Black Swan

Austria’s decision to wind down Heta Asset Resolution AG sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany: "It’s a mini-Greece going off in the heartlands of Europe." Here are some of the consequences, and delightful ironies, of a completely unexpected black swan landing in the south of Austria.

"...everybody knows there's something seriously wrong but they don’t know what is really happening."

This 'world order' may be coming to an end, he believes: "It's the collapse of that structure that was built in the 1940s that is behind all of these problems that are popping up in financial markets and economies around the world."

Has the DNA of the global economy been gradually altered by endless injections of quantitative easing, morphing it into a freakish mutant? Are things that are not supposed to happen for centuries on end going to become common occurrences? The collapse of oil prices and jump in the Swiss franc have forced us to puzzle over these weighty questions. In isolation, these events and the direction of their moves did not worry us, but their magnitude, velocity and proximity to each other sent me on an intellectual quest.

"The Fed is out of control," exclaims David Stockman - perhaps best known for architecting Reagan's economic turnaround known as 'Morning in America' - adding that "people don't want to hear the reality and the truth that we're facing." Policymakers are "taking our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that's been built up and created by the American people over decades and decades." The Fed, Stockman concludes, "is a rogue institution," and their actions have led us to "one of the scariest moments in our history... it's a festering time-bomb and we're not sure when it will explode."

3 words... fun durr mentals!

The major sudden bear markets of the last decades were not dreaded “black swan” events at all. They were perfectly predictable, by economic logic alone, the same logic that says governments cannot manipulate market prices without creating distortions that will always, without exception, be counterproductive. In the next stock market crash, we will be told that the fault was some surprising economic or geopolitical shock. Let’s remind ourselves now that this will be false.

This country has gone from being one of the most regulated countries in the OECD to one of the least regulated and as a result the economy has boomed. Many of the wealthiest people in the world have been quietly establishing escape hatches here.

Exactly as I warned 3 wks ago, Nordic countries are facing pressure. Here's strong evidence of a krone break, havoc to ensue in global banks, how to monetize when skittish brokers pull access & leverage. 

With China devaluation looming as the great unspoken Black Swan trade, and on the heels of the Swiss National Bank folding on its 'peg', we thought a quick glance at the world's "pegged" currencies would be useful as a guide to where the next shoe (and pant legs) will drop. With global FX implied volatility at EU crisis highs, the markets clearly expect more to come...

“In effect, there is nothing inherently wrong with fiat money, provided we get perfect authority and god-like intelligence for kings.” Aristotle (?2,400 years ago)

“Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” Alan Greenspan (2014)

Switzerland`s 10-Year Bond Yield is now negative 15 basis points.  Yes even neutral Switzerland`s bond market has been broken...

"Fuck the CHF and the SNB!" "Those bastards lied to us - I'll never trust them again!"

Super Bowl ticket prices continue to soar. With the game now just a day away, prices have exceeded the $10,500 average and get-in price is just over $9,000 but, as TiqIQ's CEO reports, the ticket market’s "Black Swan" moment will leave some fans showing up to Arizona having paid for tickets they’ll never receive... as derivative-based speculators were selling tickets they never had to begin with, and the short squeeze is unprecedented. "The market is being manipulated to the extreme by those who have paid teams and the league for access." When this happened in the 2011 BCS National Championship game, many brokers went out of business filling their short orders, and some others even walked away from their orders, leaving fans to fend for themselves and it appears tomorrow will be the same for Super Bowl attendees (and speculators).

The ability of oil exporters to trigger a short-term collapse in price does not automatically translate into an ability to control the financial conflagration such a crash ignites.

When the conventional media ordains oil inevitably dropping to $40/barrel, we start looking for something else to happen - like oil going to $70/barrel. There are number of reasons this isn't as farfetched as it might seem at the moment.