Absurdity, Markets, Questions, and the Joker is the Star of the Show
Imagine driving down Orange Grove Road and a car comes bearing straight down at you because the single opposite lane has become a private hire driveway? Dystopia?
We encounter teams of cyclists taking up entire lanes on Sundays and giving you the finger when you get too close, all pedaling as if they were as fast as their Porsches at home. Is this alternate reality?
There are just too many inconsistencies showing up in our lives and markets these days and we cannot blame ourselves for our disenchantment and feeling slightly brainwashed when we have 15 mentions of Trump in the NY Times headlines (as observed by Justin Wolfers, just “above the fold” on the homepage), leaving little space for constructive thought on anything else.
Source: Justin Wolfers on Twitter
Maybe that is why Joker is in the Top Ten Highest Rated Movies of All Time on IMDb, setting box office records as the highest-grossing opening in the history of October. Maybe the reason for the appeal of the Joker is global mood resonation where people are starting to identify with the absurdity of the state of affairs and embracing nihilism on a grand scale.
It is mind-boggling how the Hong Kong protestors are begging Donald Trump to save them, dangling American flags and dissing China’s Chinese as the South Africans are beating up the Nigerians in their midst.
Why do friends in Hong Kong have to lie that they are Malaysians and Chinese resort to speaking English to avoid detection?
Protests and social unrest this week in Ecuador, Chile, Haiti, England (Brexit and Extinction Rebellion), Hong Kong, Barcelona, Guinea, Lebanon... masks bans, curfews, violence and humanitarian crises. Reporters are too stretched to pay too much attention to the Climate March or the Yellow Vests. Is the Joker hiding somewhere?
Source: The National
Is it absurd? Trust has all but broken down as Boris Johnson failed to pass his Brexit deal in the UK Parliament on Saturday (the first Saturday sitting since 1982 and the Falklands War).
Absurdity has ruled ever since we observed “Bizarro markets” in July and it has only attacked our personal belief systems in earnest since and people are starting to crack and question themselves at the highest level to the ground. The U.S. Presidential impeachment proceedings for one could be a tipping point in U.S. politics that folks had enough of their president who went on to award a G7 summit contract to his own resort before bowing to criticism and retreating from the idea.
Source: NY Times
Then we had the comedic absurdity of Mexican soldiers arresting a drug lord’s son only to release him for their own safety after coming under siege by his henchmen, like “a Bad Netflix Show”.
Source: NY Times
So many questions have churned up and keep churning up as folks start to question the state of the markets.
We reel from the slew of absurdities and workings of the markets like the mystery of how the SGD dollar managed to strengthen after MAS eases monetary policy “slightly” on Monday and went on to strengthen even more throughout the week, or so we hear? Or the loathe-to-ask why has SIBOR rates not inched down the slightest since the last rate cut?
Unverified graph of SGD NEER strength
How did WeWork start 2019 at a valuation of US$47 billion, attempt to IPO in September at US$20 billion be suddenly be on the verge of bankruptcy, seeking DIP (debtor-in-possession) financing from JPM or Softbank?
It is as if investor tolerance is drawn thin these days with Airbnb scheduled for their IPO in 2020 after doubling losses in Q1 2019.
Why the repo crisis? Why are banks running in funding difficulties with the safest securities on the planet? The Federal Reserve injected nearly US$300 bio into the repo markets and pledged “QE4”, to buy US$60 bio worth of T-bills but their temporary measures continue to be stretched and oversubscribed mid-week, breaking the Sept 30 record again on Friday?
Source: Jim Bianco on Twitter
It is not that the system has run out of liquidity but as Zerohedge pointed out, the question is “just why are banks so scared of lending money to each other—now that JPM’s previously discussed reticence is also spreading to smaller banks – and choose to park their money with the Fed instead?”
If JP Morgan claims that it has been unable to lend due to regulations and that it has hit its lending limits, does it mean that JP Morgan is has become the market whale, to monopolise liquidity?
Who has been buying all the negative-yielding bonds which have fallen from US$17 trillion to US$13 trillion, still accounting for 25% of global outstanding?
Source: Jereon Blokland on Twitter
If bonds have become stocks and stocks have become bonds and capital gains have been phenomenal this year, what returns can we expect next year? Will equities continue to remain safe havens when volatility strikes the bond markets?
Why does JP Morgan fund manager, William Eigen say he would retire before buying “insane” negative-yield bonds? Did he miss the rally? And why is Franklin Templeton bond star Hasenstab pulling out his 2008 financial crisis strategy, exiting risky bets and piling up cash?
Why are stocks still near ATH (all-time highs) when Industrial Production growth for the US, Germany, U.K., and Japan are all negative for the first time since 2008?
Source: Bill Hester on Twitter
Is that why “the most bearish active investment manager is twice as bearish as the most bullish one is bullish, per latest NAAIM survey”, which last happened in 2014?
Source: SentimenTrader on Twitter
Is that also why the gap between hedge funds and asset managers in the S&P 500 has widened to an ugly high?
Source: Movement Capital
Is it because it will not be Trump or tariffs but eroding profit margins that will push the U.S. into recession in 2020, as predicted by Soc Gen’s chief U.S. economist?
Do we really need to wrap our heads up with so many questions, and trust us, there is a library full of them right now, when all we need to do it figure out how this guy on Reddit turned $766 into $107,758 on 2 option trades?
Or is it all a big sham, because shrewd reporter, William Cohan noticed the “fantastically profitable mystery of the Trump chaos trades” and the likelihood that insiders could have (and most likely did) profit from the “incoherent trade babbling”, citing incidences of large (insensible) block trades right before Trump’s sweets. We all know Trump has many hedge fund friends in the inner circle.
Source: Vanity Fair
The questions that keep us up at nights or keep to keep us going, and there are so many more that keep coming up till we come to the crux of it – does anyone running the show have a grip over all this? Are the central bankers too “intellectually isolated”, as Professor Jayati Ghosh suggests on Project Syndicate? More questions yet again for the week as we keep digesting.
We read about the HK rioters are preparing their farewell notes to their loved ones as the HK economy is now irreparably damaged and a severe downturn to follow in the months ahead. It is not as if they have much to lose for the mundane lives ahead of them, as for the rest of the folks rioting and protesting out there, some for the heck of it and others for heck not of it. Such a Joker world and we are surprised to hear folks walked out of the theatre, unable to stomach the gore. Forgive us, we have yet to watch the flick because we try not to leave the house unnecessarily (too many cyclists and private hire cars out there to freak us out). But so the Joker it is, who will be the star in all this absurdity.
Good luck before we start asking more questions…