Think about it.
We’ve got issues facing the entire planet. War in Syria, the Fukushima spill in Japan, elections in Europe, and the never-ending “gong show” of blunders playing out in the U.S.
We’ve also got stock markets ( completely contained and unto themselves ) in emerging markets such as Brasil, Colombia, Indonesia,Europe, Canada and the list goes on.
The Dow Jones Industrial Average is composed of a rinky dink “30 companies in the U.S”! – 30 companies listed in the most rigged / manipulated index on the planet!! 30 companies! Seriously – Who gives a shit?!
Can you imagine anyone outside the U.S ( or more so anyone with any important global influence / significant contribution to their own local economy / position of strength ) during times of global “risk aversion” giving a rat’s ass about the plight of 30 piddly companies in a single (and completely rigged ) stock exchange in a single country so far in debt it goes broke ( and just raises it’s credit card limit ) every 6 months!?
Common!
Open you eyes. Pull up some new charts. Get your head out of the sand. Seriously.
It’s a “not knowing the forest from the trees” type thing.
An index composed of 30 American companies , and those companies likely being “the most influenced” by Fed intervention, and promoted in the media via 6 major companies OWNED BY THE SAME INVESTOR GROUP AS THE FED – is an index I can do without.
Ditch it. Pronto.
Story by F Kong at Google +
Why Smart Money Is Moving Beyond U.S. Market Manipulation
The Real Global Currency Players Don’t Dance to the Fed’s Tune
While retail traders obsess over SPY movements and hang on every Fed whisper, institutional money managers in Singapore, London, and Zurich are positioning themselves in currency markets that actually reflect economic reality. The Swiss National Bank holds massive EUR reserves. The Bank of Japan intervenes directly in USD/JPY when it hits their pain points. China’s PBOC manages the yuan within bands that make the Fed’s “free market” rhetoric look like amateur hour. These are the players moving billions based on actual economic fundamentals, not the theatrical performance of 30 dinosaur companies propped up by share buybacks and accounting gymnastics.
Take a look at the AUD/USD correlation with iron ore futures, or how the CAD moves with WTI crude. These relationships exist because Australia actually digs stuff out of the ground and Canada pumps oil. Real economies producing real goods create real currency movements. Meanwhile, the USD strength index gets goosed every time Apple announces another overpriced gadget or Microsoft shuffles some cloud computing numbers. It’s financial theater designed to keep you focused on the wrong metrics while smart money positions itself in commodity currencies and emerging market pairs where actual price discovery still happens.
Emerging Market Currencies: Where Real Risk-Reward Lives
The Brazilian real doesn’t give a damn about whether Netflix beats earnings expectations. The Indonesian rupiah moves on palm oil exports and manufacturing data. The Colombian peso responds to coffee futures and oil production numbers. These currencies trade on fundamentals that matter to real people in real economies, not the manipulated metrics of companies whose primary business model involves financial engineering and lobbying for favorable regulation.
When global risk sentiment actually shifts – and I mean real risk, not the manufactured volatility spikes designed to shake out weak hands – you’ll see it first in the carry trade unwinds. Watch how fast the yen strengthens when institutions need to cover their leveraged positions. Look at how quickly the Swiss franc becomes a safe haven when European banks start wobbling. These movements happen because currency markets are still too big and too global for any single central bank to completely control, unlike the pathetic puppet show we see in U.S. equity indices.
Central Bank Coordination: The New Market Reality
Here’s what the financial media won’t tell you: central bank coordination makes individual market movements largely irrelevant. When the Fed, ECB, BOJ, and PBOC decide they need liquidity, they flood all markets simultaneously. When they want to tighten, they coordinate rate policies across time zones. The old correlations between equity performance and currency strength have been systematically destroyed by intervention policies that make individual market analysis pointless.
This is why focusing on the Dow is not just useless – it’s counterproductive. You’re analyzing the least important piece of a coordinated global monetary policy puzzle. The EUR/USD doesn’t move because European stocks outperform American stocks. It moves because the ECB and Fed are playing a coordinated game of monetary policy ping-pong designed to manage global liquidity flows. Understanding this coordination is the difference between trading with the smart money and getting crushed by policy shifts you never saw coming.
Trading the Truth: Where to Focus Your Analysis
Stop watching CNBC’s breathless coverage of earnings beats and start monitoring central bank balance sheets. Track the real money flows through currency futures positioning data. Watch how sovereign wealth funds allocate between USD, EUR, and CNY denominated assets. These are the metrics that drive actual market movements, not whether some bloated American corporation managed to engineer another quarter of artificial growth.
Focus on currency pairs that reflect actual economic relationships. NZD/USD moves with dairy exports and Chinese demand. AUD/JPY reflects the carry trade appetite and commodity flows to Asia. EUR/GBP shows you the real health of European integration versus British independence. These pairs move on economic reality, not the manufactured drama of whether Tesla can deliver enough cars to justify its insane valuation.
The global economy is bigger than America’s rigged casino. Trade accordingly.
Your post is somewhat timely and ya I agree. The Dow does not provide much perspective. I don’t even have it on my radar.
I do however have a question that is somewhat related. Do you know of any sites that publish regular data on currency correlations to other markets? Example: USDJPY has of late (1 yr maybe?) been positively correlated to the SPX to some degree. Probably because of pump money. These correlations would change over varying time frames and come and go. It would be nice to be able to “watch” these shifts. Do you know of any sites that publish this kind of data with rolling averages and varying time frames? Thanks!
I think I’m the only show in town J man.
These correlations and their “never ending” flipping and flopping contribute (to some degree) to the holy grail of trading!
I can’t think of a better ( and more creative ) way as to get this info – than sifting through the general day to day “rants” here at F Kong.
He he he….you’re on it Jskogs. I assume you do well at most things you do as …you’re certainly “barkin up the right tree”.
Unfortunately….I can’t suggest a single other flippin site.
Go figure eh?
Hi Kong, in the spirit of good-natured debated (which I’m assuming was your intent), and with no offense intended, I’ll provide a response. First, I think your characterization that companies like JP Morgan, General Electric, Exxon, McDonald’s, Coca-Cola, IBM, Wal-Mart, Boeing, Exxon Mobil, JP Morgan, P&G, etc. are “rinky dink” simply isn’t reasonable (even allowing you some room for hyperbole). They are among the LARGEST companies in the ENTIRE WORLD. According to Forbes, JPM is 3, GE is 4, XOM is 5, WMT is 15, etc. Almost all are top 100. Second, your suggestion that these are “U.S. companies” really isn’t accurate to the extent you mean to suggest that these companies don’t impact the world economy or get revenue from outside the U.S. Many of the DJX companies get a significant percentage of their revenue from OUS and employ workers all over the world. Try to find a country where there’s no McDonald’s, Coca Cola, Boeing airplanes, or GE priducts. I hear down in Mexico they like their Coca-Cola made with real sugar instead of corn syrup (a store nearby carries it). DJX companies get lots of revenue from foreign business. You don’t think they trade FX to hedge?
As to why you might watch the DJX, it may be totally irrelevant to your trading style and so a waste of time for you personally. But it sheds light on the risk appetite of the market. If big money is piling into the DJX (which is filled with divvy payers) and selling the RUT and NDX or vice versa, that tells you something. I certainly don’t watch it tick-by-tick, but it’s information that goes into the “weight of the evidence.” Though I trade equity options and the ES as well as spot FX.
And Columbia? Seriously? Maybe someday, but not today. In any event, you don’t think the banana republics or China manipulate things?
Glad we can chat about these things ’cause my wife don’t wanna hear about it 🙂 Always a pleasure.
Great stuff Andrew – and you’ve got it……of course these companies do indeed have massive global signatures, and contribute to economies world wide. I was just (raising a little shit no doubt) suggesting that “focus” on these “30” is a tad “narrow” when considering global risk / risk off.
An index can be “perceived”as doing fine – while companies like IBM have essentially been tanking since May. Then of course CAT, KO (hows that for a slide since May?) and a host of others as well – bad shape short of the divy yes.
If I didn’t know better “sell in May” actually did happen! Short of the Fed pump via a select few – with the attempt to keep the index afloat.
Consumer staples will always be exactly that so…..JNJ survives.
We’ve already snipped it down to 20 some…..and even of those…AA has been roasted, JPM is now facing prison / silver manipulation etc..
Short of exactly what you’ve suggested ( the massive “global profits” made by these multinationals ) it looks pretty bleak to me. Yet the media has “markets near all time highs”!
Not a fan of Colombia? ( Colombia with an “o” )
Huh. The two years I spent living in Bogota just blocks from the stock towers ( oh yes…..please google some images of Bogota – it’s a massive city…..with running water / cemement streets n all!) had my head spinning!
The number of 6″ super models dressed to the nines, over the top restaurants and lavish lifestyle had even me feel like a small fish! Talk about money in the streets! The economy has been on fire!
GXG has done very well, as Colombia serves as the business hub of S. America.
Can you name me 3 companies on the exchange there? check out their stock charts! on some weekly charts! wow!
Thanks Kong. Nothing against Colombia. 6′ supermodels, beautiful beaches, good coffee, nice cigars and rum … hmm … sounds good … I’d be up for a trip. I don’t trade any Colombian companies and I must admit I’m not familiar with any I saw on the list of ADR’s traded on U.S. exchanges. I took a look at GXG. I focus only on stocks with liquid options. Liquidity is what attracted me to the FX markets.
Again….great stuff Andrew…..he he he….and ya….if the wife’s not to “into it” – what’s a guy to do!?
I’m a tad “bias” as I’m sure it comes thru in the writing….and I need to work on that. Spending as much time as I have abroad, my view “from the outside looking in” has me a touch “out of touch” – compared to you and where you’re at.
I appreciate your input here, and our exchange.
I hope you have a great weekend!
For your own interests…and everyone else reading.
I strongly suggest researching Colombia. Please do a couple simple “image searches for Bogota” as I’m quite certain you’ll be suprised.
It’s unreal! The coffe shops are like city blocks! The restuarants are lined up out the door with suits n ties / biz types galore. Over the top really.
I’m out…..later all!
Actually, your view from “outside” is what’s interesting to me.