The collision of global markets and social mood

Monday, June 30, 2014

The BIS On Central Bank BS, Private Equity Getting Silly, And New S&P Action Levels

There has ever been a more compelling explanation of why the rally since 2009 is complete crap than the Bank For International Settlements -- 84th Annual Report.

In it, the enigmatic group of Swiss-based central bankers to the world's central bankers (think of Yellen, Carney, Kuroda, etc. as CEOs and the BIS as the Board of Directors) calls for "moving away from debt as the main engine of growth."

Whether or not you agree or disagree that debt is an engine of growth at all (I disagree), nonetheless this is a bold statement for a quasi central bank to make. I welcome it.

Of course the report probably seeks to tee up some far off goal such as a single, global currency, or perhaps even a single central bank (such as the BIS itself, hint, hint . . . ), but quotes such as these reveals a looming problem for business as usual at Fed & Co. --

". . . there is little appetite for taking the long-term view. Few are ready to curb financial booms that make everyone feel illusively richer.

". . .The temptation to go for shortcuts is simply too strong, even if these shortcuts lead nowhere in the end.

". . . it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally.

". . . Despite the euphoria in financial markets, investment remains weak. Instead of adding to productive capacity, large firms prefer to buy back shares or engage in mergers and acquisitions."

Then, as if on cue, Blackstone Group, a private-equity firm, announced that it is quietly laying plans to start a hedge fund that will make big, risky bets, an effort it hopes will eventually rival some of the largest firms in the business.

This is typical late-cycle swing-for-the-fences stuff.

Private equity getting into hedge funds in 2014 is just like private equity getting into real estate in 2007. Silly then, silly now.

Friday my near-term stop on the S&P was raised to 1956.72. A print below this spot does not necessarily spell doom. It is just where I would choose to get out of some calls I bought Thursday.

At this time, during this holiday-shortened week, the better play for taking action on new positions of my own may not materialize unless higher or lower levels are reached. These areas are 1970.89-1982.74 higher and 1906.35-1913.83 below.

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