Archive - Dec 14, 2014

It is amazing the speed at which FOMC officials have embraced not falling oil prices but collapsing crude. The pace of the decline is being driven, contrary to the fracking miracle, by the fact that nobody seems to want to bid on the stuff. That is, as I noted earlier, a demand problem. But officials like Fed Vice Chair Stanley Fischer and FRBNY President Bill Dudley are saying that these lower oil prices, due to lower demand, will end up boosting demand – big time. That is the essence of their argument, that recession is the latest “stimulus.”

One month ago, shortly after we reported that "Silver Coin Sales At US Mint Soar To Highest In Two Years" we learned that the "US Mint Sells Out Of Silver Eagles Following "Tremendous" Demand." That, however, did not prevent the mint from selling just about 5 million ounces in the period since the announcement, and as Reuters reported last week, "Strong investor demand lifted American Eagle Silver Bullion coin sales to a record for the second straight year, the U.S. Mint said on Tuesday." For those confused, it is clear that another year of record demand for physical silver explains why the price of silver is down 12.5% in 2014 after being down 36% last year. Why? Because as we said a month ago, "when it comes to precious metals, thanks to the BIS and the central banks, Paper beats Rock every time."

In recent years Geoffrey Raymond's annotating opportunities have slowed to a trickle courtesy of every central bank going all-in on some $11 trillion in QE (and rising fast) to create the artificial impression that the financial system is stable (because in some parallel universe 6 years of endless bailouts somehow is equivalent to stability and is expected to "boost confidence"), although if recent market volatility is any indication, he may soon be making a repeat appearance, if only in front of energy trading desks at first. And while we await Raymond to once again make mainstream media headlines, he has a special holiday gift idea for all those Zero Hedgers who have not yet parlayed their trillions (if Joe LaVorgna is correct) in savings from plunging crude prices into even more consumerism. Presenting "Existential Rage in the Workplace" from Geoffrey Raymond.

Within the last 90 days there has been more convoluted messaging coming from the financial media, the main stream, as well as academia than we can remember. The more one looks or tries to find relevant, useful, actionable insights – the more they get conjecture. Personally we’ll take our chances with not gambling at all or looking to any of the so-called “experts” for clues. It keeps becoming abundantly more clear by the day: without the “Chair” behind the curtain. OZ is more attainable than following the road to financial freedom these people want to point out.

Unfortunately this phenomenon is often described using the psyops captured and subverted term 'chemtrails'.........

Following Friday's US weakness and UAE's hint that $40 oil is coming next, the crude carnage continues as Middle East markets are crashing. As WSJ reports, the bearish direction of oil prices again spooked investors in Dubai where the DFM General Index finished down 7.6%, extending Thursday’s 7.4% rout. The bloodbath extended across the entire region with Abu Dhabi down 3.6%, Qatar slid 5.9%, Kuwait fell 2.9%, and Saudi Arabia’s market, the largest bourse in the region, retreated 3.3%. As one analyst warned, "the severity of this decline could very well be explained by investors covering margin calls as leverage was used on the way up over the past year."

While the market, and America's media, was focusing over the passage of the Cromnibus, and whether Wall Street would dump a few hundred trillion in derivatives on the laps of US taxpayers once again (it did), quietly and unanimously both houses passed The Ukraine Freedom Support Act of 2014, which authorizes providing lethal assistance to Ukraine’s military as well as sweeping sanctions on Russia’s energy sector. And as has happened for the entire duration of the second Cold War, any action by the US was promptly met with a just as provocative reaction by Russia. In this case, a leftist member of the Russian Duma said the US Senate’s decision to arm the Kiev regime should prompt ‘adequate measures’ from Russia, such as deploying military force on Ukrainian territory before the threat becomes too high. "It is quite possible that we should return to the decision by our Upper House and give the Russian president an opportunity to use military force on Ukrainian territory preemptively. We should not wait until Ukraine is armed and becomes really dangerous."

Who said economics can’t be fun?! How is it not absolutely brilliant that in the face of a collapsing shale oil industry – or at least, for the moment, of its financing model -, and the worst week for the Dow since 2011, the Thomson Reuters/UofMichigan consumer sentiment index shows American consumers are more optimistic than they’ve been in 8 years, and that “more consumers volunteered good news than bad news than in any month since 1984?? 1984! How does one trump that as a contrarian signal? And that I don’t mean to sound funny: that is serious.

Phibro could have the ability to mask its activity in Occidental’s hedging activity. Speaking with traders within the oil complex, I learned that there has been heavy trading activity on the OTC market on the backend of the oil curve. 

The fundamental issue confronting investors is about supply and demand.  In recent weeks, as energy prices and other industrial commodity prices fell, investors focused on supply.  The stimulative effect of the fall in prices, and the likely policy response by some major central banks, such as the ECB, and possibly the BOJ.   This was good for equity markets and weighed on the euro and yen. 

Following the passage of the Crominbus on Thursday night in a last minute "nailbiter" when the Federal spending bill got just one vote more than the required majority, it was off to the Senate. And late last night, proving that the Senate can work on weekends when a piece of Citigroup-penned legislation is on the table, in a 56-40 vote (21 democrats, 18 republicans, 1 independent voting No), the Senate joined the House in voting itself $1.1 trillion for the next 9 months, with the bill now heading for the final signature: Obama's. There is some argument whether the executive will join the legislative in confirming the US government is now (and always has been) merely a pupet of Wall Street, although we expect all it will take Jamie Dimon is just one more phone call of "encouragement" to Obama to make sure Wall Street's will is done in the White House.

• JAPAN RULING LDP WINS 275-306 SEATS: NHK EXIT POLL
• JUNIOR COALITION PARTNER KOMEITO WINS 31-36 SEATS: NHK POLL
• JAPAN OPPOSITION DPJ WINS 61-87 SEATS: NHK EXIT POLL
• JAPAN INNOVATION PARTY WINS 30-48 SEATS: NHK EXIT POLL
• JAPAN COMMUNIST PARTY WINS 18-24 SEATS: NHK EXIT POLL
• JAPAN RULING COALITION SET TO WIN 2/3 MAJORITY, NHK EXIT POLL

The New York Times is the paper of Paul Krugman and the Federal Reserve and central banks. It rarely has a critical word to say about central banks and the current fiat monetary system. Conversely, it rarely has a positive word to say about gold. The article suggests a realisation that currency wars are set to intensify with gold again becoming an important monetary and geo-political asset.

The largest economy of the Eurozone is showing important signs of fatigue...

From here to larceny!