Archive - Jan 16, 2015 - Story

At the hastily arranged press conference on January 15, SNB's president, Jordan, looked like a red-faced school boy caught with the hand in the cookie jar. None of his explanations made any sense. The SNB was clearly caught by surprise itself and didn't have time to make up some better lies. But why this sudden change of heart, throwing in the towel causing book losses of somewhere around CHF 75bn  (>10% GDP)? Some theories...

Self-government is the gift our founding fathers made possible and out of lack of respect for the sacrifices of the past, the constitutional rights of the present and the freedoms of future Americans we allow it to be traded for a comfortable existence.  We must stop and truly understand the concept of self-government as it was meant to be and then mentally reconcile that with the current state of our government.  We are parented not represented.  We are enslaved with encroaching laws that are demeaning to rational self sufficient adults.   And by a legislative body that feeds from our bosom, fights with our fists and has buried us in debt to a foreign body who they sold the rights to our currency.  How is this in any way a self-governed society?  We have been captured by a group of fraudulent citizens who control our money, our military and have desecrated our constitution.

After yesterday's report that two Greek banks had suffered sufficiently material deposit withdrawals to force them to apply for the unpopular and highly stigmatizing Emergency Liquidity Assistance program with the ECB, now the other two of Greece's largest banks have also succumbed to reserve depletion after the Greek bank run appears to have gone viral. As Greek Capital.gr reports, now all four Greek banks have requested ELA assistance from the ECB.

When it comes to America's foreign creditors, only two names matter (except for Belgium whose Euroclear service continues to be used by an anonymous entity(s) to buy up US Treasurys): Japan and China. And it is in the Treasury buying and selling dynamics of these two entities that we can see how Japan's monetary policy has impacted its holdings of US paper, which just hit a new all time high of $1,242 billion, while on the other hand Beijing's official holdings of Treasurys have remained unchanged since the summer of 2011, and which in July declined yet another month to just $1,250 billion, the lowest since January 2013.

One wonders just how disappointed Americans are going to be when the hard-data reality hits and the almost record high hopes of rising incomes is dashed on the shores of "unambiguously bad" low oil prices....

Oh the irony. You just have to laugh when you see this closed, autocratic regime scramble to build a neo-feudal wall in order to protect itself from radical terrorists of its own creation. Instead of building this Medieval monstrosity, you’d think the Saudis might want to figure out who amongst them had funded ISIS in the first place, but that would make too much sense.

If you thought the market's reaction to the Swiss National Bank's decision was extreme... imagine what happens when this unwinds...

Friends of freedom often become despondent when it seems that every day brings another growth and intrusion of government over people’s lives. But there is no reason to be disheartened, because there are lessons for winning liberty – from the opponents of freedom. If we keep the classical liberal ideal of individual rights and laissez-faire capitalism before us, we can and will win liberty in our time – for our children and ourselves.

Despite proclamations of stability in oil prices this week, Oil implied-volatility has surged back to new cycle highs this week (near record highs). Credit volatility has been rising for a number of weeks and now equity volatility has been dragged higher (to its highest weekly close since Dec 2012). Thanks to the SNB decision, FX volatility has also exploded this week - the biggest spike since May 2010 to its highest since Dec 2011. Rate volatility remains the least affected for now - though has been on the rise all year and now stands at it highest in 4 months. Simply put, since QE ended... volatility is back.

Since 2011, we have been warning of the rise of 'civil asset forfeiture' (here) with the 'stealing of American's hard-earned assets' having been on the rise signficantly in recent months; as the apparent final stage of empire begins. However, in an odd apparent success for "safeguarding civil liberties," Reuters reports that U.S. Attorney General Eric Holder said today that State and local police in the United States will no longer be able to use federal laws to justify seizing property without evidence of a crime.

It has been a rough start to a new year as all of the gains following the end of the Federal Reserve's flagship "QE-3" campaign have been erased. There is currently little concern by the majority of Wall Street analysts that anything is currently wrong with the markets. While earnings estimates are rapidly being guided down, it is likely only a temporary issue due to plunging oil prices. However, not to worry, the economy is set to continue its upward growth trajectory. Maybe that is the case. But as investors we should always have a watchful eye on the things that could possibly go wrong that could lead to a rapid decline in investment capital.

At the moment, the US dollar is choice. This isn’t necessarily a vote of confidence for the dollar. It’s more like a vote against all the others. If big institutional investors must choose between bankrupt America and bankrupt Europe, right now they choose America. But this is a decision that can and will be changed in an instant. Just look at the Swiss franc...

Canary... meet coalmine. While the divergence between US financial stock prices and their credit risk has been significant since Fed's Bullard saved the world in mid October. In fact the divergence really began when oil prices peaked and began to accelerate lower but really picked up this week after the Swiss National Bank news. Between energy-sector-based structured notes, massive short Treasury positions, and the potential for contagion from Swissy's massive moves, it would appear - judging by the major decompression in US bank credit risk this week to its worst since Feb 2014 - that counterparty risk is on the rise again.