Central Banks

A tragic example of this was seen in Italy in recent days when a pensioner committed suicide after having his life savings wiped out in a bank bail-in. A pensioner from near Rome, hanged himself after his €100,000 (£72,000; $110,000) investment in Banca Etruria bonds were wiped out in a bail-in. A suicide note was left by the pensioner criticising the bank.

"Templeton Global Bond ($100bn in total; $59bn in mutual funds) – BEN’s largest fixed income fund – has seen meaningful outflows YTD (-$7.6bn from retail; -13% annualized rate) and could persist given the deterioration in excess performance (-460bps vs. benchmark YTD)."

As soon as the Fed moves money market rates upwards, unproductive parts of the economy will come under severe strain which in turn sets in motion recessionary forces prompting the Fed to reverse course. The only way out is to realize that the world is awash in mal-invested capital that need to be written off. Since that is inconceivable for today’s vested interests, the way forward will be further “Japanification” of the global economy. And this time we are all out of arrows.

"The Fed will drive home the lower and slower mantra. That is all spin, signifying nothing... There are so many unknowns, good and bad. Either way, absolutely ignore the "it’s priced in" claims... The Fed is going to raise rates next week, and anyone who claims it is not a huge deal is fooling you, as well as themselves."

It was a relatively calm overnight session in which European stocks wobbled modestly, Japan was up, China was down following its weakest fixing since 2011 as the PBOC continues to aggressively devalue since the SDR inclusion (stoking concerns capital outflows are once again surging), EM stocks stocks were weak and the dollar was unchanged ahead of today's retail sales data and next week's Fed meeting, and then suddenly everything snapped.

The next financial crisis could manifest itself in the coming months. If so, it will mark the end of current central bank monetary policies and state control of markets, as free markets reassert realistic pricing. Government bond yields will normalise, stock markets will fall, and banks will almost certainly fail. When something as epochal as this happens, we can expect the macroeconomic establishment to be clueless with respect to the problem itself and its scale.

The just concluded 30-Year bond reopening of Cusip RP5, in which the US Treasury sold another $13 billion in long-dated paper in this year's final auction of 30 Years, was almost a carbon copy of yesterday's 10 Year auction.

The media can try to hide reality all it wants. But an economic collapse is here. It will trigger another stock market crash just as it did in the early ’90s, the Tech Bubble, and the Housing Bubble. 

The Fed & ECB are spawning the next crisis....

After yesterday's rollercoaster session in both the S&P and in oil, where initially stocks soared alongside oil, only to promptly tumble as stops were taken out and as the refiners' inventory strategy was exposed after the DOE's latest weekly numbers were released, it has been a quieter session so far, though maybe not for China where stocks jumped at the open only to fizzle and close at the lows in what appears to be ever less intervention by the market manipulating "National Team."

The U.S. is now experiencing the next stage of the great reset. Two pillars were put in place on top of an already existing pillar by the central banks in order to maintain a semblance of stability after the 2008 crash.  This faux stability appears to have been necessary in order to allow time for the conditioning of the masses towards greater acceptance of globalist initiatives, to ensure the debt slavery of future generations through the taxation of government generated long term debts, and to allow for internationalists to safely position their own assets.  The three pillars are now being systematically removed by the same central bankers. Why? They are simply ready to carry on with the next stage of the controlled demolition of the American structure as we know it.

Gold is one of the few investments that every investor should have in their portfolio. We are now at the dangerous end-game period of a very bold but very reckless & disappointing experiment with the world's fiat (unbacked) currencies. If this experiment fails -- and we observe it's in the process of failing -- gold will provide one of the best forms of wealth insurance. But like all insurance products, it only works if you buy it before you need to rely on it.

If the American Dream depends on skyrocketing debt built on a weakening foundation of stagnant productivity and income, then it is indeed over. Voters sense this fragile, debt-dependent economy is one repricing away from implosion, and they're uneasy for good reason. Voters are rightly angry that the official statistics mask or manipulate this reality, for if we can't face reality then we have zero hope of solving any problems.

If you said just more of the same, with corporate management teams buying back their own stock in near record quantities (boosting their own stock-linked compensation in the process) and serving as the biggest marginal buyer in the market, then give yourself a pat on the back.

After yesterday's 3 Year auction saw a blistering surge in Direct bidder demand (as a result of a substantial negative rate in repo), we were not at all surprised to see that today's 10 Year reopening auction of $21 billion was a likewise solid (even if tailing fractionally to the When Issued 2.232%) issue printing at 2.233% with 23.93% allotment, with the bid to cover rising from 2.58 to 2.64, the highest since September.