Don't really understand this market, or maybe I do. Don't trust it. Too many crowded trades with big, fully-hedged players using OPM.
HFT isn't everything in the volume picture for the last 8 months, but it's a lot. Subtract HFT volume and the pool's full of sharks. They'll eat what they kill, and who wants to be shark bait?
The market doesn't match the economy: that's monetary policy, stimulus, carry trade, fiat money, derivatives all rolled up into a fantasy of economics and finance. Who knows how it will come out?
They made their big play and averted a crash. Now the're stuck where they are. If interest rates rise, look out. If they don't, look out. If the economy improves, hyperinflation danger; if it doesn't deflation danger. Sometime in the next year, maybe that "trigger" gets pulled: somewhere like Japan or the UK. Dubai wasn't big enough, but something will be.
Systemic risk? Still there. "Reforms"? Not good enough. Misallocation of capital, outside the economic virtuous circle? Huge. Off-book losses? Still not reconciled. Taxpayers? Being stiffed. Currencies? My grandfather used to call it "pissing in the soup".
Eventually there has to be an accounting.
2010 will be interesting.
Jim |
