Capital controls enter the derivitives markets.

I wonder how many people understand the implications of the blase sounding headline today (paraphrased), "Banks accept new derivative rule changes".  The premise is that,"The $700 trillion financial derivatives industry has agreed to a fundamental rule change from January to help regulators to wind down failed banks without destabilising markets. The International Swaps and Derivatives Association (ISDA) and 18 major banks that dominate the market will now allow financial watchdogs to apply temporary stays to prevent a rush to close derivatives contracts if a bank runs into trouble, the ISDA said on Saturday.  A delay would give regulators time to ensure that critical parts of a bank, such as customer accounts, continue smoothly while the rest is wound down or sold off in an orderly way."

Gee, all of that sounds so logical, so "right".  Who would not want that?  Don't we all want to be safer?

I'll tell you who would not want it: leveraged gamblers, that's who.  Derivatives are gambling bets of massive leverage and "financial weapons of mass destruction" according to Buffett.  It is a matter of when they will explode and how badly the nuclear yield will be, not "if".  

So what is the mindset of a leveraged gambler playing the Ponzi?  It is clearly that they are the smartest guy in the room, that they will see the signs and will get out before everyone else figures it out.  They will cut and run at the first sign of collapse and leave everyone else to eat the losses.  This is the only winning strategy for any player in a pyramid scheme (of which a debt Ponzi is one variety). 

But that "I'm agile" strategy was formulated before this new rule which now says that a 3rd party (and one who doesn't care if you stand to gain or lose from their intervention) can basically block your exit from the Ponzi (thus killing your whole exit strategy) with the stroke of a pen and backed by force of law (which essentially means physical force if you fail to agree with it).


So now this new rule has to be woven into everyone's models and it can only lead to one thing: Start removing risk from your portfolio ASAP.  Do it now before there is a declared crisis because it is for sure and for certain that there will be one.  Of course, the truly smart money already started on the Russell 2000 small caps around mid year...

This move by the money men did not ensure global economic safety folks.  In fact, quite the opposite: it simply urges the con men running this Ponzi to get out now before their ability to do so is curtailed and they have to sit there and lose all the gains of the past 2 decades as inflation [edit 10-12; I meant deflation not inflation] deflation ravages their holdings.  This move is more likely to accelerate the death of the global economic system than to save it.  I know this is true because it works the same way every time.

Do not be surprised to see the DJIA begin to go into free fall soon, even if there is an initial bounce preceding it.  If you are caught on the sidelines in TVIX and markets gap down next week, don't be afraid to buy it as long as you are not on any kind of margin because any TVIX pullbacks will be very temporary before it rockets to higher highs and soon to break above $4.20.  Will TVIX double before the end of the year?  Yes, easily according to my models.  Triple?  Don't count it out.  It could even be higher.

I'll say again for the record, day trading by those with time and understanding can improve results but most people should consider not getting overleveraged and then doing more holding than trading.  Save the sell trade for the obvious ends of motive waves and save the buy trade for the termination of the subsequent C wave of pullbacks.  The odds are rapidly shifting such that, at least for now, those who buy the legitimate 3 wave TVIX dip and hold until 5 good sized waves transpire will, over time, do better than most panicky day traders who are betting more than they should at once.