The collision of global markets and social mood

Thursday, April 16, 2015

Thursday -- Druckenmiller On Markets, Deutsche Bank On Loosing Control

ES Futures:
Sharply lower after yesterday's tag of the 2111 volume shelf on the cash S&P. Chatter that Greece might stiff the IMF.

Absolutely must watch:

More subconscious communication, Fed edition:

Remember The Long Boom: A Vision For The Coming Age Of Prosperity from 1999? Boom usually means bust. And a bust can sound like a boom, when it implodes.

Also, Deutsche Bank in its annual default study report explains why it's so important to watch the yield curve (my emphasis):

"Why does the YC impact the default cycle?

Steep YCs tend to create maximum carry conditions which usually lead to net loosening in lending standards and a weakening in issuance quality in capital markets as overconfidence builds.

As the YC flattens, carry becomes slowly less compelling and while stretching for yield/risk might actually intensify first, eventually a flat yield curve leaves the weakest entities looking much more vulnerable than they did at the YC's peak.

Bank/investor risk tolerance reduces as the opportunity cost of carry trades increases and the risk-reward falls. This cycle does have a long lag but has been a repetitive feature of modern financial markets."

A great description of where we are now.

Also, there was another nugget. Replace "as many barrels of oil" with "as much currency" in the paragraph below and it becomes easy to understand why the globalists have worked so hard to create the euro, which is really the blueprint for a global, single currency.

"Simple game theory helps us to understand their behavior: without a cartel and an ability to affect prices, each individual producer's best survival strategy is to produce [as many barrels of oil] as possible given the limited financial resources to be able to cover its revenue shortfall to the largest extent."

A central bank is basically a banking cartel. A group of central banks working together affects the price of money. When the cartel breaks down, so does control. Participants scramble to protect their interests. This is why common currencies are doomed to failure.

Maybe that's why former Fed chairman Ben Bernanke is joining Citadel as an advisor and why the NY Fed is moving a group to Chicago -- to better control S&P futures . . . to better control the markets?

Regardless of their efforts to keep the good times going, competitive currency devaluation will continue, in my opinion, as countries & central banks try to "cover their revenue shortfalls to the largest extent" as the illusion of "control" lessens dramatically.

AUD ripping higher. EUR still seems to trade as if Greece is kicked out. JPY still acting weird -- 118.711 getting ever closer.

Again, not reaching escape velocity.

WTI crude is correcting recent gains. NG continues to look firm.

Rallied off 1183.50 but has a long way to go to shine.

S&P Outlook:
The New York Composite index, one of the broadest market indexes there is, made a new all-time high yesterday. It will be extremely important to watch how it acts now.

Does it mark time while waiting for the Dow & S&P to catch up? Does it break out? Or does it break down?

With futures down after testing the volume shelf and the trend line from the February high, this is where the S&P needs to show strength. Breadth was good. Volume increased. Good signs, but still keeping its options open. Backing and filling could be expected.

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