DEC
29 18 SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social
+ Capit-compet in Econ
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they
documented with graphics
If a doctor tells you that his
patient’s condition is swinging up and down wildly, is that a good sign or a bad sign?
If a doctor tells you that his patient’s condition is
swinging up and down wildly (no stable), is that a good sign or a bad sign? Of course the answer
to that question is quite obvious.
Just like in the medical world, instability is not something
that is a desirable thing on Wall Street, and right now we are witnessing
extreme volatility on an almost daily basis. On Thursday, the Dow was
already down several hundred points when I went out to do some grocery shopping
with my wife, and at the low point of the day it had fallen 611 points.
But then a “miracle happened” and the Dow ended the day with an increase of 260
points. As I detailed yesterday, this is precisely the sort of
behavior that you would expect during a chaotic bear market.
The Dow Jones Industrial Average posted a 865-point swing in less than two hours. The blue-chip index had been down in
mid-afternoon more than 500 points to cut the previous session’s gains in half,
before bargain hunters and short covering turned a big decline into a modest gain.
An 865 point swing in less than two hours is not “normal”.
In fact,
it is about as far from “normal” as you can get.
The inevitable consequences for decades of exceedingly foolish
decisions are starting to roll in, and the bursting of “The Bubble To End All
Bubbles” is going to be beyond excruciating.
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"The
thing that scares me most is liquidity – the lack of it."
Chaos is the only constant IN OUR Econ system , and the
bigger problem that has emerged is a far greater one: how does one trade in a market in which, as
we showed
last week, liquidity has dropped to the lowest on record?
See Chart:
Poor liquidity has
likely exacerbated the the drop in equities
We laid out the threat of plunging liquidity as follows:
"ever feel like the smallest order gets to push the Emini around like a
toy? It's not just a feeling: it's the truth, because as shown below, not only is the Emini futures top-of-book depth worse now
than it was in the highest-vol weeks of October, it is also worse than it was
during the record VIX surge in February. In fact, the top Emini orderbook has never been worse."
See Chart:
To Goldman's John Marshall, the problem of collapsing
liquifity isn’t structural or related to HFT or ETFs, but can be explained by
simple risk aversion among professional investors rather than the growth in
electronic trading, which however is a very different view from what Goldman's
Chief Markets Economist Charlie Himmelberg, said
back in May when the Goldman strategist warned that HFTs – due to their inability to process nuanced
fundamental information - may trigger surprisingly large drops in
liquidity that exacerbate price declines, and result in flash crashes.
Himmelberg highlighted the growing market share of HFT and algorithmic trading
across all markets, and warned that the growing lack of
traditional, human market-makers has made the market increasingly fragile.
See Charts:
In other words, there will come a day “with actual bad news”
when the selling onslaught is so broad, not even BTFD HFTs will be able
to resist the sudden avalanche of selling.
That’s the day when the increasingly fragile market, one
in which “liquidity is the new leverage”
will officially break and stocks will “trade outside of the NBBO constituting a
genuine flash crash” in a “negative feedback loop that causes more volatility.”
A selloff from which there will be no “snap back.”
At the same time, share totals on U.S. exchanges have
regularly exceeded 9 billion in the last few weeks, which skeptics highlights
as an indication that liquidity is actually relatively stable. It's not just
common stock: the average
volume in puts and calls surged 22% this year as the S&P 500 Index
endured two corrections and a near bear market. At 20
million contracts a day, trading is poised to surpass the previous
record of 18 million reached in 2011, data compiled by Options Clearing Corp.
showed.
See Chart: Record
Trading
That, explanation however does not satisfy the critics who
have expressed concern that structural changes since the crisis have made the
market more vulnerable, and this is where some shift blame away from HFTs to
ETFs.
Others blame a different culprit yet, namely the market's
changing microstructure: Spreads have widened because of the market’s changing
structure, according to Aram Green, fund manager at ClearBridge Investments in
New York, though he doesn’t agree that liquidity has worsened.
“You’ll see a price on your screen of a stock down 30 dollars and you go
to buy it and there’s no volume to buy it. And next thing you know it’s back to
flat,”he said. At the same time, “we decide that we’re going to get out of half
a million shares, and the thing only trades 300,000 shares a day and we put it
out there in some dark pool, and it’s gone in."
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The
S&P/LSTA Leveraged Loan Price Index has not had a gain in any trading session
since Nov 1.
For those equity traders who think they've been plunged into
the darkest circle of hell with all the recent violent moves in the S&P, we dare you to take one look at the chart below and say which
is worse.
See Chart:
S&P /LSTA Leverage Loan Index
The liquidation has been so furious, that the S&P/LSTA Leveraged Loan Price
Index has not had a gain in any trading session since
Nov. 1.
And as prices fell, they
created a feedback loop whereby lower prices led to accelerating outflows, and
said outflows resulted in even more liquidation sales.
Last week was no different, as investors continued to pull
money out of U.S. leveraged loan funds at a historical pace, withdrawing $3.5
billion in the week ended Dec. 26 (split between $2.9BN in mutual funds and
$626 million in ETFs), the
third straight week of record setting withdrawals, following last week's
then-record $3.3 billion and $2.5 billion the week prior.
See Chart:
US Loan Funds saw $3.5 Bill exodus,
a new record
As Bloomberg reports, the outflow-induced volatility has
made it more difficult for the biggest buyers of loans, collateralized loan
obligations, to step in to fill the gap. The swooning
prices are also scaring other institutional investors away with the CLO market
effectively frozen in December.
See Chart:
Monthly US CLO Activity
Yet despite clear signs the market has frozen up, some
investors remain optimistic and claim the recent market softness is merely a
buying opportunity, especially once volatility dissipates.
"If
you are a high-yield manager, loans yielding 8% is attractive," Carlino
said. "You are starting to see cross-over buyers
and that will only increase. It’s only a matter of time before institutional
investors and cross-over buyers come back to the market."
Of course, that's what the optimists said in late 2007 and
early 2008, when the LSTA loan index was trading exactly where it is now. 12 months later, during the depths of the credit
crisis, it had imploded to 62 cents on the dollar, and
only the Fed's bailout of the financial system prevented it from going to zero.
We hope this time will be different.
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"But
everybody agrees that [QE] propped up the stock market..."
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The common
theme: stocks will be risky, volatility is back and returns across all asset
classes could be "muted" in the new year.
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
[[ IF so, you would have a real
“intelligence” agency ]]
“The brain functions
according to laws.We’re discovering more and more about those laws. We
can determine when the brain is malfunctioning. We’re learning how to correct those malfunctions.”
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"Any
deaths of children or others at the Border are strictly the fault of the fault
of the Democrats and their pathetic immigration policies that allow people to
make the long trek thinking they can enter our country illegally."
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Nothing to
see here... just actual election
meddling!
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US-W ISSUES (Geo Econ, Geo Pol &
global Wars)
Global depression is on…China, RU, Iran search for State
socialis+K-, D rest in limbo
"I am
in the White House waiting for the Democrats to come on over and make a deal on
Border Security. From what I hear, they are spending so much time on
Presidential Harassment that they have little time left for things like
stopping crime and our military!"
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AFGHANISTAN CRISIS is worse than Vietnam: but not mentioned here
70,237 drug
overdose deaths last year, that is more deaths than all US military fatal
casualties of the Vietnam War.
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Is This a Possible WW3 cause?
For much of
2018, the internal situation of Russia’s oil market was remarkably peaceful... Yet events
unfolding in the past few weeks point to the possibility of a clash between
ministerial offices in lengthy judicial battles.
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
RELATED 1:
RELATED 2:
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SHOWS RT
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NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes &
terrorist imperial chaos
REBELION
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RT
EN ESPAÑOL
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
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PRESS TV
Resume of Global News described by Iranian observers..
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It’s time to take out Turks out of Syria as soon as possible
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