KIM

My thoughts on the coming year.

Did bankers use the MF Global bankruptcy to suppress gold and silver prices and create the panicked appearance of collapsing precious metals to give themselves additional precious time to delay the crash of the Euro and the US Dollar? As crazy as this sounds, a closer investigation of some key data seems to imply this possibility.

A new era of increasing instability is opening in East Asia.

• The ECB allotted EUR 489.191bln in its 3-year refinancing operation vs. Exp. EUR 310bln
• German finance agency said the Federal government plans to issue EUR 250bln worth of debt in 2012 in total vs. Prev. EUR 275bln in 2011
• AUD received a boost overnight following higher than expected Westpac leading index from Australia

All you need to read.

Even a CDO was more collateralised than fiat currency....

Following the sudden and surprising death of North Korea's "Dear Leader", many are wondering what this means for risk, especially in the Pacific rim. In other words, was last night's selloff warranted? For what it's worth, here is Goldman's Goohoon Kwon with a take of how the institutional audience is trying to comfort itself that all shall be well, and that power vacuums are all inherently rational and perfectly predictable. Just ask Egypt. And Robespierre.

Bullion banks remain positive on gold for 2012 with major banks predicting an average gold price of between 13% and 28% above today’s spot at $1,595/oz. It will be interesting to see if these forecasts get as much international media coverage as the poll of 20 hedge fund managers has. UBS have reiterated their bullish outlook for gold and believe gold will average $2,050/oz in 2012. This is 28% above today’s spot price of $1595/oz. Goldman Sachs said overnight that gold will average $1,810/oz in 2012 – which is 13% above today’s spot price. Barclays Capital have said this morning that gold will average $2,000/oz in 2012 – which is 25% above today’s spot price.

Bloomberg analyst TJ Marta summarizes market developments in the last few hours since the death of Kim Jong Il pushed risk aversion, especially in Asia to an extreme, while Bloomberg's James Holloway explains why market sentiment is where it is, and what the market will be looking for today.

• Obituary: Kim Jong-il (FT)
• Draghi Warns on Eurozone Break-up (FT)
• EU Ministers Seek Crisis IMF Funding Deal (Bloomberg)
• China November Home Prices Post Worse Performance This Year (Bloomberg)
• China Debts Dwarf Official Data With Too-Big-to-Finish Alarm (Bloomberg)
• China opens up to offshore renminbi investors (FT)
• Voters to Read Recovery Signs (Hilsenrath)
• Germany May Pay Full ESM Contribution in 2012 (Reuters)
• U.S. Housing Heals Even as its Damage Widens (Reuters)
• S&P Cut Proves Absurd as Investors Prefer U.S.  (Bloomberg)

Just out on Yonhap:

• North Korea says its leader Kim Jong-il has died.
• N. Korean leader died of fatigue at 8:30 a.m. Dec. 17 during train ride: KCNA

And Reuters confirms:

• NORTH KOREA STATE TELEVISION SAYS KIM JONG IL HAS DIED

Great. More geopolitical uncertainty. Because as the Arab Spring has shown us there is nothing quite as stable as a transitory military government to fill a power vacuum (also see Thermidorian reaction during the French Revolution).

As expected the South Korean response is immediate.

• S. Korean gov't shifts to emergency footing on news of N.K. leader's death

In order to get to the bottom of every collapse (or death), a forensic analysis of the last minutes of any transition from life to death has to be perormed. So far, we have only had broad strokes of the key events in the last days of MF Global as obviously many of them will implicate the management team in gross criminal behavior. Until now, when courtesy of the CME we have received a full breakdown of every key events in the chronology of MF Global's last days on earth, starting with October 24, and the rating agency downgrade of the futures broker (the same catalyst incidentally that started the AIG death spiral waterfall... and yet clueless pundits will tell you the ratings are totally irrelevant), and ending with the firm's filing for bankruptcy protection. Anyone who has any interest in the MF Global collapse, which incidentally should be anyone who has capital in third party possession and thus has counterparty risk, should read this narrative from first to last bullet.

Today, gold and silver mining stocks offer the best value by far of any sector in any stock market anywhere in the world. Due to the recent massive volatility that bankers have introduced into the PM stock sector, and the fact that commercial investment advisers worldwide have erroneously re-educated millions of people with the concept that volatility equals risk, the majority of people worldwide will miss a massive opportunity in gold and silver mining stocks over the next several years due to their misguided belief that gold and silver mining stocks cannot escape the throes of banker manipulation.

All you need to read.

It seems like history is accelerating. Momentous events have been occurring regularly since 2007. Our political and financial leaders are blindsided on a daily basis by each new crisis. The majority of the American public continues to be apathetic, willfully ignorant, and constantly absorbed by their array of electronic gadgets and mindless drivel spewed at them by media conglomerates. Rather than think critically, most Americans allow left wing and right wing mainstream media to formulate their opinions for them through their propaganda and misinformation operations. Linear thinkers, who make up the majority of the political, social, media and financial elite in this country, believe the world progresses and moves ever forward. In reality, the world operates in a cyclical fashion, with generations throughout history reacting to events in a predictable manner based upon their stage in life. The reason the world has turned so chaotic, angry and fraught with danger since 2007 is because we have entered another Fourth Turning. Strauss & Howe have been able to document a fourfold cycle of generational types and recurring mood eras in American history back 500 years. They have also documented the same phenomenon in other countries.