Relative to the monetary base, the gold price is currently at an all time low. In our opinion, this is a temporary anomaly, which we believe provides an extraordinarily favorable buying opportunity.
The Fed's QE policies of recent years have, for all intents and purposes told the world that “the dollar is our currency and your problem.” And, in recent years, the dollar has been a genuine problem for a number of emerging countries. Following this traumatic event, and the change in the perception of US stability, China went around the world and invited the likes of Brazil, Indonesia, South Africa, Turkey and Korea to shift some of their China trade away from the dollar and into renminbi. China started doing this in 2011 and, as we see it, the renminbi’s attempt to become a trading currency is potentially one of the most important financial developments. Yet no-one seems to care.
"As this critical domino chain of local governments in China’s credit risk situation begins to wobble, there could be significant ramifications for broad financial market stability. Such a chain reaction seems to have begun."
Scared by the recent surprise CHF event that caused many Forex brokers to completely collapse, brokers are taking no chances as Greece sits on the brink. From one broker:
"Investors have experienced many mood swings, some institutionalized irrationality, as well as treacherous trading conditions in the first six months of 2015. The wacky has become the norm."
If you jump off of a make believe cliff, don't be surprised when you hit the reality of the ground! Reggie Middleton
"Hope" of a Greek deal are being resurrected (with no real signs of progress) and that is sending stocks higher and spreads tighter and crushing Bunds and Treasuries. 10Y Bund yields are 7bps higher at 93bps and 30Y Treasury yields are spiking to 2015 highs...
Shanghai Gold Exchange volume climbed to a record today as prices declined incentivizing value driven Chinese buyers as Chinese stocks crashed 7.4%. Chinese stocks have had the biggest two-week loss in more than 18 years and are close to entering a bear market after extending losses from their June 12 peak to 19 percent in less than three weeks.
Following yesterday's furious market drop in Chinese stocks, just before the overnight open, Morgan Stanley came out with a much distributed report urging investors "Not to buy this dip", and so they didn't. As a result, the Shanghai Composite imploded, at one point trading down 8% while the Chinext and Shenzhen markets crashed even more. This was the single biggest Shanghai Composite one-day drop since 2007, and with a close at 4192.87 the SHCOMP is now on the verge of a bear market, down 19% from its June 12 highs. China's second largest market, Shenzhen, is now officially in a bear market.
For a glimpse of what happens next, look no further than Sweden.
With levels of investors complacency at extremely high levels, it is a currently "fact" that little can go wrong. There is no recession in sight; the earnings decline was all primarily related to energy companies and most importantly, global Central Banks are continuing to support the financial markets. Of course, maybe it is the last point that should be questioned. If the economy is doing so well, then why are Central Banks still needing to intervene to support the growth? This is equivalent of saying the "the patient is cured, as long as we don't take him off of life support."
“Any of these events would likely trigger asset price volatility [and] attempts by institutional investors to redeem illiquid corporate bonds in crisis circumstances would amplify volatility.”
- This headline needs updating: Creditors set bailout ultimatum for defiant Greeks (Reuters)
- Greece’s Fragile Banks Leave Alexis Tsipras Few Options in Bailout Talks (WSJ)
- Dueling Greece Plans Presented as Ministers Race for Aid Deal (BBG)
- Icahn Cashes In His Netflix Chips (WSJ)
- Meet the Health-Law Holdouts: Americans Who Prefer to Go Uninsured (WSJ)
- ECB holds Athens lifeline unchanged as Bundesbank protests (Reuters)
- Supreme Court Guide: Six Big Decisions Remain (WSJ)
- The Rise of the Compliance Guru—and Banker Ire (BBG)