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Monday Morning Quarterback: Sixteen Candles


Election Day is right around the corner.


Sweet Sixteen. It's a time of innocence and a coming of age. As we power up a fresh five-session set, it's also the countdown to new leadership for the United States of America.

At the beginning of 2008, we offered Ten Themes in Minyanville that we believed would come to fruition this calendar year.

Nestled in that discussion was the notion that:

"One of the more troubling dynamics last year was the societal acrimony that manifested despite the market probing all-time highs. We were, by conventional metrics, enjoying an economic expansion yet nobody seemed to feel like we were in a bull market.

If the collective stress was that high in a "good" market, what will happen when the other side of the business cycle arrives? We've already entered recession, albeit one that's been masked by the lower dollar and hidden with economic numbers skewed by a slimming margin of society.

This dynamic will inevitably manifest into the elections, both stateside and abroad, as political infighting and geopolitical tensions mount."

With just over two weeks until ballots are cast, we've entered a risky stretch for financial markets and the world at large. Social mood and risk appetites shape the tape and global tensions are percolating at an accelerated pace.

While I continue to operate with a sense that we may have seen the 2008 trading low (not to be confused with a market bottom), the onus is on us to respect the other side of that ride. Risk management over reward chasing has been a mainstay mantra in Minyanville.

On Friday's Buzz & Banter, Minyan Peter offered the following thought:

"Royal Bank of Scotland (RBS) canceled its credit line to Pdvesa, the National Petroleum Company of …and it may be coincidence that RBS is dropping its line to the Venezuelans less than a week after the injection of capital by the British government.

Credit is the oxygen to commerce. Todd offered long ago that the next war would be over water-does liquidity count?"

Building upon his missive, cutting off credit to the emerging world isn't in the best interests of recently nationalized world banks. If derivatives are the weapons of mass destruction, liquidity could be the neutron bomb. Pull the pin and it sucks the life out of the global economy.

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Positions in FXI, EEM, WFT, BHP
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