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The Argentina Model


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As usual, the collapse in the homebuilder stocks set off alarms in The Matrix Control Room, and the Kudlow-drafted +300,000 new jobs datapoint to be delivered by the forever gracious Elaine "Mama San" Chao today on CNBS had to be shelved.

 

Instead, they issued a weak jobs report in order to prop the T-Bones and light a match to the $HGX. Poor Elaine was stuffed and shuffled aside.

 

What happened next created a flurry of volatility.

 

The T-Bone Yield Chasers gaming the J-Lo Saucer Bottom formation were pushed off a cliff and the yields plummeted, undoubtedly creating some havoc at the JPM Derivatives desk.

 

In the Overnights, crude futures busted through $34 and started a fire in the Energy Complex. That was good enough to launch the Oil Service Index today for about 4%.

 

The stock futures tanked, but as soon as the market opened, the dippers showed up at the same time the Program Robots did and a Vertical Meltup ensued on the Nasdaq, led by panic buying in CSCO, JNPR, and KLAC.

 

Silver broke out to new highs, launching Pan American Silver (PAAS) for another 10% to new highs on record volume.

 

Gold was rather subdued, except the unreal short squeeze on DROOY rocketing up another 7%.

 

In a nutshell, it appears that The Matrix Architect has been studying Argentina's Merval index, and figured that rapid currency debasement could launch the Dow Jokes by 600% or so. Then this item hit the tape:

 

REUTERS) WHITE HOUSE'S RICE SAYS U.S. CLOSELY MONITORING ARGENTINA, IMF TALKS

 

What is Condi doing in Argentina??

 

Machinehead's Translation:

 

We are closely monitoring Argentina's fiscal irresponsibility as we are using it as our model for the continuation of our mania in equities.....

 

We will monetize all debt before our time...

 

Argentina MERVAL index: 1,194.52 + 36.90 -- completing a six-bagger gain from its Dec. 2001 low under 200.

 

GWB to Condi: "Devaluation can do that???"

 

So there you have it. The Fed Matrix is using the Argentina Model.

 

What is amazing is that it is actually succeeding. Chile announced a surprise 100 b.p. rate cut last night. Only a matter of time before Euroland joins the party, where more and more International Currencies are thrown in as FeedStock for the Atomic Particle Accelerator to join the ocean of U.S. Dollars being round tripped around the globe.

 

Just part of the program. Everything is managed and massaged by The Fed. All stock market declines are immediately arrested and backstopped by the implied guarantee of the U.S. Treasury Dept. All liquidity problems are instantly cured with Repo Blasts, Money Printing, Monetization, or whatever. And the foreigners financing our deficits are more than happy to oblige.

 

AG's Nightmare commented:

 

Without foreigners subsidizing our debt markets we'd have already had a bond implosion. What would be a real killer is if bonds tanked from here and metals took off. It would be the ultimate bird to Al Green and also leave a lot of foreigners' twig and berries swinging in the breeze.

 

I'm sick of the Fed and Wall Street micro managing every economic piece of news.

 

I expect mega bullhorning on Faux Bulls and Bulls and George Washingtons show along with delusional Barrons articles by glue sniffing economists...

 

So much Financial Exotica is getting ramped northbound, with credit spreads collapsing and liquidity aplenty.

 

However, I noticed that the Yield Curve seesawed today, with T-Bones rallying and the Fed Funds Futures exploding at the same time.

 

How will that affect the SpreadTraders?? Maybe too early to tell yet. We'll have to see where the S & P credit spreads closed at today.

 

A huge amount of money has been made the last 12 months. So far, most of it is on paper. It doesn't count until its cashed in. And it really doesn't count until its converted into gold or silver.

 

Notice how nobody has his eye on the exit doors. I wonder how so many "profiteers" are going to be able to simultaneously "take profits"?

 

I found this posted somewhere:

 

The [1990s] Replay Scenario implies that irrational exuberance could make a comeback over the next few years. Indeed, some investors see it already in the high valuation multiples for tech stocks. I recently discussed my Replay Scenario with a European investor. He is normally reserved. However, I could see that he was becoming increasingly agitated. He pounded the table and declared, ?Zo, Dr. Yardeni, have we learned nothing at all from the speculative excesses of the 1990s??

 

I replied: ?That depends.? He countered: ?That depends on what?? I answered: ?It depends on whether we all get out at the top this time!??

 

That, my friends, is the real question. Some Dow Jokes gamers decided to offload this afternoon.

 

Next week, we have Options Expiration and the official start of Yearnings Season, with the usual Headliner Results from GE, INTC and YHOO.

 

As usual, trillions of market cap will be at stake, based on the utterance of the CEO's and whether or not they can "beat by a penny".

 

Next week is guaranteed to be ULTRA HIGH STRESS for all Riverboaters on margin, especially those gaming the Semi's, Internuts, and the Nutworkers.

 

Another quote from Machinehead:

 

This is the dark side, when 50% of volume is program trading.

 

One lemming computer starts selling, and all the rest follow it over the cliff.

 

1987 Portfolio Insurance anyone???

 

..................................

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someone noted the US peso index reached the oct. '87 levels today...

 

PM's, oil and most of the REAL assets continue to skyrocket...

 

 

I remember being a senior in high school, sitting in economics class, on that fateful day in october of 1987...of course, no CRAPVISION back then, but word had spread to my professor and we got a real-time lesson.

 

bring it on...

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"One lemming computer starts selling, and all the rest follow it over the cliff. "

 

 

What if the computers have been reprogrammed not to sell? Or only sell a little bit then sit on their hands?

 

They're all playing a big game of chicken, staring each other down. Who will blink first? I bet trading computers don't even blink these days, they just buy all dips.

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Mark once quoted extensively from a book about the LTCM (Long Term Capital Management) debacle in 1998. Easy Al stepped in, because LTCM's vast leveraged bets were moving against them. Liquidating those bad bets overnight could have 'seized up' the markets, because there just weren't enough bids to unload into.

 

Six years later, Al Greenstool is the world's largest hedge fund operator. He's running a $1 trillion 'LTCM custody account' pool. He's put his clients -- Asian central banks, mostly -- into massive leveraged-long bets on T-bones and the dollar.

 

Meanwhile, Al -- like many of your cannier boiler-room operators -- is an insider who's doing constant secondary offerings of dollars himself, while his partner and sidekick Snowman does the same with the T-bones. What a scam! You double-dippers crack me up!

 

Just one little fly in the ointment -- Mike Milken, are you with me here? -- assume a 20% haircut on the dollar's drop, and a potential 10% on the bonds, and you're looking at $300 billion of losses. That's 30% of Japan's annual budget, to highlight one of Al's LTCM hedge fund clients. No client has that kind of capital on hand, in cash.

 

If the nervous clients bolt, Al's hedge fund cannot possibly liquidate without seizing up the markets. But ... who's gonna rescue the rescuers?

 

:o

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