Now if the kid were throwing it out a moving car like yesterday.... http://www.bbc.co.uk/news/world-us-canada-19581792 ......he would have many more admirers than Bernanke.
As relates to your essay at your website: http://www.mercenarytrader.com/2012/09/vc-inspired-reflections-on-qe3/ 1. You state inside of a sentence annotating your chart with a series of other phrases, âhow much is a stimulus promise going to change the recession?â This is essentially a rhetorical question, right ? I just want to be sure. 2. â From a high probability swing perspective we are mostly on the sidelines at moment.â Does this mean you have much of your powder dry in order to place it at your best perceived time in a manner that puts money where your sentiment is ? 3. How does a ârecalibration to widespread global slowdown conditionsâ become a driver for âcreating an opportunity for a powerful snapback rally in the $USD ?â I am not following the link. (I think question 5 below is the same thing ?) 4. The phrase that includes the word âaudibleâ means as in, âWe will also consider audible short calls on the major indices todayâ refers to you as being in a similar manner on the line of scrimmage and calling an ad hoc, discretionary âaudible ?â I just want to be sure this is what you mean. 5. There are two questions/points (A) and (B) here: âYou also have multiple Soros style âfalse trendsâ (in our estimation) relating to unrealistic dollar weakness expectations vis a vis the rapidly slowing rest of the world.â (A) Why would the dollar become weaker (when all other things are equal) because the world slows down ? (B) Furthermore, the world slowing down is one huge macro, but there are many other significant, moving parts that affect the dollarâs strength. 6. I saw two references in the essay relating to the Fedâs action on Thursday that appear to have been written by you before the report came out Thursday about the Fedâs actions. Your essay is dated the same day as the report. Was the essay disseminated prior to the report or am I misunderstanding ?
Post-Fed Recalibration While normal QE3 / normal policy language expectations were baked into the cake, the possibility that Bernanke would tell the hawks to go to hell and give the doves everything they could possibly have dreamed of was not baked into the cake. That is why the market roared so ferociously. Bernanke threw caution to the wind and sided lock, stock and barrel with the doves... Read more: http://www.mercenarytrader.com/2012/09/post-fed-recalibration/
Yes, we have researched (and written) a fair amount on the impotence of Fed policy as relating to economic growth. Yes again. We have the ability to vary total exposure levels dramatically, by a factor of 40 to 1 or more. There is a time to trade small and a time to trade big. Knowing when to do the former makes the latter really stand out in terms of both conserving capital and generating a positive impact on long-term returns. This is a time to trade to small. Because the "risk on / risk off" nature of markets these past few years has had a strong negative correlation to $USD. In "risk on" conditions, capital flows to emerging market equities, Europe, precious metals, commodities etc as the dollar declines. In "risk off" conditions U.S. investment capital is repatriated, strengthening the $USD, and safe haven seekers pile into Treasuries, also strengthening the $USD. Furthermore, the US economy is better off than the major economies in other parts of the world (Europe, China, various etc). As global slowdown pressures increase awareness of the reality that Europe and China are both virtually guaranteed to endure painful recession (or what in China's case might as well be a recession, e.g. growth below 8% threshold), capital again seeks out safer USTs and the relative domestic strength of the US economy. Yes. The majority of our trading decisions and risk point adjustment decisions are made outside market hours, though we pay attention to markets intraday. An "audible" means a situational-based / inflection-point-based trading decision made in the middle of the trading day (not broadcast beforehand). Refer to previous answer above. Of course there are other significant moving parts - there always are. The question is getting the main drivers right. We believe the main longer run factor, even larger than central bank activity, is that 1) global slowdown is deflationary in nature, and 2) a deflationary macro environment ultimately favors USTs and thus USD relative to other instruments. The piece was published in the morning and usually goes out prior to market open. The Fed announcement did not hit the tape until 1230 EST.
The Federal Reserve is Terrified of the Tea Party This leaves one last possibility: The Fed has decided it wants to see President Obama re-elected... and wants to help engineer that outcome at all costs. The Fed may have further decided that President Obama's reelection is so important, it is worth risking all manner of bad optics to make it happen (by juicing the economy prior to November as much as it possibly can). Read more: http://www.mercenarytrader.com/2012/09/the-federal-reserve-is-terrified-of-the-tea-party/
I know I am making this black and white, but you know the spirit within which the following comments are made: (1) I am on the other side of your opinion that US economy is better than other major's (EuroZone excluded). But then we have had somewhat of that dialogue before. Repeating cycles of economies world wide raise and lower boats together. What about the over leveraged fact ? Outside of Europe and the PIIGS there, who is the next worse for being over leveraged ? Ok....maybe Japan. (2) "... capital again seeks out safer USTs and the relative domestic strength of the US economy." I could be a nicely, well- asset-endowed individual (maybe I inherited it) and have had years of experiencing severe negative cash flow (bad management of my business, bad investments, etc.). (What is the sad history of lottery winners subsequent to their new found wealth ?) When Moody's just a FEW days ago threatened ANOTHER downgrade of U.S. credit quality, it doesn't engender a sense of restored faith in a government now rated with confidence by its constituents in single digits approaching ZERO ! (and THAT Harris poll was reported a year and a half ago ! .... when the U.S was $ 2 trillion dollars less poor ! ...and the forecast is for getting more poor more rapidly! ) http://www.harrisinteractive.com/Ne...cleId/780/ctl/ReadCustom Default/Default.aspx Actually, "flight to safety" to the U.S. I suspect is your reference to the world's notion that it continues to go to the well asset-endowed one. No argument with that one. That perception, strangely, is still in place. From a national treasure of commodity resources and economic dynamo, in ABSOLUTE WEALTH, we are a safe harbor. But this harbor has launched missiles over the last two decades (and more deadly ones in more recent years) that are "short rounds" with friendly fire victims tragically in numbers of unimaginable magnitude, and MORE missiles have not hit the ground yet, but you don't need radar to see them (unfunded medicare and social security and federal and state pensions for starters that some sources say are in the $ 50 to 70 trillion range). We won't go to the subject of decaying infrastructure and world ranking in the mid-20's for quality of education. The "well-endowed" one gets up each morning, puts on a nice, clean suit, gets into his very expensive automobile, drives away from his mansion, and seeks the smoothest path to his business destination across many miles that have to be slowly driven around automobile-deep pot holes and across teetering bridges while in between them are no guard rails along the edge of the cliff. For the here and now, your explanation is educational to me and you have made me understand the "links" I was missing. Thank you. Furthermore, it IS INDEED apparent the truth about the flow of capital traditionally. Isn't it ironic, considering the reality ? The comfortable thing for capital is that although it chooses to go to the well endowed but fateful one rather than the well managed one, it has the nimbleness to reverse course from this harbor after the large, synoptically inclement world weather has passed. It will become interesting--maybe challenging-- to figure out capital flows and appropriate trading bets in the future during the transitional stage of less U.S. harbor and more somewhere else.
China is in far more danger of being overleveraged than the United States, and may even be headed for internal economic collapse. The US has actually worked through its leverage issues to a significantly greater degree than other countries - China arguably has not yet begun to touch its leverage in any meaningful way at all. Many E.M. countries are in big trouble too. For example Vietnam: http://www.nytimes.com/2012/08/23/b....html?_r=2&partner=rss&emc=rss&pagewanted=all No one really gives a shit about the big ratings agencies. Within a year after S&P's big downgrade, U.S. treasury yields had hit multi-century lows. There is major disagreement over USTs and their trajectory. But available empirical evidence shows they are still the largest, most liquid safe haven in the world in times of crisis. If you believe in recovery you don't want them. But if you think there is more pain, more slowdown and fear ahead then the highs are likely not in yet. Right, this is largely the point - the US has already worked its way through some epic pain and leverage issues, and in terms of "less U.S. harbor and more somewhere else," at moment there simply ISN'T a "somewhere else" with better medium term prospects.
Well, I had my Sunday brunch at home while reading your piece on Mercenary Trader which was a debriefing of the week's big high- note....the FED's announcement for another QE. Your survey, analysis and style of communicating is excellent. Comprehensive content and broad analysis expressed in an easy-to-read fashion is refreshing, and is rare to find elsewhere in one, succinct report. Most importantly for the tactical trader or strategic investor is intelligent, situational awareness to monetize this knowledge with meaningful extrapolations for calculating future positions. Thank you for writing in a style with this targeted audience and its purpose in mind. It provoked a few questions I intend to pose that I think will be satisfied with short responses. I look forward to them.
In another life, I was around folks for a few decades that were working in financially oriented careers sensitive to interest rates. Every general election was preceded by the same mantra that the FED chairman wonât make a move with interest rates until the election was over. But countless times I asked why, and no one knew. Which suggested to me they were lemmings repeating what their peers were, no one knowing what they were talking about. Besides, wasnât the FED âindependentâ of political suasion? And I donât recall a chairman (Greenspan or Bernanke) necessarily always proving truth to that popular perception. Sometime along the way, mid-90âs I believe, I read Griffinâs 600 page mountain The Creature from Jekyll Island (strange invention under cover of darkness by a cabal of major bankers conceptionalizing and conspiring the birth of the Federal Reserve), and I donât ever recall him addressing the subject. If I am right on that, it is tacit acknowledgment by the author that they are not influenced. If I have this right, darkhorse, applying your game theory, Bernanke surprised us in the degree he did (my gawsh....first the Supreme Court decision and now the FED......can my heart take any more ?) because he played in his view the BIG QE card for self preservation interest of himself and the independence of the FED, opposite to the otherwise impressive series of smaller, rational cards pointing to the rationale that advancing the QE would have marginal effect if any other than piling on the national debt. Why then, many weeks back, during his (last ?) appearance before congressmen, he so much as said it was insane for Congress to believe the FED can bring back this sick of an economy with monetary modalities while Congressmen are sitting on their hands the last three years not implementing fiscal solutions ? He so much as said the FED no longer has sufficient horsepower to stop a national fatality (my word, but his meaning). It would appear he accelerates at least his own hypocrisy and the prospect of not getting installed to the hall of fame by saying one thing and behaving dramatically the other way. Many months ago, I read that Central Bankers the world over are generally more fearful of deflation with few rounds in the gun vs. inflation with an arsenal of weapons. Deflation, when the genie is out of the bottle is virtually impossible to put it back in before Depression. Bernanke played the big card Thursday that pulls the genie that much further out of the bottle. The notion of him playing the Big QE Card to keep Obama and Democrats in Congress that in your mind allows him to think he and the FED are safer in keeping their independence that way at the knowing expense of furthering the demise of the future of the country and to be dealt with later is hard to swallow; he canât help but know it accelerates the assurance of muddle along economy and possibly Armageddon-ish scenarios. Of course he must know that dangerous course doesnât exactly look promising for him to to be able to leave a lasting, glowing legacy which I would argue is more important to him than a job he wants to keep that doesnât allow him to be a winner when having no bullets remaining that are effective. I mean what's the point ? Exceptionally well written essay with lots of make-sense thinking, but tell me it isn't true: The Chairman just as well wishes to sell the country down the road for his own self aggrandizement as Congress already has proven and continues to prove it does.