Friday, June 24, 2016

RBC's Charlie McElligott; "It's "game over" for anybody out there who was short duration" and comment #BREXIT

CTA's / systematic trend strategies / 
managed futures funds / Crude and FX carry traders
--all of whom exist on leverage--
here comes "Mr Margin" calling on your risk longs.

Charlie McElligott
Managing Director, Head of US Cash Equities Sales Trading
RBC Capital Markets

In 2008 and 2009, leveraged accounts with large positions betting financial markets would rise fell, causing margin calls.

As markets fell about everyday for long enough, the amount of collateral needed to continue possessing account investments needed to be sold or more money needed/had to be deposited.  If a margin call goes long enough, the trading desk will sell out enough stock or bonds etc... without the consent of the clients.

Mandatory margin calls can create a self fulfilling prophecy.  Forced sales of equities creates more forced sales.

I followed how many margin calls hit closely to figure out when to take profits on bets against the markets.

That was back when I thought we had free markets.

Statements by high officials are practically always misleading,
when they are designed to bolster a falling market.

Gerald M Loeb

Now we have central banks buying stocks and bonds.

The Swiss National Bank increased its stake in Apple Inc.,
Exxon Mobil Corp. and Johnson & Johnson in the first quarter,
taking its U.S. equity holdings to $37.5 billion.

The Swiss central bank has already intervened today to keep a lid on its currency.
Same with Japan's central bank, Europe's and the Federal Reserve.

Stocks, bonds and gasoline broad market prices have become guideposts for many to decide whether to spend money on discretionary purchases, or not.

So what happens to consumer spending after steep sell offs?

The decline of great powers
is caused by simple economic over extension.

Paul Michael Kennedy
British historian, and author of “The Rise and Fall of the Great Powers”

Restaurants are going to take it on the chin even more than they have so far.

etc..., leading to further declines, unless the central banks move in and try to make it go away for a little while longer
BREXIT; The exact contents of a text concerning financial markets sent on June 17, 2016

Thursday, June 23, 2016; So rigged

When the rich plunder the poor of his rights,
it becomes an example for the poor to plunder the rich of his property,
for the rights of the one are as much property to him
as wealth is property to the other,
and the little all is as dear as the much.

It is only by setting out on just principles
that men are trained to be just to each other; and it will always be found,
that when the rich protect the rights of the poor,
the poor will protect the property of the rich.

But the guarantee, to be effectual, must be parliamentarily reciprocal.

Thomas Paine

Thursday, June 23, 2016; New home sales weak; past joy revised lower for the last three months

Wednesday, June 22, 2016; Truckload rate changes per mile = The economy is slowing

Monday, June 20, 2016; We are riding on a wave of unsustainable debt increase, borrowing from future growth for a more pleasant present

Monday, June 20, 2016; "$271 billion in total business sales officially disappear: Census" = Fake Federal Statistics

Human beings are… of two persuasions,
the first would spend tomorrow what they earn today,
the second would spend today what they hope to earn tomorrow.

From this…arise all conflicts that lead to economic crises,
to panics, depressions, violent and revolutionary transfers of wealth
and perhaps most wars.

Freeman Tilden

Sunday, June 19, 2016; “Businesses racked up debt in the January-to-March period at the fastest pace in three quarters"

People who have what they want 
are fond of telling people who haven't what they want,
that they really don't want it.

Ogden Nash

Sunday, June 19, 2016; It's a bank run; Brexit isn't the problem facing financial markets, it is insolvency of European banks

Saturday, June 18, 2016; The percentage difference between how bank stocks are performing relative to the 500 stocks in the S&P '500'

Saturday, June 18, 2016; "We are heading for a crisis that will be exponentially worse than 2008"

Wednesday, June 8, 2016; Bank Stock Relative Performance = Our Banks are the Financial Market and the Federal Reserve is owned by its Member Banks = Rigged Economy

A couple reasons Why the Federal Reserve and other central banks won't let financial markets falter and some recent chart and pic porn

Sam Zell selling real estate
Since the 2008/9 financial crisis, the world's central banks, largest financial institutions, wealthy investors, advertising dependent media, paid for economists and entrenched politicians dependent on campaign cash/ bribes etc..., have been kicking the economic reckoning can.

Quantitative Easing caused low interest rates to prop up real estate, financial markets and social spending by financing public deficits with money created out of thin air.

Artificially imposed stability creates ever larger levels of real instability, no different than those with addictions to harmful substances.

Monetary heroin.

Most global central bank balance sheets have at least doubled

Like Greece did after entering the Euro, many smaller European countries enjoyed the benefits of borrowing far more than could be repaid.

Other countries who could, took advantage of low interest rates while printing money to keep their respective currencies low relative to the US dollar.

When the Federal Reserve announced it would stop printing, US long term interest rates rose, affecting rates across the globe.

Then corporations stepped in with share buybacks.

Then England Japan, Switzerland and then Europe among others stepped into the printing breach.

If values fall, investors should likely increase the extrication of monies from what appear to be more risky ventures, allocating heavily to perceived safe havens, compounding affects and triggering bank runs.

The more investors begin to realize Quantitative Easing (printing money) didn't work, the sooner Emperors will appear to be holding up a financial house of cards, forcing the house to collapse with greater speed.

As the global economy is clearly slowing, many who didn't understand yesterday are suddenly awake, looking at naked Empires, now that the veil of QE can be seen for what it is.

A Minsky moment

If the natural cycle of laissez faire capitalism 
revolves between risk and aversion, 
what should happen if government intervention perverts the process?

Ponzi finance units must increase outstanding debt
in order to meet financial obligations.

A transition occurs over the course of an expansion
as increasingly risky positions are validated by the booming economy
that renders the built in margins of error superfluous,
encouraging adoption of riskier positions.

Eventually, either financing costs rise,
or income comes in below expectations,
leading to defaults on payment commitments.

Hyman Minsky
Believed excessive debt causes financial crises

The world faces a massive debt restructuring, where investors and financial institutions take the hit instead of government bailouts like last time.

It's just a question of how and when a very pushed on string snaps back in the 1%'s faces.

This has taken far too long, which means the consequences are likely greater.

Any system produces winners and losers

If the gap between them gets too great
the losers will organize themselves politically
and seek to recast the existing system within nations and between them

Henry Kissinger

What could happen if a generation of underemployed, underpaid
educated and indebted young adults
become disillusioned by their elders’ financial mismanagement
and seek to identify and punish those responsible?