More and more often respected financial institutions are releasing material warning that global financial markets are nearing a corrective downturn
This post first appeared on Russia Insider
Moscow, September 27th.
It is a lovely partly sunny early morning with a refreshing 54 (F) degree breeziness. As is usual I walked over to the farmers market down the street to pick up some fruits and veggies for later, before the crowds pick through the nicest offerings.
There (again) in front of the melons was my “Znakhar” (Seeress) woman I wrote about in the past. She was pawing the fruits and telling me “watermelons are now 19 rubles a kilo ($0.33), better take one before they disappear”. Knowing she had marked me out to haul her two watermelons to the tram, I accepted, after all they almost weighed more than she did.
On the way to the stop, she said to me:
“I thought I might run into you today. This is good as last night I had a very strong dream, which is uncommon for me, and you recall what I said about big changes happening. Well, my dream was so very vivid, so clearly a message, that my day is still disturbed."
"I expect that a great series of events will start happening tomorrow (September 28th) and will only get more severe as we enter October. I see that trust is dissipating very quickly in the world, and will continue to dissolve and rupture. It is now the time to change foreign paper money into rubles, gather up your gold and hold on to all you can”.
As usual, I smiled, thanked her for her concern, and handed up her watermelons into the tram. These meetings, while not regular, all had a similar theme… this “Znakhar”, a real prophet according to some that believe in her is convinced since March that the world is a bubble ready to pop both economically and politically.
While I am not a fan of the metaphysical, she does get me to thinking along my own tangents like geopolitics, economics and the business of things. After all, what can a slight Old Russian woman concerned with the price of melons know about market forces and the inter-relationships of politics and business? Her main revenue concerns are telling fortunes and faith healing, not exactly algorithmic, technical or fundamental trading strategies.
Recently I have been reading more and more often materials released by respected financial institutions warning that global financial markets are nearing a corrective downturn. Some are convinced that the markets are in the last stage of their rallies prior to business cycle downdrafts. Some focus on the seeming disconnect between valuation fundamentals and data.
This tends to breed fear, or as my first trading mentor would say; the rise of the Anxiety Quotient, which in record-breaking markets usually is a signal that markets are ready to decompress.
On the technical side, another indicator is the very low, even complacent level of the VIX (Chicago Board Options Exchange Volatility Index), which shows the market's expectation of 30-day volatility. It is widely used as a measure of market risk, often referred to as the "investor fear gauge." Experience has taught me that with the VIX so low in these unquestionably tense geopolitical times, it is also at an extreme, perhaps of denial?
What could trigger a black swan event that the “Znakhar” expects at the end of this week? Sitting here in Moscow I see several but by no means the only possibilities:
Tension between the United States and North Korea, and an unclear foreign policy.
Uncertainty over failures by the Trump administration to promote agenda items, like tax reform, trade policy and health care reform.
Debt, CB’s, Rates, QE, NIRP’s.
The Middle East power shifts with a record number of active players doing their proxy-best to jockey for advantage in Afghanistan, Syria, Kurdistan, and the neighborhood.
Russia-bashing and related geopolitical fallout.
The de-dollarization trend and its new adherents plus the slow shift off the petrodollar.
Stresses starting again on the fringes of the EU, such as Spain, Poland, Hungary, Greece which look to be long term and fractive.
It would seem there are enough potential events, both manmade and natural, which could serve to trigger anxious reactions, but despite it all, we are still in a bull run, until we are not.
Still, I am curious to know whether my “Znakhar’s” metaphysics has an inside track on our world.
We will see.
This post first appeared on Russia Insider
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