Gold the View in Currencies
The Big Short
QUESTION: Marty; I am curious what you thought of the Big Short especially since you are the one who got the timing right to the day. In markets, I do not have to tell you that being too early is more dangerous than being too late. Since that fateful day on the floor when the Case-Shiller real estate index peaked and the stock market began to crash, everyone was calling it Armstrong’s Revenge for it began on the day of your ECM. They lucked out on their trades since they were all too early and played a game where the bankers fixed the price rigging the game. So any comment?
ANSWER: The BIG SHORT was financed by Plan B Entertainment Inc., which is owned by Brad Pitt. I thought the film was very accurate in describing what took place. It is questionable to what extent the bankers knew the full implications of what they had done. They knew they will filling the CDOs with garbage. They knew what they sold would collapse in price. I think what they did not comprehend was the extent to which the leverage would implode.
The movie did a fair job of trying to explain complex issues for the average person. But I think it still was over the heads of most. The casino explanation was clever, but short of the mark. Perhaps they should have used the analogy of life insurance. You can take a policy out on yourself. However, anyone else can as well. Your boss may take an insurance policy on you because you have a key role. There can be multiple policies on you but there is only one you.
Yes it was dubbed Armstrong’s Revenge by many people. I was told that began on the floor with the traders in the pits. What is amazing is how many times this model has pinpointed the day precisely in so many trends and markets globally yet people still resist the idea of a business cycle and foolishly buy or sell with no regard to TIMING.
I agree, the characters in the film were very lucky to have survived their own trades. You can have brilliant ideas or subscribe to the theory that the dollar will collapse, but if you are TOO EARLY, you cannot survive your own trading decision. TIMINGis everything more so than PRICE. I wrote that piece probably 30 years ago. It is on my bucket list to republish this year.
I will show you a trade I lost on despite being right. The Russian Ruble began trading futures in 1992. I shorted the Ruble for the collapse in 1998. The futures were still thin. I had sold a boatload. The question was how to get out since the contract was expiring. So I let it go to cash. The banks were on the opposite side. So how did they stick me and avoid a large part of their loss? The exchange sided with the banks and said the cash price was some arbitrary print the banks faked. It was hundreds of basis points above the close of the futures.
This is the same thing they did in the CDOs that the film shows correctly. The underlying crashed but the banks would not lower the CDOs because they would have to pay. That was outright fraud. The banks are simply not trustworthy in such situations. Anyone who even thinks they are covered by a proprietary option the bank creates and prices, is clearly immature and out of their mind. They have ZERO trading experience and do not have the experience to hedge or manage money. You cannot trade with a counterparty who creates and prices the product to their own benefit. It is just insane.
The CDOs on Greece they rigged and would not pay off on claiming they covered only a full default – not partial. It is pointless dealing in such derivatives everyone touts as the end of civilization for they assume these things would even be honored. They will not. Only an exchange is partially safe. Even there the COMEXscrewed the Hunts in the metals back in 1980 raising margins only for long-positions. They screwed me in the Ruble. Regulators also always side with the bankers. So caution is ALWAYS advised.
Clinton Defends Big Banks & Repeal of Glass Steagall
Hillary’s big money comes from NY bankers. Guess what; Hillary is defending the bankers as sis her husband. Hillary claims she would endorse an approach that would break up large banks if they take excessive risks. That is very vague. However, Hillary has also stated bluntly that reinstating Glass-Steagall would not address the types of institutions that have risen since the law was written in the 1930s. It was Goldman Sachs and the birth of Transactional Banking that the Clinton’s championed not to mention she and Bill made student loans non-dischargeable in bankruptcy. It was the Clintons who also opened the door which led to the housing bubble in 2007 wiping out the middle class. Nobody calls her out on this shit showing how biased the press really is these days (not the journalists as much as the editors)..
War Games Always Go Bad
1952 CIA Document to Create Nationalism in Afghanistan
QUESTION: Mr. Armstrong; I read with great interest your insight into another motive behind the illogical attempt to overthrow Syria with respect to Genie. Do you agree that ISIS has been initiated by the CIA?
ANSWER: America’s ambitions to topple governments in the Middle East goes back to at least 1952. According to a Central Intelligence Bulletin during Harry Truman’s administration, dated December 4, 1952, the CIA had sought to arm the Uzbek tribes of Afghanistan in order to instigate a nationalism movement that they hoped would spill over across the border into the Uzbek Soviet Socialist Republic, and thereby create a Muslim revolution inside the USSR.
These types of military strategies have led to a huge mess. They have NEVER succeeded and have always led to war in far different scenarios than those in government ever dream about. But the USA is by no means alone in this. Saudi Arabia has been also a very active partner in the game.
Market Talk – January 5th, 2016
Certainly, the markets were a lot more sedate today than they were for the first day of 2016! All eyes were on China after yesterdays exchange close and initially, we did see a rather depressed (-2.6%) open but only to recover within minutes. Most of the day was spent in and out of the red but eventually closed marginally lower -0.26%. There were rumours around early in the day of official money in play supporting the market but any type of large buy order attracted that type of comment. The Nikkei had a similar pattern in and out of the red but eventually closed -0.42%. There were plenty of rumours around for all markets but dealers were telling us that they found more confidence in that the US market bounced so convincingly in the last twenty minutes.
In Europe it was a similar storey with all core Indices opening stronger then trying to cling on to the gains. Unfortunately, data was not on the markets side and a poor Inflation print (0.2% versus consensus of 0.4%) saw all Indices turn negative mid session. By the close all had counter-balanced the currency’s weakness to end the day DAX +0.26%, FTSE +0.72% and CAC +0.34%.
The US saw a similar price action to the global markets and after spending much of the day in negative territory bounced into the close.
Oil had spent much of the day trading down between 2 and 3%. Trader shrugged of the growing tensions and focused more on the FX market (stronger USD) and the ever increasing crude inventories. Meanwhile, we saw a rally in the Gold market as rumours of Middle East buying buoyed the market. Finishing the day at $1078 (+0.35%) especially driven by the continued weakness in Chinese factory activity concerns. However, safe-haven bids tend to be short term news and the days highs ($1083) reached early were a distant memory by the close.
Bonds had a rather inactive session with US 10’s closing almost unchanged at 2.24%. German 10yr also closed 2bp tighter at 0.55% and finally Italy closed 4bp lower at 1.51%. Tomorrow we see Germany tap the BKO 0% ‘17 with an additional €5bn.
The DXY (US Dollar Index) closed 0.52% higher at 99.49 this evening. One of the major losers was the Euro (down 0.75%) and GBP (down 0.4%). The Yen seemed to be the safe-haven bid for Asian customers actually performing against the USD by +0.25%.
Back to data tomorrow in the US when we see the ADP number released (ahead of Friday’s NFP). Forecasts are for a 192k release when last month we saw 217k announced.
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