In the 80s hit movie WARGAMES the computer program ran all its simulations for playing out a nuclear war between Russia and the United States…and in all of its scenarios and assumptions its conclusion was,
“THE ONLY WINNING MOVE IS NOT TO PLAY” (Wargames 1983)
For those that haven’t seen this movie, we do recommend it and as for the clip of the part we are showcasing can be found on YouTube, HERE (Wargames)
Why do we highlight this outcome? Because in our reality, in our time, the global central banks have backed themselves so far into the rigged Ponzi corner, that essentially their only winning move is to do nothing! Let the chips fall where they may, let the natural market forces of players risk take its chances. What do we mean? Well it’s obvious that inflation/devaluation is rearing its ugly head, yet this is not your forefathers economy. This is a highly integrated global circuit, by which the slightest glitch, will cause a chain of events so far down stream that chaos is all but certain.
In fact to highlight this fact, Zerohedge put out a great tweet, basically providing you with the only common sensical knowledge one needs to understand central bank policy:
Yes it is this obvious and no the central banks aren’t fooling anyone and certainly not the sophisticated algorithms at the largest most well connected firms. They know this truth, in fact their WOPR programs bank on it. (WOPR was the name of the computer in the movie Wargames)
We know that in the old economy the safe haven was always government debt, but not so much anymore…Yes when there is chaos, money seeks safety, sell at all costs, cash , government debt, for sure. However today, the obvious safe haven has been found right here in these equities:
These are the safe havens why? Because that class of investors, that 29% that do not have to sell, EVER hides here, they hide in tax shelters, they hide in Real Estate, they hide in all the places the commoner has zero chance at hiding and when the FED and global central banks make their policy mistakes, they use that to accumulate even more wealth when the losers sell. In fact we may bring back just for fun our “Its a Wonderful Central Bank Life” post we did years back considering the season this would be appropriate. In that post we talk about the villain Harry Potter the wealthiest guy in town, foreclosing on the poor old Bailey Building and Loan. This is how the system works, the never have to sell micro faction waits for the losers to sell then they come in and buy it all back up. Simple game right? Well not for the majority that live in the labor devalued world of today’s global central bank induced inflation.
We know the central banks will make this error, why? Because that is what its designed to do, its designed to destroy labor valuation and concentrate wealth and every decade that goes by comes with lower and lower rates, higher and higher government debt and concentration of wealth that grows each and every year.
So we know the playbook, the FED will TAPER, the yield curves will pancake, then they will TIGHTEN, the Fed Funds will rise above the 10Y rate, then the equities get hit, then the losers sell, then the micro faction buys. Rinse, Recycle, Repeat.
Where are we in this cycle? Well the curve is nowhere near inversion, but that can change very very quickly. Technically the equities have been going nowhere which leads us to believe rallies are being sold into. Let’s look at the Nikkei and Dax:
The Dax:
Stateside the Nasdaq rests at the crux 16000:
The SP500 failing at the 42% area which has stalled the prior run ups from 2016-2020:
As far as equities go we highlighted Tesla a few weeks back and the gaps that existed below in particular the first one near $900…Well we are getting close:
We also talked about LMND for quite sometime and it currently is trading below pre IPO lows down a remarkable 79% off hits highs:
Finally we leave you with Goldman’s breakdown of what’s to come, see first the Tapers then the Hikes…will this hold up? We doubt it:
This weeks FOMC meeting should highlight the urgency for the FED to begin its policy error process. We all know the difficulty of removing candy from the kids diet and the junk food junkies just want more, so to try and remove the more, seems more or less, pointless don’t you think. The Austrian in us would rather the market dictate risk, not a small group of well connected global players all focusing on the same task. Its amazing central banking doesn’t have borders, then again borders are for those that have to play by the rules, those that make the rules, well…Not so much.
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DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options on neither commodity futures. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Michael Agne owner of Magnelibra Capital Advisors. Magnelibra the CTA and its Global Futures Benchmark Program may hold long and or short positions in the various futures and markets that Econemotions covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed. ALL RIGHTS RESERVED 2021
