Friday, 20 June 2014

For Bulls and Bears - Hyperbolic then Hyperhorrid.

And so it is with English football - all but out but not even granted a clean death, instead being offered a 4% chance of surviving. I thought that sort of torture was banned in the Middle Ages. Don't we get a special conciliation penalty shoot out to go out on, just for tradition's sake? So far everything is running to schedule was we teeter at stage 11 of the 20 stages of a World Cup market. Oh well, not to worry, next up is Wimbledon where English players will be far more successful at getting the ball in the net.

I am always half hoping that football should one day receive the wrath and ire that has been reserved for the generic breed called bankers, though I am still unsure as to whom a 'banker' is as most of the folks I know in banks are far from being bankers (cockney rhyming slang excluded). I am sure that the world would have exploded in flash of moral rectitude if banking were regulated by the likes of FIFA and conversely would be delighted if footballer pay was under the same regulation re deferred and capped performance remuneration as bankers.

So on to markets - Also running much on schedule with the psychology of recent events having indeed taken the path of most pain with equities re-approaching recent highs which, judging by the squealing on most commentaries is not consensus. But here is another big spanner of unforeseen consequence of regulatory straight-jacketing - With those inside the industry allowed to comment less and less, if at all, about opinions the commentary world is becoming even more biased to those outside it where 'steady as she goes' does not constitute a headline, a tweet or FB rant. We are left with even more noise at the tails and less sensible fat middle on the normal curve.

For the sake of transparency and not being under the regulatory thumb any more perhaps I should throw in a two pennyworth that combines the boring and a tail.

So here's the view - Equities will keep grinding up boringly, but once past a tipping point, say 2150 on SPX, they will go spectacularly stratospheric in a hyperbolic spike as every Joe piles in on leverage (Zero Hedge rebrands as 'Infinite Hedge'). This happens just at the time that inflation starts to hit which also then careens higher leaving the Fed on the hop, who after trailing the curve for too long will hike dramatically stuffing global markets (includiing EM ) that by then will be fully geared for chasing micro-yield at the expense of risk. The resulting dump then triggers all the uber calamity theories with respect to the values of money, as the walls of state debt fail to withstand this final tsunami crashing into them. Meanwhile, the world will have been further weening itself off the Usd as the only currency in town and political global enforcement of US financial policy will have annoyed enough other countries to make them think twice before wanting to bail out the mothership again. throw in a few uprisings along the way and it's all change in the world.

Is that view enough to alienate me from everyone? The bears and the bulls?


JohnL said...

Hmmm, did I read buy gold.......which also seems to be a way kick off a lively discussion or ignite a flame war, if a couple of trolls climb out from under the bridge.
Have a great weekend.

Polemic said...

arrghh.. you used the G word I had avoided. Actually no... it will be most using if that is bought again on assumption and once again disappoints. The assumption that as gold was used as money for centuries in the past and so will he again may be like assuming we go back to burning witches when crops get blight rather than applying chemicals because they did in the past. There may well be better things these days.. any surplus country currency may do! rmb anyone? great w.e. too john

abee crombie said...

I too think we get a spike before we go lower, but I think it will be before 2150 in spoo's I think closer to 2050. Smart money, (if there is such a thing) I think will be heavy sellers up there and just waiting for the Fed to say something contrary (Fischer?)

Until then the SSI is doing well ;-)

On England and footie, you could have it worse as a Chicago Cubs baseball fan I guess,

Corey said...

Sounds about as reasonable as anything else I've read lately. Can't help think that we are due for an uptick in vol once the fed has fully exited. They may even be the ones responsible if they do something like this:

I can't help but think that this ISIS thing is still way under most peoples radar as far as potential to create a lasting change.