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Mercenary Trader  

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  • Germany's Outlook Is Terrible, Gold Could Be Playing Possum, And Multiple False Trends Look Good [View article]
    Re Germany and Grexit, it is true the Germans said that. I doubt they actually believe it.

    Or rather, the dumber German politicians may believe it, but the smarter ones do not. Either way, it is like a poker hand. Germany has a vested interest in convincing Greece they do not care about Grexit, in the same way a poker player has a vested interest in convincing an opponent he is not bluffing.

    The actual consequences of Grexit amount to a huge risk, and anyone who says definitively otherwise is guilty of wishful thinking. It is possible that a Grexit is handled by the system with minimal blowback. It is also possible that everything unravels completely. If there were only, say, a 25% chance of occurrence "X" happening, but X represented the destruction of the entire financial system, would that be acceptable? "Oh, there is only a one in four chance -- or maybe one in three, or one in two -- that the reactor goes into meltdown." How is that logical or okay? It is not.

    The actual logistics of a Grexit could lead to a huge legal traffic jam, or a snag on a small technicality of the Lehman variety. Attempts of Greece to run two currencies at once, e.g. defaulting on debts yet somehow staying in the euro, could lead to domino effects among much larger periphery players. A Greek exit followed by an emergency cash stabilization from an outside supporter, e.g. Russia or China, could turn NATO upside down and enrage other periphery populists. Or a full Grexit could simply add kerosene to the fire, again, for said populists in Italy, Spain et al, who absolutely could not be quietly ignored if they threatened to leave the euro (as their economies are orders of magnitude larger).

    In short, the idea that Grexit would be "ok," or easily absorbed, is laughable. It is political theatre for the Germans who say it, idiocy for those who believe it, and terrible analysis to think a risk as large as casually breaking out a euro member from what is supposed to be a non-breakable currency union, already under severe cultural and political strain, would simply be no big deal.
    Mar 3, 2015. 02:52 AM | Likes Like |Link to Comment
  • Germany's Outlook Is Terrible, Gold Could Be Playing Possum, And Multiple False Trends Look Good [View article]
    If you think we said the world is going to end, you should work on your reading comprehension skills. As for what will happen "by this time next year," what a laughably vacuous statement. You might as well state with finality who is going to win the next Superbowl.
    Mar 3, 2015. 02:42 AM | Likes Like |Link to Comment
  • Germany's Outlook Is Terrible, Gold Could Be Playing Possum, And Multiple False Trends Look Good [View article]
    Projecting our own faults on others? That doesn't even make logical sense, unless you are suggesting we accidentally endorsed a currency union for ideological / idealistic reasons that was doomed to fail because it never made economic sense.

    Schaeuble's track record is not relevant to the severe risks created by antagonizing a group of populists here and now, in humiliating them verbally after beating them down, when other, stronger, much more dangerous populist groups are watching and taking careful notes; as for his ties to the chancellor, they don't matter either in respect to the extremely foolish danger created by his actions.

    You don't understand this situation at all. Your perceived understanding of the technical dimensions actually detract from the most important elements. The heaviest weighting has nothing to do with debt-vs-debtor morality or "contracts" either at this point, except to the degree such are individual chess pieces. It is all about risk, as in, risk of potentially catastrophic outcomes, of the sort which have already occurred in Europe in the 20th century.

    To say "the answer is fiscal discipline, easy regulation and free trade" is to say nothing at all, because it does not answer the relevant questions. The more important questions to ask run along the lines of, what is Europe going to do if and when, and far more likely when, populist parties like Podemos in Spain and the Five Star movement in Italy, and possibly later the National Front in France, take over and openly revolt.

    An understanding of history, and the nature of democratic populist movements under perceived fiscal oppression and serious economic hardship, would inform the observer as to the very real risks present in Europe, the dangerous manner in which things are unfolding, and the ways in which Germany's blindness makes things worse. Too much analysis, especially that of the "sober fiscal prudence" variety, simply handwaves away all that, which is the geopolitical equivalent of playing Russian roulette.

    In thinking you understand, and blatantly missing the key points, and risks, of the matter, you fall on the side of the Neville Chamberlains, and other small-minded technocrats in general, who provide observations that are defensible on their face but fall so wide of the mark as to what matters as to be more dangerous than helpful. And this may apply on the trading and investing side too, because it is non-imaginative, non-historically aware types who are surprised blindly, and find themselves losing a great deal of money, when a gray swan risk they did not even acknowledge existed blows up in their face, their exposure profiles having left them woefully unprepared.

    This is chess, not checkers.
    Mar 3, 2015. 02:38 AM | Likes Like |Link to Comment
  • Germany's Outlook Is Terrible, Gold Could Be Playing Possum, And Multiple False Trends Look Good [View article]
    Do elaborate as to what we supposedly don't understand about European politics. The fact you call our position on Greece "whining," when we have no emotional stake in the matter, suggests that you take a moralistic debt-vs-debtor view on the dimensions of what is happening in Europe, which is not helpful at this point (in terms of assessing likely outcomes and their dangers) and may in fact be actively dangerous.
    Mar 2, 2015. 08:23 AM | Likes Like |Link to Comment
  • Germany's Outlook Is Terrible, Gold Could Be Playing Possum, And Multiple False Trends Look Good [View article]
    We aren't "betting against them" either, which is kind of the point... that's why the major European indices (barring Greece) are at runaway highs as we acknowledged... but if you recognize that QE is more psychological in effect than salutary in real economic terms, and further that euro crisis has only been post-poned, e.g. can-kicked into the Summer, you will see why the outlook beyond the short-term (three to six months) still remains quite ominous, perhaps even more so via inflated expectations in the runup...
    Mar 1, 2015. 04:14 PM | Likes Like |Link to Comment
  • Germany's Outlook Is Terrible, Gold Could Be Playing Possum, And Multiple False Trends Look Good [View article]
    Are you the personal defender of gold's honor? We don't care about the reputation of any asset, we just observe and trade. Gold has not been doing the job in USD terms, which is the main benchmark... and yes we're aware that debasing trends are in place for everything other than the USD, which is a key part of why we turned constructive on gold in the first place:

    http://bit.ly/1E7beXX
    Mar 1, 2015. 04:12 PM | 1 Like Like |Link to Comment
  • Energy Stocks Look 'False Trend' Attractive As Bulls Ignore Janet Yellen [View article]
    Depends on timeframe and reward to risk. Traders have plenty of instances where quality profits are available on a risk-adjusted basis, but for investors they would not be, due to the trader's more inherent ability to manage risk.

    There are also plenty of false trend situations we pass up due to lack of runway. Probability has to exceed a threshold, with potential for a trend to last weeks at minimum if not months, for us to consider it, along with reasonable understanding of broad market psychology at a given time.

    With that said, saying "no" to false trends entirely, demanding resonance at all times, can mean waiting in the cold for an unbearably long time -- especially if one is waiting for irrationality to subside. Two words: John Hussman.
    Feb 27, 2015. 07:34 AM | 1 Like Like |Link to Comment
  • Energy Stocks Look 'False Trend' Attractive As Bulls Ignore Janet Yellen [View article]
    Not everybody agreed with our initial Yellen interpretation. Some saw it as evidence she would be dovish for a long time even if the initial quarter basis point comes through later in the year on a squeaker.
    Feb 26, 2015. 04:24 PM | Likes Like |Link to Comment
  • Energy Stocks Look 'False Trend' Attractive As Bulls Ignore Janet Yellen [View article]
    It's not that simple. Corporate guidance is weak and dollar strength is a problem. Rising rates also threaten to cause dislocation in various overextended high yield areas. There hasn't been a rate hike in nearly a decade, anxieties build up regardless of the rationale.
    Feb 26, 2015. 10:01 AM | 2 Likes Like |Link to Comment
  • Unstoppable Force Of Eurozone Policy Contends With An Immovable Truth: The Euro Cannot Work [View article]
    Ah yes, surely you are referring to Dow Chemical (DOW), the activist play championed by the inestimable Dan Loeb of Third Point. No doubt the connection is Loeb's sense of increased pressure and opportunity, simultaneously, in respect to his Hellenic Recovery fund, which could transfer to a general rise in risk assets and added buying pressure from those holdings in the purview of Third Point specifically, due to reverse portfolio contagion in the event of added optimism on the part of a fresh Greek deal, and the triumph of cynical optimism in the medium term juxtaposed against the deliberate repression of longer term despair.

    Truly trenchant analysis my good man, and brilliantly concise. Bravo, bravo.
    Feb 23, 2015. 01:41 AM | Likes Like |Link to Comment
  • Unstoppable Force Of Eurozone Policy Contends With An Immovable Truth: The Euro Cannot Work [View article]
    This is what we said prior to the deal:

    http://bit.ly/1AlEx7N

    And some thoughts posted on twitter:

    Lesson for other populists is that Tsipras & Varoufakis screwed up by voluntarily taking euro exit off the table early. Bigger fight coming.

    German Fin Min Schauble celebrated Greece's rough treatment, openly mocking them. He is a fool. Italian populists will learn and come hard.

    Europe is basically a debtors' prison. Creditors = jailers, debtors = jailed. Other prisoners (Italy etc) watching how Greece got roughed up
    Feb 23, 2015. 01:37 AM | Likes Like |Link to Comment
  • China's Debt Bomb Remains A Stealth Candidate For Top Gray Swan Of 2015 [View article]
    That's a laughable statement. The USD is still involved in more than 80% of all global trade transactions. You have to make massive assumptions to imagine the yuan will reach parity with the USD, especially in such a short period of time, given that China has a major crisis period ahead of it (and the US' major crisis period is now six years behind it).
    Feb 21, 2015. 07:46 PM | 2 Likes Like |Link to Comment
  • China's Debt Bomb Remains A Stealth Candidate For Top Gray Swan Of 2015 [View article]
    USING ALL CAPS DOES NOT VALIDATE AN OPINION BASED ON WISHFUL THINKING AS OPPOSED TO FACT.
    Feb 21, 2015. 07:45 PM | 2 Likes Like |Link to Comment
  • Unstoppable Force Of Eurozone Policy Contends With An Immovable Truth: The Euro Cannot Work [View article]
    Piling on more debt is often a bad idea. Debtors' prison is also a bad idea. Bankruptcies and restructurings are a feature of functional capitalism, not a bug. If a man is thrown into debtors' prison, as a result of bad decisions made by someone else, he will revolt, and will have morally defensible reasons for doing so.
    Feb 21, 2015. 07:26 PM | 1 Like Like |Link to Comment
  • Unstoppable Force Of Eurozone Policy Contends With An Immovable Truth: The Euro Cannot Work [View article]
    Correct, and true political union among various euro member countries would mean absolute loss of sovereignty. This is another reason the euro was an unworkable idea from the start. What Frenchman or Italian or Spaniard, if they really understood the implications, would want to give up their national sovereignty to Germans or a group of bureaucrats in Brussels. The more that the average European understands how the euro really works, the more he is saying "WTF this is crazy." The euro exercise in its entirety is a sort of fascist repression of basic democracy principles.
    Feb 21, 2015. 07:23 PM | 3 Likes Like |Link to Comment
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