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Market Rundown: It's like Lehman, with one Huge Exception-They Need Gold

Good Morning: Markets have reacted violently and decidedly to the Russian sanction escalation. Behavior is almost the same as in previous liquidity events like Lehman in 2008 and Covid in March 2020. The Venn diagram of why things are doing what they are doing is an intersection of these things:

1. If an asset is backed by Lehman Russian money, you are unable to sell it
2. If your asset is exposed to, or even perceived as exposed to Lehman Russian counterparty risk, that asset will drop in value
3. If an asset is physical in nature and consumed, it will (EDIT: not) be sold cheaply to raise dollars, especially if it is Gold and Silver which will be punished by US Banks for US dollars

ITS ALL  ABOUT COUNTERPARTY RISK NOW

In liquidity events like Lehman etc, Gold is initially sold as a source of dollars. Today it was not.

In liquidity events like Lehman where economies will crater, Silver is sold. Today it was not.

Therefore one must perceive this event as not a liquidity crisis that is short term in duration, but a harbinger of a much bigger chronic liquidity issue that will remain for a long time.

There are no more natural sellers. There are only buyers who buy or buyers who wait to buy

Yes Gold will succumb to selling pressure again. But if you own it, know that Banks are no longer going to sell it to finance their need for dollars. Yes Silver will be sold again, but know that it is a losing trade to be short physical in a market like this.  If you want to read more read this excellent commentary on Zoltan's most recent research post. This is a market that has lost its trust of people.

More specifics are in these 3 reports put out on the topic in the last 48 hours:

• SUNDAY MARKETS: Russian SWIFT Ban Means Monday Chaos
• Report: What Are Russia's Real War Aims?
• Weekly: Markets More Worried About Fed hikes Than Ukraine
•  RoadMap Ahead: Fog Of War Descends, Don't Expect This To Be Resolved Any Time Soon 

Cheers

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