Thursday, August 2, 2012

Call it What it is: Obscene

Yes, I am alive! Still learning a lot at work and making things happen. Thanks to all the faithful that still drop on by from time to time.

Call it What it is: Obscene
I don't get too much time anymore to really get into the nuts and bolts of things market wise. I tend not to do anything less than 100% and I cannot be active in markets right now. Most of the summer that has been a good thing.

I still follow market currents and keep an eye on the big picture. I have not liked what I have seen at all in many respects. Today I saw three posts that I feel demand your attention and I did not want to miss a chance to get more eyeballs on these important works.

The economy in the US is slowing down (again?) and worldwide it's getting worse too. Why is that you may ask after all the intervention and once (then twice, then three...) in a lifetime Central Bank "operations" since 2009? Simply, because they don't address any of the structural issues. Deflationary forces, deleveraging, and insolvency cannot be fixed by artificial rates and fake money stuffed into holes. I think one could argue that the early attempts did stop the worst of the bleeding and bring calm, but here in 2012, in spitting distance of market highs, the calls for more QE, LRTO, and bubble gum get louder everyday. Something is messed up.

Joshua Brown always seems to find a way to say what I want to say but cannot. Today's post titled "Nothingtown" nails every point I have tried to make for a long time, and yet does not come off as a rant or angry, just some truth bleeding out:
"Because this is Nothingtown.  Nothing helps anyone except for the people who don't really need any help at all.  You think the Fed buying an  extra $200 billion worth of Monopoly properties with Monopoly money is going to find it's way to single moms hustling to pick up part-time work or laid-off office drones who've been replaced by"
There is more in the post, so please read the whole thing.

Years and trillions of dollars have been spent and lost, lost I tell you, fighting the last war instead of getting ready for the future.

Knight Capital Group had a spectacular algo based crash this week, and now the firm looks towards going bust (via Zero Hedge). An entire firm at risk for a few minutes of a mistaken trade program.

More market issues?

Leigh Drogen covers an MONSTER point today in a post titled "Why Fidelity Dumping Facebook is Such a Disastrous Signal for the Market" and it is required reading:
"But now things have changed. Facebook came public at 100B, other high growth tech companies aren’t coming public at less than 5B, some north of 10B. Airbnb is an amazing example of a company which 15 years ago would be public by now, but they likely won’t come public at less than 10B either.
Fidelity has no shot, and investors in Fidelity mutual funds don’t have one either."
Hit the link and read the rest.

My friend BC Lund makes a great point and it fits in with why I reject sentiment readings now and just don't believe what people say, only what they do. In "5 Ways You can Combat High Frequency and Algorithmic Trading" Brian has this nugget:
"It used to be that trading a breakout from a traditional chart pattern was the money.  But then everybody in town traded the breakout, and HFT’s took advantage of that and trading the false breakout became the money.  But now, trading the breakout in the original direction of the pattern after the false breakout is the money."
Yes, the "fakeouts" now have become the norm. Though I imagine something new is on the way.

(**Note: I do not speak for the writers above and do not take my summation paragraph below to be anything they believe or endorse.)

Where I think things are now is a financial system that has cornered the Central Banks because of two reasons. One, the only thing the Fed and ECB can seemingly influence is the stock market. Everything else eludes their control, as it always was going to be when it mattered. Thus, knee jerk easing and blustering speeches are trotted out during any market sneeze and stock prices dictate policy. This is bad enough.

Point two is that markets, with full knowledge of reason One above, have resorted to almost train-robbery like behavior (Facebook?) with the full knowledge nothing can really be done about it anyway. They are the only game in town.

Exit policy? How can one exit such an arrangement I ask? It is obscene.

Some may read this and see me as a negative thinker. Some may label me a "Gloom and Doomer" and that's fine. I am anything but. I cannot impress upon you how much I believe in America and Americans (I am iffy on the rest of the World!). All those trillions and all that time lost and given over to people that can only squander it. Given half a chance, leadership, and a clear way forward I have no doubts of our ability to shake off this morass and find our way forward in the future. Will there ever be a chance?

Have a good night.


The Basis Point said...

great post J...

EconomicDisconnect said...

Thanks J, appreciate that a ton. I really do.

Arctic Gambino said...

Hope you're not iffy on Canada. That would make us really sad.

AllanF said...

I'm stupefied by the Knight blow-up.

1) As you said, the firm was completely wiped out in 45 minutes from software!?!

2) This is the _third_ financial to completely dissolve in less than a year. And no one seems to care. (And IMO the BATS IPO fiasco should count for at least a 1/2.) Gotta give Fed credit for that I reckon, people were crapping diamonds when Bear Stearns and then Lehman went under. Now, it's all, "meh, my account is with another brokerage."

3) So it seems yes, this is what the markets have become; they have consumed all by-standards and are now turning on themselves.

Anonymous said...

For Friday's Rock Blog Post!

I stand alone.