Thursday, January 31, 2013

Orwellian Financial Market Dynamics Part Three - The Risk Trade Is Back On In A Big Way


Click on the graphic for a larger view

This is a rehash of many older posts but I’m including much of it for understanding for new readers.  After dismantling regulations on private, for-profit capital over the last few decades, the investor class, or mostly American and British looters, ride their swell of hot money around the world creating endless bubbles in its wake. (Traders love bubbles.  LOVE bubbles.   That’s why they create them.  Range expansion and volatility in tradable assets are a godsend to Wall Street and the City of London.  It’s a precursor to really effective looting.)   You can generally thank Bill Clinton,  Al Gore and Tony Blair for this although almost all politicians were certainly complicit in the deregulation of the global economy and its resultant systemic poverty and crisis.   Ahh.  Tony Blair and Bill Clinton, a love story.  The good old days.  I digress.

Anyway, one of the popular risk trades for looters over the years has been to borrow Japanese yen at essentially no expense because of low interest rate policies, and then load up on levered Australian dollars that yield a substantial interest delta.  Or tradable Australian assets which are experiencing massive inflation and, thus, yield astronomical gains.  This has contributed to creating massive bubble swells in Australian assets.   Yet it produces incredible riches for those pulling these stunts while leaving ultimate devastation in their wake.  You know, like our housing bubble, the Internet bubble, the commodities bubble, the China bubble, the emerging markets bubble and on and on.  By the way, politicians in every country are complicit in this by allowing this type of defrauding of us common folk to take place.

You see the Australian dollar to Japanese Yen ratio on the blue and red candlestick chart above.  And overlaid in green is the S&P 500.  See any correlation?  Hahaha.  How about nearly 100%.    Every upward move in the S&P 500 and the Australian dollar since the 2008 crash happened after a major monetization exercise by the Federal Reserve or the ECB.   That includes the 2009, 2010, 2011, 2012 and now the 2013 rally.   That is why every financial asset is nearly 100% correlated.  It is strictly tied to useless money printing that has done nothing more than recreated a massive bubble in all tradable assets everywhere.  In every nation participating in this global looting fest.  And, every time assets, generally controlled by the elitist, financial or corporate class, have started to teeter since 2009, a new money printing program was unleashed to prop up asset prices.  Honestly, central banks have no choice.  If they quit, we’ll see a total collapse.  Now the carry trade between Japan and the U.S. is no longer working because of Fed low interest rate policies here but then it doesn’t have to work here for the S&P 500 or equities to rise.  Corporatism and looting benefits from the carry trades everywhere because it steals from the entire world. 

If markets continue their trend, each central banking action has had less and less of an effect on asset prices.  This is something I have remarked of numerous times.  ie, Federal Reserve, ECB or other central bank money printing to prop up asset prices does not and can not create wealth or fix the economy.  This compares to the generally-held ignorant beliefs in Washington and Wall Street that the Federal Reserve does create “Christmas”.    And, that rising asset prices create wealth as noted by Alan Greenspan some years ago.  This is simply the verbalization of Ponzinomics embraced by the criminal class who have destroyed our economy and our democracy.   It is essentially an endorsement of Uncle Milty’s Monetarism that became religion with the election of Ronald Reagan.  Monetarism married with Reagan’s trickle-down, supply-side economics has been a real winner - give the elitist criminals all of the money they can hoard then sit back and watch them shower us with their grace.   We can mow their lawns, do their laundry, work in stores where they spend their riches, become their nannies, work as political consultants supporting their endless political bribery schemes, administer their wealth-stripping Ponzi schemes on Wall Street, work in the entertainment and leisure industry to amuse them, become police officers to protect them and for those marginally less fortunate, be shoved onto the government dole for society to pick up the tab.  Oh, and my favorite, fight their endless profit-driven wars and kill untold millions of people around the world to further their insatiable need for more of everything.  Slavery is a wonderful thing… for our masters.

You can see above in the incredible rush into Australian  dollars over the last handful of weeks (quantitative easing 4) that the financial clowns are again feeling their oats.  The bullishness within the financial community is almost palpable.  Dick Bove just came out and made a prediction that banks are going to have an unprecedented 14 year bullish run.  That’s just one example of the institutionalized ignorance that exists today.  For that to happen, our economy would have to be under an ever-increasing force of more and more debt tyranny for the next 14 years.  If that happens, we’ll be living in the Soviet Union under tank and troop rule or all in debtor’s prison.    

By the way, have we ever seen a poster stock for any economic period crash while financial markets levitate higher?  ie, Apple?  Not to my knowledge.  Something to think about.   Someone no longer has $300 billion dollars in perceived wealth that has been erased from Apple’s valuation.  I wonder how that affects their desire to spend?  Do you really think global equities or other assets are any different?  Their valuations don’t reflect true value or any kind of reality.  They are simply illusions created by the global money bubble.  At some point they will follow Apple as all of Wall Street bubbles have. 

Remember, a long-time thesis on here is that the investor class is headed to the soup kitchen lines. 

Public banking and democratic money…….  would literally solve all of this; replace consigliere-inspired immoral exploitation of debt slavery and corporate slavery with morally-responsible economic commitments to community, society and democracy.  Solutions to this crisis of modern society are incredibly simple yet profoundly powerful.  I said simple not painless.   Because this system is built entirely on corruption, it would collapse under a public banking and democratic monetary system unless a transition to a just, democratic system is properly managed by a functioning, transparent, democratic government.  Something we don’t have today.  Capitalism or any merit-based economic model must be subservient to We The People.  We must democratize economics to ever truly free ourselves from our masters.

posted by TimingLogic at 9:49 AM

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