Off The Cuff: Beware The Misbehavior Of Markets

They aren't as predictable as we think
Monday, September 7, 2015, 10:31 AM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Manipulated Markets
    • How the Fed uses stocks as a signaling device
  • House Of Cards
    • Why the system is more vulnerable than ever
  • The Machines Are In Control
    • Which works well until it doesn't
  • Beware The Misbehavior Of Markets
    • They are not as predictable as we think


Here's Why The Markets Have Suddenly Become So Turbulent

A perfect storm of failing trends
Friday, August 28, 2015, 1:28 PM

When stock markets are free-falling 10+% in a matter of days, it’s natural to seek some answers to the question “why now?” » Read more


The Warning Indicators To Watch For Trouble In The Bond Market

The signals that will tell when the rout is on
Friday, June 19, 2015, 11:50 AM

Executive Summary

  • Liquidity is drying up
  • Volatility is returning
  • HFT has dramatically increased crash risk
  • The key takeaways for investors

If you have not yet read Part 1: Credit Market Warning available free to all readers, please click here to read it first.

Financial assets are worth what someone will pay for them.  A corollary of this is that you’d much rather be trying to buy or sell in markets that are deep and liquid.  Thin markets provide bad prices at best, and no bids or offers at worst.

Low trading volumes are worrisome because they are usually accompanied by higher volatility. And those two can easily become dance partners that whirl each other ever faster. 

There are numerous warning signs coming from all asset markets, but especially from the bond markets.

Low Liquidity

The issue of low liquidity really jumped out at me roughly a year ago with the news that the utterly broken Japanese government bond (JGB) market had gone an entire 36 hours without a single trade(!!).

Japan bond market liquidity dries up as BoJ holding crosses ¥200tn

Arp 15, 2015

The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.

The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.

Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.


Thus comes the law of unintended consequences.  The main reason for buying JGB’s by the Bank of Japan (BoJ) was to inject a lot of liquidity into ‘the system’ in hopes that the Japanese economy would take off.

While that may have happened to some (slight) extent what also happened was that ... » Read more



Joe Saluzzi: Broken Markets

HFT, inept regulators & Fed distortion = more flash crashes
Sunday, May 3, 2015, 3:58 PM

As luck would have it, we had Joe Saluzzi lined up to record a podcast the day the news broke recently that the suspected culprit for the 2010 flash crash, Navinder Singh Sarao, had been arrested.

In this discussion, Joe shares his suspicions about Sarao (a contributor to the crash, but highly unlikely to be the actual cause) and then provides his expert assessment of what has been done in the intervening years since the flash crash to safeguard the market against a similar failure (precious little). In his opinion, a winner-take-all high-tech arms race, clueless and toothless regulators, and central bank price distortion are conspiring to make us more vulnerable -- not less -- to another systemic breakdown. » Read more


Oleksii Sergieiev, Dreamstime

For Heaven's Sake: Hedge!

If you're not positioned defensively by now, you're nuts
Thursday, April 30, 2015, 9:58 PM

Last fall, I wrote an article titled Defying Gravity that warned of the absurd price levels that stocks and bonds had risen to. Less than a month later, the stock market abruptly dropped by 7%. Those who didn't seek safety in advance were left licking their wounds, panicked not knowing if the painful down-draft was over.

So here we are roughly six months later, and the same warning bells are ringing -- just louder this time. » Read more


Off the Cuff: Our Culture Is Failing Us

We look more & more like a civilization in decline
Thursday, April 23, 2015, 9:15 PM

In this week's Off the Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Broken Markets
    • When all signals are false, how does one invest wisely?
  • The Decline Of Culture
    • A fundamental crisis within Western society
  • The Decline Of Civilization
    • We are on a track to repeat history, and not in a good way
  • Crafting A New Narrative
    • What should a more functional society aspire to?


Off the Cuff: Welcoming the Uproar Over HFT

Finally(!) the world's awakening to this abuse of the system
Thursday, April 3, 2014, 12:25 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • HFT Hub-bub
    • Finally(!) the world is awakening to this abuse of the system
  • Poking the Russian Bear
    • Our foreign policy is looking misguided & dangerous
  • Magical Stock Price Levitation Continues
    • You can't deny today's prices, but neither can you justify them
  • HFT Uproar As The Pin That Pricks The Bubble?
    • Market tops happen when there is sentiment shift
Featured Discussion

Understanding the Uproar over HFT

Understanding the Uproar over HFT

This podcast with Joe Saluzzi tells you everything you need to know

Daily Digest

Image by basheertome, Flickr Creative Commons

Daily Digest 4/19 - Chevron Defies CA Carbon Emissions, Why Boston’s Hospitals Were Ready

Friday, April 19, 2013, 9:26 AM
  • Expert: HFT Has Gamed the System - There’s No Room for Traders Anymore
  • Score: Banksters Two, Gold & Silver Zero 
  • Why Boston’s Hospitals Were Ready
  • U.S. banks issue mortgage rebate cheques that bounced
  • Full List of Bankers at White House Meeting Thursday
  • The Euro Legacy: In Greece, Children Pick Through Trash Cans For Food
  • Spain's Recession Forces Breeders To Send 70,000 Purebred Horses To Slaughterhouse in 2012
  • The Biomass Power Plant that Runs on Single Malt Whiskey
  • Engineers use brain cells to power smart grid
  • Chevron Defies California On Carbon Emissions
  • Fascinating Account Of Two Families Living Off The Grid For Two Decades

This Gold Slam is a Massive Wealth Transfer from Our Pockets to the Banks

It likely signals a big downdraft in the stock market, too
Monday, April 15, 2013, 2:55 PM

I am very disappointed by, but not surprised at, the latest transfer of wealth to the bankers from everyone else.  The most recent gold bear raid has vastly enriched the bullion bankers, once again, at the expense of everyone trying to protect their wealth from global central bank money printing.

The central plank of Bernanke's magic recovery plan has been to get everybody back borrowing, spending, and "investing" in stocks, bonds, and other financial assets.  But not equally so, as he has been instrumental in distorting the landscape towards risk assets and away from safe harbors. » Read more