"All other things being equal"... is never true...
Been watching Greg Mannarino's vids recently... but, have not been getting a warm fuzzy from his apparent under-appreciation of the market risks lately...
Found this today, which does an excellent job of "fixing" that:
Mannarino Market Risk Indicator: I Fixed It!
But, its still missing something... because... when you can see the failure happening all around you... it makes no sense to ignore it because your "indicator" doesn't predict it ?
I'd say the problem is... credit is not the only source of market risks that stocks face. Facebook did not implode this week... because they ran into insurmountable financing risks they couldn't address ? There are a lot of zombie companies out there now, that are not profitable, and that couldn't survive without the "easy credit" we have now allowing them to borrow at negative cost... ? " Money for nothing and your equity for free" ?
He ends his analysis with a number... currently 2.2.%, he says... which is the 10 year rate at which "the odds increase that the wheels come off"...
In context of that vid... consider this recent "news flow" from Bloomberg as they discuss relevant topics... including advocacy for the 50 basis point "shock and awe" to "make it transitory again" ? I noted already that idea seems its flogged by guys who've cashed out 100% and gone short with leverage... But, the Fed, they say, is being a bit more circumspect... expect "tightening" to top out at 1.8% ? (But, in which metric ? And, controlling inflation at >6% or >12%... how, exactly ?)
Maybe that's all "in the ball park" as far as it goes ?
So, why did the market fail to tick up over the moving average resistance, this week... when all the market gurus fully expected that it would ?
So, still needed are metrics... or a "feel"... for the nature of the systemic risks that do exist but that are not being quantified currently...
And, of those, there are plenty to consider... but, as a entering argument... I will limit myself to the "numerical" and "financial" as much as I can. Don't take that to mean that "the Fed imposing the end of free markets" isn't considered relevant in my analysis ? Or that "the rule of law" being corrupted has no impact ? That having a moron for a President... and idiots running Congress... the WEF trying to take over the world, etc. [It is tempting to try coming up with a "stupidity index" metric... to try to measure its influence... perhaps bounding it by "you wouldn't believe this if it was in a cartoon or a TV show" ? ] Ignorance would be great to be able to quantify as it is a time aggregating risk factor... requiring the longer you do something without really knowing what you're doing the greater the odds of failure become ? A difficult thing for many to appreciate... is that those "leaders" doing things to us... Xi / Tedros and Fauci/Gates or Jamie Dimon and Treasury/Fed/IMF et al... Congress... the EU... Soros... Putin. None of them have much of a clue... they are intrinsically myopic, and not "experts"... rather than people who fail to fully appreciate how far beyond their limits they're operating when making decisions. The Peter Principle... is the reason the world is run by dicks. And, they introduce spectacular potential to induce error... while pretending they know what they're doing.
That's what happened in banking... the least capable took over [success in "taking over" not implying any ability in anything else]... and while that fact was forcibly recognized in 2008... it wasn't "corrected"... Rather, those who'd proven themselves incapable... doubled down on "trying again"...
And, elements of that error ARE quantifiable ?
MOPE... I address often. Basing policy on lies you tell in order to influence people's decision making by imposing error in their understanding... is an insanely stupid idea. It takes the "systemic risk" concepts above... and deliberately amplifies them... by infusing "metrics" and "understanding" both with "noise" at best... propaganda... and deliberate error... for which there is no limit.. and no capacity to contain its unknowable impacts... as it generates feedback loops into "legitimate" systems. It would required "keeping two sets of books"... on what's true and what's not... not just in the accounting ?
I've noted inflation would force MOPE to fail... and it appears we're observing more and more every day showing us that is true.... that "this is what failure looks like"... seen in context of the corruption of MOPE in the financial systems...
Two or three easily measured items appear there...
One, an element in the "timelines" in how long the Fed was... able is not the right word... to sustain the delusion in their now "sort of" failed attempts in the "transitory" fraud. But, note in the Bloomberg vid above... the true believers still think "its still transitory... but, from a higher base number than we thought before" ?
Would love to see that again... with the correct reaction... <talking head rolls eyes>...
An understanding of the nature of the timing elements derivative from that... would be a good thing to have...
Two, corrected data... for "inflation" itself... or "unemployment"... in reality vs the government flogged fake numbers ? How does the assumption vs the fact of inflationary or deflationary bias alter the value of the data... or the calculus done ?
Use Shadow Stats... vs the "official numbers"... "real" unemployment" vs the "corrected" numbers... ?
Use weighting factors derivative from those... ?
It doesn't really matter which one is "right"... as calculation of "potential variability" is more about the biases adopted than it is the specific errors in numbers ? Data presented in a range between the two divergent influences... is a more reasonable approximation of reality... if not in data facts... then in reality of bias ? "MOPE" and "Counter MOPE"... might both be wrong... but, the average more useful than either without the other ?
The Mannarino metrics, even modified... are still based on numbers that... other than the Golden Ratio... can't just be "assumed valid"... ?
Each of them... will have a "variability factor"... and a "bias"... which would not be hard to correct for... ?
Is the number used to calculate the aggregate impact of "the debt" a correct number ? Is the GDP number even remotely close to accurately portraying the reality of the systemic risks it should ameliorate with a solid number ?
Volatility... or, the metrics used in visualizing them... also have specific dependencies... Bollinger bands are exactly that... a visual measure of the volatility of an issue OVER TIME in a specific period... in relation to a specific variable in the number of standard deviations applied. Fit the curves to the performance... and they tell you what the uncontrolled variable is doing... to make the "fit" happen ?
Volatility VARIES over time... it is not an intrinsic feature of a system... that is independent of the drivers (and, the errors in the drivers imposing erratic elements) causing "deviation" OVER TIME PERIODS which are bounded... As inputs change... the time functions change... and the constraint or amplification of volatility in the aggregate changes... very often, even generally,. unpredictably... Welcome to chaos theory.
It's not that it can't be "roughly" calculated... it's only that to do that... you'd have to know what you're doing.
So, that "target" metric you've calculated... is not a fixed number.... but actually has a series risk induced Bollinger Band like envelopes around it... with endless variables altering it as it changes with time and its other relationships... producing some "sigma" factor in standard deviations likely to some probability... and, then... it can still generate "rouge waves" now and then if "things just align that way" ?
For the same reasons... calculating "when" the wheels are going to come off... is problematic... because, while time progresses with the calendar... the other variables can be "manually varied"... or "massaged"...
But, ending up with "ranges of potential"... and "periodicity dependencies" is still a useful exercise...
And, then... noting "this" or "that" occurring at particular times... seeing how it "plays"... and "how it plays out"... as you remain aloof as an observer with a finger on the pulse ?
The vid I linked... was spot on there... You can't accept "normalcy bias"... when "this ain't normal" is enveloping you and binding you... as it has TWICE now in the last three weeks ?
I did a lot of work in the last year trying to figure a lot of this stuff out...
I have separate things I track... unrelated to all the above... that are more "observational" and "behavioral" than "data based" calculations of financial risk potentials...
It DOES feel like "the end is near"... again... in much the way it did last year in February and March.
And, I think last year the market WOULD HAVE crashed without the Fed acting to prevent it...
What's different this year ? While everyone notes it as "the Fed is trapped"... and, that's true...[ which is not the same thing as "the Fed is powerless" ? ] what's different this time is... the power they do have... might not be the "right" super power for the problem that's being encountered ?
I think the above... the corrected Mannarino numbers... are useful as a guide... The Fed is trapped... but they have not yet lost control...
But, I do think FAR MORE caution is warranted, now, still, than the "number" itself might tend to indicate ?
I'd hedge that expectation appropriately...
But, multiple risks and multiple potentials... have "market crash" not the only problem you have to be prepared to deal with today... ? "Continuing decline without a crash"... is one possibility...
But a big "elephant in the room"... getting the "transitory" treatment still...
I do think the market is mostly ignoring inflation still... simply being unwilling to recognize the reality... and not knowing what to do with it... leaves us at "you can avoid reality... but you can't avoid the consequences of avoiding reality"... Inflation "catch up" in things other than oil IS going to happen... at some point. It has to. As, not allowing it to... actually makes MORE inflation... not less... as supply is throttled even more in consequence, while demand is not ?
Those expecting inducing a deflationary recession... throttling demand... will "solve" the problem of accelerating inflation... by imposing deflation ?
Morons. What that will give us... is an acceleration into a "crack up boom"... and hyperinflation... The money to drive it is already out there...so "throttling back" doesn't "stop" anything ? It's like not turning off the ignition on your car when filling at the gas station... and having your car catch on fire because of that. Once it's already on fire... turning the ignition off doesn't solve the problem ?
We're ALREADY in recession... and, you can't "grow your way out of it" with LESS ?
On current trend we're likely to get something entirely new this cycle, in fact... hyper-stagflation...
But, the "flation" part of that problem is by far the most easily actionable for investors ?
Hedge against "bad days in the market"...
Hedge against... "inflation continuing to accelerate"... |
