A change of sentiment
Equities had a rough day on Friday. The articles that I have read so far claim that investors have the jitters about risks to the economy. They are afraid of “Financial Crisis 2.0”. They are afraid of sovereign debt default.
The American big media financial press just kills me. They are trying to explain a reverse in a market that has defied all logic by claiming that all the sudden the market is paying attention to the risks that are out there. Bullshit.
They have half the story right. The market has been completely decoupled from the systemic risks that drove it down a year ago. If, as the mainstream financial press claims, investors are suddenly taking systemic risks into account, then they would be selling all of their equities and buying canned goods, not knocking a few hundred points off the DOW.
Assets of all types have seen their values rise in tandem with US unemployment. The market wants bad fundamentals. The worse the fundamentals are, the longer the US government will keep on giving money away to big investors. The market dropped because of the lower unemployment number released on Friday. Good news for the fundamentals is bad news for assets. The market swings over the course of the day followed the multiple interpretations of the job numbers. The final analysis was that the news wasn’t any where near as rosy as it looked.
When the big boys start to fear that the dollar carry trade might finally unwind, their actions will be quick and decisive. There is so much risk involved in being the last one to jump. If your software is buying assets with borrowed money because they just got cheaper all of the sudden, then you are screwed.
Slight worry about good news is the mood that is causing the current movement in the markets. When there is real fear, assets will be dumped and someone will be caught with their pants down. Hooray implicit government backing. The folks that can get free money from the Fed get to play chicken with each other to see who can squeeze the most profit out of it. They know that whoever looses will just have to go through a public shaming by congress and then retire.
Now the time when a conclusion must be drawn has been reached and I’ve got nothing. In a market as divorced from logic as the current one there is little that a sane individual can do other than stand aside and hope that they don’t destroy everything.
Have a great Monday.
