Friday, May 7, 2010

A V-shaped 'Discovery' : the shape of things to come...Silly randomwalker, May Trix ain't for kids...

May Trix, a fitting foreshadowing of the denouement of the trusted, a reminder that the 'I Can't Believe it's not Capitalism' plan has not completely resolved the 'What Just Happened' Crisis; verily, some quarters, including this one, think our 'solution' has worsened the problem.

May Trix... A V-shaped 'Discovery': the shape of things to come.

The pablum narrative will probably focus on : (NY Times) In Washington, Treasury officials began combing market tapes for answers. By the evening they still had not gotten to the bottom of it, but they discovered some aberrations — market blips — in trading coming out of Chicago… As of about 6 p.m., all the officials knew was that there had been what one called “a huge, anomalous, unexplained surge in selling, it looks like in Chicago, at about 2:45.” The source remained unknown, but it had apparently set off algorithmic trading strategies, which in turn rippled across everything, pushing trading out of whack and feeding on itself — until it started to reverse...

And yet...

Fil Zucchi at Minyanville:

'Since everyone has an opinion on yesterday's 5 minute plunge, let me offer this:

•We've oft discussed that a tell-tale sign of risk withdrawal is a rising JPY/USD
•Currency movements are measured in 1/100 of a cent
•Between 10:50 and 14:00 yesterday, the JPY/USD rose 307 bps.; that's the kind of move people usually position for over a year period, not 3 hours
•Between 14:00 and 14:10 the JPY/USD gained another 100 bps. ; the S&P 500 (SPX) fell a modest 6 points in that time frame
•The plunge in the equity markets began in earnest at 14:10, after traders were already disorderly buying JPY/USD
• After 14:10 the JPY/USD gained another 150 bps. And that's when the SPX went into a tail-spin

Interpret the data as you wish, but the JPY/USD signaled crash-like risk aversion before the SPX went off the cliff. Maybe panic caused a "fat finger", but to these tired eyes, the selling was no mistake.'

Oh ye crazed randomwalkers, no doubt some revisionist rationale will be provided as to why the models don't, can't, and won't explain this latest 'reality' show.

The initial mongering (PHD and the like) crowd will hold up as a sticks-and-glue proof, that the bubbles in your soda pop do in fact explain the bubbles in your portfolio, something called the Generalized Auto-Regressive Conditional Heteroskedasticity Model and its variations. Seriously, you can look it up!

My retort? Got fractals?

What has been will be again, what has been done will be done again; there is nothing new under the sun.

The Band of the Hand can only create a Potemkin demand...

As in, the Atlanta Fed confirming that the major contributor to income growth during the past several months has been transfer payments.

As in, that birth death model... it ain't payin' no taxes!

Bread and Circuses divert folks from staring at the 'chickenless' pot...

As in , no Fed audit, no breakin' up the banks, but hey we might limit ATM fees to 50 cents!

And soon coming to the cineplex near you, the horror film, 99 Weeks Later.

They will inflate until they can’t. Inflation rewards those that have their wealth first. All roads lead to deflation. The stock market will bottom when no one cares. Much like the aristocracy when the barbarians are at the gates… you save the silver (banks) first. They will destroy the village (dollar and markets) in order to save it. After the deflation is overwhelmed, the West will never be the same.

In 1982 S&P bottomed at 6.6 P/E, a 15% earnings yield...

In 1974 S&P bottomed at 7.9 P/E, a 12.66% earnings yield...

In 1932 S&P bottomed at 5.6 P/E, a 17.86% earnings yield...

And 2012 is 40 days and 40 nights from 1932 dontchaknow...

History ingeminates and the truths you hold to be most dear are lies told to you by liars.


RPB said...

The Yen moved with the USTs, especially the CME 10 Yr Note. It's Japanese hot money flowing out of the market when things get real more than anything else, especially when stops are hit like they were. The only thing, of course, that halted the Yen rally is BOJ announcement. Also, the YEn has been moving inversely to the Euro.

Trade of the year so far? Sell the Stoxx index, buy the Dax index. Europe is in deep hamburgers, but atleast Germany is relatively better off.

Anonymous Monetarist said...

Think the DAX has fallen almost 10% since late April, but a weak euro will turbocharge the German export market.

It will be very interesting to see if the German election this weekend results in legislative gridlock, that would be devastating for the Greek bailout IMHO.