Wall Street Journal

Rickards said that gold is like “fire insurance on your house” ... “Nobody wants their house to burn down but if it does you are glad you have some insurance”. 

Having recently detailed the automakers' worst nightmare - surging new car inventories - supply; amid rapidly declining growth around the world (EM and China) - demand, it appears the bubble in new car sales is about to be crushed by yet another unintended consequence of The Fed's lower for longer experiment. As WSJ reports, Edmunds.com estimates that around 28% of new vehicles this year will be leased - a near-record pace - leaving 13.4 million vehicles (leased over the past 3 years in The US) - compared with just 7 million in the three years to 2011 - set to spark a massive surplus of high-quality used cars. Great for consumers (if there are any left who have not leased a car in the last 3 years) but crushing for automakers' margins as luxury used-care prices are tumbling just as residuals have surged.

The world is in the waning days of a historic multi-decade experiment in unfettered finance. International finance has for too long been effectively operating without constraints on either the quantity or the quality of Credit issued. From the perspective of unsound finance on a globalized basis, this period has been unique. History, however, is replete with isolated episodes of booms fueled by bouts of unsound money and Credit – monetary fiascos inevitably ending in disaster. We see discomforting confirmation that the current historic global monetary fiasco’s disaster phase is now unfolding.

Keys in the week ahead:  equity markets--still look lower; China--volatility likely to continue; Fed--market says no Sept hike

Thousands of investors with stop-loss orders on their ETFs saw those positions crushed in the first 30 minutes of trading last Monday, August 24th. Seeing a price blow right through your stop is perhaps the worst experience in all of investing because it seems like such a betrayal. “Hey, isn’t this what a smart investor is supposed to do? What do you mean there was no liquidity at my stop? What do you mean I got filled $5 below my stop? Wait… now the price is back above my stop! Is this for real?” Welcome to the Big Leagues of Investing Pain.

"The opening of the new units will feed an artificially created confrontation. [This is] the logic of the Cold War. It runs counter to genuine interests of the European and regional security." - Alexander Grushko, Russian ambassador to NATO.

Stocks in Asia and Europe have fallen sharply again this morning and gold remains robust on safe haven demand

• Charting the Market: New Month, Same China (BBG)
• China jitters send stocks tumbling (Reuters)
• Oil falls on weak China factory data (Reuters)
• Euro zone factory growth eases in August despite modest price rises (Reuters)
• Euro-Area Joblessness Falls to Lowest Level Since Early 2012 (BBG)
• Clinton friend advised on U.S. politics, foreign policy (Reuters)
• Korea exports slump as Asia's woes deepen (Reuters)

Demand Surge and Shortages of Bullion as Stocks Fall Sharply, Gold Outperforms All Assets In August

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!

"In a securities-based loan, the customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral. But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education..." The result was "dangerously high margin balances,' - the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.

This time, it really is different. It's "Structural", not "Cyclical". It's actually a very big difference, and banking will never be the same.

With professionals proclaiming yesterday's meltdown "historic," and generously telling investors "don't try to overthink what you're seeing," it is clear that the real impact of the carnage wrought by a combination of Fed-indiced crowded trades and HFT illiquidity-providers is yet to be fully appreciated. While Financial advisers, almost unanimously, have cautioned clients not to panic... As one retail investor exclaimed, yesterday's open "was a life-changing 20 minutes."

Gold appears to have once again anticipated the crisis and is acting like a safe haven in recent days - just at the moment when western investors need a safe haven and wealth preservation most. 

A non-bombastic discussion of market forces and what to expect next