Shorting The Federal Reserve

Holding gold is simply recognition that the Fed’s actions over the last 30 years have potentially severe consequences that pose threats to the value of most financial assets, the almighty dollar and ultimately your clients’ purchasing power. Owning gold is in effect not only a short on the dollar and on the credibility of the Federal Reserve, but most importantly a one of a kind asset that protects wealth.

Who Calls The Shots In China

As documented here and elsewhere, in addition to the Pope and Putin, the third world leader US president Obama is "historically" meeting this week is China's President, and General Secretary of the Chinese Communist party, Xi Jinping. But just like everywhere else, the president is mostly a figurehead for far greater political and primarily financial interests backing him. So who calls the shots in China? The following infographc lays out the key power divisions of political, economic and financial power in China at this moment.

"Everyone's Praying But No One's Believing" - The 'Fed Put' Is Dead

Yellen’s detailed speech initially triggered an out-sized market reaction.  Unfortunately, it was mainly due to shallow market depth and weak-hand positions. Yellen’s speech should quickly begin to hurt over-priced financial assets. Yellen’s speech was the first time I can ever remember a Federal Reserve Chairperson commenting that inappropriate risk-taking might be undermining financial stability.  This is explicit confirmation that the Fed’s aim of lifting asset prices in the hopes they bolster broader economic activity has reached the end of its useful life.  Barring a financial or economic disaster, the ‘Fed put’ has been put out to pasture.

Weekend Reading: Fed Confusion

The current surge in dis-inflationary pressures is not just due to the recent fall in oil prices, but rather a global epidemic of slowing economic growth. While Janet Yellen addressed this "disinflationary" wave during her post-meeting press conference, the Fed still maintains the illusion of confidence that economic growth will return shortly. Unfortunately, this has been the Fed's "Unicorn" since 2011 as annual hopes of economic recovery have failed to materialize. However, it is these ongoing views of optimism that have collided with economic realities.

The Bear Market Catalysts

  1. Peak in liquidity
  2. Deflationary recovery
  3. Manufacturing recession
  4. Capitulation of the "strong $" & "TINA" trades

Margin Debt Drops: Healthy Pullback, Or Budding Headwind?

In any bull market, certain excesses are built up during its duration. The build up of these excesses, in metrics like margin debt, can serve as a tremendous tailwind for the market…as long as they continue to rise. However, when the music stops and the market declines, these tailwinds become headwinds. This is particularly true of margin debt as margin selling necessarily exacerbates the damage in a large decline. We do not know for sure if the recent margin debt retrenchment is the beginning of a longer trend. However, given the record high levels it recently achieved, should a longer, more serious decline in the stock market be starting, the large potential risk represented by record margin debt levels will turn into large actual risk.

Boehner Is Out: What This Means For Government Shutdown Odds And The Debt-Ceiling Fight

In the aftermath of John Boehner's surprising resignation announcement, the punditry has been scrambling to opine what this departure means for the odds of a government shut down, some saying the likelihood has increased, while others, such as Goldman, confident shutdown odds are materially reduced. The truth is likely in the middle, and while the odds of a government shutdown next week are reduced as a Continuing Resolution now appears more feasible, the probability of a broader shutdown in December once the CR expires, have materially risen.

Nasdaq & Small Caps Give Up "Hawkish-er Yellen" Gains As Dec Rate-Hike Odds Tumble (Again)

With NKE almost single-handedly holding The Dow up, the rest of the US equity market is rapidly giving back any gains from a hawkish Yellen and 'fixed' European automaker market. Notably, Dec rate-hike odds were 41% pre-Yellen, jumped to 49% earlier this morning, but have now fallen back to 42%... so the 'market' is not "embracing" a rate hike environment as one supposed expert said this morning...and the Biotech bloodbath is weighing everything down...

Is This Why Biotechs Are Tumbling: "Head And Shoulders Top" Spotted In The NBI

Now that concerns about a biotech top are in play, biotechs just can't seem to catch a bid, and as of moments ago were down over 3% dragging the Nasdaq just barely positive for the day even with the S&P up 0.8% One reason for the continuied weakness may be that, as Bank of America points out, there are signs the dreaded head and shoulders top has appeared in the Nasdaq Biotech Index.

Goodbye $100 Bill? Ex-Central Banker Demands All High-Denomination Banknotes Should Be Abolished

Earlier today yet another "very serious policy maker" confirmed that cash as we know it, may be on the endangered species list - again, a necessary precondition to make global NIRP effective - when overnight former Bank of England central banker, Charles Goodhart, told a London audience that bills such as the Swiss National Bank’s 1,000-franc note and the European Central Bank’s 500-euro note should be abolished, adding this "move that might also prove beneficial by trimming interest rates."

"Nothing Is Working" - The Markets Just Aren't That Into You

With just 3 months left on the calendar, many investors are down on the year for one simple reason: nothing is really working.  That leaves them only a short period to show a positive return, or at least a less-negative result than whatever index they track. To do that, many will have to make very specific and concentrated bets. It might be about equities generally – will they recover from the current growth scare?  Or it might be asset allocation – will bonds finally go up on the year?  For stock pickers, the key question is certainly “Play the winners, or look for laggards?” All we know is that with 69 days left to play catchup, time favors the fleet.  And the bold.

US Senator Demands Ukraine "Walk Away" From Debt Payments To Russia

Oh, the irony. A senator of the world's largest creditor nation has demanded America's allies do 'whatever it takes' to support Ukraine in breaking international law by refusing to pay back $3bn of debt owed to Russia in December. As RT reports, US Senator Chris Murphy of the Foreign Relations Committee exclaimed, "the international community should make it clear that we should take whatever steps necessary to give Ukraine the legal cover it needs to walk away from that debt... I don’t think Ukraine should be obligated to pay Russia back a dime." One can only wonder how US's creditors will feel about this perspective (maybe China and EM are already showing theirs).

President Obama & President Xi "Everything Is Awesome" Press Conference - Live Feed

Clash of the Titans? President "we don't spy/cyberhack other nations" Obama and President "we don't devalue our currency" Xi will hold a joint press conference to show the world how much US and China love each other (despite China dumping Treasuries and looming US cybersecurity sanctions on China)... grab your popcorn as Xi is supposedly taking questions from the Western press...

Global Markets: It's Getting Ugly Out There

You'd have to be in full denial mode not to see that it's getting ugly out there in global markets: currencies are melting down, trade and shipping are tanking, commodities are swooning and global stock markets are increasingly on central-bank life support.