Monday, October 05, 2015

A Worrying Set Of Signals
"We keep a battery of indicators to gauge, among other things, economic activity, inflationary pressure, risk appetite and asset valuations. Most of the time this dashboard offers mixed messages, which is not hugely helpful to the investment process. Yet from time to time, the data pack points unambiguously in a single direction and experience tells us that such confluences are worth watching. We are today at such a point, and the worry is that each indicator is flashing red .. If our indicators are all near a maximum negative, surely the bottom must be in view? .. Perhaps we should no longer pay much attention to fundamental indicators .. The most worrying explanation for the simultaneous decline in our indicators is that air is gushing out of the monetary balloon. After years of near zero interest rates, asset prices have seen huge rises, but investment in productive assets remains scarce. Instead, leverage has run up across the globe .. if rates cannot be raised after years of rising asset prices and normalizing growth, when is a good time? And if central banks are prevented from reloading their ammunition, what will they deploy the next time the world economy hits the skids?"
- Pierre Gave
LINK HERE to the essay
7 Reasons To Listen 
To Carl Icahn’s 'Danger Ahead'
Evergreen GaveKal Chief Economist Worth Wray advises investors who can weather the next downturn will find themselves well-positioned to capitalize on historic long-term opportunities .. Wary advises investors to focus on the very real reasons Carl Icahn sees “danger ahead” for U.S/ financial markets.
(1)The United States needs meaningful tax & regulatory reform, which is unlikely without a strong President who can “move Congress” & “wake [this country] up.”
(2)The United States is “shooting itself in the foot” by double-taxing foreign profits, discouraging U.S.-based multinationals from repatriating roughly $2.2 trillion, & driving some firms to leave the country altogether. 
(3)Reported earnings in publicly-traded securities are highly suspect despite the broad adoption of GAAP accounting standards. 
(4)Financial engineering benefits companies’ income statements at the expense of their balance sheets. 
(5)Ultra-low interest rates are fueling asset bubbles & threatening to trigger another financial crisis. 
(6)Low-rated bonds are almost certain to collapse. 
(7)Liquidity is an illusion. If interest rates begin to rise or economic conditions begin to deteriorate – especially in the credit markets – investors may find themselves in a situation where the markets cease to function. That means that investors may find themselves in a position where they cannot sell at any price. That’s when the low interest rate party bus goes off a cliff… and when large cash positions will become invaluable.
LINK HERE to the article
Financial Markets
Cannot Hedge Financial Market Risk
Doug Noland explains how & why the central bankers' beloved party of money printing without regard to true market risks is going to get crushed .. "Central banks have convinced market participants that they can ensure liquid (and continuous) markets. Markets perceive that the Fed and global central banks have the willingness and capacity to backstop securities markets. While impossible to quantify, these perceptions have become fully embodied in securities markets around the globe. Importantly, central bank assurances and market perceptions of boundless central bank liquidity are today fundamental to booming global derivatives markets .. There’s a perilous misperception that central bankers have mitigated market risk. They have instead grossly inflated myriad risks – market, financial, economic, social and geopolitical. As for market risk, Trillions were enticed to global risk markets under false premises and pretense – certainly including specious central bank assurances. And there is the multi-hundreds of Trillions global derivative marketplace that operates under the presumption of liquid and continuous markets. Importantly, central bank manipulation – of market prices and perceptions – fomented the type of excesses that virtually ensures a crisis of confidence .. The broader marketplace cannot effectively hedge market risk .. Risk is now high for a disorderly – Party Crashing - 'run' on financial markets. At the minimum, global markets will function poorly as faith in central banking begins to wane."
LINK HERE to the essay
Argentina Forces “Pesofication”
Of Dollar Assets
Article highlights the extent of financial repression in Argentina - last week Argentina’s securities regulator shocked markets by announcing Resolution 646 requiring that mutual funds price dollar-denominated assets in pesos at the official government rate rather than the market rate that is closer to the parallel or blue dollar .. "Argentina is shelling out cash dollars and replacing them with Chinese yuan trading credits at a dangerously speedy rate indeed. Regardless of who replaces current president Cristina Fernández de Kirchner, I wouldn’t want to be his central banker. I imagine it will be fairly difficult to pay government employee salaries and energy subsidies with Chinese yuan importation credits."
LINK HERE to the article
An Implosion & Then A Restart 
Of The System Is Coming
Greg Hunter interviews Bix Weir .. Is inflation or deflation coming? Weir: "It’s not really inflation or deflation. It is a ceasing of the system. After the system crashes, no one is going to accept a Federal Reserve Note. So, I wouldn’t call it deflation. I would call it a restart. What they call it at the Fed is a ‘creative destruction event.’ Meaning, in order to move on to the next step, you have to destroy all the bad that has built up, and there is a lot of bad. We see the derivatives, and we say oh, that’s bad. There is so much more going on behind the scenes. We’re talking hundreds of trillions, if not quadrillions, of dollars in electronic assets that need to be wiped away, wiped clean completely. Otherwise, where all these assets are concentrated, they will have control over us, and that’s what we need to get rid of. We need to get rid of their control of us. . . . They seem to be making decisions completely off the wall, but truthfully, it is all leading to the same thing. Blow the bubble as big as possible so that it implodes. Then, you will see a fight to get control of the monetary system after the implosion." .. On war: "The bad guys right now are trying to start World War III. That is the real dark side of how this thing might end. It will be China and Russia against us, and that is not a good thing." .. 33 minutes
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Dr. Paul Craig Roberts:
The U.S. Faces Catastrophic Financial Risk
The former Assistant Secretary of The U.S. Treasury .. 20 minutes
Here Come The Money Helicopters!
"The idea behind 'People’s QE' is that central banks would directly fund government spending… and even inject money directly into household bank accounts, if need be. And the idea is catching on. Already the European Central Bank is buying bonds of the European Investment Bank, an E.U. institution that finances infrastructure projects. And the new leader of Britain’s Labor Party, Jeremy Corbyn, is backing a British version of this scheme. Ah-ha! That’s the monster coming to towns and villages near you! Call it 'overt monetary financing.' Call it 'money from helicopters.' Call it 'insane.' But it won’t be unpopular. Who will protest when the feds begin handing our money to 'mid- and low-income households'? .. All over the world, central planners, bankers, and politicians are watching too. 'Where goest the Bank of Japan, there too I shall go,' they tell themselves."
- Bill Bonner
link here to the essay
Coincidence Or Intentional?
Why The Move To Cash All Of A Sudden?
Commentary questions the move of many investors to go into cash out of the stock market in the month of August, just in time for banks to meet their increased reserve requirements set by the Federal Reserve .. "Are hidden forces intentionally scaring investors out of the stock markets and into cash to reach the FED’s requires capital requirements?" .. concludes by suggesting a bank run could happen & the Fed's end ultimately happening .. What if the FED's effort to raise interest rates effectively fizzles? Then we may realize the FED is powerless to spare savers from their existing plight, less than 1% interest on their saved money. If realized by those parties who have $13 trillion in long-term savings accounts, a bank run of sorts could ensue. The all-powerful FED could be revealed as an emperor with no clothes ..  With all the efforts to END THE FED, in an unexpected irony, the FED could drive the final nail into its own coffin." [Cliff Note: We don't actually agree with the way he came to the conclusion BUT we think there is a good chance the conclusion is correct.]
LINK HERE to the commentary
The Day The $h*t Hit The Fan
Palisade Radio interviews David Morgan .. the top 10 largest economies in the world are all in a bear market or entering one .. Will a rate hike from the Fed crash the economy? Yes. .. Will a stock market crash benefit gold? Absolutely. .. Is a catastrophic catalyst event in the making? Probably. .. Will this be the most epic bull market ever in precious metals stocks? Yes .. 36 minutes

How Come No One Will Attack 
The Comex Gold Short?
As of Friday (Oct 2), the Comex vault operators were reporting 161,642 ozs of gold in their “registered” vault accounts, which is the amount of gold that has been declared eligible for delivery .. "There’s 180 ounces of long/short positions for every ounce of deliverable gold sitting in Comex vaults. This ratio of paper gold to 'allegedly' available real gold represents the most extreme exploitation of the paper liability fractional reserve banking system in the history of the known universe." .. so why is no one doing it? .. "It is a riskless bet that no one is willing to take on. This is because it’s loaded with 100% risk in one aspect .. the Government would step in and prevent the trade from occurring to completion .. This is a bigger injustice to our country and our financial system than was the Hunt brothers debacle."
LINK HERE to the article
Technician Gary Dorsch: 
The U.S. Downturn Has Been 
‘Made in China’
Gary Dorsch, editor of Global Money Trends at notes that the China growth locomotive has slowed down considerably from past decades, this has led to a general global slowdown that has affected the U.S. markets recently .. believes we are experiencing a significant correction in the U.S, markets, not the beginning of a new bear market. Gary believes the Federal Reserve will raise rates later this year, which will add to dollar strength, further weaken commodities & likely lead to a dangerous situation for the emerging markets .. 50 minutes total program podcast
LINK HERE to the podcast
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The Chinese Will Establish 
A New Financial Order
"The United States is in the middle of anoth­er currency war. But this time, our main adversary is not Europe. It’s China. And this time, the situation is far more serious. Our nation and our economy are already in an extremely fragile state. In the 1960s, the American economy was growing rapidly, with decades of expansion still to come. That’s not the case today. This new currency war with China will wreak absolute havoc on the lives of millions of ordinary Americans, much sooner than most people think. It’s critical over the next few years for you to understand exactly what the Chinese are doing, why they are doing it, and the near-certain outcome."
- Porter Stansberry
LINK HERE to the essay
Are The Financial Markets Heading 
Into Deflation?
Yra Harris notes a potential new trend with a divergence in the behavior of the precious metals markets & stocks last week: "In the spirit of the poor unemployment report trapping the FED at the zero bound, GOLD and SILVER both staged strong rallies. MORE IMPORTANT, THE METALS HELD THEIR RALLIES EVEN AS THE EQUITIES CLOSED ON THEIR HIGHS. The RECENT CORRELATION for the algos has been to sell the precious metals when the SPOOS and NASDAQ rally so Friday’s counter-action is to be noted. But of course one day a trend does not make. The TECHNICAL picture for GOLD is still weak but the 200-day moving average comes in near $1177 so pay attention to overhead resistance. If the market believes that economic growth is beginning to slow with interest rates at ZERO, fear will develop about possible FED actions to stem the onset of a new round of deflation. The DOLLAR was mixed by the close as early weakness was reversed in response to the EQUITY rally. While the DOLLAR still closed weaker on the day it did not mirror the sustained rally in GOLD. The market sent us a notice of DIVERGENCE from previous algo correlations. Let’s see if there is a new dynamic beginning to unfold."
LINK HERE to the commentary