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Margin Debt Soars To 2008 Levels As Everyone Is "All In", Levered, And Selling Vol

Tyler Durden's picture


There were some readers who took offense at our "bloodbath" recap of yesterday's market action (modestly different from that provided by MarketWatch). And, all else equal, a modest 28 step drop in the E-Mini/SPX would hardly be earthshattering. However, all else was not equal, and based on peripheral facts, the reason for our qualifier is that as of last week virtually nobody was prepared for a move as violent and sharp as the one experienced in the last minutes of trading yesterday. In such a context a "mere" 1.5% drop in the futures market has a far more pronounced impact on participants than a 10% or even 5% drop would have had, had traders been positioned appropriately. They weren't. So what was the context? Let's find out.

First as the NYSE just reported margin debt just soared to a near five year high, with Margin Debt at a whopping $327 billion, surpassing the highest print since the Lehman collapse, and the highest level since February 2008. Not only is everyone all in based on , but they are all in on nearly record amounts of leverage.

As noted previously this happened just as the net long positioning of specs soared to an all time high.

In short - the "sidelines" speculator money is already all in, and is using gobs of leverage.

Second, when it comes to high beta, or traditionally the most volatile stocks, those that serves as either leaders or laggards in the market in its year end phases, we take a look at the Russell 2000 Mini speculative exposure as shown by the CFTC's weekly Commitment of Traders update. The chart below needs no explanation: the net non-commercial spec longs in the Russell 2000 have never been more bullish. If the market, which is priced to absolute levered perfection disappoints, the high beta exposure will be annihilated.

Third, and last, for all those who have had a sinking feeling ever since June that something was even more broken with the equity market, more so than usual, we have just one chart to prove all of them right. As this chart of net non-commercial CoT VIX exposure shows, starting in June and continuing ever since, the net exposure in VIX futures has gone down in what is virtually a straight line.

But what changed in June? Well, as some may recall, something very substantial - the head of the Fed's Markets Group, i.e., its trading desk, got a new head: one who has been rumored to have a different PPT style to his predecessor Brian Sack - a style that involves the relentless selling of VIX to take advantage of a market which is drowning in reflexivity, and in which the movement of the vol surface has a far greater impact on the underlying asset than any fundamentals or news flow: want to send the market higher (and have an infinite balance sheet at JV partner Citadel courtesy of your backstop, then just sell, sell, sell VIX).

At least we can now scrap the "rumored" part.

* * *

So to all those who are confused why a 1.5% drop in the market constitutes a bloodbath, now you know: with no hedges on, with massive margin exposure on, and with everyone all in, the last thing the market can sustain is selling, any selling, or else the dreaded margin calls start coming in and PMs have to satisfy margin insufficiency with more selling, setting of an avalanche of even more selling, which ends where, nobody knows. In fact one can argue that in this context a modest 1.5% drop may have a greater impact on sentiment and positioning than a whopping 10% drop did as recently as 2008 when everyone was more or less positioned to expect precisely such a thing. Because if one is 99% levered, a 1.5% move lower just wiped out all equity.

But hey: a few more percent and one can be certain that Wall Street's unofficial branch of government, the Fed, will get a solemn request by such representatives of "the people" as Chuck Schumer to "get to printwork" as soon as possible...


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Sat, 12/29/2012 - 14:43 | 3104836 Aziz
Aziz's picture

Reinflation masturbation.

Sat, 12/29/2012 - 17:05 | 3105201 ZerOhead
ZerOhead's picture

Selling VIX = sticking finger in dike

I can just smell the desperation...

Sat, 12/29/2012 - 19:23 | 3105467 RockyRacoon
RockyRacoon's picture

That's not dyke you're smelling!, I mean dike.  Heh, heh.

And as far as the article ...

I still say it's hooey!  Ha!  1.5% of nothing is still nothing.  VIX, shmix.  I don't care how levered or anything else the participants are.  Call me hard-headed -- go ahead.  Well.  Go on.  Dare ya.

Tell me what's going to happen Monday morning.  I've got my own rear-view mirror thank you very much.

Oh, wait, never mind.  I don't have a dime in the so-called "markets" anyhow.   Carry on.

Sat, 12/29/2012 - 23:38 | 3105936 MrButtoMcFarty
MrButtoMcFarty's picture

FNA Rocky!


The only consequence that matters is how far down the margin calls depress PM spots.

Love any opportunity to stack at discount.




Sun, 12/30/2012 - 00:40 | 3106014 RockyRacoon
RockyRacoon's picture

I hope they're margined up to their eyeballs, and then some.  Take gold down, and my truck has a reverse in it.


Just goes to prove that gold is a store of wealth -- when needed it's there to get your ass outta hock.


I'll second that BITCHEZ sentiment.


Sat, 12/29/2012 - 14:57 | 3104857 Orly
Orly's picture

I saw the charts on Friday but I was confused as to what they were saying.  Regarding the FX US/EUR Swaps, does it mean that the Fed has stopped swaps with the Euro?  It seems the line drops to near zero as it moves into year-end.

This may be why the European banks have tapped into the ECB window in December.  Is this a year-end "balance the books" thing or does it continue flat after the New Year?

Without the Swaps available to churn the Euro in the overnight, does this mean the Euro is on its own and may suddenly find its true market price?

Inquiring minds want to know...


Sat, 12/29/2012 - 15:13 | 3104882 stocktivity
stocktivity's picture

I can smell QE4 coming soon with Bennie buying stocks.

Sat, 12/29/2012 - 15:23 | 3104902 Jayda1850
Jayda1850's picture

More than likely already is, what do you think "other assets" are on the balance sheet. Along with foreign soveveriegn bonds and whatever other markets around the globe needing artificial stimulation.

Sat, 12/29/2012 - 15:23 | 3104911 Orly
Orly's picture

Why Greek and Spanish Government debt, of course.

Sat, 12/29/2012 - 15:28 | 3104918 Max in St Moritz
Max in St Moritz's picture



Speaking of Qe, what's going to be the catalyst that sends gold firmly over 2k?

We have infinite Qe. We had the entire financial system in America on the verge of implosion.  The stock of money (in the form of Fed reserves) has grown from 10B to 1.4T and rising.  The death rattle of the Euro was/is loud and clear.  The US lost its AAA rating.  Our debts and deficits have never been worse.  The fiscal cliff is 3 days away.  Every central bank on Earth is debasing their respective currency. 

.... and yet gold can't even stay above $1700, and silver is on a downward spiral towards $20 (*LOL*)

So, in the mind of gold-burying doomer goons, just what exactly will be the event that vindicates all your carnival barking?

Sat, 12/29/2012 - 15:34 | 3104941 Tyler Durden
Tyler Durden's picture

Funny how quickly people forget and/or prefer to just play dumb. From precisely a year ago: Gold And Silver Plunge As EUR Reaches 15 Month Lows

What drove it? Same thing that always drives year end precious metal liquidation: fulfilling margin calls (ironically in the context of a post saying margin debt is now at all time high) in other assets by dumping winners.

And yet there are those who will continue to troll and prefer to appear stupid instead of pulling up a simple price chart.

Sat, 12/29/2012 - 15:41 | 3104960 Max in St Moritz
Max in St Moritz's picture



Tyler, are you suggesting that as soon as "the year-end precious metal liquidation" is over (Jan 1st), gold and silver will continue their parabolic rise?

By the way Tyler, as much as you loathe me, I do actually have enormous respect for you.  I just happen to think that this forum is more lively and enjoyable with conflicting opinions - that's all.  No disrespect intended.


Sat, 12/29/2012 - 15:50 | 3104988 akak
akak's picture

An honest 'conflicting opinion', to BE an actual opinion, must have a logical and factual basis behind it.  Otherwise, it will be seen as merely being contrary for contraryism's sake, if not actual trolling.


PS: I fail to see the parabola in the long-term price chart of gold and silver.  Now, if you REALLY want to see a parabola, check out the chart of US federal debt.

Sat, 12/29/2012 - 16:59 | 3105187 TheFourthStooge-ing
TheFourthStooge-ing's picture

akak said:

I fail to see the parabola in the long-term price chart of gold and silver.

Those parabolic trends can only be seen by visitors to the Eastern Island Surreality Abusement Park, home to rides like the AnAnonymous Tilt-A-Whirl® Insanitation Moebius Loop and the Ben Franklin Time-Traveling Flying Rickshaw.

Sat, 12/29/2012 - 17:17 | 3105206 akak
akak's picture

My favorite one is the Hall of Citizenism Mirrors, in which all of one's own faults (and the faults of one's society) are reflected onto an American flag.

Then, of course, there is the ever-popular Blobbing(-Up) for (Road) Apples.

Sat, 12/29/2012 - 17:21 | 3105246 TheFourthStooge-ing
TheFourthStooge-ing's picture

In Chinese citizenism, road apples and dingleberries are the low-hanging roadside fruit.

Sat, 12/29/2012 - 18:12 | 3105346 disabledvet
disabledvet's picture

"you called"...

Sun, 12/30/2012 - 10:37 | 3106295 Deacon Frost
Deacon Frost's picture

Try offering a set of evidentiary facts laid out in a cohesive manner, like Tyler, instead of offering your devils advocacy.  

Sat, 12/29/2012 - 16:07 | 3105047 max2205
max2205's picture

When can we post charts?

Sat, 12/29/2012 - 16:53 | 3105173 realtick
realtick's picture

Here's a simple price chart:

Fed Funds Rate & The Dow Jones Industrial Average

Sat, 01/05/2013 - 04:23 | 3124820 MeelionDollerBogus
MeelionDollerBogus's picture

A good post but the sense of scale is lost. The DOW truly needs over such a long time to be rendered in log-scale, especially to correspond usefully, visually, to % rates from the Fed. Just sayin'. +1 anyhow

Sat, 12/29/2012 - 17:43 | 3105296 Threethreethree
Threethreethree's picture

Margin calls, yes.

Deflationary period coming soon.

Courtesy of the fiscal cliff.

Economy down.

Jobs down.

Gold down.

Market down.

Housing down.

Everything down.

The Right Wing will be blamed.

Then, when the world appears to be ending, and the financial system is in ruins....

They will save us.


Sat, 12/29/2012 - 22:16 | 3105788 BooMushroom
BooMushroom's picture


Sat, 12/29/2012 - 15:38 | 3104951 Orly
Orly's picture

The yield on the 10 year US Treasury note goes to 1% and headed lower.

All risk assets are going to get monkey-hammered, precious metals included.  Except yours, of course.  You should continue to buy as much gold and silver as you can hold.

See you in the Big Top!

Sat, 12/29/2012 - 15:52 | 3104999 akak
akak's picture

Orly, you just described one possible short-to-medium-term scenario.  However, the long-term scenario is still RIP for the US dollar, and you know it.

Sat, 12/29/2012 - 16:26 | 3105084 Orly
Orly's picture

Sorry, that's just not correct.  I have said many times and offered much proof as to why the USD will not fail.  The main one being that it is the dollar that is going to prop up every other asset in the world, especially the Euro.

Ask me why the Euro has to be so highly over-valued and I'll say that I have no idea.  But if the Fed would stop its "Other Assets" purchases (Greek and Spanish government bonds, just as Dr. Bernanke laid out in his famous speech as one of the final tools available to the Fed...), the USD would rocket to the moon.

Please don't forget that all 4X transactions are relative.  As long as there is a global economy, there will be a US Dollar.  And as long as there is a US Dollar, it will be the strongest currency in the world.  RIP for the dollar simply makes no reasonable sense whatsoever, though I do understand your sentiment.  None of this is good but ours will be way "less bad" than everyone else's.  Therefore, it follows that the US Dollar will not only survive but remain the go-to, world-reserve currency for many, many decades to come.

You should check out Marc Chandler's (of Marc to Market, posted on ZeroHedge...) book Making Sense of the Dollar so that you can better understand the mechanics of it.  If the US Dollar dies, then what will replace it?  The Euro?  The ECB has gone out of its way to discourage that kind of thinking.  Plus, without Great Britain in the Euro, there is no way that would happen and the British are in no mood to convert now.  The renmimbi?  Nowhere near enough of them.  Yen?  No way.  Maybe the Brasilisan real?  Etc, etc, etc.

I hear what you're saying: shadow money can be really, really bad.  But when you think about it, the idea of the demise of the US Dollar gets further from reality every day.


Sat, 12/29/2012 - 16:28 | 3105086 fonzannoon
fonzannoon's picture

Then print some of those precious dollars and send them our way. I will STFU I promise. (500k should do it).

Sat, 12/29/2012 - 16:37 | 3105125 Orly
Orly's picture

Half a mill, fonz?  C'mon.  It's Christmas!


Sat, 12/29/2012 - 17:05 | 3105200 TheFourthStooge-ing
TheFourthStooge-ing's picture


As long as there is a global economy, there will be a US Dollar.

So in the long term, the dollar is doomed.

Sat, 12/29/2012 - 17:09 | 3105214 Orly
Orly's picture

Of course.

It follows.

<rolls eyes and sighs>

Sun, 12/30/2012 - 00:49 | 3106024 RockyRacoon
RockyRacoon's picture

You admit that you don't know why the Euro is doing its thing.  So, how can it follow that you know why other currencies are doing their hideous things?  You can't feign to be certain about one thing when other things impinge upon its reliability.  Too many holes in your argument(s).  Denial is a necessary aspect of maintaining sanity in an insane environment.  It lends certainty (a sane facade) to what is obviously a lie.

Sat, 12/29/2012 - 17:15 | 3105220 akak
akak's picture

Orly, you historically ignorant slut.

By your specious logic and nonsensical argument, the British pound must still be the world's reserve currency.  No, scratch that --- it is the denarius of the never-fallen Roman Empire.

If and when the world returns to sound money, the very concept of a "reserve currency" is made moot --- one's OWN money (i.e., gold and/or silver) can and would function as one's own monetary reserves.  Or do you envision a permanent and indefinite continuation of the financial and monetary repression and corruption of today?  Need I point out that that which is unsustainable will not be sustained?

Really, your desperately pro-status-quo argument is utterly laughable.

Sat, 12/29/2012 - 17:21 | 3105242 Orly
Orly's picture

"When you got nothing, call names."


Sat, 12/29/2012 - 18:17 | 3105360 disabledvet
disabledvet's picture

and there i was basing my "am i pro dollar or not?" argument...and then refuting it... on a "so called economic recovery." silly me...i still stand by my phrase "the first to debauch wins." that would be the good 'ol USA. Japan and Europe are only "getting in the game" as i speak. We got THREE years on ya' you so called rich people! Let's lets see Pepsi try and sell a soda for hundred bucks! I dare ya! I DOUBLE DOG DARE YA!

Sat, 12/29/2012 - 22:31 | 3105820 BooMushroom
BooMushroom's picture

In 1945, a six pack of 12 oz bottles of Pepsi was 23¢.

I'm sure there was an asshole just like you saying they could never sell a single bottle for a dollar.

He was wrong too.

Sat, 12/29/2012 - 18:24 | 3105372 akak
akak's picture

And how's life in your 2000+ year-old Roman Empire going for you, Orly? 

Because of course Rome, like your US dollar, is "eternal", right?

Your lack of any sort of historical perspective is both laughable and to be pitied, but merely reflective of the typically insular and proudly ignorant average American citizen.

Go hug your paper all the way to the bottom.  He who laughs last, laughs best (even in a world of hyperinflation).

Sat, 12/29/2012 - 19:29 | 3105488 schadenfreude
schadenfreude's picture

Your argument is about timing akak. As long as there is no reserve currency available, Dollar is king. EUR and RMB will devalue with the Dollar to maintain their exports. So Orly is right. Brithish Pound got replaced by USD after a World War if you are looking for a catalyst to the fall of the American Empire. Although I can't see a World War rising actually. Time will tell, but at least in a medium time frame I support Orly's position.

Sat, 12/29/2012 - 20:04 | 3105532 akak
akak's picture

I still would claim that Orly is an intellectual captive to a rotten and transient status-quo, in that he/she assumes that there MUST be a reserve (fiat) currency in the first place.  Actually, that is a modern phenomenon, and largely an (unfortunate) result of the 20th century abandonment of sound money. 

When gold and silver were the basis of the world's monetary system, it was gold and silver themselves that were the "reserve currency" --- to the extent that anyone even thought in such terms.

I suspect that like so many today who are beholden to, and who profit by, the current if unsustainable financial and monetary paradigms, Orly feels threatened by any discussion of the manifestly corrupt and unsustainable nature of those paradigms, and can only fall back on arguments from authority in his/her insecurity when his/her assumptions are logically confronted.


Sat, 12/29/2012 - 21:14 | 3105702 Orly
Orly's picture


Maybe just a thoughtful realist and not a vulgar, hyper-reactionary "Mad Max" gold-bug.


Sat, 12/29/2012 - 22:22 | 3105801 akak
akak's picture

Maybe .... but the strawman-building, ad hominem-flinging, pro-Establishment, pro-status-quo, historically ignorant paperbug seems to be getting in that person's way.

Sun, 12/30/2012 - 00:08 | 3105975 DeadFred
DeadFred's picture

Still one has wonder why Brazil needs to but oil from Nigeria using the USD

Sun, 12/30/2012 - 00:54 | 3106027 RockyRacoon
RockyRacoon's picture

Ask the Iraqis.  They have your answer.

Sun, 12/30/2012 - 18:56 | 3107501 schadenfreude
schadenfreude's picture

So what's a realistic scenario then?

Sun, 12/30/2012 - 09:49 | 3106226 AGAU
AGAU's picture


Sun, 12/30/2012 - 02:37 | 3106090 MrButtoMcFarty
MrButtoMcFarty's picture

Don't know if I'll be round to see it ....but I suspect it will be a currency backed by a basket of commodities.

Gold, silver, oil, water, wheat, corn, soy, meat?? Got beef??

But it won't happen until lots more folks pay with their labors and their lives.

Does anyone really doubt the willingness and capacity to KILLEMALL that backs the USD any more?

We are Jack's psychopathic nation state.

Sat, 12/29/2012 - 17:11 | 3105221 LongBalls
LongBalls's picture

You are clearly living in lala land my friend. There may not be an end to the U.S. Dollar but there will be an end to it's world reserve currency status. We are in a debt based economy yes? The Gov/Fed ponzi needs to either issue more currency through bonds or QE to pay back the interest on the existing debt yes? Let's not even get into the fractional reserve lending standard (counterfeiting) of the member banks. So either the debt expands or it is inflated away to service the debt, yes? With Russia, China, Brazil, and countless other countries using their own currencies as settlements in trade and the Fed buying up bonds because the rest of the world has started to realize the value of the return what else do you need? Do you need proof that Central Banks around the world are buying gold up in mass? Do you need proof that the BIS and IMF hold gold in the asset column of their balanace sheets? Do you proof that there is no reason to trust the foreign currency reserves on a banks balance sheet when those reserves are continuously devalued? Do you need proof that the BIS via BASEL III is mandating banks boost collateral to lend against at the same time those reserves are being devalued AGGRESSIVELY? Do you need proof that the EU just solicited Russia to become a part of it's union? After all, Russia is a main supplier of oil and natural gas to the EU's strongest countries.

Wake up. You are going to get crushed. The Dollars life is a long one. But remember, a currencies value is only in the amount of stuff it will purchase. Gold is the only defense. The banks clearly know this. But you?


Sat, 12/29/2012 - 17:37 | 3105287 Orly
Orly's picture

Let's take it point by point and maybe with my interested queries you can find some answers...

"There may not be an end to the U.S. Dollar but there will be an end to it's world reserve currency status."

Replaced by what, exactly?  All that gold?  The Euro?

"So either the debt expands or it is inflated away to service the debt, yes?"

Not necessarily.  Does economic growth count?  The world hasn't stopped in its tracks, you know.

"With Russia, China, Brazil, and countless other countries using their own currencies as settlements in trade and the Fed buying up bonds because the rest of the world has started to realize the value of the return what else do you need?"

Fifty billion here, fifty billion there.  Pretty soon, you're talking about a $4 Trillion per day global economy.  Am I right?

"Do you need proof that the BIS via BASEL III is mandating banks boost collateral to lend against at the same time those reserves are being devalued AGGRESSIVELY?"

News Flash: European banks are in a world of over-leveraged hurt.

"Do you need proof that the EU just solicited Russia to become a part of it's union?"

How do you spell C-Y-P-R-U-S anyway?

"After all, Russia is a main supplier of oil and natural gas to the EU's strongest countries."

I guess you haven't heard of all the shale gas reserves being discovered all over Europe?

Gold is very pretty, though.


Sat, 12/29/2012 - 18:31 | 3105394 disabledvet
disabledvet's picture

your talking to a guy who was bullish on the market but bearish on US banks..."right up to the London Whale." Some of those "banks" are English my dear. Those are banks who the United States has deemed "too powerful to prosecute." This is from a country that has NO respect for the rule of law...especially it would it appear when it comes to its own people. Don't tell me "it's for the war effort"! how innocent and pure if so. The fact is the FED has "monkey hammered" the markets more than anything anyone could possibly imagine. It has done this by slamming interest rates to "at or near zero forever." That's without ANY idea of fiscal responsibility coming from our friends in DC. That CRUSHES the carry trade...which is the only way i know of to create true credit creation. That means this whole "thing" we're going through could be based SOLELY on the business cycle. is it looking Orly? "So far so good"? Indeed. But no one lasts "long" in the market by simply "staying the course." At some point the reality of "competition" must be recognized as well. No bull or bear can operate in a vacuum. So "credit flows freely"...but it does not flow "equally." Nice battle tho...we'll see how much longer i can maintain the consistency of my argument or "thesis." I've been surprised at how long it's worked already...

Sun, 12/30/2012 - 01:03 | 3106030 BooMushroom
BooMushroom's picture

Allow me to redirect: why must there be a single, worldwide reserve currency?

If each country accepts the currency of a couple of its neighbors, and a regional power accepts all the local currencies, and that of other regional powers, why could there not be multiple currencies used for global trade? I can see USD/CNY/EUR.

Sat, 12/29/2012 - 18:24 | 3105382 obejoyful
obejoyful's picture

I think the US dollar will eventually fail due to all the obvious reasons. 


But before it does I think there will be a HUGE short squeeze, this will be a great time to buy silver and gold.

Here are the reasons for the short squeeze:

  1. Debt satisfaction creates a demand for dollars. 
  2. Demand for debt satisfaction creates a demand for dollars. 
  3. Bankruptcy reduces the number of dollars available to use to satisfy debts. 
  4. Asset deflation reduces the theoretical amount of dollars available to satisfy debts. 
The huge reduction in dollars available to transact real value exchange creates an inflation of the value of the remaining dollars and a reduction in the value of assets that are valued against them...


Sat, 12/29/2012 - 19:46 | 3105491 BlueCheeseBandit
BlueCheeseBandit's picture


I read your post with legitimate interest, hoping to learn something that might change my long term outlook on USD and gold. No such luck.

Your whole argument is based on the assumption that one reserve paper currency is necessary for international trade. That doesn't jive with almost all of human history, when international trade was conducted in gold and silver.

You also imply your belief that a certain amount of currency is necessary when you talk about the Yuan. You might argue that gold and silver stocks are insufficient given international trade today. This is a common inflation isn't fallacy. It ignores the fact that purchasing power is flexible. The argument doesn't show that gold isn't quantitatively insufficient for trade, but that it's undervalued relative to an environment in which it becomes the international currency nice again. That's exactly the point of "goldbugs," such as myself.

If you have better arguments or evidence, you would be doing me a favor by bringing them forth.

PS: I own a lot more USD than gold atm, so I'm a short term deflation isn't, long term dollar collapsionist.

Sat, 12/29/2012 - 21:07 | 3105680 Orly
Orly's picture

I appreciate your response, Bandit and I am afraid that I would be unable to convince you of anything, except to give you another avenue of thought.  There are really only two scenarios under which gold would become the basis for exchange again and that is in a deflationary scenario and a hyerinflationary scenario.

But let me take your comment for argument first. 

"Your whole argument is based on the assumption that one reserve paper currency is necessary for international trade. That doesn't jive with almost all of human history, when international trade was conducted in gold and silver."

  • While it may be theoretically possible to tag all monetary exchanges to silver and gold, it is a matter of practicality and liquidity.  There is just not enough gold or silver in the world to provide enough liquidity for transactions.  Of course, one could value gold at $25,000 and ounce and be relative for silver.  Then you'd have to cut the tradable amounts down to nano-ounces and add palladium and platinum to increase the liquidity of the market.  If it weren't enough, you could add molybdenum and copper to the mix- a basket of commodities- but then you'd be back in the same boat as you are now in that it is not gold and silver that are the bases of currency exchange.  If the field would be so corrupted, then why not simply stick with the one thing- the US Dollar.
  • Fluctuations in the daily price of gold and silver and other commodities could possibly make markets more chaotic, not less.  More chaos is less confidence.  Less confidence means less free trade and that's bad.  The idea is that if everyone's gold is "pooled" into the world-wide gold/silver currency basket and , say, Putin gets assassinated, the uncertainty in Russia would lead to large fluctuations in the price fix of gold.  Or Abe gets elected in Japan, the Chinese Premier cracks down on protestors... Political ramifications behind the gold held by a sovereign could greatly efffect the price fix and add to instability in the currency markets.  When you're talking about some of these whack-a-doodle countries, the price could jump thousands of dollars in a day.  Not good.
  • Never before in the history of the world has a soybean broker in Iowa been able to get on the horn to Osaka and agree to a price for next summer's crop (or whenever soybeans are harvested...).  Most of human history, as you say, has never seen the internet, the telephone and digital transfer of millions of dollars instantly over a wire.  It has never been available and never been needed until now.  Moving backward to an illiquid, narrow and politically chaotic market for currency exchange makes no sense.

To my point that one doesn't need gold unless there is a hyperinflationary environment or a deflationary environment, the world is clearly in a deflationary environment and has been for some time.  These latest bubbles have been blown to try to reflate the bubbles that have been deflating for many years.

Hyperinflation is not oing to happen because that entails a comlete lack of faith in a currency and that is just not going to happen.

As the Japanese have demonstrated, a deflationary environment is insipid and certainly not welcome but it can go on and on and on.  They're on 25 years already and they don't even have the world's reserve currency!  Just imagine what the Fed could do, monetarily speaking, over that time period.  I am not to say that it is right or wrong but it just is.  We could find ourseves trying to reflate our way out of this hole for the next fifty years.

So you see, in all of these possible scenarios, gold and silver are simply a risk asset that acts according to available money and speculation in the commodities markets.  The same thing has happened to copper and iron ore in that the easy money came in and bid up the price.  The gold and silver markets are so thin and easy to manipulate, it is no wonder that they have gone vertical.  Goldman-Sachs did the same thing to oil in 2008 before they were told to cut it out and the chart of gold today is going to mimic the chart of crude oil back then.  Gold is in exactly the same boat as oil was except no one cares about gold because, while it is very pretty, it is just about useless except in nano-tecnhology.  That's why the big boys like JPM are "allowed" to play in that sandbox and, to me, that speaks volumes.


Sat, 12/29/2012 - 22:29 | 3105728 akak
akak's picture

Orly, your arguments are once again simply specious as well as historically ignorant.

While it may be theoretically possible to tag all monetary exchanges to silver and gold, it is a matter of practicality and liquidity.  There is just not enough gold or silver in the world to provide enough liquidity for transactions.

I suppose that is why the world was able to support a level of international trade pre-WWI, almost entirely under the classical gold standard (some countries such as China were on the silver standard instead), at levels that were not exceeded, even and especially in ABSOLUTE terms, until the last decade?

Again, as an intellectual captive of the status-quo financial and monetary paradigms, you assume that the current, hyperbolic levels of "liquidity" are necessary for contemporary levels of international trade.  Logic and history, however, both show you to be wrong.

Fluctuations in the daily price of gold and silver and other commodities could possibly make markets more chaotic, not less.

Your captivity to the fiat monetary paradigm is again on display here.   You are putting the cart before the horse here, though ---- in a monetary system in which gold and/or silver are the numeraire, there ARE NO meaningful "daily fluctuations" in the prices of the precious metals, as those (fiat currency) price fluctations are a RESULT of the unbacked fiat monetary system having to take, and make, daily relative 'votes of no confidence' in the constantly fluctuating (but generally downward) value of the fiat currency itself.  You are mistaking cause and effect.

Moving backward to an illiquid, narrow and politically chaotic market for currency exchange makes no sense.

Disingenuous and specious in a way that could bring tears to the eyes of Jon Nadler himself.

"Politically chaotic"?  GOLD?  Compared to FIAT CURRENCY, which is a PURELY political creation, and whose ONLY value is based on debt and statist coercion?  Get the fuck out of here with this shit.

One only needs to (rhetorically) ask oneself why it is that, if fiat currency is such a marvelous invention, governments feel the insistent (and vigorously enforced) need to FORCE their citizens to use it, to the exlusion of any possible monetary competitors, at the point of a gun?  We all here know the answer to that question.

Sun, 12/30/2012 - 01:18 | 3106046 Lord Of Finance
Lord Of Finance's picture

Orly, you are one smart chick, and if that's your picture, u are quite adorable. Will u marry me:D

Sun, 12/30/2012 - 07:04 | 3106164 misnomer00
misnomer00's picture

Is the scenario of bullion as well as USD appreciating against other currencies so unimaginable? I might not be able to match you guys in your fundamental analysis, but one thing I do know for sure

ie, if gold & silver break down, we Indians will not sell, we will buy triple of that what we own.

Sun, 12/30/2012 - 10:00 | 3106255 BlueCheeseBandit
BlueCheeseBandit's picture

"There is just not enough gold or silver in the world to provide enough liquidity for transactions."

Why can't you divide the units further? One of the reasons gold and silver became money was their divisibility. With modern tech it would seem there's no limit to how small the unit would be. And international trade deals in large sums anyway.

"If the field would be so corrupted, then why not simply stick with the one thing- the US Dollar."

What if ppl lose faith in the issuer? I think that's the basic argument for gold.

"Fluctuations in the daily price of gold and silver and other commodities could possibly make markets more chaotic, not less."

By and large, fluctuations in gold and silver today are fluctuations in the dollar side of the ratio, not the metals. The price of a loaf of bread in gold is essentially the same today as in Ancient Rome. The price of an gasoline in silver is the same as the 60s.

"Most of human history, as you say, has never seen the internet, the telephone and digital transfer of millions of dollars instantly over a wire. It has never been available and never been needed until now."

How was gold used in trade before? Do you think every transaction required gold to be shipped to one's door? The details were handled by banks, with clearing houses that only shipped gold when transactions didn't net out and irregularly to save costs. The rest of the time credit filled the gaps. Just because one is using gold and silver money doesn't mean you can't have a banking system. Indeed, it's common knowledge among economists that the first age of globalization per-WWI was more intense than today's globalization. Look it up.

"Hyperinflation is not oing to happen because that entails a comlete lack of faith in a currency and that is just not going to happen."

Why not? I think everything else is moot if you don't have a reason for believing this, because it's the central issue. Hint: It hasn't happened before is no more a valid argument than Ben Bernanke's "we've never seen housing go down on a nationwide basis" argument in 2005.

"Gold is in exactly the same boat as oil was except no one cares about gold because, while it is very pretty, it is just about useless except in nano-tecnhology."

How many uses do the little pieces of paper in your wallet have? Is it possible a commodity is more useful as money the fewer its industrial uses because of the reduction in supply and demand fluctuations?

"The gold and silver markets are so thin and easy to manipulate, it is no wonder that they have gone vertical. Goldman-Sachs did the same thing to oil in 2008 before they were told to cut it out and the chart of gold today is going to mimic the chart of crude oil back then."

If gold is being manipulated upward, why did we see so much price insensitive naked short selling last week? And why do institutional investors collectively have about 1% of their portfolios in gold?

Sun, 12/30/2012 - 01:06 | 3106032 Diogenes
Diogenes's picture

The dollar is the world's reserve currency, we must be very careful how we manage it

The dollar is the world's reserve currency,  we can pull any scam we want and nothing will happen.

Sun, 12/30/2012 - 12:25 | 3106519 merizobeach
merizobeach's picture

Friend, you've put a great effort into developing your ideas today in this thread, and for that and the further discussion it has facilitated, thanks.

Still, though, I first began facing what I felt was the inevitable ending of the USD about 15 years ago, when I was still in school, and I said since then that I thought that 2010 would be the beginning of the collapse, which would accelerate over the ensuing decade.  I didn't predict or recognize the magnitude of the housing bubble, not living there, so I was a bit surprised when the wheels fell off in '08.  But that's irrelevant to the reasons for which I had predicted collapse--primarily a demographic argument, and those are still playing out.  The various easings of monetary policy that have occured will only exacerbate the consequences: hyperinflation of a reserve currency will necessarily be slower than any other single nation's because, since it's the reserve, other nations will try, until they absolutely can't, to accomodate the changing monetary environment (where they are just riders of the storm--for example, all countries like Cambodia or Palau who have hard pegs, and what is basically the rest of the world who maintain soft pegs, and thereby all support the reserve currency).  The whole world is being dragged down the whirlpool because the Fed has ensured everyone's maximum interconnectedness.

But the Fed may not actually be the final end of the rope.  It looks an awful lot to me like an entity such as the BIS, and its puppetmasters, may be set to pull off a new global fiat revolution with their SDRs.  It would mean that all governments could go on deficit spending, and the proportion to which they do that, relative to other currencies, plus their on-going buy-in deposits, will influence their stake in the global currency--the SDR, or some new-named derivative of the same concept: a weighted basket of currencies--which expands and dilutes to include every member nation who pledges allegiance.  GDP calculations for each nation would be made by the dynamic weighted-average standard of the SDR and each nation's fiat's value would fluctuate according to economic strength and local monetary/fiscal (merged) policy.  The key difference between such a system and that of today's is that global exchange rates would be dictacted by a central authority.  From Wikipedia: "Since 2004, the BIS has published its accounts in terms of special drawing rights (SDRs)"  I think we'll see a new era of globalist fiat before we'll see a official standard to 'sound money', except in small isolated pockets, or maybe even on a pervasive black market.

Obviously, many nationalists (not to mention libertarians) in America, and elsewhere, resist this idea, and we may have seen the strength of their reach yet--just last year when DSK was taken down: months earlier, he'd displeased the US by suggesting that 'his' SDRs were poised and ready to take over as a reserve currency if needed, in so many words; he further displeased China, by excluding them from the new (same as the old) SDR basket when it was recently re-evaluated, and his own France, by appearing to be a primary challenger for the sitting president.  And there he went.  At least he didn't get a bullet in his head like Lincoln and Kennedy did when they tried to disempower a US central bank.

Sat, 12/29/2012 - 17:24 | 3105257 klockwerks
klockwerks's picture

Max, you will find out in the next 6 months when the perfect storm fully hits
Sun, 12/30/2012 - 07:32 | 3106168 misnomer00
misnomer00's picture

holy cow!

Sun, 12/30/2012 - 12:53 | 3106581 mvsjcl
mvsjcl's picture

Interesting stuff.

Sat, 12/29/2012 - 18:41 | 3105407 Banjo
Banjo's picture

My understanding is that less than 2.5% of peoples assets are in gold / metals, of that I would say a small percentage is held as actual physical.

How much paper gold could you or I sell to take the pressure off the physical market? (for this reason it might not be the investment for you or even me)

However in extremis gold can revalue 100% or more over night and there are more dire scenarios that make physical gold an essential.


My question based on your analysis and understanding of peoples investment allocation, paper instruments that give people exposure to gold and various manipulations especially outside of the gold market; e.g. crowding in being forced on the bond markets and the other alternatives available including property, dividend paying stock etc..

1. Where do you expect the gold market should be? Do you personally think the current gold price is too high/low? What is your opinion on a more realistic price?

2. Give us a hypothetical asset allocation of a 500K portfolio?

Additionally if you are overweight in an asset class what is your exit strategy and what do you roll into? I would like to sell my gold and silver at significant more favorable ratios than currently available and swap for equities. Say DOW/Gold at 4:1, 3:1, 2:1 will this happen not sure? Of course if the macro picture were to improve, with regards, employment, trillion dollar deficits, companies starting to rev up spending I might have to sell out and re-allocate way before any such ratios are reached.


If people have their life saving in 2oz of gold hoping for it to go to 200K I think you could be waiting a while. I think many people miss out on the point of gold being wealth preservation not winning lotto. Check gold from 1900 to today and match against inflation. Sure you might get lucky and pick 100%-300% real gain but it could equally just plod along.


For example my thoughts on current allocation

55% Property (family home)

5% Cash

20% silver

20% gold

0% stocks/equities

0% gold/silver mining stocks (never ever in a million years)

1.4% debt  (very low debt)




Sat, 12/29/2012 - 22:23 | 3105804 Missiondweller
Missiondweller's picture

With 12 years of gains in gold I fail to see your point. But you also indirectly point out the absurdity of a gold market that fundamentals suggest should in fact be well over $2,000. Could it be that the Fed and the BIS who are manipulating every other market are also manipulating gold? Sure seems like it when massive amounts are sold into the market during low volume hours all at once as if the trader were seeking the worst execution price rather than the best execution.

Sat, 12/29/2012 - 15:38 | 3104945 knukles
knukles's picture

The BoJ just announced additional QE measures... And the BoJ experience has well been a precursor, good proxy for the US...  So the good betting would likewise be on the table for additional US QE...
Especially with the U rate still above 6.5%.

However, what has been done already in Japan are similar to that pursued domestically, to no avail in the environment of a liquidity trap (by definition).  And politicians world wide desperately wish to goose economies, else they might be voted off their gravy trains, no?
So what's a CB to do?
Continue with the standard QE, expansive monetary measures, continue gravy train fiscal wasteful spending (Given by numerical, empirical research that the Keynesian multiplier is at best Zero and in fact might even be negative.) but must augment such....

Buy stocks...
But that's already happening via Commercial and Investment banks deployment of excess liquidity (Net Free Reserves) and likely the Fed's Other Asset category (undisclosed details, kinda like Ft Knox)

So, looking at it from The Bernak's past promulgations, from a speech of his in 2002: (h/t Jesse/Duy)

"...Of course, in lieu of tax cuts or increases in transfers the government could increase spending on current goods and services or even acquire existing real or financial assets."

Note the highlighted, "real assets". 

That generally means commodities, etc.  So in essence, it also by implication clearly targets Nominal GDP.  Which means that it would not be unreasonable to see the "Authorities" withhold further suppression of gold and silver thereby allowing the indica of inflation to rise but not directly translating into a structurally direct impact of higher commodity prices as if corn, wheat, oil, etc. were purchased by the Fed.
OMG, could you hear the hew and cry?  Fed buying oil, corn, livestock.... nope, wouldn't work.
Riots in the streets.
Nuh uh... have to be a proxy....

Just might not be that far out of the realm of "reasonable" when the prospect of "deflationary pressure" rise again to the fore with respect to CB expectations.

Don't forget the start of the last huge prolonged rally in gold prices happened around the end of September, 2008.  When there were the fears of the world coming to an end and deflationary cycles taking hold....  The Fed at that time made clear, unambiguous statements of concern with deflationary pressures.  And thus allowed the PM's to rise sending a clear message to the financial markets.  There would be no deflation.

Just sayin'....

History rhymes/repeats/whatever....

Sat, 12/29/2012 - 15:47 | 3104979 Orly
Orly's picture

You're right in that Abe has done nothing other than what the BoJ has been doing for lo these many years.  He wants the USDJPY cross at 90 and 4X traders are happy to oblige- to a point.

They have positioned themselves for the first leg up but now it's going to come down to real action.  That won't be done until April when Shirakawa is replaced as governor.  But then what?  They're going to buy stocks!  That's their plan!

Seriously?  I suppose it has worked so well here in the US, what with all the mom and pops just dying to get into the stock market!  Mutual fund and 401(k) redemptions are at an all-time low over here...

No, wait...

Sat, 12/29/2012 - 16:01 | 3105026 knukles
knukles's picture

Yep, the Perceptions Management is directed at the wrong area.
Mom and Pop have no interest in stocks as they got wiped out in 2007-10, etc.  All lost, nothing but bad attitudes and anger
And pictures of Sugar Plum Bankers Dancing on their Retirement Graves.

It hasn't and won't work.
Liquidity Trap and Simple Human Behavior

They're going to have to retreat to the last bastion...
Real assets...
And optics won't let them deal with the energy or softs...

So by default (pun intended halfheartedly) it'll be the PM's.  The next run, be my guess.

Sat, 12/29/2012 - 17:24 | 3105258 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

These f*ckers will not give up without a serious fight, I mean look at the bag of tricks they've already unloaded on us. When Japan started the concept of QE more than a decade ago everybody said it was dangerous, risky, with completely unknown consequences. Now it's normalized behavior by CBs everywhere. So the next trick they pull out of the hat will be even more experimental IMO. Maybe mint a $1 trillion platinum coin. Direct real estate purchases. Helicopter cash. Japan could nationalize Sharp, Panasonic, and Sony. The Treasury could take a direct cut of all online and CC transactions...I mean the sky's the limit once you've completely severed any links between the financial and the real economy.

Carnival time

Sat, 12/29/2012 - 18:53 | 3105429 ball-and-chain
ball-and-chain's picture

Everything goes back to the same old same old when a deal is reached.

We need to go over the cliff.  But it ain't gonna happen.

The republicans are looking for a way to save face.

Then they'll cave.

Sat, 12/29/2012 - 14:51 | 3104838 kevinearick
kevinearick's picture

...blinders, get your blinders right here folks, for just a few more cents than you already have invested...leverage/levitation included in the package...surprisingly, not, the short term is catching up to the long term and the psychology is getting ugly...

Sat, 12/29/2012 - 17:13 | 3105225 kevinearick
kevinearick's picture


Maybe this will help a few:

As provided, QE4 lasted all of a couple of milliseconds in the grand scheme of things, and Treasury ran out of room much faster than forecast. This next traunch will not get Treasury to March, maybe the 2nd week of Feb if its lucky, without exposing more of the machine, again speeding up the system.

Capital is hopelessly under water and getting its income from the Fed, still employing margin as bait in the trap, but the only critters left lining up are balance sheet underwater with falling income in a collapsing job market. You have to consider the psychology on the margin as to how little it takes to wipe the remainder out.

In the accounting model, the income drain vacuum is growing, while the balance sheet faucet is contracting. From the weather model perspective, variability is increasing because irrational use is proliferating faster than the planet can recycle, and the ice is melting in response to salinity, all in positive feedback loops.

Sat, 12/29/2012 - 14:49 | 3104844 Dan The Man
Dan The Man's picture


Sat, 12/29/2012 - 14:50 | 3104848 Conman
Conman's picture

These charts are why i chuckle anyone mentions "burning the shorts" or even short squeeze. What shorts!?

Sat, 12/29/2012 - 14:56 | 3104856 Karlus
Karlus's picture

Arrr, matey, looks like a good time to short this market, arrr

Sat, 12/29/2012 - 15:14 | 3104886 Salon
Salon's picture

Every good time before the volatility blew me put of the water.

Just use a pinch of leverage. Double inverse is great for the cowards and thrice bitten.

Sat, 12/29/2012 - 15:16 | 3104892 Salon
Salon's picture

Yeah supposedly this is the time to go short, right?

There will be a sunday evening "leak" of a fiscal cliff breakthrough

Sat, 12/29/2012 - 15:31 | 3104931 Conman
Conman's picture

No, didn't say go short. Just that everyone is mega long, ala BTFDs,  because of  anticipation of a meeting or rumor of a band-aid fix/bailout/asset purchase/spiderman towel giveaway.

Sat, 12/29/2012 - 18:43 | 3105414 disabledvet
disabledvet's picture

this is by FAR the best reason to be negative. "the bull has stomped out all the shorts"...hence the market falls. We saw what happened with Apple...that's what a fall in price looks like when the shorts have exited "en toto." priced to PERFECTION as they say. To me this market is NOT priced to perfection tho. It's relationship to the economy might be tenuous...that i would agree with...which might go a long ways towards explaining why the "fiscal cliff" thing had such an outsized impact (it's lack of resolution being a major negative on the economy.) i still think the biggest danger to the equity market comes from "it's self"...namely "the bulk of the recovery has been an inflation trade and now that trade is looking like a total dud." that would include gold and maybe even silver i might add. Should this trade unwind and a "new" secular bull market begin (on a pure alpha basis) then i think many of the averages will struggle. it's hard to tell because "energy" plays such an outsized role in any economy...and in that space "you can never be too big." i'll be watching to see just how quickly the USA exits its so called "oil dependency." if we become a net oil exporter in 2013 then that would start drawing dollars into the USA...and bring further investment with it. "we'll have to wait and see."

Sat, 12/29/2012 - 14:53 | 3104852 Salon
Salon's picture


Still getting scared of my double inverse SDS.

I am really too much of a pussy to truly short. Just yet anyway

Sat, 12/29/2012 - 16:11 | 3105052 max2205
max2205's picture

At 40x leverage, 1% loss = 40% loss of capital. TBTF

Sat, 12/29/2012 - 15:04 | 3104859 ekm
ekm's picture

Oh, no doubt, I'll give you the extremely high leverage net longs.


Question: Who is going to sell?

Answer: Only after one or two primary dealers or major private pensions funds have been assigned to be pulverized. That is done by executive order.

The market forces this when real goods like crude oil are withheld from the market from the same leveraged net longs, thus starving the real economy for energy. Which is No different from 2008.

Lack of crude oil in the real economy forced the Gov to force Lehman to be pulverized. The same reason will force the Gov to let 1 or 2 major players to be pulverized this time.

That's why I say, unless I see 1000 dow pts drop per day for 3 days in a row, it's not a drop. Somebody has to be FORCED to sell.



Sat, 12/29/2012 - 15:14 | 3104884 andrewp111
andrewp111's picture

Right now, there is plenty of oil.

Sat, 12/29/2012 - 15:22 | 3104899 ekm
ekm's picture


In storage, but not in the market for consumption.

Leveraged net longs have stored this oil off shore and onshore. Same as in 2008.

Time has come for it to  be flushed into the consumption market.

That was the trigger in 2008, that will be the trigger now.

Crude oil at $40 is not far fetched. I'm saying, crude oil will go as low as $15/barrel WTI. There's just too, too, too much of it stored around.

Sat, 12/29/2012 - 15:42 | 3104962 J 457
J 457's picture

At current global consumption rate, $15 barrel would never happen, short of the world economy literally ceasing.  Even $40 barrel is too low based upon FED's $85 billion a month never-ending liquidity injection.  Add in Iran military exercises and all the other geo-political issues and you'll not see anything less than $80 WTI in 2013. 

Sat, 12/29/2012 - 15:43 | 3104966 ekm
ekm's picture

I did not say it's going to stay $40 for a long time.

Sat, 12/29/2012 - 18:54 | 3105432 disabledvet
disabledvet's picture

Detroit has done its duty and made sure "there's a gas guzzler in every garage." They got what was coming to them in my view. I miss the David Rockefeller "rusty bumper" artwork that used to be in the lobby when you entered his Chase Manhattan Bank. He knew shit when he saw it...and these folks with their Government bailouts STILL produce something "only in the interests of big oil" and not in the interests of the consumer or the economy as a whole. (this is not to say they will lose of course. I just like the idea of a NO FUEL vehicle. Something i saw in the Army in the early 90's i might add.) I did see a solar powered plane on sixty minutes the other day. I was disappointed in my motorcycle consumer news when they jumped on the Big Oil Screw America Again bandwagon though. I mean "why not put the solar panels and the battery back on the motorcycle rider himself" you hybrid hating buttmunchers? HE can be the power source if necessary..."no battery required." Anywho that would actually be a BENEFIT to consumers...why would a media outlet want to do that? They're too busy selling "what your neighbor is up to."

Sat, 12/29/2012 - 15:30 | 3104919 ekm
ekm's picture

And of course, crude oil at $40 for few months or $15 for few weeks will put Iran to the ground.

Sat, 12/29/2012 - 15:32 | 3104934 fonzannoon
fonzannoon's picture

what would it do to Saudi Arabia?  They are very happy with $85 crude.

Sat, 12/29/2012 - 15:36 | 3104946 ekm
ekm's picture

They have already pre-sold at above $90 and shipped to US most of their quota, from what I read.


Middle men have purchased in advance this oil on leverage aiming at selling it quite higher.

Gov have purchased this oil for the reserve in case Iran goes mad. Qatar and Bahrain have hedged at $45 drop.

It gets to a point that there would be so much oil stored that the gulf would have to stop producing. This is info I've gathered from different internet sources.

Sat, 12/29/2012 - 15:51 | 3104995 Spastica Rex
Spastica Rex's picture

I think you have a very interesting theory. +1

Sat, 12/29/2012 - 16:40 | 3105133 Orly
Orly's picture

He knows of what he speaks...

Sat, 12/29/2012 - 16:50 | 3105159 ekm
ekm's picture

I have no inside knowledge. I do not work in finance since I love to have my sanity under control.

However, people with inside knowledge spill the beans here and there on the internet.

Enough spill makes up for a good full glass.

Sat, 12/29/2012 - 18:04 | 3105330 Orly
Orly's picture

Same with 4X. Just to pick up the crumbs of these big boys is a LOT of money.

Sat, 12/29/2012 - 15:46 | 3104978 J 457
J 457's picture

Interesting concept.  But why would POTUS want forced selling?  Seems the goal is to maintain these asset prices to fund the govt budget.

Sat, 12/29/2012 - 15:50 | 3104989 ekm
ekm's picture

Because world trade is grinding to a halt.

Stocks are not trading, hence NYSE going bankrupt. Oil is getting stored, hence the real economy has halted.


Even in 2008, nobody wanted to let Lehman go, but their hands were forced. Oil went $147.

NYSE volume had evaporated. World trade was minimal.

Sat, 12/29/2012 - 15:58 | 3105023 fonzannoon
fonzannoon's picture

EKM the only problem that I have with your theories in general, is that they are too well thought out. I do actually think there is a true chance that TPTB are actually just despearate and dumb as all hell. What we try to attribute as evil genius is them just barely holding this thing together with newly printed dollars. It has staved off the end, but not prevented it. Laws of Physics is unavoudable.

Sat, 12/29/2012 - 16:09 | 3105033 ekm
ekm's picture

Agree with everything you said.

Why is that a problem?



If you had time like me and delved into studying how things are actually done behind closed doors, you wouldn't have made that comment.

Wheeling and dealing behind closed doors among power holders is no different than what we see on mafia movies.

Everything is thought out pretty well, it just a matter of whether it works as per plan or not, bute THERE IS ALWAYS A PLAN.

Sat, 12/29/2012 - 16:30 | 3105089 fonzannoon
fonzannoon's picture

The plan is always to print. That plan always fails.

Sat, 12/29/2012 - 17:21 | 3105245 LongBalls
LongBalls's picture

Is it possible that the gov. is hoarding oil in prep for war in the oil producing region of the world? Honest question here. I know that Russia has troops on the ground in Syria. The U.S. has troops on the ground with Patriot missile detachments in Turkey. Seems to me things are heating up.

Sat, 12/29/2012 - 19:01 | 3105446 ekm
ekm's picture

Short answer: YES

A longer answer: That's what Reagan did in 1988 right before attacking Libya. Loaded up on crude, attacked libya, crude spiked, Reagan flushed the market with crude oil from the reserve, crude price collapsed.


There used to be a time when American had you know what is that.........oh yes.......real leaders.

Sat, 12/29/2012 - 19:05 | 3105450 disabledvet
disabledvet's picture

from a "super cycle of debt" to a "super cycle of violence." one of the better trades of our generation actually. don't mess with Senator Kerry as he becomes Secretary of State. This guy is no "wolf in sheep's clothing." a consensus has formed in Washington in how to deal with the "Afghanistan debacle"...and it involves getting MORE involved not less. I will be watching very closely for any movement on the peace process. to me that is far more important that the fiscal cliff as a market mover. If Israel and Palestine are at the table to talk "permanent settlement of border issues" then i'll start paying attention. I will also be watching very closely what the "American legation in Libya" looks like "post assassination." We can get rid of unemployment tomorrow...with a draft. I still don't think something like that will come...but the extraordinary knowledge base of this current professional military is something that without the people to pass it down too will simply wither and die. "And that is how we lose" as they say.

Sun, 12/30/2012 - 15:21 | 3106944 zebrasquid
zebrasquid's picture

Market crashes = flight to safety = lower Govt bond rates = Can kicked

Sun, 12/30/2012 - 01:44 | 3106063 Non Passaran
Non Passaran's picture

That is laughable.
Okay, give us a timeframe.
3 months? 6 months?

Don't tell me that the apparent lack of oil takes 9 months to materialize.

Sun, 12/30/2012 - 15:56 | 3107053 ekm
ekm's picture

Is there anything that is not laughable nowadays?

Sat, 12/29/2012 - 15:05 | 3104861 Freddie
Freddie's picture

Buy the F'in Dip and Buy Apple.

Everyone loves Apple.  Apple is the bestest company there ever was.

"The Bernank Put. The Bernank prints money and puts it under your pillow."

Sat, 12/29/2012 - 15:01 | 3104862 Water Is Wet
Water Is Wet's picture

"more selling, setting of an avalanche of even more selling"

Tease.  This should go in the XXX section of Zerohedge porn.

Sat, 12/29/2012 - 15:04 | 3104870 Jayda1850
Jayda1850's picture

I just got wood.

Sat, 12/29/2012 - 15:28 | 3104926 Rubicon
Rubicon's picture


Sat, 12/29/2012 - 15:04 | 3104868 Samsonov
Samsonov's picture

Still not a bloodbath.  Please stop debasing the currency of language by frivolously printing hyperbolic words.

Sat, 12/29/2012 - 15:15 | 3104891 Water Is Wet
Water Is Wet's picture

What would Joe Weisenthal do?

Sat, 12/29/2012 - 15:53 | 3105002 Spastica Rex
Spastica Rex's picture

Just think of hyperbole as American English.

Sat, 12/29/2012 - 16:42 | 3105141 Orly
Orly's picture


Sun, 12/30/2012 - 03:12 | 3106106 Lordflin
Lordflin's picture

Orly, you appear to be a true believer... That is great... It truly is... But fiat is a confidence game... And confidence is running out. But hey... You keep your paper, and let me get suckered into buying up the metal... I can live with that...

Sat, 12/29/2012 - 17:09 | 3105215 TWSceptic
TWSceptic's picture

I'm sure they can find even stronger language when SHTF so don't worry.

Sat, 12/29/2012 - 15:09 | 3104875 djsmps
djsmps's picture

On this CNN "Money" show, they just said that the US is headed for an Economic Renaissance, unless the "fiscal cliff" inhibits it. But I gotta tell you, it doesn't feel like Florence around here.

Sat, 12/29/2012 - 15:18 | 3104896 Salon
Salon's picture

More like Diocletian Rome

Sat, 12/29/2012 - 18:48 | 3105419 ThirdWorldDude
ThirdWorldDude's picture

Was that before or after Nero set it on fire?    /s

Sat, 12/29/2012 - 16:32 | 3105102 BurningFuld
BurningFuld's picture

Economic Rena-colapse you say?

Sat, 12/29/2012 - 16:36 | 3105122 Freddie
Freddie's picture

Why do you watch that sh*t and why do you support The Matrix?  ALL TV and ALL Hollywood are total propaganda trash and they want to disarm you.  Stop supporting those propaganda scum for the NWO.   They are total liars.  If the fiscal cliff is fixed there will be a Eco Renaissance.  Also if the public is disarmed it will be unicorsn and skittles.  These people are so evil.  Fox is not any better. ALL of TV is shit.

F them.

Sun, 12/30/2012 - 01:40 | 3106062 Non Passaran
Non Passaran's picture

Of course they are!
And look at Barron's - "Time to buy Europe".
Buy buy buy...

If that's true, it's time to buy silver.
If it isn't, then it's best to wait a bit and then buy silver.

Sat, 12/29/2012 - 15:10 | 3104876 q99x2
q99x2's picture

BTFD Bernanke will hand a chunk of change to the PPT like they never dreamed of if necessary. The banksters have more important things like austerity to implement and gun control before they'll have any of that market crashing stuff.

Sat, 12/29/2012 - 15:11 | 3104878 Getting Old Sucks
Getting Old Sucks's picture

Question here.  Has anyone heard anything about keeping the cap gians tax at 15% in their so called fiscal cliff bargaining?  To me, seems like any increase possibilities would spur a sell off now before any new tax increase, and especially before a likely crash if no deal is reached.  Please educate me guys.  


Sat, 12/29/2012 - 15:21 | 3104903 Salon
Salon's picture

The market has priced in no increase in capital gains taxes

Market is confident fiscal cliff is a non event.

I am betting against the market on this one

Sat, 12/29/2012 - 15:30 | 3104930 fonzannoon
fonzannoon's picture

Even if you bring cap gains and div tax up to say 25%....where else are you going to put your money? A 5% div paying stock taxed at 25% is still much better than your bank or bonds. You have to put your money in the market. It's your only option. PUT YOUR MONEY IN THE MARKET DAMMIT! YOU HEAR ME? WHADDAYA GOT....SHIT IN YOUR EARS?

  - CNBS

Sat, 12/29/2012 - 15:51 | 3104975 akak
akak's picture

The problem is not with any shit in our ears, it's much more a matter of the public increasingly spurning all the  desperate, transparently self-serving and contemptible shit spewing from the stockpimping whores in the corporate-controlled media.

Sat, 12/29/2012 - 15:50 | 3104993 Getting Old Sucks
Getting Old Sucks's picture

Will do Fonz.  Well, maybe a little.  After the crash of course.

Sat, 12/29/2012 - 15:55 | 3105011 fonzannoon
fonzannoon's picture

Just try to enjoy the good things in life Getting old. There will always be plenty of bad. You seem like a good dude. Believe in karma. It's real.

Sat, 12/29/2012 - 19:54 | 3105528 BlueCheeseBandit
BlueCheeseBandit's picture

The only shit I see is coming out of the mouths of those on CNNC.

Sat, 12/29/2012 - 15:14 | 3104888 q99x2
q99x2's picture

Really nice article for a Saturday. Great info.

Sat, 12/29/2012 - 15:29 | 3104906 rehypothecator
rehypothecator's picture

Zerohedge is far more deserving of a Nobel Prize in economics than any central banker or his Keynesian lackey.  

[edited to add "far"]

Sat, 12/29/2012 - 16:30 | 3105093 TrustWho
TrustWho's picture

You are speaking like Ron Paul.

Sat, 12/29/2012 - 16:42 | 3105140 Freddie
Freddie's picture

Oh I disagree!  Paul Krugman is far more deserving than anyone. (rolls eyes)

Sat, 12/29/2012 - 20:24 | 3105588 Excursionist
Excursionist's picture

Disagree about the article's quality / utility.

A multi-year time series of margin debt dollars (in nominal terms no less) is of little or no value without the accompanying equity dollars standing behind the margin debt.

Margin debt may be back to go-go day highs, but leverage may not.  This is a key leap in logic the article's first chart expects you to make.  All things being held equal, would you short ES based on such a leap?

Sat, 12/29/2012 - 15:22 | 3104907 whoopsing
whoopsing's picture

Is it still considered flying if your plane has lost its wings, but you havent hit the ground yet?

Sat, 12/29/2012 - 15:25 | 3104916 Orly
Orly's picture

I think it's called "falling- with style."

-Buzz Lightyear

Sun, 12/30/2012 - 01:34 | 3106061 Lord Of Finance
Lord Of Finance's picture

Orly, u are one smart chick, and if that is your picture, u are quite adorable. Will u marry me:D


Ultimately, bernanke or whoever will have to raise rates to bring this fiasco to reset. Inflation will have to kick in, the fed will not be able to deny it any longer, as Greenspan had to acknowledge which is what really pricked mr. housing bubble. The next prick will deflate the bond bubble. Speaking of 'pricks'; pay no attention to these hostile replies. Their anger is a response of their ignorance.

Sat, 12/29/2012 - 15:23 | 3104910 Rompoculos
Rompoculos's picture

Every market is cornered now, or soon will be. There is enough debt fiat sloshing around chasing everything, and enough time has passed without a real recovery or debt destruction, that the conviction players are in their respective corners and are not coming out. The hot money last-to-the-party have pushed the prices of pretty much everything up too high. Now we wait.

Sat, 12/29/2012 - 15:24 | 3104913 orangegeek
orangegeek's picture

The term bloodbath can probably be used in a year from now.


The Dow Jones Daily has turned over yet again.


When Q4 earnings start reporting in a couple of weeks, that should speak volumes.  Q2 and Q3 were exercises in finding profit because revenue was flat/declining - and they did.  Let's see if the Dow 30 can do it again.

Sat, 12/29/2012 - 15:27 | 3104920 The Axe
The Axe's picture

Tyler, this is not the first time we have seen a crazy afterhour later become just a nightmare....After all we no longer have a equity market...that works....

Sat, 12/29/2012 - 15:28 | 3104927 yogibear
yogibear's picture

Bubble Time!

Keep blowing the bubble bigger, Bubble Bernanke and the fed.

Eventually the bubble pops. When it does it will be a sight to be seen.

Just have to be amused at the Fed's ever expanding balance sheet.

Currency crisis dead ahead. 

Sat, 12/29/2012 - 15:32 | 3104932 ebworthen
ebworthen's picture

"...Margin Debt at a whopping $327 billion, surpassing the highest print since the Lehman collapse, and the highest level since February 2008."

And if it weren't for Nanny FED propping the banks and making cotton candy out of the markets there would not be so many levered up at the county fair high on debt sugar riding the roller coaster.

By propping the banks and markets the FED has created yet another bubble; wonder who benefits?


Sat, 12/29/2012 - 15:34 | 3104933 devo
devo's picture

I think everyone knows we'll hear fiscal cliff rumors on Sunday night, futures will levitate 250-300 points, and psychology will once again be 100% bullish. Eventually stocks will out price (collapsing?) earnings and FED liquidity, but you have to let it play out. Usually when everyone is bullish it's a good time to be bearish, but not sure that holds true in this time of central planning desperation. They will do anything.

One thing that's happening is people are moving out of stocks and into rental property for their returns. I have no idea how that will pan out. Right now it's put a floor under decent property, but I'm not sure there are enough qualified tenants (ie. good wages) to maintain that trend. Subprime renter bubble? Do these new landlords put their returns into stocks? I think that's the relevant question.

Also, how much of the FED liquidity/speculation is in gold? If it's a high amount, then gold is in trouble, too. People seem bearish on gold right now so I'm thinking that drop from 1750 to 1650 cleared out some speculators. I'm just wondering how many buyers are "strong hands" at 1650. To see a shortage of physical and subsequent high premiums we need fewer speculators and more strong hands, even in the paper markets.

Sat, 12/29/2012 - 15:59 | 3105024 riphowardkatz
riphowardkatz's picture

total myth that fed thinks the market has to be up at any one point,

they dont. in fact they prefer a little of the irrational exuburance being let out. they have a ways to go, straight lines are too obvious and going perpindicular is  the primary fear. letting the air out solves both of those.


Sun, 12/30/2012 - 02:52 | 3106096 Clowns on Acid
Clowns on Acid's picture

rip - it also allows the Fed to point to Congress as the culprit for the time being....

Sat, 12/29/2012 - 15:42 | 3104964 Catullus
Catullus's picture

If the Fed is relentlessly selling vol, then doesn't that mean someone is buying it on the cheap and therefore is hedging accordingly?

Sat, 12/29/2012 - 15:45 | 3104976 Assetman
Assetman's picture

VIX and their derivatives won't get too far out of hand... unless you see an unraveling in the TED spread and/or 1-month LIBOR.  A brief pop of the VIX to around 30 will give Mr. Potter all sorts of ammo to manipulate things in 2013.  Potter is pretty smart in his approach, because VIX can be recycled without the market facing total collapse. 

See, that invented Fiscal Cliff crisis has some value after all.

One interesting note, though, is that the TED has been acting pretty erratically... and may have already reveresed its downward trend.  With so much available liquidity from QE++++++, I don't think LIBOR will follow.  So... this is likely just a "sucking in" all those people who want to buy volatility and think they can make a big profit.  The odds are still not in your favor here.

Sat, 12/29/2012 - 15:59 | 3105022 Tyler Durden
Tyler Durden's picture

The TED Spread lost all utility lost all utility some time in mid-2009. Libor is a complete joke which nobody looks at anymore. The only real pivot indicators of monetary tenseness revolve around the shadow banking system such as general collateral readings, including what is or isn't "special", and any and all readings of repoability, as well as the occasional currency or inflation forward swaps (although these two, like the ViX can be manipulated using reflexive pathways). Everything else is noise.

Sat, 12/29/2012 - 16:20 | 3105071 ekm
ekm's picture

No doubt.

It's all and all about REAL collateral. Something useful.

Sat, 12/29/2012 - 16:15 | 3105062 max2205
max2205's picture

The man is still behind the curtain pulling levers and pushing knobs even though we all know who he is.  

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