Counterparties

Rousseff - hand-picked by Lula da Silva to succeed him - appears to be caught up in da Silva's backdraft. Opposition parties also claim she violated Brazil's fiscal responsibility law when she doctored government accounts to allow more public spending prior to the October election last year. Rousseff in turn described the attempt to use Brazil's economic crisis as an opportunity to seize power a modern day coup.

"As interest rates go more negative, market participants will have increasing incentives to make payments quickly and to receive payments in forms that can be collected slowly. This is exactly the opposite of what happened when short-term interest rates skyrocketed in the late 1970s: people then wanted to delay making payments as long as possible and to collect payments as quickly as possible.... if interest rates go negative, we may see an epochal outburst of socially unproductive—even if individually beneficial—financial innovation."

So far, it’s a different type of crisis – market tumult in the face of global QE, in the face of ultra-low interest rates and the perception of a concerted global central bank liquidity backstop. It’s the kind of crisis that’s so far been able to achieve a decent head of steam without causing much angst. And it’s difficult to interpret this bullishly. If Brazil goes into a tailspin, it will likely pull down Latin American neighbors, along with vulnerable Indonesia, Malaysia, Turkey and others. And then a full-fledged “risk off” de-risking/de-leveraging would have far-reaching ramifications, perhaps even dislocation and a collapse of the currency peg in China. China does have a number of major trading partners in trouble. Hard for me to believe the sophisticated players aren’t planning on slashing risk.

What better way to mute demands for a return to sound money and the gold standard, than by making them equivalent to jihadist terrorism? Why, there are none, which may explain the hilarious appearance of the "Islamic State's" latest 55-minutes pro gold standard YouTube clip, which is nothing but a crash course in Austrian economics.

After forensically analyzing Morgan Stanley's balance sheet (which is very much like the rest of Wall Street's balance sheet) I can draw direct parallels to that of Lehman and Bear Stearns in 2007. It's a party!

Both the October and December gold contracts are backwardated, and Feb '16 contract is not far. The gold market is tight. Why?

The WSJ reported that none other than the operator of the biggest dark pool in the US by volume, Credit Suisse and its massive Crossfinder dark pool, "is in talks with regulators to settle allegations of wrongdoing at its “dark pool” with a record fine in the high tens of millions of dollars, according to people familiar with the matter." What is grotesque about this story, is that back in December 2012, it was none other than Credit Suisse which conveniently explained and laid out all those forms of HFT manipulation which we accused virtually every HFT firm of employing since 2009... and which Credit Suisse itself is now accused of engaging in!

The reality might just be that the collective "we," and quite possibly sooner than we think, really will need a bigger boat. That is, as it pertains to the global debt markets, which have swollen past the $200 trillion mark this year rendering the great white featured in Jaws which can be equated with past debt markets as defenseless and small as a small, striped Nemo by comparison. The question for the ages will be whether size really does matter when it comes to the debt markets...

Jim Rickards, “I think it’s always very important to own gold. I’ve recommended that investors have about 10% of their portfolio in the yellow metal.” “If I’m right and some catastrophic event is on the horizon, then that 10% would be your portfolio insurance.”

On the heels of a veritable bloodbath in Chinese equities overnight which saw the SHCOMP slide a harrowing 8.5%, the entire world is now beginning to take a hard look at the notion that dramatic bouts of selling pressure are aggravated and perhaps triggered by an unwind in the multiple backdoor margin lending channels that allowed investors to skirt official restrictions on leverage and helped to drive the market’s world-beating rally. Here is the complete guide to China's CNY4 trillion shadow margin edifice.

We decided to do a little research to find out the size of different investable asset classes globally, to try to get some color on the money flows in this extraordinary period. The data is from various dates from 2013 to 2014, but the differences don’t matter much.

In what amounts to still more evidence that investors are moving into derivatives in order to avoid illiquid cash markets, UBS finds that over the "past three months, daily average futures volume stands at nearly 70% of cash Treasuries, based on the notional amounts transacted... up from about 50% in 2011."

In yet another sign that Russia and China are set to work together to extricate themselves from a dependence on the dollar specifically and on Western financial institutions more generally, Russia’s largest bank has, for the first time, extended yuan-denominated letters of credit in concert with the Chinese Export-Import bank.

"Central bank distortions have forced investors into positions they would not have held otherwise, and forced them to be the ‘same way round’ to a much greater extent than previously... unless fundamentals move so as to justify current valuations, when central banks move towards the exit, investors will too.... The way out may not prove so easy; indeed, we are not sure there is any way out at all."