Archive - Nov 10, 2014

In 2013; a chain of events led to what was (at the time) the greatest stampede into gold in human history. It began with the Cyprus Steal, the West’s first “bail-in”. This led to the realization (by the Smart Money) that no paper assets were safe any longer, within any Western financial institution or market.

No news, no catalyst... just a friendly VIX-crushing to lift stocks across the board back into the green from pre-non-fram-payrolls... which 'proves' the jobs data was great (despite the Fed's LMCI saying otherwise). With Europe now closed, let's see if it holds...

When it comes to inflation data, there are two parallel sources: the BLS, and ShadowStats' John Williams, who continues to plough through the underlying "data" using pre-pre-pre-revision protocols, and every month reveals a parallel universe in which something shocking is revealed: the truth. Here is his take on the October "weaker but really stronger than expected" jobs numbers. Here is what really happened.

Just as "orange is the new black", I think that "oil producers are the new gold miners." It doesn't sound quite as good, but here's my point:

Don’t expect this national mood of paralysis and surrender to last indefinitely. What troubles us at the moment is that when that mood snaps, it will be for a bad reason in the wrong way. In a way, it will be the true beginning of the end. The end of what? Of pretending that the people in authority know what they are doing. When it is really too late to fix any of these things, they’ll beg someone to tell them what to do, and the job-description for that position is dictator.

Following the massacre of 43 students who were allegedly abducted by corrupt police in southwestern Mexico in September, violent anti-establishment protests have broken out across the nation. As Reuters reports, demonstrators set fire to the door of Mexican President Enrique Pena Nieto's ceremonial palace in Mexico City as the Mexican people are angered at Nieto's visit to China (at a time when he should, in their eyes, be focused on domestic issues). The violence has been condemned, "You can't demand justice while acting with violence," said Nieto but it seems the people's restlessness is growing - not helped by the cancellation of a high-speed rail contract last week as opposition lawmakers accused the government of rigging the bidding.

while the algos would have been delighted to let October 15 slide into the collective memory made obsolete by a constantly rising market (because investors are only truly angry when the market plunges not when it surges) just as the regulators made a mockery of their fiduciary responsibilities in the aftermath of May 6, and now markets are more fragile than ever as HFTs comprise the vast majority of all trades, some appear to be complaining and even, gasp, asking questions how it is possible that the $12 trillion US Treasury market traded like an illiquid Pink Sheets pennystock, or worse, the Nikkei.Here is the WSJ with some of the complaints: “It starts moving faster and faster, and you can’t point to anything."Actually, yes you can.

At 4.0, the Fed's goal-seeked 19-factor Labor Market Conditions Index (LMCI) is unchanged in October (but everyone said Friday that jobs were great?). This is marginally below the average level of the last 4 years and provides the perfect ammunition for the Fed to be lower-for-longer... even as initial jobless claims near 40 year lows.

The moment the US equity market opened, the USDollar surged (driven by JPY and EUR weakness) and oil, gold, and silver mirrored the surge, tumbling from the open. Interestingly, while WTI is remaining near the lows of the day, gold and silver are bouncing back despite continued USD strength.

The Central Bankers bet the financial system that their theories were correct. They were wrong. Horribly wrong. And we will all pay the consequences for it. 

"An open Internet is essential to the American economy, and increasingly to our very way of life," begins the President as he explains why the FCC should regulate the internet for Americans' own good:

*OBAMA CALLS FOR REGULATING INTERNET LIKE PHONE COMPANIES
*OBAMA ASKS FOR 'STRONGEST POSSIBLE RULES' FOR OPEN INTERNET

"The Internet has been one of the greatest gifts our economy — and our society — has ever known," and that's why Obama feels the need to regulate it to "protect an open, accessible, and free Internet."

The bottom line, or rather, negative line, is the Millennials' savings, because "after a flirtation with thrift after the recession, young Americans have stopped saving. Adults under age 35—the so-called millennial generation—currently have a savings rate of negative 2%, meaning they are burning through their assets or going into debt, according to Moody’s Analytics. That compares with a positive savings rate of about 3% for those age 35 to 44, 6% for those 45 to 54, and 13% for those 55 and older."

Almost three years ago, Iran reportedly downed a US drone. The RQ-170 Sentinel recon drone that was reportedly captured has apparently been reverse-engineered, and now, as Reuters reports, Iran state news agency IRNA reports the drone-clone has taken its first flight. Iran's Supreme Leader noted, "Today is a very sweet and unforgettable day for me." Of course, this 'news' should be taken with a modest pinch of salt but, as with everything in foreign policy these days, Brigadier General Ali Hajizadeh states that "a film of the flight will be released soon."

EURCHF is rapidly falling towards its 1.20 peg level - not seen since September 2012 (when the SNB described the "massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development.") It appears the CHF buying pressure is based on traders betting on the Swiss Gold Initiative (SGI) referendum on Nov 30th - if it were to pass, the SNB would be forced to choose between buying gold or giving up on the peg (and allowing even more "massive overvaluation" of the swissy). For now, it seems EURCHF is the best indicator of SGI risk as precious metals remain unimpressed by the potential demand. Of course, as ForexLive notes one trader's comments, "even if the gold vote goes against them they can still hit the print button to infinity," to defend the peg; though that may just viciously impact the cost of the physical gold they would be forced to buy.

October was a historic month for McDonalds. While the investing public was already well aware that things are bad and getting worse when it comes to demand for the iconic hamburger following MCD's 30% plunge in Q3 profit, moments ago the troubled fast-food chain reported that in the first month of the fourth quarter it celebrated a tragic anniversary: one year of US comp store sales without a single increase, following a 1% drop in US October sales! This is the first time in history when MCD has anniversaried negative same store sales in the US.