The collision of global markets and social mood

Tuesday, May 14, 2013

Global Dislocation

“We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.”

“We know everything you’re doing and the government can track you.”

“We will know your position down to the foot and down to the inch over time…Your car will drive itself, it’s a bug that cars were invented before computers…you’re never lonely…you’re never bored…you’re never out of ideas.”

It's Bilderberg season. These comments are by Google CEO Eric Schmidt, who has been steering the tech behemoth closer and closer to the ideals of the Bilderberg elite for several years now. Just thought I'd pass them along.

Regarding the yen, I found an interesting bit about Japan that amplifies my thinking of late. It's from Aspen Trading, a recommended follow on Stocktwits.

...last weeks limit down day in the Japanese bond market (JGB's) struck me immediately. How can that be, the BoJ is The Fed on steroids right now, yields should at a minimum remain flat or go down. I know the answer but I am asking to prove a point.

A colleague of Bill Fleckensteins offers this insightful nugget. You can be sure this only further heightened my interest in keeping a very close eye on Japan.

"He believes we need to keep our eyes closely peeled on Japan because in the very short run, the stock and currency markets there have acted like they are (preemptively) rejecting the concept of money printing.

He pointed out that while the yen has tanked 15%, and Japan's bonds have backed up 25 basis points (though merely back to January/February levels) from a base of 50 basis points(!), beneath the surface the volatility has increased in such a way that it might begin to cause problems for Japanese derivative books. When you are in a country such as Japan, where interest rates have been zero for so long, you can be sure that all manner of volatility has been sold, in an attempt to enhance yields, at the wrong price. So if volatility and interest rates increase, we could see quite a lot of chaos precipitated from Japan, just like when the housing bubble burst, when it wasn't just declining housing prices that caused problems, it was the levered up exposure to mortgage-backed assets and other crazy products."

If, after record central bank stimulus not ever seen on this planet, money printing should appear to fail for any reason in Japan, an enormous global dislocation could follow.

JGBs may have become the most important leading indicator in the world of finance.

S&P futures did a round trip last night, trading out a Big V which has ended higher for the time being. This fits with the action in the cash S&P, which seems to have a target of 1640+ in mind.

There are higher targets such as 1665, but the way the A/Ds look (advancers - decliners) it's a wonder the market is up at all. A/Ds simply look pathetically weak. This is occurring while 91.5% of the S&P is above its 200-day moving average, with price a stunning 161 points above the 200-day average.

Credit as represented by JNK and HYG has plunged severely versus SPY and IYG (financials). The market is ahead of itself.  Any thrust to 1640 or above will have me unload SPY 163 calls and book profits and put on some outright short positions.

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