Tuesday, December 8, 2015

Never Cry Meltdown

Because eventually stoned zombies will stop believing you when you say that the impossible is not possible. Then when they least expect it, they'll lose everything in a "Black Swan" event. I feel really bad about that...

Overnight, the Yuan weakened to its lowest point in four years as the Chinese government allowed hot money to escape at maximum velocity. Now that the IMF (last week) approved the Yuan to be added to the reserve currency basket, we should expect even more devaluation deja vu of August. November outflows were the fastest on record in China. No surprise, a lot of that hot money headed back to Japan putting a bid under Yen, forcing unwind of the dollar carry trade aka. "S&P futures". This clusterfuck is reaching end-game...

The commodity sector is in meltdown:

Cash is king. There's no such thing as cash in a brokerage account so near-cash: T-bills, short-term Treasuries, German/Swiss bunds, Money markets, are safest, although nothing is 100% safe. Liquidity is key. 

Those in put options/volatility calls, need to be mindful of counter-party risk and broker risk as experienced back in August when many brokers broke literally. By the end of this, every broker will be offline. And whatever positions exist at that time will be frozen. Doesn't mean the money is gone, but moving it around may be difficult for days or weeks. 

Counter-party risk will be extreme. Many/most banks will fail. Most people will eventually get their money back but we already know there will be "bail-ins" aka. haircuts for depositors.

Invest at your own risk.