Sunday, April 14, 2013

JGB Watch

JGB’s close right at support in bearish fashion.

1:56 am: Starting to get interesting…but needs to take out April 4th low. People are most likely unprepared for a 10%+ down week in equities if all this really starts to blowup…we will likely find outselves to be in freefall territory…just in time for BURNanke to have gotten everyone all leveraged up long on US equities and Gandma and Grandpa back in the stock market because a deposit in the bank is not safer and makes 0%…hmmm

1:01 am: JGB’s continue rest precariously above support and when it falls the Gold and Silver Margin calls are going to look small in comparison…and certainly likely much worse than the initial margin calls that were likely heavily managed with exceptions and extensions.
Funny thing is, when you try to blow up your currency and manage what can only be managed by a properly functioning market you get things like this…CYPRUS has not yet begun selling gold, however, Japan and China have en mass. And why? Well in the case of Japan, Gold was at record highs when priced in Yen…which along with other over stocked commodities that at under performing Japanese corporations - makes for a very good reason to sell. In the case of China, traders are stuck behind Friday's Gold Liquidation and have margin calls on the open, then we have reserve problems, credit problems and GDP problems all threatening to blow up a number of bubbles…so, sell Gold. Certainly in both cases sell before, Cyprus, Slovenia, Portugal, Belgium, Ireland, Spain and Italy are forced to sell Gold and Silver reserves…When JGB’s go, all those countries/their financial institutions and a few more will be selling their Gold and Silver reserves en mass too. It won’t likely be pretty and to think this all triggered from a little thing called Abenomics because Alan Greenspan and Ben Burnanke think Bretton Woods was a joke and printing, interfering in capitalism and markets is the far better approach. Japan’s deflation, though of its own making functions in an unhinged manner because their Central Bank operates the same policies as the Federal Reserve and because Bretton Woods was thrown out.

10:44 pm: at the moment the story of the night is not yet the JGB’s though it will be. Its the story of the continued commodity implosion spearheaded by another day of $80 dollar losses in gold and 10% down in silver and many other across the board. 

The margin calls will progress similar to my previous post regarding the JGB margin calls. Moreover, since new equity will have to be posted, US equities have to be sold. Exacerbating that is that the goal so far this year has been for American to put off selling equity till the last possible moment prior to taxes. Clearly everyone has wanted to get the best possible prices…those prices were supposed to come on Monday for equity and with a bounce off support for Gold last week. Well they are not looking like they are on the menu right now and we now have another rush for the exits setting up. We will see how easy it is for people to get into trades on a disorderly market or out of trades when premarket for equities opens up. As I have indicated I was expecting to see some sort of 50 to 70 point down day for the S&P - it may well have arrived with the onset of and realization of deflation. 

Margin calls are now being generated for individuals, institutions and central banks…in their various forms. Equity holders in the US are not facing margin calls YET…most probably as the only remaining asset that is still standing is identified - it will be sold. Moreover, that asset class, US equities and European Equities has one of the highest notional margin debt amounts outstanding ever…a wave of selling triggered by the collapse of Gold, Silver, Copper, Oil, Platinum, Palladium and Other Petroleum products will surely be like lighting a match to fumes.

We will have to see whether the FED is ready to be buyer of everything of last resort regardless of liquidity or quality.

The next issue we have is CYPRUS. Are they really going to want to sell gold at $300 lower than when ECB requested it only to have absolutely nothing left? Most probably they are starting already to reconsider those plans and we will likely see deflationary forces inaction again as CYPRUS seriously mulls and then tells ECB, EU and Germany to jump...

9:00 pm: JGB Looks to be getting ready to break a support line that has been setting up since the earthquake last week.
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