The Credit Crisis Financial Stocks Short Journal

Interesting piece from Dylan Grice. He's looking for cheap insurance for Black Swanish events. He doesn't like volatility as one of his cheap insurance products.

http://www.zerohedge.com/article/pr...the+survival+rate+for+everyone+drops+to+zero)

He points out that while vol seems quite low right now, its still pretty high by historic standards - i.e. it is still pricing in a bit of a 2007-9 scenario repeating. Certainly makes me think twice about my VXX call purchases. I'm not too worried about them going to 0, since it will cost me well less than 1% of my assets. However, its pretty clear that VXX can easily still fall quite a bit and not yet be cheap on a historic basis.
 
I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.


Ambrose Evans Pritchard...

http://blogs.telegraph.co.uk/financ...007777/shut-down-the-fed-part-ii/#dsq-content
 
Quote from Martinghoul:

AEP is such a drama queen...
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I'm not sure what is going on with him. He seems to be rambling against inflation targeting, yet there was simply no indication of any kind from the Fed in the last 12 months that they had given up an implicit inflation target of 2%. Now the Fed will defend the 1% or lower core CPI with QE and he acts surprised for whatever reason
 
Quote from Debaser82:


My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.

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I dont see the difference either. Apparently AEP is on the inflation target camp but his target is higher than but close to 0% while the Fed is on lower than but close to 2%. I'm yet why his approach would be better given that every recession would come with the threat of debt deflation(his buffer is too small). I would actually favor a even higher target for the Fed but thats too controversial to be adopted
 
AUD is making multi-year highs against the USD today, maybe all-time highs. The weak $, strong commodity, strong equity trade is getting incredibly frothy and is at odds with the massive rally in bonds and the yen.

If there is the slightest crack in the "China Growth" story or a crack the above scenario, the AUD will drop 15 cents in a month. I'm not saying its going to happen tomorrow, but options for this scenario are pracitcally being given away. I'm reminded of 2008 - I was short GBP for pretty much the entire year and found it incredibly frustrating the it was still hanging around $2,00 as late as August when it was clear to me that things had completely fallen apart in the UK. By labor day, the GBP was below $1.80. By the end of the year, it was in the $1.50s.

In the meantime, the US=Mexico trade will continue to work. 3rd world, he we come.
 
China has slowed. Its PMIs have been around 50 for the past few months. They have raised interest rates and continue to take other steps to curtail the housing (really capital spending) bubble.

The latest meme out there is that the Chinese authorities will know the exact time to take their foot off the brake and start pumping again. Faith in the omnipotence of government bureaucrats - whether in the US or China - runs deep.
 
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