Market Cycle Crash

Well it’s all going much as expected.

2014 has been another year of tail chasing with most macro and discretionary traders finding it hard to make money, so coming into year end the clock has been running down and the sprint for the finish has getting more and more dicey with positions that would have preferably been put to bed for the year having to be run to the line. November trends normally extend into December so those desperate for last minute reprieves would logically look to join the nicest of these and lever up to make the line. Long equities, having given up on the bear case through 2050 on SPX, and of course the ‘what could possibly go wrong’ long Nikkei / short yen trade together with a catalogue of other 'if you can't beat them join them' trades.

So we end up with the portfolio managers going hell for leather to cross the year-end line ahead of target but as with a cycle sprinter going flat out for the finish, it doesn’t take much to upset their balance, with the smallest stone or bump in the road tipping them up. At which point things start to go wrong pretty fast. Those around are swiftly caught up and those coming up behind jam on their brakes and get off and walk rather than risking their own health. In other words, if you have any form of profit and you are running up to year end bonus/performance finish lines you are not going to want to risk what you have and will get out of positions pretty fast at the first sign of trouble.

I have managed to persuade a French street theatre group to enact what I am talking about using metaphor, simile and some bicycles. See the video clip of them below



And just as the commentators of that scene didn’t really have a large overwhelming story to pin the cause of the crash on, neither do we need a huge cause for the last three days action other than positional stress and attempted profit protection.

But if we were to labour the cycle crash analogy, then it would be interesting to pass that clip to various media to imagine what they would come up with as the reason for the crash. Some suggestions below.

Bloomberg - Cyclists crash the most since last time as chicken sales fall in Indonesia.

CNBC - Cyclists crash but surely Dan, isn’t this just a correction and opportunity to pick up your bike down here and get back on it?

Zero Hedge - Cyclists crash due to bicycle manipulation, as we always said. The race is fixed so there’s no point in competing, just buy gold.

Reuters - Cyclists doing fine - CORRECTION Cyclists crash.

The Economist - Cyclists crash due to embedded structural problems within the global bicycle industry, cycling popularity could fall to zero.

FT - Cyclists crash as take overtaking manoeuvre is forcibly rejected by majority. Boardman resigns.

Bank Strategists - Cyclists crash due to a slowdown 3 years ago in Debt/GDP ratio correlations with rubber prices as outlined in this chart on page 74 of the powerpoint presentation. Did I say chart? Sorry I meant ‘exhibit’.

Technical Analysts - Cyclists crash due to bicycle continuing to fall over once it had started to fall over.

Sell Side Advisors - Cyclists crash due to stop losses.

Goldman Sachs - Cyclists crash due to something we can’t talk about due to conflict of interest.

The Sun - CYCLISTS CRASH DUE TO CONFLICT OF INTEREST!

BBC - Cyclists crash due to Government cuts in funding of road surface research.

Russia Today - Cyclists crash due to Keiv government refusing to respect the will of the cyclists yet Russia is sending puncture repair kits protected by a battalion of T90s

FCA or SEC - Cyclists crashed today and we will be conducting a full investigation as to why. Any cyclist found in breach of regulations or moral duty will be suspended or face criminal prosecution. We advise all bicycle teams found not to have enforced codes of conduct to prepare for significant fines.

New York Times - Cyclists crash in Europe but it’s their own fault.

FOX news - Cyclists crash due to Obamacare and maybe Ebola.

Daily Mail - Cyclists crash in a foreign country due to foreign people riding the bikes and eating potentially carcinogenic tomatoes. Something must be done.

Vogue - Cyclists crash due to clash of colours

Singapore Times - Cyclists crash due to littering and antisocial behaviour. Cycling to be banned in Singapore.

Australian Financial Review - Cyclists crash just temporary and long term demand for new bicycle iron expected to soar. Ain’t Australia Great!