Sunday, June 19, 2011

Ever seen a global margin call? This is what it looks like...

There are market participants that have done their level best to create the over-leveraged condition of our markets and the world. Due to those conditions we are now in a GLOBAL MARGIN CALL and the call has not been covered. It will be but it will not be a clean and smooth process, it will be hairy, smelly and very ugly. Anyone thinking that we have seen those conditions needs to reacquaint themselves with the flash crash and its anything but fat finger trigger. It, therefore, gives me pause to tell you that, based on what I see, I believe that Goldman Tax has established a significant commodities/energy short similar to the structured products shorts that they put on in 2007 and 2008. And this, while they are full on the bandwagon trumping up their story for "long" certain markets in the commodities and risk asset space and while selling any credit product that's not glued to any oil producing nation that will sign for them.

Goldman is showing long trades in many individual markets, commodities and currencies that represent simply atrocious positions and most likely a conflict of interest on the part of the firm if they were to be investigated. Personally, I want to know more.

I generated well over 100% returns during the last 10 to 11 months on medium risk level accounts that I would say ended up trading nearly the universal opposite of Goldman published trade recommendations. I do not specifically seek to trade counter to Goldman calls, nor have I attempted to do so in the past. The fact, however, that the majority of my positions have been opposite of theirs so often only became obvious to me after the pattern continued persistently into this year. But, point of fact, by being opposite their recommendations most of the time in the markets I trade, I made significantly better than 100% return. That must certainly put the Goldman client in a rather disadvantageous position since in the end I was apparently taking quite a bit of money from them...on my part, I am not putting out disinformation, unlike my perception of Goldman, who seems to have an affinity for taking a lot more money from their customers than those customers may readily think via what I see as nefarious means.

In any case, back to the markets. I see a lot of people looking at the dollar pullback on Friday as significant and for the proverbial bounce off the 200 day moving average to construct a perfect head and shoulders pattern from which to establish perfect short positions...I do not think that this market has the liquidity to produce those kinds of results...I think that there are many insolvencies in various stages of playing out. Many are in no small part being additionally fueled via the margin requirement reductions that were published just before the markets dropped...hey if you can lose money with 10 contracts of ES it must be better to be able to get has to wonder what the real basis was for reducing these requirements – it certainly was NOT the reduction in market volatility. I am still struggling to figure out how one of the most volatile markets I have seen can be the basis for reducing requirements. But the result is that as with Silver, the losses that many people are nursing are now larger than their gains from the “Buy the “F***in Dip” days and are likely to get much worse. What I see dead ahead is the global markets MARGIN CALL...and I think it will be unfolding imminently.

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