5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives

When is the U. S. banking system going to crash? I can sum it up in three words. Watch the derivatives. It used to be only four, but now there are five “too big to fail” banks in the United States that each have more than 40trillion dollars in exposure to derivatives. Today, the U. S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable. And unlike stocks and bonds, these derivatives do not represent “investments” in anything. They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future. The truth is that derivatives trading is not too different from betting on baseball or football games. Trading in derivatives is basically just a form of legalized gambling, and the “too big to fail” banks have transformed Wall Street into the largest casino in the history of the planet. When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.
If derivatives trading is so risky, then why do our big banks do it?
The answer to that question comes down to just one thing.
The “too big to fail” banks run up enormous profits from their derivatives trading. According to the New York Times, U. S. banks “have nearly $280 trillion of derivatives on their books” even though the financial crisis of 2008 demonstrated how dangerous they could be…

This post was published at The Economic Collapse Blog on September 24th, 2014.

Listen to the Slowing US Economy, Hear Echoes of Japan

Now in its sixth year, this sorry excuse for an expansion is ready to boom – accelerating to ‘escape velocity’ – according to many economists. Or perhaps the boom grows old, even sclerotic, so we should start watching for the next recession. The consensus of economists never sees a recession until after it begins, so we’ll have to find other ways to look ahead.
This post describes one such way: the economy slowing to its ‘stall speed.’ This alarm might be flashing yellow, or even red, now.
‘Echoes of Japan’
Economic Cycle Research Institute (ECRI), 22 September 2014 – Opening:
In 2011 the Fed published a study aimed at identifying ‘particular values for output growth and other variables, such that when these values are reached during an expansion, the economy has tended to move into a recession within a fairly short time span.’
The study concluded that Gross Domestic Income (GDI) – which, while income-based, is theoretically identical to Gross Domestic Product (GDP) – ‘provides a better measure of output growth than GDP,’ and identified a two-quarter annualized real GDI growth rate of 2% to be the ‘stall speed’ threshold.
… this GDI growth measure (see chart) has now stayed below the 2% ‘stall speed’ threshold for three straight quarters starting in Q4 2013, which is much longer than the duration of the harsh winter weather. …
Real GDI crashed below 2% SAAR in Q2 2006. Before this cycle, since 1947 real GDI had fallen below 2% only once in a period not associated with a recession – in Q1 1993. Real GDI is now below 2% YoY. For the past 3 quarters (and 4 of past 5 quarters) it’s been below 2% SAAR on a QoQ basis.
What is stall speed?

This post was published at Wolf Street on September 24, 2014.

Forget The “Alibaba Top” – This Is The Chart Everyone Is Watching

While it is easy, even sentimental, to pin what may (or may not) be a bubble, or as some call it – market – top on the recent liquidity and euphoria-soaking IPO of China’s megaretailer Alibaba and its sliding chart since it broke for trading, a la what the Blackstone IPO did to the previous bubble, it is also wrong. The reality is that the attention of what few carbon-based investors and traders are left, is glued to very different chart: the one below from Deutsche Bank, showing the between the S&P and the total assets owned by the Fed.
Read on for the reason why:

This post was published at Zero Hedge on 09/24/2014.

With A Venezuela Default Looming, This Is What A BofA Banker Wanted To Look At First

With a 66% chance of default/devaluation implied by the Venezuelan credit market, BofA economist Francisco Roriguez sprung an unusual question on the struggling socialist nation’s central bank – Can you show me your gold?
As Bloomberg reports, the answer was “yes”…
He’d been itching to take a peek for years and now was the time to ask. With the government’s bonds sinking toward prices that indicate investors are bracing for the possibility of default, the country’s $15 billion of gold bars are crucial to ensuring debt payments are met.

This post was published at Zero Hedge on 09/24/2014.

Is This A Triple Bottom In Gold?

his is an excerpt from the daily StockCharts.com newsletter to premium subscribers, which offers daily a detailed market analysis (recommended service). It shows the ongoing inter-market effect of a rising dollar, which proves to be weighing on precious metals prices so far.
Gold has been performing badly for some time, but especially since August 21st when our Trend Model changed from a BUY to a SELL. The chart is completely negative with price below the 20EMA, which is below the 50EMA, which is below the 200EMA. Recent support at 1240 failed quickly, but more important support at 1180 may soon be in play.

The weekly chart, however, is ever so much more revealing. We can see that the 1180 support has held twice before, so there is a good chance that it will hold upon another retest. I don’t wish to be overly optimistic because the triangle that has formed over the last year is technically a continuation pattern, meaning it is expected to resolve downward. Also note that during the consolidation, price has made progressively lower highs, showing that the bulls are losing strength. Nevertheless, a triple bottom which forms the base for a new, longer-term up leg is a distinct possibility. As for how to exploit that possibility, we would suggest that it would be best to await a clear bounce off the support area.

This post was published at GoldSilverWorlds on September 24, 2014.

Today’s 3-Step Manipulation To S&P 2,000

The last couple of hours of today’s US session were quite surreal for many cross-asset-class traders. As the following chart shows, the “need” for the S&P 500 to achieve 2,000 (and green post-FOMC) was evident in a 3-step process of manipulating VIX, USDJPY, and Gold. All they could achieve was 1,999.79 highs but not without an epic last minute VIXtermination effort…
Post-EU Close, stocks had started drifting lower… that will never do… So, enter “The Manipulators”
Goal: S&P 500 to 2,000
Step 1: Sell VIX (VXX or VIX futures most liquid and/or use dark pools to hide the volume) – S&P 500 starts to rise..
but the momentum does not hold..
Unleash Step 2: Another VIX slam but throw in some JPY jiggery-pokery just to see if we can ignite the momentum and run those 2,000 stops…
Yep – that worked… any minute now…
Oh wait, it stalled at 1,999.79…
Step 2a: Try selling gold… that should keep the rally alive…

This post was published at Zero Hedge on 09/24/2014.

Shanghai Silver Stocks Continue To Fall As Silver Eagle Sales Explode Higher

As the manipulated paper price of silver heads lower, so are the silver inventories as the Shanghai Futures Exchange. The silver stocks hit an all-time low today as the price of silver trades in the $17 range. At the peak, the Shanghai Futures Exchange held 1,143 metric tons of silver. However, today only 7% of that record amount remains.
As we can see from the chart below, silver inventories declined from a high of 575 mt (metric tons) in February, to a low of 81 mt today.

Unless the Shanghai Futures Exchange starts depositing silver, warehouse stocks maybe totally wiped out within the next several months…

This post was published at SRSrocco Report on September 24, 2014.

Hugh Hendry Is Not Having A Good Year

Having infamously “thrown in the bearish towel” late last year (must read), Hugh Hendry’s Eclectica fund has not enjoyed the kind of money-printing melt-up euphoria he had hoped for in 2014. According to his August letter to investors, the fund is -10.9% year-to-date, shrinking the firm’s performance since inception to a mere 0.7%. His positions are intriguing but his commentary can be summed with this sentence alone, “when central banks are actively pursuing a goal of higher prices the most rational course is to tenaciously remain invested in equities.” And so he is…

This post was published at Zero Hedge on 09/24/2014.

Gold Daily and Silver Weekly Charts – Options Expiration on the Comex Tomorrow

As a reminder, tomorrow is an option expiration for gold and silver October contracts on the Comex. There was intraday commentary here. The gold that was smuggled into India the other week is greater than all the registered gold on the Comex. And there is much more upcoming for the festival season. This is a world of tails wagging dogs. But they think they have the tails to do it. I get the sense that the pigmen are scared. Now what they may fear is another question. Perhaps they are afraid of spraining their knee from repeatedly kicking the markets in the ass towards whatever direction they prefer at that time. Or perhaps they are staring into the abyss once again, and feeling the edge growing nearer. It is hard to say. There was further intraday commentary here introducing a video from Nomi Prins about why the Anglo-Americans have such a keen interest in certain locales like the Ukraine and Syria she calls ‘gateways.’ There was nothing much of interest happening yesterday on the carney game called the Comex, that paragon of transparent price discovery. hah!

This post was published at Jesses Crossroads Cafe on 24 SEPTEMBER 2014.

Hunt for Taxes Target Corporations

The world economy is imploding faster than anyone suspects. Governments cannot get it through their thick skulls that they consume money – they do not create economic growth. The higher the tax burden, the less disposable income, and the lower economic growth be it individuals or corporations. The difference is capital can flee, labor cannot. That is changing with FATCA. They are hunting global capital but in the process they are wiping out international commerce. The NSA has contributed by now inspiring others to replace US technology because American companies have been compromised. All of this bodes very badly for the future post 2015.

This post was published at Armstrong Economics on September 24, 2014.

Miracle Panic-Buyer Lifts Stocks Green From 50DMA

Do you believe in miracles? With death-crosses crossing, Hindenburgs Omening, bonds and credit diverging, breadth deteriorating, stocks on the verge of the worst run of thge year, and the S&P 500 testing the crucial 50-day moving average… it should be no surprise that a combination of VIX-slamming, USDJPY-ramping, PBOC-firing, Fed-speaking sent stocks to their biggest gains in 7-weeks after the worst selling in 5 weeks (and people think the BoJ is the only one buying stocks). Treasury yields rose but nothing like the exuberance in stocks. HY credit markets deterioratednotably (bounced with stocks but notably less so). The USD surged (apparently on PBOC rumors) early ( 0.3% on the week). Gold & Silver dropped, copper rose modestly but WTI oil prices exploded higher with stocks’ exuberance (and Benghazi headlines). VIX was banged from over 15 to under 13.5. S&P 500 2,000 (1,999.79 achieved) and getting back to green post-FOMC was all that mattered today – and Mission Accomplished… before a slightly weak close.

This post was published at Zero Hedge on 09/24/2014.

sept 24/no change in gold inventory at the GLD/No change in silver inventory at SLV/Ned Naylor’s important commentary on the suppression of news regarding silver/gold rigging/gold and silve…

Gold closed down 2.40 at $1218.60 (comex to comex closing time ). Silver was down 7 cents at $17.64
In the access market tonight at 5:15 pm
gold: $1217.00
silver: $17.70
GLD : no change in gold inventory at the GLD (inventory now at 773.45 tonnes)
SLV : today we had no change in silver inventory (inventory 342.846 million oz)
We will discuss these and other stories
So without further ado………………
Let’s head immediately to see the data has in store for us today.
First: GOFO rates/
All months basically moved towards the negative needle. On the 22nd of September the LBMA stated that they will not publish GOFO rates. However today we still received today’s GOFO rates
London good delivery bars are still quite scarce.
Sept 24 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
.105000% .10750000% .107500% .1200% .2175000%
Sept 23 .2014:
1 Month Rate 2 Month Rate 3 Month Rate 6 month Rate 1 yr rate
107500% .11000% .1125000% .1200% .22500%
Let us now head over to the comex and assess trading over there today,

This post was published at Harvey Organ on September 24, 2014.

Canada Warns its Citizens Not to Take Cash to USA

The Canadian government has had to warn its citizens not to carry cash to the USA because the USA does not presume innocence but guilt when it comes to money. Over $2.5 billion has been confiscated from Canadians traveling to the USA funding the police who grab it.
If you are bringing cash to the land of the free, you will find that saying really means they are FREE to seize all your money under the pretense you are engaged in drugs with no evidence or other charges. It costs more money in legal fees to try to get it back so it is a boom business for unethical lawyers to such an extent than only one in sixth people ever try to get their money back and the cops just pocket it.

This post was published at Armstrong Economics on September 24, 2014.

Housing Prices, “Real” Interest Rates, and the “Real” CPI

With housing prices still rising, albeit more slowly, inquiring minds might be wondering about “Real” interest rates and the “Real” CPI?CPI DistortionsI believe the CPI is hugely distorted, but not for the same reasons as everyone else. Home prices used to be in the CPI but the BLS now uses OER (Owners’ Equivalent Rent). OER is a measure of actual rental prices as well as fiction. The BLS determines OER from a measure of rental prices and also by asking the question ‘If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?’If you find that preposterous, You are not the only one. Regardless, rental prices are simply not a valid measure of home prices. OER Weighting in CPIOER has the single largest weight of any component in the CPI, at 23.957%.

This post was published at Global Economic Analysis on September 24, 2014.

Household Net Worth Just Hit A Record High: Here Is Who Benefited

A few days ago, the Fed proudly declared that in the quarter ended June 30, household net worth rose by another $1.4 trillion hitting a record $81.5 trillion.

A stunning accomplishment which, however, as we explained, was exclusively due to the artificial rise in financial assets courtesy of $10 trillion in central bank liquidity levered some 2-3 times by the dealer/bank/hedge fund community.
Needles to say, if indeed the US economy had boosted everyone’s income by $1.4 trillion in the past quarter, USD GDP would now be growing at a double digit pace. It did not. So to get a sense of just whose net worth rose by the noted amount, we go to Stone McCarthy which answers the question who benefited from holding stocks directly. To those who have read Piketty, socialist conclusions notwithstanding, the answer was revealed long ago: the entire increase in “net worth” went to a tiny sliver of US society. The richest.
From SMRA:

This post was published at Zero Hedge on 09/24/2014.

Bank Of Japan Buys A Record Amount Of Equities In August

Having totally killed the Japanese government bond market, Shinzo Abe has – unlike the much less transparent Federal Reserve, who allegedly use their proxy Citadel – gone full tilt into buying Japanese stocks (via ETFs). In May, we noted the BoJ’s aggressive buying as the Nikkei dropped, and in June we pointed out the BoJ’s plan tobuy Nikkei-400 ETFs and so, as Nikkei news reports, it is hardly surprising that the Bank of Japan bought a record JPY 123.6 billion worth of ETFs in August. The market ‘knows’ that the BoJ tends to buy JPY10-20 billion ETFs when stock prices fall in the morning. The BoJ now holds 1.5% of the entire Japanese equity market cap (or roughly JPY 480 trillion worth) and is set to surpass Nippon Life as the largest individual holder of Japanese stocks. And, since even record BoJ buying was not enough to do the job, Abe has now placed GPIF reform (i.e. legislating that Japan’s pension fund buys stocks in much greater size) as a primary goal for his administration. The farce is almost complete as the Japanese ponzi teeters on the brink.

This post was published at Zero Hedge on 09/24/2014.

Some of the dumbest taxes throughout history

In the days of ancient Rome, it was tradition for the upper class to liberate their slaves after a set number of years.
The Roman government, however, looked at this as an opportunity to generate revenue, and they taxed the newly freed slave on his freedom.
I can’t imagine anything more repulsive than paying tax on freedom. But they gave it a pretty good try –
In 1696, the English government under William III (William of Orange) passed a new law requiring subjects to pay a tax based on the number of windows in their homes.
Not willing to pay such a ridiculous tax on something as basic as sunlight, many Englishmen simply reduced the number of windows in their homes.
There was less light… and less ventilation… which ultimately became a public health problem.
To follow that up, England introduced a tax on candles in 1789. Making your own candles was outlawed unless you first obtained a license and paid tax on your own homemade candles.

This post was published at Sovereign Man on September 24, 2014.

Is This Why Stocks Are Soaring?

Yes, we know the real reason why stocks are suddenly soaring is that global economic growth is once again tumbling…

… so much that the Bank of China is now actively contemplating joining its western peers in flooding the world with a few extra trillion in liquidity, the very reason why there is no growth to begin with, but still, this is just too good to pass by, and follows directly on the heels of Stocks Slide As Gartman Goes “Long Of One Unit Of The US Equity Market.” To wit, just out from Dennis Gartman:

This post was published at Zero Hedge on 09/24/2014.