Submitted by QTR's Fringe Finance
“It is a shit storm out here. You have no idea the kind of crap people are pulling, and everyone’s walking around like they’re in a goddamn Enya video.” - Mark Baum
Even if the stock market holds up, something is going to have to break in a big way.
This is about the simplest way I can try and explain how I feel about the state of the economy and markets, delivered to you honestly and devoid of detail, as someone who truly neither has the patience nor the attention span to dive into the intricacies of the Eurodollar system or the path printed money takes during QE or QT.
The fact is that I just don’t care about how the bowels of the system works. I don’t need to care. All I need to know is that money creation as a method of “solving” recessions can’t continue in perpetuity: the dollar amounts necessary for bailouts become astronomical, too quickly, and inflation becomes a pressing issue. Then, as we are now, Central Bankers get stuck between an “inflation vs. recession” rock and hard place. It’s a flawed system that once exploited a loophole (money printing) to slap band-aids on problems. We then thought we could do it in perpetuity to keep ourselves and voters consistently comfortable by presenting the illusion that everything had done “back to normal” - and now we’re finally going to have to deal with very uncomfortable consequences of our actions.
How’s that for a book report from someone who didn’t actually read the book? And I didn’t even need to mention “swaps” or “interest rate futures” to fake sounding smart.
Putting aside what bureaucrats are saying about deposit insurance and Fed policy in the midst of the banking crisis we are having, underneath it all people seem to be forgetting that the economy has just tapped into a large pool of chaos and unrest in the form of 4% interest rates we’re supposedly using to fight inflation.
And just as was the case with Covid, the headlines today don’t seem to match the reality of what’s happening in markets. Are we to honestly believe that, in the face of a cascade of bank failures that has now encompassed Silicon Valley Bank and Credit Suisse, with names like Charles Schwab and Deutsche Bank also being tossed around, that a real “flight to safety” is people pouring their money into the Nasdaq QQQ ETF at 27x earnings? Because that’s what’s happening.
Of course this is simply the residual effect of too much liquidity in the system, behavioral incentives that have reversed free market poles over the last 30 years and a stock market that has been coddled, babied, micromanaged and manipulated to the point of no longer making any sense.
The further we stray off the path, the closer we get to something having to give.
Powell and Yellen
I think the key point I am trying to make today is that I strongly continue to believe we have not seen the last - or even the beginning, really - of the volatility we’re in store for as a result of rate hikes.
When there’s over $1 trillion still floating around in the crypto ecosystem and tech stocks are the “risk off” trade, you know we haven’t experienced even a modicum of fear or capitulation yet. It’s the same hubris and arrogance we had during QE infinity.
And we’ll keep this “plan” until, in the parlance of Mike Tyson, we are eventually “punched in the mouth” by something we didn’t see coming.
The question is: what is going to break, and when?
The answer I have for you today: who the hell knows?
We’re already starting to see a flight into gold and silver, probably as a hedge against the system and inflation at once, as well as a response to the idea that the Fed is likely to pause, then pivot, soon. In the last 6 months, gold is pushing a 20% rise:
This move in the metals has taken place before Jerome Powell has alluded to rate cuts.
In fact, last week he said that rate cuts were not a part of the Fed’s base case. As I have been saying for months, I still expect the market to tank at some point, which will then cause the Fed to hurriedly step in with rate cuts. Not only have we not seen a sell off yet, we haven’t even seen the suggestion of a sell off.
When I try to visualize the Fed’s priorities, based on their spineless action over the last couple decades, all I can think about is that they’re going to want to protect the price of stocks at any cost.
In other words, soaring inflation by more money printing is okay with them, as long as the nominal price of assets keeps going up. Rising nominal asset prices always seems to trump letting the economy crash for the Fed. Why? Because the former “solution” widens the inequality gap and protects those with assets (the rich), while the latter would actually contract the inequality gap and disproportionately harm those with assets (the rich).
In a scenario where the Fed lets the economy crash instead of surrendering to inflation, the rich would be most susceptible to taking real losses. And we can’t have that, can we?
Now say, instead, that the Fed tries to walk a thin line between inflation and recession. Something will still have to break, it may just not be as pronounced or as quick if the central bank commits to one of the other. And by “break” I don’t just mean the economy wrecking somewhere, I mean it showing up in the price of something…somewhere.
Take a look out there and you can find a case for pretty much any story you want to tell yourself. There’s analysts saying gold will go to $8,000, there’s analysts saying oil could go to $300, there’s analysts saying the Dow Jones will go to 50,000, there’s analysts saying copper is going to 20x and there’s analysts saying the bond market will crack up in the face of yield curve control.
All of a sudden my brutal honesty of admitting I don’t have a clue what’s going to happen next looks pretty good, right?
The point is that while everybody has a different take on what the specific malfunction is going to be, it all falls under the umbrella of agreeing there is going to be some major malfunction in prices somewhere. I’d love to tell you, Jim Simons-style, that I have some theoretical mathematic opinion on the situation, but the fact is, I’m just kind of sitting around, Eastwood-in-Gran-Torino-style, sipping a beer waiting for something to blow up.
The easy, broader point that I’m trying to make is that the complacency in the market we are witnessing currently is outrageous.
The market will do what it will - I can’t control that. But what I can control is how closely I am watching and paying attention. I truly believe we are in the calm before a very big storm in equity markets, so I’m focused acutely on day-to-day sentiment. There will come a time when “fear mongering” stops and I think the market will be on autopilot again. But that time isn’t now.
Every issue heralds the end of the dollar reserve system according to fear mongers https://t.co/cpq6MvCJ1J— Sara Eisen (@SaraEisen) March 26, 2023
In fact, someone should inform Sara Eisen and CNBC that the “fear mongering” has now made its way to CNN.
If the US dollar's global supremacy erodes, America will face a reckoning like none before.— Fareed Zakaria (@FareedZakaria) March 26, 2023
My take: pic.twitter.com/yxTz16bi3N
Meanwhile the blow up of Silicon Valley Bank and the ensuing swings in the market haven’t pushed volatility levels to any type of alarming level, especially when compared to the onset of the pandemic.
And let us not forget that, underneath it all, we still have to deal with the very real consequences of not dealing with consequences for the last several decades. Once again, it is time to take the medicine from our terrible monetary policy and that, in turn, is going to require a much larger response than it ever has from central banks.
Most of the quantitative tightening that the Federal Reserve has already performed has been put back on the central bank’s balance sheet already. Now, the gate will swing wildly in the other direction as the Fed’s balance sheet inevitably starts to grow once again.
I know I repeat myself a lot talking about this stuff, but it is so important to realize: the fed is still raising rates.
Again, for the millionth time, these rate hike (or cut) moves affect the economy with a lag. Silicon Valley Bank blowing up was the result of rate hikes that took place probably six months to a year ago.
That means we have six months to a year of rate hikes that haven’t been “processed” through the economy yet.
I would guess that there are blowups happening as you read this. I guarantee you there are compliance officers in the back room of a major hedge fund somewhere right now, examining the size and scope of a massive blowup that is about to take place (or has already), that nobody knows about yet.
But in time, all of these blowups and failures will be revealed. And then, it isn’t as though they’ve just magically worked their way out of the system and we can all go about our business. You then have all of the counterparties that need to be looked at and scrutinized carefully. On top of that, every new blowup chips away a little bit more at psychology and sentiment in the market, encouraging a risk off attitude and increasing the likelihood of another blowup. Yikes.
Again, I do think the Fed will ride to the rescue here, but only once the market smashes into something hard and immovable. If the stock market was a bowling ball dropped off the roof of a 100 story building and the Fed only stepped in to react after it smashed into the sidewalk, it would still be at about the 98th floor right now.
I’d love to hear your thoughts in the comments in this free discussion here about what part of the market you think is going to blow up first, where it will reflect the most in prices, and what you think the Fed’s “plan” is going forward.
QTR’s Disclaimer: I am not a guru or an expert. I am an idiot writing a blog and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning and generally trade like a degenerate psychopath. This is not a recommendation to buy or sell any stocks or securities or any asset class - just my opinions of me and my guests. I often lose money on positions I trade/invest in and I’m sure have lost more than I’ve made in my time in markets. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. Positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it three times because it’s that important.
US Dollar Index Higher on JOLTs Data
Hiring was unchanged at around 5.9m (3.7%); total separations, which, according to the Bureau of Labour Statistics (BLS), include quits, layoffs, discharges…
Hiring was unchanged at around 5.9m (3.7%); total separations, which, according to the Bureau of Labour Statistics (BLS), include quits, layoffs, discharges and other separations, was also little changed at 5.7m (3.6%). The quit rate came in at 3.6m and was almost the same as the previous month at 2.3%. The BLS noted that the number of quits increased in accommodation and food services, finance and insurance, as well as state and local government.
Markets were not totally reactive on the back of this release. However, it did initially guide major US equity indices lower and lift the US Dollar Index to fresh YTD pinnacles, pulling price action to within striking distance of resistance on the daily timeframe at 107.61. The release also sent the USD/JPY beyond the ¥150.00 handle for the first time since October 2022 and weighed on the EUR/USD further under monthly support at $1.0516.
As seen from the monthly and daily charts below, the US Dollar Index demonstrates room to continue exploring higher levels.
The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.
Crypto Ponzi scheme AirBit: All but one exec now sentenced
AirBit Club co-founder Dos Santos is now the last AirBit defendant not yet sentenced but is scheduled to learn his fate on Oct. 4, 2023.
AirBit Club co-founder Dos Santos is now the last AirBit defendant not yet sentenced but is scheduled to learn his fate on Oct. 4, 2023.
The United States District Court for the Southern District of New York is progressing with the sentencing procedure of key individuals behind the cryptocurrency Ponzi scheme AirBit Club.
The office of the U.S. attorney for New York on Oct. 3 announced the sentencing of three of the five surviving defendants in the AirBit case, including Scott Hughes, Cecilia Millan and Karina Chairez. The sentences came months after all three defendants pleaded guilty to money laundering and other charges in the AirBit case in early 2023.
Hughes, an attorney who allegedly laundered approximately $18 million in AirBit Club fraud proceeds, was sentenced to 18 months in prison. Millan, a senior-level promoter of AirBit Club, was sentenced to five years in prison. Chairez, another senior-level promoter of AirBit Club, was sentenced to one year and one day in prison.
Additionally, Hughes was sentenced to three years of supervised release. Millan and Chairez were also sentenced to three years and three months of supervised release, respectively.
The AirBit Club scheme was launched in late 2015 and was promoted as a “multi-level marketing club” in the cryptocurrency industry. The defendants provided promising presentations to trick investors into thinking that AirBit Club had guaranteed daily returns from crypto mining and trading. But instead of funding AirBit’s promoted crypto operations — which in fact had never been the case — $100 million of investors’ money went to the pockets of its founders and promoters.
Despite some users complaining about withdrawal delays and hidden fees in early 2016, the AirBit Club scheme managed to maintain its fraudulent activity until 2020.
Announcing the sentences, U.S. attorney Damian Williams stressed that Hughes, Millan and Chairez each played a key role in perpetuating the AirBit Club pyramid scheme.
“At the top-tier of promoters, Millan and Chairez for years aggressively solicited investments from and misled hardworking and unsophisticated investors to line their own pockets,” Williams said, adding:
“Today’s sentences send a message that anyone who facilitates cryptocurrency investment schemes — not only those at the very top of the pyramid — will face serious consequences for such crimes.
This comes after AirBit Club co-founder Pablo Rodriguez was sentenced to 12 years in prison in late September 2023. Dos Santos, another co-founder who has pleaded guilty to charges including wire fraud conspiracy, money laundering and bank fraud conspiracy, is scheduled to be sentenced on Oct. 4, 2023.
Santos will be the last defendant to be sentenced out of a total six defendants behind AirBit Club. Jackie Aguilar, who pled guilty in February 2023, reportedly passed away in May, a few weeks prior to sentencing.cryptocurrency blockchain crypto crypto
Here’s how Bitcoin investors can trade amid tension surrounding a US gov’t shutdown
Rumors of a U.S. government shutdown impact asset prices, including Bitcoin. Here’s how BTC options traders can capitalize on the 45 day funding deadline….
Rumors of a U.S. government shutdown impact asset prices, including Bitcoin. Here’s how BTC options traders can capitalize on the 45 day funding deadline.
Bitcoin’s (BTC) price bullish action toward $28,000 on Oct. 1 was partially fueled by the uncertainty regarding the United States debt limit. However, United States President Joe Biden signed the spending bill just hours before the Sept. 30 deadline, avoiding a government shutdown.
Investors now question whether the momentum remains favorable for cryptocurrencies, given that the worst-case political-economic scenario is no longer on the table. However, it is worth noting that this bill merely provides extra funding for the next 45 days, giving more time for the House and Senate to work on their funding plans for 2024.
At first glance, it might be tempting for investors to use futures contracts to go long on Bitcoin. However, there’s a significant risk of getting liquidated if the price suddenly drops, and it’s impossible to predict whether a successful budget discussion down the road will benefit cryptocurrencies.
With the current extension in place, lawmakers now need to find a solution before Nov. 17. According to Margaret Spellings, president and CEO of the Bipartisan Policy Center:
“We can’t continue postponing our fiscal health and negotiating on the brink of government shutdowns and debt defaults.”
There’s no doubt that, despite narrowly avoiding a crisis, the overall risk of an economic recession remains. The U.S. Federal Reserve is grappling with persistent inflation and rising energy prices, factors that have driven the S&P 500 to its lowest point in 110 days and pushed the 10-year Treasury yield to levels not seen since October 2007.
Additionally, oil prices have surged to $90, marking a 27.5% gain in just three months. This upward pressure on inflation is expected to further constrain economic activity.
On Sept. 27, Minneapolis Fed President Neel Kashkari expressed uncertainty about whether interest rates have been raised sufficiently to combat this price growth.
Bitcoin’s initial reaction does not guarantee bullish momentum
Amid all this turmoil, Bitcoin has increased in value, breaking through the $28,000 resistance on Oct. 2. This performance prompted investors to anticipate heightened volatility for the cryptocurrency as the upcoming debt ceiling decision approaches.
Professional traders will avoid directional risk, given the uncertain outcome of the political debate, and opt for the reverse (short) iron butterfly, a limited-risk, limited-profit trading strategy.
The prices mentioned were accurate as of Oct. 2, with Bitcoin trading at $28,326. All options listed expire on Oct. 27, but this strategy can also be adapted for different time frames. It’s essential to remember that options have a set expiry date, meaning that the price increase must occur during the defined period.
The recommended neutral-market strategy involves selling 5.4 contracts of $26,000 put options while simultaneously selling 5.4 call options with a $30,000 strike. To complete the trade, one should buy 5.8 contracts of $28,000 call options and an additional five contracts of $28,000 put options.
While a call option grants the buyer the right to acquire an asset, the contract seller assumes a potential negative exposure. To fully shield against market fluctuations, an investor must deposit 0.253 BTC (approximately $7,170), representing the maximum potential loss.
Conviction in volatility is essential, as the risk-reward is reversed
For this investor to profit, Bitcoin’s price must be below $26,630 on Oct. 27 (a decrease of 6%) or above $29,280 (an increase of 3.4%). In essence, the trade offers a potentially substantial profit zone, but losses are 90% higher than potential gains if Bitcoin remains stagnant.
The maximum payout is 0.133 BTC (roughly $3,770). However, if a trader believes that volatility is imminent, a 6% movement within 24 days appears achievable.
It’s important to note that investors have the option to reverse the operation before the options expire, preferably after a substantial Bitcoin price movement. To do this, they should repurchase the two options they had initially sold and sell the two options they had originally bought.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.sp 500 cryptocurrency bitcoin btc oil
Eli Lilly to buy radiopharma company Point Biopharma for $1.4B as PhIII readout looms
Bitcoin, Solana products lead first crypto investment inflow since mid-August
The RBA’s battle with inflation: Examining the latest data points
3 Key Relationships to Help Assess Market Direction
Major Asset Classes | September 2023 | Performance Review
New tool reveals how drugs affect men, women differently — and will make for safer medications
One-third of all CFTC crypto enforcement actions took place this year — Chairman Behnam
What This Unique MLP Merger Means for You
ICE (Black Knight) Mortgage Monitor: “Home Prices Set Yet Another Record in August”
Book describes Sam Bankman-Fried with little attention span or respect for appointments
Uncategorized22 hours ago
Eli Lilly to buy radiopharma company Point Biopharma for $1.4B as PhIII readout looms
International23 hours ago
Swiss franc slips as inflation falls
Uncategorized13 hours ago
Cardano stablecoin project gambled away investors’ money before rug: Report
International15 hours ago
Computer model predicts who needs lung cancer screening
International10 hours ago
New robot could help diagnose breast cancer early
Government20 hours ago
Nationwide test of Wireless Emergency Alert system could test people’s patience – or help rebuild public trust in the system
Uncategorized8 hours ago
SEC asks judge to reject Coinbase’s motion to dismiss lawsuit
International18 hours ago
Airlines are being hit by anti-greenwashing litigation – here’s what makes them perfect targets