I know I’m late this week. But let me say here, as Mark Twain once did, that the rumors of my death have been greatly exaggerated. I am physically alive… and not bankrupt (yet). Not that these last few days have been easy for us naysayers and permabears. We should never take life itself, or the solidity of our balance sheet (or income statement) for granted.
I painfully and gradually built a short in the E-mini S&P500 march futures, and was already dreaming a Caribbean retirement. It is always about greed and fear. Was my dream too greedy? It must have been, because it all crashed in five days of trading. When I take a look at the SP500 chart (or the IBEX35 index for that matter), I find the drawing quite extraordinary. I had never seen a market turn around technically like that in a life time. It was a sharper turn around than the one in june 2013. At least Central Bankers are enriching our life experience. My epitaph will read: “he saw it (nearly) all”.
Now, I am not saying the market does not have a right to be bullish. The market can do whatever it wants to do, in order to inflict the maximum pain, on the maximum number of participants. But it is a truism it used to respect certain rules. After all, market prices are only a series of numbers that normally show positive serial correlation. It is always clear that the market can change its mind from a bearish set up to a bullish one, in due time, and following certain numerical procedures. A 200 point SP500 round trip in a fortnight, on no news (except central banker timed remarks), is something to talk to my grandchildren about when I grow older (and they do as well). Gestapo, KGB, Stasi, or Mossad are a lot less efficient than POMOs.
Thank god I acknowledged total defeat last week, and left only a residual short in the low to mid 1900’s. I plan to hold on to half that short (leave 5% of the portfolio short the index). I still think the SP500 will pay my retirement extras (see timing the top), but I will have to be patient. Rome wasn’t built in a day. People who held on to their technically logical short positions were crushed. Hedge fund performance in october will be a disaster.
Natural disasters can be awful, but at least they are unpredictable. In this central bank coordinated battle, no POW were taken. POMO desks do not have the mandatory concentration camps for people like us. Losers were all executed in ISIS terrorist style (not to confuse with Isis, the greek godess). It has been a merciless victory for the establishment and the central banks. POMO desks manipulated prices efficiently and coordinately. They looked for stop areas and busted them. They retaliated against any anti-systemic positions in strength. The market did the rest. With the benefit of time, one can see that it was a resounding victory.
And then, last friday, the allied troops organized a celebration day, and Kuroda (he’s one of the allies this time around), put the icing on the cake.
“More free money (against unbridled debt of course). We will all be richer from now on”.
See in the side chart (from daily shot) the new, out of the blue, yen monetary base to be generated asap.
Friday was veritably a great party. And it was fully sponsored and paid for by Abenomics. Women and wine for the victorious POMO troops. How nice of them. The Japanese are cleaning up their bad reputation left overs from world war II. Continue reading