I’ve given it a little more thought, and have put a few more pieces of the puzzle together over the past 24 hours.
I am now 100% certain that the Fed will yank the taper here very, very quickly and implement additional measures to “increase QE”.
Seeing that Japan’s GDP numbers have disappointed ( as well considering the ticking time bomb Fukushima in the backyard ) I am also 100% positive that the Nikkei will continue to fall, and that Abe will have no other choice but to “push print” – much sooner than later ( I don’t think as soon as tonight/tomorrows monetary policy meeting) – likely late March.
Another huge contributing factor has it that China looks less and less likely to implement the “proposed reforms” discussed at the 3rd Plenum Meeting some months ago so the “looming debt/credit crisis in China” may just as well continue on. A further “kicking of the can” if you will.
The EU Zone is a complete and total disaster as it has been, and as it will continue to be.
So…..all things considered, I find it highly unlikely that “ripping the band-aid” really stands a chance here, and imagine you can “once again” thank the good ol U.S Federal Reserve for screwing this up so badly – that at this point…there really is no choice. The rest of the planet has now become so dependent on the constant flow of “funny money” that markets don’t even appear to be concerned.
The data out of the U.S is terrible, housing will immediately collapse, blah blah blah….
The printing “must” continue. To bad it won’t work regardless.
Bond yields are gonna shrink back down. USD is going to make its final trip “to the basement”, stocks are gonna take one more shot to the moon before the entire falls into the ocean.
More as the week gets rolling…….
The Great Central Bank Circle Jerk Accelerates
What we’re witnessing isn’t policy—it’s desperation wrapped in economic jargon. The Fed’s about-face on tapering isn’t some calculated strategic pivot. It’s pure survival mode when you realize the patient can’t handle withdrawal from the money printing addiction you created.
Think about the timeline here. We went from “transitory inflation” to “we need to be aggressive” to “maybe we should pause” in less time than it takes most people to refinance their mortgage. That’s not confidence. That’s panic disguised as prudent policy adjustment.
Japan’s Kamikaze Economics
Abe’s got nowhere to run and he knows it. The GDP disappointment wasn’t some statistical anomaly—it was the inevitable result of trying to print your way out of demographic collapse and natural disasters. When your central bank owns more of your government debt than exists in some countries’ entire economies, you don’t have policy options. You have mathematical inevitabilities.
The Nikkei’s descent isn’t a correction. It’s gravity finally working on an asset class that’s been held aloft by monetary helium for over a decade. And when that crash accelerates, watch how fast “gradual policy normalization” becomes “emergency liquidity measures.” March feels optimistic—I’m thinking February.
China’s Debt Time Bomb Keeps Ticking
Beijing’s reform promises from the Plenum were always political theater. Real structural reform means admitting the growth model that lifted 400 million people out of poverty is fundamentally broken. No politician survives that admission, especially not when your legitimacy depends entirely on economic growth.
So instead we get more infrastructure projects to nowhere, more shadow banking expansion, and more can-kicking until physics intervenes. The credit expansion required to maintain their growth targets isn’t sustainable, but the political cost of contraction isn’t survivable. Classic policy trap.
Every month they delay real reform adds another zero to the eventual reckoning. But hey, that’s a problem for future Xi Jinping to solve, right?
The Dollar’s Final Death Rattle
Here’s where it gets interesting for us currency degenerates. USD weakness isn’t coming from strength elsewhere—it’s coming from the Fed’s complete capitulation to market pressure. When your entire monetary policy framework changes based on a few weeks of market volatility, you’re not the world’s reserve currency anymore. You’re just another political tool.
The housing collapse narrative is real, but it’s not the headline risk. The real risk is that markets finally figure out the Fed has zero credibility left. Once that perception shift happens, the dollar’s decline won’t be gradual. It’ll be violent.
Bond yields compressing back down isn’t bullish for anyone except the debt addicts who need cheap financing to survive. It’s a signal that growth expectations are evaporating faster than morning mist.
The Final Stock Market Sugar High
Equities are about to get their last hit of the good stuff before the dealer runs out of product. This final run higher won’t be based on fundamentals, earnings growth, or economic strength. It’ll be pure liquidity desperation—money fleeing everything else and piling into the only assets that have maintained the illusion of value.
But sugar highs don’t last. And when this one ends, there won’t be another central bank put waiting in the wings. The policy ammunition has been spent, the credibility has been shredded, and the market cycles are moving faster than the policy responses can keep up.
We’re watching the final act of a monetary experiment that was doomed from the start. The only question left is whether the landing is hard or catastrophic. My money’s on catastrophic, but then again, I’ve always been an optimist.
Kong, Thanks for the views. What would you or any readers suggest to short the housing market?
I’m going to poke around, and I’m sure a couple of the guys here will have suggestions.
Here is a link with some home builder etf’s if that is how you choose to go.
http://etf.about.com/od/industryetfs/a/Home-Builders-Etfs-For-The-Home-Construction-Industry.htm
My personal opinion is pretty similar to what Kong has said here. So while homies and related industries might take a short bath….I’m not sure they make good short. Reason being is that the industry already got destroyed 5 years ago and is constantly under the watchful eye of the fed. Intervention could come at any second with respect to housing and blow your ass outta the water.
Housing? – Ya I’m not touching it, as it’s not my area of expertise.
BOJ gonna cranker er upppppppp! Not this week……but at some point down the road.
And ya Kong re the BOJ. Stuff I read over the weekend says that they are generally happy with the level of inflation so I doubt they will do anything new this week. One article was on Reuters. If anybody cares I can find the link I am sure
I finally have a confirmed daily NEG fire in the DXY – will be tracking the weekly squeeze now which should when it fire take us down to test the $72-$74 range if it should fire neg as well…. PM’s pulling back a little as expected…. daily RSI in silver still very high @ 72 from 76 – would like/expect it to come down to 60/65 before we continue higher…. Same with diggers…. I expect a final pop tomorrow am & then have them dip down as well….. I think options exp could be interesting this week with pm’s maybe rising into exp…. Will be interesting to see how this all plays out with the DXY firing off NEG…. think stock could also surprise as data coming in was pretty poor last week….. there was no reason for it to be recovering….. looking at the reversal as a bull-trap currently….. expecting a surprise here as well…. stock & usd lower….. PM’s pulling-back to reset overbought levels & then continuing until the March-April TF for a top…
We will see how this plays out here…
Cheers Schmederling
Short USD/CAD here as well – layering these in ….. ok I am outta here….. excited about this week….
Wow brave Schmed.
USD being so oversold here – should move up a day er two.
It “should” but ya these days……gees – stuck in the mud for sure.
Call me mental if you must but I’m thinking of taking some more yen and usd nibbles later today
This thing is a freakin meat grinder……I’ve got no interest in sitting here all day watching this thing continue to grind.
Short AUD/JPY as well NZD/JPY look reasonable but “still” hanging around at level seen over the past 5 days.
USD continues to take hits….I’m not doing anything til I see something move with “some conviction”.
What’re you targeting if you don’t mind me asking Schmed?
I really like it long at 1.0850 (hoping to add there this week). So hopefully you’ll get a nice down move, and me a great level to add to my long.
As well Schmed and maybe you too JSkogs.
A list of some great Canadian miners?
I’d like to branch out and explore several more companies.
The only ones I have any real knowledge of are ATAC Resources, Rockhaven Resources and Strategic Metals Ltd. ATAC has quite a serious find under its belt. The three companies are related financially. These are juniors so they are pretty speculative but I do know ATAC will likely turn into something big. I’d obviously urge people to do their own homework first on them.
Thanks J – I’ll have a look!
On my end…moves in EXK , as well GPL have been great, and I believe will continue after we get a lil pullback here.
ANV on my radar in gold – as a big buy out in the works from Chinese fellows.
Total meat grinder for sure. USD pairs getting sold but into a very tight range that looks like it will resolve to the upside for USD and yen futures contract looking very much like continuation to the upside. Not acting yet as I agree with but definitely on watch because it could be a powerful move given the extremes
Hey Kong,
Price action as of late feels like a “flushing.” I see where your head is at long term but I am not there with you as yet…
i think the market is doing what it is supposed to do these last couple days, think tomorrow could be a big moving day… I haven’t lost faith in the USD and Yen yet : )
Cheers
Frankly – price action can come and kiss my big fuzzy ass!
Another day of indecision, another day of grind…just make a move already!
Patience pays in the business does it not Kong? : )
Pour me a shot yes, it’s too damn cold out here. Sigh-more snow overnight…
You know it Rob…and yes this time around certainly stretching it.
He he he….a shot needed indeed!
Today’s like watching paint dry,
There is ast least something that looks attractive in my opinion and I’m starting to build a long position in GBP/CHF and will continue to do if she heads down further, I see a good opportunity medium-term with a move back over 1.50 (but 1.50 is attractive to take some off the table as she hasn’t been able to break and hold that for a while now).