I guess we're beginning to see why gold rallied so sharply last Friday on the afterhours Globex. What we have here are the early stages of a global loss of confidence in the omnipotence of the central bankers planners. As confidence is the only "asset" backing their scheme, a growing loss of confidence is utterly devastating and this begins to lead the world back to the certainty of gold and silver.
Once again, events are moving very quickly so we'll try to sum up as best we can...
Click through for the rest. This loss of confidence is I think infecting not just markets but countries. And I wonder just how much of it is trickling down to the street level with how people are not only spending but behaving.
By Stefan Gleason* “The last duty of a central banker is to tell the public the truth.” – Alan Blinder, former Federal Reserve Board Vice Chairman The Federal Reserve Board finds itself back in a quandary of its own making. When Fed chair Janet Yellen pushed through an interest rate hike this past December, she confidently cited an “economy performing well and expected to continue to do so.”
The Fed set the stage for more rate hikes in 2016. But something went awry along the way – namely, the Fed’s upbeat forecast.
Official pronouncements of optimism don’t square with the economic realities now unfolding. Since the Fed’s rate hike, warning signs of a looming recession have rapidly accumulated. Industrial production is slumping. Global bulk shipping rates are in the dumps. The number of people without full-time jobs is growing. Corporate earnings are weakening. The junk bond market is melting down, and the stock market appears to be following suit. ...
BullionByPost, Britain's biggest online gold dealer, said it has already taken record-day sales of £5.6m as traders pile into gold following fears the world is on the brink of another financial crisis. Rob Halliday-Stein, founder and managing director of the Birmingham-based company, said takings today had already surpassed the firm's previous one-day record of £4.4m in October 2014. BullionByPost, which takes orders of up to £25,000 on the website but takes higher amounts over the phone, explained it had received a few hundred orders overnight and frantic numbers of phone calls this morning. "The bullion market has been building with interest since the end of last year but this morning things have gone bananas," said Mr Halliday-Stein. "Some bankers in London are placing unusually large orders for physical gold."
A topic I have written about before, “GAPS”. This is no acronym, simply a description of what is going to happen, probably quite soon! If you don’t now what a gap is now, you will know it when you see it! In technical terms, a “gap” opening is when a market opens either higher than the previous day’s high and does not trade down to that previous high …or, trades below the previous low and does not trade back up to that low. On a chart this action will leave a “gap” of emptiness signifying no trading took place in the gap area.
One place we are already seeing “gaps”, many in fact, are the gold and silver mining stocks. Since the beginning of the year there have been four or five instances where these gaps have occurred. Under “normal” circumstances, almost all gaps get “filled”. Meaning the asset in question will ultimately trade back to the gap levels and “fill” in the chart. We in my opinion are in no way living in “normal” times and the current and coming gap openings will be huge and never be filled. “Never” is a very long time, in this case it will be a generation or more in many asset classes.
As you know, I believe we are in the process of a financial meltdown that will alter the landscape on such a grand scale, history will call it something more severe than “the greatest depression”. In fact, I believe many currencies will go away and be replaced by new currencies. Credit will cease for a time and business will need to adjust to a new paradigm with far less credit but I digress. ...
What the central banks cannot do is create productive places to invest the credit they've generated in such excess, or force qualified borrowers to swallow more unproductive debt. One way to lose a war is to focus on preparing to fight the last war. Preparing to fight the last war is a characteristic of losing generals, militaries and nations. The same is true of finance and economies.
General Grant's difficulties in breaking the trench warfare around Petersburg, VA in the last year of the American Civil War (1864 to early 1865) telegraphed the future of trench warfare to astute observers. Few took heed of the lessons of the "first modern war," and many of the same strategies of 1864 (digging a tunnel under enemy lines and filling the tunnel with explosives to blow a hole through their defenses, for example) were repeated in the Great War of 1914-1918 fifty years later. ...
As global markets head into what will surely be another wild trading week, today the man who has become legendary for his predictions on QE, historic moves in currencies, and major global events, warned that the governments of the world are now preparing for total collapse.
Egon von Greyerz: “Eric, 25% of government bonds are now negative around the world. On Friday morning Bank of Japan was the latest country to introduce negative rates. There are now 13 countries with yields up to 2 years being negative and 10 countries with negative yields up to 10 years. I have been saying for a very long time that Japan is bankrupt and negative rates will of course not save their economy…
There have been two schools of thought regarding the measurement of Chinese gold demand – those who have followed the figures put out by the major precious metals consultancies and the World Gold Council, and the hugely higher figures suggested by Shanghai Gold Exchange (SGE) withdrawal figures.
In truth we find the mainstream consultancy and WGC figures increasingly hard to live with, despite the analysts pouring scorn on the SGE figures which, to this observer, look much more likely if one relates them to known mainland China gold imports alone – let alone adding in the nation’s very substantial domestic new gold output. For example, if one goes by mainstream consultancy GFMS China gold consumption figures you find an annual total under the consultancy’s latest report of something well south of 1,000 tonnes for 2015 and with the added comment that Indian consumption was ahead of that for China for the second consecutive year.
But – and this is a big but – it all depends on how one defines consumption. As far as gold jewellery demand is concerned this is probably all very true. But GFMS also comments that Chinese bank holdings of gold increased by as much as 400 tonnes over the first three quarters of the year bringing total bank holdings to some 1,900 tonnes at that time – and presumably to over 2,000 tonnes by the year end. This is all gold being absorbed by the Chinese market in some form or another. Interestingly if China treated its commercial bank holdings in the same way that Turkey does, then the country’s total gold reserves (Central Bank plus commercial banks) would probably be close to 4,000 tonnes, which does correlate pretty well to some estimates of total Chinese gold holdings, rather than the 1,762 tonnes the Central Bank reports to the IMF.
If the risk-on euphoria of punters borrowing billions of dollars in margin debt doesn't materialize, stocks could languish for years after falling 50%. The financial service industry's Prime Directive is to exploit humanity's core drives of Greed and Fear. Financial service companies promise high returns (fulfilling our greed) that are low-risk, i.e. "safe" (placating our fear of losing our nest-egg).
But the safety of many supposedly low-risk investments is illusory. The risk is not actually near-zero; rather, the risk has been buried, masked or obscured, for the obvious purpose of persuading the marks (i.e. the investing public, non-financial institutions, etc.) that the promised gains are essentially risk-free. ...
By Frank Holmes – CEO and Chief Investment Officer, U.S. Global Investors
Plunging oil prices, rising market volatility, surging global debt—it’s all beginning to remind some investors of 2008. Earlier this month, billionaire former hedge fund manager George Soros warned of an impending financial crisis similar to the last major one, which sent shockwaves throughout global markets.
The comparisons to 2008 have triggered gold’s Fear Trade, with many investors scrambling into safe haven assets. Jeffrey Gundlach, the legendary “bond king,” recently made a call that amid further market turmoil, the metal could spike as much as 30 percent, to $1,400 an ounce.
Once the power to manage expectations has been lost, the central bank bag of tricks is empty. No one knows precisely how and when the global unraveling will impact their corner of the planet, but we do know one thing with absolute certainty: central banks are out of tricks.
Like all good conjurers, the major central banks will claim that their magical powers to inflate asset valuations and inspire the animal spirits of risk, borrowing and spending are unimpaired, but this time the audience knows the truth: their magic is threadbare and their trick-bag is empty. Obfuscation and doublespeak are primary components of central bank magic.The magic is largely semantic: if the Federal Reserve claims it can restore the economy and the stock market with reverse repos and other financial legerdemain, the corporate media is always ready to repeat this dubious claim until it is accepted as self-evident.
Virtually every major program of every major nation-state is financially unsustainable going forward.
Though triage is typically used in a medical setting, we are entering an era when financial triage will increasingly be necessary on a household, enterprise and national level.
The term triage may have originated during the Napoleonic Wars from the work of Dominique Jean Larrey. The term was used further during World War I by French doctors treating the battlefield wounded at the aid stations behind the front. Those responsible for the removal of the wounded from a battlefield or their care afterwards would divide the victims into three categories:
Those who are likely to live, regardless of what care they receive
Those who are likely to die, regardless of what care they receive
Those for whom immediate care might make a positive difference in outcome. ...
After touching $1200 a couple of days ago (See: Gold touches $1200 in dramatic surge), the gold price fell back, and even fell further during Fed Chair Janet Yellen’s report on last week FOMC meeting to Congress. But as the statement continued and it became obvious that the Fed was in serious uncertainty over what both domestic and overseas economic indicators were meaning, gold the gold price surged after hours in North America, and overnight in Asian markets, to blast through the $1,200 psychological support level to close in on $1,220 - a level then comfortably surpassed during morning trading in Europe.
Further proof of how confidence in the FED is failing. Click through for the rest.
Hopefully you have read between the lines of my writings over the last few weeks and felt the urgency of the situation. Markets all over the world are coming apart at the seams and “control” is rapidly being lost. I would like to mention, over the years there has been one “rule” never broken. Almost ALWAYS, whenever the president of the U.S. speaks, or whenever the Fed meets and issues a policy statement …or whenever the Chairman of the Fed speaks …”control” is at its greatest.
Topic: negative interest rates vs. The Crudele Plan. I know, I’m excited, too.
Eight years of bad-to-mediocre economic growth have certainly been interesting. The new normal has become an unimpressive 2 percent annual expansion at best.
Federal Reserve head Janet Yellen calls this steady growth even though, in congressional testimony Wednesday, she seemed a little less sure. I say it’s about as steady as the Knicks — steadily unimpressive.
Now I don’t want to go pointing fingers (at least not yet), but last Friday’s employment data for January, which showed weaker-than-expected job growth but also a drop in the unemployment rate, contained some very odd stuff.
The global oil industry is caught in a self-feeding downward spiral as falling prices cause producers to boost output even further in a scramble to service $3 trillion of dollar debt, the world’s top watchdog has warned. The Bank for International Settlements fears that a perverse dynamic is at work where energy companies in Brazil, Russia, China and parts of the US shale belt are increasing production in defiance of normal market logic, leading to a bad “feedback-loop” that is sucking the whole sector into a destructive vortex. “Lower prices have not removed excess capacity from the market, but instead may have exacerbated it. Production has been ramped up, rather than curtailed,” said Jaime Caruana, the general manager of the Swiss-based club for central bankers.
The action in nearly all markets worldwide changed on a dime since January 1st. I am not sure “what or why” the change coincided so closely with the calendar year but the rate hike by the Fed is the leading candidate. As for the real global economy, there is certainly evidence the weakness of late last year has deepened significantly. The pace of collapse has shifted gears as evidenced by trade, earnings and even central banks. Japan’s new policy of negative interest rates followed by new Fed trial balloons of same speak volumes about “stress”.
Another area of stress is change in the action on COMEX. I have documented over the past year several delivery months where there were more contracts standing than registered gold available for delivery. The current Feb. contract has gone past first notice day with 13.3 tons of gold standing for 4.5 tons of registered gold. A very good synopsis of this was done yesterday by Craig Hemke at TF Metals Connecting The Comex Dots I encourage you to read this as Craig documents the recent shell game with inventory.
It is important to understand there are huge changes going on at COMEX. First I need to correct something I wrote last week. I said “it doesn’t make sense for the shorts to not deliver on the first or second day of the delivery period and wait until the end of the month”. This is absolutely correct, but I wrote this in late Jan. … so the deliveries we saw were some FIFTY PLUS days after the delivery period began on Dec. 1st! Are they really allowed to wait 55 days to make a delivery? Just to make it clear, it make no sense whatsoever to not make a delivery on day one or two because the storage costs must be paid. I absolutely stand by the most obvious reason not to deliver is because the gold was not available. ...
Systemic fragility doesn't respond to central bank jawboning or Keynesian claptrap; unlike those "policy tools," fragility is real. The core narrative of central bank/cartel capitalism is centralized agencies have the power to limit downturns and extend credit-based "good times" almost indefinitely. The centralized power bag of tricks includes fiscal policies such as deficit spending to boost "aggregate demand" in downturns and monetary policies such as lowering interest rates to zero and buying assets, a.k.a. quantitative easing.
If we crawl under the barbed wire and escape the ideological Keynesian Concentration Camp, we find thinkers such as Ugo Bardi, John Michael Greer and Dimitry Orlov, whose work explores the dynamics of collapse, resilience and sustainability. All three have added a great deal to my own (emerging) understanding of the many dynamics of collapse.
Every once in a while it is a good thing to review something we already know and have known for quite a while. What we’re talking about are derivatives and the very basics of how they work… or not. We have seen massive volatility since the Fed raised rates last month. The humor (tragedy), admitted to yesterday by the Fed, the 4th quarter saw slowing economies all over the world and “Nobody Really Knows Anything Right Now” ! I say “humor” because the Fed tightened rates just as the economy was weakening again. Many have said the Fed raised rates at “exactly the wrong time”. History may agree with this, I do not. In fact, there has not been one single day since the end of 2008 the Fed “should have” raised rates simply because of the massive debt embedded in the system and those pesky weapons of mass financial destruction called DERIVATIVES! Higher rates will only serve as a “margin call” in a system with no margin left!
First, derivatives are generally a zero sum game contract between two parties “betting” on something. They can be looked at as a speculation, a hedge, or even “insurance”. For this missive, let’s look at the “insurance aspect” of derivatives as literally $10′s of trillions in gains and losses have occurred just this month alone worldwide.
For example and as you know, the price of oil has collapsed. Ignoring the gains and losses directly on oil, let’s look at companies who’s business is oil. Whether it be production, exploration, transport or even “trading”, huge sums of money have been gained or lost depending on which way your bet was. Many oil related companies have CDS (credit default swaps) written against their debt. These contracts have been rising and rising in value as oil has dropped and the possibility of bankruptcies have risen. Huge gains by owners and losses by the “writers” of CDS have accrued.
If the "solution" doesn't enable the accumulation of capital in all its forms by individuals and households, it isn't a real solution--it's just another top-down scheme that institutionalizes subsistence serfdom. Phrases like reviving the American Dream emit the lingering stench of empty political rhetoric mouthed by bought-and-paid-for candidates. But if we wave aside this foul smell, we're left with a very profound topic: reviving broad-based opportunity.
What a tangled web the global geopolitical situation has become. Geopolitics and finance have always been interrelated but recently much more so. As many readers know, I have speculated we would be hit over the head with a “truth bomb” from the East and most likely from Mr. Putin himself. Just this week Britain has alleged Mr. Putin personally ordered a “hit” on an ex KGB agent for calling him a pedophile http://nypost.com/2016/01/21/murdered-ex-spy-accused-putin-of-pedophilia/. ; Another story came out that Turkey shot down a NATO helicopter which made no press coverage at all in the West. Also, Victoria Nuland recently travelled to Russia and was refused an audience by Mr. Putin. This, after John Kerry had a meeting where he went into it saying “Assad must go” and came out saying Mr. Assad can stay … Why all of this now? I would simply say this reeks of desperation and also a VERY dangerous strategy to attack Mr. Putin personally. I say “dangerous” because it raises the likelihood of a response from him. Can you imagine the outrage were Russia to accuse president Obama or the Prime Minister Cameron of Britain for ordering the murder of someone who called them a pedophile?
Before going any further, I believe nearly ALL of what we are seeing is centered by and on the “petrodollar”. Will it survive or be replaced? In my opinion it is no longer “if”, but “when” and by “what” will it be replaced with? Just over the last two weeks we have seen three very important yet interrelated events. First, the sanctions against Iran in place over the last 35 years were lifted. Along with this comes the ability for Iran to sell oil and they will now have access to up to $150 billion worth of assets and accounts previously frozen as reported by many credible non-government sources. ...
By Bill Fleckenstein President Of Fleckenstein Capital
January 19 (King World News) – Though my last column was only a few days ago, it almost feels like an eternity, with Friday seeing huge selling, the world stabilizing while we were on holiday, and the market opening today as if nothing bad had happened last week or so far this year. That’s not to say that the market should never bounce, because we often see bounces in bear markets and declines in bull markets.
I am just a little surprised to see so much complacency given the damage that has been done, but I guess since we haven’t seen real fear, as demonstrated by a huge spike in the VIX, perhaps complacency actually fits…
So what the hell is going on with the stock market?
You have the right to ask that question, not only because stock prices are down nearly 10 percent in the last month but also because you are hearing some crazy explanations from Wall Street pundits — as well as from those in the media.
And the media types are merely regurgitate what the pundits say.
The answer is simple: The market is down because stock prices were artificially high for a long time — thanks to the Federal Reserve — and because the world economy is extremely weak. And a weak economy doesn’t bode well for corporate profits going forward, which is what stock prices are supposed to be based on.
It’s really that simple — until the “experts” muddy it up with explanations that are mainly intended to cover their asses.
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