Thursday, October 23, 2014

Saxo Bank CIO:
"Shock Drop" Coming
Saxo Bank's Chief Economist Steen Jakobsen is predicting another 'shock drop' in the markets within a few weeks .. With debt & low inflation continuing to create a nervous atmosphere behind most markets, Steen argues that we will hit fresh lows in mid-November .. Steen takes the view that central bank policy is creating a 'fantasy land' for investors and he points out that the recent 'day dive' in markets was a closer reflection of reality .. Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 - 7800 .. Be long fixed income as it is "a free put on the equity market.. and the economic cycle is not yet ready to adapt to a rising interest rate."
The Bond Bubble
"The bond market is larger than the stock market for various reasons. Whereas only corporations issue stocks, governments and corporations both issue fixed income securities. The U.S. Treasury is the largest issuer of bonds worldwide. Because U.S, Treasury bonds provide the bulk of reserves which are just over $30 trillion. This is the real bond bubble. Capital is so accustomed to just hiding in bonds, it knows no other alternative. We can see that debt increased sharply in 1928. However, the collapse with the Sovereign Debt Crisis is what really made the Depression so Great. You can drop the stock market by 50% and you will not create a prolonged depression. Reduce the bond market by 33% and you get a depression .. The Crash of 1929 turned into a serious Depression and that came NOT by taking stocks down, but by wiping out the bond market .. The central banks trying to stimulate the economy with lower interest rates have set the stage for the greatest crash of all time. You cannot image the bloodbath if interest rates go back to just 8% where they began this Phase Transition in bonds. We will see the worse economic bubble burst all over the street and this will be the real 'GREAT' event of all time."
- Martin Armstrong
link here to the reference
Kyle Bass*: 
More Macro Volatility
Discussing the potential blow back from Japan’s debt crisis, with Kyle Bass, Hayman Capital Management
Why Gold Is Undervalued
click to enlarge
Alasdair Macleod provides analysis of gold prices from several perspectives including technical analysis to demonstrate that today's market value of gold is badly reflective of gold's true worth .. "When the current global financial bubbles eventually burst, there will only be a tiny minority who end up possessing gold -- by which I mean physical gold held outside the fiat money system .. When the gold price is being smashed in western capital markets, it's easy to forget that Asia is quietly buying up not only all or most of its own mine and scrap supply, but significant quantities of the above-ground stocks held in western vaults as well. It's a process that dates back to the birth of the petro-dollar in the 1970s and has continued ever since. The three big ownership centers are the Middle East, India and China -- the latter two having in recent years enjoyed high rates of economic expansion, with increasingly wealthy middle-classes with a high propensity to save .. Not only do we have evidence that the price is based on western paper markets with declining liquidity, but by comparing above-ground stocks with the Fiat Money Quantity of the world’s reserve fiat currency, we can see that gold is extremely undervalued at a time of high, possibly escalating systemic and currency risk."
LINK HERE to the essay
IT WILL TAKE 398,879,561 YEARS 
Sovereign Man considers the awesomeness of U.S. debt from the perspective of how many years it would take of working at the average wage to pay off the U.S. debt .. "The current debt level of over $17.9 trillion would thus take more than 398 million years of working at the average wage to pay off . This means that even if every man, woman and child in the United States would work for one year just to help pay off the debt the government has piled on in their name, it still wouldn’t be enough .. Mind you that this means contributing everything you earn, without taking anything for your basic needs—which equates to slavery .. Now, rather than saying that the national debt is reaching $18 trillion, which means nothing to most people, you could say that the debt would currently take almost 400 million work-years to pay off. Wow .. When accounting for unfunded liabilities, the work-years necessary to pay off the debt amount to astonishing 2.38 BILLION work-years .. And the years of slavery required are only growing."
LINK HERE to the article 
click on image to view
courtesy of Visual Capitalist 
Cry For Me Argentina! 
A Tearful Inflation
McAlvany Commentary program show .. topics include “Blue” is the new Black in surviving devaluation .. Gresham’s Law: “We take only GOOD money” .. “Old money”: Agriculture- “New Money”-Politics! .. 35 minutes
click to enlarge

Wednesday, October 22, 2014

European Bond Market Could 
See A Stampede For The Exit
"What ECB President Mario Draghi’s undeliverable pledge actually did was to incite the fast money crowd into frenetic peripheral bond buying on the usual front-running presumption that smart guys buy now what the central banks announce they will be buying later. Soon the prices of these sovereign junk credits were ripping higher, and the rest of the market piled on—- especially the very same Spanish and Italian banks .. .. That means that virtually any unexpected catalyst could start a run on the trillions of Greek, Italian, Spanish, Portuguese and Irish debt that is now insanely over-valued. Accordingly, the European bond market is a massive conflagration waiting for an ignition. Worse still, Germany now has all the matches, and it is becoming more evident by the day that its politicians and financial statesman have finally drawn a line in the sand. There will be no outright QE, and, therefore, there is no way to keep ... from experiencing an eventual stampede for the exit gates."
- David Stockman*
LINK HERE to the essay
Currency Wars Are Evolving
The Goal Is To Avoid Deflation
Bloomberg article on how currency wars are moving with the motivation of increasing inflation, not necessarily economic growth .. currency strategist: "This beggar-thy-neighbor policy is not about rebalancing, not about growth .. This is about deflation, exporting your deflationary problems to someone else." .. Japan is taking this approach .. Europe is taking this approach .. another currency strategist: "Deflation is such a major part of the story that dealing with that, by whatever means necessary, is key .. If that involves getting the currency lower, then so be it. You have to deal with it."
LINK HERE to the article
U.S. Banks are Buying Treasuries, 
Taking Deposits, but not Lending
Currency guru Marc Chandler identifies U.S. banks as stepping up now to buy U.S. Treasury bonds as the Federal Reserve has been tapering its buying of them .. For the past  months, U.S. banks have bought a little more than $145 bln .. points out deposits have grown a lot, outpacing loans .. "They are taking in deposits, but are not lending it out. Households are not re-leveraging .. These excess deposits are part of the highly liquid capital sloshing around the system. Roughly half of the excess deposits are being used to buy U.S. government paper. The deposits cost practically nothing, so the banks earn the entire carry." .. Chandler also identifies an additional driver of buying - new liquidity rules: "This source of pressure on bank to own more government paper is unlikely to ease up soon .. The new and evolving regulatory environment strongly encourage banks to buy U.S. government paper."
LINK HERE to the essay
"When you come to the fork in the road, take it."
- Yogi Berra
Matterhorn Interview of
Keith Barron on Peak Gold
Interview with exploration geologist & mining entrepreneur Keith Barron .. discusion on the challenges for gold mining companies; the effects of a downward rigged gold price on Third World countries; the “inevitability” of a gold price at 5000 USD per ounce in the future; Barron’s support for the Swiss gold initiative .. 47 minutes
'Federal Reserve is Slowing Down the Economy & Holding Up The Stock Market'
Zero Hedge commentary on current state of the financial markets, references David Einhorn's observation: "They're actually slowing down the economy, even though they don't realize that they're doing that" & also Carl Icahn: "The Fed is really holding the market up.... The Fed turned this market around here because it let it be known that the Fed funds rate isn't going to be raised in March. I am concerned about the high yield market, I think that's in a major bubble, but nobody knows when it's gonna burst."
LINK HERE to the commentary
Deflation then Inflation 
Through the Roof
Interview with Michael Snyder .. "When there is a financial crisis, all of a sudden, banks don’t want to lend. They don’t want to lend to each other, and they don’t want to lend to anyone else. Credit freezes up, and our financial system is based on debt and the flow of money from the banks lending it to the rest of us. I believe we will have a brief period of deflation before the response by the Federal Reserve and the federal government, where we are going to then have tremendous inflation through the roof." .. emphasizes a lot of people are quick to say let the banks fail, but if we go in that direction, the economy is going to die as well .. NNOO on all issues .. 26 minutes
click to enlarge
Canadian Capital On Lock Down
As A Result Of Ongoing
"Terrorist" Shooting Incident
- Still active shooter
- 3 separate shooting sites
- Multiple gunmen
- 1 gunmen dead
LINK HERE to the coverage
In the Year 2024?
"All of the gold in the world was confiscated in 2020 .. Some lucky ones had purchased gold in 2014 and sold it when it reached $40,000 per ounce in 2019. By then, inflation was out of control and the power elites knew that all confidence in paper currencies had been lost. The only way to re-establish control of money was to confiscate gold. But those who sold near the top were able to purchase land or art, which the authorities did not confiscate .. Those who never owned gold in the first place saw their savings, retirement incomes, pensions and insurance policies turn to dust once the hyperinflation began. Now it seems so obvious. The only way to preserve wealth through the Panic of 2018 was to have gold, land and fine art. But investors not only needed to have the foresight to buy it… they also had to be nimble enough to sell the gold before the confiscation in 2020, and then buy more land and art and hang onto it. For that reason, many lost everything. Land and personal property were not confiscated, because much of it was needed for living arrangements and agriculture. Personal property was too difficult to confiscate and of little use to the state. Fine art was lumped in with cheap art and mundane personal property and ignored."
- Jim Rickards*
LINK HERE to the fictional dystopia
Europe’s Brush with Debt
Economist Hans-Werner Sinn* points out that Italy & France have just made the decision to not comply with the euro zone's fiscal agreements (agreed to in 2012) - they intend to run up new & more debt .. "France’s debt/GDP ratio will rise to 96% by the end of this year, from 91% in 2012, while Italy’s will reach 135%, up from 127% in 2012. The effective renunciation of the fiscal compact by Valls and Renzi suggests that these ratios will rise even further in the coming years .. In this context, eurozone leaders must ask themselves tough questions about the sustainability of the current system for managing debt in the EMU." .. Sinn suggests 2 possible models for ensuring stability & debt sustainability.
LINK HERE to the essay
Predatory Lending
Boom Bu$t .. discussion on predatory loans .. interview of Karl Denninger on regulating payday loans & what the appropriate regulatory response to predatory lending should be .. also a discussion with George Magnus on emerging markets .. 1/2 hour total program
Financial Repression Takes Away 
Private Risk Taking & Investment
Courtesy of Gordon T Long*:  
"The Stampede is only beginning, 
as government grows in size 
and use of regulations to direct money 
to support increasing government needs."