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Paranoid Bull @paranoidbull
, 18 tweets, 3 min read Read on Twitter
What we are currently witnessing in U.S. Equity markets has been building for some time and has already been well underway globally. This is simply the next chapter.

The Global Reset continues.
The Reason for The Global Reset is that Risk prices have been distorted globally for a decade due to excessive manipulation by Central Banks across all asset classes, beginning with Sovereign Credit.
In 2015 and 2016, the Cycle attempted to turn due to natural Cyclical facts like mispriced high yield debt and a slowdown in China, but the Global Central Banks refused to allow this to happen.

They conducted one last coordinated intervention in early 2016 across the globe.
This intervention translated what might have been a simple Cyclical contraction into the Systemic Collapse that we are now in the early stages of experiencing.

It might even be worse than I’ve previously feared.
The Reason the collapse is now Systemic is that Sovereign Credit Markets were severely distorted globally producing the most excessive search for yield in the history of the financial markets.
This Excess was so extreme it is all around us in so many ways (search “I wish there were signs of excess” on Twitter if you have doubt).

These included a Sharpe Ratio of 3.7 for the S&P 500, $8T+ of negatively yielding government debt, and a $Trillion fictional currency market.
The excess has literally been extremely obvious across all markets, yet like a frog in a pot of boiling water, things like career risk, imitative strategies, the Myths or Passive Magic and The Infallible Central Bank convinced people to remain in delusion
What is most absurd about this process is the fulcrum security for this manipulation - Government Debt - is exposed to THE MOST OBVIOUS RISK ON THE PLANET - Political Risk.
This Cycle is far worse than last because at least in 2007, some people weren’t aware that housing prices had already declined while they were pretending subprime is contained.

Political Risk is everywhere and obvious.

We literally have political bombings happening in the US.
The problem is that people are in such deep delusion about the markets that they can’t see this obvious Systemic Risk staring them in the face.
Their frameworks are so deeply flawed that they ignore the fact that the front end of the US curve has been skyrocketing post the 2016 election long before #Italy began to break down this year.
They can’t fathom that Rising Rates is simply a natural result of mispriced Risk at a deeply Systemic Level causing a deep reset across all asset classes.
The Reason this Cycle is likely even worse than feared is that the natural Cyclical slowdown that began in China and elsewhere in 2015 was simply delayed and now the fundamentals are ALSO rolling over.

We are getting hit with both at the same time.
In other words, what is happening is BOTH a Cyclical slowdown experienced in Autos, Semiconductors and other Global Cyclicals that are past peak and declining
AND a reset of Political Risk in Sovereign Credit through higher rates.
This double whammy is hitting markets right now and thusly the results are violent and Global.

But we must remember this is still very early in the process.
A Decade and many Trillions of intervention has distorted literally every market and asset class and so the process of normalization will take time.

It will be violent and most will remain in Denial and Delusion even while it happens - like right now.
The Global Reset is truly global and truly cross asset class.

Rates will rise, equity markets will fall, Credit Markets will have volatility and experience extreme drawdowns.
If anything, Political Risk continues to elevate and the Global Cyclical slowdown is just getting started.

What we have seen so far is nothing.

The Global Reset continues.
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