If you have ever wondered how we can fight back against the financial insanity that Central Bankers are attempting to impose upon us, implement these three steps, and we’ll be off to a solid start.
We said 1 for a reason, because while indeed homes have never been more affordable... one must pay for them in constant gold. Yes, holding gold over the past century has as of this point effectively defeated any of the accumulated home price inflation over the years, and when expressing home prices in terms of gold, the average home is now more affordable than ever before. We said gold. Not dollars, not yen, not spam, not Nobel economics prizes. So for everyone who wants to exchange some of that shiny metal into the most valuable and capital intensive investment the average American will do in their lifetimes, this is your moment.
We’re now officially in the Second Round of the Great Crisis. And if you thought the first Round of the Financial Crisis was bad, wait until you see the next one. Indeed, I fully expect that what’s coming is going to be 2008 on STEROIDS. I’m talking about market crashes, civil unrest, riots, bank holidays and more.
- Fed Dissenters Say Pledge Gives Appearance of Targeting Stocks (Bloomberg)
- U.S. Inquiry Eyes S.&P. Ratings of Mortgages (NYT)
- 6 dead in string of attacks in southern Israel (CNN)
- ECB’s Nowotny Says Italy Not Greece, Too Early for Euro Bonds (Bloomberg)
- France, Germany Push for Sanctions (WSJ)
- Breaking Europe’s cycle of enfeeblement (FT)
- Biden tells China's Xi that cooperation key for global stability (Reuters)
- Hong Kong Exchange in Venture Talks With Shanghai, Shenzhen (Bloomberg)
Bloomberg's Mike McDonough has put together the simplest, and thus best, chart of the latest epic collapse in the BOJ's attempt to intervene and keep the Yen from appreciating. The chart needs no explanation, and shows that the half life of BOJ interventions is not only exponentially shorter but now, outright laughable. What does need an explanation, however, is the prevailing quandary of just what sleeping medications Noda and Shirakawa will have to take once USDJPY touches on 75, then 70, then 65, then 60 and so on, and they watch, watch, watch, the "one-sided" moves in the USDJPY, helpless to do absolutely anything as the Chairman drop kicks yet another monetary opponent into a permanent knock out.
- High pressure on Sarkozy-Merkel talks (Reuters)
- Noda to "watch" "one-sided moves" in the USDJPY to parity soon enough - Yen to Reach Record Amid ‘Downfall’ of West, Sakakibara Says (Bloomberg)
- Eurobond Debate Rises in Germany, France (WSJ)
- China official paper calls for widening of yuan trading band (Reuters)
- China Economy Slowing ‘Significantly,’ Conference Board Says (Bloomberg)
- BOE's Miles: No Need for More QE (WSJ)
- Christine Lagarde: Don’t let fiscal brakes stall global recovery (FT)
- Zoellick: Governments should deal with global debt woes (Reuters)
- On Midwest Bus Tour, Obama Jabs at GOP (WSJ)
- U.S. debt still safest place for China reserves: top banker (Reuters)
The trading today was consistent with the last three days, with one exception: Dealers bought calls. Dealers bought them in fence form, but they were careful to sell volatility in premium while covering their short calls. Examples include the 1700/2000 Risk Reversal and other structures of that type that sold premium yet bought skew. Remember the December 2000 Call is a 15 delta item now, hardly a typical skew option, yet it has premium of over $22. Volatility is by no means cheap. Simultaneously, it is by no means unjustified. Up until today, between the call liquidation and the straddle selling we would have said the market was poised for a quick sell-off or a slow move higher. Today’s risk reversal trading by dealers makes us lean toward the latter, and at a slightly faster pace. Our technical analysis below highlights levels to watch. Options just don’t show us washing out right now. Perhaps another two or three margin raises will do the trick. Conclusion: Mildly Bullish
- World Bank president Zoellick: "Markets heading to new danger zone" (Reuters)
- Treasury yields testing bank limits (FT)
- Three steps to resolving the eurozone crisis (FT)
- Singapore Prime Minister: Global Recession Is 'A Possibility' (WSJ)
- A helpless SNB leaks even more disinformation: CHF should be linked to € (Manager Magazin)
- Japan’s GDP shrinks less than expected (FT)
- SNB, Swiss Government in Talks Over Franc Target, SonntagsZeitung Reports (Bloomberg)
- Japan’s Noda Warns of Further Intervention as Yen Again Nears Postwar High (Bloomberg)
I am beginning to feel a bit like one of the French unfortunates stumbling through the fog in the Ardennes, circa 1914. Except that, instead of Germans full of deadly intent coming at me in the gloomy forest, it is a flock of black swans. As it was for the French in the Ardennes, the number of problems – then Germans, now black swans – is becoming overwhelming. Consider just a little of what we as investors, and as individuals looking forward to retirement in accommodations more commodious than a shipping box, must contend with...
Bild Zeitung, is Germany’s biggest- selling newspaper, is the best-selling newspaper outside Japan and has the sixth-largest circulation worldwide. Bild encouraged German people to invest in gold as the global debt crisis continues to deteriorate and cause turmoil in global markets. “While the companies listed on stock exchanges have lost over the past 14 days, about $8 trillion dollars in value, the price of gold climbed to a record high.” “While money can be printed, gold reserves are limited. To date some 150,000 tonnes of gold have been mined.” Gold “is better than cash,” the newspaper said. “While any amount of money can be printed, gold is limited,” making it “one of the safest investments in crisis times.” The article is interesting as gold has remained taboo is much of the non specialist European press and media and was only briefly covered in recent days due to the deepening crisis and succession of new record nominal highs. German demand for gold has been very robust in recent years and the Germans experience of the Weimar hyperinflation means that they are very aware of the risks posed by today’s excessive money printing and global currency debasement.
Just after hitting a new all time high of above $1815 in spot gold, the CME immediately sent out a notice to members advising that gold margins for Tier 1 members were increasing by 22% for both initial and maintenance positions, from $4,500 to $5,500. Unfortunately for the CME, this predetermined move was telegraphed to the market weeks ago, and with rumor 57 out of 22 finally turning out correct, this latest move only managed to push gold down modestly, and at last check was once again trading above $1,800. Just like all central bank interventions, which now have a half life between 1 hour and 4 days max, so this latest exchange attempt to subdue prices will fail spectacularly. Naturally, just like in the case of silver, this will merely embolden the CME to proceed with hike after hike, which in turn will kill speculative elements while merely reinforcing the strong hands. End result: in one month gold will be above $2,000 with almost 100% certainty.
Relevant news by www.thetrader.se
It was just 4 days ago that the BOJ purchased Y4.5 trillion (or $58 billion) worth of dollars in the open market to lower the Yen against the dollar. Well, that intervention last not even a full 4 days. As the chart below shows it is time for Shirakawa and Noda to start watching... watching... watching... the yen as it once again approaches all time highs against the dollar. But at least the equity market is confused enough to believe that 2 years of projected deflation is good for risk. Ben wins.... if only for a few hours. The irony is that everyone expected that a fixed inflation (or in this deflation) calendar language is the weakest of the Fed's options. Now that this is precisely what has been utilized, a soft form of Operation Twist 2 which locks in the rates on the 2 Years as explained previously, the market is cheering it deliriously. Once the market has slept on it, it will likely realize why it was so skeptical as recently as 2 hours ago on the viability of this approach.
Since the stock market is in the news (perhaps as a result of trillions of dollars/euros/yen/yuan/quatloos having suddenly vanished from millions of accounts), it seems timely to examine the key correlation between stocks and the U.S. dollar. As I have often noted here, this "big picture" correlation is a simple see-saw: when the dollar is scraping bottom, stocks are at their highs, and when the dollar is up then stocks are tanking. At the risk of alienating chart-averse readers, I've marked up the charts of the S&P 500 (SPX) and the U.S. dollar index (DXY). For those who aren't going to look at the charts, what they suggest is that there are really only three possibilities in play:
A. Stocks go up and the dollar drops to new lows
B. Stocks fall and the dollar rises significantly, a pattern that has repeated several times since 2007
C. The see-saw breaks and stocks and the USD rise or fall together.