Deprcon warning
Market crash and banks
Based on the information we have received during the past few days, we issue a warning for a possible crash in the asset markets. While actions can be taken by the central banks, and based on the comments of, e.g., Fed Chairman Jerome Powell are been taken, the situation may not be in the hands of central bankers, anymore.
There are several extremely troubling signals coming from the markets, and it seems recent developments have cancelled the short ‘plateauing’ period, we speculated could occur less than a week ago. Economic and political instability is growing fast. The rumoured military coup in China, unsubstantiated at current time, is a prime example of this.
This also shows in the markets. For example, retail traders have accumulated a massive put-option-protection position in the U.S. Basically, they are buying protection against the decline in the prices of stocks in never-before-seen fashion.
The net speculative option premiums of institutional investors have also reached a never-before-seen negative position. This reflects a massive cash flow into options, that is, to contracts guaranteeing a preset (“strike”) price for an underlying security. This implies, again, a massive covering against falling prices in the markets.
Thus, both retail (leveraged) and institutional investors are expecting a that markets will face a ‘cataclysmic event’ in the near future.
We have also received information that one of the banks in Finland is (already) having troubles. We have lived under (large sum) cash-withdrawal restrictions since summer. As Finnish banking sector can be considered one of the safest in Europe, this is not an encouraging sign. We recommend raise cash to cover at least two weeks usage (preferably a month).
This warning is effective for the next two weeks. If nothing dramatic happens, we can assert that central banks, especially the Fed, has found a way to ensure the smoot functioning of the markets, for now.
We keep monitoring the situation closely.
Disclaimer:
The information contained herein is current as at the date of this entry. The information presented here is considered reliable, but its accuracy is not guaranteed. Changes may occur in the circumstances after the date of this entry and the information contained in this post may not hold true in the future.
No information contained in this entry should be construed as investment advice. Readers should always consult their own personal financial or investment advisor before making any investment decision, and readers using this post do so solely at their own risk. Readers must make an independent assessment of the risks involved and of the legal, tax, business, financial or other consequences of their actions. GnS Economics nor Tuomas Malinen cannot be held i) responsible for any decision taken, act or omission; or ii) liable for damages caused by such measures.