We have called this a tale of two graphs. But what it really describes is a clear and present danger to American capitalism fostered by an unelected monetary politburo in thrall to its own lust for power and mesmerized by its own doctrinaire group think. The tragedy is that nothing can stop them except the thundering crash of the gargantuan bubble they have single handedly enabled.
China, the world’s largest gold producer and buyer, feels its market weight should entitle it to be a price setter for gold bullion. It is asserting itself at a time when the established benchmark, the century-old London ‘gold fix’, is under scrutiny because of long-running allegations of price manipulation.
Take note, Gold is officially money for the most powerful entities in the world. They are not only accepting Gold as collateral but are openly trying to insure that they have their own Gold in safe custody.
While sentiment towards gold in the West is abysmal - even as gold languishes at record lows when adjusted for inflation - Asian demand remains insatiable. It would be wise for investors to inform themselves as to why this should be so. Demand for gold in Asia is often written off by Westerners as an irrational impulse of uneducated Asian peasant farmers and workers.
Just as China was closing for trade and Europe was opening, something previously unseen happened: no, not another another GPIF or Virtu inspired marketwide stop squeeze, those are quite recurring these days. It was virtually every Bloomberg terminal around the globe suddenly going dark.
This is why Bernanke said rates won’t normalize in his lifetime: any normalization means a crisis magnitudes larger than the 2008 crash.
As noted earlier, with equities now a barren wasteland of volume (and liquidity), the last remaining HFT master (of whale order frontrunning) has been forced to go to those asset classes where organic flow is still abundant such as FX, courtesy of central banks engaged in global currency wars. However, HFTs realize it is only a matter of time before FX order flow also dries up as central banks take their trade away from public venues (and dark pools) and as such are always looking for new, untapped markets. One place where they are about to land according to the WSJ, with hilarious consequences sure to follow, will be the one place that HFTs should have felt at home from the very beginning: bitcoin.
We're just a little over two weeks into PSPP and signs are already beginning to show that the ECB is effectively breaking the market. "The soaring cost of borrowing government bonds in secured lending markets highlights the distortions caused by the ECB's asset-purchase scheme, which analysts say could clog up Europe's financial system," Reuters notes.
BNP is out with a note calling China’s equity bubble “a microcosm for the overall economy: unsustainable growth in leverage masking ever-deteriorating fundamentals and increasing future downside risks. Margin purchases are now accounting for almost 20% of equities daily turnover which itself has soared to wholly unprecedented levels in another sign of self-feeding speculative frenzy. What happens next is clearly an ‘unknown-unknown’."
The $665 Million Evolution in a Space Nobody Respected a Year Ago - Already Outpacing the Internet Circa 1994
"Under our central case, gold prices are likely to rise gradually, eventually breaking through the USD2,000/oz level within the next decade. This is the most likely outcome, to which we assign a 45% probability," ANZ analysts say, in a note explaining how a number of factors are converging to make the outlook for gold particularly bullish.
unlike the late summer and early fall of 2014, when the rise in the Chinese stock market could be attributed to the PBOC's PSL "QE Lite", the relentless buying leg that started in mid-November has stunned most people, as nobody has been able to figure out just who is responsible for all this buying. Until now. According to Reuters, it is precisely China's trust firms, with total assets of $2.2 trillion, and who together with Banker Acceptances comrpise the bulk of China's shadow banking pipeline, are shifting more cash into frothy capital markets and over-the-counter (OTC) instruments instead of loans. In other words, instead of using their vast cash hoard of over $2 trillion to re-lend and stimulate China's economy, China's unregulated, shadow banking conduits are now directly buying stocks!
When even JPMorgan strongly implies that the ECB's QE is about to fail, one short week after it started, now may be a time to panic: "In all, we note the above analysis challenges the ability of the Eurosystem to meet its quantitative target without distorting market liquidity and price discovery."
The beginning of the end of high frequency trading has arrived, and it has done so in a most unexpected fashion: with an HFT turning on other HFTs and revealing on the record, for the entire world to see, just how truly parasitic, manipulative and "market-rigging" the algorithms truly are.
- Fed Likely to Remove ‘Patient’ Barrier for Rate Increase as Soon as June (Hilsenrath) - which year?
- Clinton says used personal email account for convenience (Reuters)
- Euro sinks to 12-year lows as yield gap grows (Reuters)
- Get Ready for Oil Deals: Shale Is Going on Sale (BBG)
- EIA raises 2015 US oil production forecast, cuts 2016 outlook (Reuters)
- How Falling Oil Prices Are Hindering Iraq’s Ability to Fight Islamic State (WSJ)
- China economic data weaker than expected, fuels policy easing bets (Reuters)
- ECB ‘Chasing Own Tail’ as Bond Rates Turn Negative, SocGen Says (BBG)
- Swiss makers quietly gear up with smartwatches of their own (Reuters)