Reuters

BIS Warns of ‘Major Faultlines' In Global Debt Bubble - "Unrealistic and dangerous to expect that monetary policy can cure all the global economy’s ills"

 "The reason the markets aren't going lower is people are holding and hoping." Incidentally, there is a reason why hope is not a strategy: in the end, it always fails.

"The Russian intervention is a massive setback for those states backing the opposition, particularly within the region – Qatar, Saudi Arabia and Turkey – and is likely to elicit a strong response in terms of a counter-escalation."

Never have markets carried so much risk. And never have markets been as vulnerable to an abrupt change in perceptions with regard to central banker competence, effectiveness and capabilities. At the minimum, global markets will function poorly, but risk is now high for a disorderly – Party Crashing - "run" on financial markets, as faith in central banking begins to wane.

As the German refugee crisis has now dragged down not only Merkel, whose popularity rating just tumbled to a four year low "reflecting growing concern over the influx of hundreds of thousands of refugees into Germany, a poll showed on Thursday", but has exposed "free speech" advocate Facebook as merely another government propaganda pawn, Germany has been scrambling to find some silver lining on this scandal. It did just that on Friday, when the bank with the greatest amount of notional derivatives in Europe and the world, Deutsche Bank, raised its German 2016 GDP forecast "because the heavy influx of migrants would increase consumption as much as half a percentage point."

By way of excuse for what President Obama called "a tragic incident," (and The UN called a 'war crime') US officials have claimed that the Taliban were fighting from within the Kabul hospital (which was destroyed by a US air strike yesterday killing at least 19 including 3 children) using aid workers as "a human shield." However, this justification for the 'collateral damage' has been vehemently denied by Medecins Sans Frontier (MSF) who have issued a statement dismissing the US claims, "the gates of the hospital compound were closed all night so no one that is not staff, a patient or a caretaker was inside the hospital when the bombing happened..." but, the US strike has done one thing, as one local health official concluded, "this city is no longer for the living."

The global silver-coin market is in the grips of an unprecedented supply squeeze, forcing some mints to ration sales and step up overtime, sending U.S. buyers abroad to fulfill a sudden surge in demand.

• U.S., Allies Demand Russia Stop Attacks on Syria Opposition (BBG)
• Russian Airstrikes Defend Strategic Assad Regime Stronghold on Syria’s Coast (WSJ)
• Emerging Stocks Head for Weekly Advance Before U.S. Jobs Data (BBG)
• Wage Strife Clouds Car-Sales Boom (WSJ)
• Oregon town reels from classroom carnage (Reuters)
• Oregon shooter came from California, described as shy and skittish (Reuters)

Having recently pointed out the surging premiums for physical gold and silver relative to the 'paper' prices spewed forth by the mainstream media, it will likely come as no surprise that, as Reuters reports, "silver [coin] demand is absolutely through the roof," according to the Perth Mint. Confirming the demand side is the U.S. Mint sold 14.26 million ounces of American Eagle silver coins in the third quarter, the highest on records going back to 1986. Dealers and mints trace the supply squeeze to a burst of buying by mom-and-pop investors in the United States, who scrambled to scoop up coins they considered to be at bargain levels after spot silver prices in early July sank to six-year lows.

The signs of deflation are now flashing all over the globe and the possibility of an associated financial crisis is now dangerously high over the next few months. Our preferred model for how things are going to unfold follows the Ka-Poom! Theory, which states that this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison. First an inwards collapse, then an outwards explosion.

In August, hedge funds blamed risk-parity funds for their dramatic underperformance. In September, the underperformance continued however this time, with risk-parity funds supposedly buying stocks, one can't blame them. To be sure, some such as Ackman whose 20 million shares of Valeant are hurting badly, will blame the Martin Shkrelis of the world for the biggest biotech tumble in years, but others may have to bite the bullet and admit it is their own lack of ability to come up with alpha in a centrally-planned "market" that is the reason.

"He deliberately tries to do things to throw opponents off balance and he’s always trying to get some sort of element of surprise and tactical advantage over people, that’s sort of what keeps him going is this constant springing surprises and flipping events in his favor."