Forced liquidation... capitulation ... contract roll... or "liquidity provision" gone awry? You decide.
As Nanex puts it "you said you needed to go faster to provide liquidity. This chart determined that was a lie."
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Question: The crash in the oil market is already causing jitters in the financial markets around the globe. What is your take on that?
Gundlach: Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying.
Gundlach is right historically... large and rapid rises and falls in the price of crude oil have correlated oddly strongly with major geopolitical and economic crisis across the globe. Whether driven by problems for oil exporters or oil importers, the 'difference this time' is that, thanks to central bank largesse, money flows faster than ever and everything is more tightly coupled with that flow.
So is the 50%-plus YoY drop in oil prices about to 'cause' contagion risk concerns for the world?