Money Knockers

By: John Mackenzie | Wed, Oct 6, 2004
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Yesterday's action was telling; the past few weeks have been important to shaping the balance of 2004's outcome. The Hedge Fund Economy, courtesy of Alan Greenspan and Co. has made extraordinary efforts to hang on like stink, toxic mustard gas, the New World Financial Odor.

I can find NO aspect of the Financial Markets that even begin to approach financial sense, let alone a tattered shred of anything resembling common sense. This makes perfect sense given the nature of the environment, whereby returns are all that matters to the majority of those gunning the broad markets (aka casinos).

In this all or nothing landscape, human nature will certainly follow its well worn path of greed and fear as the key drivers to results. The Credit Cycle will continue until it cannot. It is important to note, they all ended in collapse as credit contracts.

We are likely seeing the beginning of THE End for the Broad Markets for a very long time.

Underestimating the complete and total dislocation to PRICE : VALUE at this juncture may end up being very costly... Price action is all that matters to those gaming pay for performance, it's not their money... they don't really care whether the tool is broken when it's over, only that it allowed them to build a payday.

GOLD yesterday was telling, the roundtrips in that sector on volume showed the willingness to press positions. We are witnessing the formative stages of a potentially HUGE squeeze in this sector as the COT's show Commercials very short, as they have been since the $250s. A quick series of inflows into this sector are going to create a very large problem for the PM Shorts.

Lindsay's Three Peaks and a Domed House were intended to provide consideration for the potential emotional "blow off" heading our way...

The reasons are quite simple.

It's year end and without a significant gaming of the broad equities markets, the Hedge Fund Economy is going to end up with a very bleak 2004.

Consider the following: it is not their money. Players chase returns for income, funds are sitting on cash as bears once again convince themselves the broads are about to croak, once again, for good.

Short positions are piled on, MauiBear's still waiting for that perfect set of Put waves... He'll catch them one day, but will he be able to collect?

The dollar can be devalued, per the balance of the G9's request; too many dollars are currently being absorbed for resources in trade, so expect this devaluation to pick up steam shortly after the most recent short additions are left beaten again.

Our FRN confetti is finding its way into "preparing for the future shocks" to come. What these entail is difficult to ascertain beyond history's lessons, but again, they are a fairly accurate guide, human nature being what it is.

The globe is rapidly catching on to just how badly things have gone here in the US of A.

Fannie Mae, for it's august implosion and now clear Governmental management under the auspices of the United States Treasury / FED... has survived yet another stake in its vampire heart... for now.

The Fed appears to have no problem continuing an environment whereby Credit Spigots remain wide open.

The flurry of locks on ARM's has yet to hit, and convexity in bonds will certainly have an undesired effect as swaps begin to invert. The dislocation due to the short end manifesting its real rate of return in this deeply inflationary environment will have a profound effect.

Keeping pace with the decline in real purchasing power is going to be difficult, if not impossible without honest, real and tangible money... Precious Metals.

Real wages will continue to decline, as they have for years.

"Price" will begin to rise and accelerate as the spillover from Credit Facilities / Aggregates leave the first abuser's hands and spread like wildfire, all the while structural Deflationary imbalances in Capital, Labor and Exchange will take hold.

This is the worst of all possible environments.

Panic should begin to take hold shortly and by June - August of 2005 it will be acknowledged by most everyone as to precisely where we are heading.

It has already begun, right on time and although we may not have the "event(s)" in this August's light of day. We had many critical events during that month that have shaped what will transpire for the next 15 months.

The domed house appears to be underway.

Impossible, you say?

"We're heading off the cliff now!" instead?

No doubt, but human behavior is the one constant.

I suspect the unreality is just beginning its blow off disconnect.

We don't have much time left to prepare for the coming generational storms; this will become increasingly clear, "TIME IS MONEY"... the more you waste, the more you will pay... next generation is now, and it's regressive in every way but price until it ceases to function under it's centrally planned paradigm.

By my way of observation, by December of 2005 the nightmare of reality will be in full swing. Best to prepare now and remember how we ended up in this mess.


 

Author: John Mackenzie

John Mackenzie

John Mackenzie manages private capital.

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