Friday, October 7, 2016


I was just getting on the outside of my first see-through last night when all hell broke loose in Asia.  Three minutes after New York had effectively shut down, Sterling fell nealy10% in a blink of an eye in Hong Kong, settling at 1.1830  but with reported prints of 1.15.  Why?  no clue but the uncertain consensus was that was a glitch in certain algorithms or a "fat finger trade' (Chinese are notorious for having fat fingers) or just a computer malfunction.  After the initial shock and throughout the morning, the currency clawed its way back to the 1.23-1.24 range but never quite got back to the point from which it started its fact it was down nearly 4% and the London close.

The reason were explained as mechanicalbut the fundamentals behind the fall were reported to be the so called "Hard BREXIT" policy line of the May government which has the world all a-twitter that a British government would be so silly as to put politics before commerce irrespective of the fact that is was the politics of the Union that was the subject of the referendum not commerce.  The British people voted "out"and it is what their government is probably duty-bound to give them, but of course for any government to follow the will of its people is frowned upon in smart circles these days.  I mean, after all, how do the people know what's good for them?

Now all this is rather interesting and quite amusing if one thinks about it but today's events convey certain dark images which are worth exploring.

FX trading these days is roughly 70% by machine; the days of ringing up a broker or a trader directly are pretty much gone, which means you can trade from any place on the globe at any time...BUT, if you're going to get a move like today's in Sterling I find it hard to believe that it would not initiate in a major center for the currency...not in Hong Kong.  Then again, the timing was exquisite.  It occurred just minutes after "the book" was "passed" from New York to Hong Kong when there were no other major Asian Markets trading and therefore, by definition, liquidity was at its lowest which would of course magnify any large move in either direction.  Then, too NOTHING that happens in Hong Kong of this magnitude is to be taken as a random event but at the same time how the hell does one get apparently every trading program around to move in the same direction at almost the exact same time?  Beats me.  But folks are trying to find out and in the forefront is the Bank of England.  Stay tuned, because this wasn't random.

As for the jobs number, well of all things I got it wrong.  156,000 new buns and bedpan jobs.  A lousy number if the truth be known but one which certainly takes the pressure off the Fed but surprisingly, the equities dipped slightly and bonds did nothing except firm-up yields slightly.  While the former was viewed as a bit of a surprise, the latter might explain it.  Could it be that the bond market is simply not going to wait for central banks to reach the point of firming but is going to push them there?  There is this feeling of tension highlighted by these strange random events, seemingly unconnected but leaving the impression that something is afoot.  Then there is debate #2 this weekend.  Speaking of things getting odder...

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