Posts Tagged ‘S&P/bond ratio’

Notes From Underground: Trading Strategies For An Automated World

October 10, 2017

Yesterday, I sat down with the group TOPSTEP TRADER to discuss ways I prepare to trade. Topstep is a private group that educates/prepares potential traders for a profitable existence. As the fourth quarter has begun, I thought this video would be beneficial as a review for my readers. Reviewing rules and concepts are important, especially as I BELIEVE WE ARE HEADING INTO A PERIOD OF INCREASED VOLATILITY. A rise in market volatility can be a time of great profit but it comes with a major increase in risk. The complacency of the market because of the central banks continued intervention coupled with the risk selling of the risk-parity crowd. I say crowd because it is not just AQR and Bridgewater involved in risk parity but there are many volatility sellers piggy backing on the power of the largest market players. Remember, when George Soros/Druckenmiller broke the Bank of England in September 1992, it wasn’t just Soros but many of the banks servicing Soros were tailcoating the Quantum Fund. But when the elephants leave the drinking hole many denizens of the jungle get crushed (Niederhoffer).

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Notes From Underground: Welcome to 4Q, May We Not Be Drawn and Quartered

October 1, 2017

The political and economic landscape is fraught with danger even as the global equity markets remain mesmerized by the continued liquidity from the ECB, BOJ and the Swiss National Bank. It is not only the massive amount of asset purchases sustaining the elevated equity levels, the siren call of a HUGE U.S. tax cut (OR IS IT REFORM), which will be aided by being revenue neutral, keeps Wall Street pushing for lower risk premiums, or conversely increased stock market valuations. As I noted last week, the S&P/BOND RATIO has broken out to all-time highs as it has struggled for several years to climb above the record made in December 1999. The ratio moved to an all-time monthly high Friday, an indication that stocks are the highest price to Treasury debt, ever. Are stocks over extended on a fundamental basis?

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Notes From Underground: Which Spark Will Start the Prairie Fire?

September 27, 2017

In several blog posts over the last eight years I have used the words of Mao to relate to the potential issues that could cause severe disruption to the global financial system. If you listen to the narrative propagated by the mainstream financial media your concerns would revolve around North Korea, the Trump tax and healthcare plans, the FED starting QT (or else citing the Fed’s ridiculous dot plots), concerns about the potential shutdown of the U.S. government, the economic implications of Brexit, etc. The bottom line is that all the forecasters have been wrong for long as Phillip Tetlock revealed in his wonderful book, Superforecasting. The FED has been worshiped as all-knowing fonts of wisdom when nothing they have forecast has proven correct. Yesterday, Fed Chair Janet Yellen admitted that the FED is as confused about the lack of inflation as most of the prognosticators on Wall Street. This confirmed my theory that what the FED peddles IS NOT ROCKET SCIENCE.

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Notes From Underground: ALAS, THE ECB STEPPED INTO THE VOID

August 8, 2011

As expected, the ECB began buying Spanish and Italian bonds. The ECB actions brought about a drop in yields of 82 basis points on the Italian and 92 points on the Spanish. Today was one of the few days in recent memory when the Italian and German Bond Futures both staged significant rallies, meaning this was just not a rotation out of one and into another. The collapse in equity prices obviously caused a flight into DEBT as global investors ran to safety. GOLD, of course, was the greatest recipient of the search for safe havens. BUT THE BID FOR GOLD WAS HELPED BY THE ACTIONS OF THE ECB, FOR TODAY WAS THE FIRST DAY OF QE1 FOR EUROPE. Further proof for this was that the EURO FX failed to rally in conjunction with the ITALIAN BTP rally. Italian bonds up; EURO down as the ECB was creating short-term liquidity.

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