking as the socialist mobs supporting Warren have now declared that hiking is racist—all of whom have pitted themselves against a President Trump whom the Wall Street Journal has just congratulated for his sailing the US economy through a trade war with “barely a scratch”—and is why all of the top experts are proclaiming today that there is almost no chance of a recession occurring in 2020—which should allow Trump to concentrate his considerable genius energy on the warning just issued by Britain’s first astronaut Dr. Helen Sharman that “Aliens Definitely Exist And May Already Be Living Among Us”—as would be expected by the leader of the United States Space Force—whose creation of last month made Trump human history’s first bonafide Space Force Commander-In-Chief—and who still remains undefeated in all of his battles.
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January 13, 2020 EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.
[Note: Many governments and their intelligence services actively campaign against the information found in these reports so as not to alarm their citizens about the many catastrophic Earth changes and events to come, a stance that the Sisters of Sorcha Faal strongly disagree with in believing that it is every human being’s right to know the truth. Due to our mission’s conflicts with that of those governments, the responses of their ‘agents’ has been a longstanding misinformation/misdirection campaign designed to discredit us, and others like us, that is exampled in numerous places, including HERE.]
[Note: The WhatDoesItMean.com website was created for and donated to the Sisters of Sorcha Faal in 2003 by a small group of American computer experts led by the late global technology guru Wayne Green(1922-2013) to counter the propaganda being used by the West to promote their illegal 2003 invasion of Iraq.]
[Note: The word Kremlin (fortress inside a city) as used in this report refers to Russian citadels, including in Moscow, having cathedrals wherein female Schema monks (Orthodox nuns) reside, many of whom are devoted to the mission of the Sisters of Sorcha Faal.]
Trump Throws Leftists Into Chaos After Committing Crimestop Thought Offense
Magical Millennials Chart History Free Star-Path To Their Own Destruction
Lincoln Jailed Over 13,000 Journalists—Roosevelt Went Around Them—Now Trump Presides Over Their Destruction
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- Jan 13, 2020 9:12pm Jan 13, 2020 9:12pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
- Post #7,513
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- Jan 13, 2020 9:15pm Jan 13, 2020 9:15pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was first identified in a 1929 book, Gold and Central Banks, by Polish economist Feliks M?ynarski,[1] who identified a fundamental instability in a gold-based international monetary system, that the reserve currency countries would tend to accumulate foreign reserves,
https://en.wikipedia.org/wiki/Triffin_dilemma
The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was identified in the 1960s by Belgian-American economist Robert Triffin,[1] who pointed out that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfill world demand for these foreign exchange reserves, thus leading to a trade deficit.
The use of a national currency, such as the U.S. dollar, as global reserve currency leads to tension between its national and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account, as some goals require an outflow of dollars from the United States, while others require an overall inflow.
Specifically, the Triffin dilemma is usually cited to articulate the problems with the role of the U.S. dollar as the reserve currency under the Bretton Woods system. John Maynard Keynes had anticipated this difficulty and had advocated the use of a global reserve currency called 'Bancor'. Currently the IMF's SDRs are the closest thing to the proposed Bancor but they have not been adopted widely enough to replace the dollar as the global reserve currency.
In the wake of the financial crisis of 2007–2008, the governor of the People's Bank of China explicitly named the reserve currency status of the US dollar as a contributing factor to global savings and investment imbalances that led to the crisis. As such the Triffin Dilemma is related to the Global Savings Glut hypothesis because the dollar's reserve currency role exacerbates the U.S. current account deficit due to heightened demand for dollars.
- Post #7,514
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- Edited 10:41pm Jan 13, 2020 9:37pm | Edited 10:41pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
Authored by Tim Price via The Cobden Centre,
"A deeply disturbing account of the destructive potential of belief.”
– Ammar Kalia, reviewing BBC Four’s Storyville: Jonestown – Terror in the Jungle.
When it’s not trying to overturn legitimate plebiscites or shoving woke propaganda down the throats of its reluctant viewers, the BBC is still capable of showing half-decent documentaries. This correspondent recently caught the tail end of one such piece, Storyville: Jonestown – Terror in the Jungle. Being nine at the time of the original atrocity, we don’t remember any coverage of the story being aired, but 1978 was a different age, and wary parents might well have suppressed the news in any case.
Here are the facts. In 1974, the cult leader Jim Jones established the Peoples Temple Agricultural Project (“Jonestown”) in northwestern Guyana. The organisation purported to practise what it termed “apostolic socialism”. What became known as Jonestown would represent, to its believers, a socialist paradise and a haven from media scrutiny.
Temple members were originally worked six days a week, between 6:30 a.m. and 6:00 p.m., but after Jones’ health began to deteriorate, the schedule was relaxed to eight hours a day for five days a week – a regime adopted from North Korea. The settlers’ Hollywood movies were replaced by Soviet propaganda and documentaries about American social problems. Jones himself would often read to his parishioners news items from Radio Moscow and Radio Havana. Temple staff would “interpret” other material and help the congregation to “appreciate” Marxist-Leninist messages. Parishioners who misbehaved would be consigned to a 6 x 4 x 3 foot plywood box. Errant children would be consigned to the bottom of a well, sometimes upside down.
In 1977, former Temple members Tim and Grace Stoen began a campaign seeking custody of their five-year-old son, John. Eventually, Congressman Leo Ryan offered to assist them. By 1978, Jones was apparently taking significant quantities of Valium, Quaaludes, stimulants and other drugs. He was probably also suffering from chronic insomnia.
On November 14, 1978, Congressman Ryan arrived at Jonestown with a delegation that included representatives from the US embassy to Guyana, a number of journalists including NBC reporter Don Harris, and representatives from the ‘Concerned Relatives’ pressure group, including Tim and Grace Stoen.
After a few days at the site, the Ryan delegation left for the Port Kaituma airstrip with a small number of defectors from the Temple. They were intercepted by Temple members. A number of NBC employees were shot dead. Congressman Ryan was shot dead. A damaged Twin Otter plane and the survivors from the delegation were left behind on the airstrip.
Aides at the compound meanwhile prepared a large barrel of grape-flavoured Flavor Aid, a cheap knock-off of Kool-Aid, tainted with Valium, cyanide, chloral hydrate and Phenergan. Jones then urged Temple members to commit “revolutionary suicide”. Parents were encouraged to dose their children, then take the poison themselves. Reluctant parishioners were dispatched by armed guards. A total of 918 people, including many children, died, “voluntarily” or otherwise. Jim Jones was among them; he shot himself in the head.
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Attending the recent MoneyWeek annual investor conference, this correspondent was struck by the apparent consensus amongst the event’s panellists that the world’s central banks were highly likely in 2020 to start implementing what is known as Modern Monetary Theory (MMT). MMT holds that any government that issues its own money can pay for goods, services and financial assets without a need to raise taxes or issue debt. It also holds that governments cannot be forced to default on debt denominated in their own currency.
It seems increasingly plausible that MMT will be the next iteration of macroeconomic planning from our monetary authorities, the central banks. We would argue that their previous policies of QE (Quantitative Easing) and especially ZIRP (Zero Interest Rate Policy) have led their respective economies into something of a dead end. Perhaps “Jonestowns” would be an appropriate analogy. With the cost of capital effectively at zero, profitless ‘concept stocks’ can secure almost unlimited funding, driving down profit margins for competitors that actually have credible and sustainable business models. Eventually the entire economy and financial system becomes zombified.
ZERDIRETap featuring a curated list of must-read stories.
As Adam Smith could easily have said, there’s a great deal of ruin in a fiat money system. The rot has been setting in for years. Here, for example, is what the John Wilkes Club wrote about the system seven years ago:
..this shadowy financial engineering, eye-watering price volatility and the foisting of our debt on unborn generations seem to share some nebulous characteristic which is as instantly recognisable as it is hard to define – a certain grubbiness, the quality of something unpleasant that we have become resigned to living with.
The sense that the whole economy is a hostile and dishonest place, that there is no pleasure or virtue to be found in it, is so much a hallmark of the modern world that it might almost be its distinguishing feature. If there is a single culprit, the smoking gun is surely grasped in the pallid talons of the monetary system, now so far from being an organic social convention, evolved to meet real human needs, that we should hardly be surprised that we no longer expect it to promote basic social decency.
During the twentieth century, the nature of money itself was remorselessly inched away from being a real monetary commodity – the honest and logical medium of exchange which it had been since the very dawn of homo œconomicus – to being an arbitrary and elastic pile of government promissory notes backed by nothing at all. This was not brought about by our changing preferences as money users, but by a series of planned changes conceived on our behalf by progressive folk with reassuring credentials.
These were intelligent, often brilliant people whose misguided faith in the ability of human genius to transcend the limitations of inherited behaviours made them tragically susceptible to the insane schemes which so characterised the last century. At its least harmful, this ambition brought us those planned urban communities which seem to be based on Lord of the Flies; at its most, it brought us millions of corpses. Somewhere in between these two on the list of twentieth century mistakes lies the global non-system of fiat money which developed between 1913 and 1971.
We do not often quote Lord Keynes at the JWC, but here he is in 1923: “[t]he individualistic capitalism of today…presumes a stable measuring rod of value and can not be efficient – perhaps can not survive – without one.” It was the economists of his generation, however, who decided that they alone could calculate the correct monetary balance to ensure non-inflationary growth and implement it though the central bank, just as they alone could determine the just and efficient allocation of scarce resources and implement it through licensing, regulations and subsidies. The gold standard was out, and what Detlev Schlichter has wittily called the ‘PhD Standard’ was in.
They seem to have been glacially unconcerned that modern economic life – indeed, any social organisation more sophisticated than a primitive barter society – needs a sound accounting unit in order for long-term obligations or depreciation schedules to have any meaning at all, let alone to be accurately calculable. An exponentially expanding stock of paper or electronic units does not contain the information needed for any large or lasting enterprise to match off values, any more than jelly can be nailed to the wall.
Before, when money was a gold derivative, a pound note or dollar bill had been a kind of short position against a physical asset. Gradually, this easy calculation was replaced by a labyrinth of paper claims against paper whose expansion was not even readily susceptible to measurement, because the definitions of money and credit were now so close as to be virtually indistinguishable. How can the value of a money-market fund be anything but arbitrary when it becomes nothing more than an aggregation of short-term credit obligations?
Nevertheless, governments leapt at the new economic orthodoxy like pirates on an unexpected chest of doubloons. Here at last was the story they needed in order to float as much debt as they wanted: risk-averse savers holding money-balances were now effectively lending money to their governments rather than hoarding precious metals. The fiscal discipline which the successful system of commodity money had imposed on greedy and ambitious politicians was broken. Moreover, their weapons have become more sophisticated over time: any attempt to bet against government policy can now be taken down by unleashing irresistible firepower through the derivatives markets.
The automatic stabilising effects of inelastic commodity money are well known and need not be rehearsed here – suffice it to say that the inability to create more money makes the kind of trade and fiscal imbalances of 2013 self-correcting. Our main point here is that honesty and honour in contractual relationships is dependent on trust and therefore on certainty. The monetary system is a moral as well as an accounting frame of reference.
The three examples with which we began this post are merely topical instances of a much broader decline of social virtues in economic behaviour: manufacturers seeking profits in financial engineering instead of product sales, stock markets which seem to have nothing to do with the boring process of channelling savings into productive investments, and whole societies transferring to themselves the wealth of people who are unable to consent.
Our entire culture is pervaded by a moral turpitude in financial matters. Whereas in a hard money system the amount of savings sets an upper limit to the amount of borrowing, today’s imbalance between savers and would-be borrowers can be simply circumvented by governments and banks siphoning off purchasing power from others by inflating the currency. Never mind credit expansion and the business cycle: it is simply unethical to use human patrimony, built over years or generations of hard work, without the freely negotiated agreement of those who have built it.
Another imbalance – our multi-decadal trade deficits – shows how addicted first world countries have become to having prosperous lifestyles despite negative savings rates: a narcissistic, self-indulgent culture of entitlement by which the richest people in the world live beyond their means by forever extending the games they play with their elastic currencies, paying for foreign work with newly-created irredeemable paper.
Harry Schultz was surely right that the deterioration in economic attitudes in our society – indebtedness, lack of respect of the system and lazy moral relativism – is related to the meaninglessness of our medium of exchange. In contrast, a commodity money system limits debt, the scope for financial dishonesty and the ability to use currency and credit expansion to establish political control over others. Those limitations foster sound and ethical economic behaviour.
Our Georgian and Victorian ancestors correctly held commerce to be amongst the highest of the social virtues.. Not understanding that the monetary system in the twenty-first century is qualitatively different as well as quantitatively debased, we see the corruption and involuntary transfers all around us and feel grateful that the economic bureaucracy has the power to step in. Truly, it is the cure that is making us sick.
We give the last word on the intellectual credibility of MMT this week to Mr. George Hatjoullis who wrote the following to the editor of the Financial Times in November 2014:
Sir,
Adair Turner suggests some version of monetary financing is the only way to break Japan’s deflation and deal with the debt overhang (‘Print money to fund the deficit – that is the fastest way to raise rates’, Comment, November 11). This was precisely how Korekiyo Takahashi, Japanese finance minister from 1931 to 1936, broke the deflation of the 1930s. The policy was discredited because of the hyperinflation that followed.- Post #7,515
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- Jan 14, 2020 9:55am Jan 14, 2020 9:55am
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- Post #7,516
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- Jan 14, 2020 9:56am Jan 14, 2020 9:56am
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- Jan 14, 2020 3:05pm Jan 14, 2020 3:05pm
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What You Aren’t Being Told About The World You Live In
How The “Conspiracy Theory” Label Was Conceived To Derail The Truth Movement
How Covert American Agents Infiltrate the Internet to Manipulate, Deceive, and Destroy Reputations
Other reports in this series include:
Trump Walks Mideast Tightrope To Achieve Historic Iran Peace Moves World Thought Impossible
January 14, 2020
Democrat Party Breaks With Rest Of World To Support Iran Policy Based On War And Bloodshed
By: Sorcha Faal, and as reported to her Western Subscribers
A critically worded new Ministry of Foreign Affairs (MoFA) report circulating in the Kremlin today noting Foreign Minister Sergey Lavrov offering that Moscow is ready to contribute to launching dialogue between the United States and Iran if the sides show interest in this, says the events of this past week pushing the world the brink of the apocalypse demands such an action occurring much sooner than later—events that quickly escalated to near catastrophe when the US announced it had dispatched six of its B-52 strategic bombers to an Indian Ocean base within striking distance of Iran—but kept hidden from the American people by their lying leftist media, was that what the US Air Force had just approved them to carry are nuclear-tipped cruise missiles—all under the control of President Donald Trump who had previously warned that “the last person that wants to play the nuclear card believe me is me…but you can never take cards off the table either from a moral stand…from any standpoint and certainly from a negotiating standpoint”—which in this case, though, were not used because of Trump’s masterful moves in achieving a quickly negotiated peace with Iran—a negotiated peace necessitated by Trump’s ordering the assassination of an Iranian terrorist general that US Attorney General William Barr ruled definitively under US federal law “was a legitimate act of self-defense”—a legal ruling immediately followed by France, the United Kingdom and Germany triggering the Iran nuclear deal dispute mechanism because the Iranians were not abiding by its agreed upon commitments—all of which has now been astonishingly met by hundreds of Trump-supporting regime protesting Iranian students refusing to walk on either the American or Israeli flags—and even more remarkably, has seen top Iranian news broadcasters quitting their jobs on air and saying such things as: “It was very hard for me to believe that our people have been killed…Forgive me that I got to know this late…And forgive me for the 13 years I told you lies”—unheard of events beyond shockingly being ignored by the American socialist Democrat Party and its top leaders who are breaking from the rest of the entire world trying to bring peace to Iran—most important of them being Democrat Party Leader Nancy Pelosi declaring that she will not support these Iranian freedom protesters—a demented declaration fully supported by Pelosi’s fellow Democrats and their leftist mainstream media lapdogs who are all praising this now dead Iranian terrorist general—thus making it no wonder why President Trump sent out to his over 70-million followers a picture of Democrat Party Leaders Nancy Pelosi and Chuck Schumer dressed as the Iranian mullahs they’re acting like. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]
http://www.whatdoesitmean.com/dit21.jpg
President Donald Trump sends out to his over 70-million followers on Twitter a picture exposing who Democrat Party Leaders Nancy Pelosi and Chuck Schumer really support.
According to this report, because of President Trump’s decisive actions to bring peace to the Middle East by any means possible so he can bring his military forces home where they belong, the leaders of Iran are now placed in the position of having no good options—options that range from bad, to really bad—but are under siege leaders both the United States and Israel are giving breathing space to so logical decisions can be made—best exampled yesterday by Israel stating that it sees no threat from the new Iranian general who replaced Soleimani—that was followed by the US Supreme Court rejecting a case trying to seize $1.7 billion from Iran.
Most despicably, though, this report notes, President Trump’s moves towards peace are being met by a socialist Democrat Party supporting leftist mainstream propaganda media establishment continuously providing cover to the murderous Iranian regime—a cover being provided because their lying and distorted Iran narrative got shot down by Trump and they don’t know what to do—as one would expect from these insane socialist lunatics, who are still keeping hidden from the American people the stunning news of the Obama Regime’s secret letters sent to Iranian terrorist general Soleimani—and instead of their telling true things and facts, have now been exposed as being the propaganda puppets they truly are—and as just reported:
In the first 100 days since House Democrats began their impeachment push on September 24, ABC, CBS and NBC have aggressively aided the effort.
A Media Research Center analysis finds the Big Three evening newscasts have battered the President with 93% negative coverage and promoted impeachment at the expense of nearly all other Trump news.
At the same time, the broadcast networks donated at least 124 hours of wall-to-wall live coverage as they pre-empted regular programming in favor of House Democrat-led impeachment activities.
On the other hand, the networks’ frenzy over impeachment has meant the Democratic presidential candidates have been barely visible on the evening newscasts, even though voting is due to begin in just three weeks.
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This massive and unprecedented socialist Democrat Party-led, and leftist mainstream media establishment supported propaganda war against the American people to turn them away from President Trump, however, this report concludes, has now predictably collided head-on with the very foundation of the United States itself—a nation whose Founding Fathers actually engineered the Constitution of the United States around the problem of political ignorance, thereby diminishing its harmful effects—thus explaining why, at the same time these deranged socialist Democrats and their media sycophants are using propaganda to create a nation of political imbeciles, the American people themselves are solidly rejecting the ruling class, be it the Northeast liberal “establishment”, the mainstream media, or the Hollywood elite—a political earthquake propelling both Trump and Bernie Sanders—both of whom are supported by a subterranean, subliminal rumble that is building across America, although large populations in the West and Northeast seem deaf to it—and while at first blush, American politics might seem polarized, breaking neatly along left and right political fault lines, even a cursory look at the 2020 Presidential Race presents a very different picture—as a breathtaking 80% of the American public is fed up and prefers candidates who are well outside the traditional political ruling class, be it left or right—which explains why the ruling class Democrats and their media lapdogs have warned their followers “Here It Comes: Get Ready for a Stop-Bernie Onslaught Like You've Never Seen” as they begin to destroy Sanders—exactly like these idiots did in 2016—which led to Sanders voters helping Trump win—all of whom have forgotten to their peril the often used cliché: “The definition of insanity is doing the same thing over and over again and expecting a different result”—and equally as important, their ignoring the fact that the American people really don’t care who their next leader is—as long as its someone who will take a firebomb and blow these ruling class elites up and then smash their remains into oblivion—which Trump has been doing a very good job of all by himself.
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January 14, 2020 EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.
[Note: Many governments and their intelligence services actively campaign against the information found in these reports so as not to alarm their citizens about the many catastrophic Earth changes and events to come, a stance that the Sisters of Sorcha Faal strongly disagree with in believing that it is every human being’s right to know the truth. Due to our mission’s conflicts with that of those governments, the responses of their ‘agents’ has been a longstanding misinformation/misdirection campaign designed to discredit us, and others like us, that is exampled in numerous places, including HERE.]
[Note: The WhatDoesItMean.com website was created for and donated to the Sisters of Sorcha Faal in 2003 by a small group of American computer experts led by the late global technology guru Wayne Green(1922-2013) to counter the propaganda being used by the West to promote their illegal 2003 invasion of Iraq.]
[Note: The word Kremlin (fortress inside a city) as used in this report refers to Russian citadels, including in Moscow, having cathedrals wherein female Schema monks (Orthodox nuns) reside, many of whom are devoted to the mission of the Sisters of Sorcha Faal.]
Trump Throws Leftists Into Chaos After Committing Crimestop Thought Offense
Magical Millennials Chart History Free Star-Path To Their Own Destruction
Lincoln Jailed Over 13,000 Journalists—Roosevelt Went Around Them—Now Trump Presides Over Their Destruction
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- Post #7,518
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- Jan 14, 2020 3:31pm Jan 14, 2020 3:31pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
The Fed Is Going All-In To Keep The System From Collapsing
January 14, 2020Financial Markets, Gold, Market Manipulation, U.S. Economybank bailout, Fed, FOMC, repo, Repo rate
Gresham’s Law in action: The diminishing availability of physical gold from the market (per several different accounts in London) corresponds to the proliferation of fiat currency printing and paper gold derivatives.
Since September the Fed has increased the size of its balance sheet by $414 billion or 11% in less than four months. It’s the fastest rate at which the Fed has printed money in its history. The Fed insists that this “repo” program is not the reinstatement of “Quantitative Easing.” In one sense the Fed is correct. This money printing program is a direct bailout of the big banks. And now the Fed is proposing to start bailing out hedge funds:
Federal Reserve officials are considering lending cash directly to hedge funds through clearinghouses to ease stress in the repo market. But that could be a tough sell for policy makers (WSJ).
Yes, liquidity in the inte-rbank overnight collateralized lending system dried up in September. But it’s not because of a shortage of cash to lend. The reason is two-fold. First, banks needed cash/Tier 1 collateral to shore up their own reserves. Why? Because bank assets – especially subprime loans – are starting to melt-down – i.e. rising delinquencies and defaults. This is provable just by looking at the footnotes in quarterly bank 10-Q’s. Second, hedge fund assets – primarily the bottom half of CLO’s, credit default swaps, leveraged loans – are melting down.
The banks know this because these are the same deteriorating assets held by banks. In order to induce overnight repo lending, it would require a repo rate many multiples of the artificially low repo rate in order to reflect the risk of holding compromised collateral overnight. This is why the repo rate spiked up briefly to 10% in September. That rate reflected the overnight interest rate desperate borrowers were willing to pay for an overnight collateralized loan. Banks pulled away from lending in the repo market because they no longer trusted the collateral – even on an overnight basis. This is why the Fed was “forced” to start printing $10’s of billions and make it available to the repo market.
The Fed created the problem in the first place by holding interest rates artificially low and leaving several trillion of its first series of QE operations in the banking system. This in turn fostered a catastrophic level of morally hazardous investing by banks and hedge funds. Now the Fed will try to monetize this – it has already hinted that the “repo” bailout will be extended now to April. Absence this Fed intervention, 2008 x 10 will ensue – which will happen eventually anyway.
Ultimately, it will be a tragedy if the Fed bails out the the banks and the hedge funds – especially the hedge funds. Who benefits from this? Bank and hedge fund operators should be penalized for making reckless investment decisions – not bailed out by what will end up to be taxpayer money. We already saw in 2008 that banks take the bailout funds and continued to pay themselves huge bonuses despite making lending decisions for which they should be penalized.
And a bailout of the hedge funds would reward hedge fund managers for investments that would never have been made had the Fed let a free market determine the true cost of making those investments.
I said back in 2003 that the Fed would print money and monetize debt until the elitists had swept every last crumb of middle class wealth off the table and into their own pockets before letting the system collapse. The bank bailout in 2008 and now the bank/hedge fund bailout is an example of this wealth transfer process. The only question that remains in my mind is whether or not the current bailout operation will be the last “sweep.”
- Post #7,519
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- Edited 8:37pm Jan 14, 2020 8:04pm | Edited 8:37pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
JAN
14
FED adds over $1.1 Trillion in Repo
https://1.bp.blogspot.com/-_YynnUw3s...l%2Bcopter.jpg
What shouldn't come as a surprise to any of Econemotions readers is that the FED continues to backstop the markets by providing its global risk-taking cabal with ample liquidity. Yea, yea, yearend needs, yea right, don't be fooled this is and will be a permanent and ongoing operation as the debt is just too much. Not only that the asset prices can only gain continued unprecedented growth as long as high powered FED Repo money is accessible. Without the continued support, we would expect the markets to be unwound as fast money only cares about how much and how long it can finance such gimmickry. Anyway, this chart paints a very clear picture of the ongoing liquidity:
https://1.bp.blogspot.com/-KEJX1yfnH...%2B14%2B20.jpg
With all this in mind and knowing full well that since TARP back in 2008, asset prices have and will continue to be heavily supported by the global central banks, for their existence most certainly depends upon it. James Bianco put out a great chart today putting both the total return of US Treasury Bonds and the S&P500 into perspective:
https://1.bp.blogspot.com/-FNWQfpnCh...l%2BReturn.png
As far as some more current or relevant technical market set ups, let's take a look at the 2x Russell2k future vs the Nasdaq. This chart clearly shows the absolute drubbing and downward trend the Russell has had vs the tech heavyweight. What seems like a decent risk/reward setup the chart is currently positioning itself at the lower end of its channel:
https://1.bp.blogspot.com/-1UCdKYVYT...1600/RusNQ.png
https://1.bp.blogspot.com/-qg8jOWrMn...s200/Trump.jpg
We also read this week an excellent article from C.J. Hopkins at the Unz Review, if you haven't seen or read it, we highly suggest it as it posits a different viewpoint about the geopolitical posturing between the U.S. and Iran and the ongoing struggle for global power. I won't spoil it but give it a read. He did use a great little cartoon meme of POTUS which we shamelessly posted here as well. Anyway its a decent short read and the link is here, The Unz Review
Bianco also put up another great chart showing the massive short covering led rally of Tesla and its clear dominance in terms of market cap over the rest of the American automakers:
https://1.bp.blogspot.com/-RSFdiz6vY...US%2Bautos.jpg
Mike McGlone at Bloomberg Intel posted a great Bitcoin chart displaying the declining supply vs increasing demand. We would also like to note that Bitcoin is defined and constrained by its mathematical properties, once people remove this correlation of value in terms of a fiat currency which is designed to lose value over time, they will realize the true potential of a decentralized utility technology such as bitcoin.
So, we are glad we are seeing positive developments and analysis like this out of the main stream. We would also like to note the absolute pure economics, mathematics as well as its overall decentralized trustless properties will make Bitcoin a dominant player in the future of value transfer. Here is the chart that McGlone posted:
https://1.bp.blogspot.com/-6GP47Lcoc...y%2Bdemand.jpg
Finally, if it hasn't been obvious by now that all the money flowing out of the FED is being well concentrated within the never have to sell coffers of Private Equity and Venture Capital. It is going to be interesting to see how declining tax revenue and higher debts are combated by fiscal policy in the future. With all that in mind and with all the BS efficient portfolio theory, we can only say, do as they do, not as they teach. Well, apparently, many are tossing theory aside and concentrating capital in just a very few places and this chart from Gavekal should paint the necessary picture as the size of the top five firms in the S&P500 as a share of the overall market cap have reached epic proportions!
https://1.bp.blogspot.com/-Lf-vrZsSf...Bmkt%2Bcap.jpg
Thanks for reading, we hope you enjoy our blog posts and we hope you continue to support us by reading, sharing and spreading the knowledge around to your friends, coworkers and family as everyone benefits through education and communication. Cheers!
Michael Agne
CTA Manager
Magnelibra Capital Advisors
DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options on neither commodity futures nor an endorsement for the purchase and sale of an ICO, Crypto currency or any digital asset and should not be construed as such. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Mike Agne owner of Magnelibra Capital Advisors LLC (MCA) and the website blog, which can be found at www.econemotions.com. All rights are reserved. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, (MCA) makes no warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.
Posted 1 hour ago by Mike Agne
- Post #7,520
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- Edited 9:32pm Jan 14, 2020 9:17pm | Edited 9:32pm
- | Commercial Member | Joined Dec 2014 | 11,739 Posts
Submitted by Peter Garnry, Head of Equity Strategy, Saxo Bank
Equities are getting frothy with short squeeze and momentum accelerating technology stocks higher. This has led to the highest top five concentration in the S&P 500 eclipsing the dot-com bubble in a sign of destabilisation and increased fragility.
We are putting out an early warning to investors as a sharp correction in equities could be imminent. Our overall longer term view is still positive on equities, but sharp moves up are typically followed by rapid declines. In today's equity update we also talk about equity valuations and earnings season.
The first two weeks of the year have seen a tremendous acceleration in technology stocks with the sector by far outperforming all other sectors. As we talk about in today’s Market Call podcast we are witnessing an epic short squeeze in Tesla and other heavily shorted stocks. In higher echelons of the market the FANG+ Index is accelerating at an unprecedented pace showing clear signs of frothy behavior. It mimics the move leading up to the volatility explosion in February 2018.
While we laid out our asset allocation view yesterday as overweight Europe and EM equities, and overweight equities vs bonds, the short-term dynamic could get ugly here when the short squeeze and momentum have exhausted itself.
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In VIX we are observing a increase in net positioning although from a very low level but could signs that bigger players in the futures and option markets are preparing for increase in volatility. On the other, the forward curve in VIX futures is still not sending any distress signals, but these things change fast and the catalyst may be very subtle.
The rapid rise of the large US technology stocks has catapulted the five largest stocks on market value to reach an index weight of 18%, the highest level observed in the S&P 500 in 25 years. Increased concentration risk is a clear sign of fragility increasing and the system is destabilizing underneath the surface. It’s historically a recipe for violent moves so it should definitely be on investors’ radar.
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As we hinted at in our equity update yesterday the equity valuation expansion might be fueled by investors anchoring their long-term interest rate expectations at a continuing lower level increasing the equity risk premium and hence allowing higher multiples on earnings. With the lower anchoring and dual stimulus coming from the monetary and fiscal side we cannot rule out that equity valuation will reach new all-time highs before the party ends.
But the current move seems too aggressive, and the probability of a sudden large drop in equities could happen anytime. Investors should consider reducing equity exposure somewhat here or add some downside protection.
The earnings season kicks into gear today with the first big names (Citigroup, JPMorgan Chase and Wells Fargo) reporting Q4 earnings. Consensus is looking for strong EPS y/y figures for JPMorgan Chase and Citigroup due to base effects from a very weak Q4 2018.
Wells Fargo which is a more pure banking play is expected to show slightly negative y/y EPS growth. All there financials are expected to show negative q/q growth numbers. But overall analysts are looking for decent numbers from financials compared to other industries. In aggregate S&P 500 is expected to deliver its fourth straight negative y/y EPS growth in Q4 for the first time since the financial crisis.
However, the real price action lies in the outlooks which should be improving given the recent macro backdrop and better signs coming out of Asia.