We posted our base case scenario a few days ago, Essential Charts Update. Markets have since reversed and are trading lower. With fresh memories after the central planners “killed” the shorts, many are hesitant to shorting the market. With the sell off we saw today, many are caught totally wrong, and frustration is increasing as we approach the supposedly calm holioday season.
Short term charts below. Note how the central planners coordinated effect soon is gone.
Another classical soap opera in finance is continuing. According to latest stupidity, Corzine, did not know pretty much anything about nothing. Nor does he have a clue where the money is. We can’t but ask ourselves what he did at MF Global, if he did not know the above. This is unfortunately a repeating story in the financial world. People take too much risk, and when it goes bad, they start the blame game.To be continued….
Is Finance run by Psychopaths? Below from Corzine’s I know nothing speech;
Recognizing the enormous impact on many peoples’ lives resulting from the eventssurrounding the MF Global bankruptcy, I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employeesand investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on mymind every day – every hour. And, as the chief executive officer of MF Global at the time of itsbankruptcy, I apologize to all those affected.Before I address what happened, I must make clear that since my departure from MFGlobal on November 3, 2011, I have had limited access to many relevant documents, includinginternal communications and account statements, and even my own notes, all of which areessential to my being able to testify accurately about the chaotic, sleepless nights preceding thedeclaration of bankruptcy. Furthermore, even when I was at MF Global, my involvement in thefirm’s clearing, settlement and payment mechanisms, and accounting was limited.
Betting against equities – the market – is always difficult. First, the market isn’t designed to go down. Companies provide those goods and services for one reason – to turn a profit, and hopefully, such activity can be recognized with a rising stock price. Second, our economic stewards and political leaders (wisdom?) use the stock market as a vehicle that validates all that they do. Fixing a crisis is one thing, but fixing a crisis and having the Dow confirm such actions with a 600 point move is even better. Call this headline risk to any short position because market participants are likely to shoot first and ask questions later on any rumor. When was the last time you heard some elected official say “run for the hills”? There is always the hope that they can fix the problem. For example, this week alone, we have US Treasury Secretary, Tim Geithner, in Europe for “important” meetings. That’ 3 days of headlines telling us Europe’s problems will be fixed.
Nonetheless, here we find a market hoping for a Santa Claus rally just like they were hoping for the traditional Thanksgiving lift that showed up about a week late. How did that work out for you? Thanksgiving week was the worst Thanksgiving week since 1932. Oh well.
So why I am a bearish? I have 4 reasons.
It has been Europe’s year. All focus on the EZ debt problems, the Euro and whether the EZ will break up. Going into holiday season, “something” might just happen when we expect it the least. We are puzzled who would print the WSJ story getting a lot of attention today, if they didn’t have very good sources? WSJ reports on the banks preparing for the break up;
Some central banks in Europe have started weighing contingency plans to prepare for the possibility that countries leave the euro zone or the currency union breaks apart entirely, according to people familiar with the matter.
The first signs are surfacing that central banks are thinking about how to resuscitate currencies based on bank notes that haven’t been printed since the first euros went into circulation in January 2002.
A secret report into the operations of Ireland’s National Asset Management Agency, the state agency set up to purge Irish banks of their toxic property loans, has recommended that the government should consider selling it off as a single entity http://ftalphaville.ft.com/thecut/2011/12/08/786001/dublin-urged-to-sell-toxic-loans-as-job-lot/
JPMorgan Chase has increased its lending to troubled eurozone economies, reports the FT, as US rivals retreat from the region. The bank’s loans in Spain, Italy, Greece, Portugal and Ireland have jumped 9 per cent since September 30 http://ftalphaville.ft.com/thecut/2011/12/08/785821/jpmorgan-expands-eurozone-lending/
Demand for dollar funding from the ECB has jumped sharply after a price cut agreed with the US Federal Reserve, suggesting that banks are more comfortable about tapping the ECB for help, says the FT. Thirty-four banks obtained $50.7bn in three-month loans yesterday and five took $1.6bn in one-week dollar liquidity http://ftalphaville.ft.com/thecut/2011/12/08/785721/demand-for-ecb-dollar-liquidity-surges/
Germany on Wednesday insisted that its European partners must undertake the politically fraught process of changing EU treaties, or at least accepting a binding new eurozone accord, reports the FT. On the eve of a European summit in Brussels to stem the eurozone crisis http://ftalphaville.ft.com/thecut/2011/12/08/785711/germany-insists-on-new-treaty/