I think he's early on the call.
The Fed's open market purchases of treasuries are scheduled to run through June and equity market participants are fully aware that they are playing a game of Chicken with each other. The problem the punters face is the miserable returns offered elsewhere, a half-point picked up in a Netflix scalp can equal the interest earned on T-bills in 100 days. So they stay at the market.
It is going to take one of those collective Wile E Coyote moments:
Wile E realizes there is nothing supporting him a nanosecond before gravity reasserts itself. We aren't at the mass realization stage yet. As I said yesterday, "When the music stops try to grab a chair, this is a dangerous little game we're all playing.".
We all know it, we've been babbling about it since August.
Last month in "How Dysfunctional Is This Market? (SPY; XLF)":
Everyone knows this market is rigged. The general feeling is that when it tanks "I" will be sharp enough to recognize it....
...Most of the proceeds the primary dealers receive from the Fed for the QE2 purchases are going back into frontrunning the Fed (see "Is QE2 A Stealthy $90 Billion Gifting Scheme To The Primary Dealers?" (BAC; C; GS; MS; JPM; HSB; UBS)) quite a bit is also going toward levitating the AAPL's of this market.Or December's "Private Equity: Carlyle Set to File for IPO as Investors Grow Wary of Buyouts":
What I'm saying is: the dance will go on for a while longer but you may want to show off your sweet moves a little closer to the fire door.
Stocks are either for buyin' or for sellin'.No special insight there, it's common knowledge. Here's some uncommon knowledge via ZeroHedge:
Combined with the Glencore IPO I may be moving from the center of the dance floor to a spot a bit closer to the exits sometime next year....
Time to fade Jackson Hole
This is the third piece that I have written since arriving at Nomura, the first was released on 22 October, the second on 1 December. I will first discuss the key themes that we feel are likely to drive global macro markets this year, and then will provide a tactical update....
....Trading and positioning recommendations
1 – Tactically we are now bearish and look for at least a partial reversal of the post- Jackson Hole QE2 inspired rally. Many technical and sentiment indicators are suggesting a 5% to 10% correction in equities (S&P500 from 1300 to 1220s). As I stated in my previous two pieces we were expecting risk assets to rally from mid-November through to early Q1 2011. My initial target on the S&P500 set in November when it was in the mid-1100s was 1220, and once we cleared and closed over 1220 for four consecutive days 1300, 1330 and 1350 were/are the next obvious targets. It has touched 1300, but has fallen well short of 1330 and 1350 – for now anyway.
February may see the S&P500 grind up to 1350, and I expect the bulk of the tactically bearish repricing to occur in and around March and April. If it goes to 1350, and assuming that we do not have four consecutive closes above this level, my March/April target for the S&P500 (as a global risk proxy) is for a minimum 10% sell-off down to 1220, although my central forecast is for a correction of up to 20%, looking for the S&P500 to trade down to mid-1000s in during March/April. If there are four consecutive S&P500 closes above 1350, then we may be seeing markets enter melt-up phases (see below)....MUCH MOREThe bits between the ellipses are well worth the read, I truncated the Janjuah quotes because my intro ran so long.