{"id":1481434,"date":"2024-08-03T16:50:00","date_gmt":"2024-08-03T20:50:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1481434"},"modified":"2024-08-03T16:50:00","modified_gmt":"2024-08-03T20:50:00","slug":"psychology-has-shifted-and-confidence-has-broken","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/psychology-has-shifted-and-confidence-has-broken\/1481434\/","title":{"rendered":"Psychology Has Shifted And Confidence Has Broken"},"content":{"rendered":"

Psychology Has Shifted And Confidence Has Broken<\/span><\/p>\n

\n

Submitted by QTR’s Fringe Finance<\/a><\/em><\/p>\n

Just about two weeks after I wrote an article called \u201cWe Are On The Edge<\/a>\u201d, discussing how, if I had to pick only one trade to put on at the time, it would have been getting long volatility, we saw a massive spike in the VIX to end the week on Friday. Here\u2019s how things looked early afternoon on Friday.<\/p>\n

<\/a><\/p>\n

In my opinion, Friday\u2019s trading session marks the beginning of a scenario that I have been predicting<\/a> would unfold for the better part of the last two years. Here\u2019s what I think is playing out.<\/p>\n

Friday, we finally saw serious signs of an economy deep in recession emerge in the macroeconomic data, as hiring slowed significantly and the unemployment rate jumped to 4.3%.<\/p>\n

<\/a><\/p>\n

Normally over the last two years, this would have been shrugged off by the market.<\/p>\n

However, the tech and AI bubble had already started to burst about three weeks ago, and momentum into the numbers today was bearish instead of bullish.<\/p>\n

<\/a><\/p>\n

The news also came after a horrific overnight session in Japan, where stocks plummeted 6% on the back of the BOJ raising rates. Ken Cheung, director of foreign exchange strategy at Mizuho Securities, told\u00a0CNN<\/a>:<\/p>\n

\u201cThe BOJ made a hawkish shift after its surprising 15 (basis point) rate hike. Importantly, the BOJ flagged the inflation upside risks \u2026 and left the door open for further rate hikes. \u201d<\/p>\n

And both the jobs number and Japan\u2019s market taking a shit came after a week of escalating tensions in the Middle East, with a direct conflict between Israel and Iran looking more likely.<\/p>\n

<\/a><\/p>\n

Source: AP<\/em><\/p>\n

And now we\u2019re waiting on promised action from Iran and they don\u2019t work during market hours. Which means the 72 hour \u201cbreak\u201d from trading over the weekend sure seems like a long time.<\/p>\n

But the biggest deal about Friday\u2019s trading wasn\u2019t the volatility in stocks; it was that, for the first time in the last two years, it\u00a0feels like psychology has shifted and confidence has broken<\/em>. Hell, Friday morning, Elizabeth Warren even took to X and, in a move that does far more harm than good, begged Jerome Powell to cut interest rates.<\/p>\n

<\/a><\/p>\n

You don\u2019t need to take Game Theory or Human Psychology 101 at Wharton to know that pleading publicly for rate cuts isn\u2019t a tactical solution; instead, it is taking a megaphone and telling the entire world that you are starting to panic.<\/p>\n

And panic, as Japan taught us overnight, is contagious.<\/p>\n

Think of all the weeks that have gone by with proclamations of a soft landing and a miraculous defeat of inflation while sparing the economy. They look like this:<\/p>\n

<\/a><\/p>\n

On this blog, we have long thought these proclamations were nonsense, but now we\u2019re seeing proof. As I have been saying for two years, 5.5% rates on top of the largest debt bubble in history is nothing more than a ticking time bomb making its way through the economy’s plumbing.<\/p>\n

And now, at the worst possible time, that bomb is about to blow.<\/p>\n

It isn\u2019t just Friday\u2019s move in the market that is making me say this. Macro data related to housing, loan delinquencies, commercial real estate, and personal savings that I have been pointing out all year has continued to support the argument that the American consumer is broke and liquidity has run dry.<\/p>\n

And, as I have written in numerous articles over the last year, by the time the Fed moves to cut now, it isn\u2019t going to matter. I\u2019ve\u00a0said<\/a>\u00a0that as we get closer and closer to the first rate cut, I\u00a0continue to believe that this could be the ultimate \u201csell the news\u201d event<\/a>\u00a0and could mark the beginning of a large correction in equity markets, depending on the Fed\u2019s appetite for massive QE.<\/p>\n

\ud83d\udd25\u00a070% OFF, THIS WEEKEND ONLY:<\/strong>\u00a0Using the coupon entitles you to 70% off an annual subscription to\u00a0Fringe Finance\u00a0<\/em>for as long as you wish to remain a subscriber:\u00a0Get 70% off forever<\/a><\/p>\n

Moving rates from 5.5% to 4.5% in the middle of a market crash \u2014 as JP Morgan hurriedly\u00a0publicly declared<\/a>\u00a0would now happen in the middle of the trading day on Friday \u2014 when\u00a0everybody was already expecting those moves to begin with<\/em>, does nothing. A good way to think about it is this:\u00a0the market is crashing today with the expectations of rate cuts already baked into the cake.<\/strong><\/p>\n

Now we have officially realized the rock and hard place we have been stuck between for the last two years. In one direction, the Fed has to make massive, decisive, easing moves that will see things like gold and Bitcoin move higher exponentially and will reopen the door to all of the inflationary forces we\u2019ve been fighting over the last two years, like when Walter Peck shut down the power grid in Ghostbusters and released all the spirits back into New York City.<\/p>\n

<\/a><\/p>\n

On the other hand, the Fed can clench its teeth and go with the \u201cplanned\u201d cut or leave rates where they are, and we can continue to watch Japan\u2019s deflationary shockwave make its way through the U.S. and eventually into our bond market, where something exceptionally large will break \u2014\u00a0as James Lavish detailed recently on my podcast<\/a>\u00a0\u2014 potentially creating systemic risk or currency risk.<\/p>\n

Either way, there is no going back to the soft landing narrative now. With unemployment at 4.3% and the market in turmoil, the grim reality of needing to pay the piper is starting to rear its ugly head.<\/p>\n

As far as my portfolio allocation, nothing really changes too much because this is the scenario that I\u2019ve expected for a while, right down to the fact that gold was rising Friday morning, ostensibly as a hedge against the volatility, and then quickly crashed as it became clear over-leveraged investors needed to raise cash. This\u00a0sell-off that I predicted would come<\/a>\u00a0represents a buying opportunity in gold and miners because, as I have stated repeatedly, the next step from here is likely the Fed trying to jawbone and overshoot the mark with quantitative easing.<\/p>\n

The likely scenario short-term, in my opinion, is that the Fed will reiterate its already expected cuts and perhaps move them up timewise. In my opinion, this will not be enough to appease the market since cuts are already expected, and we will see this scenario of a further market drawdown into the Fed rate cut that I\u2019ve been expecting and writing about for a year.<\/p>\n

Naturally, as stocks start to sell off, I look for \u201cboring\u201d names to continue to add: namely, defense stocks, consumer staples, utilities, commodities, and things of that nature.<\/p>\n

I\u2019ve been saying for two years that you simply can\u2019t raise rates the most in recent history at the fastest pace in recent history on the most debt outstanding in history and not face consequences. With Friday\u2019s action in markets, it has become clear we have started to walk down the path of finding out what those consequences are going to be.<\/p>\n

It\u2019s weekends like these that I\u2019m glad my economic education comes from the Austrian school, and I\u2019m not an intern working at Goldman Sachs or doing wealth management for AXA Equitable Advisors. Sometimes it feels like you\u2019re pushing a rock up a hill, but every\u00a0once in a blue moon<\/em>, things make a little sense.<\/p>\n

Now read:<\/p>\n

Fearless<\/a>:\u00a0Trump Survives<\/a>\u00a0\ud83d\udd25 43,000 views<\/em><\/p>\n

Gold Allocations Still “Very Low”, Silver A “Very Special Metal”<\/a>\u00a0\ud83d\udd25 22,500 reads<\/em><\/p>\n

Market Moves Like These “Have Not Ended Well”<\/a>\u00a0\ud83d\udd25 22,300 reads<\/em><\/p>\n

The Next Worst Thing<\/a>\u00a0\ud83d\udd25 25,200 views<\/em><\/p>\n

3 Trump Trades<\/a><\/p>\n

<\/a><\/p>\n

QTR\u2019s Disclaimer<\/strong><\/em>:<\/strong>\u00a0Please read my full legal disclaimer\u00a0on my About page here<\/a><\/em>.\u00a0This post represents my opinions only.<\/em>\u00a0In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a\u00a0Creative Commons license<\/a>\u00a0with my best effort to uphold what the license asks, or with the permission of the author. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade\/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates.\u00a0I did my best to be honest about my disclosures but can\u2019t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I\u2019m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it\u2019s that important.<\/em><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSat, 08\/03\/2024 – 12:50<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/psychology-has-shifted-and-confidence-has-broken<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Psychology Has Shifted And Confidence Has Broken Submitted by QTR’s Fringe Finance Just about two weeks after I wrote an article called \u201cWe Are On…<\/p>\n","protected":false},"author":0,"featured_media":1481435,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1481434","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1481434","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1481434"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1481434\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media\/1481435"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1481434"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1481434"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1481434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}