Monday, January 26, 2015

The Oil Crash Could Trigger Billions In UK Bank Losses

"British banks including Royal Bank of Scotland and Barclays may be sitting on billions in losses from the collapse in oil prices after a surge in junk loans to the industry.
UK banks have been behind more than $50bn of leveraged loans — high-yield, non-investment grade debt — to the oil and gas industry in the past four years, according to data from Dealogic.
Although British lenders are not the most exposed to the oil collapse, with most debt issuance arranged by US and Canadian institutions, leveraged loans arranged by UK lenders have more than doubled since 2011 amid the North American shale boom.
The price of Brent crude has slumped from $110 a barrel last summer to $48.91 on Friday, amid a glut in supply and falling global demand.
While low prices are likely to give a shot in the arm to consumers and manufacturers, many oil producers, particularly in America’s shale gas fields, are likely to be driven out of business.
A lengthy period of cheap crude is likely to trigger widespread defaults and many oil and gas loans are now changing hands for well below their face value as investors fear they will not get their money back.
Banks will offload many of the loans and hedge their losses, and some will have stricter lending standards for high-yield loans than others.
Losses will also depend on how long the oil price stays low, so it is unclear precisely how exposed the banks are to the energy industry’s woes.
Some lenders have privately indicated that they consider the oil price fall to have a positive impact, with the wider economic benefits offsetting the loans they are writing off. However, significant losses are seen as inevitable if prices fail to rebound.
Chirantan Barua, an analyst at Bernstein Research, has estimated that the combined losses of Barclays, RBS, HSBC and Standard Chartered from falling oil prices could amount to $3.4bn..."


Putin: Ukraine's Army Is A NATO Proxy Aimed At 'Containing Russia'

"Russian President Vladimir Putin said on Monday that Ukraine's army is a NATO proxy whose geopolitical aim is to constrain Russia.
"This is not the army, per se, this is a foreign proxy, in this case a foreign NATO legion, which, of course, doesn't pursue the objective of national interests of Ukraine.
"They have entirely different goals, and they are tied with the achievement of the geopolitical goals of containing Russia, which absolutely does not fall in place with the national interests of the Ukrainian people," Putin said on Monday.
"We often say: the Ukrainian army, the Ukrainian army. But in fact, who's fighting there? Indeed, there are, in part, official units of armed forces, but for the most part it's the so-called 'volunteer nationalist battalions,'" Putin added. 
His defiant tone comes as Russian-backed rebels launched an assault on the vital Ukrainian port city of Mariupol, killing 30 people. Over the weekend, the New York Times noted that Ukraine and NATO have flagged "Russian troops in unmarked uniforms apparently joining the separatists in the assaults on Ukrainian positions..."


The Terrifying $250 Trillion Time Bomb, Gold And Escalating Currency Wars

"The successive rounds of money creation are to be shoveled into the system. Negative interest rates exist in Switzerland, Germany and Japan reminiscent of the Great Depression. Money is not money any more. Sub-zero interest rates are the norm. We believe that sooner or later, there will be a need for money and rather than a mass produced fiat currency, capital will flow to that store of value that can be created without a push of the button.
Another problem is that the collapse in oil prices has raised risks in the world’s interconnected financial system. The world’s biggest banks possess some $250 trillion of energy exposure which are mismatched while leverage remains high. Russia’s central bank has already bailed out a mid-sized lender and the country faces a repeat of the late nineties when it defaulted on its obligations despite some $400 billion of foreign exchange reserves. Can the ruble go lower?
Bursting Bubbles, Gold And Currency Fears
Meantime, gold is a safe haven amid concerns of weakening currencies. The stealth currency war removes the last shock absorber to the system. Gold is a barometer of investor anxiety. Today, the consequences of the oil collapse, renewed tensions in the Middle East, the unraveling of Russia and a repeat of the Eurozone crisis makes gold a much more compelling haven than the dollar.
Gold is a beneficiary of quantitative easing and has risen before every round of QE. Seven years ago, the Fed’s unveiling of QE was a catalyst in gold’s torrid bull run. Gold is also a hedge against central banks’ penchant of unpredictability in a world of competitive devaluations and negative interest rates. No one, it seems, remembers that it was massive monetary accommodation and rampant speculation that led to the bubble whose bursting caused the Great Depression..."


Putin Draws Line In The Sand As West’s Major Oil Companies Push For War

"Shutting Iran out of SWIFT was a devastating blow to the Iranian economy, and denying Russia access to SWIFT could deliver a deadly blow to the already reeling Russian economy, suffering from the double whammy of US-led sanctions and oil prices cut in half over the last six months.
On The Verge Of War
The chief executive of Russia's second largest bank, speaking at the World Economic Conference in Davos, Switzerland, said, "If there is no SWIFT, there is no banking . . . relationship.  It means that the countries are on the verge of war, or they are definitely in a cold war.  The next day, the Russian and American ambassadors would have to leave the capitals."
If this seems like hyperbole, consider that one of the reasons Japan attacked Pearl Harbor was because the U.S., which was the world's largest oil producer at the time, had cut off oil sales to Japan — a move that clearly signaled which side of World War II the U.S. supported..."


Extraordinary Level Of Chaos And Confusion Now Engulfing World Markets

"With the U.S. dollar pulling back and crude oil still struggling near multi-year lows, today King World News is featuring a piece that discusses the extraordinary level of chaos and confusion that has now engulfed world markets.  This piece takes readers on a walk through the historic events that are now unfolding and also takes a look at what to expect going forward. 
We have lost our way as a people and a country when we ignore and/or fail to see the significance of history. King Abdullah and his father King Abdul Aziz al Saud were titans of the modern day middle east that so affected us all. I read about his death in the B section of the local paper after a story about our local nursing home under new management. God, Allah, Adonai . . . please help us all.
January 26 (King World News) – I received the aforementioned quote early Friday morning as I was contemplating the death of Saudi King Abdullah and the potential collateral damage it could cause from a change in Saudi leadership. Our emailer was exactly right, “King Abdullah and his father King Abdul Aziz al Saud were titans of the modern day middle east that so affected us all.” They were “moderates” in an area of the world that is awash with anything but “moderates.”


Monday, January 19, 2015

Richard Russell Warns Great Forces Now Overpowering Central Banks – Expect Gold-Backed Currencies

"After a wild week of trading that saw chaos erupt in Europe and the price of gold and silver soar, the Godfather of newsletter writers, 90-year old Richard Russell, warned that great deflationary forces are now overpowering central banks and the world is going to see gold-backed currencies once again.

Richard Russell:  “The great deflationary forces that are overpowering central banks everywhere have settled in. In an effort to combat the world deflationary forces, every nation wants a cheaper currency to benefit their exports. The result is a world choking on ever expanding fiat money.

This is pushing assets higher. The result will be a limited-time explosion with assets priced in terms of soaring fiat currencies. This will give us the third phase of the bull market that started in 1980. Ultimately, the power of world deflation will end the bull market and we will enter a correction (bear market) that will take the price of everything except gold to unbelievable new lows.

I expect the reaction to world deflation will be the revaluing of gold and new gold-backed currencies, in an attempt (as FDR did in 1933) to thwart deflation. The one percent of smart money sees the picture and is preparing for it..."


Former White House Official – Europe In Danger Of Mega-Bank Runs That Jeopardize The World

"Today a former White House official and Plunge Protection Team member warned King World News that Europe is now in danger of mega-bank runs that will destabilize the entire global financial system.  Former presidential adviser and member of the U.S. President's Working Group on Financial Markets, Dr. Philippa Malmgren, also discussed why the bank runs may spread across the Atlantic to the United States, eventually engulfing the entire world in chaos.

Eric King:  “It now appears at this point that the multiple bank runs in Europe have the ability to spread and create massive contagion.”
Dr. Philippa Malmgren:  “We have seen Banco Santander, which is considered the most important of the continental banks in Europe, recently announce without any warning that they didn't have enough cash and they had to do a very sudden and abrupt cash call of almost $8 billion just to stay alive….
Continue reading the Dr. Philippa Malmgren interview below…

This started a bank run at Banco Santander.  As much as 30 percent of the deposits in the U.K. were immediately withdrawn.  So this was of course a very big event and it has contributed to further euro weakness.  The fact is that when the biggest bank in Europe tells you without any warning that they need $8 billion just to keep the doors open, this is a big story.”
Increasing Number Of Bank Runs
Eric King:  “We are now seeing serious bank runs develop in Europe.”
Dr. Malmgren:  “Yes.  Now we have the four biggest Greek banks that have requested emergency assistance because they are experiencing bank runs.  The ECB is already being asked if they can support them.  So the bank runs are spreading.  And I think the worry is that central banks don’t have the resources to do a bailout.  This is another reason why Federal Reserve officials are saying it’s too early to raise interest rates.  It’s because big events are happening in the background.  So yes, there is systemic risk in the European banking system and now these weaknesses are starting to be exposed.”
Entire Global Financial System At Risk
Eric King:  “How bad could this situation get?  We saw bank runs in Europe once before and it got pretty dicey.  Will we see a repeat of that or something even worse?”
Dr. Malmgren:  “Yes.  All that happened before was they put enough cash into the system so that it temporarily hid the problem.  But the fundamental problems have been there from the start.  All these banks have too much debt, not enough cash, and they are very vulnerable.  In fact they are a source of vulnerability to the entire global financial system..."


Serious Questions Surround Germany’s Alleged 120 Ton Gold Repatriation From U.S. And Paris

"With the announcement today by the Bundesbank that the German's have allegedly repatriated 120 tonnes of their gold held abroad in the United States and Paris, serious questions have immediately begun to emerge about the shady way this co-called repatriatration has taken place.  This piece takes a trip down the rabbit hole of today's shady Bundesbank announcement.
January 19 (King World News) – Comments regarding Bundesbank's announcement of 2014 gold repatriations to Germany (120 tonnes)
Bundesbank today has released the already overdue announcement of its gold repatriations to Germany in 2014:
Facts first, then a few official comments from me / from our public campaign "Holt unser Gold heim!" / "Repatriate our Gold ":
- BuBa claims to have repatriated 120 tonnes in 2014 …
– … a number slightly higher than our estimate of 100 tonnes
– allegedly 85 tonnes were transported from NY/Fed and 45 tonnes from Paris/BdF
– 50 of the 85 tonnes from NY have (again) been melted and recast into new bars
– at least 43 of the 85 tonnes from NY must have been transported only in DECEMBER of 2014 (based on US-Fed-statistics)
Our comments as follows:
1. "Holt unser Gold heim" is somewhat satisfied that Bundesbank obviously has reacted to public pressure – and increased its repatriation speed significantly over 2013: 37 tonnes in 2013 compare with 120 tonnes in 2014 (5 tonnes from NY in 2013 versus now 85 tonnes in 2014)!
2. We still are not fully happy with the repatriation process in general for three reasons: speed, transparency and volume.
3. Speed: Average repat tonnages for 2013 and 2014 now stand at 78 tonnes per year. In order to repatriate all German gold abroad (2,400 tonnes), Bundesbank would still take more than 30 years! And there is no guarantee whatsoever whether BuBa will continue to repatriate at the current rate of 78 tonnes per annum..."


Tuesday, January 13, 2015

Finance More: Oil Risk Global Economy Nouriel Roubini I Went To A Talk With Nouriel Roubini And Ian Bremmer, And Now I'm Worried About Everything

"Everything is going to be terrible in 2015. 
That's the message that I came away with after listening to Time's Rana Foroohar interview economist Nouriel Roubini and geopolitics expert Ian Bremmer talk about global risk in the coming year.
There are major risks in China, in Russia, in Europe, in the Middle East, and in Nigeria. 
Beyond just general terribleness, there are a few things to consider specifically: 
The Global Economy
On the economy, Roubini said that he sees four major drivers of the global economy: the US, Europe, Japan, and China and other emerging market economies.
The only one of the four currently on the upswing is the US. However, it's questionable whether the American economy can distance itself from the rest of the world if there are economic headwinds everywhere else. The Federal Reserve's ending of quantitative easing (QE) hasn't hurt the US. But it has hurt emerging markets in the rest of the world..."


The Confessions Begin: Goldman, BofA Warn Crude Crash Will Have Negative Impact On GDP, Earnings

"The bad news is that contrary to conventional wisdom, as even Bank of America and Goldman now admit, sliding crude prices will have an increasingly more negative impact only not on economic growth but S&P earnings... something we said from day one.
Here is Bank of America becoming increasingly less cheery:
Despite conventional wisdom, investors seem to be on edge, with the 10-year yield below 2% and equities stumbling. Global disinflationary fears are growing, with concerns that the US will not be able to decouple from weakness abroad. And despite the benefits of cheaper gasoline, reports of a recent shale default and cuts to energy capex are putting the focus on downside risks. In our view, those risks are contained.

In our Year Ahead piece, we highlighted the downside risks to the energy patch from falling oil prices. At that time, based on our 2015 oil forecast of $90/bbl, we saw around 0.1%-pts of risk to GDP. But continued declines in the oil price suggest mounting risks.Here, we gauge the downside risk to growth if oil stays at $50/bbl. Already, rig counts have fallen to 1482 in the first week of January from a high of 1609 in October last year (Chart 1), suggesting declines in exploration/drilling outlays.

Although that 8% drop appears modest relative to history (we saw a 60% decline in the 2009 recession), Chart 1 shows that there’s about a four-month lag in the response of rig counts to weaker oil prices, so there’s likely more pain to come. Indeed, our Oil Services team sees a near 15% decline in rig counts in 2015. It’s important to note that the relationship between oil production and rig counts is non-linear. As our Commodity Strategy team points out, early reductions in rigs don’t necessarily imply falling output as operators may initially shift resources to more economic wells, keeping production intact. As prices fall further, the decline in rigs may eventually trigger greater curtailments in production. Thus, we see a notable lag of several months in the response of production to weaker prices.

The good news is that oil and gas extraction accounts for only 1.8% of GDP directly, suggesting a small hit to the overall economy. For example, if energy production were to fall by 10% in 2015 (just shy of the 14% decline in the recession) the decline in production would slice 0.2% off of GDP.
Needless to say, oil is not only 10% lower than the $50/bbl price when this note went to print on Friday,but is about 50% below BofA's 2015 oil forecast. So... what were we talking about again?..."


Next Greek Premier Says Economic Data "Shamefully Embellished" To Look Better

"The Greek general election is just around the corner, and as expectations for a Greek overhaul, if not outright Grexit, rise so does the rhetoric by the man who, barring an act of god or Diebold, will be the next Greek premier: Alexis Tsipras, who some see as the catalyst for a Grexit, while others describe as merely yet another apparatchik of the Troika. Overnight Tsipras wrote an op-ed article in Germany’s Handelsblatt newspaper, summarized by Bloomberg, in which he said the notion that Greece’s economy has stabilized is an “arbitrary distortion of the facts.” He said that while the economy grew 0.7 percent in the third quarter, the recession isn’t over because of 1.8% deflation.
Psst: whatever you do, don't call it deflation. "Negative Inflation" is the preferred nomenclature, or better yet: "Joyflation."
Some of his other pearls: "We’re facing a shameful embellishment of the statistics to justify the effectiveness of troika policies."
Clearly writing to a German audience, Tsipras said that "German taxpayers have nothing to fear from a Syriza government. Our goal is not to seek confrontation with our partners, more credits or a blank check for new deficits."
So what exactly is his goal, aside from promising lower taxes and other things which the Greek government will be unable to achieve absent a surge in external funding, especially now, as we explained before, the Greeks have stopped paying their taxes entirely in advance of the elections?
"The truth is that Greece’s debt cannot be repaid as long as our economy is subjected to constant fiscal waterboarding,” Tsipras said in Handelsblatt.
Sorry, the truth is that Greek debt cannot be repaid, period..."


Russia To Increase 'Combat Capabilities' In Crimea, Sees Ukraine Conflict Worsening

"Following the adoption of its new military doctrine signed by President Vladimir Putin in December which identifies NATO expansion as an external risk, it is perhaps hardly surprising that, as Reuters reports,Russia's top general, Valery Garesimov stated that the "Defence Ministry will focus its efforts on increasing the combat capabilities of its units and increasing combat strength.. with special attention will be given to the groups in Crimea." Amid renewed heavy shelling in Donetsk, NATO's top military commander noted they will be stepping up exercises in the Baltic Sea region as Russian Deputy Foreign Minister Grigory Karasin warns, "the situation in eastern Ukraine is deteriorating."

Russia's top general said on Tuesday he would beef up combat capabilities this year in Crimea, the Arctic and the country's westernmost Kaliningrad region that borders two NATO states.

The remarks by General Valery Gerasimov, chief of the General Staff of the Armed Forces, are likely to deepen concern in the West over what it sees as Russia increasingly flexing its muscles since the start of the crisis in Ukraine.

"In 2015, the Defence Ministry will focus its efforts on increasing the combat capabilities of its units and increasing combat strength in accordance with the military development plans," Gerasimov told Russian journalists."


Boom Goes The Dynamite: The Crashing Price Of Oil Is Going To Rip The Global Economy To Shreds

"If you were waiting for a “black swan event” to come along and devastate the global economy, you don’t have to wait any longer.  As I write this, the price of U.S. oil is sitting at $45.76 a barrel.  It has fallen by more than 60 dollars a barrel since June.  There is only one other time in history when we have seen anything like this happen before.  That was in 2008, just prior to the worst financial crisis since the Great Depression.  But following the financial crisis of 2008, the price of oil rebounded fairly rapidly.  As you will see below, there are very strong reasons to believe that it will not happen this time.  And the longer the price of oil stays this low, the worse our problems are going to get.  At a price of less than $50 a barrel, it is just a matter of time before we see a huge wave of energy company bankruptcies, massive job losses, a junk bond crash followed by a stock market crash, and a crisis in commodity derivatives unlike anything that we have ever seen before.  So let’s hope that a very unlikely miracle happens and the price of oil rebounds substantially in the months ahead.  Because if not, the price of oil is going to absolutely rip the global economy to shreds..."


Man Asked To Speak To Chinese Officials Warns Of Cascading Series Of Global Defaults

"Today a legend who was recently asked by the Chinese government to give a speech to government officials in China warned King World News that the Chinese are preparing for a disastrous series of global derivatives defaults.  John Ing, who has been in the business for 43 years, also discussed how China is preparing ahead of the coming disastrous chain reaction, panic and worldwide financial destruction.
John Ing:  “Gold is up almost $50 in the last week.  This has been accompanied by an increase in volatility everywhere.  We also have the geopolitical instability that is causing increased volatility and dramatic swings in the market….
Continue reading the John Ing interview below…
“In one week in December the Chinese withdrew 57 tons of gold from the Shanghai Gold Exchange.  So the Chinese bought more than 2,000 tons of gold, which is a staggering amount for 2014.  The Chinese central bank continues quietly accumulating its gold hoard.  In the same week it was also announced that Russia bought gold.  So not only did this squash the rumors that the Russians were selling gold, instead they were accumulating.
Credit Default Swap Troubles
We are also seeing more attention being paid to credit default swaps troubles in countries like Venezuela, Argentina, and even Russia itself.  Of course credit default swaps were one of the primary reasons for the big financial collapse in 2008.  It’s ironic that today the exposure of derivatives is even larger, and therefore the exposure now greater than it was in 2007 and 2008. 
Citibank reported more than $70 trillion worth of derivative exposure, surpassing JP Morgan, which has something like $65 trillion of derivative exposure.  The biggest beneficiaries of the Fed’s QE were the big banks.  The problem is that the big banks are now more heavily leveraged than they were in 2007, before the collapse.
World Facing Cascading Series Of Defaults
So what the world is facing in 2015 is a very potent mixture, one that is even greater than the combination that caused the explosive events which led to the disastrous 2008 – 2009 markets.  There is the potential for a cascading series of defaults in key derivatives markets.  The larger the balloon gets, the greater the risk to the world’s financial system.  The Chinese are keenly aware of this danger, which is why they continue to be such prolific accumulators of physical gold at these levels.”


Absolutely Stunning News In The War On Gold

"Today King World News is pleased to share a fantastic piece which contains absolutely stunning news in the war on gold.  This outstanding piece also features three remarkable illustrations that all KWN readers around the world must see.
January 13 (King World News) – Regarding Gold In 2014, Did You Know?
1. It is only in America that nobody seems to know or care but, in fact, during 2014 gold was the second best performing currency after the US$.
KWN Tocqueville III 1:13:2015
2. Most Western investors see gold as a short term trade even though over the past 10 years, gold is +157% vs S&P +70% and over the past 15 years, gold is +300% vs S&P +40%.
3. When the Ruble collapsed in 2014, it was gold, not equities, that offered a safe haven.  As the Ruble declined 70% against the US$, Russian equities lost about 12% in Ruble terms whereas the gold price in Rubles rose 73%.
4. Gold ETF holdings have declined with gold prices but silver ETF holdings have remained stable. What gives? Over the past two years gold ETFs have served as a “swing bullion supplier” that prevented supply shortages as prices  of paper gold declined even as demand for physical gold has remained strong.
5. While Western investors have been trading gold securities, real gold has been flowing to the East where it is viewed as a core reserve holding that is independent from the fortunes of fiat currencies and financial assets (see charts below of Russian Gold Reserves & Shanghai Gold Withdrawals).
KWN Tocqueville I 1:13:2015KWN Tocqueville II 1:13:2015
In 2014 gold has protected investors whose currencies lost global purchasing power. This property of gold is valued in the East where they continue taking advantage of the West’s willingness to part with its bullion at current prices."
King World News note: This is all leading to a dramatically higher repricing of gold as it is reintroduced into the world monetary system by the Eastern bloc of nations, led by China and Russia.  Tragically the West is losing its gold hoard at the worst possible moment in history.  This will lead to a radically lower standard of living in the West and a total shift of global supremacy to the rising powers in the East."


Gold And Silver Markets Now Set For Spectacular Surge

"With gold trading near $1,240 and silver above $17, it now appears both of these markets are setting up for massive moves to the upside.  Included in the piece below is a key illustration as well as an important first target for the upside advance in the price of gold.

Below is top Citi analyst Tom Fitzpatrick's key chart showing the breakout in gold along with his commentary which includes an initial price target for gold.

All That Glitters Is Gold
"Yesterday's close above the neckline at $1,227/Oz confirmed an inverted head and shoulders on Gold….
Continue reading the Tom Fitzatrick piece below…

The pattern targets a 10.4% move higher to $1,355/Oz.
KWN Fitzpatrick 1:13:2015
This target is close to the July high at $1,345/Oz.
Only a close back below the neckline at $1,227/Oz would have us reconsidering the pattern's robustness.
King World News:  It's also important to note that the sentiment in gold, silver, and the shares are still near all-time historic lows.  This bodes well for the advances in gold, silver, and the shares as there is a distinct lack of bullishness in both metals, and particularly the shares."


Friday, January 9, 2015

Stephen Roach Warns: "The Fed Is In Total Denial... On What It Put The World Through A Decade Ago"

"Having previously warned that The Fed's "fixation with the markets has created a deadly trap," andrecently noted that "Central Banking has lost its way," Stephen Roach unleashed a few minutes of painfully honest truthiness on an unsuspecting Kelly Evans at CNBC. The brief interview reiterates Roach's previous comments, as Tim Iacono notes, that "it didn't have to be this way." The Fed "is in total denial," Roach rants, adding that it "hasn't learned the lessons of what it put the world through a decade ago."

"It didn’t have to be this way. The big mistake, in my view, came when the Fed condoned the equity bubble in the late 1990s.

It has been playing post-bubble defense ever since, fostering an unusually low real interest rate climate that has led to one bubble after another.

And that has given rise to the real monster -- the asset-dependent American consumer and a co-dependent global economy that can’t live without excess US consumption.

The real test was always the exit strategy."
Nothing ever changes..."


10 Key Events That Preceded The Last Financial Crisis That Are Happening Again RIGHT NOW

"They can see the same patterns that we saw in early 2008 unfolding again right in front of us.  I wanted to put these patterns in a single article so that they will be easy to share with people.  The following are 10 key events that preceded the last financial crisis that are happening again right now…
#1 A really bad start to the year for the stock market.  During the first three trading days of 2015, the S&P 500 was down a total of 2.73 percent.  There are only two times in history when it has declined by more than three percent during the first three trading days of a year.  Those years were 2000 and 2008, and in both years we witnessed enormous stock market declines.
#2 Very choppy financial market behavior.  This is something that I discussedyesterday.  In general, calm markets tend to go up.  When markets get choppy, they tend to go down.  For example, the chart that I have posted below shows how the Dow Jones Industrial Average behaved from the beginning of 2006 to the end of 2008.  As you can see, the Dow was very calm as it rose throughout 2006 and most of 2007, but it got very choppy as 2008 played out…
The Dow 2006 to 2008
As I also mentioned yesterday, it is important not to get fooled if stocks soar on a particular day.  The three largest single day stock market gains in history were right in the middle of the financial crisis of 2008.  When you start to see big ups and big downs in the market, that is a sign of big trouble ahead.  That is why it is so alarming that global financial markets have begun to become quite choppy in recent weeks.
#3 A substantial decline for 10 year bond yields.  When investors get scared, there tends to be a “flight to safety” as investors move their money to safer investments.  We saw this happen in 2008, and that is happening again right now.
In fact, according to Bloomberg, global 10 year bond yields have already dropped to low levels that are absolutely unprecedented…
Taken together, the average 10-year bond yield of the U.S., Japan and Germany has dropped below 1 percent for the first time ever, according to Steven Englander, global head of G-10 foreign-exchange strategy at Citigroup Inc.
That’s not good news. The rock-bottom rates, which fall below zero when inflation is taken into account, show “that investors think we are going nowhere for a long time,” Englander wrote in a report yesterday.
#4 The price of oil crashes.  As I write this, the price of U.S. oil has dipped below $48 a barrel.  But back in June, it was sitting at $106 at one point.  As the chart below demonstrates, there is only one other time in history when the price of oil has declined by more than $50 in less than a year…
Price Of Oil 2015
The only other time there has been an oil price collapse of this magnitude we experienced the greatest financial crisis since the Great Depression shortly thereafter.  Are we about to see history repeat?  For much more on this, please see my previous article entitled “Guess What Happened The Last Time The Price Of Oil Crashed Like This?
#5 A dramatic drop in the number of oil and gas rigs in operation.  Right now, oil and gas rigs are going out of operation at a frightening pace.  During the fourth quarter of 2014, 93 oil and gas rigs were idled, and it is being projected that another200 will shut down this quarter.  As this Business Insider article demonstrates, this is also something that happened during the financial crisis of 2008 and it continued well into 2009.
#6 The price of gasoline takes a huge tumble.  Millions of Americans are celebrating that the price of gasoline has plummeted in recent weeks.  But they were also celebrating when it happened back in 2008 as well.  But of course it turned out that there was really nothing to celebrate in 2008.  In short order, millions of Americans lost their jobs and their homes.  So the chart that I have posted below is definitely not “good news”…"


The Gold Market Has Finally Turned & This Leg Will Lead To A Parabolic Rise

"Today King World News is featuring a piece by a man whose recently released masterpiece has been praised around the world, and also recognized as some of the most unique work in the gold market.  Below is the latest exclusive KWN piece by Ronald-Peter Stoferle of Incrementum AG out of Liechtenstein.
January 9 (King World News) – Gold Has Finally Turned & This Leg Will Lead To A Parabolic Rise
2015 – A Golden Year Ahead?!
A glance at the (monetary) history books leads us to a clear conclusion: the fundamental arguments in favor of gold are more convincing than ever. The efficacy of monetary policy measures becomes ever more questionable, risks are rising. Mohamed El-Erian compares the behavior of central bankers to that of a pharmaceutical company that forces the market to take a medication that has never before been clinically tested. Investors should not only focus on the near-term successes of the treatment, but also consider the long-term side effects.
In the middle of the 19th century, the laws of thermodynamics provided the formal foundation for the understanding that it is impossible to create energy out of nothing. Analogous to this, central banks and governments are currently trying to create an increase in prosperity out of nothing. Such a monetary perpetuum mobile would be quite desirable for humankind, however, historically such attempts have at best led to a brief sugar high followed by a major hangover.
Total US Credit Market Debt as a % of GDP
KWN Stoferle I 1:9:2015
Japan's Abenomics program is in our opinion emblematic for the “Keynesian endgame” currently underway. It is a final desperate attempt to keep a debt dynamic going that must sooner or later collapse. We also see Japan as a harbinger of what the West will soon face as well. A painless way out of this situation is by now unthinkable.
If one wants to understand the future, one must look at the past. Future problems are always rooted in the crises of the past. The West is still at the beginning of its great paper money experiment – 43 years is not a long time period for a monetary order. The Austrian School of Economics not only poses the correct questions in this context, it also provides the correct answers. The root of the calamity is the unbacked, government-regulated monetary system. Together with a growing number of economists, we are convinced that the global monetary system needs an anchor again. Gold can play an important role in this context. Change will not come overnight through a central institution, but is rather a long-term process that has already begun.
Global financial assets are increasing faster than ever
KWN Stoferle II 1:9:2015
Our outlook for the gold price clearly remains optimistic. The ongoing consolidation that began in the late summer of 2011 with the all-time high is important for the bull market's health. The nominal gold price may appear to be still high, but relative to the monetary base it is actually at an all-time low. In our opinion, this is a temporary anomaly, which we regard as an excellent entry opportunity. We have demonstrated that gold remains attractively priced relative to stocks and bonds, but also relative to a number of hard assets. Hence, the gold bubble argument often promoted by pessimists is refuted as well..."


Thursday, January 8, 2015

You Are Being Lied To – The West Is In Bad Shape, Particularly The United States

"As the great propaganda machine that is the Western mainstream media continues to tell the public there is a tremendous economic recovery, it turns out the West is in bad shape, particularly the United States.  Below a 50-year veteran sets the record straight and also issues a major warning for the people of the United States. 
John Embry:  “I think the drop in oil is getting overdone on the downside, but it’s going to create major problems in the derivatives world.  There are an awful lot of derivatives written against oil and there’s a lot of junk paper written against oil.  There will be serious ramifications to all of this….

“I am amazed at how sanguine most people are in Canada regarding the collapse in the commodity sector in general, but most particularly in oil prices.  This is an incredibly negative development for Canada.
Toronto is where I live and it has been sustained by a condo boom of historic  proportions.  The Canadian housing markets have rivaled or even exceeded those seen at the peak of the housing bubble in the United States.  I don’t think any of this is sustainable, so I think Canadian optimists should be very wary..."


Bill Gross & Ray Dalio – Disaster Will Strike In 2015

"A January Investment Outlook should normally be filled with recommended “do’s and don’ts,” “picks and pans” and December 31, 2015, forecasts for interest rates and risk assets. I shall do all of that as usual when I travel to New York City for the annual Barron’s Roundtable in a few weeks’ time. That is always an opportunity for me to engage in verbal jousting with Marc Faber, Mario Gabelli and the usual bearish forecast from the Gnome of Zurich, Felix Zulauf. So I’ll leave the specific forecasting for a few weeks’ time and sum it up in a few quick sentences for now: Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.
Timing the end of an asset bull market is nearly always an impossible task, and that is one reason why most market observers don’t do it. The other reason is that most investors are optimists by historical experience or simply human nature, and it never serves their business interests to forecast a decline in the price of the product that they sell. Nevertheless, there comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset returns. Now is that time and hopefully the next 12 monthly “Ides” will provide some air cover for me in terms of an inflection point. Manias can outlast any forecaster because they are driven not only by rational inputs, but by irrational human expressions of fear and greed. Knowing when the “crowd” has had enough is an often frustrating task, and it behooves an individual with a reputation at stake to stand clear. As you know, however, moving out of the way has never been my style so I will stake my claim with as much logic as possible and hope to persuade you to lower expectations for future returns over the next 12 months..."