This is what the end of the world looks like (in chart form)

I hope these charts are preserved as an art exhibit, so future generations will know what it looked like when the world was ending.

I'm so glad I liquidated everything last week. I'd be chugging PeptoBismo by the bottle if I hadn't.

What's funny is that you can visibly see the central banks fighting against the entire trading world. Literally, the only people who approve of the actions being taken by the central banks are the central banks themselves. Everyone else is working against them.

When the central banks loan money to institutions, the institutions are immediately using that money to short the central banks.

The only thing that makes me sad is that I didn't have money in swiss francs.

That sound you hear? That would be the sky falling.

That is, the central banks are trying to destroy the traders, thus giving traders an incentive to try and destroy the central bank positions.







Getting in a war over currency is one thing, but not even a central bank can provide support levels to an index futures market once all the previous support levels have been demolished.

At this point look for either a total ban on short selling, or possibly a total ban on selling alltogether.

 

To highlight why the central bank interventions in currency markets are a big deal, keep in mind FX trading is often done on several thousand times margin. So a few pip move is where fortunes are made or lost. A 300 pip move in a currency... it's just unspeakably large.

 

The first 5 are various currency pairs. Which pair it is can be identified in the upper left hand of each screenshot.

Except for the 2nd chart, which is basicly a chart of Japan's GDP. GDP going down is very bad.

The last chart is futures on the S&P 500. 1070 is a key support level in the S&P500 for a variety of reasons (by support level we mean a certain level where, for a variety of reasons, it is difficult for the price to go under, because large numbers of orders are sitting and waiting at that level).

What you see is something we've seen a lot the last few months. Whenever there is big volume, it means markets are going down like Paris Hilton. Most the big 'gains' we've had in recent months are a total illusion, because the volume is so low that the stock prices and index prices don't represent the real value. Thus when volume shows up, markets go down.

Which is why the DOW, NASDAQ and SP500 all were down basicly 4% today. Which is a lot of fucking money. Like, crazy lots of money.

Even though stock markets are important, currency exchange markets (FX) are generally far more important. In large part because a lot more money moves across them ever day. When you buy a stock you are buying a share of a company, and making a prediction about what it will do in the near futue. When you buy a currency you are, in a sense, buying a share of an entire country and what it will do in the future. Becasue every single business that does business in that country, OR with that country, needs to use that currency.

What you're seeing in the currency markets is central banks (probably including the Fed) basicly at war with traders. Traders are de-risking as fast as they can, trying to get rid of euros, short the euro currency, etc. And we now have central banks directly intervening in their own currency exchanges to prop them up... and they appear to be doing so simply by 'printing' massive new amounts of money (probably as part of an unlimited swap program the federal reserve started last week).

And so you get bat-shit crazy situations like germany banning short selling and certain types of CDSs, followed directly by massive central bank interventions in the currency markets to prop them up, causing the swap rates and GDPs of other countries like JPN to get sodomized with a chain saw. The aussies have been taking their currency surprise buttsex like champs lately.

Because FX markets are highly massively leveraged this also has a whole new set of difficulties added to it. If something happens somewhere along the line to force a margin call, you get a liquidity crunch, meaning people are having trouble getting the money they need to pay back their 'loans.'

And what if the asset that you put up to get those loans were a bunch of greek bonds? Which 3 weeks ago were AAA rated sovereign debt, but have now been shown to be worth significantly less than double quilted toilet paper. The ECB is saying "Oh don't worry greece is going to get a huge bailout package it'll be all good greece won't default." So if greece isn't going to default why is my dog getting potty trained on greek bonds instead of newspaper because the bonds are worth less on the open market than used newspaper?

And if you have one country in the euro zone defaulting on their sovereign debt, which was somehow AAA a month ago and is now junk status, what does that say about the euro in general? Why would countries like germany or france want to stay in the euro when they are doing okay financially and have been acting like grown ups, while other euro countries have been out blowing their entire GDP on hookers and blow? And come to think of it, in such a situatuon, WHY THE FUCK WOULD I WANT TO OWN ANY EUROS?!?!?!? And in the face of a realistic collapse of the euro the central banks are intervening to keep the value of the euro how and not letting people sell their euros, short sale certain things, etc. Great. Just great. If the euro is so stable then why does it need to be propped up?

This is all made EVEN WORSE by the fact that the entire Euro system is a fiat currency system. The only thing that makes the euro valuable is because it has the guarantee of the european union behind it. So if the european union is on the brink of going under, countries in the union are considering sovereign debt defaults, and to stop their currency from collapsing they have to print money and pump it right into the market... then what makes the euro worth anything at all?

So in short, the sort of central bank intervention in currency markets is really bad. This is the sort of shit that dumb south american central banks used to do in the 80s. It CAN work, but it's almost impossible. In theory it can work, but in practice I really don't think it ever has.

Basicly this sort of central bank activity, where they are printing money to intervene in their own currency markets is an absolute catastrophe waiting to happen, and is on par with making war against every trader in the world.

It's basicly like being at 20 in blackjack and doubling down, praying for the ace to hit, and there are no aces left in the deck.