Ben Bernanke

This is the REAL DEAL for Europe. Anyone who has some kind of counter-argument to these points either doesn’t understand the political environment we’ve entered (even Central Banks are fed up with bowing to political pressure from politicians) or is simply hoping that by ignoring these realities they (the realities) will go away.

Goodbye, living spirit.

There was a time when the CME was rushing to hike crude, gold and silver margins. That seems like an eternity ago. So was the appointment of Obama to the role of margin hiker-in-chief, and his most recent witch hunt to rid the world of all evil speculators (oddly, the speculators are only evil when driving the price of oil higher, never that of stocks). Anyway, as of minutes ago, the CME just cut margins for Crude (CL) and Gold (GC) by 13% and 10% respectively. At this point we doubt it will do much if anything. Those who care, know that the only real assets are those that one has possession of, not held by proxy of an exchange which just can't wait to spring the trap and hike margins the second Bernanke announces the NEW QE. Sorry: the people just aren't going to fall for that one again.

Here in the U.S., I think that The Bernank’s plan was to pretend they didn’t need to print more money, get commodity prices down and then hope that the economy would respond favorably to that development.  This wouldn’t have negated the need for more printing; however, it would have bought time and allowed for a potentially lesser degree of action.  Instead, what has happened is that the global ponzi is completely and totally incapable of holding itself together without consistent and increasingly large infusions of Central Bank money.  The debt burden is too large, the mal-investments too pervasive, the corruption too systemic.  The whole house of cards that is the global economy will vanish into dust rather quickly without more and more printing.  So what do you think they are going to do? If I am correct, and the U.S. economy itself is now in the early stages of what will probably turn into a serious economic slowdown, then it will not be easily stopped with incremental Central Bank policies.  The fact that they have waited this long and the fact that the global economy is in the midst of a serious slowdown tells me one thing.  They are way behind the curve and by the time they realize this it will be too late to stem the momentum.  That said, I do expect them to respond and the fact that things will have gotten much worse than they expected will mean a major response.  I’m not talking operation twist part deux.  I mean a serious print.  Potentially the BIG ONE.

The two biggest market props of the last two years: the Fed and the ECB have found their hands tied. What will follow will make 2008 look like a joke. On that note, if you have not taken steps to prepare for the end of the EU (and its impact on the US and global banking system), you NEED TO DO SO NOW!

By the time Operation Twist (1) ends in just over 40 days time, on June 30, Fed Chairman Ben Bernanke, according to his previously announced "loose" target, will hope to have extended the average maturity of all bonds in the System Open Market Account (SOMA) to a record of roughly 100 months from 75 month at the onset of the program in October 2011. After all the sole purpose of Twist was to load up the Fed's portfolio with duration, forcing the rest of the market to shift its investing curve even further into risky assets, as the Fed will have effectively onboarded the bulk of securities in the 3-4% return interval. Now as we showed back in early April, hopes that the Fed will simply continue with Operation Twist 2 after the end of "season" 1, as suggested by some clueless "access journalists" who merely relay what they are told by higher powers, are completely misguided as the Fed simply does not have enough short-term securities (1-3 years) to sell, and would have at most 2 months of inventory for a continued sterilized operation. Which however, does not mean that the Fed can not be quietly ramping up its operations in the ongoing Twisting episode. Because as Stone McCarthy demonstrates, as of the past week, the Fed has already surpassed its 100 month maturity target of 100 months, and is at 102.82 months as of May 16. And this is with 6 more weeks of Twist to go: at the current rate of SOMA purchases, the Fed will have a total portfolio average maturity of just shy of 110 months by June 30! Which means that contrary to market expectations of what the Fed's own stated goal may have been, Bernanke will have gobbled up nearly 40% more long-dated Flow relative to estimates! In other words, Ben does not need to do a full blown Operation Twist 2 episode: by the time Twist 1 is over, he will have attained nearly 40% of the goals of the next potential sterilized operation.

The last time the body language (and ex-intelligence) experts from Business Intelligence Advisors appeared on these pages, their target was Ben Bernanke, and specifically his first ever post-FOMC press conference. This time around, BIA has chosen the analyze what has been left unsaid by none other than the head of JP Morgan in the context of his $2 billion (and soon to be far larger) loss which is still sending shockwaves around the financial world. As a reminder, "Using techniques developed at the Central Intelligence Agency, BIA analysts pore over management communications for answers that are evasive, incomplete, overly specific or defensive, potentially signaling anything from discomfort with certain subjects,  purposeful obfuscation, or a lack of knowledge." So what would the CIA conclude if they were cross-examining Jamie Dimon?

Some look at today's FaceBook IPO flop, the ongoing market rout, and the situation in Europe with disenchantment and disappointment. We, on the other hand, view it with hope: because more than anything, the events of the past few days show that the truth is getting out - the truth that capital markets simply can not exist under the authoritarian rule of central planners, the truth that the stock market is a casino in which the best one can hope for a quick flip, and finally the truth that our entire socio-economic regime, whose existence has been predicated by borrowing from the uncreated wealth of the future, and where accumulated debt could be wiped out at the flip of a switch if things go wrong in the process obliterating the welfare of billions (of less than 1%ers), is one big lie.

In an interview with Louis James, John Hathaway discusses the US's economic outlook and why he's delighted by the current bearish sentiment toward gold. "I think we're at the end of a correction that resulted from the peak last summer. It was overcooked, kind of hyperventilated hysteria over the debt-ceiling talks, the rating downgrade of the US sovereign debt, and I think basically the stocks and the metal had been working off that boiled down to what we now have is a simmer. I think we are at a position where there's not a lot of downside, and I would not be surprised by revisiting the previous highs of $1,900 and maybe even new highs over $2,000 this year."

The situation in Europe is bad...  How BAD? Well, France, Spain, and Germany have ALL implemented border controls. That's not a typo. Spain, France, and Germany can each close their borders for up to 30 days at any point if they so choose. Why are they doing this? Because they know that when the stuff hits the fan and the EU collapses (which it will in the next few months) people are going to attempt to flee with their money... so they have made it so that no one can get it... and no one can get out. 

We are constantly told that this time is different and we are on a sustainable magic carpet ride to growth, that stocks are merely 'stabilizing' to allow earnings to catch up with valuations, and that buying-the-dip is the obvious trade. However, as the three charts below indicate - its no different this time at all. As Barclays notes, VIX and credit markets are leaking exactly as they did in 2010 and 2011 in preemptive anticipation of the end of Twist (and LTRO) leaving stocks vulnerable to the real shocks of a real macro event risk world; equity performance remains too good to warrant a central bank response (as we just saw in the FOMC minutes) and TIPS breakevens are far above previous intervention levels; and while bank funding fears, growth slowdown concerns, and sovereign downgrade worries are supposedly lesser than in previous sell-off periods, we suggest they are absolutely rising in anxiety and that is the catalyst for the next leg down before the inevitable QE/LTRO occurs.

12-year old Victoria Grant drops knowledge on adults that can't put two and two together and figure out that our immoral, morally reprehensible fractional reserve banking system is responsible for the  majority of misery and suffering in the world today.

When inflation isn’t particularly hot, it’s praised as something desirable....

Explaining why and how the global monetary system is failing, why it is too late to stop, what will come next, and why the crisis is only financial – not commercial.

Digging into the details of the Fed's balance sheet can sometimes be a thankless task but  Charles Biderman and Jim Bianco have some fascinating insights into where the real money is being hidden. The stability of the Fed's balance sheet post-QE2, given we are borrowing-and-spending over $100bn per month is all down to Operation Twist and the Fed's creation of demand at the short-end (via telling banks that rates will be low forever and 'guaranteeing' positive carry returns on rolling overnight repo) and using this 'cash' to almost entirely fund longer-term borrowing. In a simple primer of the Fed's implicit risk-free carry trade, the two chaps note that the only downside is too much growth or inflation which would cause a massive unwind of these positions (leading only to further bailouts). Critically though, they explain the fact that Operation Twist (and its implicit off-balance-sheet funding of this risk-free carry trade) is nothing more than the Fed's version of the ECB's LTRO - as the banks are 'encouraged' to buy short-term government debt with risk-free-carry expectations - implying the Fed's balance sheet could in fact be considerably larger than it appears. Yet more ponzinomics explained in a simple way - that surely eventually will trickle down to the masses who will question the emperor's clothing.