The deeper question is whether central banks truly have the will to stay the course that they now appear to be on. In my serial bubbleview of the world, the moral hazard dilemma has been compounded over the years -- making it riskier for central banks to turn off the liquidity spigot today than it was in 1994, 1998, and even 2000. To me, this is the modern day equivalent of 1979 -- when one central banker (Paul Volcker) had the courage and political independence to do the unpopular thing and go after CPI inflation. Today the challenge is precisely the same -- but the threat is asset inflation. This is the gut check that could make or break central banking for years to come. -Roach (MS)

E stimated Factor Exposures for Long-Short Equity Funds:
Market exposure rising and nears historical highs.

It appears hedge funds kept their net long equity positions and likely hedged with derivative instruments such as puts during the recent sell-off. On average Long/Short was down as much as the S&P 500 peak to trough or 8%. It appears
plausible that another de-leveraging process takes place in the US with Hedge Funds lowering their equity exposure. The recent de-leveraging was done primarily by Macro Hedge Funds. -Bartels (ML)

Adding to the above insight, as of the latest COT data reading, commercial hedgers held their largest NET short position [DOW ftrs] since 1997 (taking the other side of small traders and specs). A powerful directional move is likely in the cards. D