2014: Tahun Penuh Kejutan?

December 18th, 2013 nico

The fact that we have system-wide liquidity has allowed a complete replay of the circumstances that led up to the 2008 collapse. The system is way too over-leveraged on a global basis. It is also apparent to me that the ability of the financial system to recover from an asymmetric shock, a black swan, is less than it was back in 2008. When I think about the number of things that could create a shock, there are too many to list. But when I think about our ability to withstand the shock, given the bullets we fired at the beast last time – such as oceans of fiat currency or massive liquidity – are bullets that we’ve already fired, one wonders how far we can push on that string the next time around. In this incredibly fragile and, unfortunately, ‘Orwellian’ environment, investors are being bombarded with mainstream media propaganda every day about how things have changed since 2008, but I don’t believe it has changed, with the exception of liquidity in the system. This is why I say I am a terrified observer as I watch the end game drawing to a close. If chaos erupts this time around, there may be no stopping it.”

                                                                                                      –– Rick Rule

Karena pertemuan menentukan bagi FOMC the Fed AS pada 17-18 Desember pekan ini, apakah akan memutuskan QE-Taper atau tidak, maka di kesempatan ini saya akan membahas terlebih dahulu mengenai hal tersebut. Pertanyaan besarnya adalah apakah bank sentral AS akan melakukan QE-Taper pada Desember ini? Tentunya tidak ada seorang pun yang sepenuhnya yakin untuk menjawabnya saat ini. Oleh karena itu saya memang tidak akan memprediksikan apa keputusan bank sentral AS pekan ini. Namun saya dapat mengatakan bahwa the Fed tentu tak ingin kehilangan kredibilitasnya. Untuk itu mungkin saja mereka melakukan QE-Taper bersifat simbolis saja hanya sekitar $5-$10 milyar dari program stimulus $85 milyar/bulan (atau $1,2 trilyun/tahun). Jika tidak, maka rasa ketidakpercayaan masyarakat global akan semakin meningkat. Sebelum menuju topik utama laporan ini, ada sebuah artikel yang akan sangat menggugah pemikiran  Anda dari W. Bent Hunt dari Epsilon Theory mengenai cara manipulasi bank sentral AS agar Anda meyakini apa yang diinginkannya: Up to the walls of Jericho With sword drawn in his hand Go blow them horns, cried Joshua The battle is in my hands – “Joshua Fit the Battle of Jericho”, traditional African-American spiritual

The Stuka

At the outset of World War II, the German Luftwaffe attached an ear-splitting siren – the Jericho Trumpet – to the Junker Ju-87 dive-bomber, commonly called the Stuka. Dive-bombers are wonderful tactical aircraft if you have control of the skies, highly effective against tanks, vehicles of all sorts, even smaller ships, but they simply don’t carry enough ordnance to be a strategic weapon. They can certainly help you win a battle, but they’re unlikely to help you win a war. By attaching the Jericho Trumpet, however, the Stuka became a psychological weapon as much as a physical weapon, striking fear in a much wider swath than the actual bombs. During the early Blitzkrieg days of the war, the Stuka had exactly this sort of strategic effect, crushing the morale of the Polish army in particular.

Because it was a propeller-driven siren, the Jericho Trumpet actually made the Stuka a less effective dive-bomber, slowing its air speed and making it an easier target to hit. This was a trade-off that the German High Command was happy to make so long as the Stuka maintained its mystique as a terrifying harbinger of death from above, but that mystique was shattered once the Royal Air Force started shooting them down by the dozens in the Battle of Britain. By the end of 1940 the Stuka was almost entirely redeployed from the Western Front to the East, and those planes that remained had their sirens removed. As Churchill famously said of the RAF, “never was so much owed by so many to so few,” and it’s the psychological dimension of this victory that is so striking to me. I don’t think it’s a coincidence that the military tides of World War II shifted in the West at exactly the same moment that the Luftwaffe took off the Jericho Trumpet and the Stuka lost its mojo.

Today the financial media – and the WSJ’s Jon Hilsenrath in particular – is the Fed’s Jericho Trumpet. Unlike the Luftwaffe, the Fed is not trying to inspire terror, but they are similarly trying to turn a powerful tactical weapon into a strategic weapon through psychological means. The Fed is now embracing the use of communication as a policy tool in a totally separate manner from whatever concrete actions the communication is ostensibly about, and they use Hilsenrath (and a few others) as a modern-day Joshua to blow the horn. The Fed is now playing the Common Knowledge game openly and directly, making public statements through their media intermediaries to tell you how ALL market participants perceive reality, even though in fact NO market participant has a clear view of reality. In the Common Knowledge game – whether it’s the Island of the Green-Eyed Tribe that modern game theorists write about, the Newspaper Beauty Contest that Keynes wrote about in the 1930’s, or the Emperor’s New Clothes that Hans Christian Andersen wrote about in the 1830’s – the strong public statement of what “everyone knows” creates a reality where it is rational behavior for everyone to act as if they, too, see this reality … even if they privately don’t see it at all.

Here’s the money quote from Hilsenrath’s article last Friday after the November jobs report, titled (self-referentially enough) “Hilsenrath’s Five Takeaways on What the Jobs Report Means for the Fed”:

MARKETS BELIEVE TAPERING ISN’T TIGHTENING: Markets are positioned more to the Fed’s liking today than they were in September, when it put off reducing, or “tapering,” the monthly bond purchases. Most notably, the Fed’s message is sinking in that a wind down of the program won’t mean it’s in a hurry to raise short-term interest rates. Futures markets place a very low probability on Fed rate increases before 2015, in contrast to September, when fed funds futures markets indicated rate increases were expected by the end of 2014. The Fed has been trying to drive home the idea that “tapering is not tightening” for months and is likely to feel comforted that investors believe it as a pullback gets serious consideration.

In truth, the shift in the implied futures market expectations of short-term rate hikes from late 2014 into early 2015 says nothing about what “The Market” believes about tapering. It says a lot about the enormous effort that the Fed is putting into its forward guidance on rates, as a communications policy replacement for its prior reliance on forward guidance and linkage of unemployment rates and QE (a mistake that I wrote extensively about at the time and is now universally seen as a policy error). The Fed, through Hilsenrath, is trying to tell you how you should think about tapering. Not by giving you a substantive argument, but simply by announcing to you in a very authoritative voice what everyone else thinks about tapering.

Hey, don’t worry about tapering. No one else is worried about tapering. You are totally out of step with all the smart people if you’re worried about tapering. It’s duration of ZIRP that matters, not QE. Don’t you know that? Everyone else knows that. Maybe you’re just not very smart if you can’t see that, too. Can you see it now? Ah, good.

This is game-playing in an almost pure form. It’s smart and it’s effective. The siren from above is starting to wail: if you react negatively in your investment decisions to tapering, you are Fighting the Fed.

The bombs are going to drop – increased forward guidance on rates and decreased direct bond purchases – but these policies in and of themselves are just tactical. What’s really at stake is the strategic meaning of these policies, the belief system that takes hold (or doesn’t) around the power of the Fed to create market outcomes.

Over the next three or four months we’re going to see quite a battle for the hearts and minds of investors, with both “sides” employing the Narrative of Don’t Fight the Fed. On the one hand you will have the Fed, with their Jericho Trumpet of Hilsenrath et al shrieking at you a new interpretation of the Narrative: ZIRP is the source of the Fed’s power, not QE, so tapering is no big deal. On the other hand you also have the Fed, but the Fed of the past several years and the way it has trained the market to believe that the portfolio rebalancing effect … i.e., the behavioral impact of QE that Bernanke has directly credited with driving up the stock market … is what really matters. And if that’s your reality, then tapering is a big deal, indeed. I’ll be monitoring all this closely at Epsilon Theory in the weeks ahead.

Importantly, this psychological battle is taking place entirely within the larger Narrative of Central Bank Omnipotence. If the QE meme wins the day and tapering ends up hitting the markets hard … well, it’s Fed balance sheet operations that determine market outcomes. If the ZIRP meme wins the day and tapering is a non-event … well, it’s Fed forward guidance on rates that determines market outcomes. Either way, it’s a Fed-centric universe. Forever and ever, amen.

Berikutnya mari kita lihat bagaimana prospek tahun depan, yang bisa saja penuh kejutan terutama untuk investor/trader yang belakangan ini sudah demikian optimisnya.

Pertama adalah laporan dari Michael Snyder dari The Economic Collapse blog, yang menulis “2014 Predictions From The Big Guys…”:

“Some of the most respected prognosticators in the financial world are warning that what is coming in 2014 and beyond is going to shake America to the core.  Many of the quotes that you are about to read are from individuals that actually predicted the subprime mortgage meltdown and the financial crisis of 2008 ahead of time.  So they have a track record of being right.  Does that guarantee that they will be right about what is coming in 2014?  Of course not.  In fact, as you will see below, not all of them agree about exactly what is coming next.  But without a doubt, all of their forecasts are quite ominous.  The following are quotes from Harry Dent, Marc Faber, Gerald Celente, Mike Maloney, Jim Rogers and nine other respected economic experts about what they believe is coming in 2014 and beyond…

–Harry Dent, author of The Great Depression Ahead: “Our best long-term and intermediate cycles suggest another slowdown and stock crash accelerating between very early 2014 and early 2015, and possibly lasting well into 2015 or even 2016. The worst economic trends due to demographics will hit between 2014 and 2019. The U.S. economy is likely to suffer a minor or major crash by early 2015 and another between late 2017 and late 2019 or early 2020 at the latest.”

–Marc Faber, editor and publisher of the Gloom, Boom & Doom Report: “You have to say that we are again in a massive financial bubble in bonds, in equities, in [other] asset prices that have gone up dramatically.”

–Gerald Celente: “Any self-respecting adult that hears McConnell, Reid, Boehner, Ryan, one after another, and buys this baloney… they deserve what they get.

And as for the international scene… the whole thing is collapsing.

That’s our forecast.

We are saying that by the second quarter of 2014, we expect the bottom to fall out… or something to divert our attention as it falls out.”

–Mike Maloney, host of Hidden Secrets of Money: “I think the crash of 2008 was just a speed bump on the way to the main event… the consequences are going to be horrific… the rest of the decade will bring us the greatest financial calamity in history.”

–Jim Rogers: “You saw what happened in 2008-2009, which was worse than the previous economic setback because the debt was so much higher. Well now the debt is staggeringly much higher, and so the next economic problem, whenever it happens and whatever causes it, is going to be worse than in the past, because we have these unbelievable levels of debt, and unbelievable levels of money printing all over the world. Be worried and get prepared. Now it [a collapse] may not happen until 2016 or something, I have no idea when it’s going to happen, but when it comes, be careful.”

–Lindsey Williams: “There is going to be a global currency reset.”

–CLSA’s Russell Napier: “We are on the eve of a deflationary shock which will likely reduce equity valuations from very high to very low levels.”

–Oaktree Capital’s Howard Marks: “Certainly risk tolerance has been increasing of late; high returns on risky assets have encouraged more of the same; and the markets are becoming more heated. The bottom line varies from sector to sector, but I have no doubt that markets are riskier than at any other time since the depths of the crisis in late 2008 (for credit) or early 2009 (for equities), and they are becoming more so.“

–Financial editor Jeff Berwick: “If they allow interest rates to rise, it will effectively make the U.S. government bankrupt and insolvent, and it would make the U.S. government collapse. . . . They are preparing for a major societal collapse.  It is obvious and it will happen, and it will be very scary and very dangerous.”

–Michael Pento, founder of Pento Portfolio Strategies: “Disappointingly, it is much more probable that the government has brought us out of the Great Recession, only to set us up for the Greater Depression, which lies just on the other side of interest rate normalization.”

–Boston University Economics Professor Laurence Kotlikoff: “Eventually somebody recognizes this and starts dumping the bonds, and interest rates go up, and inflation takes off, and we’re off to the races.”

–Mexican Billionaire Hugo Salinas Price: “I think we are going to see a series of bankruptcies.  I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis.   This is going to bring down the derivatives system (and the financial system).

There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates.  The spiking of interest rates in the United States may set that off.  What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe.”

–Robert Shiller, one of the winners of the 2013 Nobel prize for economics: “I’m not sounding the alarm yet.  But in many countries the stock price levels are high, and in many real estate markets prices have risen sharply…that could end badly.”

–David Stockman, former Director of the Office of Management and Budget under President Ronald Reagan: “We have a massive bubble everywhere, from Japan, to China, Europe, to the UK.  As a result of this, I think world financial markets are extremely dangerous, unstable, and subject to serious trouble and dislocation in the future.”

And certainly there are already signs that the U.S. economy is slowing down as we head into the final weeks of 2013.  For example, on Thursday we learned that the number of initial claims for unemployment benefits increased by 68,000 last week to a disturbingly high total of 368,000.  That was the largest increase that we have seen in more than a year.

In addition, as I wrote about the other day, rail traffic is way down right now.  In fact, for the week ending November 30th, U.S. rail traffic was down 16.3 percent from the same week one year earlier.  That is a very important indicator that economic activity is getting slower.

And we continue to get more evidence that the middle class is being steadily eroded and that poverty in America is rapidly growing.  For example, a survey that was just released found that requests for food assistance and the level of homelessness have both risen significantly in major U.S. cities over the past year…

A survey of 25 American cities, including many of the nation’s largest, showed yearly increases in food aid and homelessness.

The cities, located throughout 18 states, saw requests for emergency food aid rise by an average of seven percent compared with the previous period a year earlier, according to the US Conference of Mayors study, published Wednesday.

All but four cities reported an increase in demand for assistance between the period of September 2012 through August 2013.

Unfortunately, if the economic experts quoted above are correct, this is just the beginning of our problems.

The next wave of the economic collapse is rapidly approaching, and things are going to get much worse than this.”

Berikutnya adalah Egon von Greyerz, pendiri Matterhorn Asset Management, yang belum lama ini ke King World News (www.kingworldnews.com) mengirimkan statistic paling menakutkan menjelang tahun 2014.

Egon von Greyerz juga membahas bagaimana korelasinya ke prospek harga emas dan perak di tahun 2014, serta saran investasinya yang sangat praktis dalam tulisan di bawah ini:

“As we approach 2014 this will be a year of major change, and the tide will begin to turn in the world economy.  Since we are talking about the end of a major era, and the tide that will hit us all will be very powerful….

So I’ve thought about some things that investors must not do in 2014, or don’ts as I call them:  Don’t hold major amounts of cash.  Either your bank will not survive, or there will be a bail-in so investors will lose a major part of their funds.  Don’t think that certain banks are superior.  It’s correct that all banks won’t go under simultaneously, but some of the most exposed banks will last longer than others because governments won’t let them fail.

Take the examples of Deutsche Bank, Barclays, and Bank of America:  Even if their balance sheets are very weak, the governments won’t let those go under until the very end — they are just too-big-too-fail.  So there will be bail-ins, but these big banks will be the last to fall.  But the smaller, more marginal banks will not be saved.

Remember that the whole banking system is interconnected and therefore all banks are exposed.  A bank in Singapore or Hong Kong will have dollars in a US bank and in a forex transaction with a US bank, so the whole system is interconnected.

Another don’t is don’t hold bonds, and especially US Treasuries.  Why?  Because the US government is bankrupt.  The last 32 years the US debt has gone up 17 times, and tax revenues have only gone up 2.5 times.  And for these 32 years there has never been a surplus.  Not one time.

So how can anyone believe that the US debt can be repaid with real money?  Let me tell you, it can’t.  There is a hyperinflationary depression scenario in which the dollar is totally destroyed, and the other option is to let the banks collapse.  This means major defaults and the end of the whole financial system as we know it.  The reality is that central banks will print as much money as they can, but in both cases gold will function as the only reliable money or medium of exchange.

The next don’t is don’t hold paper money, and especially not US dollars.  The reign of the US dollar as the world’s reserve currency is coming to an end.  That’s the end of a 100 year experiment of government and central bank interference in the economy, an interference which has been a total failure.

We know the dollar has lost 98% of its purchasing power since 1913.  Since 1971, when Nixon made the desperate move not to back the dollar with gold, the dollar collapse has greatly accelerated.  The dollar has also lost 80% of its value against the Swiss franc since 1971.  The Dow is up 18 times measured in dollars since 1971, but if you measure the Dow in Swiss francs, it’s only up 4 times since 1971.

Another don’t is don’t hold stocks.  The US stock market and most other markets are now at the end of a major long-term bull market, and this will end in a massive bear market.  The debt-induced bubble in stocks is coming to an end.  We might get one final move higher, but after that it’s finished for a very long time.

There are many warning signals regarding stocks.  Right now there are 4 times more bulls than bears in the US stock market.  There are only 14% bears.  The last time we saw this was in 1987, right before the crash.  Also, margin debt in the US is at a record 2.5 times GDP.

If you look at the Schiller P/E Index, that is at the same level it was in 1973, right before the stock market collapsed by 50%.  So stocks will be a very bad investment in 2014 and onwards.  The only exception to that will be precious metals mining stocks, which are massively oversold and likely to have a spectacular run.

Another don’t is don’t have debts or be highly leveraged.  In a hyperinflationary scenario interest rates will soar and debt servicing will be very onerous.  Also, there is a risk that banks will index debts so debtors will not benefit from the inflation.  This has happened in many countries in the past.

Finally, don’t have counterparty risk.  A lot of counterparties will fail.  Therefore, counterparties must be eliminated.  Obviously there are lots of other ‘don’ts,’ but if investors just follow the ones I have just outlined they will save themselves from ruin.

What about do’s?  Well, precious metals are at the top of that list.  What’s happening now is commercials are turning to the long side.  Recently, bullion banks have added 100 tons of gold to their holdings.  The 4 big US banks are now long 180 tons of gold.  Producers are also long 37 tons.  These are incredibly significant amounts.  Just last week 54 tons of gold was delivered to the Shanghai Exchange.  That’s around $2 billion of gold.  If you annualize that it’s 2,800 tons, which of course exceeds the annual production of gold.

So in my view the gold and silver correction is finished as I indicated last week.  The choppy action we have seen this week is typical of a major turn.  I see new highs for both gold and silver in 2014, with gold about $2,000, and silver well above $50.”

What Do the Charts Say?

Meskipun meleset di saham dan emas, analisa teknikal Citi FX yang diketengahkan dalam “12 Charts of Christmas” untuk tahun 2013 bekerja baik di pasar forex, obligasi dan komoditas.

Tahun ini, Tom Fitzpatrick dan timnya merilis 2014′s most important charts – sebuah titik awal bagi prospek mereka untuk tahun depan.

Mulai dari perlambatan pasar perumahan hingga ekspektasi penguatan dolar AS; maupun dari “roll-over” dalam Consumer Confidence menuju ke penguatan emas, mereka melihat kelanjutan “repair process” meskipun dalam langkah yang lamban meskipun ada kekhawatiran bahwa bursa saham semakin mirip dengan pergerakan tahun 2000.

Via CitiFX Technicals,

What do we believe for 2014?

• The USD bullish trend remains intact and the DXY Index should set new trend highs (90+).

• EURUSD: We expect a sharp turn lower that could see EURUSD in the 1.18-1.22 range in 2014. A very easy ECB policy will likely be a contributing factor here.

• USDJPY: Remains in a broad uptrend and we would expect a move towards at least 110-111 this year. This should continue to be supportive of the Nikkei.

• Consumer Confidence: Looks set to “roll” lower in a fashion similar to 2000 and 2007. This may have implications for the U.S. Equity market which looks stretched at this point in a fashion similar to 2000.

• Housing looks better than it was at the lows but nowhere near the traditional recovery/escape velocity of prior cycles. In 2014 we may even see a pause in its improvement.

• US yields: Similar to last year we suspect that an initial move lower may well emerge towards at least 2.40% (10 year) and 3.50% (30 year) and possibly lower. This is within a longer trend dynamic where they will likely move higher again thereafter. We would expect significantly higher yields in the next few years to materialize.

• Gold finally looks to be forming a base for a move higher. However we need both more convincing price action and likely a struggling equity market to solidify this potential.

• In Local Markets the USDBRL chart is one of the more convincing pictures and suggests a much weaker BRL is in prospect in 2014.

Overall: We see a backdrop where the “repair process” of recent years continues at a slow pace but where the US continues to look like the “best house on a bad street” when it comes to the major developed nations. This should also benefit the USD and keep the relative picture for yields (monetary policy) in favor of the US.

The corrective platform could be the “launch pad” for a move to new highs in the trend and a stronger USD all the way to 2016 as per previous post housing collapse cycles.

EURUSD turning lower like it did in 1998? A move towards 1.20 this year and much further over the next 2+ years looks likely.

A move similar to 1978-1982 could see USDJPY as high as 118 eventually while a repeat of 1995-1998 would suggest as far as 139. An average of the two could see USDJPY close to 130 by 2015. For 2014 we would expect a move to at least 110-111.

Another 4 year and 4 month trend coming to an end?

The last 2 peaks in Consumer Confidence led the S&P by 3-4 months. That pretty much takes us to now… big divergence between the Equity market and the real economy.

Peak in the 1,820-1,830 area? Prior peaks have seen pretty quick falls to the 200 week moving average.

Is the US 30 year yield double topping as it has done so many times before?

The potential double bottom will target 3.70 with a break above 2.62. Beyond there the all-time USDBRL high at 4.00 could well be eventually tested.

And summarizing their strong conviction 2014 views:

Agar tetap ceria, berikut adalah sebuah gambar lucu untuk Anda:

Source: IBD via The Burning Platform blog

Terima kasih sudah membaca dan semoga beruntung!

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