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Yearly Archives: 2015

Are We In A Bear Market Yet?

Punch Line: No. We do not have structural confirmation.

Is a bear market coming? Yes it is and it may have started as of December 29th, however, as we have all learned, the central bankers are resolved to fight deflation at all costs so maybe they can push out the day of reckoning further.  However, what is different this year is that the Fed ended QE in October and passed the baton to the ECB and BOJ.  Last year according to JPM about $1 trillion in sovereign debt was monetized between the Fed and BOJ.  This year JPM estimates about $1.3 trillion of sovereign debt will be monetized between the ECB and BOJ.  Two problems with this:

1) The ECB has not officially announced QE yet.  In addition both Germany and Greece are throwing their own wrenches into the works.  It is a long time between now and January 22 when the ECB will let us know their decision.  So we have a POMO air pocket that continues to age.

2) Is QE from a non reserve currency powerful enough to levitate the US and Global stock markets?  I say no way as the rising $Dollar and crashing oil price are proof positive that QE or the threat of QE from the ECB and BOJ are not enough to re-inflate the asset markets.

Bottom Line: I Expect QE 4 from the Fed to be announced at some point in the next 6 months.  How low does the market have to go? Down -10%, -20%, -25%? I expect us to take out the December lows in the near term.  After that lets reassess.  Nothing the central banks do from here on out should surprise us.

The only sure thing is that volatility is to be expected and embraced.  Stock pickers beware! It is macro time again and lots of cash is advised unless you can trade well.

Side note:  When I was at my old shop that managed trillions of dollars in 2008 and 2009 the constant chatter about fundamentals was a complete waste of time.  In my morning call I listened to the Repo desk (read on liquidity) and the High Yield guys (credit market read).  As things started to tighten I went to the bunkers and when they gave the all clear I bought hand over fist.  We may be entering this type of period.

 

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Top 10 2015 Predictions Not Made By Bob Doll!

Happy New Year!

Predictions for 2015:

1) Volatility is back in a big way.  Eventually the market should resolve lower due to the deflationary forces sweeping the globe.  However, the Central Banks will not go gently into the night and should continue to try and prevent the next financial crisis through actions and Jawboning at the right moments.  I expect violent swings both up and down and I intend to profit from all moves.  10% swings will become the norm.  This should be a traders market this year and much profit is there for the taking.  Nimbleness and flexibility will be key.

2) Active Managers will continue to get slaughtered. Correlations should rise dramatically as beta, sector positioning and cash cushions will matter more than stock picking.  More flows will continue to get squeezed into SPY, DIA and QQQ.

3) The Dollar (DXY) will correct lower soon but eventually ends the year at 105.  The largest margin call in the history of the world has begun.  The periphery (emerging markets) will continue to experience serious damage.  This will eventually spread to the Core (developed markets), however the wild card is a potential US stock market blow off top as capital flows seek perceived safety.

4) The Ukraine CIA puppet regime will launch a major military strike against the rebels in the East in Q1 and will be defeated.  Russia and Putin will make Washington and Obama look like incompetent fools.

5) Major Fraud and Corruption scandal will be exposed in Washington this year.

6) Ebola will make a comeback.

7) ECB does not do QE in Q1 as Germany kicks and screams but they eventually relent and agree to do it in Q2.

8) Social Unrest will continue to rise and we should unfortunately see 1960’s style urban riots across the country this Spring and Summer. NYC has peaked and will descend into a crime infested shit hole as the police go on strike.  DeBlasio will resign in shame.

9) The Central Bank Omnipotence meme will begin to be questioned as global market volatility rises violently.

10) ISIS will launch an attack against the Homeland or it will be made to appear that an attack was launched.  The end result is the same which is more money for the security and military industrial complex.  Also a great distraction from the incompetence and corruption of the Federal Government.

 

 

 

 

 

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