The Mystery of the Muddled Markets – Market Thoughts

If you are feeling confused, lost, disoriented, bewildered, fatigued and the like, rest assured that you are not alone. It is real and happening. The markets are muddled.

If you are feeling comfortable right now, a big thumbs up and clap on the back. You are worthy indeed for the Buffet league.

Mixed signals are pouring forth, mingled with schizophrenic headlines such as JP Morgan announcing that markets are running ahead of forecasts on 3 Jan, only to say something’s got to give 2 weeks later. As an trader, it is hip hip hooray, as an investor, it is w.t.f. ?

Even banks are contradicting each other with Citi saying short the SGD and JP Morgan saying long the SGD, against different baskets. I really do not know what to make of it.

Today is Martin Luther King Day in the U.S. and out flashed the Bloomberg quote of the day, “All men are caught in an inescapable network of mutuality.”~ Martin Luther King Jr.

The entire context of that quote lies in his powerful statement made in his letter while in jail.

Injustice anywhere is a threat to justice everywhere. We are caught in an inescapable network of mutuality, tied in a single garment of destiny.”

Mystery no more.
The Turkish lira hit a new historic low today, AUD falls to a 3 1/2 low, the EUR is under pressure and we are seeing breakouts in the USDMYR, USDCAD, USDCHF, USDPHP, USDRUB and more.
Stock markets around the world are looking to the US for a signal. Bankers, trying their hardest to drum up interest and trades, turning their backs on China without sounding pessimistic and raising banner for Eurozone and Japan without over committing themselves.
Meanwhile, none of them suggested we buy Gold or Silver and hence the rally we are seeing in those two. Nor were we advised to buy sovereign bonds over all the credits they are jamming down the throats of clients.
If Martin Luther was an entrepreneur and at that rate, he might have been the founder of Linked In or Facebook which, of course, he couldn’t with segregation then. But he chose a noble path that changed the US and the world along with it.
Today, the markets are tied in a single garment of destiny. The extent of the QE largesse has made some very rich and it will not be easy to take back what was borrowed.
We are heading into central banking season kicking off with the BoJ and Bank of Canada on 22nd Jan, the FOMC on the 29th, Yellen to take over from Bernanke on the 1st of Feb before the RBA on the 5th, the BOE and ECB on the 6th. All this happening in the midst of the big Chinese new year holidays.
IMM data suggests that market positions are being wound down into this rocky period and I would not be holding out for any miracles for reversals or hope too much for growth spurts after the string of dismal earnings we have seen. But we can probably expect empathy from the central banks, at least, which makes USD the magic word for now. And if we get tired of the boy who cried wolf too many times, we still have Gold.