Thursday, April 21, 2016

Russia Threatens U.S., Will Respond With "All Necessary Means" To Any NATO Intimidation Attempts

"Last week, the US Navy and Air force were livid when Russian fighter jets first buzzed the US missile destroyer USS Donald Cook in the Baltic Sea, and just days later flew within 50 feet of a US recon planealso flying over the Baltic Sea, which some interpreted as a Russian warning to Poland. The U.S. escalated and complained vocally to Russia (even if Obama did not mention the incident during his phone call with Putin last week)..."


One Commodity Trader Writes: "What Is Happening Has Absolutely No "Reasonable" Explanation"

"One commodity trader writes in with some very unique observations. From trader "Peter"
* * *
The insanity has now fully spilled into the commodity markets – a market which I professionally made a transition to after the 2008 crisis from the financial markets, simply because I believed it was a market that would still function according to true fundamentals…
I guess that only lasted so long…
The commodity markets have been prone to excessive speculation for years, but at the end, the thought of specializing in something “tangible” that EVENTUALLY would have to revert back to true supply and demand fundamentals made all the sense in the world.  Specially with the true circus that the financial markets have become since 2008…
* * *
To: "Peter"
Sent: Wednesday, April 20, 2016 1:35 PM
Subject: volume totals today
774K of soybeans traded today and that would be a record by nearly 160K contracts as yesterday set the record at 615K.
Over 88K Jly/Nov traded today and 97K May/Jly traded.  Unheard of non-roll numbers.
Meal volume was 270K and we have to think that was a record as well but not 100% on that one.
Lots of ideas around to try and explain the move: from commercial short hedgers blowing out, Chinese pricing, product switching from Argentina to the US.
Not really sure if all or any of this is true but it was quite a wild session
* * *
From: "Peter"
Sent: Wednesday, April 20, 2016 2:41 PM
Subject: RE: Some staggering volume totals today
Man… I would be VERY surprised if this was due to any of the reasons people are mentioning…
    Chinese pricing – I am very positive it does have something to do with it, but for the overnight session – not the daytime.
    Commercial hedgers blowing out – very possibly adding to the mess – but no way commercial volume takes us to these levels of ridiculousness in total volume…
    Product switching from ARG – yep, because we REALLY need to ration our 400+ mb bean stocks… LOL
This is way past insane, ridiculous, etc…
The “fundamental” reasons people are trying to ping to this are simply a nice “window dressing”…
There is nothing else that can explain this other than you know what? 
Here comes my Very-REAL Conspiracy Theory: the stupid FED and other Central Bankers around the world acting in unison to artificially raise inflation so that they can hopefully get out of the F’ing mess they got themselves into with this low/negative rate BS.  Call me crazy, and I am not a “conspiracy theorist” – but what is happening has absolutely no “reasonable” explanation.  So I have to think outside the box…
The FED and other Central Banks have already destroyed the equity and other macro-financial markets… it is now turn for the commodities markets…
I am serious … I really am… I wish I was just being sarcastic… but pause for a moment and think about what is written above…
What explains the move in Crude? Ok, I could try and put some sort of “rationality” on the initial move from $26 - $40 (as crazy as it was), but the action in the oil market since Sunday’s “about face” in Doha?  No way anything other than pure, simple and outright manipulation can explain these last 3 days of action in the crude oil market… nothing…
How about the fact that the main drag on the inflation figures has been what? What? FOOD & ENERGY…
So is it so crazy to think that Central Bankers all got together in early 2016 and came up with the following equation???


Pimco Economist Has A Stunning Proposal To Save The Economy: The Fed Should Monetize Gold

"Back in December 2014, just before the ECB officially launched its initial phase of QE in which it would monetize government bonds, Mario Draghi was asked a very direct question: what types of assets could the ECB buy as part of its quantitative easing program. He responded, "we discussed all assets but gold."
The reason for his tongue in cheek response was because over the past few weeks speculation had arisen that gold could be part of the central bank’s asset purchases after Yves Mersch, a member of the ECB executive board and former Governor of the Central Bank of Luxembourg, said on November 17 that "theoretically the ECB could purchase other assets such as gold, shares, ETFs to fulfill its promise of adopting further unconventional measures to counter a longer period of low inflation."
Mario Draghi promptly shot down that idea.
But according to a provocative paper released by none other than Pimco's strategist Harley Bassman, Yves Mersch's inadvertent peek into what central bankers are thinking, may have been on to something. 
In "Rumpelstiltskin at the Fed", Bassman goes down the well-trodden path of proposing Fed asset purchases as the last ditch panacea for the US economy, however instead of buying bonds, or stocks, or crude oil, Bassman has a truly original idea: "the Fed should unleash a massive Fed gold purchase program that could echo a Depression-era effort that effectively boosted the U.S. economy."
He is of course, referring to FDR's 1933 Executive Order 6102, which made it illegal for a citizen to own gold bullion or coins or risk prison time. Americans promptly sold their gold to the government at the official price of $20.67, with the resulting hoard of gold was then placed in Fort Knox.
The Gold Reserve Act of 1934 raised the official price of gold to $35.00, a near 70% increase. It also resulted in an implicit devaluation of the US dollar. As Bassman points out, over the three years from January 1934 to December 1936, GDP increased by 48%, the Dow Jones stock index rose by nearly 80%, and most salient to our topic, inflation averaged a positive 2% annually, despite a national unemployment rate hovering around 18%.
In short, a brief economic nirvana which was unleashed by thedevaluation of the dollar confiscation of gold. In fact, we have frequently hinted in the past that another Executive Order 6102 is inevitable for precisely these reasons. However this is the first time when we see a "respected economist" openly recommend this idea as a matter of monetary policy.
Bassman says that the Fed should "emulate a past success by making a public offer to purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce? It would be operationally simple as holders could transact directly at regional Federal offices or via authorized precious metal assayers."
What would the outcome of such as "QE for the goldbugs" look like? His summary assessment:
A massive Fed gold purchase program would differ from past efforts at monetary expansion. Via QE, the transmission mechanism was wholly contained within the financial system; fiat currency was used to buy fiat assets which then settled on bank balance sheets. Since QE is arcane to most people outside of Wall Street, and NIRP seems just bizarre to most non-academics, these policies have had little impact on inflationary expectations. Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits..."


Startling Inflation News Illustrates The Failure Of Easy Money

"After three decades of epic deficit spending and three years of extraordinary money creation, Japan’s economy is enjoying a rollicking inflationary boom. Just kidding. Exactly the opposite is happening:

Japan households’ inflation expectations hit three-year low – BOJ

(Reuters) – Japanese households’ sentiment worsened in the three months to March and their expectations of inflation fell to levels before the Bank of Japan deployed its massive asset-buying programme three years ago, a central bank survey showed..."

This Is How They Fool Us, China Edition

"So it seems that China’s economy, caught in the grip of a credit crisis just a few months ago, is all better. And so, by extension, is everyone else. As the Wall Street Journal explains it:

China Calms Anxiety With Economic Fixes

WASHINGTON—The world’s financial leaders started the year worried about China’s decelerating economy dragging the world into another major crisis. Now, they are breathing a small sigh of relief...
 To its credit, the Journal does express concern over how China stabilized its and the world’s economy. But that’s down in the “journalistic balance” section, while the headline and first few paragraphs set the overall optimistic (or at least relieved) tone. The casual reader is thus left with a sense that progress is being made.
But that’s emphatically not the case. All China did was borrow a bunch of money and spend it, and it’s left to the sound money community to figure this out. Doug Noland in his Credit Bubble Bulletin of course gets it:
Rather than the bust that appeared likely in 2016’s initial weeks, the first quarter witnessed record Chinese Credit expansion. Friday data showed Chinese March total social financing jumping $360 billion (led by a surge in bank lending). This was somewhat less than January’s incredible $520 billion expansion, though it did push Q1 Credit growth above $1.0 TN (historic)..."


ALERT: This Will Be The Biggest Shock For The World In 2016

"This will be the biggest shock for the world in 2016.
Peter Boockvar:  The continued rally in stocks resulted in the highest spread between Bulls and Bears since last August according to II, right before that market selloff. Bulls rose to 47.4% from 41.2% last week and vs 45.4% in the week prior. Instead of coming from the Correction side, those Bulls came from the Bear side where they dropped by 6.1 points to just 21.7%, the lowest since August. I’ve said for weeks that the shift to the bull side made this index no longer a tailwind from a contrarian standpoint but was definitely not a headwind yet. With today’s reading getting stretched again with bulls now 25.7 points above bears, it now becomes so…"

Peter Boockvar – Gold & Silver Bullish As Silver Breaks Out To Highest Level Since May 2015!

"Today Peter Boockvar sent King World News a fantastic piece discussing gold’s surge, silver’s breakout and central planners eventually getting overwhelmed by market forces.

Peter Boockvar:  “Most noteworthy in Europe today is the uptick in interest rates coincident with the rise in US rates and on the heels of the highest closing level yesterday in the CRB index since December 4th and persistent rally in stocks. The German 10 year yield is higher by almost 7 basis points to .22%, the biggest one day basis pt move in six weeks and to a one month high. Yields in Asia also moved higher overnight..."


Sunday, April 17, 2016

This Ticking Time-Bomb Is Now Threatening The World Financial System

"This ticking time-bomb is now threatening the world financial system.
Here is a portion of today’s note from Art Cashin:  I Owe You One – In this week’s edition of “Outside the Box”, my friend, John Mauldin, featured the latest report from Dr. Lacy Hunt of Hoisington Investment Management. It is an eye-opening piece on the topic of debt.
To whet your appetite, here is a quote from John’s introduction:
The Federal Reserve, the European Central Bank, the Bank of Japan and the People’s Bank of China have been unable to gain traction with their monetary policies…. Excluding off balance sheet liabilities, at year-end the ratio of total public and private debt relative to GDP stood at 350%, 370%, 457% and 615%, for China, the United States, the Eurocurrency zone, and Japan, respectively…. The debt ratios of all four countries exceed the level of debt that harms economic growth. As an indication of this over- indebtedness, composite nominal GDP growth for these four countries remains subdued. The slowdown occurred in spite of numerous unprecedented monetary policy actions – quantitative easing, negative or near zero overnight rates, forward guidance and other untested techniques..."

SentimenTrader Issues 2nd Major Update On The War In The Gold & Silver Markets

"With increased volatility in both the gold and silver markets, SentimenTrader issued a second important update on the war in the gold and silver markets.
From SentimenTrader:  “The latest Commitments of Traders report showed some modest changes from last week. In gold, hedgers moved to their most net-short since 2012 (see chart below).
KWN SentimenTrader I 4:15:2016


Monday, April 4, 2016

Jim Rogers What’s coming will be ‘worse than anything we’ve seen in our lifetimes


Marc Faber - The Fed Have No Idea What They Are Doing Or Whats Going On In America!


Robert Kiyosaki And Harry Dent Warn That Financial Armageddon Is Imminent

"Financial experts Robert Kiyosaki and Harry Dent are both warning that the next major economic crash is in our very near future.  Dent is projecting that the Dow will fall to “5,500 to 6,000 by late 2017″, and Kiyosaki actually originally projected that a great crash was coming in 2016 all the way back in 2002.  Of course we don’t exactly have to wait for things to get bad.  The truth is that things are not really very good at the moment by any stretch of the imagination.  Approximately one-third of all Americans don’t make enough money to even cover the basic necessities, 23 percent of adults in their prime working years are not employed, and corporate debt defaults have exploded to the highest level that we have seen since the last financial crisis.  But if Kiyosaki and Dent are correct, economic conditions in this country will soon get much, much worse than this.
During a recent interview, Harry Dent really went out on a limb by staking his entire reputation on a prediction that we would experience “the biggest global bubble burst in history” within the next four years…
There will be… and I will stake my entire reputation on this… we are going to see the biggest global bubble burst in history in the next four years…
There’s only one way out of this bubble and that is for it to burst… all this stuff is going to reset back to where it should be without all this endless debt, endless printed money, stimulus and zero interest rate policy.


Rickards: 'Unallocated Gold Is a Euphemism for No Gold.'

"I think that Rickards is correct in his judgement, and joins many others including Kyle Bass, who because of their backgrounds are much harder to ridicule and dismiss by the creatures of the bullion banks.  And in some of their more recent remarks about this, one can almost feel the desperation.  And here and there, the rats seem to be leaving the ship.

When this pyramiding of bullion and price manipulation falls apart, which history suggests that it must, there will be many angry investors demanding explanations of officials and regulators and bankers who will be shuffling from one foot to another, trying to excuse their lack of good fiduciary judgement and responsibility.

I just wonder if they will try to wait for some 'big event' to disclose this, in the hopes that fewer questions will be asked, and will be more easily dismissed.

As Rickards notes, and again I think he is right, they will 'close the gold trading window' and force settlements for cash at one price, and then reopen the price for actual bullion at a price that will climb  shockingly higher, despite a determined PR campaign by their friends in the media.

Perhaps I am wrong about this, but to me it has seemed for some time to be all too similar to the improbable sustainability of the Madoff scheme, and other such arrangements that depend on large numbers of people accepting a proposition that is dangerously misconstructed, misrepresented, and therefore mispriced in terms of risks.

"If JP Morgan leases gold from the US Treasury it does not mean that they back up a truck in Fort Knox and drive the gold away. There is no need for that. It is just a paper transaction. The gold can sit in Fort Knox. JP Morgan can take a hypothecatable title. Now once JP Morgan has the gold what they do is they sell it at times 100 to gold investors who think they have gold but what they really have is what is called unallocated gold.

Unallocated gold is a euphemism for no gold. If I call up JP Morgan and I say, 'You know I wanna buy a million dollars worth of gold,' they will say, 'Fine. Here is our contract. Send us the million dollars.' I sign the contract. I send the million dollars. They send me a confirmation and it says I own a million dollars worth of gold subject to the contract.

Well, read the fine print in the contract. What it says is your gold is unallocated which means that they do not claim to have any specific bar with a serial number or your name on it. In reality they have taken the same bar of gold and sold it to a hundred different investors.

Now that is fine if we are happy with the paper contract, but if all 100 of us show up at JP Morgan and they have only got one bar of gold, the first person may get the gold. The other 99 people, they are going get their contracts terminated. They are going to get a check for the value of gold at the close of business yesterday, but they are not going to get today's price movement or tomorrow's price movement when super spiking going up to $2,000, $3,000, $4,000 an ounce. That is when you want your gold for the price protection when everything else is falling apart. That is when you are going to discover that you do not have gold."

Read the entire interview with Jim Rickards here.

Very unlikely you say? Do you remember what happend to those who were holding their bullion in these warehouses through MF Global? And this was a relatively isolated event. A more general break in the chain of cross ownership and counterparty risks at 100 to 1 leverage would create a market dislocation that would be quite memorable.

And as a reminder, here is what Kyle Bass had to say about unallocated and hypothecated gold, even that held within a 'fractional reserve' exchange structure..."


In A Time Of Universal Deceit, Telling The Truth Becomes A Revolutionary Act

"In a time of universal deceit, telling the truth becomes a revolutionary act.
Egon von Greyerz:  “In a world of manipulated economic figures and markets, it is not always easy to maintain your sanity. The world economy is now based on fantasy and hope and has very little to do with reality. But the problem is Eric, is that virtually nobody understands this. Whether it is a bank analyst or a Nobel Prize winner in economics, they are all spreading the same false message…"

Saudis Retaliate To "Oil Freeze" Fallout: Ban Transport Of Iranian Crude In Territorial Waters

"At first, when it announced the terms of its "oil freeze" agreement with Russia one month ago, Saudi Arabia seemed willing to grant Iran a temporary exemption from the supply freeze, at least until it recovers its pre-embargo production levels. That however changed on Friday when the country's Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia's Arab allies in the Persian Gulf, telling Bloomberg his country would only join the freeze curbe Iran - and all other OPEC member nations - also joined.
Following the Friday announcement, yesterday Iran's oil minister Zangadeh made it clear that the country rejects Saudi demands, and would continue ramping up production at will, in the process making the April 17 Doha meeting meaningless.
And then, in a new and unexpected retaliation by Saudi Arabia for Iran's intransigence, moments ago the FT reported that Saudi Arabiahas taken steps to slow Iran’s efforts at increasing oil exports, banning vessels that transport Iranian crude from entering their waters, according to traders and shipbrokers.
More details from FT:
Iranian vessels carrying the country’s crude are restricted from entering ports in Saudi Arabia and Bahrain, according to a circular sent by a shipping insurance company to its members in February.

The notice said ships that have called to Iran as one of its last three ports of entry will also require approval from the Saudi and Bahraini authorities before entering their waters. Shipbrokers and traders have relayed the same messages since.

Iranian oil executives have expressed their concern about the message circulating in the market, saying it is only adding to problems they face in selling their crude.

Saudi Aramco, the state oil company, and The National Shipping Company of Saudi Arabia (Bahri) did not respond to requests for comment.
It is not clear just how much of an impact this escalation will have because as shown in the map below, Saudi territorial waters are hardly a major factor in Gulf shipping lanes..."


Japanese Traders Are Getting Angry: "The BOJ Is Destroying The Functioning Of The Market"

"Back in the summer of 2014, when the ECB first unveiled NIRP, many were concerned that this submersion into the monetary policy twilight zone would first crush Europe's money markets. However, at least until now, European MM funds have proven relatively resilient,
The story in Japan is different.
When the Bank of Japan announced they were instituting NIRP back in January, they intended to spur lending and push inflation up. As often is the case with central planners, their academic theory was much different than the economic reality.
Money market has fallen off a cliff in Japan, and the freeze in short-term credit markets can be solely attributed to the BOJ’s negative interest rate policy. So far, in a contrast to the financial crisis, activity is frozen simply because brokers are having a hard time pricing and processing transactions as opposed to concern over counterparty risk (for now). Firms have capital to sustain this short-term freeze at the moment, but the break in this market is certainly something to keep a close eye on.
This sums up the sentiment in Japan: "Among central banks, the BOJ is the one that destroys functioning markets the most,"Izuru Kato, the president of Totan Research in Tokyo was quoted by Bloomberg.
"Companies will slash staff and scale back operations where activity is grinding to a halt, exposing markets to spikes in rates when the time comes for normalization."
What normalization?
As Bloomberg shows, the interbank call market hit a record low at the end of March.

As the BOJ continues to push on the NIRP string, the list of unintended consequences grows by the minute. Outside of the short term credit freeze and complete inability to set borrowing costs, there are more concerns starting to bubble up. Banks may be preparing to lay off workers due to the lull in transactions, which won’t help their wage and inflation issues. Traders are simply trying to front run BOJ asset purchases as a way to earn profits, as the rest of the “market” is eroding – which is spilling over to banks of course, as their inability to make money lending forces them to turn to a buy & sell to the BOJ model for profits.
We’re not sure what other unintended consequences will show themselves over the coming months, but one thing is certain: The BOJ losing control, or perhaps it already has.
Finally, we can't help but wonder just how much of Japan trader anger is the result of the Nikkei crashing 1000 points since Yellen's dovish appearance, one which seemingly shifted the balance of monteray power away from Europe and Japan (and their surging currencies) to benefit China by way of a weaker dollar. How long before Kuroda is forced to re-escalate once again in the increasingly more anguished global currency wars?

Crude Loses Key Technical Support As BNP Sees Oil "Revisiting The Year's Lows"

"The early exuberance in oil has faded today as WTI tumble to fresh one-month lows...
...crucially losing the key 40-week moving average once again as the downtrend looks set to continue.

With BNP Paribas warning that WTI is set to revisit the lows of the year:
Ahead of a producer gathering in Doha on 17 April aiming to freeze output, recent comments by Saudi Arabia indicate that the Kingdom’s participation is conditional on that of other producers, including Iran. That effectively puts a nail in the coffin of the Feb-Mar oil price rally.Iran will not accept a freeze of its output until such time that lost market share, due to US and EU sanctions, is reclaimed.


Roubini : Prepare for a Currency War


Geopolitical problems lead Nouriel Roubini's list of top economic risks for 2015


Sunday, April 3, 2016

Famed Short Seller Warns The Nightmare Outcome Will Occur In The Blink Of An Eye

"With many people wondering what’s next for the markets, today a famed short seller warned that the nightmare outcome will occur in the blink of an eye.
By Bill Fleckenstein President Of Fleckenstein CapitalMarch 31 (King World News) – Overnight equity markets took the night off from the recent partying and were slightly lower. After the recent rampage here the market was back to dull nothingness, as the indices meandered around unchanged all day…"


50-Year Veteran Warns A Great Financial Holocaust Is Coming

"Today a 50-year market veteran told King World News that a “Great Financial Holocaust” is coming.
John Embry:  “Eric, as far as I can determine, the economic outlook is deteriorating virtually everywhere as it appears the severely over-levered global financial system can no longer support any sustainable growth…"