Friday, 1 September 2017

Correlation AND Causation..................from Rico

In a perfect, theoretical world, correlation is not causation.
- Correlation is merely a measure of how closely related two things are.
That's really swell for statistics and the world of macadamia, BUT it ignores the reality of Central Banks and HFT (high frequency trading), at least sine 2008.
Since 2008 over 90% of the trading volume on the NYSE and NASDAQ has been by computers using sophisticated algorithms aka HFT, not traders on the floor or in the trading pit. Bots.
- There are no "markets" today, HFT controls everything.
- Central Bankers know this [think: FED, ECB, BOJ] and they seek to control HFT.
Since the "markets" are driven by algo's, they can be spoofed to run the markets matter how crappy the news might seem to a human trader.
- Disasters? Tin pot dictators with bad haircuts shooting-off missiles? Meh. Central Banks want stability, and they want to keep the "markets" elevated to give the appearance of stability (of course, the wealth effect doesn't hurt either).
Look at the correlation of the attached chart, specifically Gold and the USD-JPY currency pairing.
This is so simple, even a Central Banker can do it!
1. Buy the USD-JPY pair.
2. Sell the VIX.
= "Markets" go higher no matter what.
It's worth noting that the Bullion Banks have their own algo tied to the USD-JPY pair.
- Want spot Gold lower?
- Make the USD-JPY rise.
That's it. It's really as simple as this.
- Control HFT and the algos, and you control the "markets" = you rule the financial world.
St Anne of Barnhardt was correct years ago: "If you're in these markets, you're either stupid or on drugs."

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