Do you know why I put two sets of quotation marks around the word ““markets?””
Because they are so manipulated that they bear no resemblance to your grandad’s markets. Markets are where prices are set between buyers and sellers. Manipulated ““markets”” are used by central banks to set a narrative.
Usually, that narrative is something inane like “We’re in control!” or “Gold is bad!” or “Inflation is coming down!”
The problem is that by forcing prices into unnatural places for too long the manipulators interfere with this thing we call reality. Out here in the real world, oil wells don’t get drilled if prices aren’t reflective of real-world risks and costs of capital. Copper mines don’t get opened. Farms get foreclosed upon (although, this isn’t necessarily a bad thing for the central banker’s friends who are eager, for some reason, to buy up these struggling operations).
In this deep dive I go into the explicit mechanism by which the central banks are openly and with official blessing monkeying about in markets where they have zero legitimate reason to be participating. Places such as Bitcoin futures, US Ag markets, Silver, and Oil. If after watching the video you have another more innocent explanation, I am all ears.
This is essential framing, as I call it, and therefore I have decided to make it public.
Thanks Chris. Scary but glad things are starting to move. Have just sold 1 property (in Argentina unfortunately) but have another there. And have a reasonable supply of Au and some bitcoin, arable land in a quiet rural community, skills and emergency kit, downside is the getting long in the tooth. Who knows when the best time is for things to finally come apart? Just hope the shooting match isn’t full on.
The international financial class has thought, for 400 years now, that they should and would one day own the world. (One of the Rothschilds just said it’s time to integrate corporations, governments, and AI in order to “reform capitalism”.) Of late it has seemed clear, though, that because of the multi-polarism now breaking out - whatever we think of the various principals - the unipolar world of the Euro Elite’s wet dream won’t manifest. Armageddon would come first.
Inevitably, as the geographical scope of ownership scales down, the determination to dominate what’s left increases in intensity. So I expect that the would-be rulers of the world are going to concentrate ever more of their will and wrath on us Westerners, from whom they spring and over whose governments they have actual sway. We in the heart of the would-be empire, we “free” citizens of the United States, are likely to bear the hardest brunt of their frustrated desires.
The original edition of Mark Twain’s mid-nineteenth century social commentary novel, A Connecticut Yankee in King Arthur’s Court, was illustrated by the then-famous political cartoonist Charles Beard. One of Beard’s illustrations has proved a decades-long icon for my own thinking about how the pan-Atlantic self-styled aristocracy really thinks about our social and political structure. (The only thing: the Church is no longer in the most senior position; it might not even belong in the illustration at all, being all but irrelevant as an institution capable of moving the modern political needle. In its place we must now insert The Banker.) https://peakprosperity.com/wp-content/uploads/2023/12/Screenshot-1028-1701856206.3247.png
I totally agree that the markets are manipulated, and it certainly wouldn’t surprise me if they were also manipulating the VIX. But I will play devil’s advocate here and offer a different viewpoint. Here are two reasons against the VIX manipulation: LIQUIDITY & COMPLEXITY.
LIQUIDITY
There has been so much fiat thrown into the system that the players and positions have grown to a size that dwarf the liquidity in the “”markets””. A favorite example was many moons ago when I was in the derivatives business (I spent 30-years in derivatives), we had a major market sell-off. And during this sell-off, as many hedge funds and other buy-side participants had to sell liquid index ETFs to hedge (IWM, SPY, QQQ), we would see these large “liquid” ETFs show-up on the “Hard to Borrow” list (HTB). This meant that if someone wanted to short these HTB names, they would have to pay a premium to borrow them in order to short. The reason they were on the HTB list was because there wasn’t enough supply to go around. Said another way - the buy-side players got so big, that when they needed to hedge in these ETFs (also derivatives), they outsized the markets.
This was a wake-up call for me that totally resonated and makes perfect sense, and this was 10-years ago. The ironic punchline: the central banks have created so much liquidity, that they’ve created an environment where the participants have outgrown the daily liquidity of the markets.
We are left with a market place with monster players (the behemoths that are trading have billions and trillions under management) and when they “need to” move large positions around, their market impact creates chaos. For this reason, we can expect to see more gaps and more moves that make little to no sense.
The VIX is a good example of this. All the participants see an obviously risky market environment with rates ripping higher, the inflation genie is out of the bottle, and the world is on fire. The long volatility trade was so obvious and crowded, that they all got caught offsides and when they needed to sell volatility, the market was not big enough to absorb and we see a massive move in the VIX like this.
COMPLEXITY
The VIX is a different beast. The VIX is made up of a series/strip of SPX options. The calculation of the VIX consists of a whole bunch of SPX options (it’s an interpolated 30-day measurement) — all the options from at-the-money strikes and all the downside puts over a couple of expirations to arrive at this 30-day metric.
So, in order to manipulate the VIX the central banks would have to be managing a large book of derivatives. This is very different than just smashing gold and silver futures. Yes, they can just sell the VIX futures and other volatility products, but again, these volatility derivates are just not that liquid. In addition, these are listed products, so we should be able to see all the volumes and prints for a more transparent view.
In conclusion, the markets are manipulated we know. I am simply highlighting another major risk factor I find interesting - the unintended consequences of “liquidity”. Their attempt to liquify the system is in the process of out sizing the system itself: the tradable “”markets””.
Oct 30, 2023, Rahu and Ketu changed. 18 months, stock market will be volatile but up. It’s Astrology based on the ancient texts of India. J.P. Morgan: “Millionaires don’t use Astrology, billionaires do.”
Excellent comment! Let me think on this…I’m not sure I fully grasp the distinction between liquidity and crowded trades. A liquid market is one with depth and lots of participants and a healthy book of bids and asks.
But an illiquid market could have just as much capital sloshing around, but is concentrated into too few large hands. I get that as well.
How do you think of “liquidity” and in that definition is that something the central banks control either with reasonable control or with some sort of a lag?
I’ll apologize now for the lengthy response but this is a bee’s nest. There is definitely some overlap between the concept of liquidity and crowdedness. A couple examples to help clarify:
CROWDED AND LIQUID: we have a lot of participants long AAPL stock going into earnings. The earnings are a blow-out (a big beat), yet the stock trades down 5%, because it was a crowded long. The stock is liquid, so AAPL trades down 5% in a day, and then life goes on – AKA marching to new highs of course (sarc).
NOT CROWDED AND NOT LIQUID: we have a small cap manager that has been buying this same illiquid small-krap stock every time new funds come in the door. They are creating their own outperformance and looking good. For whatever reason, it is now time to sell. The manager realizes they hold 10x the average daily volume and they are trapped. This unwind could easily take a month and cost 20% – pick a number.
Then we have everything in between.
In the case of the VIX, we many participants – both the sell-side dealers (banks) and buy-side players (hedge funds, money managers, etc.) expressing LONG VOLATILITY strategies for all the reasons we know (rates higher, inflation higher, and the world on fire). This long volatility exposure can be expressed in a mind-numbing amount of ways (thank you derivatives), and a common offset to volatility risk is often SPX options/volatility (the liquidity in the SPX options will be more liquid than their existing long-vol derivatives play). Just like a directional trade – the common offset to a directional bet is the SPX (a market hedge).
Now we have the world off-sides with their long vol bets and the market is not acting the way they had hoped. The fast and easiest way for them to hedge their long volatility exposure is through the SPX options (the VIX). Remember, the VIX is totally replicable by trading a series of SPX options, which is also why the VIX is so popular. At the end of the day, the size of the long vol positions outsized the liquidity in the SPX/VIX, and the VIX can make a move like we just witnessed.
The other major variable is what I like to call – “The year-end benchmark fallacy”, where books need to be squared away before year-end, so this can exaggerate any move late in the year like we just witnessed here.
Saving the central banks for last – as much as I like to blame these unelected “leaders” for all that is wrong in the world, the central banks may not play a role in the scenario I just laid out. Again, I am not saying they do not have their thumbs on this VIX scale, but I can see this VIX action unfolding without their involvement.
PUNCHLINE: there is an inverse correlation between volatility and liquidity. And now everything is magnified because we are dealing with derivatives on volatility. #beesnest
It starts with the most important price out there, which is the price of “money” – interest rates. That is all QE is – a rate suppression game. They are creating currency units to buy their own bonds to keep rates artificially low. Once we accept that they are overtly manipulating rates, I wouldn’t put anything past them to be involved anywhere and everywhere. We also know that other central banks will buy stocks in addition to their own bonds (Japan owns a laughable number of their Japanese ETF’s and equities). It’s pretty well documented that they also have their thumbs on the scales in the paper silver and gold markets, as CM explained in the video. Then there are a whole host of other examples where they play god – like the melt-up in the Nickel futures where the regulators simply came in and cancelled a bunch of trades after the fact. When we think about how big this QE experiment is, the “cost” to move and manipulate some of these other markets is quite small in comparison.
Your interpretation that swap lines of the Fed are being used to buy according market manipulation services from foreign central bank sounds convincing. I understand that this is all coincidental in your view.
Alternatively this could as well be intentional and thus being an important (pre-planned) tool for the plan to reduce the capabilities of the so-called West (with the USA being the lead nation and with other nations being their vassals of different hierarchy and influence status).
The main function of this activity (market manipulation via swap lines) is then to keep the normalcy bias at work as long as possible thus increasing the anticipated damage (and perhaps even the possible gains) associated with the waited-upon crash.
Naturally many participants (whether aware of the situation or not) like to live in the current status-quo as long as possible in order to avoid the gruesome perspectives of the expected crash.
Central Bank Interference Good Or Bad - Right Chris - What Could Possibly Go Wrong?
Are the central banks AND I’m sure other large financial players manipulating.
Duh!
Time to withdraw consent. Of course I said that years ago and have been extracting retirement funds from “markets”. After Silicon Valley, I’m now convinced they’ll crash the small banks next to take out what’s left of the resistance.
Time to spend on real assets for sure. Since I now have solar, I’ve been wanting to hedge my bets by replacing a hybrid with a plug-in hybrid. Gave up last spring because dealers in the midwest couldn’t get them. Time to try again.
And of course, as we mentioned in the what are you doing thread, continue to rap up tax credits by investments in home energy credits.
the central banks may not play a role in the scenario I just laid out. Again, I am not saying they do not have their thumbs on this VIX scale, but I can see this VIX action unfolding without their involvement.
Yes, absolutely. Some of the financial market players have incomes bigger than most GDP’s. Since the apps all run off the same fixed game, they can easily produce coordinated results without actual overt conspiracy. Simply nobody big wants to bet against the system because if you don’t make a killing the first time, you won’t get a second chance. It’s much easier to buy legislation and regulations that will protect and grow your assets than it is to provide actual valuable goods and services. And in the trillions game, congresspeople are pretty cheap.
It’s more than that. By setting up economic scarcity and then fermenting political discord, you end up with the masses blaming each other. None of the “wingnut” factions steps back and says, wait a sec. There’s a bunch of stark naked mini-emperors in NY, DC and silicon valley and they’re responsible. Not some fabricated social/political enemy scapegoat. Maybe we need to take names and publish the scoundrels. NOT the frontmen, but the actual elites who are getting assets (not money, hard assets) and power out of the scams. Pointing out how the Pelosi gang managed to enrich themselves with her at the helm is a perfect example. Who owns farmland - Gates. Who’s buying up the houses my kids wanted to purchase to start a family - we can get a list.
Just a thought
