Monday, January 25, 2016

Central Planning Casino Report

Central Banks got gamblers into risk, but they can't get them out. The momentum feedback loop that they sponsored, is now going in reverse...

Global Central Banks squandered their resources to prop up a collapsing debt bubble, by making it bigger. Unlike the Great Depression, the debt was never discharged in 2008, instead, lenders were bailed out by giving borrowers more debt.

0% was offered where 1% had failed catastrophically. Bernanke says he is a student of the Great Depression. He's a student of Dungeons and Dragons...

Now, the Central Banks are out of ammo.

Status: "Fucked"
Last week, Goldman Sachs' Chief Investment Officer, Mario Draghi, renewed his commitment to do whatever it takes. Starting in March. By sheer coincidence it was exactly last March when he finally delivered upon his last (2012) promise to do "whatever it takes", by initiating European QE...

Unfortunately, Wall Street had been front-running him for three years straight, so Goldman Draghi bought the exact top. From Wall Street:

"We'll re-pay you when you come back to Goldman Sachs post-ECB:"

Status: Fucked
It's the perfectly named "People's Bank of China", or as it's affectionately known in China, the "Croupier". Where to begin...Before I present a picture of the Shanghai Casino, suffice to say that China finds itself between the familiar rock and hard place of a country that is trying to support its currency while attempting to ease monetary conditions at the exact same time. The tsunami of fleeing capital is using everything from BitCoin and inflated Domain Names, to faked imports i.e. set up a company in Hong Kong that sells widgets and then buy each widget for $1 million USD over the actual price - as just a few unique ways of ditching the Yuan. For Central Planning casino operators, they have an impossible task, which means that they 100% believe that it can be accomplished. And by the way, "the Yuan is stable", meaning it goes down by the same amount every day. 

WSJ: Jan. 13, 2016

U.S. Federal Reserve
Status: Clueless AND Fucked
The U.S. Fed has been monkey hammering Emerging Markets and Commodities for almost two years straight, over a de minimis .25% rate increase to prove that their fake recovery isn't fake. They are widely expected to "pause" rate increases this Wednesday. Forever.

Here are Global Stocks (Ex-U.S.) at a 20+ year low with Commodities at a 45 year low:

Bank of Japan
Status: Dutch Kid with finger in the dike
The biggest money printer in human history meets on Friday. Yen longs at four year high had been betting as recently as yesterday that they stand pat. However, via ZeroHedge, this literally just in (midnight Tokyo time):


Yen / dollar (Friday close):

To conclude, a Global risk off event is WELL underway, affecting somewhere north of $200 trillion in global risk assets. One Central Bank drip feed stimulus program may or may not attempt to stand in the way of the stampede out of risk.

Can an incremental few billions of liquidity hold back a multi-trillion dollar asset reallocation?

We'll find out.