Midnight Run To Cover

Tyler Durden's picture

It is early in the Asian morning session and the mood is decidedly like that in late September, early October of 2008, when every day felt like it could be liquidity's last. And while we have long discussed that the "liquidity"situation in equities is laughable, with May 6th confirming our concerns, tonight we are seeing, for the first time, the evaporation of liquidity from the FX market, where tight bid/ask spreads are needed for proper market functioning. The EURUSD and EURJPY as well as various cable pairs are plunging, taking out massive 10 pip steps lower with every block, something unseen since the Lehman collapse. Furthermore, with funds anticipating something, anything out of Europe this weekend after the major move down in the euro last week, and the disappointing silence out of both Brussels and Luxembourg, the EUR will likely test the next support of 1.18.

The much more critical for American stocks EURJPY pair is also getting trounced as "risk off" is now on.

And with realized vol exploding to weekly changes not seen in over one year, last week's rumors of massive carnage as the key FX desks are becoming ever louder. We would not be surprised if tomorrow we discover that a liquidity crisis has struck at some major hedge funds and prop desks. Surely, the implosion of a TBTF FX desk would only make the Volcker case that much stronger.

It appears that tonight the LBMA is too busy with putting out other fires than to worry about a surging gold. At last check it was back on its way to retest $1,250. So the very same conditions that pushed gold higher today, were responsible for it plunging on Friday... The intervention (and lack thereof) is just getting far too blatant.

As for index futures, we won't bother you with those as we expect the Liberty 33 night shift to take over around 3 am and to make a spirited attempt at a green open. However, for now everything is solidly 1%+ down. So much for that 1,000 point/limit up bounce on the European "bailout."

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HFT1's picture

About 15 pips from flash crash levels in AUD/USD. No fat finger trade here, just short risk accross the board. The last 3 or so Sundays have seen a gap up in risk not so today. I agree team PPT will be active in the early morning hours...

geminiRX's picture

I am glad I'm out of this mess. I don't have the stomach for it. I hope they can save these markets - because if they don't, it will be mass slaughter. I would love to participate in markets again, but I won't until governments get their spending in check and valuations become more realistic

Implicit simplicit's picture

Remeber the anti-Cramer "short, short, short"

chumbawamba's picture

Anyone who's in gold and silver is "out of this mess".

Good luck, All.

I am Chumbawamba.

ConfederateH's picture

Not only are they out of the mess, they are doing their part to put an end to farce.  Gold, the one true WYSIWYG.

Gordon_Gekko's picture

Yup. Gold holders are almost chuckling as they watch this circus play out.

Anything you don't have in physical Gold will burn. 100% physical Gold is the ONLY way to go.

akak's picture

No silver or platinum at all, Gordon, not even a little?

What can I say --- I like white AND yellow!

(Although admittedly, platinum is more grey than white.)

Popo's picture

Gold and Silver holders are "out of this mess"?

Please just stop the preaching.

Disclaimer: I hold a significant amount of gold and silver.

I have been a gold and silver investor for almost 20 years, and what *terrifies* me right now is the number of newbie investors in metals who think they've found a surefire answer. Only a fool would rest his laurels on the metals market. Am I long metals? No way. (I do like gold and silver very much however). I am the definition of loose hands, and that doesn't come from lack of conviction. That comes from experience my friend. The powers that be are very big, very dangerous and very, very scared. The only thing more dangerous than a starved, caged dog, is a room full of starved, caged, 1200 lb. gorillas.

Metals are a dangerous, slippery beast. And if you think you "know" the short term vector within 50% percentage points, you are by definition a 'neophyte'. There are way too many people clinging to gold and silver out of a quasi-religious belief in their 'power'. It's important to recognize that 'power' frequently comes with a white-knuckle ride that tests the metal of even the most seasoned investors.

A drop in liquidity is a deflationary event. It does not, in any way bode well for metals in the near term.

Will I bail out on my gold and silver? No. Not yet. But is a collapse of 30% of the PoG possible? Hell yes. Extremely possible. Is a spike also possible? Hell YES. Also extremely possible.

Recognize the danger people. If you're not a seasoned investor, Gold and Silver are *NOT* safe havens. Go look at a historic chart and just try to call that massive volatility "safe".

I like metals right now. But there are way too many noobs here who will either hang on too long, or get crushed by the riptide of unexpected short term drops.

You're hardly "out of this mess".

My 2 cents...

Noah Vail's picture

Your comments identify you as a speculator, not an investor. metals won't go to zero, currencies can and will. If you are happy in paper, great, the rest of us are terrified of it.

Popo's picture

Right. That sounds suspiciously like an ad hominem attack.

By the way, I never, at any point said I was "happy in paper". Did you make that up?

I'm also glad you responded with your "the rest of us are terrified" comment. It's nice to be engaged in a dialog with the person who apparently speaks for the entire board. ...Or is the groupthink here really that dense? (Don't answer that... I know. Hence my concern.)

You're attempting to place me on the opposite side of the gold silver argument because my beliefs don't sync perfectly with yours. As I said, I like metals.

My point -- my sole point -- is that volatility is guaranteed to be *massive* within metals prices in the near term. I don't think most new investors realize this.

By the way, the term for one who buys and sells is a "trader". Your comments identify you as someone who will be taken to the cleaners the next time the big fish do the latter.

Escapeclaws's picture

Thanks for your two cents, Popo. I've been regretting that I did not just buy and hold gold when it was at $600--$700. I can't bring myself to buy gold when it is ascending vertically like a rocket. People like GG should come out and say what their average cost of gold is before recommending to fools like me to get in at current prices. If you bought your gold at $300 you can be quite comfortable watching its gyrations around $1200. What has kept me from staying in gold is precisely my refusal to take losses greater than 5%. Instead of just saying buy gold, the goldbugs should be saying, buy it at $1250, can't lose! These goldbugs are going to lose their popularity and their sheen when they've misled people into buying gold at inflated prices before a big collapse. At least people should be position sizing their purchases, looking at the downside risk as well as the upside. Get a copy of Van Tharps book and learn position sizing before you commit to any investment!  Twisting the words WB Yeats, "Cast a cold eye on gold, on silver/ Horseman pass by!"

WaterWings's picture

If there is a big collapse PMs won't even be priced in Federal Reserve Notes. Up 50%, then down 50%. It's a shame if they couldn't have acquired more because of timing, but for the little guy investing in anything else these days is like 100 mph, 50-lane Frogger.

trav7777's picture

Take losses > 5%??  Don't hold FRNs.

There is no petrodollar hailmary to save the FRN this time.  Gold at this point is not an investment, it is an attempt to translate paper into physical assets.  Anybody looking to "get rich" as opposed to conservatively preserve wealth with PMs at this point is a fool.

Absinthe Minded's picture

I can't say I blame you Escape. I got in when it was around $900 and I only bought a little for insurance. Personally I think Silver is a better bargain right now and have been buying on the dips, thank you JPM. Like any other investment, it's gambling and you should only invest what you can afford to lose. I don't know what is going to happen to it, I don't think anybody really has a clue, although many claim to. I know that if gold drops to $900 an oz. again I'll be thinking long and hard about whether I should buy the dip or get out before I lose my shirt. Unfortunately knowing the volatility of it I won't have a chance. I know a lot of the goldbugs are positive it isn't going anywhere but up, and with the money printing going on it seems like a sure bet. I just don't know, this world has become so volatile.  

cossack55's picture

LIFE is a good definition of volatility.  Have had silver for 45 years and the better looking half demands gold in the form of bangles.  So be it.  She is happy, I am happy.  The markets may do what they wish.  I shall rejoin after the collapse only if the goobermint is destroyed.

FischerBlack's picture

I have quite a bit of physical gold and silver, too. But it's not going to be enough to get me through a real collapse. There's really only one thing that will get you through a collapse and that's *income*. You better have a skill that people will pay you or barter with you to use. Dentist? People will trade lots of good stuff to fix tooth pain. Farmer? You'll be the nouveau riche. Obstetrician or midwife? There will always be babies to deliver. Angler? Trapper? Prostitute? Surgeon? Storyteller? Gold is good, but few individual speculators have enough to survive for very long. 


Cindy_Dies_In_The_End's picture

Thanks Fischer. I wish more people realized that. Having experienced living thru Hell in former Yugoslavia, I can assure you that for some time, it was very hard to do anything with gold. Skill and barter was required. If you are "terrified" of a Armageddon scenario, you do yourself a HUGE favor by stocking up your own personal stash and THEN a barter stash. I promise you that barter will be much more important. Even when things got slightly better it was still difficult to get someone to take gold for a long time.

Anyway, gold is good but if you starve or get robbed in the short term, well, it won't provide a great deal of comfort.



Absinthe Minded's picture

Being an electrician I hope there is a need for my services. I'd hate to have to learn how to make solar powered inverters, but if that's the future, so be it.

WaterWings's picture

Recharging car batteries for people so they can power an LED light at night instead of going to bed early like most of human history.

Sell the LEDs, inverters for high-drain appliances, etc. Imagine sources of electricity other than the grid: stationary bicycles, wind, solar, even steam. Expect distruptions in availability - long term - our infrastructure is crumbling. All very small scale but being able to recharge some AA to power a flashlight or radio will be highly desireable in a breakdown/prolonged depression we cannot avoid.

kitty's picture

I hear more people talk about buying physical gold as insurance against paper as opposed to buying gold as an investment. With more and more people buying/hoarding gold these days, I wonder if Obama will outlaw the private ownership of it as one of his heroes, FDR, did in 1933?

JW n FL's picture

Your Vote for Bush caused this... you are the Sheepeople, you are the ignorant Cancer that has caused this once great Nation to faulter... now go paint up a pro-life picket sign and do what you Love.



DoChenRollingBearing's picture


Boy, that was mean spirited.

Stormdancer's picture

People that dare to make gold their numeraire instead of measuring wealth in fickle, unstable, manipulated fiat currencies quickly discover that their purchasing power has increased almost across the board the past decade.  If they have any gold or silver that is.  Of course (wildly increasing) volatility is likely in our future...if you care about how much currency your gold will buy.  I don't.  I care about how much energy, wheat, water or labor it will buy.  I also hope newer entrants to the precious metals will realize that volatility is going to be part of the scenery in increasing and sometimes gut wrenching measure and not be prematurely shaken out of their insurance by any of those "unexpected short term drops"....for "short term" they shall be.  But then, anyone who has been around PM's for awhile knows that PM's are wont to hand out 30% haircuts now and then...such events shouldn't be "unexpected".  Judicious use of paper hedges of physical positions at high technical risk junctures can be of great value...

chumbawamba's picture

Yes, we will have volatility, as in the past.

However, someone please tell me into what currency people will flood that will cause gold to fluctuate wildly to the downside?

What currency?

Being as there is none, and nothing on the horizon would indicate anything is coming, it is pretty silly to think that gold is anything but the safe haven that it is.  It is a wealth preserver.

And people who think it's the be-all and end-all also don't know what they're doing.

Gold, guns, garden.

Those who've been around long enough know that I've always prescribed all three in equal measure.  Better have it all or else you're wasting your time (but at least you'll have gold).

I am Chumbawamba.

cossack55's picture

Hey chumb, looks like you have some autojunkers tracking you.

BTW, Ayn Rand:  A man who thinks cannot be ruled.

ApplesConspiracy's picture

You can't spell "slaughter" without "laughter"

akak's picture

And you can't spell "crap" without "rap".

That has no connection whatsoever to your comment --- I just like saying it, because of course it is true.

John Law's picture

Futures down over 1%. If melt-up Monday doesnt occur as normally scheduled, it could get really ugly, really fast. It's time guys. Be prepared and enjoy the show and buy what ever gold and silver you can now.

hognutz's picture

Don't forget your lead too!  ;-)

jedwards's picture

Meh.  I'm sure the markets will be in the green by the end of tomorrow.  At some point tomorrow we're going to hit a reversal, just not sure at which point it will bounce, maybe after a really strong move down to S2 on the SPX.  People are looking for a reason to juice this market, so many people are on the downside (me included).  If we see a reversal overnight and we're in the green before the NY open, then we know it's going to be a green OPEX week.

Fraud-Esq's picture

$70,000 paid 1M in February FX if you called US-Euro parity. wow. The money you can make in currency if you move these markets is incredible. 

Didn't someone think the US FX swaps deal with ECB would prop the Euro till Fall? Doesn't seem to be helping. 

chindit13's picture

The lack of solution or concern---I'm not sure which---was evidenced on the Fareed Zakaria show that also carried the G-Pap interview.  In the panel of D. Strauss-Kahn, Christine LaGarde, a lump of flesh who surname is the season of our discontent, and some self-congratulatory Singaporean bureaucrat who is clueless about how dependent his corporate monarchy is on unlimited Chinese bank credit, there was almost a total lack of concern about the ongoing market instability, as if it was still December 2006.  Frankly, I found it shocking;  they didn't even pretend there could possibly be any trouble on the horizon.

I think reality is about to do some major arse biting on the whole lot.

Noah Vail's picture

Yeah, I saw about sixty seconds of that, was all I could take. I especially love the transistion from talk about recovery now to growth. Recovery is a done deal, now its on to the next bubble. Nauseating.

moneymutt's picture

I work in construction, and sometimes have to tell guys how they built something is totally wrong and likely to fail. Some guys, after I walk them thru carefully how wrong things are, how bad things could be if the fail, and demonstrate to them I am not a chicken little as I have seen similar builds fall, they then accept what I am saying and rebuild. They are depressed, but they realize a failure is very likely and realize a rebuild is much less worse than a failure. Then there are the other guys who built things wrong but cannot IMAGINE that something could ever fail. They have not good reasons to think their construction is stable, no arguments on their side, other than they can't conceive of a failure, they have never seen one, they have never methodically accounted for the forces on their structure versus the structure's strength. They have never had a failure, they have not seen one, so they must not exist. And then failure comes. If a guy has built something, had it fail, and survived to continue to build, they are the best builders, as they will not take short cuts, they know that any moment they could bite you. They want to sleep at night, and they know enough not to sleep well if they do anything not right.

Problem is, we have a whole world of people that can't conceive of failure because everything has been rosy their whole career and they are unwilling won't take a sober look at how the numbers add up. So the building is cracking, moving, making weird noises..."I'll just put a brace here or there, because buildings don't fail, never seen it, never could happen"

By the way, you still in Bangkok?

RockyRacoon's picture

Fareed managed to have a "discussion" with 4 people who generated NO repeatable sound bites.  Summers was about as bland as I've ever seen him.  What a waste.  There were many questions that could have been asked, but weren't.  It was like watching paint dry.

Number 156's picture

Lets see...

Greece domino is falling...                   check,

Greece preparing to sue US banks...      check,

Bankers about to get the Volcker rule...   check,

Jiffy Pop in my kitchen pantry,             check.

Fish Gone Bad's picture

This mess took a while to build up, it will take a while to unwind.  I have a case of popcorn set aside.

Number 156's picture

Meanwhile, there are a few webcams out there that are worth watching:


http://jvc.thaniya.tv/  --An internet cafe near the beleaguered neighborhoods. You can see military and police patrolling outside.

http://webcam.ose-software.com/         (not much to see here...)

http://www.bkkok.com/webcam/ccam.jpg   --Almost at ground zero...


http://www.grandebretagneview.com/  --Theres two cameras here, Acropolis cam and Parliment cam. I was watching hell break loose on the Parliament cam last week.

http://www.webcams.travel/webcam/1216135541-Weather-Webcam-Temple-of-Oly...  --more Greece cams on that one.

JW n FL's picture

Nice... Thanks for the quick cam post.

DoChenRollingBearing's picture

O/T, but it is after midnight...

A couple or so days ago, a kind poster provided the ZH community the recipe of one of Hemingway's favorite cocktails "Death in the Afternoon".

I have my own variation:

"Death After Midnight"

5 parts Stoli berry flavored vodka, 1 part absinthe

So, if I start writing gibberish soon (like Bravo & yip), well, it was the absinthe talking, not me!

chumbawamba's picture

In my case it's almost always the weed talking, but then that's what makes me so interesting ;)

I am Chumbawamba.

Trial of the Pyx's picture

yeah chumba...we know


he drinks a whiskey drink, he drinks a vodka drink

he drinks a cider drink, he drinks a lager drink

TheSettler's picture

just one more hit....ooowwwhhhh..ok

your turn....

dumpster's picture

chumbawamba  talking with both hands ,, weaving   lol

thesapein's picture

I'll smoke to that.

He is Chumbawamba.

DoChenRollingBearing's picture

He be the Chumbawamba!

Just in case any of MY comments sound like JB, yip, et al, well it was the absinthe talking...

Gold everyone!  Your last best hope...

Further commentary from the bearing likely tainted by the absinthe.....


ConfederateH's picture

I hope you have a medical permit for that!  If not, claim you are suffering from burn-out.

merehuman's picture

Dont bogard da joint man. The junk man must really like you.