"Gold has become much more affordable in recent days as the price has collapsed. Such a collapse is unpleasant, but not cause for concern," advises Dylan Grice. "Gold remains durable," as a source of protection from loss of confidence in the system, and, he adds "a correction was overdue. Now, the gold market has become healthier." Critically, Grice warns during this interview with Finanz und Wirtschaft, "gold will not protect against a crash in the financial markets, it showed 2008," since if many investors simultaneously urgently need cash, they sell everything they have, including gold. However, Europe is a time-bomb, China's credit bubble is ow where the US was before the financial crisis, and while inflation may not be an imminent threat (and likely shuffled more gold holders out leaving "a more stable investor base,") Grice concludes, "Gold endures. If confidence in the currency is lost, or in the bond market; Gold is a safe haven." There are good reasons to own gold. And to buy gold, there is now a reason more than a week ago: It's 30% cheaper.
Yes, there was economic news overnight, such as a Eurozone and UK CPI, both of which came in line with expectations (1.7% and 0.4% respectively), and a German ZEW which confirmed Europe's accelerating deterioration, tumbling from 48.5 to 36.3, far below expectations of a 41.0 print (somehow the huge miss has managed to push the EURUSD up by 60 pips to an overnight high of 1.31 but this is merely the pre-US open manipulation to ramp US equities higher), just as there was news that Angela Merkel's support for a Cyprus bailout is growing (was there an alternative?), and that as part of their ongoing investigation into Italy's repeatedly insolvent Monte Paschi, investigators had seized €1.8 billion worth of assets from Nomura Holdings, and that Spain as usual sold more Bills than expected, driven by oversize Japanese and Pension Fund purchases, but what everyone has been looking for is whether the relentless and record rout in gold is over. For now, it appears that is the case, with gold printing an overnight low of just over $1320 and ramping higher ever since, up 3% so far and rising.
Ex-Soros Advisor Sells "Almost All" Japan Holdings, Shorts Bonds; Sees Market Crash, Default And HyperinflationSubmitted by Tyler Durden on 04/14/2013 20:24 -0500
Former Soros' Japan advisor Fujimaki takes center stage: “The volatility in the JGB market as well as the fact that there is large selling represent fear among investors,” Fujimaki said. “They are early signs of a larger selloff and we should continue to monitor the moves in the long-term bonds.” Fujimaki said he recently bought put options for Japanese government bonds of various maturities, without elaborating. He continues to hold real estate in Japan and options granting the right to sell the yen against the greenback expiring in less than five years. He also holds assets in U.S. dollars and currencies of other developed nations. "Japan’s finance is sinking into the ocean,” Fujimaki said. “There’s no escape from a market crash in the future when you have such enormous debt.” “By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together. Shirakawa did more than enough and he had good reasons to not do any more,” said Fujimaki. “There will be tremendous side effects from monetary stimulus. QE doesn’t work and has no exit... Things may look rosy for now as stocks rise, but should we see hyper-inflation, JGBs will see a huge selloff, leading to a stock market crash,” said Fujimaki, adding that he sold “almost all” of his Japanese stock holdings some time ago.
The stock market is not crashing yet, but there are lots of other market crashes happening in the financial world right now. Just like we saw back in 2008, it is taking stocks a little bit of extra time to catch up with economic reality. But almost everywhere else you look, there are signs that a financial avalanche has begun.
We all know how this will end: with higher inflation/ costs of living and now very likely with a market crash. Every bubble the Fed has blown has resulted in disaster. This time will be no different.
Below are portions of a comment letter submitted by R.T. Leuchtkafer to the SEC on April 16, 2010, just 3 weeks before flash crash. The second paragraph in the excerpt below, unknowingly describes exactly how the flash crash was started. The letter goes on to alert the SEC on the dangers of High Frequency Trading (HFT), phantom liquidity and other concerns.
In 2013, we are receiving the same banker and mass media propaganda that we heard in 2008. The stock markets are okay, economies are recovering, blah, blah, blah. However, do any of the facts support the propaganda? For example, this “bullish” US stock market has not even recovered to the levels of October, 2007. And even, if more QE, more HFT low-trading volume rigging can rig US and other western markets higher, do rising stock markets even matter if the growth of stock markets are less than
Monday's selloff gives us opportunities pick up stocks for less and to write additional puts at better prices.
While the topic of net Fed capital flows, and implicit balance sheet risk has recently gotten substantial prominence some three years after Zero Hedge first started discussing it, one open question is what happens when we cross the "D-Rate" boundary, or as we defined it, the point at which the Fed's Net Interest Margin becomes negative i.e., when the outflows due to interest payable to reserve banks (from IOER) surpasses the cash inflows from the Fed's low-yielding asset portfolio, and when the remittances to the Treasury cease (or technically become negative). To get the full answer of what happens then, we once again refer readers to the paper released yesterday by Morgan Stanley's Greenlaw and Deutsche Bank's Hooper, which discusses not only the parabolic chart that US debt yield will certainly follow over the next several decades, but the trickier concept known as the Fed's technical insolvency, or that moment when the Fed's tiny capital buffer goes negative. In short what would happen is that the Fed will be then forced to print money just so it can continue to print money.
It's no shock that the Spanish housing market is horrible but hope has been, following the government's nationalization of various banks and creation of the 'bad bank' to soak up all the toxic crap those banks had on their books, that a recovery could blossom. It appears not - not at all. Not only are bad loans rising at record rates with house prices remaining down over 40% but now Reyal Urbis has filed for insolvency making it the nation's second largest bankruptcy as dozens of smaller firms have failed. What makes this so important is the fact that the banks were unwilling to refinance the debt - seemingly comfortable with liquidation - summed up perfectly: "Many loans were refinanced one or two years ago, in the hope that things would get better, but it has not been the case and there is now more realism about the situation. Why would you extend a new loan today?" A good question, one that Tepper's Appaloosa will be pondering as its EUR450mm loan looks in trouble.
There are just too many variables, too much information, and even unknown variables that play into market dynamics.
As most of Asia is on vacation for the lunar new year, UBS' Art Cashin is growing more and more concerned with the excessively bullish tone. While not screaming for an outright short, the venerable volatility-handler fears many factors he sees in the market currently from sentiment to vauation, and a lack of 'rotation', and while the January Effect and the Super-Bowl are in the bulls favor, he gently reminds that the 'Year of the Snake' has typically not been a good one for markets or man...
We now live in an entirely fabricated fiscal environment. Every aspect of it is filtered, muddled, molded, and manipulated before our eyes ever get to study the stats. The metaphor may be overused, but our economic system has become an absolute “matrix”. All that we see and hear has been homogenized and all truth has been sterilized away. There is nothing to investigate anymore. It is like awaking in the middle of a vast and hallucinatory live action theater production, complete with performers, props, and sound effects, all designed to confuse us and do us harm. In the end, trying to make sense of the illusion is a waste of time. All we can do is look for the exits…
Bob Janjuah may nt have rvrted to his RBS wrtng style of yore, yet, but the New Nrml appears to also fnly b getting to 1 of our fvrte strategists, who has finally gone bold, ALL CAPS. "IF I AM WRONG AND WE TRULY HAVE FOUND ECONOMIC AND MARKET NIRVANA SIMPLY THROUGH THE CENTRAL BANK PRINTING PRESS AND ENORMOUS INDEBTEDNESS, THEN I WILL HAVE NO HESITATION IN ENJOYING THE FUTURE, THINKING ABOUT THE FUNNY MONEY MIRACLE, NEVER NEEDING TO WORRY ABOUT ECONOMIES OR GROWTH EVER AGAIN (all hints of sarcasm entirely intentional)....Real wealth can only be created by innovation and hard work in the private sector, with policymakers, the financial sector and financial markets there to aid and encourage/incentivise. Real wealth is not created by the printing press and by excessive government spending. We simply cannot turn wine into water – after all, if it were that easy, why have we not done this before (with any lasting success, as opposed to abject failure, for which there is plenty of evidence)! "
It was rumored that the 2008 crisis hit the Queen of England particularly hard – over USD 40 million in stock market losses. This experience must have jilted something, as when The Queen was visiting the esteemed London School of Economics she asked the professor a rather “un-queen” like question – why did economists fail to predict the biggest global recession since the Great Depression? Speaking on behalf of economists, investment managers and mutual fund sales people everywhere, the professor responded that “at every stage, someone was relying on somebody else and everyone thought they were doing the right thing.“ In short, no one could have predicted the 2008 crash. Meanwhile, in the parallel universe called America, Ben Bernanke January 2013 The Queen was selling everyone the exact same story. If the famed London School of Economics and the Chairman and full committee of the US Federal Reserve were unable to predict the crisis, what hope does the World have with predicting future crises? In actual truth, and despite claims by the US Federal Reserve and the London School of Economics, many people accurately predicted the collapse of the US housing market and the subsequent collapse of the stock market. Fortunately, it doesn’t have to be that way. Accepting, understanding, and embracing the fact that today there are plenty of investment professionals who are willing to view the World objectively should be comforting.