The Swiss pulled a fast one on the world today with the stunning overnight currency revaluation. The most surprising aspect of this move is that the head of the IMF, Christine Legard, was not informed and in her own words was “a bit surprised.” The implications of this fact are tremendous. The global coordination of central bank policy is now over. It likely has been over for awhile but now the global trading community has just become aware of this fact. Large commercial players will be in the process of deleveraging after the Swiss decision. In the FX market leverage of 10:1 is quite common. Knock on effects will occur and I expect stocks to be collateral damage. The Global carry trade will defiantly be affected. I urge extreme caution as we now have the Central Bank omnipotence meme called into question.
I am now convinced that financial market reflexivity has reversed and the feed back loops are becoming negative. I am working on creating a list of shorts. Once we have structural bear market confirmation I will be deploying my dry powder on the short side. I may start adding some in slowly over the next few weeks. I am up 7.5% YTD. I urge extreme caution as the game is changing and the large players begin to realize the central bank put may be over. I suspect we go lower first but then get a powerful bounce into ECB QE announcement next Thursday. I am sitting on my hands today. I will look to layer shorts into the rally next week.If you enjoy the content at iBankCoin, please follow us on Twitter