Archive - Nov 2014 - Story

While we have covered the aberration that is a negative gold GOFO rate previously and in extensive detail in this post, an abridged version of what negative GOFO means comes courtesy of Deutsche Bank's recent discussion on what a successful Swiss gold referendum. To wit: "It is interesting to note that benchmark gold-dollar swap rates have recently traded negative, meaning investors are paying to borrow gold. This is unusual as gold is traditionally used as a source of collateral for cash financing.... [A] number of factors may play a role, such as excess dollar liquidity or an increased demand for collateral on the back of the global regulatory developments." In short a gold shortage at the institutional, read commercial and central bank, level. And not just a shortage but the biggest shortage in history, judging by today's latest plunge in the 1 Month GOFO which just dropped to -0.5% and , worse, 1 Year GOFO that just hit its lowest print in the 21st century, and is also about to go negative: something that has never happened before further suggesting the gold shortage could go on for a long, long time!

Because nothing gives "Thanks" like Americans fighting over things they don't need...

Meet 28-year-old Navy vet Mark Paffrath - the latest confirmation of the relentless bull market in fascism in America today...

In 2013, 186,000 people were allowed to buy weapons without a background check at all, according to the AP, after the FBI was unable to process their applications within the legal window of three days. This year demand is even higher...

The final days of US empire are fast approaching. Perhaps its end will pass slowly and gradually, or perhaps the event will unfold rapidly and catastrophically. Maybe chaos will break loose, or maybe its demise will be organized well and proceed smoothly. This nobody knows, but the end of empire is coming as surely as day follows night and sun follows rain. Overexpansion, overreach and over-indebtedness will take their toll—as all past empires have discovered.

Yesterday it was the French, with record high unemployment and record low bond yields. Today, it is the turn of the Italians with the unemployment rate rose to 13.2% - the highest since records began - as bond yields continue to plumb new "lower rates will spur lending which will spur economic growth which will create jobs" lows... What is more worrying (despite Renzi's "glass is not half empty" comments) is 70% of Q3 jobs in Italy were filled by temp contracts...!

Western dominance was born from a distrust in the dominant reserve currency at the time. Its decline will be because they followed the same route. And the canary in the coal mine is what’s happening in Switzerland this weekend.

Essential...

What best shows that for Venezuela it is essentially game over, is that as the chart below shows, Venezuela’s international reserves declined $1.3 billion in the week after President Nicolas Maduro transfered $4 billion of Chinese loans to the central bank. In other words, the scrambling oil exporter was forced to burn one third of its Chinese bail-out loan to keep itself solvent. The country’s reserves dropped to $22.2 billion today, according to central bank data. As Bloomberg also notes, Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world’s highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading. “If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn’t do it in any way,” Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview.

If you ever needed proof that the financial press has been completely indoctrinated in the cult of Keynesian central banking consider the following...

Having already tumbled 10bps on the week, US Treasury yields plunged 4bps after the US equity market cash session closed... to the lowest 30Y yield close since May 2013.

Not 'off the lows'

Because nothing says "spend on Black Friday" like a fractionally positive Dow Jones Industrial Average closing in the green with a last minute surge that gets its from red to just barely green... and completely unrigged. 

Despite the best efforts of business media to paint a rosy picture of the Black Friday spend-fest, stocks had only one trajectory - from upper left to lower right - from the open. Small Caps were slammed but all major indices gave up significant knee-jerk "energy schmenergy" gains to close ugly. However, The Dow was pushed just into the green - and new record highs - to prove everything in the centrally planned world is awesome. Crude oil prices were monkey-hammered to 5-year closing lows. The USDollar gained on the day - after 3 down days - and combined with Swiss referendum expectations, gold faded notably (as did Silver with oil). Treasury yields tumbled 10-12bps on the week and HY credit notably underperformed.