Market Talk
Interesting day in Bunds where we saw initial weakness as the safe-haven bid was unwound, only to see it all reverse at the end of the day! GGB 2yr got messy at one stage on headlines (needless to say no IMF repayment was made) and was last seen 50bp higher at 35.75% at the time of this writing. YTD Greek banks on average have lost 52-61% of their value with Eurobank the worst performer (-61% YTD).
One area we should keep an eye on is the US/Bund 10yr yield spread. Currently quoted at 155bp. This spread will start taking its lead from the Euro, so when that starts to loose favor keep a watchful eye on TY/RX.
Asian shares were very volatile, Shanghai particularly trading with a 10% variation (daily low to high) today as PBOC were active again. In Europe we did see small gains intraday in DAX and CAC but neither could hold on and actually closed well into negative territory both down over 1%. UK FTSE never got into the green all day and closed -1.5%.
Credit markets are almost closed we hear! Trades are happening by appointment and to even move 1Mio EM bonds (at an opening price) is almost impossible. It is not uncommon to hear an indication only to trade 2% away from it. No-one is standing up to prices and to liquidate even a small portfolio can take weeks. Worth noting it is not worth partially selling bonds unless you can clear the position! Because once there is a traded price ALL holders will have to remark the book. That is unless it is on the back book (Balance Sheet) where MTM (Mart-to-Market) is not necessary daily for all books.
One can only remember in Japan when stocks/bonds went illiquid and they simply readjusted the laws for “Bad Debt” which was once 30days without payments extending it to 180 days (six months) before it was declared a default. Don’t think we are quite there yet but the longer it takes the further it goes. Therefore, we may see yet an attempt to extend the deadline for default to pretend Brussels and the Euro are still OK for now. If the INF simply extends the payment date by 6 months, then magically there is no Greek default. So let the games begin.
Professional Analysis vs. a Fool’s Game
The way people try to judge one analyst against another is like saying, “Oh, he is right and someone else is wrong.” That is unprofessional because OPINION is irrelevant and NO ONE can be correct all the time. It is humanly impossible to forecast the future based upon what someone “thinks” will or will not happen. As soon as anyone tries to engage in such comparisons, they reveal their own stupidity for it is a pointless exercise in nonsense. The only possible way to forecast any market is (1) by means of a quantitative model never fundamentally; and (2) such a model cannot work on a single market in isolation.
The analysis provided on this site is NOT my OPINION for absolutely NO ONE can stay on top of everything all the time to the point that they are NEVER wrong. The entire object of our model is to monitor the world and that takes observational power that is really beyond human capability. Once you begin to see the world in a connected way, your reality will change for what lies behind the curtain is complex and proof positive that while people will try to manipulate the world, it will never be tamed or broken.
The greatest part of the learning curve in utilizing our forecasting: (1) understand it is a computer monitoring the world simultaneously; (2) the model has three primary components Time, Price, and Pattern Recognition, and (3) the absence of human emotion and subjective “I think” analysis or prognostication. Analysts must yield the stark realization that they must yield to their human inability to always be right, as politicians must yield to the fact that they are the problem because of their human inability to resist power and self-interest.
The threshold to opening your mind to be able to trade CONSISTENTLY is to avoid subjective analysis. Comprehending that our analysis is a quantitative model and not simply personal opinion. That is the ONLY way to achieve consistency. All forecasting must be presented very black and white – IF THIS; THEN THAT; OR ELSE THAT WILL HAPPEN. This style of analysis removes human subjective judgment. Under this methodology, we allow the market to show us the correct path. Any other form of analysis is a vain attempt to judge the market based upon what you may think will happen. That cannot be consistent because the majority must always be wrong for that is the very fuel that drives the market like a pendulum going back and forth.
Each aspect of PRICE, TIME, and Pattern Recognition (Global Market Watch) is entirely independent. Therefore, we gave three levels on the Dow the 18500, 23000, and 32000/40000. When we introduce TIME, the first opportunity for a major high was 2015.75 and the three price targets would then come into play. So while the maximum objective would have been 32000/40,000 as early as 2015, we have been unable to get through the first target at 18500. Hence, if we saw a price advance to 23,000 with the TIME of the ECM (October 1, 2015), then we should expect a correction because we met both TIME and PRICE. Failing to reach that next threshold at 23,000 means the next TIME target becomes 2017. Exceeding 23,000 before TIME means you then go to the next target in PRICE, being the 32,000/40,000 area.
We identify time windows and for such targets; to form important highs or lows there MUST be the alignment of both TIME and PRICE unfolding often according to Pattern Recognition.
We use the Reversals to step in and out, letting the market guide us. So the entire object is to eliminate HUMAN emotion and judgment, which includes myself. I would sell against a Bullish Reversal based upon TIME or buy against one below also with TIME.
This is how the Reversals were situated for the 1987 Crash. We can see there was a huge gap. Breaking that PRICE target of 286.10 on the S&P 500 futures meant you then go to the next level and that was 180. The TIME was just 2 days to the ECM and that was precisely what took place.
That forecast, which became famous, was not based upon my personal opinion. It was based entirely upon this system of three separate approaches.
No, we do not use Elliot Wave or technical analysis trading patterns. Such methods are highly subject to debate and rest only upon the plain and simple observation and thus OPINION. Therefore, subjective methods of this nature are unsuitable for definitive management or trading.
Greek Referendum in Vote on Grexit
Brussel’s worst nightmare is coming true. The one thing the Troika has fought so hard to do is kill any democratic vote on the euro by the people in every country. This is not about the terms of austerity, which they still cannot understand is DEFLATIONARY and supports debt holders at the expense of society because politicians borrow forever, waste money, and the hand the bills to the people – TAXATION WITHOUT REPRESENTATION.
They are trying to scare the Greeks that they will be the loser, when in fact it is really the other way around. Protests in support of a NO vote (Grexit) are not only crowding the streets in Athens, they are coming out in Britain in support of Greece. What comes to mind is Mel Gibson’s classic movie “Braveheart” where Gibson played William Wallace, the hero of Scotland. At the end of the film, as he is being disemboweled, his last words are “FREEDOM!”
They broke down in negotiations followed by a rejected extension proposal put forward by Greek Finance Minister Yanis Varoufakis. Meanwhile, the Greek parliament voted on Prime Minister Alexis Tsipras’ proposed referendum to secure popular support for their staunch negotiation position. The government won approval for the vote, which will be held on Sunday July 5. This vote may decide the fate of Greek’s future in the Eurozone, not whether to accept the terms.
Yet it is true that Greece is holding a referendum on a proposal that no longer exists according the Troika. What makes sense here is that the people are entitled to vote. This is what everyone forgets. We are supposed to be in a “free society” and politicians believe only in their power rather than the will of the people. Even the trade deal handed to Obama is of the same nature removing the right of the people to even participate.
This is the Crisis in Democracy I have warned of since the mid-1980s. It never matters what form of government we adopt. It ALWAYS, and without exception, expands its rights against the people and that sets in motion the perpetual cycle of civil unrest and revolution. This is why there has never been a single form of government to endure throughout time.
It is time for Greece to yell “FREEDOM!” for the brain-dead concepts of the Troika cannot even see a solution. All they see is their own power and jobs. They assume they will be fine as long as they suppress the people and strangle the economy by authoritarianism. They fail to see that their collapse is INEVITABLE for they cannot sustain a system that is economically impracticable any more than Communism was sustainable. They can tell the press to stop calling them the Troika, but that is what they remain – the three-headed monster of old.
Can We Help Greece?
A slew of emails have been coming in asking if we would help Greece if they leave the euro. ABSOLUTELY YES! This week we have people in Athens meeting as I write, offering at this stage an informal proposal should the people vote to leave the euro. This would be the GREATEST of all events that would not merely restore the dignity of Greece, it would quickly show the way out. So yes, we are presenting in Athens as I write the general outline of our proposal that was submitted to Cyprus, which then newly elected President had run on a platform of joining the euro. He sacrificed his nation and his people on the political altar in Brussels.
If Greece would accept our Cyprus Proposal principle, we in fact would move our headquarters to Athens in a blink of an eye. Every hedge fund would move from Cayman Islands, who will begin to report on them to the rest of the world RETROACTIVELY on the date of the ECM – October 1, 2015.
During the Great Depression, Britain abandoned austerity (gold standard) and its economy was the first to reverse out of the lows. This was observed by George Warren, and was used to advise Franklin Roosevelt (FDR) to devalue the dollar. Then too, FDR’s Brains Trust argued for austerity to maintain confidence in the bond market which had collapsed thanks to the Sovereign Debt Crisis of 1931. We are making the very same stupid mistake – oppressing the economy and the people, causing massive unemployment, and a lost generation of the youth who all try to support debt that will NEVER be repaid.
This is the perfect opportunity for Greece to once again lead the world: abandon the euro, readopt the drachma, suspend all payment of debt, convert debt ro coupon exchangeable for shares in domestic corporate investment only (debt to private equity swap), and eliminate federal taxation; do this and you will hear the loudest sucking sound as assets pour into Greece. All we need to do is look even at the U.S. economy pre-1913, before the introduction of the income tax. The Founding Fathers FORBID direct taxes in the Constitution for a reason. This is not some hair-brain idea; this is abandoning Marxist theory of manipulating society.
What lies ahead is more than simply forecasting markets. We face a swing to the very hard left that is stripping us all of our freedom and rights. The people in charge are not some devious cabal, but politicians who never see government as the problem – only the solution. Yet, “A” students end up working for “C” students or dropouts (non-conformists); “B” students, as well as “D” students, work for government.
We stand ready to show the way out of this nightmare. That is the only worthwhile purpose left in life. What good is making all the greatest trades in history, making a fortune, if you cannot spend it or travel because you are desperately in need of money? What kind of a world will we leave behind? National debts only strip us of all liberty, for we have no right to even vote upon debts created before us. We are saddled with debt and interest payments that have reached 70% of the total national debt, leading to many people losing half of their income to support an onerous debt that we never created, nor benefited from. This is TAXATION WITHOUT REPRESENTATION. Is this a world we really want to leave to our children?
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