Royal Bank of Scotland to investors: 'Sell everything'

Ragu,

You're like oop on the football threads.

 

There was a logical reason for that intraday move. It was a classic short squeeze. They can be way more violent than that was. That move was stunning because it happened very quickly -- in a matter of less than an hour. It also didn't hold into the close.

It isn't real buying. It's just a break in the action. Things get oversold over a very short time period, some of the people piling in get a reality check that it is dangerous to all move to one side of the boat at once. ... and so things push back in the other direction. Unfortunately, it probably won't even buy a few days. U.S. equity futures are down early, and Mario Draghi comes out to flap his gums after a rate decision in 35 minutes are so. They aren't expected to do anything, so the potential for him to freak everyone out isn't as great as it was last time. He could even spur a short-term rally. Who knows? It's sad that markets have spent the last several years trading on news out of central banks about what their plan to manipulate the debt markets are, rather than on fundamentals. The fundamentals have been shitty -- the world is in a malaise. Yet, stock prices, particularly in the U.S., ran up like we were in a boom, on the back of phony liquidity being pumped into the financial system. It was unsustainable. The Federal Reserve stepped back a bit when they pulled back on the last round of quantititive easing and then started yapping about raising rates. ... and this is what you get. The economy they have saddled us with, can't even survive rates that are less than 1/2 of 1 percent. Economic growth in the U.S. is anemic at best, and more likely contracting. If they step back in with more asset buying or by reversing on rates or some other type of reckless "stimulus," they will make the crisis sometime in the future yet worse. Unfortunately, that is probably what will happen, though. It has been the script -- they are idiots. They sold out our future, and either we pay the price or we buy a bit of time and create a much worse price. Even if they buy time, people will continue to suffer -- underemployed, running up debt. They have put us in a permanent malaise. I wish they'd step aside and let markets correct the mess they made (it will be violent), but it is the only way we can get healthy again.

 

You'd have to read investment advice into anything I have posted. In fact, the only time I have ever posted investment advice on here, it has been on threads where people ask what to do with a 401(K), for example, and I suggest an asset allocation mix of some sort that will allow you to sleep at night, yet grow. ... and to use low-expense index funds rather than trying to find someone who can outperform markets. I have posted that multiple times on here.

The rest is people reading my posts and putting "advice" into my mouth.

I trade for a living. I do very nicely at it. I make good money doing something the vast majority of people wash out doing. Believe me or don't. It doesn't matter much. I don't trade the way I know most people on here think I do. Again, it doesn't matter. But if I write, "The U.S. dollar is way overvalued," it doesn't mean my trading account is loaded up short on dollars. For what it is worth, the dollar is in an irrational bubble -- based on the Federal Reserve having fucked up its game. It's why I keep a great deal of savings (money I earned trading) in gold (ha ha, he wrote gold!) rather than dollars (even if I hedge it by owning it in Japanese yen or euros, which have been the weaker currencies in the rotating game of currency wars).

Trading is not investing. Most people on here won't get that. I don't want to keep trying to explain. So I just do my posts. Read them or don't.

The only investing I do is toward my retirement. All things being equal, I don't want to be trying to time markets. Yet, me and Ms. Ragu have been sitting in 100 percent cash for more than a year -- I have seen a bubble brewing for the last 5 years of the currency wars, and it got to the point where I saw way more downside risk than any potential upside. I am certain I have told multiple people on this board that in messages. DQ may be one. Our investments (which were a mix of asset classes) are down more than 10 percent since then. I think it there will be a great buying opportunity ahead. We are not even close to it. The Federal Reserve might blink and reinflate the bubble in the short term and markets may rally again on it, but it will still be a phony liquidity-induced bubble.

 

That's good. If you don't have the time horizon for risk, you shouldn't be taking it.

What compounds it now is that the risk equation is terribly skewed due to central bank manipulation. They have pushed everyone into VERY risky behavior.

It has manifested itself in a stock market run up, but it goes way beyond that. The amount of debt and leverage out there is dangerous. Corporate debt (and it was not priced properly given the actual risk in an unmanipulated world), sovereign debt (the U.S. is the worst with our debt levels and it isn't being priced into the dollar yet, the way it has gotten priced into Europe over the last few years) and consumer debt (the auto loan market, for example, got insane; we created a trillion dollar student loan bubble) levels are through the roof -- worldwide. Either they can manipulate our debt markets to make it "risk free" to lend forever. ... or they created credit-induced bubbles all over the place, and there is going to have to be a massive deleveraging, along with the crisis and pain that come with it.

Even "safe" assets are no longer what people think. Here is an example. With the stock market sell off over the last few months, there is some money that has needed a new home. So even with the Federal Reserve having primed everyone for rate normalization, and even raising 1/4 of a point in December, the yield on the 10 year is down. And bond prices are marginally up. That will draw even more money. And contribute to THAT bubble.

I look at a risk equation -- and a sub 2 percent yield on a 10-year treasury without a world of currency wars (and Federal Reserve manipulation of rates through quantitative easing and suppressing the overnight rate) does not price in in the inherent risk of a country that is massively in debt and keeps running up more and more debt. Even with the pass the U.S. gets for being the most stable place in the world, take away the Federal Reserve manipulating rates, what do you think a MARKET-BASED rate on the 10 year would be? If it is much higher than sub 2 percent. ... and you pile into "safe" U.S. treasuries, you are betting that the Federal Reserve can price fix our debt markets forever and create risk-free debt.

 

Ha. As I was posting that Mario Draghi flapped his gums. He intimated that the world isn't so great (ya think?). ... and hinted at even easier monetary policy coming up from the ECB. Markets are loving it! He is going to fill up the punch bowl. Let's all get drunk some more.

This is what markets have been reduced to. Not fundamentals. Not buyers and sellers figuring out risk commensurate with conditions and discovering a price. Nope. Hints from technocrats at what kind about what kind of manipulation is coming. Mind you, last time he did his "whatever it takes" promise, he underdelivered and markets freaked out. But today, maybe the promise of a renewed drug fix for the addicts will be "good news."