European Union

By that, I mean the normal supply and demand forces no longer make sense.

After looking over all the figures, it seems as if something broke in the U.S. Silver Market this year. By that, we mean the normal supply and demand forces no longer make sense.

The movement toward deeper European integration appears to have halted, and gone into reverse, as the EU seems to be unraveling along ideological, national, tribal and historic lines. If these trends continue, and they seem to have accelerated in 2015, the idea of a United States of Europe dies, and with it the EU. And this raises a question about the most successful economic and political union in history - the USA.

My overriding theme and the central drama for the coming year is that unexpected events can take on greater importance as the Federal Reserve ends its near-decade-long Zero Interest Rate Policy. Consensus premises and forecasts will likely fall flat, in a rather spectacular manner. The low-conviction and directionless market that we saw in 2015 could become a no-conviction and very-much-directed market (i.e. one that's directed lower) in 2016. There will be no peace on earth in 2016, and our markets could lose a cushion of protection as valuations contract. (Just as "malinvestment" represented a key theme this year, we expect a compression of price-to-earnings ratios to serve as a big market driver in 2016.) In other words, we don't think 2016 will be fun.

It appears The Establishment has decided to bring in the big guns to dislodge The GOP's nightmare scenario as Donald Trump goes from strength to strength in the polls. Writing in an op-ed for The Guardian, billionaire puppet-master George Soros urges Americans "to resist the siren song of the likes of Donald Trump," adding that "the terrorists and demagogues want us to be scared. We mustn’t give in."

• The Year Nothing Worked: Stocks, Bonds, Cash Go Nowhere (BBG)
• Oil falls toward $37, near 11-year low, as excess supply weighs (Reuters)
• End of easy money for mini-refiners splitting U.S. shale? (Reuters)
• Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure (Reuters)
• 'Safe’ Puerto Rican Debt Stirs Worries (WSJ)
• These Will Be Wall Street's Most In-Demand Jobs Next Year (BBG)

Europe's Patriot Act has finally taken shape: according to a proposed amendment, the French state-of-emergency police powers, such as to conduct warrantless searches and order house arrests, will be unconditionally shieleded from court challenges.

• Global Stocks Take Breather After Oil-Fueled Rally (WSJ)
• Junk Investors Evade the Trade (WSJ)
• How the Third Avenue Fund Melted Down (WSJ)
• Oil Traders Set to Pounce as U.S. Prepares to Lift Export Ban (BBG)
• JPMorgan Says Japan Inc. Must Prepare for Yen Below 100 a Dollar (BBG)

Speaking to Slovak news agency TASR on December 15h, President Milos Zeman said that he was "extremely disappointed that the summer negotiations between Greece and creditors did not ultimately lead to Greece’s exit from the euro area, although it looked quite possible." Greece had an immediate response: it recalled its ambassador to Prague. 

On Dec 16, Federal Chair Janet Yellen announced the Fed was raising the federal funds rate by 25 basis points. She will have to take it back.

"Things took off beginning in September. Since then, our dealers have been totally overrun. We have never experienced anything like this in the 21 years of our corporate history. Fear: This is not rational. The important term is: 'refugee crisis'."

• Oil heads for third straight weekly loss as supply weighs (Reuters)
• BOJ's $2.5 Billion ETF Boost Seen Having Little Impact on Stocks (BBG)
• Japan core CPI seen flat in November, household spending down (Reuters)
• Dollar gets altitude sickness as BOJ disappoints (Reuters)
• Fed Hikes, but Some Rates Veer Lower (WSJ)
• White House calls for 'common sense steps' to help Puerto Rico (Reuters)

• Fed Poised to Mark the End of an Era (Hilsenrath)
• Fed opens meeting to put an end to crisis era policy (Reuters)
• Fed's Historic Liftoff and Everything After: Decision Day Guide (BBG)
• Emerging Markets Gird for Fed Rate Increase (WSJ)
• What 7 Years at Zero Rates Have Looked Like (BBG)
• 5 Things to Watch at the Fed Meeting (WSJ)

The day has come when the boxed-in Fed has no choice: with the vast majority of the market expecting a rate hike, Yellen has to deliver or suffer a crushing confidence blow like no other. And deliver she will, with expectations that said hike will be "as dovish as possible." For now however, the market is desperate to convince itself that just as more easing and more QE were bullish for the market, so rate hikes are just as bullish. Recall from late 2013: "tapering is not tightening," then the 2015 version of this refrain is "tightening is not tightening."