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Bank of America Explains How Central Banks Rigged And Manipulated The Market
Bank of America Explains How Central Banks Rigged And Manipulated The Market
It used to be the provenance of “conspiracy theorists” – alleging that central banks have manipulated, rigged or otherwise broken the “efficient market.” That is no longer the case.
As we previously showed, now even the big banks admit it.
However, since for some unknown reason the broader media has yet to catch on to this concept which exonerates the “tinfoil” crowd and makes a mockery of the “bull market” of the past 7 years while posing some very troubling questions about how it all ends, here again is Bank of America explaining not only how “central banks have unfairly inflated asset prices” with the “market aware the price of risk is not correct”, but why the biggest risk to the financial system is a “loss of confidence in this omnipotent CB put”
And the cherry on top comes from JPMorgan which declares “Mission accomplished – QE drives up equity valuations”
Sources: “Fragility is the new volatility” by Benjamin Fowler, Global Equity Derivatives Rsch, Bank of America, December 9, 2015; “Eye on the Market Outlook 2016” by J.P.Morgan Private Bank
The Market’s “Other” Panic Indicator Just Went Off The Charts
The Market’s “Other” Panic Indicator Just Went Off The Charts
With indicators from macro-fundamentals (e.g. retail sales, core capex, inventory-to-sales) to market-oriented measures (VIX levels and backwardation, HY credit spreads, commodity prices) all flashing various colors of dead canary in the coal-mine red, we thought today’s colossal spike in the Arms (TRIN) Index was a notable addition.
An Arms Index value above one is bearish, a value below one is bullish and a value of one indicates a balanced market. Traders look not only at the value of the index, but also at how it changes throughout the day. Traders look for extremes in the index value for signs that the market may soon change directions. The Arm’s Index was invented by Richard W. Arms, Jr. in 1967. In essence, a sudden surge in the TRIN indicates a jump in trader lack of confidence, as everyone scrambles to either go long the 2-3 rising stocks, or to sell or short the biggest decliners, ignoring the bulk of the market..
Today’s move was far greater than “Black Monday’s market-halting crash:
In longer context:
As we noted previously, the Arms index is an indicator of market breadth essentially tracks lemming like momentum-chasing behavior with respect to volume… meaning today saw panic-buying volumes which given that it was dip-buyers at the close, we suspect won’t end well…
…click on the above link to read the rest of the article…
Mapping The World’s “Grey Swans”
Mapping The World’s “Grey Swans”
As H2 2015 begins, Goldman looks at so-called “grey swans” – known market risks that could prove particularly disruptive. From China credit risks to Russia and from rate volatility to Russia with Middle East tensions, cyber threats, and illiquidity-induced ‘flash-crashes’, the known-but-not-priced-in risks are rising… because – simply put – central bank omnipotence remains the narrative (for now).
Russia is fading as a risk quickly (much to Washington’s chagrin) as China risk accelerates rapidly…
And over time…
And so while Janet keeps trying to talk down any rate hikes as ‘priced-in’ or not an issue, the market (and Goldman) clearly thinks differently as sees interest rate volatility as the biggest “grey swan” currently… and when the costs of capital vary dramatically, CFOs will tamp down their debt-financed buybacks…
Source: Goldman Sachs
oftwominds-Charles Hugh Smith: Where Will Risk Erupt This Time?
oftwominds-Charles Hugh Smith: Where Will Risk Erupt This Time?.
So where has all the risk pooled up in the system? In foreign exchange (FX) markets, that’s where.
One of the precepts of this blog is that risk cannot be disappeared, it can only be transferred or temporarily hidden from view. This runs counter to modern portfolio management, which holds that all risks can be hedged with counterparty-issued securities, i.e. options, futures contracts, derivatives, etc.
…click on the above link to read the rest of the article…Hussman Funds – Weekly Market Comment: On the Tendency of Large Market Losses to Occur in Succession – October 20, 2014
Abrupt market losses typically reflect compressed risk premiums that are then joined by a shift toward increased risk aversion by investors. In market cycles across history, we find that the distinction between an overvalued market that continues to become more overvalued, and an overvalued market is vulnerable to a crash, often comes down to a subtle but measurable shift in the preference or aversion of investors toward risk – a shift that we infer from the quality of market action across a wide range of internals. Valuations give us information about the expected long-term compensation that investors can expect in return for accepting market risk. But what creates an immediate danger of air-pockets, free-falls and crashes is a shift toward risk aversion in an environment where risk premiums are inadequate. One of the best measures of investor risk preferences, in our view, is the uniformity or dispersion of market action across a wide variety of stocks, industries, and security types.
Once market internals begin breaking down in the face of prior overvalued, overbought, overbullish conditions, abrupt and severe market losses have often followed in short order. That’s the narrative of the overvalued 1929, 1973, and 1987 market peaks and the plunges that followed; it’s a dynamic that we warned about in real-time in 2000 and 2007; and it’s one that has emerged in recent weeks (see Ingredients of A Market Crash). Until we observe an improvement in market internals, I suspect that the present instance may be resolved in a similar way. As I’ve frequently noted, the worst market return/risk profiles we identify are associated with an early deterioration in market internals following severely overvalued, overbought, overbullish conditions.
…click on the link above to read the rest of the article…
