Gold has surged over 3% today on increased safe haven demand as stocks and in particular bank stocks see sharp falls again.
Because so much is riding on what so few decide,once the faith in the Central Banks fail, the chances of us getting out of this diminish every second...
The currency wars continue unabated as does the developed world's experiment with negative rates as the Riksbank moves further into NIRP, cutting the repo rate by 15 bps to -0.50%. "Uncertainty regarding global developments is still high, with low inflation and several central banks pursuing more expansionary monetary policy [and] Swedish monetary policy must relate to this," the bank said.
Hong Kong traders are back from vacation, and with few options on the table, they are buying the one asset that provides the best cover to central banks losing faith, demonstrated most vividly by the total failure of the BOJ, and as a result just as Yen soars above 113, gold has taken out the numerous $1,200 stops and is currently surging to levels not seen in almost a year.
"This is a very price elastic market. The only reason price hikes held last year was that all escorts raised their prices; customers had little choice. But it’s also a testimony to income growth: customers had the available disposable income."
"There is excessive debt everywhere and negative interest rates are dangerous... My number one fear? That’s the same as asking me where it will start. When you view the economy as a complex, adaptive system, like many other systems, one of the clear findings from the literature is that the trigger doesn’t matter; it’s the system that’s unstable. And I think our system is unstable... Central Bank models are just wrong"
In May 2015, Warwick's European Distressed & Special Situations Credit Fund liquidated after investors submitted redemption requests amounting to 90% of the fund’s assets. But something unexpected happened" "the problem" as HFA writes, is that "the fund’s remaining assets — encompassing debt and equity positions in Fitness First, New Gulf Resources, Oasis Holdings and Punch Taverns — are too illiquid to be sold."
"The Fed is completely dangerous - it's the most dangerous entity out there. The policy makers are the ones who are causing much of the problems we have today... The bad news has only just begun... This bear market will continue which means we’re headed lower with rallies in between until the Federal Reserve is forced to come in and start QE4."
What we do know is that the eurodollar system is failing and we know how it is failing. From negative swap spreads to the shrunken, depressed money and credit curves, they all spell out the death of the current standard. The money supply, for lack of a more appropriate term in the “dollar’s” universe, is in the long run converging with the shriveled economic baseline. The immediate problem for our current circumstances is that we don’t yet have any idea what that foundation might look like even now- how far is down.
"The Fed doesn't have a clue!" - We allege that not only because the Fed appears to admit as much, but also because our own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower - think what happened in 2000. To understand what's unfolding we need to understand how the Fed is looking at the markets, and how the markets are looking at the Fed.
JPM estimates that if the ECB just focused on reserves equivalent to 2% of gross domestic product it could slice the rate it charges on bank deposits to minus 4.5%. In Japan, JPM calculates that the BOJ could go as low as -3.45% while Sweden’s is likely -3.27%. Finally, if and when the Fed joins the monetary twilight race, it could cut to -1.3% and the Bank of England to -2.69%.
Central Banks are losing control everywhere...
Broad equity indexes have declined significantly since July 2015, and forward price-to-earnings ratios have fallen to a level closer to their averages of the past three decades.
Leverage [among speculative-grade and unrated firms] firms has risen to historical highs, especially among those in the oil industry, a development that points to somewhat elevated risks of distress for some business borrowers.