http://www.321gold.com/editorials/gr...egen120716.pdf
Snippet: Gold and silver are obviously the big constant clearly illustrating what the best hedge is against currency devaluations. In all currencies except for the US dollar gold has outperformed all asset classes. And gold and silver will really take off and resume their secular bull market when the US dollar, the fiat currency of last resort, starts declining.
It is because gold and silver are inversely correlated with US dollars being expressed in the US dollars, they
are the mirror image of the reserve currency. If the US dollar is strong for fundamental reasons, not “last resort” reasons, there is no reason for gold and silver to be strong. And let me very clear for people that don’t understand gold and silver gold is not I repeat not a “barbaric relic” if there is any barbaric relic it is debt (paper money), which can be printed ad infinitum and is ruining the financial system. I equate paper money to manipulation and disorder and physical gold and silver to discipline and order. The BIS and ECB are now also publicly confirming that the US dollar is the real benchmark of risk, the real “fear indicator”.
On November 24 the ECB warned that there Is "significant risk of abrupt market reversal" One week after the BIS issued an unexpectedly stern, if completely ignored warning, that the surge in the US Dollar is leading to an abrupt tightening in financial conditions around the globe, making the repayment of trillions in USD-denominated cross-border debt increasingly more difficult and suggesting that the Dollar index itself is the new "fear indicator". This was followed by the European Central Bank warning that the risk of "abrupt" global asset market corrections "have intensified" on the back of rising political uncertainty, which poses a threat to banks, stability and economic growth. “More volatility in the near future is likely and the potential for an abrupt reversal remains significant amid heightened political uncertainty around the globe and underlying emerging market vulnerabilities,” the ECB warned in its twice-yearly Financial Stability Review published on Thursday November 24.
The conclusion thus has to be that the dollar is not getting stronger because its solid fundamentals but because the immense amount of US dollar debt that is being repaid by EM countries and corporations and the dollar loans that are not being rolled over. If the dollar strengthens much more it will kill even more US offshore earnings which account for 50% of profits of the S&P500 companies which will lead to further translation losses. And with interest rates rising in the US and across the world something will have to give!! Where is the growth coming from? There is no growth to speak off. Just look at the velocity of money in the US, which is at historic lows whilst the B/S of the Central banks grew to $19-20trn! It is the clearest indication that there is no confidence, no growth.
Talking about elections the NO vote for the Italian referendum, held on December 4, is almost a certainty with potentially very upsetting results. A EU breakup as a result of a NO vote cannot be excluded next to the fact that Italian debt yields could go up significantly following the ensuing uncertainty? The snowball effect could hit International banks having lent Italy €550bn with the French banks holding in excess of €250bn in Italian debt. Next to that the Italian banks have €360bn+ in NPLs or Non Performing Loans. By the way the restructuring of Monte Paschi will take place on Monday November 28! Good luck with that buying in pensioners. Cyprus is around the corner and this is only the beginning.
Several people have warned of the “unintended consequences” of Dodd-Frank, which are crushing bond market liquidity. Wall Street responded to Dodd-Frank by shutting down its proprietary-trading desks and shrinking inventories of securities like bonds. The government though allows banks to continue trading securities in their capacity as market makers, serving as intermediaries between buyers and sellers. Regulators have said banks must show that the amount of bonds and other securities they hold on their balance sheets don’t exceed what they need to meet “reasonably expected near-term demand. Next to that a growing volume of bond trades are circumventing market makers altogether crossing bonds internally. The volume of bond sales being crossed internally thus further exacerbates the lack of liquidity in the $100 trillion global bond market.
”On the day of Brexit we got a glimpse of what can happen when the world's most liquid bond market suddenly isn't and as one veteran bond trader exclaimed, the US Treasury market liquidity is "worse than Brexit." U.S. government-bond yields were deviating on average from a fair-value model. By that measure, the deterioration of liquidity in Treasuries has been the most severe since the U.K.’s June vote to exit the European Union.
Since its lows in May of 2014, short-term USD borrowing costs (1M Libor) have quadrupled. As the 100%-priced-in December rate-hike looms, the cost of funding for American businesses is once again on the rise, now at its highest since December 2008.
For now, it seems, the most levered US equity market ever appears ignorant of this rapid tightening of financial conditions...
Unfortunately, it leads to a rather ominous conclusion. The bouts of illiquidity will continue until central banks stop distorting markets. If anything, they seem likely to intensify: unless fundamentals move so as to justify current valuations, when central banks move towards the exit, investors will too.
As mentioned here above if we break the 3% on the 10y treasuries we will break out of the 35-year range and we will have fireworks. What also adds to this probability is that the Chinese are selling a record amount of Treasuries and the Russians and Saudis are doing the same. Who wants to remain in treasuries till the end of the year and risking even higher losses on bonds when everybody is selling into the “rally” hence why we don’t see the yields really going below the 200 daily moving average of 2.20%. In my point of view everybody is selling into the rally especially because of the created illiquidity by the CBs and the regulations. Next to that the reverse repos are trending much higher and show peaks not even achieved in 2008. It is showing me that there is a huge demand for collateral because so many positions are under water hence why the Fed is providing treasuries. In other words it is a mess in the world, which very quickly could get unglued because of the rate hike, the Italian NO vote or the break out of the 35-year interest range exceeding 3% and showing its ugly face.
To finish I wonder how many people really have a clue what is going on till it all happens? It is the same with AIG that kept on issuing CDS to players like Goldman Sachs because they thought that the events of 2008 would never happen. And we have seen what happened, an almost systemic breakdown of the financial system. These days any size is moving markets drastically, and the machines just make it worse. Interestingly it seems so far higher bond yields are not weighing on stocks yet though if the 10y yields break out above the 3.00% there will be no escaping. Though this time it will be at least 10x 2008 and be aware we don’t have any ammunition left to rescue the markets and any QE or other cash infusion will instantly dilute and implode the reserve currency a la Zimbabwe.
http://finviz.com/futures_charts.ashx?t=ZN&p=m5
http://finviz.com/futures_charts.ashx?t=ZN&p=m5
Snippet: Gold and silver are obviously the big constant clearly illustrating what the best hedge is against currency devaluations. In all currencies except for the US dollar gold has outperformed all asset classes. And gold and silver will really take off and resume their secular bull market when the US dollar, the fiat currency of last resort, starts declining.
It is because gold and silver are inversely correlated with US dollars being expressed in the US dollars, they
are the mirror image of the reserve currency. If the US dollar is strong for fundamental reasons, not “last resort” reasons, there is no reason for gold and silver to be strong. And let me very clear for people that don’t understand gold and silver gold is not I repeat not a “barbaric relic” if there is any barbaric relic it is debt (paper money), which can be printed ad infinitum and is ruining the financial system. I equate paper money to manipulation and disorder and physical gold and silver to discipline and order. The BIS and ECB are now also publicly confirming that the US dollar is the real benchmark of risk, the real “fear indicator”.
On November 24 the ECB warned that there Is "significant risk of abrupt market reversal" One week after the BIS issued an unexpectedly stern, if completely ignored warning, that the surge in the US Dollar is leading to an abrupt tightening in financial conditions around the globe, making the repayment of trillions in USD-denominated cross-border debt increasingly more difficult and suggesting that the Dollar index itself is the new "fear indicator". This was followed by the European Central Bank warning that the risk of "abrupt" global asset market corrections "have intensified" on the back of rising political uncertainty, which poses a threat to banks, stability and economic growth. “More volatility in the near future is likely and the potential for an abrupt reversal remains significant amid heightened political uncertainty around the globe and underlying emerging market vulnerabilities,” the ECB warned in its twice-yearly Financial Stability Review published on Thursday November 24.
The conclusion thus has to be that the dollar is not getting stronger because its solid fundamentals but because the immense amount of US dollar debt that is being repaid by EM countries and corporations and the dollar loans that are not being rolled over. If the dollar strengthens much more it will kill even more US offshore earnings which account for 50% of profits of the S&P500 companies which will lead to further translation losses. And with interest rates rising in the US and across the world something will have to give!! Where is the growth coming from? There is no growth to speak off. Just look at the velocity of money in the US, which is at historic lows whilst the B/S of the Central banks grew to $19-20trn! It is the clearest indication that there is no confidence, no growth.
Talking about elections the NO vote for the Italian referendum, held on December 4, is almost a certainty with potentially very upsetting results. A EU breakup as a result of a NO vote cannot be excluded next to the fact that Italian debt yields could go up significantly following the ensuing uncertainty? The snowball effect could hit International banks having lent Italy €550bn with the French banks holding in excess of €250bn in Italian debt. Next to that the Italian banks have €360bn+ in NPLs or Non Performing Loans. By the way the restructuring of Monte Paschi will take place on Monday November 28! Good luck with that buying in pensioners. Cyprus is around the corner and this is only the beginning.
Several people have warned of the “unintended consequences” of Dodd-Frank, which are crushing bond market liquidity. Wall Street responded to Dodd-Frank by shutting down its proprietary-trading desks and shrinking inventories of securities like bonds. The government though allows banks to continue trading securities in their capacity as market makers, serving as intermediaries between buyers and sellers. Regulators have said banks must show that the amount of bonds and other securities they hold on their balance sheets don’t exceed what they need to meet “reasonably expected near-term demand. Next to that a growing volume of bond trades are circumventing market makers altogether crossing bonds internally. The volume of bond sales being crossed internally thus further exacerbates the lack of liquidity in the $100 trillion global bond market.
”On the day of Brexit we got a glimpse of what can happen when the world's most liquid bond market suddenly isn't and as one veteran bond trader exclaimed, the US Treasury market liquidity is "worse than Brexit." U.S. government-bond yields were deviating on average from a fair-value model. By that measure, the deterioration of liquidity in Treasuries has been the most severe since the U.K.’s June vote to exit the European Union.
Since its lows in May of 2014, short-term USD borrowing costs (1M Libor) have quadrupled. As the 100%-priced-in December rate-hike looms, the cost of funding for American businesses is once again on the rise, now at its highest since December 2008.
For now, it seems, the most levered US equity market ever appears ignorant of this rapid tightening of financial conditions...
Unfortunately, it leads to a rather ominous conclusion. The bouts of illiquidity will continue until central banks stop distorting markets. If anything, they seem likely to intensify: unless fundamentals move so as to justify current valuations, when central banks move towards the exit, investors will too.
As mentioned here above if we break the 3% on the 10y treasuries we will break out of the 35-year range and we will have fireworks. What also adds to this probability is that the Chinese are selling a record amount of Treasuries and the Russians and Saudis are doing the same. Who wants to remain in treasuries till the end of the year and risking even higher losses on bonds when everybody is selling into the “rally” hence why we don’t see the yields really going below the 200 daily moving average of 2.20%. In my point of view everybody is selling into the rally especially because of the created illiquidity by the CBs and the regulations. Next to that the reverse repos are trending much higher and show peaks not even achieved in 2008. It is showing me that there is a huge demand for collateral because so many positions are under water hence why the Fed is providing treasuries. In other words it is a mess in the world, which very quickly could get unglued because of the rate hike, the Italian NO vote or the break out of the 35-year interest range exceeding 3% and showing its ugly face.
To finish I wonder how many people really have a clue what is going on till it all happens? It is the same with AIG that kept on issuing CDS to players like Goldman Sachs because they thought that the events of 2008 would never happen. And we have seen what happened, an almost systemic breakdown of the financial system. These days any size is moving markets drastically, and the machines just make it worse. Interestingly it seems so far higher bond yields are not weighing on stocks yet though if the 10y yields break out above the 3.00% there will be no escaping. Though this time it will be at least 10x 2008 and be aware we don’t have any ammunition left to rescue the markets and any QE or other cash infusion will instantly dilute and implode the reserve currency a la Zimbabwe.
http://finviz.com/futures_charts.ashx?t=ZN&p=m5
http://finviz.com/futures_charts.ashx?t=ZN&p=m5