This from Hedgeye Risk Management CEO Keith McCullough this morning speaks precisely to my comments on gold yesterday:

“…people have to get liquidity where they have it, because with all of their liquidity problems they can’t get it. At the end of the movie, how this ends, for those of you who haven’t navigated successfully in the last two times this happened, back in ’01/’02 and ’08, I did both, is that they sell their losers at the end.

It’s not just getting liquid here, eventually they have to sell those /!#*ty credits, those illiquid private equity positions, those levered long credits, they sell all of that at the end, they sell what they have to at the end.

This part of the movie, on the stuff that they have liquidity in, they’re selling because they have to raise money.”

McCullough hits the nail on the head with regard to why certain asset classes that you’d think would work beautifully at moments like this — gold and treasuries, for example — aren’t. It’s essentially a liquidity crisis among big market players, and it apparently forces them to make the mistake virtually all beginning, and too many “experienced”, traders make; they’re — for no fundamental (to good investing) reason — selling their winners and letting their losers run. 


When they have to get to those losers is when all hell breaks lose. The Fed knows this and will continue to break all of the money-printing records to try and avert it.

This speaks to why we’ve been saying for the months that credit markets are what potentially turn the present bear market into something that rivals the past two…