Tuesday, October 27, 2015

“The Central Intelligence Agency owns everyone of any significance in the major media.” — William Colby, former CIA Director

"The Western Press is completely owned by the CIA:
The Central Intelligence Agency owns everyone of any significance in the major media.” — William Colby, former CIA Director..."
at http://investmentwatchblog.com/the-central-intelligence-agency-owns-everyone-of-any-significance-in-the-major-media-william-colby-former-cia-director/

Europe's On A Road To A Very Bleak Nowhere

"Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
On the day after a bunch of European countries headed into yet another -emergency- meeting, and as the refugee situation in Greece and the Balkans was more out of hand than ever before, not in the least because the numbers of refugees arriving from -in particular- Turkey are larger than ever, let’s reiterate what should always be the guiding principle driving the response to issues like this.
That is, the only way to approach a crisis such as this one is to put the people first. To say that whatever happens, we will do what we can, first and foremost, to not allow for people to drown, or go hungry or cold, or contract diseases. Because that contradicts our basic morals. The loss of lives and prevention of misery should be the most important thing for everyone involved, all the time, from politicians to citizens.
If we cannot approach both the issue and the people with decency and humanity, we are as lost as they are. If only because we have no claim to being treated better than we ourselves treat others. After all, if someone else’s life is neither sacred nor valuable, why should yours be?
Looking through the response across Europe to the growing numbers and the growing crisis, what’s remarkable is the difference between individual citizens and the governments that are supposed to represent them. Apart from outliers like Hungary PM Victor Urban and the ubiquitous fascist groups from Greece through Germany, citizens win hands-down and across the board when it comes to humanity.
The arguably worst record is set by the European Union, ironically the one body that claims to represent everyone in the 500 million strong continent. Individual politicians in leading nations like Germany, France and the UK are close behind. European ‘leaders’ are not looking for a European solution, they’re all only trying to deal with their own part of the problem. As long as the refugees don’t burden their nations, they’re satisfied.
After a year of increasing refugee arrivals it’s safe to say that the pan-European approach, to the extent that it can even be said to exist, is a dismal and deadly failure.
Yesterday’s ‘Balkan+’ mini-summit was no exception. The AP headline says it all: “EU Agrees To Tighten Border Controls And Slow Migrant Arrival”. Europe’s priority is not to fight or minimize the suffering, it’s to make the problems go away by making the people go away. The new deal that came out of the summit cannot possibly work because it is based on unrealistic predictions of stopping the flow of refugees.
Greece has agreed to ‘host’ 50,000 refugees, but with 10,000 arriving daily that is a meaningless number. Apart from that, this is supposed to take place in ‘holding camps’, and the term all by itself should make one shiver. The ‘hotspots’, another EU initiative, are already making the refugee situation even worse than they have been for months.
Moreover, these people don’t want to stay in Greece, because in Greece economic prospects are so bleak as to be non-existent for the simple reason that the EU itself has demolished the Greek economy. Those responsible for that demolition now seek to force Greece to keep refugees from traveling north in holding camps and severely undermanned fingerprint facilities.
Disgrace comes in spades. It was therefore good to see that Greece had the pretty perfect answer:

at http://www.zerohedge.com/news/2015-10-27/europes-road-very-bleak-nowhere

Who's Really Isolated? Iran Set To Join BRICS Bank, Strengthen Ties With Brazil

"As US hegemony wanes in the face of dysfunctional domestic politics, foreign policy confusion, and a “lead from behind” mentality, the world has begun to transition towards a kind of new world order both politically and economically. 
On the geopolitical front, we’ve seen a resurgent Russia take charge in Syria after the situation spiraled out of control, leaving hundreds of thousands dead and creating the worst migrant crisis in Europe’s history. 
On the economic front, the BRICS nations have embarked on a series of projects designed to supplant the US-led multinational institutions that have dominated the post-war world.
In what has become one of the bigger stories of the year, China has established its own development bank (the AIIB) and after the UK broke with Washington to support the new venture back in March, the floodgates opened with US ally after US ally jumping on the bandwagon. Although Beijing has promised it doesn’t intend to use the bank as an instrument of foreign policy or as a means of promoting yuan hegemony, the renminbi is set to play a prominent role in loans issued by the bank and there’s little question that development lending will bolster China’s attempt to establish a kind of Sino-Monroe Doctrine. Beijing has similar ambitions with the Silk Road Fund (see our full breakdown here), although part of the story there looks to revolve around an effort to provide a kind of pressure valve for the country's excess industrial capacity.
And then there is of course the BRICS bank, which officially launchedalong with a reserve currency pool back in July. The following chart does a nice job of demonstrating why the bank matters:
Much like the AIIB, the BRICS bank is in many respects a response to what the emerging world views as an abject failure on the part of existing multilateral institutions to provide representation that’s commensurate with the growing clout of influential emerging economies.
Given this, and given what we know about the extent to which the current situation in the Mid-East has served to strengthen ties between Moscow and Tehran, it should come as no surprise thatIran is now set to join the BRICS bank. Here’s RT:
Tehran intends to participate in the BRICS New Development Bank, the Iranian Tasnim news agency reported on Monday, citing an Iranian official.

The Iranian Deputy Minister of Economic Development Mohammad Khazaee said at a meeting of a joint Iran-Brazil economic council that the country is aiming to join the BRICS bank."

at  http://www.zerohedge.com/news/2015-10-27/whos-really-isolated-iran-set-join-brics-bank-strengthen-ties-brazil

Saudi prince held after seizure of two tons of amphetamines at Beirut airport

"A Saudi prince has been detained at Beirut airport in Lebanon after two tons of an amphetamine drug popular with Syrian rebels was found on a private jet.
Prince Abdel Mohsen Bin Walid Bin Abdulaziz and four other men were held after what was described as the biggest ever drugs bust at the city’s main Rafik Hariri International Airport, according to local media and security sources.
They were allegedly "attempting to smuggle about two tons of Captagon pills and some cocaine", a security source was quoted as saying.
Captagon is a brand name for the widely used amphetamine phenethylline.
Although this type of amphetamine has been prescribed in the past to treat childhood and other behavioural disorders, it is now used overwhelmingly as a stimulant in the Middle East..."
at http://www.telegraph.co.uk/news/worldnews/middleeast/lebanon/11955937/Saudi-prince-held-after-seizure-of-two-tons-of-amphetamines-at-Beirut-airport.html

Saudi Arabia hits hospital run by Doctors without Borders in Yemen

"Doctors without Borders (MSF) says a hospital run by the international medical group in Yemen has been hit by Saudi airstrikes.
“MSF facility in Saada [sic] Yemen was hit by several airstrikes last night with patients and staff inside the facility,” the group said in a tweet on Tuesday.
MSF spokeswoman Malak Shaher separately said that there were “no casualties” in the attacks.
Meanwhile, Yemen’s state news agency Saba quoted the Heedan hospital director as saying that several people were injured in Saudi attacks on the hospital – which is also located in Sa’ada – last night.
“The air raids resulted in the destruction of the entire hospital with all that was inside – devices and medical supplies – and the moderate wounding of several people,” Doctor Ali Mughli said..."

at http://presstv.com/Detail/2015/10/27/435169/Yemen-Saudi-airstrike-Doctors-without-Borders

Only Three Nations in the World Can Build a Modern Jet Fighter on Their Own

"Recently, U.S. Defense Secretary Ashton Carter once again shot down South Korea’s request to transfer four key technologies for that country’s KF-X “indigenous” fighter project. The United States’ refusal to transfer those technologies highlights a fundamental problem with developing a homegrown fighter—most nations don’t have the technology to develop a jet on their own.

The technologies Korea wanted include the know-how to develop an active electronically scanned array radar, cutting edge electronic warfare systems, an infrared search and track system and an electro-optical targeting system. The U.S. also refused to help South Korea with a sensor fusion engine to tie all of those systems together into a single coherent picture for the pilot—all the keys needed to develop a modern fighter. Nonetheless, the U.S. is willing to transfer twenty-one other less important but vital technologies needed to build the KF-X—it’s just unwilling to transfer the crown jewels of American technology to anyone. Indeed, much of the technology for the indigenous KF-X will come from the United States—including its General Electric F414 afterburning turbofan engines.

But depending on the United States can be a major drawback for many countries—especially if they want to incorporate technologies from third parties or export those platforms. Using American technology means that Washington gets a veto—which it exercises often. Indeed, both Israel and Korea have discovered that the hard way on several occasions.

But it’s not just the United States—using any foreign technology generally means that a third party has veto on sales or modifications. Saab discovered that the hard way when the United Kingdom vetoed a JAS-39 Gripen sale to Argentina because the jet uses British technology. Incidentally, since the Swedes use so much American technology in the JAS-39—the United States also has a veto on Gripen sales.

Generally speaking however, the United States is a lot stricter in terms of technology transfer than the French, British, other Europeans or Russians. But the United States also generally offers much better technology and far more comprehensive deals in terms of weapons and strategic partnerships. The price for that, of course, is sovereignty. And given Washington’s preeminent position on the world state, the United States usually gets what it wants.

If a nation does choose to develop an indigenous fighter with outside help from Russia, France or the other Europeans, that nation has to be aware that—like the United States—those powers are not going to share the crown jewels of their technology. While the French, Russians and rest of the Europeans are somewhat more generous in terms of technology transfer—they generally have to be in order to compete with the United States. But even then—Dassault, for example, will not just hand over the keys to the kingdom to India or anyone else..."

at http://russia-insider.com/en/politics/only-three-nations-world-can-build-modern-jet-fighter-their-own/ri10743

On the march to western Europe: Shocking pictures show thousands of determined men, women and children trudging across the Balkans as politicians warn EU could collapse in weeks

"Battling strong winds, driving rain, mud and freezing temperatures, these stunning photographs show a slow trek of thousands of migrants making their way to Europe amid the harsh conditions of the oncoming winter.
As one European leader warns the ever growing crisis will see the EU fall apart 'in weeks', tens of thousands of people are continuing to try and reach the Eurozone via the arduous Balkans route.
And as these pictures show, they are prepared to do so despite often overwhelmingly difficult conditions..."

at http://www.dailymail.co.uk/news/article-3289031/The-long-march-Stunning-pictures-thousands-migrants-brave-mud-rain-days-bid-Balkans-western-Europe.html#ixzz3pmXhrNEC

Well-‘red’: MI5 spied on prominent academics ‘for decades’, secret docs show

"British intelligence services, including MI5, secretly spied on a number of prominent academics with socialist leanings “for decades,” including Oxbridge dons Christopher Hill and Eric Hobsbawm, secret files disclosed on Friday show.

The historians were among a number academics at the UK’s top universities who were placed under rigorous surveillance by the security services after officers became concerned about their supposed ‘communist’ leanings.
However, instead of secret plots, the files, which are held in the National Archives in southwest London, actually tell of more banal issues, including marital infidelity and forensic academic disputes with the British Communist Party.
The security services used covert techniques including bugging offices and wiretapping phones to build a comprehensive picture of the academics, who were marked out by security services for their support for the communist ideology in the 1930s, as it began to gain popularity in the West.
On the documents, an MI5 officer noted the intelligence was necessary “to establish the identities of his contacts and to unearth overt or covert intellectual communists who may be unknown to us.”
Other academics monitored included AJP Taylor, one of the worlds’ leading figures in 20th-century European history, as well as writer Iris Murdoch and the moral philosopher Lady Mary Warnock, who joined Hill in a march against nuclear weapons in 1959.
“I’d love to see the file, or anybody’s file come to that, to see what was/is regarded as suspicious … I am completely taken aback and even faintly flattered,” Lady Warnock told the Guardian..."
at https://www.rt.com/uk/199008-mi6-spy-uk-academic/#.Vi0PTmUE78M.reddit

Almost 1.5 million Iraqis killed in this illegal invasion. Blair apologizes and all is fine and dandy now

"Tony Blair Admits Iraq War Led To Rise Of ISIS, Apologizes For “Mistakes”
If there’s one lesson Washington simply refuses to learn when it comes to Mid-East foreign policy it’s that forcibly removing autocrats almost invariably leads to chaos.
That’s not to say that promoting democratic principles and encouraging government “of the people, by the people, and for the people” isn’t somehow a noble pursuit at the theoretical level. It’s simply to say that real political change must be completely organic and cannot be brought about via military intervention or by covert attempts to support popular uprisings..."

at http://investmentwatchblog.com/almost-1-5-million-iraqis-killed-in-this-illegal-invasion-blair-apologizes-and-all-is-fine-and-dandy-now/

China warns US after Navy ship passes disputed islands claimed by Beijing

"China's Foreign Ministry reacted angrily Tuesday after a U.S. Navy ship passed within 12 nautical miles of disputed islands in the South China Sea late Monday in an apparent challenge to Beijing's territorial claims in the region.

The ministry said that authorities monitored and warned the guided missile destroyer USS Lassen as it  moved inside what China claims as a 12-mile territorial limit around Subi Reef in the Spratly Islands archipelago, a disputed group of hundreds of reefs, islets, atolls and islands in the South China Sea that is also claimed by the Philippines.

A defense official told the Associated Press the patrol was approved by the White House and took place without incident.

"The actions of the U.S. warship have threatened China's sovereignty and security interests, jeopardized the safety of personnel and facilities on the reefs, and damaged regional peace and stability," the ministry said on its website. "The Chinese side expresses its strong dissatisfaction and resolute opposition."

at http://www.foxnews.com/politics/2015/10/27/us-navy-to-send-warship-near-disputed-islands-claimed-by-china/

Russia and China Increase Gold Holdings As Central Banks Continue Loose Monetary Policies

"...When you consider gold withdrawals from the SGE as well as the flows from China, one thing is certain and that is the demand for gold by China remains enormous.
Yet, despite the massive demand for physical gold from China, and as gold flows from West to East, the futures market of Comex is still largely responsible for setting the gold price.  But, the more the Chinese become involved in the global gold price mechanism the more their influence will rise in determining the actual price given these massive gold flows.  This of course will lead to a more credible reflection of prices as they will be determined according to the correct fundamentals and not simply by a few bullion banks that simply create price distortions.
But, it is not only the Chinese that have been adding physical gold to their reserves. Russia has been consistently increasing its holdings of the precious metal.
Russia added another 34.2 tons of the precious metal in September. This follows on the heels of a 1 million ounce increase in Russian gold reserves in August.
Since the global financial crisis, Russia has increased its gold reserves at an average pace of about 300,000 ounces per month. And, other countries formerly part of the Soviet Union have also increased their holdings of gold.
According to Bloomberg, Kazakhstan increased its gold reserves for the 35th straight month in August. The country purchased about 2.1 tons to bring its stash to roughly 210.2 tons. Belarus also expanded its reserves to 47.1 tons that same month..."
at http://goldsilverworlds.com/investing/russia-and-china-increase-gold-holdings-as-central-banks-continue-loose-monetary-policies/

Thursday, October 15, 2015

A Remarkable Look At The War In The Gold And Platinum Markets

"With gold and silver showing strength in the past nine trading days, today King World News is pleased to share an extraordinary piece that takes a remarkable look at the war in the gold and platinum markets.  This piece also includes four key illustrations that all KWN readers around the world must see.
October 15 (King World News) – Jason Goepfert at SentimenTrader:  “Gold continues to move impressively higher. Sentiment has improved as well, and during a bear market that always bears watching. A market stuck in a long-term bear market tends to peak out when sentiment recovers from extreme pessimism to neutral.
KWN SentimenTrader II 10:15:2015
The chart (above) shows the other peaks in gold during the past two years, and we can see that each of the peaks was associated with an Optimism Index right around 50. The latest reading has recovered to only 29, so there is a ways to go before it would trigger some concern that sentiment has recovered too much, too fast.”
King World News note:  The chart below shows the recent improvement in sentiment in the gold market, which broke the reading back above the excessive pessimism level (see chart below).
KWN SentimenTrader I 10:15:2015
at http://kingworldnews.com/a-remarkable-look-at-the-war-in-the-gold-and-platinum-markets/

Tuesday, October 13, 2015

How Much Gold Is China Importing And Does It Still Correlates to SGE Withdrawals?

"We have some catching up to do in terms of discussing Chinese gold import in H1 2015 and how this relates to withdrawals from Shanghai Gold Exchange (SGE) vaults. For this post it’s advised you’ve read The Mechanics Of The Chinese Domestic Gold Market to have a basic understanding of the physical gold supply and demand flows through the Shanghai Gold Exchange within the Chinese domestic gold market.
SGE withdrawals in 2015 are stronger than ever. Although, SGE withdrawals are (seemingly) less correlated to Chinese gold import this year, nonetheless Chinese gold import in the first six months of 2015 was higher relative to the same periods in the years before. 

Chinese Gold Market Recap

started reporting on SGE withdrawals in 2013 because I noticed these numbers exactly equaled Chinese gold demand as disclosed in the China Gold Association (CGA) Yearbooks 2007 until 2011. In addition, the structure of the Chinese gold market appeared to be designed to direct all Chinese gold supply through the SGE. Therefor, what comes out of the SGE (withdrawals) must equal total supply, which must equal total (wholesale) demand.
SGE withdrawals equal domestic mine output plus recycled gold supply plus import. Therefor, by using withdrawal data from the SGE, Chinese domestic mine output figures from the CGA and estimate the amount of recycled gold supply, we could calculate import.
Mine + recycled gold + import = SGE withdrawals
Import = SGE withdrawals – mine – recycled gold
SGE withdrawals proved to be a very effective tool to estimate import figures and measure Chinese wholesale gold demand. That is, until the Chinese gold market changed. In 2014 the Shanghai International Gold Exchange (SGEI) opened its doors, potentially inflating SGE withdrawals from the Shanghai Free Trade Zone without this gold ending up in the Chinese domestic gold market, and recycled gold supply increased significantly relative to 2013. From late 2014 I started writing SGE withdrawals were more difficult to analyze because of these changes in the Chinese gold market. After a period of abstinence from my side in reporting on SGE withdrawals, in this article we will resume to analyze the physical supply and demand flows in the Chinese domestic gold market.
The challenge is that China does not disclose gold import data in its regular customs reports. To find out how much China is importing we must use the foreign trade data statistics from all countries that export to China. A few years ago the bulk of Chinese gold import came in through Hong Kong and so gold export data from the Hong Kong Census and Statistics Department roughly elucidated how much China was towing in. Currently, China is importing gold directly from many other countries. To grasp how much gold China is importing I’ve started to chase the foreign trade statistics from all the major gold hubs (UK, US, Switzerland, Singapore, Hong Kong, Turkey, Dubai) and the big miners (Russia, South Africa, Ghana, Australia, Brazil, Canada, Mexico, Peru, Uzbekistan). Unfortunately this study is taking far longer than I was hoping for – in some countries the customs representatives, when finally contacted, are very sluggish in replying to my emails. I will share the data I have collected so far..."
at https://www.bullionstar.com/blogs/koos-jansen/how-much-gold-is-china-importing-and-does-it-still-correlates-to-sge-withdrawals/

Market Expectations Of A Stock Market Crash Have Never Been Higher

"With VIX collapsing 10 days straight (for the first time since October 2010), one might be forgiven for thinking "everything is awesome."However, as always, the real news is in the nuance that the mainstream often misses. As VIX has plunged (complacency about 'normal' risk), Skew (which measures extreme tail risk) has exploded to its highest ever...
Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options
 Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors(institutional/professional investors are the biggest traders in SPX options).

An unusual move in the skew index (which historically oscillates approximately between a value of 100 and 150) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums.

Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usually'(it is exactly the other way around when the VIX is high and SKEW is low)..."
at  http://www.zerohedge.com/news/2015-10-13/market-expectations-stock-market-crash-have-never-been-higher

The "1%" Own Half The World's Assets: The Stunning Chart

"On of the key things to understand about the massive, coordinated, global easing effort on which central banks have embarked since the financial crisis is that these policies have served to widen the gap between the rich and poor. 
Ben Bernanke - and plenty of other vaunted central planners for that matter - will tell you a different story. They’ll tell you that by creating jobs and boosting the economy, QE and ZIRP have actually done more for the middle- and lower-classes than they have for the wealthy. 
Obviously, that’s nonsense. When you adopt a set of policy measures specifically designed to inflate the value of the assets that are most likely to be concentrated in the hands of the rich, you perpetuate inequality and exacerbate class segregation by default - indeed, by definition. Here's proof:
If it wasn't for Ben "the Hero" Bernanke's courage to print like a drunken Keynesian madman, none of this would have been possible, and by "this" we of course mean that the net worth of the top 0.1% of Americans is about to surpass the wealth of the bottom 90% of US households.
This is everywhere apparent and has been documented by the Fed itself on at least one occasion this year. Meanwhile, asset bubbles in things like high end art and mega mansions underscore the extent to which the top echelons of society are increasingly flush. 
Credit Suisse is now out with the latest edition of its Global Wealth report and although the results are not surprising, they are worth highlighting. 
Three standouts: i) the rise in the value of financial assets is most certainly contributing to an increase in global inequality, ii) dollar strength led to the first decline in total global wealth (which fell by $12.4 trillion to $250.1 trillion) since 2007-2008, iii) 0.7% of the world's population own nearly half of the world's wealth while the bottom 71% of the population own just 3%. 
We present the wealth pyramid first followed by some further color from the report.
The topd of the pyramid, zoomed in:
*  *  *
From Credit Suisse
The share of financial assets rose again as a percentage of total wealth and may help explain why wealth inequality is edging upwards. The top 1% of wealth holders now own half of all household wealth.
To determine how global wealth is distributed across households and individuals – rather than regions or countries – we combine our data on the level of household wealth across countries with information on the pattern of wealth distribution within countries. Once debts have been subtracted, a person needs only USD 3,210 to be among the wealthiest half of world citizens in mid-2015. However, USD 68,800 is required to be a member of the top 10% of global wealth holders, and USD 759,900 to belong to the top 1%. While the bottom half of adults collectively own less than 1% of total wealth, the richest decile holds 87.7% of assets, and the top percentile alone accounts for half of total household wealth. Last year’s report covered trends in wealth inequality in detail. The shares of the top 1% and top 10% in world wealth fell during 2000–2007, that of the top percentile from 48.9% to 44.8%, for example. However, the trend has reversed since 2008 and the additional rise this year takes the share of the top percentile to a level not observed since 2000 and possibly not seen for almost a century. Nevertheless, the share of the top decile remains below the 88.3% level achieved in 2000.
While there are reasons why wealth inequality may be on a secular upward path, the year-on-year changes are heavily influenced by the relative importance of financial assets in the household portfolio, as we explore in more detail in the next section of this report. There are strong reasons to think that the rise in wealth inequality since 2008 is mostly related to the rise in equity prices and to the size of financial assets in the United States and some other high-wealth countries, which together have pushed up the wealth of some of the richest countries and of many of the richest people around the world. The jump in the share of the top percentile to 50% this year exceeds the increase expected on the basis of any underlying upward trend. It is consistent, however, with the fact that financial assets continue to increase in relative importance and that the rise in the USD over the past year has given wealth inequality in the United States – which is very high by international standards – more weight in the overall global picture. 

There are many reasons for the wealth differences observed across individuals. Some of those with low wealth are young and will have had little opportunity to accumulate assets. Others may have suffered business losses or personal misfortune, or may live in countries or regions where prospects for wealth creation are limited. Opportunities are also constrained for women or minorities in some countries. At the other end of the spectrum are individuals who have acquired large fortunes through a combination of talent, hard work and good luck. The wealth pyramid shown in Figure 1 reflects these differences. It has a large base of low wealth holders and upper levels occupied by progressively fewer adults. We estimate that 3.4 billion individuals – 71% of all adults in the world – have wealth below USD 10,000 in 2015. A further billion adults (21% of the global population) fall in the USD 10,000–100,000 range. While average wealth is modest in the base and middle tiers of the pyramid, total wealth here amounts to USD 39 trillion, underlining the economic importance of this often neglected segment..."
at http://www.zerohedge.com/news/2015-10-13/1-own-half-worlds-assets-stunning-chart

Axel Merk: Got Gold?

"Submitted by Axel Merk via MerkInvestments.com,
While some continue dancing, the music might have already stopped: are we already in a bear market in stocks? In this context, we study past bear markets to see whether gold may serve as a valuable diversifier for what's ahead.
Are we in a bear market?
A "bear market" is frequently defined as a decline of at least 20% in the S&P 500 index. Trouble is that by the time pundits provide their seal of approval that we are indeed in a bear market, the index has already lost 20% from its peak. Many of them will likely have told investors to buy the dips all the way down.
In our August 4 Merk Insight Coming Out - As a Bear!, we argued that a bear market is about to commence. Mind you, that was just before the surge in volatility. At the time, some wondered why a "currency and precious metals" guy like myself would have anything to say pertaining to the stock market; just about a week later, there were numerous media reports blaming the currency markets for turmoil in the stock market. Go figure.
We are not going to repeat the entire bear case again, except to summarize that we believe we have shifted from an environment where investors think the glass is half full to one where the glass may be half empty. This is largely induced by the Fed's attempt to extricate itself from its 0% interest rate policy; that's because, in our analysis, just as the Fed's extraordinary policies have fostered complacency, any attempt to move away from it may cause fear to return to the markets. There are numerous implications, but one of them being that investors may be shifting from buying the dips to selling the rallies as their focus shifts from chasing returns to capital preservation.
How to prepare for a bear market?
In some ways, whether or not we are in a bear market already is not the most important question. Instead, investors may want to ask themselves whether they are sufficiently diversified to be ready for the next bear market, which will eventually come.
In the past, we have extensively discussed ways to diversify in an environment where many assets have been rising in tandem. We believe the tide has turned, and prices across a broad spectrum of asset classes may be at risk. We have discussed alternative strategies such as long/short strategies in the currency or equity space that each come with their own set of opportunities and risks. Today, we zoom in on gold. This discussion is not meant as an endorsement of any one tool to be used in a bear market. Instead we look at it in the context of the toolbox former Fed Chair Bernanke used to talked about: just as the Fed has had its toolbox, investors may to have one of their own to be ready for what may lie ahead.
Gold as a diversifier
A key reason we look at gold as a diversifier is because of its low correlation to the equity markets. Correlation is a measure of how two securities or asset classes move in relation to each other. There are times when the price of gold moves in tandem with the S&P 500; other periods, when it moves in the opposite direction. When all is said and done, over the past 45 years, the correlation between the price of gold and the S&P 500 is zero.
Aside from correlation, the other key ingredient investors may want to consider is the expectation of future returns. That's a sticking point for many, as this shiny metal doesn't earn any interest (unless leased out). Having said that, investors also typically use cash as part of their portfolio, often with little motivation to earn interest (indeed, interest on cash is also earned only when it is put at risk by, for example, placing it in a bank account, although government insurance schemes might mitigate that risk)..."
at http://www.zerohedge.com/news/2015-10-13/axel-merk-got-gold

By This Metric, We Are Already In A Global Recession," HSBC Warns

"One of the things you might have noticed if you follow trends in global growth and trade, is that the entire world seems to be decelerating in tandem with China’s hard landing (which most recently manifested itself in another negative imports print). 
For evidence of this, one might look to the WTO, whose chief economist Robert Koopman recently opined that “it’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing.” And then there’s the OECD, which recently slashed its global growth forecasts. The ADB joined the party as well, citing China, soft commodity prices, and a strong dollar on the way to cutting its regional outlook. Even Citi has jumped on the bandwagonwith Willem Buiter calling for better than even odds of a worldwide downturn.
Indeed, virtually anyone you talk to will tell you that the world looks to have entered a new era post-crisis that’s defined by a less robust global economy. Those paying attention will also tell you that this dynamic may well end up being structural and endemic rather than transitory. 
Earlier today, we noted that Credit Suisse’s latest global wealth outlook shows that dollar strength led to the first decline in total global wealth (which fell by $12.4 trillion to $250.1 trillion) since 2007-2008. 
Interestingly, a new chart from HSBC shows that when you combine the concepts outlined above, you learn that when denominated in USD, the world is already in an output recession. 
Some color from HSBC:
We are already in a global USD recession
Global trade is also declining at an alarming pace. According to the latest data available in June the year on year change is -8.4%. To find periods of equivalent declines we only really find recessionary periods. This is an interesting point. On one metric we are already in a recession. As can be seen in Chart 3 on the following page, global GDP expressed in US dollars is already negative to the tune of USD1,37trn or -3.4%. That is, we are already in a dollar recession..."
at  http://www.zerohedge.com/news/2015-10-13/metric-we-are-already-global-recession-hsbc-warns

Highest Ever Likelihood Of A Black Swan Event Taking Place Over The Next 30 Days

"With continued uncertainty in global markets, today King World News is pleased to share an extraordinary piece warns that traders have now priced in the highest ever likelihood of a black swan event taking place over the next 30 days.  This piece also includes a key illustration that all KWN readers around the world must see.
October 13 (King World News) – Jason Goepfert at SentimenTrader:  “The SKEW Index has soared to a new all-time high.  This means that S&P 500 options traders are pricing in the highest-ever likelihood of a “black swan” event over the next 30 days (see chart below).
KWN SentimenTrader I 10:13:2015
According to calculations from the Chicago Board Options Exchange, the current reading indicates an approximately 15% chance of a 2 -standard-deviation move over the next month (that probability was under 6% as recently as September 30).  The previous high in recent years occurred on September 18, before the S&P tumbled more than 9% over the next few weeks.” 
at http://kingworldnews.com/highest-ever-likelihood-of-a-black-swan-event-taking-place-over-the-next-30-days/

Warning On The Markets And A Look At The Destruction Of A Culture And A Nation

"With continued uncertainty in global markets, today a legend in the business sent King World News a powerful piece covering everything from the destruction of a culture and a nation to the action in major markets.
October 13 (King World News) – From Art Cashin’s note:  (Today we will revisit one of the most devastating economic events in recorded history. It all began with the efforts of a few, well-intentioned government officials.)
Originally, on this (-2) day in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to “jump start” a stagnant economy. Many months earlier they had decided that what was needed was easier money. Their initial efforts brought little response. So, using the governmental “more is better” theory they simply created more and more money.
But economic stagnation continued and so did the money growth. They kept making money more available. No reaction. Then, suddenly prices began to explode unbelievably (but, perversely, not business activity)..."
at http://kingworldnews.com/warning-on-the-markets-and-a-look-at-the-destruction-of-a-culture-and-a-nation/

Monday, October 12, 2015

Ben Carson Upsets Mainstream Media: Openly Questions Fiat Money

"[T]he only reason that we can sustain that kind of debt is because of our artificial ability to print money, to create what we think is wealth, but it is not wealth, because it's based upon our faith and credit. You know, we decoupled it from the domestic gold standard in 1933, and from the international gold standard in 1971, and since that time, it's not based on anything. Why would we be continuing to do that?”
Because of views like this, O’Brien dismisses Carson as not being a “candidate of serious policy.”..."
at http://www.zerohedge.com/news/2015-10-12/ben-carson-upsets-mainstream-media-openly-questions-fiat-money

Top 0.1% Of US Households Own As Much Wealth As The Bottom 90%

"If it wasn't for Ben "the Hero" Bernanke's courage to print like a drunken Keynesian madman, none of this would have been possible, and by "this" we of course mean that the net worth of the top 0.1% of Americans is about to surpass the wealth of the bottom 90% of US households.
That, and making Thomas Piketty's sequel just a matter of time.
The good news is that the wealth gap is not quite as bad as it was in 1929 when the top 0.1% owned 25% of all wealth, almost double the 16% generously "trickling down" to the "poorest" 90% of the US population."
at http://www.zerohedge.com/news/2015-10-12/top-01-us-households-own-much-wealth-bottom-90

Deflation = Debt + Demographics + Disruption

"With every passing day the Fed, which recently revealed that among its mandates are China, the VIX, the Dow Jones, and who knows what other market-driven indicator (a market which is also influenced by the Fed, leading to the mother of all reflexivity nightmares), is realizing the trap it has set for itself with 7 year of ZIRP and QE, two policies which on their own would have boosted much needed inflation (because a world drowning in $200 trillion in debt can only survive if the debt is inflated away, otherwise mass defaults are imminent), and yet has seen inflation expectations recently tumble to lows not seen since the financial crisis.
The reason for this pervasive global deflationary tide was explained by Bank of America in very simple terms, or rather letters, as follows: Deflation = Debt plus Disruption plus Demographics.
To wit: The cyclical fallout from the Great Financial Crisis and the secular deflationary “D’s” of excess Debt, tech Disruption, aging Demographics have been the major catalysts for deflation.
  • Disruption: Technological innovation and disruption are driving many goods & service sector prices lower (rent & health care are two important exceptions); extending human life and the propensity to save; fostering wage and job insecurity..."
at http://www.zerohedge.com/news/2015-10-12/deflation-disruption-debt-demographics

Global Deflation Alert: Hidden EM Debts To China Could Be Immense

"Authored by Carmen Reinhart, originally posted at Project Syndicate,
As central bankers and finance ministers from around the globe gather for the International Monetary Fund’s annual meetings here in Peru, the emerging world is rife with symptoms of increasing economic vulnerability. Gone are the days when IMF meetings were monopolized by the problems of the advanced economies struggling to recover from the 2008 financial crisis. Now, the discussion has shifted back toward emerging economies, which face the risk of financial crises of their own.
While no two financial crises are identical, all tend to share some telltale symptomsa significant slowdown in economic growth and exports, the unwinding of asset-price booms, growing current-account and fiscal deficits, rising leverage, and a reduction or outright reversal in capital inflows. To varying degrees, emerging economies are now exhibiting all of them.
The turning point came in 2013, when the expectation of rising interest rates in the United States and falling global commodity prices brought an end to a multi-year capital-inflow bonanza that had been supporting emerging economies’ growth. China’s recent slowdown, by fueling turbulence in global capital markets and weakening commodity prices further, has exacerbated the downturn throughout the emerging world.
These challenges, while difficult to address, are at least discernible.But emerging economies may also be experiencing another common symptom of an impending crisis, one that is much tougher to detect and measure: hidden debts.
Sometimes connected with graft, hidden debts do not usually appear on balance sheets or in standard databases. Their features morph from one crisis to the next, as do the players involved in their creation. As a result, they often go undetected, until it is too late.
Indeed, it was not until after the eruption of the 1994-1995 peso crisis that the world learned that Mexico’s private banks had taken on a significant amount of currency risk through off-balance-sheet borrowing (derivatives). Likewise, before the 1997 Asian financial crisis, the IMF and financial markets were unaware that Thailand’s central-bank reserves had been nearly depleted (the $33 billion total that was reported did not account for commitments in forward contracts, which left net reserves of only about $1 billion). And, until Greece’s crisis in 2010, the country’s fiscal deficits and debt burden were thought to be much smaller than they were, thanks to the use of financial derivatives and creative accounting by the Greek government.
So the great question today is where emerging-economy debts are hiding. And, unfortunately, there are severe obstacles to exposing them – beginning with the opaqueness of China’s financial transactions with other emerging economies over the past decade..."
at http://www.zerohedge.com/news/2015-10-12/global-deflation-alert-hidden-em-debts-china-could-be-immense

US Paradrops 50 Tons Of Ammo To Syrian Rebels

"...Because this latest program was such a public embarrassment, the Pentagon had to come up with a new idea to assist Syria’s “freedom fighters” now that they are fleeing under bombardment by the Russian air force only to be cut down by Hezbollah.
The newest plan: helicopter ammo. No, really. The US has now resorted to dropping "tons" of ammo into the middle of nowhere and hoping the “right” people find it. 
No, really. 
Here’s CNN:
U.S. military cargo planes gave 50 tons of ammunition to rebel groups overnight in northern Syria, using an air drop of 112 pallets as the first step in the Obama Administration's urgent effort to find new ways to support those groups.

Details of the air mission over Syria were confirmed by a U.S. official not authorized to speak publicly because the details have not yet been formally announced.

C-17s, accompanied by fighter escort aircraft, dropped small arms ammunition and other items like hand grenades in Hasakah province in northern Syria to a coalition of rebels groups vetted by the US, known as the Syrian Arab Coalition..."
at  http://www.zerohedge.com/news/2015-10-12/us-paradrops-50-tons-ammo-syrian-rebels