Someone gave institutional investors over the Labor Day weekend the “all-clear” when it comes to equities.
Well the G-20 nations got together along with IMF chief Christine Lagarde and her World Bank counterparts in Turkey to discuss the global slowdown.
Since the meeting with an understanding that China would do what it needed to support the markets. To that end the Chinese government made it too costly to trade in its futures market slamming 99 % of the volume in a week — thereby taking away a market correcting mechanism — and made shorting or selling of stocks very difficult.
So off stocks went. A 1,000 point rise in Nikkei over two trading days, including a 7.7% rise in Wednesday trading tells me the fix is in for now.
Oh, and that September rate rise is off the table, as I said first in January of this year. No rate rise this year
The central bankers are in the markets to bubble them up to keep the juggernaut afloat.
There’s a story going around of hedge funds getting into Treasury note arbitrage. What could possibly go wrong with short-term trading in and out of Uncle Sam’s debt using large amount of leverage to make it profitable.
Add a little currency play with leverage to take the bumps out of the debt side and you have Long Term Capital Management II.
No can’t happen this is a whiz kid from Yale, who Nobel winner Robert Schiller mentored as a professor there. Well put this name in your tick file: Jeffrey Talpins of Element Capital Management, when things get squirrely Talpins will be in the same paragraph as John Meriwether of LTCM.