"If you believe that [Bernanke] means what he says," explains Gloom, Boom, and Doom's Marc Faber to a spell-bound Trish Regan on Bloomberg TV, "then you believe in Father Christmas." Simply out, Faber adds, "we are going to see QE99," and while he notes that equities, bonds, and gold are "very oversold," he would "rather buy bonds and gold than equities." From his views on Laszlo Birinyi to inflation, the 'taper', US housing, and China, Faber calmly warns that "the S&P could drop 20-30% from the recent highs - easily."
"The only thing that I know is that I want to own some physical gold because I don't want all of my assets in financial assets."
"I am not a prophet, I don't know exactly where the price will be on a month by month basis, but I want to have some wealth, some of my assets in physical gold. I can see a lot of problems coming into the world including expropriation through taxation or through regulation or even through revolution and social strife."
If the Brazilian government thought that caving yesterday to popular demands against a $0.10 bus and subway fare hike would be enough to placate the millions and see a peaceful dissolution to the protests that had gripped the country in the past two weeks, it found out in less than 24 hours that ceding to the angry mob only emboldens the public to demand more (and with a list a grievances including corruption, violence, police repression and failed politicians the list of demands is sure to escalate). Sure enough, the very next day, the public emerged with newfound energy and momentum, as 300,000 people took to the streets of Rio de Janeiro and hundreds of thousands more flooded other cities in the largest protests yet.
As noted yesterday, and perhspa even more prescient now Anastasiades is back with the begging bowl, the debt crisis in Cyprus and the subsequent "bail-in" confiscation of bank depositors' money matter for two reasons: 1. The banking/debt crisis in Cyprus shares many characteristics with other banking/debt crises. 2. The official Eurozone resolution of the crisis may provide a template for future resolutions of other banking/debt crises. It also matters for another reason: not only is the bail-in a direct theft of depositors' money, the entire bailout is essentially a wholesale theft of national assets. This is the inevitable result of political Elites swearing allegiance to the European Monetary Union.
It started off a simple protest in Sao Paulo as a demonstration by students against an increase in bus fares from R$3 to R$3.20, and then quickly morphed into general demonstration of discontent with the nation’s political classes on both sides of the spectrum involving over 200,000 across the country, with those marching on Monday holding placards decrying everything from the enormous sums spent on the World Cup to the treatment by police of protesters last week. It got to the point where protesters invaded and occupied, peacefully, the roof of the national Congress complex in Brasilia. Then things turned less peaceful when a breakaway group from the main rally in Rio de Janeiro attacked the state legislative assembly building and attempted to set it on fire.
There has been considerable throughput of gold in western capital markets, with substantial buying from all round the world following the April price crash. The supply can only have come from two sources: the general public, or one or more governments. It really is that simple. Two months later the gold price has only partially recovered, so physical supplies have continued to be made available. Physical demand cannot have been entirely satisfied by ETF liquidations, confirming governments are involved. This article looks at the dynamics of the gold market around this event and the implications.
Why do the debt crisis in Cyprus and the subsequent "bail-in" confiscation of bank depositors' money matter? They matter for two reasons: 1. The banking/debt crisis in Cyprus shares many characteristics with other banking/debt crises. 2. The official Eurozone resolution of the crisis--the "bail-in" confiscation of 60% of bank depositors' cash in an involuntary exchange for shares in the bank (which are unlikely to have any future value)--may provide a template for future official resolutions of other banking/debt crises. In other words, since the banking/debt crisis in Cyprus is hardly unique, we can anticipate the resolution (confiscation of deposits) may be applied elsewhere.
- Obama prepares for chilly talks with Putin over Syria (Reuters)
- G8 opens amid dispute on Syria arms (FT)
- Economists Blame Fed for Higher Bond Yields (WSJ) - wait... what? Isn't the "stronger economy" to blame?
- What a novel concept - In the Czech Republic, a spying scandal has forced the PM to resign (BBG)
- Rigged-Benchmark Probes Proliferate From Singapore to UK (BBG)
- Economists Wary as Fed's Next Forecast Looms (Hilsenleak)
- Banks Balk at New Rules for Small Loans (WSJ)
- Sporadic clashes in Turkey as Erdogan asserts authority (Reuters)
Two weeks after the break out of protests in Turkey, often times violent, the local discontent is nowhere closer to resolution. In fact, it is getting worse, and is on its way to converge with the "resolutions" adopted in its neighbor Greece following news that two Turkish union federations said on Sunday they would stage a one-day nationwide strike on Monday in protest at the forced eviction by riot police of hundreds of anti-government demonstrators from an Istanbul park. From Reuters: "The Confederation of Public Workers' Unions (KESK), which has some 240,000 members in 11 unions, and the Confederation of Revolutionary Trade Unions (DISK) announced the strike in a joint statement. Three other groups representing doctors, engineers and dentists will also join the action, it said."
The espionage scandal that keeps on giving has released its latest installment, once more courtesy of the Guardian, which on the eve of tomorrow's starting G-8 meeting reveals that foreign politicians and officials who took part in two G-20 summit meetings in London in 2009 had their computers monitored, their phone calls intercepted, and fake internet cafes were set up on the instructions of the British Government Communications Headquarters (GCHQ), the sister organization to the US NSA. Naturally, it wasn't just the GCHQ - according to the Guardian, during the 2009 G-20 meeting there was an NSA attempt to eavesdrop on then-Russian leader, Dmitry Medvedev, as his phone calls passed through satellite links to Moscow. And while broad espionage allegations can be deflected by pretending by the rhetoric-endowed and teleprompter-aided that only terrorist threats were targeted, it will be very difficult to explain why the national information super spooks used every trick of the trade to spy on the so-called leaders of the developed world.
While the world awaits Russia's formal response to last week's US escalation in Syria (as Putin demonstratively arrived an hour late for talks on Syria with UK PM David Cameron) another country: Iran - fresh from an election in which moderate candidate Hassan Rohani became the new president - is taking matters into its own hands. The Independent Reports that "a military decision has been taken in Iran – even before last week’s presidential election – to send a first contingent of 4,000 Iranian Revolutionary Guards to Syria to support President Bashar al-Assad’s forces against the largely Sunni rebellion that has cost almost 100,000 lives in just over two years. Iran is now fully committed to preserving Assad’s regime, according to pro-Iranian sources which have been deeply involved in the Islamic Republic’s security, even to the extent of proposing to open up a new ‘Syrian’ front on the Golan Heights against Israel."
- As Goldman's money-printing tentacle Carney arrives, everyone else leaves: Tucker to Leave BOE (WSJ)
- So much for pent up demand: Refinancings Plunge as Bond Yields Rise (WSJ)
- Singapore Censures 20 Banks for Attempts to Rig Benchmark Rates (BBG)
- Behind the Big Profits: A Research Tax Break (WSJ)
- While working for spies, Snowden was secretly prolific online (Reuters)
- Turkey to Await Ruling on Park as Erdogan Meets Protesters (BBG)
- Iran votes for new president, Khamenei slams U.S. doubts (Reuters)
- NSA revelations, modified wheat cast a pall on U.S. trade talks with Europe (WaPo)
- Euro zone inflation subdued as employment keeps falling (Reuters)
It would appear the cleanest dirty shirt is losing its appeal as both bonds and stocks are being sold this morning and the JPY and EUR are rallying as the liquidity washes back home. The USD Index is back at its 10DMA again but it seems the building tension in Europe (Turkey and now the potential for a collapse in the Greek coalition over the ERT closure - which we warned about yesterday) and Abenomics hangover is leading to an unwind of these levered carry trades everywhere around the world.
Wednesday may be the new Tuesday (which halted its relentless and statistically impossible streak of 20 out of 20 up DJIA days last week), if only in terms of the overnight no news stock futures ramp, which today is back with a vengeance. In a session that was devoid of any news, the e-Mini is up enough to practically erase all of yesterday's losses. Whether this is due to a relatively calm Nikkei trading session, to no further surge (or collapse) in the USDJPY, or to the 10 Year trading flat inside 2.20% is unclear. What is clear is that the bipolar market swings from extreme to extreme on speculation about the largely irrelevant topic of whether the Fed will taper (because if it does, it will be very promptly followed by an untapering once risk assets around the world implode.)
After a couple of days of exuberant dead-cat-bouncing in Japan (and therefore implicitly US equities), the reality that credit markets had been hinting at is starting to be realized once again. A nasty gap-down open in US equities saw BTFDers come piling back in, aided by pressure on bonds and a final liftathon into the EU close in AUDJPY. That was the best of the day and JPY's biggest surge in over 3 years (~3%!) dissolved any equity-dip-buying power as stocks jerked up and down around VWAP for the rest of the day. Credit markets opened even more gap wider than stocks weaker as chatter was that bondholders were hedging exposures (as opposed to reducing exposure - hoping that redemptions don't come). That gap was very rapidly filled and aided the parabolic ramp into the EU close. Then, credit was offered, stocks followed as VIX and Treasuries were bid the rest of the day. A very chaotic day in almost every asset class (with PMs actually relatively stable) as US markets begin to mimic Japanese volatility. The Nikkei is now 800 points off the dead-cat-bounce highs from 2 days ago.
It appears to be rapidly shifting from bad to worse in Turkey...