Daily Archives: August 28, 2014

Timing the top.

Kobe Bryant

Kobe Bryant

The challenge of a life time. Now I know how Kobe Bryant feels, when his teammates hand him the ball with just a few seconds left on the shot clock. With no time left to create a better choice, he just has to get lucky on a miracle shot.  Financially speaking, after years of market manipulation -if not outright deception- by central banks, it’s really now, or never. Last chance to make big money with this new, last super bubble of the lot.

Oh yes, there will be a market after this top, but it will be an illiquid one, with limited chances of making big money. Cleaning up this credit bubble is going to take a long, long time. This next top is, as Warren Buffet would put it, the fat pitch we should have been waiting for. I know most batters have been swinging at pitches lately, and they made money with this market in the interim. Good for them; but I disagree with the risk-reward targeted. Risk didn´t materialize, but it was there all the time. Unlike in baseball, there is no penalty for being patient in investing. As I grow old, my patience improves daily. Nothing else does.

This top is going to be “the mother of all tops”. And it will come, as sure as night follows day. It is keeping me awake some very long nights. As Herb Stein stated,“If something cannot go on forever, it will stop.” ¿When? In order to get the three points from the Kobe Bryant last nanosecond shot (make money shorting the next market top), we need luck, and even then, a lot of aspects around the trade have to be perfect.  Two elements have to be right: precise timing, and determining if the first top will be in bonds, or stocks.

Of course, all aspects to consider, interact between themselves, in order to make things as complex as possible. The market is a bitch. First and foremost, precise timing is crucial. A correct predefinition of the macro aggregates to watch, simplifies the problem enormously (if correct!). Then there is noise to account for, and behavioral market player considerations. The POMO desks of the Central Banks manipulating everything they can, as much as they can, for as long as possible, are also to be considered. And it’s a dog fight. It will be their last stand in the current credit expansion. Continue reading