On QE99, Gold, & Global Growth Concerns – The Chart That Explains Marc Faber’s Fears

While The IMF recognizes the gaping chasm between collapsing global growth expectations and market exuberance, they remain confident that US growth will save the world. This, Marc Faber explains to a wise Bloomberg TV panel, is why stocks around the world (and now in the US) are starting to weaken, “the recognition that global growth is not accelerating,” as the narrative would like us all to believe, “but is slowing.” Central Bank money-printing has enabled deficit-heavy fiscal policy and, Faber simplifies, “the larger the government, the less growth there will be from a less dynamic economy.” Policy-makers have only one tool – money-printing, and QE99 is coming.

This post was published at Zero Hedge on on 10/11/2014.

This is the best currency to hold for now (you may be surprised)

October 10, 2014 Santiago, Chile
I just got off a two-hour conference call with the board of directors of our agricultural investment company.
I’m fortunate that our board is comprised of some incredibly smart people, including a senior executive at one of the largest sovereign wealth funds in the world, another investment banking executive, private wealth manager, etc.
These are very intelligent people who understand both finance and agriculture.
Our conversation this morning turned to exchange rates, and we discussed the future of the US dollar.
Bear in mind that we all hold a rather dim view of the dollar’s long-term fundamentals. That is, after all, why we pooled funds to trade paper currency for high quality productive farmland.
But over the coming months, our consensus was that the US dollar is in a favorable position when ranked against other major fiat currencies. I’ll explain why:
There are only a handful of currencies in the world that can handle huge institutional inflows and outflows.

This post was published at Sovereign Man on on October 10, 2014.

Bonds Entering Resistance Zone

As the market volatility increases and that is likely to continue for awhile let’s turn our attention to Bonds for clues. It’s entering an obvious area of resistance right now so it will be important to see how it trades between the $120-125 level. I personally don’t think this has enough momentum to break out which could give the general markets a lift if this chart tops, but it’s to early to know that right now. It could just as easily continue moving higher but watch the RSI for clues as right now there is negative divergence as it won’t make a new RSI high if TLT makes new highs.


This post was published at ZenTrader on October 10, 2014.

The $70 Trillion Problem Keeping Jamie Dimon Up At Night

Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon – devoid of other things to worry about – warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D. C., and delivered a mostly upbeat message: in fact when he said that the industry was “very close to resolving too big to fail” we couldn’t help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger “because no one is paying attention to it.” He said the system is “huge” and “growing.”

Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives) amounts to over $70 trillion globally.
What he is very much wrong about is that nobody is paying attention to shadow banking: Zero Hedge has been covering the topic since early 2009.
Which is why we urge anyone who is curious to catch up on the issues surrounding non-bank lending, to read our 1,000 articles on the topic.
However, for those who are time-strapped, here is a recent take from Bloomberg summarizing the IMF’s 192-page report on Shadow Banking released last wee titled “Risk Taking, Liquidity, and Shadow Banking.”
In a summary of the report, the IMF estimated the shadow banking industry at $15 trillion to $25 trillion in the U. S.; $13.5 trillion to $22.5 trillion in the euro area; $2.5 trillion to $6 trillion in Japan; and about $7 trillion in emerging markets. Not included in the summary were estimates of the size of shadow banking in countries including the U. K., and Gelos said later at a press conference said the industry globally exceeds $70 trillion, citing figures from the Financial Stability Board.

This post was published at Zero Hedge on on 10/11/2014.

Saxobank CIO Warns “The Narrative Of Central Bank Omnipotence Is Failing”

We have been discussing the widespread belief in “the narrative of central bank omnipotence” for a number of months (here and here most recently) as we noted “there are no more skeptics. To update Milton Friedman’s famous quote, we are all Bernankians now.” So when Saxobank’s CIO and Chief Economist Steen Jakobsen warns that “the mood has changed,” and feedback from conference calls and speaking engagements tells him, there is a growing belief that the ‘narrative of the central banks’ is failing, we sit up and listen.
Via TradingFloor.com’s Steen Jakobsen, CIO & Chief Economist Saxobank,
The Mood Sours
I have had several macro conference calls and speaking engagements over the course of this week – a few takeaways:
1. The mood has changed – See the ‘confidence index’ from T Theory below for data. The driver in my opinion is the gradual acceptance of disinflation/deflation – as Albert Edwards has been pointing out and as Russel Napier has substantiated that when inflation gets low enough it becomes a problem for risky assets. (Edwards – Napier)
2. There is growing belief that the ‘narrative of the central banks’ is failing. We’ve had such low yields for so very long now that it’s becoming an issue. I’ve discussed this with several of you and the consensus opinion is that the European Central Bank’s Mario Draghi lost out with his latest ‘wide in scope, small in size’ programme; that the Bank of Japan looks like a deer caught in the headlights; and most importantly, Fed chief Janet Yellen and her team are doing a poor job in communicating their message.
There is even open resentment of Yellen as a female chair. I don’t condone any of the Fed’s policies, but I firmly believe Yellen is misunderstood. She is more dovish than the market can figure out and in contrast to her predecessors, she allows more room for the opinions of fellow board members. This is why we are seeing Stanley Fischer being a new and much-improved voice for the Fed, as is also the case with William Dudley. Further, Yellen is considerably better than both Alan Greenspan and Ben Bernanke in terms of understanding the mechanics of the Fed and the economy.

This post was published at Zero Hedge on on 10/11/2014.

Keiser Report: Meeting of Megaminds (ft.Russell Brand & Alec Baldwin) [KR665]

The following video was published by RT on Oct 11, 2014
In this episode of the Keiser Report, Max Keiser and Stacy Herbert host a two part interview with award-winning film and television actor, Alec Baldwin, and comedian, actor, author and host of the Trews, Russell Brand, about revolution, the media, ultra low interest rates, cobblers and their little helpers. They also discuss whether or not Sean Hannity has the talent to be a ‘terrorist’ and Russell Brand gives his opinion on the role of Fox News.

Li Opening Shanghai Gold Exchange

Premier Li Keqiang visited a branch of Bank of China in the China (Shanghai) Pilot Free Trade Zone on Sept 18, ahead of the opening of the international board of the Shanghai Gold Exchange later in the day. Li said the move is a sign that China will continue to open up its finance sector, and he urged Shanghai authorities to continue their efforts to realize the city’s potential in the finance industry – and also to enable the public to reap the benefits.

This post was published at Armstrong Economics on October 10, 2014.

Anatomy Of A Dislocation-In-Process

No, this is not a crash call.
It is, however, a warning – that you should beware of the conditions that have preceded severe market dislocations before, be aware of them, pay attention to them, and contemplate whether it is worth being involved in the market at this particular time.
Market dislocations come from many causes but have one common precursor — over-extension of credit (margin debt) that must be rapidly unwound. The are seeded in an environment that is generally volatile in the negative direction, thus exposing a greater percentage of those positions to margin calls. They are usually accompanied by or associated with an expiration of one or more instruments that provide alleged “protection” against such volatility, where the cost of their replacement is high.
The precise trigger for the event itself is usually analyzed in the wreckage that follows with all sorts of books and papers, yet the fact is that none of those are more than a guess. In 2000 a little dog-crap public firm (that incidentally still exists!) was, to the best of my ability, the triggering event — they announced a restatement at an inauspicious time. 2008 was of course blamed on Lehman, but in fact Lehman was a symptom, not the problem itself.
Every night someone wakes up in a cold sweat and pushes the flatten button. Someone else wakes up with delusions of grandeur in their eyes and mashes the buy it all button.
The dislocation itself happens when a lot of the first group show up at once and few or none of the latter do, and then the phone starts to ring on the desk (or in the hand, nowdays) of all the people who didn’t mash that flatten button — and they’ve got a big fat margin loan out that has now driven their account into negative equity.
Cascade selling comes from people who are told they must sell because the margin clerk is on line #1 and he’s just advised you that if you do not deliver good funds to him within the next hour you will be forcibly liquidated and, if you still have a debit balance, they will next lien all your assets, including in most states your house.

This post was published at Market-Ticker on 2014-10-10.

The stock market is finally recognizing severe global volatility: Stock market has worst performance in two years.

Volatility in the market came roaring back this week. Stocks had their worst weekly performance in two years. It was hard to understand given the interconnected nature of the markets how little of an impact was being had in US stocks when global markets and governments are facing dramatic challenges. The markets are slowly coming to the realization that the Federal Reserve simply does not have all the answers to every crisis that arises. A low interest rate is not going to stall geo-political risk or the spread of infectious diseases. There are more complicated forces at work here especially when the biggest consumer economy in the US is seeing those exact consumers lose purchasing power with inflation. There wasn’t any significant news that set the markets off this week aside from trends that have been ongoing for some time now. It just appears that the markets are reflecting a more realistic position of what is happening around the world.
Volatility is back
One of the most surprising things in this historic stock rally going back to 2009 is that there has been relatively low volatility. It has been one giant bounce from the bottom. That is atypical in many recoveries especially after a crisis like the Great Recession. The world has become a very complicated place with risk running wild in many areas. It looks like volatility is now being recognized once again:

This post was published at MyBudget360 on October 11, 2014.

As Monday Looms, Experts Warn Japan’s Half-Trillion Dollar Fat-Finger-Trade “Could Absolutely Happen” In The US

Just over a week ago, the Japanese stock market participants were stunned when stock orders amounting to a whopping $617 billion (yes Billion with a B) – more than the size of Sweden’s economy – were canceled for reasons still unknown in what was one of the biggest ‘fat finger’ trading errors of all time. Since then, US equity markets have suddenly become notably more volatile – and fallen significantly, VIX has seen odd intraday ‘spikes’, S&P futures saw the very odd ‘satan signal’, and USDJPY has suffered its worst losses in 3 years. This raises the question of whether US market microstructure is any better than Michael Lewis’ Flash Boys’ book describes.. (as we head into a bond market holiday, dismal liquidity, and a potential Black Monday), ‘That could absolutely happen here,’ Tabb Group’s Larry Tabb warns Bloomberg.
A week ago, this happened… (From Bloomberg)
At 9:25 a.m. Tokyo time, orders for shares in 42 companies totaling 67.78 trillion yen ($617 billion) were canceled, according to data compiled by Bloomberg from the Japan Securities Dealers Association. A representative at the organization wasn’t immediately available to comment.
The biggest order was for 1.96 billion shares of Toyota Motor Corp., or 57 percent of outstanding shares at the world’s biggest carmaker, for 12.68 trillion yen through an off-exchange transaction. Toyota declined to comment. Other stocks with scrapped transactions included Honda Motor Co. (7267), Canon Inc., Sony Corp. and Nomura Holdings Inc.

This post was published at Zero Hedge on on 10/11/2014.

US Share Market for Next Week Oct 13, 2014

We have elected a Weekly sell signal in the Dow and this is warning that we may yet see that November low during the week of November 3rd. The critical support now lies at 15961 and a weekly closing beneath this area will warn of a sharp correction that will make people’s nose bleed. Nevertheless, our models show next week as a turning point with Directional Changes back-to-back for the next 2 weeks and high volatility for the week of 11/03. Critical support also lies at 15555/ Only a monthly closing below this area would warn of a sustained correction.

This post was published at Armstrong Economics on October 11, 2014.

Revenge of the Kress Cycle

Throughout most of 2014, economists were convinced that the threat of deflation had been successfully bypassed thanks to Fed intervention. Indeed, many celebrated economic forecasters have been loudly cheering the mostly solid-looking economic data throughout most of this year. But as Yogi Berra once said, ‘It ain’t over ’til it’s over.’
The Kress 60-year cycle of inflation and deflation, known as the Super Economic Cycle, was scheduled to bottom this October. The bottom of the cycle may well be in, but the deflationary pressure it has helped create hasn’t bottomed yet. If the downward spiral of commodity prices generated by the final ‘hard down’ phase of the cycle this summer and fall isn’t reversed soon, we may end up seeing ‘Revenge of the Kress Cycle’ coming to a theater near you.
[Read: Deflation’s Final Curtain Call and Part 2] Put another way, the incessant meddling and intervention by the U. S. Federal Reserve in recent years may have staved off the deflationary impact of the final years of the 60-year cycle after the credit crash. But as Mr. Kress himself was wont to say, ‘The Fed ultimately can’t beat Mother Nature and Father Time.’ The years of artificial suppressing the natural cycle of deflation may have created a cyclical backlash, a counter-wave if you will, that could witness a confluence of falling prices across several major financial markets around the world.
There have definitely been premonitions of such a deflationary backlash in just the last few weeks. One of the most conspicuous of proofs that deflationary currents are at play is the drastic decline in petroleum prices. Consider that gasoline prices have been plunging and are now at their lowest level in almost four years.

This post was published at FinancialSense on 10/10/2014.

“Game Over For Aussie Coal” As China Levies Tariffs After 10-Year Hiatus

A wild week as markets began to act very sloppy. Wide and loose action with large daily swings is rarely a good thing and we are now beginning to break lower.
I’m still not sure just how deep this correction will go…but 200-day moving averages are coming into sight now, and should provide support or the ultimate low.
As for stocks, we were lucky enough to have nailed one who rose some 60% in a couple days but that was a rare sight last week.
I’m short a couple names right now and only using small position sizes if I take a trade at all.
The metals finally began to stabilize…but I’m still not so sure a low is in. After such a large and constant fall, metals need a rest. It is that simple. They can rest a couple months and rise and fall all the while. A major low could be in but I’m not yet convinced of that yet.
If a low is in place, we will have lots of time and tons of chances to get in. There is no rush to try to catch the exact low.

This post was published at Gold-Eagle on October 11, 2014.

Western Real Estate Bubbles: History’s Greatest Wealth-Trap

For the majority of Western populations; real estate is considered to be the ultimate ‘hard asset’, and thus the most-desirable financial shelter in times of economic peril/uncertainty. Ironically, it is precisely this attribute (and attitude) which makes real estate the ultimate wealth-trap – at the hands of unscrupulous bankers/governments.
First readers need to familiarize themselves with some of the economic dynamics associated with real estate. As a finite, hard asset (there is only so much usable land in the world), supply is limited. It is because of this limited supply that people trust real estate to preserve its value, and thus preserve their wealth. But the implicit assumption in this equation is that we have legitimate, properly functioning markets and economies.
As regular readers understand; nothing could be further from the truth. Our markets are literally nothing more than rigged casinos. Our economies are literally nothing more than (ridiculously unstable) Ponzi-schemes. This can be seen clearly, simply by comparing the present economic/market insanity with normal, historic conditions.
Under normal economic conditions (with legitimate markets), there are specific economic dynamics which help to ensure that real estate values do not get over-inflated, turning a financial shelter into an asset-bubble – and a wealth-trap. In times of ‘high inflation’, which is one of the principal fear-factors which make people look toward real estate; the tendency is for people to flock into real estate markets, thus driving prices up to unsustainable, dangerous levels.
However, in times of high inflation; all legitimate governments raise interest rates. Raising interest rates is the most-effective blunt-force monetary tool in dampening prices, in any/all markets. Thus the push into real estate driven by high inflation is countered by the pull of higher interest rates, driving people away from real estate, due (mostly) to significantly higher mortgage costs.
It is here we see the irredeemable corruption of the governments of the Western bloc. As prices spiral higher today in the two most-important price categories – food and housing – these corrupt governments tell us that inflation is near zero. Indeed, these shameless liars now have the audacity to claim that inflation is ‘too low’ (something which is economically impossible).

This post was published at BullionBullsCanada on Saturday, 11 October 2014.

Gold Investors Weekly Review – October 10th

n his weekly market review, Frank Holmes of the USFunds.com summarizes this week’s strengths, weaknesses, opportunities and threats in the gold market for gold investors. Gold closed the week at $1,223.09, up $31.74 per ounce ( 2.66%). Gold stocks, as measured by the NYSE Arca Gold Miners Index, rose 0.24%. The U. S. Trade-Weighted Dollar Index fell 0.90% for the week.
Gold Market Strengths Gold futures rose this week as many anticipate the Chinese will take advantage of lower gold prices. Indeed, gold seemed to withstand recent decreases in oil prices as well as increases in the dollar, implying that many investors are taking advantage of the bargain prices. On Friday, the Bank Credit Analyst highlighted that gold prices are unlikely to break down after successfully bouncing off support at $1,200 and are poised to stage a relief rally into the end of the year.
Gold Market Weaknesses Deutsche Bank recommended shorting gold due to the strong dollar environment.
A continuation of the prevailing socialist model in South America, Chile’s Supreme Court granted a petition by the Diaguita communities to overturn a resolution to develop the El Morro gold-copper project joint venture (JV) in Chile. This is the third time Goldcorp’s El Morro project has been suspended in three years.

This post was published at GoldSilverWorlds on October 11, 2014.

Deflation Fears Gaining Ground in Europe

The following article in the London Telegraph is definitely worth a read. It confirms what I have been thinking for a while now that the primary fear facing the markets and thus the Central Banks as far as the Western economies go, is NOT inflation, but rather deflation. Try as they can, the ECB and the BOJ in particular, cannot seem to get the kind of growth they are hoping for, and more particularly, an inflation rate of 2% annually.
Dam breaks in Europe as deflation fears wash over ECB rhetoric ‘We are reaching the end game in Europe. If they don’t launch real QE soon, the consequences are too awful to contemplate,’ warns RBS We have been following the Euro here in detail ever since ECB head Draghi first began attempts to talk the currency down when it reached the 1.400 level in May of this year. Quite frankly, with the problems that the Eurozone was having economically, the last thing desired in those quarters was a strong currency.
This was accomplished primarily by first raising the specter of additional monetary easing by lowering rates. Secondly it was then further reinforced by successive steps taken by the ECB which were seen as stimulative in nature by investors. I will not go into detail here as those have been covered previously here on this site.

This post was published at Trader Dan Norcini on Saturday, October 11, 2014.

Goldcorp CEO visits Australia and predicts ‘peak gold’ next year

Canada's Goldcorp, the world's biggest gold producer by market value, has renewed its prediction that "peak" gold will arrive next year, setting the scene for the bullion price to rise significantly over the next five to 10 years.
And it expects competition for gold resources will eventually force it out of its "comfort zone" of operating only in North and South America, with Australia's status as a major mining destination making it part of the new location considerations.
Goldcorp president and chief executive Chuck Jeannes told the Melbourne Mining Club yesterday that from next year there would be a steady reduction in global mine supply, due in part to the rate of new discoveries falling dramatically since peaking at 175 million ounces in 1995.
He said while investment demand for gold had been hit with the flight to equities in the past two years, China's cultural affinity for the precious metal, the rising wealth of its population, and the need for asset diversification away from the U.S. dollar meant the supply/demand fundamentals were "very strong" with the coming of peak gold.

This post was published at GATA

Lawrence Williams: Silver in supply deficit but price unmoved so far

Silver has been dubbed the ‘devil’s metal’ and likened to ‘gold on steroids’ because of its vastly more volatile price pattern vis-à-vis gold, with which it is inextricably linked. Indeed the prices of all the so-called precious metals tend to be linked to gold’s price performance although their fundamentals suggest that this should not be the case and, like silver, industrial supply/demand factors should be the main price drivers..
Over the past two years with gold in decline, silver has thus fared even worse, it tending to underperform gold on the downside and outperform on the up. A much followed measure of this is the gold:silver ratio which over the past few years has varied from around 35 to 70 and, at the time of writing is sitting at just over 70 – the worst level (for the silver investor that is) for  4 years.
What is perhaps surprising regarding the current silver price though, is that the latest analysis figures from specialist London-based precious metals consultancy, Metals Focus, suggest that this year silver will again be in supply/demand deficit, as it was last year, yet the price has still continued to fall. The silver bulls – and there are plenty of them – will point to murky goings on in the COMEX silver market as the root cause behind the decline, with huge short silver positions held by big banks with the apparent financial clout to manipulate the market whichever way they wish.

This post was published at Mineweb

ECB to publish results of bank audit on Oct 26

The European Central Bank said on Friday it will publish the results of new stress tests of eurozone banks on October 26, before it takes over as the region's banking supervisor.
These tests have been carried out under new powers given to the ECB as a result of the financial and debt crises, and are expected to be far more rigorous than previous tests which turned out to have missed weaknesses in some banks.
The ECB audits have focused attention in banks' boardrooms on whether they need to boost their capital base, since the purpose is to ensure that banks are strong enough to withstand sudden shocks and loss of confidence.
The ECB "will publish the results of its comprehensive assessment of 130 banks on October 26", the bank said.

This post was published at France24

Doug Noland: Derivatives Story 2014

At this point, I’ve seen sufficient market evidence to posit that the global financial Bubble has serious fissures. Emerging market currencies, bonds and equities are in trouble. Commodities are in trouble. The global leveraged speculating community appears close to, if not already in, trouble. Geopolitics is full of trouble. Global “risk off” liquidity issues are becoming a bigger issue – and are now being transmitted to U.S. securities markets through liquidity-challenged sectors such as small cap equities, corporate Credit and surging prices for risk protection. Corporate credit default swap (CDS) prices this week surged to multi-month highs. The VIX stock market volatility index jumped to an eight-month high. Moreover, this week’s bludgeoning in the over-loved and over-owned technology sector could have pushed some to the edge. Examining it all, the unfolding backdrop has me pondering previous vulnerable Bubbles along with the soundness of global derivatives markets.

This post was published at Prudent Bear