Wednesday, June 6, 2012

Quick Market Update

We have received several inquiries regarding our recent silence so a quick update is in order.  Our dormant state can be attributed to the fact that there is really nothing to say.  We know where things are headed in the intermediate term but with powers at the top battling for control in an twisted version of the game Risk, we now sit waiting in purgatory.

The news has long been a medium of choice for controlling mass psychology.  While we are tortured by emotionally charged soundbites, objective reality seems to escape us.  Here are a few snips we find interesting.

Are we finally allowed to connect the dots for ourselves to see that the bailouts for Greece were only to repay certain bondholders while the European public was loaded with fresh liabilities?  What you must understand is that the playbook calls for creating a situation where the European public as a whole is in financial peril then offering a solution.  The problem is that the same people who profited from creating the problem are suggesting that they should administer the solution.  When we you see this?
What?  Are they assuming we have no memory recall for the emotionally charged LTRO solution ushered in only weeks ago?  Any bond issues with a duration under 36 months are fully guaranteed by the ECB.  So how is it news that they will issue just a microscopic amount of debt outside that guarantee window?  Spain is desperately tethered to excess bond issuance in order to maintain fiscal and, more importantly, social order.

Let's not forget that we are funding militant efforts throughout Syria in order to create chaos which will be followed by our offer to administer a solution via a brief occupation designed to "liberate the people."  This has not gone so smoothly though as Russia spent the last 10 years developing a foothold in Tartus.  This key coastal Syrian city has become a reliable resupply point for their Mediterranean naval fleet.

Also, remember that the US bullied Iran by discontinuing their access to SWIFT earlier this year.  This makes international trade virtually impossible as payments can not be settled via wire transfer.  As sanctions take hold the Persians have resorted to bartering and gold settlement in an attempt to remain in control of their economy.

Just as a geographical reminder, Iran shares a border with Turkey.  Turkey shares a border with Syria.  Turkey and Russia share the Black Sea.  Istanbul is the gateway from the Black Sea into the Mediterranean.      You might be able to connect the dots and understand the importance of the Syrian port at Tartus from the Russian perspective.  
Perhaps you are grasping the nature of our recent silence.  What is there to discuss when we are pounded with these headlines which mean nothing other than 100 Dow points either direction before reversing course overnight.  Short term markets are untradable in this era as they open higher or lower offering almost no intra-day movement.

At least there is one section of the world that seems to understand human nature or at least sees that the same playbook has been used for hundreds of years.  They also know that there is one particular trade which involves no counterparty risk and is dirt cheap at this time on a relative basis.

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