Futures market

When the dollar falls, we are told it is logical.  The empire is crashing and burning.  When the dollar rises, the markets, we are told are manipulated.    Well, the dollar is back, and the technical correction ended, near we told you it would.  

Paging Waddell & Reed... Even for this early in the US session, liquidity in the most-liquid financial instrument in the world is - in the words of Nanex's Eric Hunsader, "abysmal."

The Russian Ruble has collapsed this morning. Despite a modest dead-cat-bounce-like rally in crude oil, the Ruble is down almost 3 handles smashing through the 61/USD level for the first time ever. Minutes after flash-crashing to 61.46/USD, officials, according to Reuters, halted trading in certain instruments to “prevent possible manipulation of equity futures market." Russia's 5Y CDS has broken above 500bps for the first time since 2009 (+21bps today), the RTS stock market is down over 6%, and 5Y bond yields are pushing towards 13%. It seems Putin is increasingly being put under pressure to do something...

Has too much bearish sentiment been priced in too fast in the price of oil? 

Phibro could have the ability to mask its activity in Occidental’s hedging activity. Speaking with traders within the oil complex, I learned that there has been heavy trading activity on the OTC market on the backend of the oil curve. 

The US dollar's run stopped last week, but not before new highs were recorded against the euro, sterling, and the yen.   By the end of the week, the euro had risen 1.4%, sterling 0.9%, and the yen had risen as much as the two of them put together.  It was the biggest weekly gain for the yen in 16-months.  

There is one pressing question that international investors will be mulling this weekend:  How far and how long is the dollar's correction?   

The benefits of cheap oil are no match for the destruction that touches on a thousand different parts of our economies. It doesn’t help that much of both Canadian and American oil, especially the unconventional kinds, were drowning in debt even before oil turned south with a vengeance. But that’s not even the most crucial part. Our entire economies revolve around oil, it’s not just something that you put in your car, oil is everywhere, it’s built our world and it maintains it. And therefore the effects of a sudden 40% price drop – and counting – will be felt everywhere. What we’ve seen so far can still be labeled ‘orderly’, but that’s not going to last. Still, look at the bright side: at least you can say that for once in your life you’ve witnessed a functioning market.

If prices fall any further (and what’s going to stop them?), it would seem that most of the entire shale edifice must of necessity crumble to the ground. And that will cause an absolute earthquake in the financial world, because someone supplied the loans the whole thing leans on. An enormous amount of investors have been chasing high yield, including many institutional investors, and they’re about to get burned something bad. We might well be looking at the development of a story much bigger than just oil.

Europe's banks are vulnerable in 2015 due to weak macroeconomic conditions, unfinished regulatory hurdles and the risk of bail-ins according to credit rating agencies  ...  Oh what a tangled web, we weave  ...

In the 2003-2004 playbook, “considerable period” gave way to “patient” as a signal that the hikes were drawing closer, and it is interesting that the words “patient” or “patience” have shown up quite frequently in recent Fed speeches. The problem with a simple shift to “patience” without any qualifications on December 17 is that back in 2004 this shift occurred just 4½ months before the first hike, and some market participants might therefore take it to mean a hike before June.

You thought gold was "only" for wealth preservation? You ain't seen nothing yet.

Deny it.  Engage in all kinds of mental gymnastics to dismiss it if you must,  but the fact is the US dollar is rising, and not just because of negative developments abroad, but positive economic developments in the US.  

While we have covered the aberration that is a negative gold GOFO rate previously and in extensive detail in this post, an abridged version of what negative GOFO means comes courtesy of Deutsche Bank's recent discussion on what a successful Swiss gold referendum. To wit: "It is interesting to note that benchmark gold-dollar swap rates have recently traded negative, meaning investors are paying to borrow gold. This is unusual as gold is traditionally used as a source of collateral for cash financing.... [A] number of factors may play a role, such as excess dollar liquidity or an increased demand for collateral on the back of the global regulatory developments." In short a gold shortage at the institutional, read commercial and central bank, level. And not just a shortage but the biggest shortage in history, judging by today's latest plunge in the 1 Month GOFO which just dropped to -0.5% and , worse, 1 Year GOFO that just hit its lowest print in the 21st century, and is also about to go negative: something that has never happened before further suggesting the gold shortage could go on for a long, long time!

As the debate regarding whether or not Switzerland should keep the bulk of its gold reserves at home on Swiss soil reaches it's climax - the referendum takes place on Sunday - it is telling that the Dutch announced on Friday that they have just secretly repatriated 122 tonnes of their sovereign gold reserves from New York back to Amsterdam.

Contrary to the death of the dollar chatter, the US currency continues to appreciate.  Here's why there is still punch left in the bowl.