Friday, April 19, 2013

John Hussman - The Optimist...

The Results and Words of a Meeting of Finance Ministers and Central Bank Governors

As German Stocks Make Big New Lows…German bonds are NOT making new highs...

In a sign of what seems to also be a similar pattern in the US bond market but to a less extreme…bonds appear to be being liquiditated to raise cash.

Cyprus NOT fixed and NOT gone...

Exiting the EURO, focusing on their own currency, raising cash and focusing on the shambles that is left of their economy is what is required now.

Plan for new Cyprus vote casts uncertainty on bailout 
THE €10 billion aid deal to save Cyprus from bankruptcy has been thrown into fresh uncertainty with news that the island’s fractious parliament will vote on the final package. 
The surprise vote has only just been scheduled, and early signs are that nearly half the members of the 56-seat parliament may oppose the bailout, seen as vital to keep Cyprus in the euro zone. 
The Greens Party said yesterday its sole parliamentarian would vote to reject the deal, becoming the first party to announce its intentions. 
However, the Communist AKEL and Socialist EDEK parties, which together have 24 seats, have been vocal in their opposition to the bailout, and are seen as likely to vote against, although there is some chance they may abstain instead 
"We've fought for freedom, we've fought to maintain the Cypriot Republic," Greens MP George Perdikis said in statement. 
"It is, in my opinion, a crime and wrong to deliver Cyprus into the hands of the troika and allow it to become a colony," he said, referring to the country's European Union, European Central Bank and International Monetary Fund lenders. 
The parliament shocked Europe by voting unanimously in March against an initial bailout plan which featured controversial demands that bank depositors including small savers should have funds seized to pay towards the cost. 
The final version of the bailout agreed with the European Union and International Monetary Fund, forced massive losses on big depositors in the island's two major commercial banks, triggering economic turmoil likely to sink the country deeper into recession. 
The deal, which still requires ratification by parliaments in some EU member states, must also be put to Cyprus's parliament for a vote - a previously unscheduled plan - according to Attorney general, Petros Clerides. 
"Whoever is prepared to vote against the loan agreement should at the same time propose where this €10 billion will be found," government spokesman Christos Stylianides told state radio yesterday. 
“They should also propose how we would deal with issues such as paying wages and pensions, and how we would deal with the international uproar caused by a possible rejection of the loan agreement," he said. 
The bailout agreement was expected to be put to the assembly at the end of the month, once it has been approved by the cabinet, parliament's acting permanent secretary, Socrates Socratous, told Reuters yesterday. 
Ruling DISY, and coalition partner DIKO, even if their parliamentary votes are combined, will fall short of a majority. 
"It's time to face this critical situation for the salvation of our country and everyone needs to take responsibility," said DISY’s Lefteris Christoforou.

Wednesday, April 17, 2013

Waterfall could be about to start spreading...

For comparison let look at what recently happened during trading hours for gold:
As a symbol of the power of this move and it NOT being close to over…the below kind of remarks are most definately not the kind that end a horrendous 20+% decline…

Farage vs BaRUFFO...

BURNanke has tried to do this with a Boeing 747 EL Super Cargo loader...

US 10 Year up only .13% - a HUGE underperformance…BURNanke forced exit coming?

I will post charts later, but it appears that the only thing BURNnake feared the most may be occuring…the unwind of public trading and banking leverage is so great that even the lowest risk assets, namely US treasuries are being liquidated to cover obligations…its even worse in Germany as the 10 years over there is under performing even more. This makes it clear, that at some point soon, whether BURNank and DRUGhi like it, liquidations will necessitate higher interest rates which will facilitate more liquidations...

Why were margins increased on Equity futures? hmmm...

Are debit balance margin calls coming for Equity futures traders now too?

Let me take a stab at it. First, consider that the activity in Gold, Silver and Commodities has put many futures accounts in debit balances. That means that the accounts now owe the broker money and the broker is responsible for the loss and must proceed with collection efforts. This is what happens when a market is so fast that margin calls can not keep up with margin calls. We currently have a state in the equities futures where people are more leveraged than normal to put it lightly and brokers have taken losses on accounts which now have debit balances. It is usual for the exchanges to lower margin requirements at times like these for equities allowing the maximum number of people to trade the maximum number of contracts generally to the long side. It is indeed curious that ICE and CME are making adjustments to margin before there has really not been much equity volatility, This is in direct contrast to what they have done nearly every time equity futures are making new highs. In fact, it has been a pretty reliable indicator that when equities are making substantial new highs over the last years and margin rates are reduced that markets will take a significant fall. It happened before flashcrash, before the 2011 27% drop and nearly every other time…but now in total reversal of pattern the exchanges have raised margin requirements…and something smells in Denmark... Spain,Italy,Portugal,Greece, Ireland, Cyprus, Slovania, Hungary, Lithuania and France…too

Russell 2000 Futures…at an inflection point...

Long term Gold versus the DOW

I included the DOW for perspective only and to demonstrate that during the current reflation/deflation era, shaded in blue, risk assets more or less traded together. Prior to that Gold was more of a fear instrument and traded counter to the dow. Thanks to GreenSPIN and BURNanke and company there are no hedges anymore unless they rely on unsound counterparty risks ultimately at JPM or GS.

For the highest resolution click here

ICE Increases Margin Requirements effective 4/18

Many Currency Pairs Change significantly
Russell 2000 goes to $4,800
Russell 1000 goes to $2,100

https://www.theice.com/publicdocs/futures_us/exchange_notices/04162013NewMarginRequirements.pdf

Its starting to feel like 2008 all over again...

Monday, April 15, 2013

Trust GreenSPIN, BURNanke, BarRUFFO, LAGguard, MerKILL or DRUGhi and this is what you will get...

These people are walking disasters. They need to be water boarded and incarcerated in solitary since these people are manipulators, fools and liars of the highest order. They have stolen from anyone who can create something in order to give to people who do not - guys like Jamie DEMON and Lloyd BlankFIEND.

The immeadiate triggers are JAPAN and CHINA then EUROPE - the FED and the US govenrment engineered these economies to emulate our debt pyramid and debt currency tactics - they are the weakest links and will exacerbate the situation and risks till the US and UK join the party.

North Korea is a distraction as are today’s events in Boston…with full symathies to those injured…However, what is really going on is a social upheaval caused by the inability of people to manage their own wealth, happiness or futures because there is always the inflation to fight, interest to pay, the social net to support, the bank to bail out and the war to wage.

JGB’s are next…GOLD was a sideshow…All risk assets especially EQUITIES will get crushed...so if you think today’s dynamic, $5 billion POMO not withstanding, were interesting just wait… Captial is being destroyed and the Bond Markets may be done too…today’s action in the highest quality bonds was distressing to say the least and smack of the liquidity crisis to end all liquidity crisis’s. What we are witnessing is 10x of 2008…in 2008 the 10year could actually rally…now the capital destruction is so great and the money pyramid so strained that even the safest bonds can not seem to rally during this time of stress…the last thing we need now is a reluctant US and German Bond market.

Hopefully there will be a time for judgement and justice and the central banker of our time and their enablers will be the recipients of it.

Everyone wants to know what started the GOLD crash...

A new high in Gold prices in YEN combined with an implied default in JGB’s (on April 5th) in an environment of high distrust of BOJ and other central banks and a great need for cash to settle debts (and margin calls!) in an insolvent Japan would sound like the perfect trigger to me. Wait till you see how the markets behave when JGBs follow the same path - and they will…this GOLD implosion will likely look small in comparison the new ones that are created.

The funny thing is the types of liquidations we are seeing are not just liquidations, they are destruction of capital, which may in the end cause a muted US and German bond rally followed by margin call selling even overwhelming the best government bond markets. If there is no place to hide…then we get a freefall.

Not to make light of the EPIC gold and Silver disaster…

Apparently, in an ultimate irony, Orange Juice (its gold too) is up a lot today. Natural Gas (it a neutral color too - kind of silver like) is up …

This is what Ben BURNanke calls the success of his price stability mandate...

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. http://m3financialsense.blogspot.com/2013/04/jcgs-what-to-expect-next-margin-call.html 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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