Saturday, February 6, 2016

Accelerating Margin Call

Overnight: BLOOD IN THE WATER. The PBOC just chummed the waters for speculators:
January's drawdown: $100 billion versus $108 billion for December

China's currency reserves with the All World Stock Index:

January's figure was the second highest drawdown on record...$1.2 trillion annualized. $4.5 billion/trading day. The Yuan is depreciating at -1.5%/month, reserves are drawing down at -3%/month. Assuming this new rate of drawdown continues, another $600 billion out the door by the end of June, almost double the last six months. The "critical" $2.8 trillion reserve threshold would also be reached by mid-June. In a year the Yuan will be -20% lower with reserves at $2 trillion. Risk assets will be getting monkey hammered every day between now and then, as "reverse QE"'s hard to imagine reserves didn't actually drawdown more, but we know the Chinese government would never lie...we can assume they're shitting bricks right now, realizing they just confirmed that the speculators are right...which will do nothing to curtail even greater pressure on the currency, as the biggest short continues. 

Feb. 6, 2016:

China's reserves (black) with the Yuan (red)
As logic would dictate, the slope of the currency decline, which is accelerating, is also leading to accelerated drawdown of reserves...all commonsense, but somehow refuted by some *intelligent* denialists...

Totals indicate reserve change in billions for prior 6 months:

The Yuan itself is directly correlated to global risk (off), so the size of this latest bounce can't be good for Netflix...

Whether they devalue or intervene, the selling will intensify. Their standard of living is unsustainable so they're selling the family jewels to prop it up and flooding the world with "assets" that are absorbing liquidity. The idea that they would achieve a developed world standard of living was all a big fucking fantasy.

WTI crude with Yuan:

Russell 2000 with Yuan: 
As Prechter would say, "it's all the same market" aka. "Risk"

JPY. Oh my...