How not to inspire confidence in a Central Bank.

This statement would be an excellent exhibit for historians of the future.  Of course, if time = money...

*BUNDESBANK'S DOMBRET SAYS CENTRAL BANKS CAN ONLY BUY TIME

Collateral.

It seems the collateral (and liquidity) questions are being partially answered today.  Again, its not time for a major reprisal.  Bonds will be fine once the equity rotation begins to wane.

The Widowmaker...

...strikes again.  Tough to see that one coming.

Shhh...

...you hear that? (Silence).  That is the sound of nobody caring.

The U.S.’s AA+ credit rating outlook was increased to stable from negative by Standard & Poor’s, based on receding fiscal risks, less than two years after the company stripped the world’s largest economy of its top ranking.

The U.S. has a less than one-in-three likelihood of a downgrade in the “near term” with the revision, S&P said today in a statement. The New York-based company said it sees “tentative improvements,” such as the deal politicians reached to resolve what became known as the fiscal cliff and through spending cuts in the Budget Control Act of 2011.

Risk on...

...Risk off.

The Karate Kid is a somewhat heartwarming (if still bad) rendition of a revenge story***.  Young spindly kid gets beat up by bully.  Kid takes Karate lessons from Okinawan Master.  Kid defeats bully in a tournament.  Bully graciously accepts defeat for some reason.   At this time in American culture (1984) Karate and Japanese martial arts held massive sway over young impressionable males such as yours truly.

This was largely due to the work of the great Sho Kosugi, whose myriad ridiculous "Ninja" movies (Enter the Ninja, Revenge of the Ninja, Pray for Death, etc.) convinced us all that Japanese martial arts, as opposed to, say, Boxing, was the way to go.  This marketing effort gave "The Karate Kid" credibility...just train for a couple of months and you too could defeat a physically superior opponent.  Forget studying other styles of combat and engaging in intense physical training for several years...just start washing fences and floors and voila!, you had the basics down and were instantly proficient in a street-level physical confrontation.

Of course, the entire genre was instantly destroyed by the abomination known as "Gymkata".  When adolescent men see a movie where the protagonist is defeating a mob armed with spears by performing pommel horse maneuvers, well, to put that into the modern vernacular, the Shark was truly jumped.

The point being marketing and media in the financial markets tend to overly simplify something incredibly complex.  There are no rules like "risk on, risk off" that work in the real world.

It would seem that every time bonds or stocks move 1%, pundits begin talking about "risk on" and "risk off" positions that would leave naive observers to believe these defensive positions somehow block losses.

Who can possibly find it profitable to trade every time markets move 1%, and getting suckered into a bad position at least 50% of the time.  You add the Vig of commissions and other "market frictions" (read: costs) and I have no idea who does this.  Its just another version of a bad marketing ploy...only this time instead of the quick fix of Karate, we have the quick fix of following some ephemeral market trend like "risk on, risk off".


***the film "Conan the Barbarian" abrogates the need to ever make another revenge movie.  What is the point.

MiniTru

Life imitating art...just about every response by official channels reads like MiniTru releases (sans Newspeak) with respect to what I thought "everyone" knew:  that all phone conversations in the U.S. have been recorded for at least 5 years.

Such power...I am certain it will not be misused...

Uh-oh...

I think the MOF and BOJ exercise their facility for cruelty.  Just as Bond shorts were clinking the champagne glasses, the following non-expansionary policy guidance appears:

JAPAN GOVT PANEL: MONETARY EASING MUST BE BACKED BY GOVT'S FISCAL DISCIPLINE TO AVOID CONCERN ON MONETISATION

Again, the "Widowmaker" trade's reputation is not undeserved...