The collision of global markets and social mood

Thursday, June 27, 2013

Problem, Reaction, Solution

RSI? MACD? Stochastics? Sometimes real money is the best indicator. Hat tip to a conversation with my friend Sean McLaughlin (@chicagosean) for making me realize this.

What were an ideal way to gauge the inability of the market to break down on Monday -- VIX puts -- have been an absolute dog on the rebound. The VIX has moved more than SPY and yet the options have frozen. So what should have been a 3X trade has barely broken even.

The better trade would have been to use the P/L on the VIX puts as a real money indicator to signal the buy in another asset such as SPY calls, ETFs, or e-minis. Since it was such a hard area to buy (with 1536 as my preferred target), even if I'd stuck with my usual plan and bought high-gamma SPY calls, I wouldn't be writing this.

Basically the VIX puts were so asymmetric that they were asinine. A perfect buy before a 40 point S&P move should make a week's P/L, not a blog post. So I hope you can learn from my mistake.

I still see higher prices with all the same targets: 1618, 1628.93, possibly even 1650 still.

There was a story in the UK's Telegraph that caught my eye regarding the Fed. Ambrose Evans-Pritchard said some odd things.

"That the Fed should tighten even as it cut its own growth and inflation forecasts for this year is a bizarre state of affairs."

It's not at all bizarre if you simply realize that the Fed has shareholders. The Fed is a business just like any other. Its shareholders expect to make money. When they realize that their operations are not working, the desire to throw good money after bad ends swiftly. That it took them so long to realize is proof of their real fear: deflation. Asset prices be damned. If they can't get credit growth back to pre-2008 levels, they are screwed. Credit growth is their livelihood; deflation is when credit growth contracts.

No, the bizarre part was Pritchard's commentary regarding the BIS (Bank for International Settlements) and its decision to call for a worldwide halt to QE. I was suspicious myself when I heard this recently, but I passed it off as an acknowledgement by "the central bank to central bankers" that QE is a losing battle.

This passage by Pritchard, on the heels of the latest Bilderberg meeting, made me think far worse:

One thing is certain, if such a nihilist cocktail of BIS contraction were imposed on the world in its current condition, it would kill recovery altogether, throw millions more out of work, and probably extinguish a few democracies along the way. Hungary is half gone already.

It would cause debt trajectories to explode, and therefore prove self-defeating on its own terms. The ultimate outcome would be a chain of sovereign defaults and bank crashes. This is one way to achieve a cathartic debt jubilee and wipe the slate clean, I suppose, but by stone age methods, with stone age results.

To wipe the slate clean of competing national currencies and institute a single world currency has long been a not-so-secret fetish of globalists.

Therefore, be aware of a problem-reaction-solution scenario. The problem is failing economies, failing banks, and failing currencies in reaction to FAILED central bank policies. The reaction could be failed economies, failed banks (with depositor "bail-ins" -- that means you), and failed (worthless) currencies. The "solution," presented as if it's the only way forward, but in reality having been secretly planned for years, is then foisted on a broken populace too sedated by television and pop culture to understand what is really happening.

For years I've kept the following quote by George Soros, one of the central advocates of a world currency and world government, on my wall as a warning as well as a reminder how he and his fellow twistoids really think:

“Many momentous historical developments occur without the participants fully realizing what is happening.”

When my friends ask me what they should do with their money, I tell them the same thing each time: "GET your money . . . before the banks do."

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