Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

The Big Bang (as in Bust) Theory of Markets

admin by admin
February 28, 2015
in Uncategorized
0
0
SHARES
35
VIEWS
Share on FacebookShare on Twitter

Janet Yellen Encouraged More Levered Risk Taking in Markets Tuesday

by EconMatters, EconMatters.com

Risk Taking Tuesday

Federal Reserve Chair Janet Yellen testified before the Senate banking committee on Tuesday, and again the end result from the market`s point of view was to borrow even more money, and buy risk assets in the form of bonds and stocks.

Bonds Have Become Speculative Risk-On Assets

When bonds go up when stocks go up, that`s all you need to know that under the Free Money Fed that Bonds have changed from being traditionally risk averse assets, or assets to hedge against risk during bad times or portfolio balancing, they have now become ultra-aggressive risk assets to buy just like stocks for price appreciation and yield chasing plays. How you can tell is by what other assets like the important funding currency crosses do, and today`s action just screamed borrow more money via the various carry trade crosses, and buy the risky assets like overpriced bonds and stocks because to the market Janet Yellen gave them the all clear for at least TWO MORE MONTHS.

Read More: The Bond Market Has Reached Tulip Bubble Proportions

What Yellen Said…and The Market Believed Anyway?

The ironic part is the market`s interpretation and what Janet Yellen actually said is such a large gap that you could float and iceberg through it. She said the Fed will most likely not raise rates for two more Fed meetings (March and April) the market interpreted this as no rate hikes for 2015!

Read More: The Swiss 10-Year Bond Illustrates Central Banks` Flawed Monetary Policy

June (25 Basis Point) Rate Hike 95%

It is interesting that Janet Yellen is starting to discuss elevated financial metrics in financial markets, but yet at the same time not be aware of how her actions and statements are interpreted as far more dovish than her literal statements, nothing she said today postponed a June Rate Hike, in fact, if anything it looks like that June Fed Meeting is when the first rate hikewill occur, being that it is a quarterly meeting with a formal press conference attached.

Hawkish Tone Needed From Yellen

So if Janet Yellen is concerned with elevated financial valuation metrics on one hand, and after she gets done speaking about Fed policy, the market interprets her as even more dovish, and the all clear is out to take more risks, where do these same elevated financial valuation metrics stand after her Senate testimony? In effect Janet Yellen just talked up more leverage, more risk taking, and blew bigger bubbles in both stocks and bonds today with her Senate testimony.

Read More: The Fed Can`t Raise Rates Because the Sky Is Blue

It Takes a lot longer than 2 months to liquidate positions in over levered trades at a decent price

The market might want to rethink the not raise rates for 2015 interpretation regarding Yellen`s Senate testimony, and stick to the literal statement, two fed meetings. Remember, one way to look at this is two months before the next Fed Rate Hike, but does that represent a buying or selling opportunity, given where bond and stock prices and valuation levels are right now? Remember if it is in fact two months this means investors have to sell everything they buy over the next two months, plus all the other ‘pricey merchandise’ they have been buying for the last 7 plus years of ZIRP.

Rationalizations, Risk Taking & No Rate Hikes for 2015

Today`s Yellen testimony seemed to just about cement a June Rate Hike by the Federal Reserve, but when market participant`s just look for rationalizations to do what they wanted to do all along which is to borrow more money, take more risks, and push more assets up, and deal with the consequences long after the fact, yeah two months does indeed sound the same as No Rate Hikes for 2015!

All Going To End Very Badly

This is just all going to end very badly, and Janet Yellen is just as much to blame as the over aggressive traders taking on all this risk and making the financial system extremely vulnerable to tail-risk selling episodes that destabilize the entire global financial market. Again Janet it is nice to know that you are paying attention to elevated financial valuation metrics, just so you know you just encouraged more risk taking today with your testimony, good job cheering on the irresponsibility, making valuations even more extreme and unsupportable, and setting the stage for the next financial crisis.

Art Imitates Life: Didn`t we see this movie already with the Financial Crisis?

Janet Yellen and the entire Federal Reserve should be forced to watch the movie Margin Call as many times as it takes to understand the role that Fed Policy plays in relation to Trader`s loading up on unsupportable risky assets to such a degree, that when the bubble bursts, the entire system`s stability is at stake in the process.

Bubble Methodology & Solutions

The best goal is to never build bubbles in the first place with monetary policy, the next goal if the first one is already violated, is to recognize the bubble, and Janet seems to be recognizing these facts with her valuation comments, this should be followed by slowly letting some of the air out of the asset bubbles.

There She Blows…The Bubbles Keep Getting Bigger and Bigger

But instead with every statement opportunity of the last six weeks, and she has to realize that she has to talk more hawkish given her dovish reputation for markets to even consider the potential for taking the punch bowl away, and given financial markets propensity for taking risks in general; dovish or statements that could be interpreted as dovish, are only building the bubbles bigger, and exacerbating the problem of unsustainability that we are nearing right now with regards to asset prices.

I Guess We Are Favoring the Crash Scenario for Bubble Containment Strategy

In short, Janet Yellen is setting the stage for the Crash Scenario of “Asset Repricing”, instead of slowly letting the air out little by little, the air comes out all at once, and there is a big bang of a burst where everybody realizes that the shit has hit the proverbial fan – or the moment in Margin Call where the analyst realizes just how offside his firm is with unsustainable, levered assets that will Bankrupt the entire firm with just a normalized correction in asset prices. The last thing Janet Yellen needs to be doing right now is cheer-leading more risk taking on behalf of financial market participants!

Previous Post

The Banking Protection Racket

Next Post

Cracking Down On Fraud?

Related Posts

Is Deflation Good For Crypto?
Uncategorized

Is Deflation Good For Crypto?

by John Wanguba
March 24, 2023
TikTok Hits 150M U.S. Monthly Users, A Spike From 100M In 2020
Business

TikTok Hits 150M U.S. Monthly Users, A Spike From 100M In 2020

by John Wanguba
March 24, 2023
SpaceX, Boeing, Netflix To Join "Biggest-Ever" US Business Mission To Vietnam
Business

SpaceX, Boeing, Netflix To Join “Biggest-Ever” US Business Mission To Vietnam

by John Wanguba
March 24, 2023
Do Kwon Faces Fraud Charges From US Authorities Hours After Arrest
Econ Intersect News

Do Kwon Faces Fraud Charges From US Authorities Hours After Arrest

by John Wanguba
March 23, 2023
Bank Profits At Risk From Possible CBDC Transformation OF Global Economy – Moody’s
Business

Bank Profits At Risk From Possible CBDC Transformation OF Global Economy – Moody’s

by John Wanguba
March 23, 2023
Next Post

Cracking Down On Fraud?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Is Deflation Good For Crypto?
  • TikTok Hits 150M U.S. Monthly Users, A Spike From 100M In 2020
  • SpaceX, Boeing, Netflix To Join “Biggest-Ever” US Business Mission To Vietnam

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish