Bond

"What I find most hilarious is that some serious commentators have been pontificating at considerable length about what the market’s participants think. These days, some 70% of market orders are generated by computers, and many of the rest by indexers. And computers do not think... I cannot remember a time when less thinking has ever been done in the financial markets, which is why I find today’s financial markets infinitely boring."

- Charles Gave

Without giving any reasons, South African President Jacob Zuma has fired his finance minister (after just 19 months in office). This has shocked investors, already anxious about the nation's surging debt and sluggish economy and South African bonds and FX have collapsed andhas given rating agencies “perfect justification” for further downgrades and the loss of investment grade status. 10Y yields spiked 140bps to 10.18% - the highest since July 2008 - and CDS have soared. The Rand has crashed to new record lows above 15 to the USD.

• Win or Lose, Trump Has Already Left His Mark on Republican Primary (BBG)
• S&P 500 Futures Rise With Miners; Oil Erases Gains, Euro Drops (BBG)
• U.S. top court divided over affirmative action in college admissions (Reuters)
• San Bernardino Shooter Said to Have Planned an Attack in 2012 (WSJ)
• Gun buyer and gunman linked through marriage, previous plot (AP)

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.

Economists have put together models of how an economy works, but these models were developed years ago, when the world economy was far from limits. These models may have been reasonably adequate when they were developed, but there is increasing evidence that they don’t work in an economy that is reaching limits.

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 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.

"... a default cycle in commodity-related areas at this point is unavoidable, and the only real question here is whether it stays contained to those areas or extends itself to other sectors."

 The analogy is as if you notice an ember smoldering in a combustible forest you might be only somewhat cautious, perhaps even rationalizing it away.  But if you then notice a second ember smoking up...

Government interference by both central banks and regulators (the latter are desperately fighting the “last crisis”, bolting the barn door long after the horse has escaped, thereby putting into place the preconditions for the next crisis) has created an ever more fragile situation in both the global economy and the financial markets. As the below charts and data show, price distortions and dislocations have been moving from one market segment to the next and they keep growing, which indicates to us that there is considerable danger that a really big dislocation will eventually happen.

• Gloomy mood prevails despite calmer commodities (Reuters)
• A Strong Dollar Hurts China More Than the U.S. (BBG)
• China Sets Yuan at Four-Year Low in ‘Stress Test’ (WSJ)
• Dow Chemical and DuPont Are in Advanced Talks to Merge (WSJ)
• Yahoo scraps plan to spin off Alibaba stake (Reuters)

Overnight market action has largely been a continuation of Tuesday's key themes with European stocks falling as a selloff in mining companies extended to a 7th day, even as metals prices rose and crude oil rallied modestly from a six-year low after yesterday's API crude inventory draw. U.S. equity futures have rebounded from modest declines, as emerging-market shares extended their losing streak to a 6th day while Asian stocks dropped to 2 month lows.

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