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Risk parity fund unwind tipping point
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Risk parity fund unwind tipping point

  #31 (permalink)
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next crisis caused by negative rates?

I cannot find words appropriate to describe how this academic, who has zero experience in the real world, is incapable of comprehending that his Marxist style intervention is creating the next crisis.

Yes, negative interest rates lower deficits. But who will buy the negative debt besides central banks? Why borrow money at all and compete against the private sector? Interest rates are negative to punish savers for saving.
.........

Economists such as Rogoff are still basking in the ideas of Karl Marx that government can and should manipulate society to achieve the public policy dreams of those in power. Rogoff is not willing to even think about what he has done to the pension system and how we are looking at states like Illinois becoming broke.

In California, less than four years have passed since it fought to achieve a balanced budget by raising taxes to the highest level in the nation. Politicians cannot manage the economy and negative interest rates are destroying pensions. There is no long-term gain, for Rogoff cannot imagine the next step. The central banks are trapped and can never resell what they have bought under Quantitative Easing. We are rapidly approaching the point of no return or no bid. That is when government tries to sell its debt to pay off the last chunk and there is no bid.

Martin Armstrong Rages: Ken Rogoff Is "An Elitist Who Has No Respect For The People" | Zero Hedge

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  #32 (permalink)
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aquarian1 View Post
ears later.
China once touted has the boon to drive the world markets is now seen as a hard landing candidate - with shadow banking, zombie companies and ghost cities.
  • Is China the USA friend? -no
  • If China surprise devalues it's Yuan will it do it when it is the most or least opportune for the USA? - least.
  • Can China buy puts just before a surprise devaluation attack and profit from the knowledge? - for sure.
  • If equity speculators (eg the banks) see a rapid fall in equities and understand that the landscape has changed and they will have to pay some interest on margin accounts will they dump stocks or buy? - perhaps buy until they see that it has exceeded 10% and then reverse.

Each time in the last 3 yrs there has been a flash crash the Fed has stepped in at exactly a 10% fall (to the tick!).

Will they on the next one? -Probably.

Will it stop the cascade? perhaps initially ( but eventually it won't. IMO)


A good time for the Chinese to launch a yuan devaluation attack? -Perhaps over the holidays or just after Trump steps in.

Trump is coming in tomorrow.
That is Friday
and then the weekend

Prior Yuan devaluations were over the weekends with the shock hitting on Monday.

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  #33 (permalink)
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The gloves come off, in other words.

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  #34 (permalink)
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aquarian1 View Post
Trump is coming in tomorrow.
That is Friday
and then the weekend

Prior Yuan devaluations were over the weekends with the shock hitting on Monday.

Doesn't make sense that China or whoever is buying tons of puts. The VVIX is declining, suggesting options on the vix are cheap, with a low expected move in the vix, translating to a low expected move in the indices . At least, that's my very rudimentary understanding of it.

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  #35 (permalink)
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jackbravo View Post
Doesn't make sense that China or whoever is buying tons of puts. The VVIX is declining, suggesting options on the vix are cheap, with a low expected move in the vix, translating to a low expected move in the indices . At least, that's my very rudimentary understanding of it.

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Yes, well I don't follow and haven't tracked VVIX.
Do you know what the reading was prior to the last surprise devaluation?
(It took the markets down 10% in one day - prior to the US govt buying)

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  #36 (permalink)
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Yuan Devalued to Combat China Slowdown

China devalued the yuan in a move that rippled through global markets, as policy makers stepped up efforts to support exporters and boost the role of market pricing in Asiaís largest economy.

The central bank cut its daily reference rate by 1.9 percent, triggering the yuanís biggest one-day drop since China ended a dual-currency system in January 1994. The Peopleís Bank of China called the change a one-time adjustment and said its fixing will become more aligned with supply and demand.

source:
https://www.bloomberg.com/news/articles/2015-08-11/china-weakens-yuan-reference-rate-by-record-1-9-amid-slowdown
------
Yuan Sinks to Five-Year Low as PBOC Surprises With Weaker Fixing
Bloomberg News
Tuesday, January 05, 2016 7:46:25 PM Wednesday, January 06, 2016 10:27:43 AM

Offshore rate slides to record discount to Shanghai level
China sending out confusing policy signals, Macquarie says
source;
https://www.bloomberg.com/news/articles/2016-01-06/offshore-yuan-sinks-to-5-year-low-as-pboc-fixing-cut-for-7th-day


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  #37 (permalink)
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The power of black swans is in being black

In this thread I posted many different possible reasons and often by referencing others.

I don't know when a surprise fall will/would come.
I don't know what will be touted after the fact as the "reason"

When and avalanche comes down a hill people don't argue about which snowflake or sound caused it.
The avalanche people don't predict the day - only that there are dangerous avalanche conditions.

I'm a day-trader and my interest in the fall is an increase of down days.
The more often there are 20pt down moves the better.

I don't want to trade long side because of "flash crashes".
18 months after "fat-finger" Tuesday (complete with ridiculous rumours -- he typed a "Y" instead of a "T") they found the algo was programmed to sell without pause..

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Last edited by aquarian1; January 21st, 2017 at 02:30 PM.
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  #38 (permalink)
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supposedly brilliant people programming these algos.

Never saw a story of anyone being jailed though.

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  #39 (permalink)
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It's hard to figure out the exact timeline based on the articles. But here's what I found:

Looks like the first Yuan devaluation happened Tuesday, August 11, 2015 (well, Monday August 10 overnight in the US). VVix was around 81 on August 10, which is very low. Started rising, and was at 85 on Tuesday, 88 on Wednesday. The SPX crash didn't occur until the next week, August 20, 2015, and VVix had risen to over 100 by that time. VIX was close to 20. There was plenty of warning that people were buying puts on the market and options on the VIX.

If that information is correct, that article from ZH seems like a big conspiracy theory which does not align with the available data.

The above scenario is not what's happening today.

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Last edited by jackbravo; January 20th, 2017 at 03:33 PM.
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  #40 (permalink)
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There was plenty of VIX warning in August 2015, as there usually is.

The term structure flattens out. Not always but 97% of the time.

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