Whiffs of The Unwind ~ The Risk Averse Alert

Saturday, September 05, 2015

Whiffs of The Unwind

Today we feast on a few select quotes from this week's Credit Bubble Bulletin titled, "The Unwind."
"I see discomforting confirmation that the current historic global monetary fiasco’s disaster phase is now unfolding. It is within this context that readers should view recent market instability."
Definitely rhymes with my "In other words, yesterday's 'extreme' very well could be today's 'you ain't seen nothin' yet.'"
...speculative “hot money” flows have reversed course. Global deleveraging and de-risking have commenced. The fallacy of “liquid and continuous” markets is being exposed. Faith that global central bankers have things under control has begun to wane. And for the vast majority in the markets it remains business as usual. Another buying opportunity.
Sort of rhymes with "there isn't 1 in 10,000 who even vaguely imagines a decline of this magnitude is remotely possible."

Make it 1 in 9,999.
Crowded Trade Dynamics ensure that a rush for the exits has folks getting trampled.
Okay, so you'd have to be practically blind not to see this coming. We did here. Several years ago.
Today, a Crowd of “money” is rushing to exit EM. The Crowd seeks to vacate a faltering Chinese Bubble. “Money” wants out of Crowded global leveraged “carry trades.” In summary, the global government finance Bubble has been pierced with profound consequences.
Like I said the other day, Doug Noland concludes the "global government finance bubble"—the granddaddy of them all—has popped. What this means he explains in a sentence...
I just fear we’ve reached The Unwind phase where throwing more liquidity at the problem only exacerbates instability.
Case in point China. Rescue acts that worked yesterday today are failing. Soon to join the ranks will be every central bank on the planet. That is why I have persisted calling them hopelessly insolvent. That is why I have made satire of NASA's Mars Curiosity Rover in relation to lenders of last resort being ALL IN.

My case for "China Bash" and connection with Trump finds some interesting circumstance here to consider...
To see China’s “shadow banking” assets balloon to $5 Trillion has been nothing short of astonishing. Then there is the explosion of largely unregulated Credit insurance throughout Chinese debt markets – and EM generally.
Unregulated credit insurance. Wanna guess how that ends? How many of those hedge funds Trump bashes do you suppose have American pensions tied up in China's shadow banking system? Just wondering because pension plans likely to collapse in the upcoming period then might have an easier, far away scapegoat. And almost as far away from London as possible!

(In other words, is the Trump Tax on hedge funds a smokescreen?)
From my vantage point, market action points to serious unfolding financial dislocation in China. It also would appear that a large swath of the leveraged speculating community is facing some real difficulty.
Hedge funds are among "the leveraged speculating community" no?
There still seems little recognition of the seriousness of the unfolding global market dislocation. It’s destined to be a wrenching bear market – at best.
Get Smart, Homer.

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