Silver takes a bow, leading the charge/gold advances marginally

Welcome To Hyperinflation Hell: Following Currency Devaluation, Belarus Economy Implodes, Sets Blueprint For Developed World Future 

Submitted by Tyler Durden on 05/25/2011 17:22 -0400

"A ‘91-style meltdown is almost inevitable." So says Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, discussing the imminent economic catastrophe that is sure to engulf Belarus following the surprise devaluation of the country's currency by over 50%, which we announced on Monday. "Unless Belarus heeds Russia’s call for mass privatization of state assets, it is headed for “hyperinflation, massive un- and under-employment, and a shutdown of production" Moiseev concludes. Ah: "privatization" as Greece is about to learn, the lovely word that describes a fire sale of assets to one's creditors, courtesy of a "globalized" new world order. Ironically, this is precisely the warning that will be lobbed at each country in the developed world, as the global race to devalue currencies, first against each other on a relative basis, and ultimately against hard currencies, or on an absolute basis, as the world realizes that there simply is not enough cash flow to cover the interest payments on a debt load, in both the public and private sectors, that continues to rise at an astronomic rate, even as the world prepares to exit from the latest transitory, centrally-planned bounce in the Great Financial Crisis-cum-Depression that started in earnest in 2007 and has been progressing ever since. Ultimately, Belarus will succumb to hyperinflation, as will each and every other government which seek to devalue its currency (hint: all of them): "Unless Belarus heeds Russia’s call for mass privatization of state assets, it is headed for “hyperinflation, massive un- and under-employment, and a shutdown of production,” VTB’s Moiseev said. The ruble will slide to 10,000 per dollar, he added." Of course, this is the primary side effect of attempting to avoid formal bankruptcy through currency devaluation. And all those who continue to believe deflation is an outcome that will be allowed by the Fed, need to look just to the former Soviet satellite to see what lies in store for everyone currently doing all in their power to devalue their currency.




I would like to hear from some of our visitors from  Belarus...Please consider posting some comments of what is actually happening.
If you prefer, email comments to wethesheeplez@yahoo.com and I will post them...
I hope your Pantry and Freezers are Full...

Thanks




Harvey Organ, Wednesday 25 , 2011

Silver takes a bow, leading the charge/gold advances marginally

Guest Post: Things Are Spinning Out Of Control 

Submitted by Tyler Durden on 05/25/2011 12:01 -0400

The single greatest conceit of the Status Quo in the U.S., China and Euroland is that systems and trends can be tightly controlled. That conceit is slowly being revealed as hubris, as all sorts of things are spinning out of the control of the centralized authorities and financial elites in each geopolitical power center. Does anyone really think the people of Greece will stand idly by while the state treasures of their nation are transferred to the banks which foolishly lent billions to a visibly risky enterprise? The banks, of course, lent freely to insolvent governments throughout the European Union, confident in the backstop of the E.U. itself....Does anyone really think the uprisings against this transfer of national wealth to the "too big to fail" banks in Europe will fade as unemployment rises and the true costs of the transfer become apparent to all?...Does anyone really think the banks are really that precious to the people they are stripmining? Just how awful would it be if all the big banks with exposure to sovereign debt in the E.U. went belly up and were declared insolvent? A handful of very wealthy managers would lose their jobs, a handful of very wealthy owners would lose their stake, and all the pension funds and mutual funds which bet on the infinite passivity of the citizenry and the infinite checkbook of the E.U. would lose, too. It's called Capitalistic risk and return, baby, and return can be negative. All the big players assumed the citizenry would quietly line up to have the clothing ripped from their backs and their flesh flayed to extract the pound of flesh "owed" the banks. But as the citizenry of Europe wake up to costs of the stripmining, which extends now to the taxpayers of Germany, Finland and beyond, they are withdrawing their support of the financial Status Quo.

The Amazing(ly Profitable) Intraday Risk Divergence-Compression Trade Strikes Again 

Submitted by Tyler Durden on 05/25/2011 16:19 -0400

Increasingly more people are starting to outwit the Fed at its own game, which appears to have run out of sufficient capital to manipulate all risk assets (troubles at Citadel?), and thus is forced to focus exclusively on the E-mini. While not pointed out explicitly today, those who were following the trade were presented with an amazing opportunity to pick several basis points when ES once again ramped away from the risk basket (AUDJPY, EURUSD, 10 year, 2s10s30s, Oil and Gold) following the more than obvious buy program attempt to triggers stops, only to slam back with a vengeance and close the gap at close. Like clockwork. The trade continues to be an ideal play for everyone who wishes to remain bull/bear agnostic, and merely trade against Brian Sack's increasingly desperate and underfunded attempts at risk manipulation.

Presenting The Fed's Slogan: "Making It Harder To Feed Your Family For 98 Years And Counting" 

Submitted by Tyler Durden on 05/25/2011 15:09 -0400

One of the side effects of the overarching "price stability" mandate of the Fed, it turns out, is the fact that since its inception, food and pretty much all other commodity prices have, well, gone up non stop. And elsewhere, the purchasing power of the dollar is now predicted to go negative in under ten years.

From Bad To Worse For Bank Of Countrywide Lynch: Utah AG Says BofA's State Foreclosures Are Illegal, As Elijah Cummings Demands BofA Subpoena 

Submitted by Tyler Durden on 05/25/2011 14:54 -0400

There were those who were fuming about what a great deal Bank of America got in acquiring Countrywide. Ironically, that same deal threatens to bite the banks in the ass and cost it tens of billions in litigation as more and more realize that the bank's mortgage-related practices (both before the CFC acquisition and after) have been based on a foundation of fraud. While Zero Hedge has not discussed the issue at length recently due to the expected temporary pushback by various legislatures, which would make an outright risk assessment against BofA impossible since there is far more politics than finance involved, it seems that with each passing day things are getting closer to spiralling out of control for America's largest lender. The latest news, just out from Bloomberg, indicating that the bank may be advised to urgently increase its litigation and putback reserve, is that Utah's AG Mark Shurtleff advised Brian Moynhian that the bank's foreclosures in Utah are illegal. "A Bank of America Corp. unit conducting home foreclosures in Utah is violating the law, the attorney general said in a letter as individual states advanced their investigations of mortgage servicing. “All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal,” Shurtleff wrote." Oops. There goes another several billion in litigation fees because that beeping noise is thousands of foreclosed upon mortgageholders calling the first attorney they can find in the yellow pages in hopes (soon to be fulfilled) of unwinding completed foreclosures. This action joins comparable pushes from Connecticut, Illinois and California, and pretty soon BofA will be unable to foreclose upon any home in the domestic US. We estimate that the legal cost associated with foreclosure delays will cost the bank well over a billion when all is said and done. And just to make life truly miserable for BofA, Elijah Cumming sent a letter to the Committee on Oversight and Government Reform advising he is considering a broad subpoena to all mortgage servicers, chief among them, you guessed it: Bank of America.

Systemic Risk Elevated 

Submitted by Tyler Durden on 05/25/2011 14:26 -0400

The Financial Stability Board created a list of 30 large global financial entities that represented to it the most systemically worrisome firms in the world. The chart above tracks a weighted average of the 5Y CDS (or credit risk) of these 30 names. The higher the index, the great the credit risk perceived among the world's most systemically worrisome financial entities. The greater that credit risk, the more concern there should be for another round of potential insolvencies or collapse of the financial industry. While the currrent level is certainly not in the critical zone, it is rising rapidly and is approaching key levels at which risk managers will begin to start evaluating CVA overlays in our opinion. A 14% rise in the index over the last three weeks is extremely fast and we note that at current levels we are almost twice as risky currently as were prior to the financial crisis and also at the trough post the financial crisis in Jan2010. 

Oppenheimer's Fadel Gheit Accuses Goldman Of Manipulating Crude Market 

Submitted by Tyler Durden on 05/25/2011 13:47 -0400

It is no secret that Zero Hedge follows every utterance by Goldman Sachs (Morgan Stanley, not so much - it is sad just how irrelevant MS has become when it comes to swaying any opinion at all) as pertains to the firm's outlook on various commodities, simply because by the very nature of the firm's trading operations, whereby its prop desk (yes, Goldman's prop desk is alive and well) controls a substantial amount of the actual commodity outstanding (in either paper or physical form) and then advises clients to do the opposite of what the firm itself is doing. In essence: using its economy of scale (or monopoly, however one wishes to define it), Goldman can sway the market this way and that with one simple "client" note. The recent fiasco whereby Goldman downgraded Brent in April only to upgrade it in May using the very same assumptions, is nothing more than just the latest example of what we have claimed over and over is outright market manipulation. Today, we find we are not alone after Oppenheimer's Fadel Gheit accused the firm of precisely the same thing on Bloomberg TV: "Whether or not they are influencing the market and manipulation could be a stronger word, but they are influencing the market. They are doing things that could be beneficial to them but harmful to the rest of us. That is where government comes in and says stop, enough. You have a Ferrari or a Maserati and can go 120 mph, but guess what? Those of us who can only go 60 miles per hour will be pulverized. That is where the government has to come in and say there is a speed limit here, but that is not happening." Of course, if Oppenheimer was large enough and influential enough to do what Goldman does, we are 105% confident Fadel would be singing a totally different tune.

Levered Beta Uber Alles: NYSE Borse Margin Debt Jumps To Three Year Highs, Investor Net Worth Remains At Record Lows 

Submitted by Tyler Durden on 05/25/2011 13:40 -0400

As we have been saying for over a year, the levered beta rally, and nothing but the levered beta rally (also known as the "if there is career risk involved then you must go all in" rally) continues to be the only trade in the stock market. For today's confirmation we go to the just released April margin debt data from the NYSE which confirms that in April, despite the turbulence of March, investors actually levered up even more, bringing total margin debt to another 3 year high, and at $320 billion (a $5 billion increase from March), and the highest since the $334.9 billion in February of 2008, just before Bear Stearns became the first bank to keel over and die. And it still has a way to go: the all time high was hit in July 2007, when it was $381 billion. What does not have a way to go, is Investor Net Worth expressed as Margin debt less Free Credit Cash and Credit Balances in Margin Accounts: this stayed flat M/M at essentially the lowest level ever of just under ($75) billion. Bottom line: for another month virtually nobody wants or dares to take profit on existing positions. We can only hope all those hundreds of billions in margin dollars succeed to exit at the same time in an orderly fashion when the inevitable unwind finally does occur.

5 Year Bond Prices At Record Bid To Cover As Indirect Demand Surges In Bond "Shorted" By Goldman Sachs 

Submitted by Tyler Durden on 05/25/2011 13:17 -0400

Today's $35 billion 5 year bond auction was one of the strongest auctions completed in recent years, with a Bid To Cover of 3.20, the highest in the series, compared to 2.77 before and a 2.79 average in the last twelve auctions. This happened despite the yield dropping from 2.124% to 1.813%, the lowest since December 2010. Total competitive bids tendered surged from $97 billion to $112 billion, primarily due to Indirect bids rising from $18.6 billion to $24.4 billion, resulting in a drop in the hit rate from 74.9% to 67.5%. The Primary dealer hit rate also dropped from 25.7% to 20.7%. Indirect take down at 47.1% was the highest since September 2010. Completing the internals, was the -1.7 tail. As a reminder, on March 18 Goldman advised clients to short the 5 Year. That trade did not work out too well. As for the fact that this auction takes total Marketable Debt even further above the debt ceiling, that's irrelevant: the Treasury can just underfund retirement account holdings by another $35 billion.