[PopeGideon]

precipitous drop in PMs - generally linked to a CB somewhere dumping large quantities. Perhaps to raise cash.

[americandream]

$this->bbcode_second_pass_quote('JFT', '')$this->bbcode_second_pass_quote('americandream', '')$this->bbcode_second_pass_quote('JFT', '')$this->bbcode_second_pass_quote('smallpoxgirl', 'M')akes sense that oil prices are going to undulate. Price spike leads to demand reduction leads to transient price drop. I've been waiting for a sustained drop since $40 a barrel. Hasn't happened yet.

The precipitous drop in metals is pretty mysterious to me, as is the dramatic rebound in Lehman Brothers stock. It was down to about 20 on Monday and is now back up in the 40's.

[BigTex]

Here's a thought:

Smart money is getting out of PMs because they look overbought and it's profit taking. Smart money knows that bigger equity downers are coming, which will further depress PM prices short-term because investors will be selling everything. When PM prices are sucked down with the broad decline, the smart money will come back in and buy at the depressed prices before the PMs start back up while the rest of the equity market languishes. The small investor will miss out on the PM trough because they're too scared of the fact that everything seems to be tanking at once.

I can barely make out the outlines of this pattern, but this is what it looks like to me.

This pattern should repeat when the long term bond market explodes, probably later this year.

The good news is that when the long bond market corrects, there should be the opportunity to buy 30 year bonds paying 8-10%, which should be very good investments going forward.

[pup55]

$this->bbcode_second_pass_quote('', 'L')ight, sweet crude for April delivery fell $4.94 to settle at $104.48 a barrel on the New York Mercantile Exchange, the largest one-day price decline for a front-month oil contract since 1991

[BigTex]

The better "record" story from today is gold, which dropped $59 an ounce.

If it had dropped that much in 1972 it would have been free.

[threadbear]

$this->bbcode_second_pass_quote('BigTex', 'H')ere's a thought:

Smart money is getting out of PMs because they look overbought and it's profit taking. Smart money knows that bigger equity downers are coming, which will further depress PM prices short-term because investors will be selling everything. When PM prices are sucked down with the broad decline, the smart money will come back in and buy at the depressed prices before the PMs start back up while the rest of the equity market languishes. The small investor will miss out on the PM trough because they're too scared of the fact that everything seems to be tanking at once.

I can barely make out the outlines of this pattern, but this is what it looks like to me.

This pattern should repeat when the long term bond market explodes, probably later this year.

The good news is that when the long bond market corrects, there should be the opportunity to buy 30 year bonds paying 8-10%, which should be very good investments going forward.

[americandream]

$this->bbcode_second_pass_quote('BigTex', 'H')ere's a thought:

Smart money is getting out of PMs because they look overbought and it's profit taking. Smart money knows that bigger equity downers are coming, which will further depress PM prices short-term because investors will be selling everything. When PM prices are sucked down with the broad decline, the smart money will come back in and buy at the depressed prices before the PMs start back up while the rest of the equity market languishes. The small investor will miss out on the PM trough because they're too scared of the fact that everything seems to be tanking at once.

I can barely make out the outlines of this pattern, but this is what it looks like to me.

This pattern should repeat when the long term bond market explodes, probably later this year.

The good news is that when the long bond market corrects, there should be the opportunity to buy 30 year bonds paying 8-10%, which should be very good investments going forward.

[threadbear]

Where is the money coming from? The unending question.

I don't believe it is the Fed, nor do I believe it is Japanese housewives, at least not directly. I believe it is hedge funds - or maybe was will be more correct soon enough.

The hedge fund industry is the one which has shown explosive growth over the last 5 years and they have something close to $1.5 trillion under management. They don't hesitate to engage in risky behavior since its not their money. They are heavy users of leverage. Increasingly Pension funds and institutional investors have employed them to "juice" the returns. They can operate anywhere in the financial markets - derivatives to commodities and anywhere in between. They are not long term investors indeed they are the opposite of long term investment. They will exploit any advantage they can find including and certainly not limited to things like the yen carry trade

The concept used to be that their stealth and contrarianism allowed them to navigate the crevices in the markets and extract outsized returns. The effectiveness of that strategy is soon negated by the sheer volume of capital attempting to act in the same manner. It would tend to become much more herd like over time resulting in your "black box" type moves in the markets as they all switch on and pile in.
Yobob:
They have done for the stock markets in the post 2000 period what mutual funds did in the prior decade.

Its all great fun until someone gets their eye poked out. More and more eyes are getting poked of late, as we have witnessed various hedge funds blow up.

History rhymes. Much of the stock market crash in 1929 was blamed on the "investment trusts". They were a forerunner of today' mutual funds but without all those nasty regulations now present. They operated much more like today's hedge funds and then as is now were really the last hurrah before the lights went out.

http://indexcalls.com/forums/index.php? ... ntry340788

[Ferretlover]

Money coming from all those not-entered-on-the-balance-sheets items?

[americandream]

$this->bbcode_second_pass_quote('threadbear', 'W')here is the money coming from? The unending question.

I don't believe it is the Fed, nor do I believe it is Japanese housewives, at least not directly. I believe it is hedge funds - or maybe was will be more correct soon enough.

The hedge fund industry is the one which has shown explosive growth over the last 5 years and they have something close to $1.5 trillion under management. They don't hesitate to engage in risky behavior since its not their money. They are heavy users of leverage. Increasingly Pension funds and institutional investors have employed them to "juice" the returns. They can operate anywhere in the financial markets - derivatives to commodities and anywhere in between. They are not long term investors indeed they are the opposite of long term investment. They will exploit any advantage they can find including and certainly not limited to things like the yen carry trade

The concept used to be that their stealth and contrarianism allowed them to navigate the crevices in the markets and extract outsized returns. The effectiveness of that strategy is soon negated by the sheer volume of capital attempting to act in the same manner. It would tend to become much more herd like over time resulting in your "black box" type moves in the markets as they all switch on and pile in.
Yobob:
They have done for the stock markets in the post 2000 period what mutual funds did in the prior decade.

Its all great fun until someone gets their eye poked out. More and more eyes are getting poked of late, as we have witnessed various hedge funds blow up.

History rhymes. Much of the stock market crash in 1929 was blamed on the "investment trusts". They were a forerunner of today' mutual funds but without all those nasty regulations now present. They operated much more like today's hedge funds and then as is now were really the last hurrah before the lights went out.

http://indexcalls.com/forums/index.php? ... ntry340788

[BigTex]

$this->bbcode_second_pass_quote('americandream', '')$this->bbcode_second_pass_quote('BigTex', 'H')ere's a thought:

Smart money is getting out of PMs because they look overbought and it's profit taking. Smart money knows that bigger equity downers are coming, which will further depress PM prices short-term because investors will be selling everything. When PM prices are sucked down with the broad decline, the smart money will come back in and buy at the depressed prices before the PMs start back up while the rest of the equity market languishes. The small investor will miss out on the PM trough because they're too scared of the fact that everything seems to be tanking at once.

I can barely make out the outlines of this pattern, but this is what it looks like to me.

This pattern should repeat when the long term bond market explodes, probably later this year.

The good news is that when the long bond market corrects, there should be the opportunity to buy 30 year bonds paying 8-10%, which should be very good investments going forward.

[threadbear]

Scroll down to flick of Paul Volker weighing in with the amazing intellect ,Charlie Rose.

http://calculatedrisk.blogspot.com/

[anarky321]

$this->bbcode_second_pass_quote('Utopia', '')$this->bbcode_second_pass_quote('Heineken', '
')Makes no sense on the back of a .75-point interest-rate cut, does it?

[threadbear]

If commodities continue the plunge, you're right Anarky, the deflationist camp wins. It could easily be just a blip, though.

[anarky321]

fractional reserve banking + credit collapse = deflation

FRB + credit collapse + increased reserve ratios due to higher risk = serious...serious deflation (credit is decreased exponentially)

commodities are going to tank for the simple fact that noone will be buying

there's alot of speculative money in commodities right now but those positions will be unwound as the financial crisis progresses ever further

gold is going to break for the simple reason that in a deflationary environment there's no need to hold gold (except if your government is at risk of defaulting of course); gold has been pushed to nosebleeding heights by misinformation and misunderstanding; a huge percentage of the population actually buys the inflation prognosis with all seriousness - they see food prices and oil prices and gold prices shoot up and think *f*ck i need to get into gold to preserve my savings"

this is not so, the runup in oil prices and food prices is not inflationary in nature, it is simply a factor of supply and demand

the runup in housing prices was inflationary because it was fueled by expansion of money - cheap cheap credit, now that the credit is gone we're going to see it collapse on itself in a spectacular deflation

as the economy goes down the tubes commodity prices simply cannot be sustained due to vastly decreased demand for goods (its not that people dont want to buy...they simply cant)

the US consumer has been on a credit binge for the last 5 years

the party is over, and the hangover is going to be a b*tch

[dorlomin]

$this->bbcode_second_pass_quote('threadbear', 'S')croll down to flick of Paul Volker weighing in with the amazing intellect ,Charlie Rose.

http://calculatedrisk.blogspot.com/

[Pops]

As my neighbor says:

It sure is pretty but what do you do with it?

IOW put your money in things you can use and no one else can lose.

[Iaato]

$this->bbcode_second_pass_quote('anarky321', 'f')ractional reserve banking + credit collapse = deflation...

...this is not so, the runup in oil prices and food prices is not inflationary in nature, it is simply a factor of supply and demand

the runup in housing prices was inflationary because it was fueled by expansion of money - cheap cheap credit, now that the credit is gone we're going to see it collapse on itself in a spectacular deflation

as the economy goes down the tubes commodity prices simply cannot be sustained due to vastly decreased demand for goods (its not that people dont want to buy...they simply cant)

[threadbear]

Iatto and Anarky--This is where the rubber hits the road. If oil continues it's downward trajectory, we may have a better idea of how the oil is being priced; whether it's based purely on traditional economic theory, or if it is actually factoring in depleting oil stocks.

[DantesPeak]

It's funny that the drop in oil is characterized as huge drop when it is at the highest price in history, except for a few recent weeks.

Those hoping that 'speculators' leave the oil markets may get what they wish for, but those speculators may not be on the side of the market they think are.

If anyone has proof that speculators are on one side of the market or another, let's see it. We've discussed PO here for years with facts, figures, and data. Why should those talking about a speculative bubble get a free ride without presenting any rational evidence to support their position?

I suspect a lot of the drop these last two days is just a normal correction in a very powerful bull market.