Not If, When?
$1.1T in SP500 options alone expire next week, that's huge. Oil headed back under $40 with much potential downside to come. I concur with my mentor Salmo Trutta, my calcs also point to a March 2016 bottom in commods, perhaps. TBD.
The jobs report is BS and a real big "hand", if you know what I mean. All meaningful economic indicators (i.e. ISM under 50) already decelerating for an extended period, are continuing to point towards further contraction at the worst possible time.
The annual seasonal downturn in monetary flows will be exacerbated in the extreme by an ongoing severe contraction in the growth rate of means of payment concomitant with a continuance of global economic contraction.
Bottom line, from the Dec BIS report: "negative basis swap spreads indicate the absence of arbitrageurs to meet heightened demand for US dollar liquidity."
Read that sentence again and ponder the implications. In one sense, market making is potentially crippled and may not be able to withstand a huge systemic shock. In another, dollar liquidity is at a premium.
$19T in global ED says that any fluctuation in FFR, whether by market force or Fed raising (next week?) could kick off a chain reaction of margin susceptible or sensitive carry trades involving the "dollar" and forward swaps, which could hit their pre programmed stop limits.
The ensuing global unwind and resulting market ill-liquidity would exacerbate an already self reinforcing dollar maelstrom, which despite unlimited FX swap agreements between central banks, helicopter money and any number of possible interventions by CB's and PPT's, could not be stopped.
TBTF could be replaced by TBTS with that potential tsunami and the lag thereof, TBD. So let it be written...
The jobs report is BS and a real big "hand", if you know what I mean. All meaningful economic indicators (i.e. ISM under 50) already decelerating for an extended period, are continuing to point towards further contraction at the worst possible time.
The annual seasonal downturn in monetary flows will be exacerbated in the extreme by an ongoing severe contraction in the growth rate of means of payment concomitant with a continuance of global economic contraction.
Bottom line, from the Dec BIS report: "negative basis swap spreads indicate the absence of arbitrageurs to meet heightened demand for US dollar liquidity."
Read that sentence again and ponder the implications. In one sense, market making is potentially crippled and may not be able to withstand a huge systemic shock. In another, dollar liquidity is at a premium.
$19T in global ED says that any fluctuation in FFR, whether by market force or Fed raising (next week?) could kick off a chain reaction of margin susceptible or sensitive carry trades involving the "dollar" and forward swaps, which could hit their pre programmed stop limits.
The ensuing global unwind and resulting market ill-liquidity would exacerbate an already self reinforcing dollar maelstrom, which despite unlimited FX swap agreements between central banks, helicopter money and any number of possible interventions by CB's and PPT's, could not be stopped.
TBTF could be replaced by TBTS with that potential tsunami and the lag thereof, TBD. So let it be written...
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