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Flight To Safety, Liquidations Resume On Fresh European Stability Concerns

Tyler Durden's picture


Yesterday's last minute short covering rally has been all but eliminated and then some, on fresh European concerns following a Deutsche Bank report that the agreed writedown of 21% from the July 21 second Greek bailout agreement could be executed, and that instead an orderly default with an up to 50% haircut is being considered. Generally, broad concerns that Greece can and will go bankrupt any minute once again dominate and have undone any favorable market sentiment from yesterday's G20, also known as the Full Tilt Ponzi Group, announcement, which was also followed up by an ECB statement that the central bank would do everything to prevent further contagion. Judging by the risk waterfall this morning, and the liquidations in gold (driven by a vague but ever stronger rumor of a winddown at a GLD-heavy hedge fund that is now down 50% YTD), virtually nobody believes anything coming out of any European institution. Alas, this is what two years of relentless accrued lying will do to your reputation. Adding fuel to the fire is a report from Credit Suisse that the chance of a "general European break up" is about 10% and that European banks would fall by about 40% on a disorderly Euro breakup and that peripheral European banks' net foreign liabilities would rise by €800 billion. In other words, European banks would blow up, which is nothing really new. Next, we hear from Dexia which yesterday got annihilated and today is down another 2.5% despite promises from the Belgian central bank governor Luc Coene that the bank is not in trouble and has not sought dollars from the ECB in a long time: obviously an attempt to prevent an all out attack on the insolvent bank, which as is well known bypasses the ECB and goes straight to the Fed for emergency funding. Overall, there is a very distinct sense that it's the end of the world as we know it, and the market does not feel all that fine anymore.

A summary of the market conditions from Bloomberg's TJ Marta is as follows:

  • 3-mo Euribor/OIS spread wider to 0.8870%, level exceeded only during worst of 2008-9 crisis
  • 1-yr euro basis swap -1.325bps to -76.75; on a closing basis, exceeded only in Sep. to Dec. 2008 period
  • 3M USD Libor rises to fresh year high at 0.360% from 0.358%, probably a second straight month of consecutive rises, even as banks are not able to borrow in the interbank market and have to pay the ECB 1% for direct USD loans.
  • All major equity indexes lower, led by Nikkei -2.0%, OMX (Nordic) -1.4%; US futures mixed in narrow range
  • Most sovereign 5-yr CDS wider; Germany’s +5.3bps to record 108bps, Portugal’s +24bps to 1162bps, near record 1178bps
  • Gold, silver lower, could be profit taking as market participants pare risk, liquidate positions to account for losing stock trades
  • German, US yields mixed as markets stall, likely as traders hesitate near record lows
  • FX mixed in moderate ranges, with growth/risk currencies both outperforming (Mexican peso, A$) and underperforming (C$, Swedish krona)

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Fri, 09/23/2011 - 07:27 | 1700315 Thepnr
Thepnr's picture

Ahhhhhhhhh, love the smell of fear in the morning. First denial....Then acceptance.... Finally ......capitulation. Game on.

Fri, 09/23/2011 - 07:34 | 1700329 Cassandra Syndrome
Cassandra Syndrome's picture

And its a Friday as well.

Fri, 09/23/2011 - 07:36 | 1700335 Spirit Of Truth
Spirit Of Truth's picture

Jeepers....we're still in the denial stage from what I can tell.

Fri, 09/23/2011 - 07:50 | 1700372 Temporalist
Temporalist's picture

And it's only lasted 3 years.

Fri, 09/23/2011 - 10:06 | 1700923 mcguire
mcguire's picture

i remember the days (august) when flight to safety meant an increase in gold prices... 

now the liquidation story is back.. where were the liquidators then???

the drop in PMs over the past 48 hours has been poorly accounted for...

even leading up to the FOMC meeting, the PM markets were fading that this was going to happen, even though equities "priced in" something more.. 

glad i have some bullets left, but still disappointed... the ersatz disappointment of a great buying opporunity.. guess i have to scotch tape my nuts back on.  lol.


Fri, 09/23/2011 - 07:28 | 1700317 BeerGoggles
BeerGoggles's picture

btfd silver

Fri, 09/23/2011 - 07:34 | 1700330 kito
kito's picture

Buy the dip???? What dip??? I see a plunge. Deflationary period setting in amigo. Our biggest chink in the gold/silver plated i posted yesterday night, it may be lights out for pms. Nobody wants to print. They will sacrifice the weak for the precious fiat!!!!!

Fri, 09/23/2011 - 07:40 | 1700350 Tater Salad
Tater Salad's picture

They will print, they have no other option now.

Fri, 09/23/2011 - 07:43 | 1700356 Going Loco
Going Loco's picture


Kito is right. So was Tyler when he called the gold price risk. In this phase cash is King, and that means either banknotes or Treasuries, nothing else. See

Of course this is just a phase. This is Ruffer's "moment of deflationary fear" and it is only after we have experienced that phase that his "inflation of currency compromise" will make PMs the safe haven.



Fri, 09/23/2011 - 07:53 | 1700380 Motley Fool
Motley Fool's picture

If you are American perhaps. Paid any attention to the forex markets lately? :P

Fri, 09/23/2011 - 09:19 | 1700713 mayhem_korner
mayhem_korner's picture

Short-term perhaps.  Physical PMs will carry the day over time.  There is nothing surprising going on here.  The last two bubbles to burst are the debt bubble and the dollar bubble.  The debt bubble has been burst; it's evidence has simply been forestalled by protracted manipulation of monetary policy.

All of the prior bubbles have migrated to the banks' balance sheets as toxicity.  The last three years has been a transfer of those toxins to the CBs, who have only the ability to dilute/paper over.  So again, asset bubbles beget debt bubble begets fiat bubble.  The equation has not changed - there is way more debt than real asset value and the piper will be paid somehow.

I'm heavy physical and cash, so I just wait it out.  :D

Fri, 09/23/2011 - 08:23 | 1700482 junkyardjack
junkyardjack's picture

The volume in gold has been signaling a crash for a while. Anytime volume came in the price tanked vs driving prices up meaning supply was outstripping demand.  Once people had a reason to sell there is no demand there to pick it up so expect a collapse.  I'll be looking to buy in again when it stabilizes at its new bottom whatever that may be but I sold out yesterday.

Fri, 09/23/2011 - 07:38 | 1700341 achmachat
achmachat's picture

It's a little early. You will recognize the dip when silver goes up 2%, then back down a little less than 2% the next day.
(that is, if it continues behaving like before... Then again, you never know these days)

Fri, 09/23/2011 - 07:29 | 1700319 Minoan
Minoan's picture

3 month low for lithium exploration-penny stock of the year.

Now that's a fear index.

Fri, 09/23/2011 - 07:30 | 1700323 ??
??'s picture

at the 7 oclock hour there was an interview on Bloomberg TV with Terence Keeley an MD at Blackrock who's at the G20. 

If there was any doubt, any doubt at all that the banksters are in charge watch this interview and your blood will run cold (I'll post the link when it is up)

Fri, 09/23/2011 - 07:33 | 1700325 Arius
Arius's picture

nevertheless everything is fine ... just keep cool!

on unrelated news .... NO MORE SOUP FOR YOU!


Fri, 09/23/2011 - 07:33 | 1700326 wombats
wombats's picture

It's ALL ON SALE Today!!!   Look at AG < 33!!

Fri, 09/23/2011 - 07:36 | 1700336 Arius
Arius's picture

give it a few more hours ... it will be 28.5

Fri, 09/23/2011 - 07:38 | 1700344 BeerGoggles
BeerGoggles's picture

going cheap. it will be 35 by eod

Fri, 09/23/2011 - 07:50 | 1700373 ThatGuyEhler
ThatGuyEhler's picture

I just wish I had the cash on hand to BTFD.....

Fri, 09/23/2011 - 08:20 | 1700473 WonderDawg
WonderDawg's picture

Sometimes luck is better than brains.

Fri, 09/23/2011 - 07:34 | 1700327 Landotfree
Landotfree's picture

The Federal Reserve Z1 report shows the problem, you can't expand at an exponential rate forever about 60-80 years and thats it.  


Fri, 09/23/2011 - 07:34 | 1700328 Robslob
Robslob's picture

And que futures "Up" on bad news...if it gets anyworse we could have a 400 point up day!

Fri, 09/23/2011 - 07:35 | 1700331 hungarianboy
hungarianboy's picture

Looks like the PM market ( Silver and Gold etc ) become a big ponzi to :-)

Actually it is a big ponzi. long long long blah blah blah. yer right. Long my ***

Fri, 09/23/2011 - 07:35 | 1700332 baten
baten's picture

Silver is not going to stop here - remember 2008, it fell more than 50% from its high.

Fri, 09/23/2011 - 07:45 | 1700358 BeerGoggles
BeerGoggles's picture

come on, this is just forced selling so that banks can buy cheap. I suggest you buy with them in the low 30s.

Fri, 09/23/2011 - 08:23 | 1700481 WonderDawg
WonderDawg's picture

Might want to take off the beer goggles. Silver might bounce a little from the low 30's, but then it will fall again. A lot of people are getting burned and it's probably going to get worse before it gets better.

Fri, 09/23/2011 - 07:36 | 1700334 GoldbugVariation
GoldbugVariation's picture

"Profit-taking" in PMs? Silver is -10% on the day today (and same yesterday), going parabolic to the downside.  That stinks of margin calls everywhere and going bidless.

Fri, 09/23/2011 - 07:39 | 1700349 hungarianboy
hungarianboy's picture

Next up is gold :-) Already can't wait for the big plunge and all those pumpers finnaly STFU.

I feel sorry for the bag holders tho, but that's life. the moment central banks buy you better get out and sell the crap to them. It is as it is. cycles. next 20 year is down.

Fri, 09/23/2011 - 07:50 | 1700370 Going Loco
Going Loco's picture

Hungarianboy - what you said is bollocks. This is just a phase. Damn hard to trade these markets - I sold our gold except for the "enmergency" coins - a while before the blow-pff top and i am now trying to time re-entry but it's very difficult. Those who take the long view should sit tight and ignore the price, just accummulate with regular purchases (and ideally not brag about interim peaks in the price). Sell to the central bankers for paper and walk away for good like you seem to suggest? No. Bollocks to that. Either learn to trade or quietly accummulate. But in the end the paper money is going to zero.

Fri, 09/23/2011 - 07:55 | 1700389 The Limerick King
The Limerick King's picture



Hungarian Boy is a twit

I troll who will just never quit

When the whole system tanks

From the greed of the banks

I'll use fiat to wipe off my shit

Fri, 09/23/2011 - 07:59 | 1700402 Motley Fool
Motley Fool's picture

:D !

I'm sad I can't give up more green arrows. In this case I'd like to make a exception.

Fri, 09/23/2011 - 08:40 | 1700536 Mitzibitzi
Mitzibitzi's picture

There, you can borrow my green pointy-uppy thing.

Fri, 09/23/2011 - 07:36 | 1700337 The Limerick King
The Limerick King's picture



The metals are under attack

The system is starting to crack

They need metals low

Should the whole system blow

So that equities might just come back

Fri, 09/23/2011 - 07:45 | 1700359 Motley Fool
Motley Fool's picture

Haha, another awesome limerick. :)

Fri, 09/23/2011 - 07:52 | 1700376 janus
janus's picture

kudos on that en, your majesty!



Fri, 09/23/2011 - 07:37 | 1700339 aleph0
aleph0's picture

Nigel Farage on EUR and Gold :


MP3 interview link at bottom.

Fri, 09/23/2011 - 08:33 | 1700517 swiss chick
swiss chick's picture

Just love Nigel Farage, always a pleasure to hear him or read him...

Fri, 09/23/2011 - 07:38 | 1700342 Sambo
Sambo's picture

Full Tilt Ponzi Group can go take a hike in the Alps...

Fri, 09/23/2011 - 07:38 | 1700343 Tater Salad
Tater Salad's picture

Smelling an intra-day reversal soon, maybe today even of mythic proportions.  Careful out there!

Fri, 09/23/2011 - 07:39 | 1700345 Ned Zeppelin
Ned Zeppelin's picture

Don't underestimate TPTB.  Armageddon will not be showing up anytime soon. 

Fri, 09/23/2011 - 07:39 | 1700346 ZippyBananaPants
ZippyBananaPants's picture

Michelle carousa cabaere (I really don't give a fuck if I spell it right) is an idiot with lips and tits.

Fri, 09/23/2011 - 07:39 | 1700348 Ned Zeppelin
Ned Zeppelin's picture


Fri, 09/23/2011 - 07:42 | 1700354 pvmuse
pvmuse's picture

Michelle is a complete wise-ass, know nothing, idiot, tits yes, lips, not so much.

Fri, 09/23/2011 - 08:45 | 1700556 Mitzibitzi
Mitzibitzi's picture

She always looks to me like she's regretting not taking the diocalm before the show. Nice norgs, though, I agree.

Fri, 09/23/2011 - 07:39 | 1700347 PivotalTrades
PivotalTrades's picture

Buying 50% position in Dec Silver @32.70 

Looking for 1635 to enter 50% Gold.

Fri, 09/23/2011 - 07:46 | 1700363 BeerGoggles
BeerGoggles's picture

1700 is 50% fibo

Fri, 09/23/2011 - 07:48 | 1700366 bob_dabolina
bob_dabolina's picture

Better buy the physical. That contract will expire worthless. A return of some capital is better than a return of no capital.

Fri, 09/23/2011 - 07:54 | 1700384 sudzee
sudzee's picture

Silver and gold will need to go much lower to clear a couple of trillion of pm derivatives before the world goes strctly physical. We may see silver at 5 bucks and gold at 250 for a few months before a reset. 1's and 0's created never went into economies, except thru bank bonuses, so economies have no way to pay the fake debt. If you can get some physical cheap, do so, as all will go underground till after the reset.

Fri, 09/23/2011 - 07:58 | 1700399 BeerGoggles
BeerGoggles's picture

ahhahahah hahahahha ahahhaha aggh.

hahahahahahahaa. agh

Fri, 09/23/2011 - 08:01 | 1700405 Motley Fool
Motley Fool's picture

Technically he is right. If this is the endgame paper gold and silver will drop to nothing.

Fri, 09/23/2011 - 08:05 | 1700411 BeerGoggles
BeerGoggles's picture

endgame. get real. we are years from the end game.

Fri, 09/23/2011 - 08:10 | 1700436 Motley Fool
Motley Fool's picture

If that is the case, this is simply another attack on metals.

Fri, 09/23/2011 - 07:41 | 1700351 msmith
msmith's picture
AUDUSD has continued to show weakness and should drop lower. Here is an analysis. - looking for a break lower.
Fri, 09/23/2011 - 07:44 | 1700357 El Gordo
El Gordo's picture

Damn, I've placed my third order for silver this morning, and it's still going down.  Gotta go find that coffee can down in the basement and dig out more dry powder to buy more.  I'm riding this train off the cliff and all the way down.  The way I see it, when the dust settles, lead and silver will rule the day.

Fri, 09/23/2011 - 07:51 | 1700374 janus
janus's picture

lil tip for pandora:

hire real DJs!  you know, people who love music.  not some over-priced primadonna, just regular folk with a passion (yes, they should have benefits and whatnot, too) may just be surprised how many people love a good DJ (and remember them, for that matter); even more than a soul less algorythm, if you can believe it!

Fri, 09/23/2011 - 17:23 | 1703474 Jena
Jena's picture

Nice play list for reading ZH to.  Thanks.

Fri, 09/23/2011 - 07:52 | 1700375 viator
viator's picture

"Overall, there is a very distinct sense that it's the end of the world as we know it, and the market does not feel all that fine anymore."

Tyler, you're pretty funny.

Fri, 09/23/2011 - 08:30 | 1700505 Zgangsta
Zgangsta's picture

At the very least, it's the end of R.E.M. as we know it.


Fri, 09/23/2011 - 07:54 | 1700381 Navigator
Navigator's picture

True...and Kernan is no better.  Without Carl, Sorkin and even Becky, this morning show is just a wasteland of wingnuttery that belongs over on Faux.  So, of course, they made the next show unwatchable by putting Cramer on it.  They must be trying to destroy their ratings.  I only have it on for the futures scroll at this time of day and NEVER turn the vol up.

Fri, 09/23/2011 - 07:54 | 1700387 youngman
youngman's picture
  • "Gold, silver lower, could be profit taking as market participants pare risk, liquidate positions to account for losing stock trades "
  • What?  as the western world collapses around would sell the only thing that will survive the fall....I just don´t get it.....USA Treasuries...will be like Confederate dollars after the war....worthless....or at least worth less....I don´t know...I am totally confused here...I can´t believe what the politicians and Bankers are saying...I don´t think they CAN do ANYTHING....If I was and Indian..would I buy us treasuries..or gold....especially now??????? 

    Fri, 09/23/2011 - 07:55 | 1700390 MFL8240
    MFL8240's picture

    The US con show back in full swing.  Gold and Silver are shit, confetti and notes from a bankrupt country are king. lol

    Fri, 09/23/2011 - 07:56 | 1700392 Chrikus van der...
    Chrikus van der Rockhuizen's picture

    BTFD bitchez

    Fri, 09/23/2011 - 07:56 | 1700393 GoldbugVariation
    GoldbugVariation's picture

    Correction, silver 11% down on the day, and US has not even opened yet.  Gonna have to be some more margin calls this morning, silver going to be fairly spikey in the first hour.

    Fri, 09/23/2011 - 07:57 | 1700396 Mitch Comestein
    Mitch Comestein's picture

    There are a lot of paniced posters on the site this morning.  For those that think deflation is here, you need to check out the austrian money supply & M2 put out monthly by Michael Pollaro.  TMS2 is running over 15% for the year and over 22% for the last three months.  THERE IS NO MONETARY CONTRACTION.  THERE WAS IN 2008.  TMS2 was less than 5% in 2008 before the big $$ supply ramp up.


    Fri, 09/23/2011 - 08:06 | 1700417 BeerGoggles
    BeerGoggles's picture

    the panic indicates the bottom is in.

    Fri, 09/23/2011 - 08:04 | 1700408 The Deleuzian
    The Deleuzian's picture

    If silver goes to $20...I would have been very wrong for sure..Got roasted on some of the miners accept NEM... But monster boxes for $10,000 or so!... I seriously doubt apmex or anybody would have any in stock for quite a while/Or they woulden't sell them for that! 25-50% premiums are all but guaranteed!

    Fri, 09/23/2011 - 08:10 | 1700433 msmith
    msmith's picture

    EURUSD price action is breaking down again. Expecting another drop soon. EURUSD Market Report is available here

    Fri, 09/23/2011 - 08:12 | 1700445 youngman
    youngman's picture

    I don´t think this is a "correction" I think its a collapse right now....the fall of the Western economies...its print or crash right now....

    Fri, 09/23/2011 - 10:29 | 1701038 PivotalTrades
    PivotalTrades's picture

    They will print and print,, then inflate the debts away,, then crushing interest rates to cure the inflation!

    See how TPTB remain TPTB

    Fri, 09/23/2011 - 08:14 | 1700448 terryfuckwit
    terryfuckwit's picture

    uk dealers are very slow to reflect any big changes?? for the bigga badda bling may be decoupling!!

    Fri, 09/23/2011 - 08:15 | 1700453 smlbizman
    smlbizman's picture

    the prices on ebay are completly disconnected from the paper prices of silver....

    Fri, 09/23/2011 - 08:16 | 1700456 eddiebe
    eddiebe's picture

    Cash is king til it isn't.

    Fri, 09/23/2011 - 08:28 | 1700501 The Deleuzian
    The Deleuzian's picture

    You think Fed actions are politically impossible at this point?  Washington is hours/days away from crying Uncle!!!

    Do NOT follow this link or you will be banned from the site!