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UNIDOS HACIA EL FUTURO

“The markets are the product of 1999 & 2007 hooking up for a one night stand.”
Tweet by Danielle DiMartino Booth (@DiMartinoBooth), 25th August 2020.

“In the middle of the journey of our life, I came to / Myself in a dark wood, for the straight way was lost.”
Dante, Inferno.

“Zoom is now worth more than IBM.”
“I don’t know if that says more about Zoom or IBM.”
Tweets by Morgan Housel (@morganhousel), 31st August 2020.

By the mid 1970s, film director William Friedkin was on a roll. 1971’s The French Connection bagged him an Oscar and widespread critical acclaim; 1973’s The Exorcist became the highest grossing Warner Bros film of all time. How did Friedkin follow up on all this monstrous success ? He decided to adapt Georges Arnaud’s novel The Wages of Fear (Le Salaire de la peur), in which down-on-their-luck truck drivers in Latin America attempt to ferry nitroglycerine across a treacherous mountain range in order to extinguish an oil well fire. The resultant 1977 release was called Sorcerer. It sank more or less with all hands.

Which is a shame, because Sorcerer – or Wages of Fear as it was somewhat unimaginatively titled in the UK (see poster below) – has moments that are pure cinema. The sequence where Roy Scheider and Francisco Rabal pilot their ramshackle truck over a threadbare rope bridge across a river in flood is one of the most extraordinary in film history (and very Werner Herzog). All of which vindicates screenwriter William Goldman’s assessment that in the movie business, nobody knows anything.

Source: https://www.originalfilmart.com/products/sorcerer-quad

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – June 29 2020: What if it’s just begun?

Blain’s Morning Porridge – June 29 2020: What if it’s just begun?

What if the real pain is still to come?

“That about sums it up for me..”

There is an amusing piece on the FTs’ Alphaville listing 20 things investors should look for when trying to work out who will be the next Wirecard. You don’t need to be a financial genius to work out which company they might be talking about… It’s a basic wake-up call. In periods of economic darkness, its all-to-easy to be persuaded as to the efficacy of snake oil. If something over-promises, makes lots of noise while underdelivering, and is basically a personality cult – then it’s long-term unlikely to be a particularly successful investment.

Back in the real world…

We are nearly half-way through 2020. Although we’ve been shocked, surprised and buffeted by the Virus, and buoyed by the swift and effective intervention of Governments to support companies and mitigate job losses while Central Banks have calmed markets with the opium of QE Infinity, I can’t help wonder if the real earthquake is yet to come. 

I am still bullish about long-term recovery as we adapt to the virus and it spurs a new tech development age. But I can’t help feeling deeply uneasy about current markets and the resilience of global financial systems. 

This crisis is unlike anything I’ve experienced before. Normally a market crash is explosive event – it occurs when something in the financial sphere breaks; like confidence in housing and financial systems in 2007, or valuations in the Dot.Com crash, or faith in credit constructs like during the European Sovereign Debt crisis in the 2010s. In each of case of financial mayhem I’ve experienced since the Great Perp Crash of 1986, the initial shock and horror gradually lessens as the market discounts the shock, shrugs it off, and carries on. 

…click on the above link to read the rest of the article…

992 Billion Reasons Why The Fed Needs Another Market Crash In The Next Few Weeks

992 Billion Reasons Why The Fed Needs Another Market Crash In The Next Few Weeks

Speaking in a video conference organized by the Peterson Institute, turbo money printer Jerome Powell today reassured the market that negative rates are not something the Fed – which expanded its balance sheet by $2.6 trillion in the past two months – is contemplating now. Of course, that will change after the next market crash or if economic shutdowns return, but for now the Fed’s message to traders was clear: don’t push forward fed fund rates negative, which also catalyzed today’s sharp market drop as a key source of potential forced easing was removed.

However, with Powell taking negative rates off the table (for now), it means the Fed has another problem on its hands, one which was first laid out by Deutsche Bank’s credit strategist Stuart Sparks, who in a recent note said that “for all the measures taken by the Fed and fiscal authorities to counter the COVID19 shock, policy remains too tight.” And, as Sparks adds, if the Fed opts to avoid negative policy rates – which appears to be the case – “further easing must be provided by the size and  composition of the Fed’s balance sheet”, meaning more QE.

How much more QE? Well, with short-dated market real yields positive, Deutsche Bank estimates that r*, or the neutral rate of interest, has fallen to around -1%, “suggesting additional accommodation required for policy to be “easy” could be more than 100 bp in terms of “policy rate equivalent.

Previously the Fed had estimated that $100 billion in QE has approximately the same short term impact on growth as 3 bps of rate cuts. This equivalence means that in order to provide a 1% of “rate equivalent” easing, the Fed would need to grow the balance sheet by roughly $3.3 trillion.

…click on the above link to read the rest of the article…

The Insanity Continues: Futures Crash Limit Down, S&P Indicated 6% Lower

The Insanity Continues: Futures Crash Limit Down, S&P Indicated 6% Lower

After surging 6% yesterday, with the Dow briefly rising more than 1,000 point, traders once again got a reminder of what record high VIX means when overnight futures crashed again – despite the Fed’s launch of two Lehman-era crisis facilities, the PDCF and the CPFF – and plunged by the -5% limit down, with the SPY ETF currently hinting at a -6% open.

Putting the latest market move in context… well, see for yourself:

  • March 12: Limit Down
  • March 13: Limit Up
  • March 16: Limit Down
  • March 17: Limit Up
  • March 18: limit Down

Copper, Oil and S&P 500 E-Mini Futures Offer Dynamic Signals

“A rise of 1,000 points in Dow is something you see only during a financial crisis. It is not a good sign,” said Tomoaki Shishido, senior fixed income strategist at Nomura Securities. “A rise of 100 points would be much better for the economy.”

“Another remarkable day in what is clearly fin-de-regime,” Rabobank’s global strategist Michael Every wrote. “Things have already irrevocably changed and whipsaw market action reflects that this is the case. The only issue is how much further they change from here, and hence where markets settle.”

With the market rejecting both the Trump admin’s latest $1.3TN fiscal stimulus proposal and the Fed’s panicked attempts to restore stability, there was no place to hide and European stocks (which at least were not halted) plunged alongside US futures: the Euro Stoxx 50 plunged -5.2%, Dax -4.6%, FTSE 100 -5.1% with industrial-goods and construction companies leading the decline and telecoms the only sector in the green. The Stoxx Europe 600 Index fell 4.6% as of 10:30am in London, reaching a new session low, as miners, constructors and industrial stocks drop more than 6%.

Asian stocks also plunged, led by energy and finance, after ending flat in the last session. Most markets in the region were down, with Australia’s S&P/ASX 200 dropping 6.4% and South Korea’s Kospi Index falling 4.9%, while Thailand’s SET gained 0.2%.

…click on the above link to read the rest of the article…

“Just Close The Whole Thing Up”: CNBC Anchors Melt Down, Beg For Market Closures On Twitter

“Just Close The Whole Thing Up”: CNBC Anchors Melt Down, Beg For Market Closures On Twitter

Few are dealing with the economic and market turmoil with more chaos and less class and resolve than the expert “buy and hold” class over at CNBC, who shockingly never said one word of warning to their retail viewers when the market was doing nothing but going straight up for more than a decade, and instead were dragging mom and pop investors into massively overvalued stocks urging them to buy at all time highs, and who are now melting down before our eyes at the first sight of a substantial market pullback.

Their solution: own the shorts by shutting down the market entirely. Because if one can’t BTFD, is it even a market?

As recently as Friday, when the Dow Jones posted a 2000 point gain on the back of a short squeeze that nearly doubled the indexes gains in the last 15 minutes of the day, there was no talk about markets being defective or needing to close. That was, of course, until the Fed’s $700 billion “quarantative easing” bazooka bailout of markets fizzled spectacularly on Sunday nights and futures promptly went limit down. When it appeared that this plan was failing, some of the industry’s finest began to panic visibly.

Prior to the Fed news, Halftime Report’s Scott Wapner had already called for blanket censorship of Twitter…

Then, after the Fed bazooka failed to calm markets, it sent the popular talking heads into a typing panic, as Wapner started tweeting wildly, criticizing NFL players for signing contracts, prodding the NYSE to “close the floor” and then begging for them to “close the whole thing up” so the market could “start again later”. Perhaps because when things don’t go your way, you can always beg for a reset in some imaginary world where the Fed still runs everything.

…click on the above link to read the rest of the article…

China Bans Selling, Plans Massive Liquidity Injection To Prevent Market Crash

China Bans Selling, Plans Massive Liquidity Injection To Prevent Market Crash

Judging by the collapse in Chinese futures and the Offshore Yuan over the past week, China’s key cash equity index – The Shanghai Composite – is set to plunge around 6-8% as the market re-opens for the first time since Lunar New Year (and the coronavorus chaos).

China stock futures have tumbled…

Source: Bloomberg

And Offshore Yuan is fighting at the 7.00/USD level…

Source: Bloomberg

Which of course will not do for the nation has to maintain the appearance of a minor flesh-wound than a catastrophic coronary. And so, as Bloomberg reports, China unveiled a raft of measures over the weekend to aid companies hit by the coronavirus outbreak and also shore up financial markets.

Quarantative easing? 

The People’s Bank of China announced that the total injection announced was 1.2 trillion yuan, the largest single-day addition of its kind in data going back to 2004.

The money will be supplied using reverse repurchase agreements to ensure liquidity is “reasonably ample” during the outbreak, according to the PBOC.

The new measures follow the announcement last week that China’s biggest banks will lower interest rates for firms in Hubei, the center of the outbreak.

However, as Tommy Xie, an economist at Oversea-Chinese Banking Corp notes, the net effect of this admittedly huge liquidity injection is much lower as there are more than 1 trillion yuan of short-term funds scheduled to mature on Monday.

The amount of the net injection isn’t huge. The PBOC may want to retain some flexibility, which means it can add more liquidity in the rest of the week if the sentiment is too bad.”

Source: Bloomberg

Finally, we wonder if even this additional liquidity injection will be big enough as judging by Dr.Copper, the Chinese economy is about to be hit by the biggest shock in recent history…

…click on the above link to read the rest of the article…

World’s Ultra-Rich Preparing For Market Crash, UBS Warns

World’s Ultra-Rich Preparing For Market Crash, UBS Warns

A synchronized global slowdown, with no end in sight, has spooked some of the wealthiest investors around the world, according to a new survey from UBS Wealth Management, seen by Bloomberg. UBS polled wealthy investors, who are preparing for a significant stock market correction by the end of next year. 

In the survey of more than 3,400 high net wealth respondents, 25% said they’ve sold risk assets, such as equities, commodities, and high-yield bonds, and have transitioned into cash. The synchronized global slowdown, coupled with a US-China trade war, were some of the greatest concerns of respondents. 

“The rapidly changing geopolitical environment is the biggest concern for investors around the world,” said Paula Polito, client strategy officer at UBS GWM, in a statement. “They see global interconnectivity and reverberations of change impacting their portfolios more than traditional business fundamentals, a marked change from the past.”

About 80% of the respondents expect volatility to increase through 2020, and 55% believe a market plunge could occur before Q4 2020.

Worse, 60% of respondents expected to raise cash levels in the coming quarters (i.e., sell stocks).

Most respondents said the added caution is due to a possible blowoff top in global equity markets. About 70% of respondents are optimistic through 2030.

“The challenge is that they seem to want to respond” to short-term uncertainty “by really shortening their time horizons and shifting to assets like cash that are safe,” said Michael Crook, a managing director on the investment strategy team. Though with many of these people investing on a time horizon across decades and for future generations, that “seems like a mismatch.”

And while most respondents said they’re preparing for market turbulence in the short term, many should rethink their US outlook for the next decade. Teddy Vallee, CIO of Pervalle Global, shows that the “US is dead money for the next 10 yrs.” 

 …click on the above link to read the rest of the article…

Crashing The Financial System For Fun And Profit

Crashing The Financial System For Fun And Profit

Huge Fortunes Can Be Made In Falling Markets

It would be wise to remember we are in uncharted waters and this market could reverse on a dime. The stories flowing out of companies such as WeWork that are burning through cash screams danger ahead! This means we should not discount the idea that those in charge might reach a tipping point where they crash the financial system for fun and profit. While this may seem outlandish the possibility is real. This doesn’t mean that every rich guy and gal would sign on to this plan, just enough to push things over the edge. When things have gone too far in one direction history shows that a correction always takes place. It could be argued we have reached that point and true price discovery has been lost.

A huge amount of money can be made during a market crash for those properly positioned. As long as the Fed and the big banks survive those who control these institutions couldn’t care less about how the 99.5% at the bottom fair. In fact, the Dodd-Frank Act which is over 2,300 pages allows this under Title II what is viewed by many as a “bank bail-in”. This is done by imposing the losses of insolvent financial companies on their common and preferred stockholders, debt holders, and other unsecured creditors including depositors.

The whole event of a “bank bail-in” can be viewed as another way to disguise a massive default and it can happen here in America. An example of just how delusional we have become as to the fragility of our financial system is that many people have taken comfort in the efforts to control the banking sector through the Dodd-Frank act following the 2008 crisis. 

 …click on the above link to read the rest of the article…

Getting Ready For The Stock Market Crash…

Getting Ready For The Stock Market Crash…

It is something of a tradition amongst market commentators to make bold stock market calls because they gain you notoriety if you get it right. Over here at AiC, I don’t particularly care what people think. I’m here to make money—that’s it. Therefore, I’ve refrained from big market calls—particularly as I have no real edge in guessing where an index of a few hundred companies will be trading at a certain date in the future. This doesn’t mean that I don’t recognize economic and share-price cycles and manage my portfolio accordingly. 

Over the past few years, I have been increasingly concerned about the massive structural imbalances in the world, along with excess debt and asinine monetary policy leading to an epic equity market bubble. Remember, your investment returns are directly correlated to the price you pay, not your analytical ability and I refuse to play in the greater-fool theory of finance. With that in mind, I have consistently managed my portfolio with a rather reduced overall exposure profile. Despite holding plenty of cash, I have certainly not been a perma-bear—those guys tend to complain a lot but make no money. Rather, I’ve continued to find opportunities to do smart things in esoteric sectors of the market, leading me to consistently trounce the US equity markets over the past few years. Yet, the whole time, I have been quick to sell companies that appreciated to 80% of fair value, I have been un-willing to take on risk and have passed on many perfectly good investments as I preferred to miss something than increase my market exposure.

 …click on the above link to read the rest of the article…

Preparing For A Financial Apocalypse: Insiders Are Selling “$600 Million Of Stock Per Day In August”

Preparing For A Financial Apocalypse: Insiders Are Selling “$600 Million Of Stock Per Day In August”

In the U.S., corporate insiders have been selling stocks at an average rate of 600 million dollars per day during the month of August.  This kind of wild selling indicates that there is a tremendous amount of fear among corporate insiders right now, and such selling would only make sense if a stock market crash is imminent.  And without a doubt, we have already seen volatility return to Wall Street in a major way as our trade war with China has dramatically escalated.  Many Americans are hoping that things will start to calm down and that our trade conflict with China can be resolved calmly, because if things take a bad turn many analysts are warning that we could soon be facing the worst financial crisis since 2008.  Here is one example

Remember the brutal sell-off last year when stocks suffered their worst December since the Great Depression? Something worse than that could happen in days, a Nomura analyst said.

Macro and quant strategist Masanari Takada turned heads earlier this month with his bold call for a “Lehman-like” plunge. He’s sticking with this prediction as market sentiment shows no signs of improving, leading him to believe a monster sell-off could arrive this week.

With chilling forecasts like that being thrown around on a regular basis these days, it is understandable that corporate insiders would be tempted to get out of the market, and right now they are racing for the exits at a pace that is absolutely breathtaking.  The following comes from CNN

Corporate insiders have sold an average of $600 million of stock per day in August, according to TrimTabs Investment Research, which tracks stock market liquidity.

 …click on the above link to read the rest of the article…

Blain’s Morning Porridge – July 10 – Will Boeing trigger Crash?

Blain’s Morning Porridge – July 10 – Will Boeing trigger Crash? 


“Ignite blue touch paper and step back. Do not let Children play with Fireworks.” 

All eyes on what Powell tells Washington today, but a number of Porridge Readers called to tell me I’m wrong about summer risks! They think my expectation for a long worried nervous but stable summer before markets are bailed out by accommodative central banks in late Q3 is way too optimistic. 

A number feel markets are ripe for a sudden and painful rollover in bonds and stocks – and much sooner than I think. What they did agree with was my assessment the likely trigger for a market shock will be a “no-see-em”, something so obviously hidden in plain sight it catches us completely and painfully by the short and curlies. 

And “Plane” sight might be a good way to put it. I’m wondering if Boeing might be the trigger! (See what I did there..?) 

Hang on? We all know the next market collapse isn’t booked till October? Well maybe not. What if someone tries to start the market apocalypse early? That would shock the many market participants who think the perception of a Global Central Bank put means there is nothing to worry about. Complacency is a terrible thing. 

Smart bond gurus are shouting bubble! Although US junk bonds have not tightened as much as treasuries through the last uptick, they are still at incredibly tight spreads. European sub-investment grade is rallying in the expectation a tide of new ECB investment grade purchases will lift all boats. Yet, with yields so low as to completely discourage any dealer inventory (which is too high a capital cost anyway), liquidity has never been so thin.

 …click on the above link to read the rest of the article…

Third and Final Leg of Stock Market Crash in October or Sooner

Third and Final Leg of Stock Market Crash in October or Sooner

Third and Final Leg of Stock Market Crash in October or Sooner – Part 2 David Brady (25/04/2019)

I shared the first part of this series of articles last week, explaining why I expect the third and final leg of the crash that began in October 2018 to occur in October 2019, or sooner, and see the S&P 500 fall ~30% to lower lows ~2100-2200.

Until then, I expect the S&P to slowly grind higher towards 3000-3150, short-term pullbacks aside.

This matters to Gold because when stocks crash, the Fed will be forced to reverse policy to rate cuts, QE, and more monetary insanity on steroids, and that will catapult precious metals and miners to new highs.

There are many reasons why I expect another “Crash in the Fall” like that in 2018. I began with Liquidity last week, now let’s cover the technical and Elliott wave case for the crash in October (“or sooner”), especially based on how close we are to the peak above circa 3000 plus.

TECHNICALS

Sven Henrich did some excellent work recently on the S&P from a technical perspective, which I am sharing here. 

Drawing the upper trend line (see chart below) from the 2007 highs into the January 2018 and September 2018 highs, and the lower trend line from the 2009 lows, the one that was broken in December 2018 and has been hugged by markets for the past several weeks, they intersect at circa 3100. 

The middle trend line dates back to the 1987 crash and formed following the 2000 crash, then ended up being resistance in 2014-2015 and twice in 2018. Note from that chart that it, too, intersects the other two trend lines at the same point, 3100.

Circa 3100 also represents 261.8% Fibonacci level derived from the 2007 highs and the 2009 lows. 

Three historic trend lines converging at the same key Fibonacci level is a powerful signal. A quadruple convergence, as Sven puts it. And if that wasn’t sufficiently interesting, then consider “when” they converge: October 2019.

 …click on the above link to read the rest of the article…

World is Comfortably Unaware of Approaching Disaster – Andrei Polgar

World is Comfortably Unaware of Approaching Disaster – Andrei Polgar

Best-selling author of “The Age of Anomaly,” economist Andrei Polgar, says the world is set up to be blindsided in the next financial disaster. Polgar points out, “Right now, after so many years after the ‘Great Recession,’ not only are people comfortably unaware, but even worse yet, the entire idea of financial preparedness has been discredited. I have noticed this because I have been on many shows promoting my book. . . . People are not that interested in financial preparedness. A common element was always this: People have made predictions, and they didn’t pan out. Other analysts have made gloomy predictions, and they didn’t pan out. So now, the general public has essentially been numbed. One of the big issues I talk about with my book is sustainable financial preparedness, and it’s a tough sell. It’s a tough sell because people are even worse than just ignorant in an uncomfortable way; they are downright dismissive with anything that has to do with financial preparedness. So, on top of all the problems with our economy, and on top of all the political issues you are well aware of, we also have this general state of not even apathy, even worse, contempt . . . of financial preparedness in general.”

Polgar says, “Market crashes are cyclical. Of course, we are going to have one, and I am not afraid of the idea of a market crash. I am afraid of what happens when the chain is broken or, to put it differently, when the status quo no longer works. . . . Your readers comment about being comfortably ignorant. That makes perfect sense. People have in their mind, yeah, there is going to be a crash, but central banks and governments will have it all under control.”

…click on the above link to read the rest of the article…

A Glimpse At 2019​​

A Glimpse At 2019​​

Markets In Critical Transformation, Chaotic Behaviour Has Just Began.

Our inability as market participants to properly frame market fragility and the inherent vulnerability of the financial system makes a market crash more likely, as it helps Systemic Risk go unattended and build further up. For the first time in a while, elusive economic narratives started to fail at blaming market weakness on secondary-order factors: Trade Wars, the FED, Oil prices. Attempts at dismissing market events as no more than a temporary turbulence miss the bigger picture and cast the fishing net on unaware investors looking for a dip to buy. In contrast, over the last month, conventional market and economic indicators (e.g. breaks of multi-year equity & home price trend-lines, freezing credit markets, softening global PMIs/orders) have all but confirmed what non-traditional measures of system-level fragility signalled all along: that a market crash is incubating, and the cliff is near. Nothing has happened yet.
1.      Early Tremors, Not Market Bottoms
2.      Elusive Narratives Fail, Unveiling a Deeper Malaise
3.      Mainstream Investment Strategies Face a Tougher New Year
4.      Triggers For Market Chaos: A Timeline For 2019
Early Tremors, Not Market Bottoms
After a slow start, the season of market chaos has taken off.
In the last few months, global markets have visibly entered the ‘phase transition zone’, a process of critical transformation that will eventually lead to a new equilibrium at significantly different levels, after severe ruptures and a possible full-cycle market crash.
Rather than ‘a short-term correction in a structural bull market’, or a ‘temporary turmoil in healthy economic conditions’, this is the beginning of a structural adjustment after a decade of liquidity abundance and market manipulation, which reflexively changed the structure itself of the market for private investors in hazardous ways, making it insensitive to fundamentals, passive or quasi-passive, overly-correlated and overly-concentrated. 

 …click on the above link to read the rest of the article…

Is This Downturn A Repeat of 2008?

Getty images

Is This Downturn A Repeat of 2008?

Crashes differ, so be cautious about your assumptions

Even people who don’t follow the stock market closely are aware that the global economy is weakening and appears to be heading into recession.

For those who track the stock market, the signs are ominous: the U.S. was the last major market to notch gains this year and in October the U.S. market followed the rest of the global markets into an extended slide which has yet to end.

Just as sobering, key sectors such as oil, banking and utilities have crashed with alarming ferocity, reaching oversold levels last seen in 2008 as the global financial system was melting down.

These sectors crashing sends an unmistakable signal: the global economy is heading into a potentially severe recession and assets will not be rising in value in a recessionary environment. So better to sell risk-assets like stocks now rather than later, and rotate the money into safe assets such as Treasury bonds.

And indeed, households now own more Treasuries than the Federal Reserve–a remarkable shift in risk appetite.

Many other indicators of recession are in the news: auto and home sales and global trade are all slumping.

Are we in a repeat of the global financial meltdown and recession of 2008-09? The sharp drop in equities is certainly reminiscent of 2008. Indeed, the December decline is the worst in a decade. Or are we entering a different kind of recession, the equivalent of uncharted waters?

And if we are entering a recession, what can central banks and governments do to ease the financial pain and damage? We can’t be sure of much, but we can be relatively confident central banks and states will respond to the cries to “do something.”  This poses two questions: what actions can central banks/states take, and will those policies work or will they backfire and make the recession worse?

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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