from KingWorldNews:
With major markets around the world continuing to get hit, today King
World News interviewed James Turk out of Europe. Turk told KWN the
situation in Europe is deteriorating and the banking system is being
severely tested. Turk also discussed gold and silver, but first, here
is what Turk had to say about the crisis in Europe: “The
situation here in Europe is rapidly deteriorating, Eric. Moody’s
downgrade of 26 Italian banks was just the latest nail in the coffin.
It seems likely that more bank downgrades are coming in other countries
because Europe is in a downward spiral.”
James Turk continues @ KingWorldNews.com
With major markets around the world continuing to get hit, today King
World News interviewed James Turk out of Europe. Turk told KWN the
situation in Europe is deteriorating and the banking system is being
severely tested. Turk also discussed gold and silver, but first, here
is what Turk had to say about the crisis in Europe: “The
situation here in Europe is rapidly deteriorating, Eric. Moody’s
downgrade of 26 Italian banks was just the latest nail in the coffin.
It seems likely that more bank downgrades are coming in other countries
because Europe is in a downward spiral.”James Turk continues @ KingWorldNews.com
U.S. ‘Fiscal Cliff’ Looms: Will Lawmakers Heed Bernanke’s Warnings?
by Morgan Korn, Finance.Yahoo.com:
In late February Fed Chairman Ben Bernanke started warning lawmakers
about the looming “massive fiscal cliff” that would bring the U.S.
economy to its knees if Congress cannot agree on long-term fiscal
decisions. Bernanke explained that the confluence of events happening
Jan. 1, 2013 – the expiration of the Bush-era tax cuts and extended
unemployment benefits, the $1.2 trillion automatic spending reductions
and the end of the payroll tax holiday — will likely lead to a recession
in the U.S.
Neither political party wants this worst-case scenario to come to fruition but lawmakers are likely to “kick the can down the road” instead of addressing these pressing policy issues before the November elections says Greg Valliere, chief political strategist at Potomac Research Group. Bernanke reiterated his concerns to a select group of lawmakers last week, escalating his rhetoric about the necessity of resolving these budget concerns sooner rather than later.
“I think [Bernanke] is worried, and people at the Fed are worried because this is such a dysfunctional group,” says Valliere in the accompanying video. “And there’s talk now of a government shutdown on Oct. 1 when the new fiscal year starts.”
Read More & See Video @ Finance.Yahoo.com
In late February Fed Chairman Ben Bernanke started warning lawmakers
about the looming “massive fiscal cliff” that would bring the U.S.
economy to its knees if Congress cannot agree on long-term fiscal
decisions. Bernanke explained that the confluence of events happening
Jan. 1, 2013 – the expiration of the Bush-era tax cuts and extended
unemployment benefits, the $1.2 trillion automatic spending reductions
and the end of the payroll tax holiday — will likely lead to a recession
in the U.S.Neither political party wants this worst-case scenario to come to fruition but lawmakers are likely to “kick the can down the road” instead of addressing these pressing policy issues before the November elections says Greg Valliere, chief political strategist at Potomac Research Group. Bernanke reiterated his concerns to a select group of lawmakers last week, escalating his rhetoric about the necessity of resolving these budget concerns sooner rather than later.
“I think [Bernanke] is worried, and people at the Fed are worried because this is such a dysfunctional group,” says Valliere in the accompanying video. “And there’s talk now of a government shutdown on Oct. 1 when the new fiscal year starts.”
Read More & See Video @ Finance.Yahoo.com
Japan's WTF Chart
No really, WTF!?Is The Pain Over For Bruno Iksil?
Today,
for the first time since the advent of the JPM prop trading fiasco
last Thursday, the IG9-10 Year skew has diverged, dipping from -3 bps
to -5 bps as the index remained flattish while the intrinsics widened
by about 2 bps. While hardly earthshattering, this move likely means
that either JPM's CIO trading desk is playing possum and is no longer
unwinding its original pair trade exposure (either because it no longer
has anything to unwind, or because it can't take the pain any more and
is out of the market entirely), or the hedge fund consortium has had
enough of pushing IG 9 wider in hopes that max pain would force JPM to
cover its synthetic leg. As a reminder, this is where last Thursday we
said the time to push JPM would likely end. As for the question of how
much additional P&L loss JPM has sustained from Friday through
today is a different matter entirely, and we are confident the next
announcement from JPM will come momentarily, coupled with the
announcement that Bruno Iksil, the last remnant of the CIO desk, and
now having completed his duty of unwinding the trade that brought so
much pain for Jamie Dimon, has been retired.No Bull Market Has Lasted Forever
Admin at Jim Rogers Blog - 3 hours ago
These things go in cycles. There has never been any bull market which has
lasted forever. No bull market in the history of the world has lasted
forever. These commodity cycles come and go. On average, they’ve lasted 18
to 20 years in the past. I have no idea how long this will last. But it’s
not over yet.
*Jim Rogers is an author, financial commentator and successful
international investor. He has been frequently featured in Time, The New
York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The
Financial Times and is a regular guest on Bloomberg and CNBC.*
In 1918 The U.K. Was The Richest Country In The World
Admin at Jim Rogers Blog - 5 hours ago
The U.K. in 1918 was the richest, most powerful country in the world. There
was no number two. In three generations, they were bankrupt. - *in Forbes*
*Jim Rogers is an author, financial commentator and successful
international investor. He has been frequently featured in Time, The New
York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The
Financial Times and is a regular guest on Bloomberg and CNBC.*
Bloomberg Video: Europe, Market Outlook
Admin at Marc Faber Blog - 7 hours ago
Latest video interview, Bloomberg.
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and **futures markets around the world.*
I Always Wanted To Have More Than One Life
Admin at Jim Rogers Blog - 8 hours ago
I didn’t want to wake up at 75 and still be looking at a computer screen.
I’d always wanted to have more than one life, so off I set to have more
than one life. And I’ve had more than one life. I retired. I was 37. And
set off to have more than one life.
*Jim Rogers is an author, financial commentator and successful
international investor. He has been frequently featured in Time, The New
York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The
Financial Times and is a regular guest on Bloomberg and CNBC.*
Soros Quadruples His Investment In Gold
Dave in Denver at The Golden Truth - 8 hours ago
Everyone in the precious metals/mining stock sector is looking for anything
to grab onto for optimism. Nothwithstanding that this type of sentiment *
always* demarcates a bottom, and notwithstanding the fact that the basic
fundamentals underpinning the precious metals - like catastrophic
Government deficit spending and disastrous Central Bank negative interest
rate policies - get stronger by the day, here's an excellent harbinger of a
potential bottom/upturn in the metals/miners: Soros has quadrupled his
exposure to gold via GLD: LINK.
This sell-off in the miners has become silly.... more »
Germany frets about their gold reserves/FBI involved in JPMorgan probe/Spanish 10 yr yield 6.36% and Italian 10 yr bond 5.85%
Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 8 hours ago
Good
evening Ladies and Gentlemen:
The price of gold lowered by $3.00 to finish the comex session at
$1556.80 Silver retreated by 27 cents to close at $28.05. Today German
GDP numbers came in at a 0.5% rise instead of being flat which caused
the risk on trade to commence and most bourses rose until the Greeks
announced that they could not form a government and new elections will
be called.
Risk Aversion Money Flows Drop the HUI
Trader Dan at Trader Dan's Market Views - 10 hours ago
The mining sector was weak to start the session even as some larger
entities were attempting to force the S&P futures above the 1350 level. The
problem was that gold could not move into the plus column, the Dollar was
not buying the concerted push nor were the bond and note markets which
refused to go negative on the day even with stocks initially rallying.
Once the S&P dropped back below the unchanged level, that was it for the
mining sector shares which are now getting what looks to me like the
BEGINNING of a final washout in this sector.
Note that the critical 50% Fibonacci retra... more »
Greece Gets Hint of Leeway From Euro Officials
Eric De Groot at Eric De Groot - 13 hours ago
Liquidity floats all boats until the public can no longer afford to eat.
Headline: Greece Gets Hint of Leeway From Euro Officials European
governments hinted at giving Greece extra time to meet budget-cut targets,
as long as the financially stricken country’s feuding politicians put
together a ruling coalition committed to austerity. Calling talk of a Greek
pullout from the euro “nonsense”...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
California wants to tax rich to solve budget woes
Eric De Groot at Eric De Groot - 13 hours ago
The rich, high mobile, will simply leave California. Headline: California wants to tax rich to solve budget woes NEW YORK (CNNMoney) -- Tax the rich! That's how California Governor Jerry Brown wants to solve the state's growing budget crisis that now nears $16 billion. The governor laid out his revised spending plan Monday. It would slash $8.3 billion from almost every part of the state's... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
Will America Ever Recover From The Housing Crisis - A Real Estate Infographic
Back
in March, on the back of the last gasp of yet another central
bank-induced sugar high (in this case mostly LTRO 1+2), as well as
economic data skewed by record warmth, a plethora of housing bottom
callers (we would call them analysts but they are anything but) emerged
from their hibernation and did what they do like clockwork every year:
called a housing in bottom. Sadly, now that the market has topped out,
at least for the current easing iteration, it appears that the housing
triple dip as measured by Case Shiller will shortly be a quadruple dip.
And so on, and so on, until the question becomes: will America ever recover from the housing crisis. We
don't know, but we do know one thing - fixing an excess debt problem
with more debt won't work. Period. Yet that is what continues to be the
only "policy" in resolving the aftermath of the Great Financial Crisis.
For everyone else seeking a more nuanced answer we suggest perusing
the infographic below which provides a less jaded perspective and even
has a Hollywood conclusion: "The end is on the horizon"... well, a
Tarantino-esque conclusion: "...The distant horizon."Next Stop: Dow 100,000
We thought that Jeremy Siegel, Laszlo "the Ruler" Birinyi and Jim Altucher were optimistic with their stock market targets. Sadly, with their equal to or less than 20,000 Dow Jones predictions, the three merely come off as rank amateurs, especially when compared to the forecast of BNP's head of fixed income Philippe Gijesels, who sees the stock market at 100,000 at some point over the next 25 years. However, unlike the previous trio who bases its forecasts on misguided expectations of economic growth, Gijesels may actually end up being right, because his estimate is predicated on one simple thing: hyperinflation, or specifically 12.2% inflation each year, which for a country like America is tantamount to the dreaded H-word. The other premise used by Gijesels: too much debt which has to be inflated. And actually, he is spot on. The only problem is that when the Dow hits 100,000 due to money printing, which is his underlying thesis, one will needed scientific notation to express the price of any hard asset (and most certainly gold), because if America falls in a two-decade long Weimar republic phase, the Dow may well be 100,000 or 100 googol - the truth is it won't matter as the money this number translated to would be absolutely meaningless. Just ask the Weimar Germans, who may have had some tremendous monthly increases in their 401(k) statements, but all they really cared about is whether they had the latest and most fashionable wheelbarrow model.
Majority Of Neo-Normal Greek Cops Vote Neo-Nazi
In a somewhat stunning revelation, especially after our earlier note on the Golden Dawn leader's 'position' on the issues of the day, GreekReporter notes via the news paper To Vima, that more than half of all police officers in Greece voted for pro-Nazi party Golden Dawn in the elections of May 6th.
It's not really for us to judge (well maybe it is) but when some
polling stations report Golden Dawn receiving 19-24% of the votes,
things are going from the dismal to the horrific (and potentially
chaotic) very fast.What Happens When A Hedge Fund Hotel Explodes
Sometimes,
when one desperately chases alpha at any cost, all one needs to see is
a somewhat credible asset manager, in this case Bill Ackman's Pershing
Square, invest a massive amount of cash in a given company, to decide
to invest alongside. In this case the company is JCPenney, and the
amount in question invested by Ackman being $1.3 billion (at last check
his third biggest positions after GGP and CP). Usually this strategy,
elsewhere known as herding, 13F chasing, or alphacloning, works, until
it doesn't. In the case of JCPenney it just didn't, after the company
just blew up in real time dropping a tape bomb, missing on the top and
the bottom, cutting the forecast, and for good measure also eliminating
the dividend. End result: Ackman just lost nearly $200 million after
the stock imploded by nearly 15% after hours, and all those who blindly
piggybacked along without doing their homework (such as Whtiney Tilson
whose 4th largest cash position is JCP), went for the ride.Market Deja Deja Deja... Oh Forget It!
Today
was special - full-retard kind of special - as the S&P 500 e-mini
futures (ES) did a double-dip deja vu move extending the series to
seven days in row of early buying and late selling as ES closed at new cycle lows and a plethora of other asset classes all dropped aggressively to multi-month records. Credit markets remain the indicator for weakness
and while JPM's exaggerated the moves, bear in mind that IG credit is
only correcting back to where its underlying names have been trading
(forced rich - too high - by JPM's previous actions) and the late-day
sell-off dragged stocks down near to convergence. Some early stability
in IG9 provided a quiet rally in financials but as the afternoon began
the selling restarted in the credit index (which pushed to new cycle
wides - despite the skew collapsing - as momentum is in charge now).
Commodities slid on USD strength and liquidation pressures as we note Gold held in well (better than its peers) until the last hour
or so (which has the smell of margin/collateral calls). Equities
recoupled with Treasuries today after 3 days of exuberance (again).Of Whitney Tilson's $345MM In AUM, $104MM Is In Call Options, $24MM Is In Warrants
For all the totally inexplicable facetime T2's Whitney Tilson gets on prime time financial comedy air, one would imagine that the man runs billions and billions. Instead, as per the just released 13F, Tilson's fund has a grand total of $345MM in long AUM as of March 31. So far so good, however that does not explain why the manager has a Sharpe ratio of roughly 0.00 in the past 3 years. Well, now we know: of the $345 MM total, a ridiculous $104 Million is in call options! In other words, not only is Tilson nothing but a bullish bet that copycats various other select hedge fund portfolios, it is a mega-levered one at that, with what appears ridiculously high theta! It get's worse: as it turns out, another $24MM or so is... in Warrants. Yup: all levered products without actually owning the underlying, leading to massive monthly swings in actual P&L. In other words, real assets held by Tilson amount to $217 Million. And one wonders why the fund can be up 20% one month and down 30% the next... or how Tilson can spend hours a day on TV.CRAAPL
Presented
without comment as the iconic tech firm of our time loses the somewhat
satanic $555 lows of pre-earnings taking the firm back to two-month
lows and dragging the rest of the market with it...Acknowledging The Arrival Of Peak Government
Most
informed people are familiar with the concept of Peak Oil, but fewer
are aware that we’re also entering the era of Peak Government. The
central misconception of Peak Oil -- that it’s not about “running out of
oil,” it’s about running out of cheap, easy-to-access oil -- can also
be applied to Peak Government: It’s not about government disappearing,
it’s about government shrinking. Central government -- the
Central State -- has been in the expansion mode for so long that the
process of contracting government is completely alien to the nation, to
those who work for the State, and to those who are dependent on the
State. Thus we have little recent historical experience of Peak
Government and few if any conceptual guideposts to help us understand
this contraction. Peak Government is not a reflection of government
services or the millions of individuals who work in government; it is a
reflection of four key systemic forces that drove State expansion are
now either declining or reversing.Seth Klarman On The Absurd Short-Termism Of The Exuberant Rally
While
most of the retail investor's time is (hopefully not) spent watching
CNBC propaganda spouted by wannabe traders (mostly asset gatherers as
opposed to real return seekers) who sell their $29.95 books on how to
be rich in 30 seconds trading the TVIX; some might prefer to listen to
the original thoughtful value investor - Seth Klarman. The man whose
book 'Margin of Safety' sells for over $1000 (and whose acumen extends
for decades) just released Baupost's (his fund) quarterly letter and
makes what should be a critical statement for any and every investor to
consider when next they hear of quantitative easing prognostications.
In two short sentences, Klarman states: "We will not be tempted
into making investments based on such absurdly short-term thinking,
which sadly still dominates Wall Street. We focus solely on fundamentals. We are comfortable
missing out on potentially major rallies if they are based purely on
money flows or government action; the risks of engaging in this sort of
speculative activity are simply too high." And echoing our
thoughts perfectly, "The same low interest rate, deficit-spending
driven, leverage-friendly economic policies that fueled the
unsustainable conditions that led to the 2008 collapse are with us
still."Santelli Explains Why A Broke California "Likes" A Hot Facebook IPO
The
unsurprising and yet depressingly real budget data from California
today should shock no-one and CNBC's Rick Santelli provides the most
succinct and even more saddening reality check on the situation this
morning as he points out the $15.7 billion shortfall and how cuts and compromise will fill that gap. His sane response to the implicit rise in taxation that this compromise realistically requires will mean - happy feet as Californians leave the state.
His rant is one of the best but a little later in the day, the problem
appears to be on its way to being fixed by none other than the
hoody-in-chief himself. According to Bloomberg, Facebook Inc.’s
initial public offering likely will account for 20 percent of
California’s personal income growth this calendar year, the
state fiscal analyst said. The state expects personal income to grow 4.9
percent in 2012. If the Facebook IPO were excluded, that would total
4.0 percent, the agency said. Money paid to company executives,
investors and insiders would equal 1 percent of all personal income in
2012, the agency said. So two things come to mind: 1) we sure hope there
are more mega-IPOs due next year to fund CALI's shortfall or we may
have to pull the 'transitory' or unsustainable card out of the drawer;
and 2) how will all those Facebook employees (and the corporation
itself) feel when they start facing higher taxes (as Saverin just pre-emptively did?).
Will they follow Santelli's happy feet out of the state? In the
meantime, it would appear that the Facebook IPO is just the snake-oil
medication that everyone needs - how could the IPO go wrong?That Which Is Unsustainable Will Go Away: Pensions
One of the few things we know with certainty is that which is unsustainable will go away and be replaced by another more sustainable arrangement. Whether we like it or not, or are willing to accept reality or not, unsustainable public pensions will go away. What makes "defined benefit" pensions unsustainable? 1) Promised cash/benefits packages that are not aligned with the fiscal realities of what can be contributed annually to the pension funds 2) New Normal low yields on low-risk investments and 3) skyrocketing costs of healthcare benefits.This is easily illustrated with basic math.
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Silver rarely outperforms gold on the ‘up days’ to the same degree it under performs on down days. Sure, on up days silver often rises faster on a percentage basis – but on the down days silver gets HAMMERED, and often at a ratio of 20 to 1 or worse.
Based on worldwide mining data we know that on an annual basis there is only 9 times more physical silver being pulled out of the ground than gold. So why is the silver to gold ratio nearly 56 to 1? It’s a geological fact: SILVER IS PRECIOUS. Silver is also horrifically manipulated by the criminals at JP Morgan. The cartel is working overtime because they want you to give up, sell your silver and go away – never to darken JPM’s door again.
But we’re not going to go away. We’re not going to stop talking abut
the criminality of Federal Reserve or the Fed’s primary dealer JP
Morgan. We’re not going to stop talking about JP Morgan’s $70+ Trillion
in Derivatives exposure. We’re not going to stop talking about JP
Morgan’s record paper short positions in the silver market. And we’re
sure as hell not going to stop buying PHYSICAL precious metal – chiefly
SILVER. Especially when the criminal cartel knocks the price down at a
rate of 20 or 25 to 1 every day. We know the hard numbers. We know the
silver story. We know the facts. This manipulated paper silver plummet
is a joke – and a gift. Read More…from BrotherJohnF:
.
from ASecond0pinion:
from Liberty Blitzkrieg
Last
week as silver headed toward the $29/oz level, I received an excellent
piece of commentary from a retired Canadian geologist that goes by the
handle “Rhody.” In it he states that at sub $30/oz silver is below
cost, which I take to mean marginal cost. For those not familiar with
the commodity markets, marginal cost is the price that must be
maintained to support new projects in order to keep supply growing to
meet demand. This cost includes capital investment in addition to all
other costs as well as an implied return on investment. I am not sure
if Rhody included a return on capital in his $29/oz figure so it could
be even higher. In any event, he goes on to make some extraordinarily
poignant statements on the overall macro backdrop in general. So much
so that I asked him if I could post it and he agreed. Without any
further ado…
Read More @ LibertyBlitzkrieg.com
Last
week as silver headed toward the $29/oz level, I received an excellent
piece of commentary from a retired Canadian geologist that goes by the
handle “Rhody.” In it he states that at sub $30/oz silver is below
cost, which I take to mean marginal cost. For those not familiar with
the commodity markets, marginal cost is the price that must be
maintained to support new projects in order to keep supply growing to
meet demand. This cost includes capital investment in addition to all
other costs as well as an implied return on investment. I am not sure
if Rhody included a return on capital in his $29/oz figure so it could
be even higher. In any event, he goes on to make some extraordinarily
poignant statements on the overall macro backdrop in general. So much
so that I asked him if I could post it and he agreed. Without any
further ado…Read More @ LibertyBlitzkrieg.com
from Testosterone Pit.com:
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.”
John Maynard Keynes penned these words after World War I (The Economic Consequences of the Peace); and all Fed governors, certainly Chairman Ben Bernanke, should be required to read them out loud each morning.
When inflation isn’t particularly hot, it’s praised as something desirable, though in its gradual, nearly invisible way it continues its insidious work. And the inflation data released today (BLS PDF) fall into that category: flat for the month and up 2.3% over the last 12 month. It will trigger palliative lingo such as “moderate” or “well anchored,” and any spikes would be “temporary.” But spikes in inflation, along with moderate, well-anchored, and temporary inflation, unless followed by deflation, become permanent. Result: a CPI-U index value of 230.085, where “100” represents price levels of 1982-84. Hence, 130% inflation over the last 30 years. In the process, the Fed “debauched” the dollar, to use Keynes’ term, by 56.5%.
Read More @ TestosteronePit.com
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.”
John Maynard Keynes penned these words after World War I (The Economic Consequences of the Peace); and all Fed governors, certainly Chairman Ben Bernanke, should be required to read them out loud each morning.
When inflation isn’t particularly hot, it’s praised as something desirable, though in its gradual, nearly invisible way it continues its insidious work. And the inflation data released today (BLS PDF) fall into that category: flat for the month and up 2.3% over the last 12 month. It will trigger palliative lingo such as “moderate” or “well anchored,” and any spikes would be “temporary.” But spikes in inflation, along with moderate, well-anchored, and temporary inflation, unless followed by deflation, become permanent. Result: a CPI-U index value of 230.085, where “100” represents price levels of 1982-84. Hence, 130% inflation over the last 30 years. In the process, the Fed “debauched” the dollar, to use Keynes’ term, by 56.5%.
Read More @ TestosteronePit.com
from Silver Doctors:
Precious metals investors were taken to the woodshed today in yet
another indication that fundamentals are governing trading. Analysts at
JP Morgue, resigned to investors’ fate, were seen making paper
airplanes in the New York offices of the fortress balance sheet bullion
bank. “We told everyone these things are nothing more than dog
squeeze,” remarked one analyst who declined to be named. His colleague,
Bubba John Lapdog, estimated that supply and demand trends for silver
peg its true fair value at $1.75 per ounce. “Ouija Board metrics
indicate silver must trade below North American natural gas prices
before we hit bottom,” Lapdog barked.
Read More @ SilverDoctors.com
from TrendsJournal:
Read More @ SilverDoctors.com
from TrendsJournal:
from The Daily Bell:
Greece
calls new election after coalition talks fail … Greece abandoned a
nine-day hunt for a government on Tuesday and called a new election that
threatens to hasten the nation’s slide towards bankruptcy and a future
outside the euro zone. An inconclusive election on May 6 left parliament
split between supporters and opponents of a 130 billion euro bailout
deal which is reviled by Greeks for imposing deep wage, pension and
public spending cuts. A second election is expected to produce a
similarly divided parliament, with opponents of the EU/IMF
rescue consolidating their gains and raising the likelihood of an
anti-bailout coalition that reneges on the deal keeping Greece afloat.
“For God’s sake, let’s move towards something better and not something
worse,” Socialist leader Evangelos Venizelos told reporters after a
meeting of party leaders failed to agree on a government of technocrats.
“Our motherland can find its way, we will fight for it to find its
way.” European leaders have said they will halt the aid if promises
given in return for the bailout are not kept. If so, Greece could go
bankrupt as early as next month. Analysts say that this will almost
certainly herald a Greek return to its drachma national currency. – Reuters
Dominant Social Theme: What will the Greeks do without a government?
Free-Market Analysis: So the Greek government has collapsed … again. Reuters (above) makes it sound like a national tragedy. But maybe we are missing something here. Didn’t the Greek government cause the current problems?
Read More @ TheDailyBell.com
Greece
calls new election after coalition talks fail … Greece abandoned a
nine-day hunt for a government on Tuesday and called a new election that
threatens to hasten the nation’s slide towards bankruptcy and a future
outside the euro zone. An inconclusive election on May 6 left parliament
split between supporters and opponents of a 130 billion euro bailout
deal which is reviled by Greeks for imposing deep wage, pension and
public spending cuts. A second election is expected to produce a
similarly divided parliament, with opponents of the EU/IMF
rescue consolidating their gains and raising the likelihood of an
anti-bailout coalition that reneges on the deal keeping Greece afloat.
“For God’s sake, let’s move towards something better and not something
worse,” Socialist leader Evangelos Venizelos told reporters after a
meeting of party leaders failed to agree on a government of technocrats.
“Our motherland can find its way, we will fight for it to find its
way.” European leaders have said they will halt the aid if promises
given in return for the bailout are not kept. If so, Greece could go
bankrupt as early as next month. Analysts say that this will almost
certainly herald a Greek return to its drachma national currency. – ReutersDominant Social Theme: What will the Greeks do without a government?
Free-Market Analysis: So the Greek government has collapsed … again. Reuters (above) makes it sound like a national tragedy. But maybe we are missing something here. Didn’t the Greek government cause the current problems?
Read More @ TheDailyBell.com
by Peter Grandich, Grandich.com:
When we last visited this price area on gold in December 2011, I challenged the loud-mouthed gold bears to wager $1 million dollars on gold hitting $2,000 before $1,000. I offered the world’s worst gold forecaster and the “Tokyo Rose” of the gold market to double that bet, but instead he/she did his/her usual “duck and cover” dribble (Jon, the public knows how bad your track record is no matter how much a few in the media make you think your past forecasts were forgotten).
Since then, an avalanche of bearish forecasters have hit the gold market (including one that comes and goes with his gold his only worth $800 or usually half the going price) and many former bulls have gone into hiding and/or are hedging their forecasts so not to look like they are ardent bulls anymore.
Well, this former “legend in my own mind” who was once CEO and Chairman of the “Me, Myself and I” society may appear to be brash, but with what I believe is one of the most crucial junctions in the mother of all gold bull markets upon us (Please recall the flack I took when I boldly said the same when we couldn’t stay above $500, $800 and then the crap that flew around $1,000), I feel like John Belushi in Animal House.
Read More @ Grandich.com
Jim Sinclair’s Commentary
Here is the latest from John Williams’ ShadowStats.com.
- Core‰ CPI-U Inflation Hits Cycle High
- April Year-to-Year Inflation Softens: 2.3% (CPI-U), 2.4% (CPI-W), 9.9% (SGS)
- Real Average Weekly Earnings in Ongoing Year-to-Year Decline
- Retail Sales Were Stagnant, Statistically Insignificant
April CPI, Real Earnings, Retail Sales, Euro
Web-page: http://www.shadowstats.com
Jim Sinclair’s Commentary
"Self-Reliance, Community, and the Marketplace"
Readers here are well-acquainted with the dire consequences triggered when Central States attempt to “inflate our way to prosperity” via hyper-inflation and the destruction of currency, and with the basic investment strategy of investing in tangible assets and local enterprises. In this sense, this essay delivers no new strategy except the obvious ones of diversifying away from dependence on the Central State, as well as financial assets denominated in fiat currencies and preparing for a reduction in government services and payments, either directly or indirectly via high inflation.
The End of the Free Lunch by Charles Hugh Smith, contributing editor
Monday, May 14, 2012
Executive Summary
How the State supplanted community enterprise with an entitlement-driven economy
Why the State’s entitlement approach is unsustainable, mathematically — and is finally imploding as we watch
What to expect at this point: more egregious abuse to keep the system working, ultimately triggering serious social unrest
How self-reliance and local enterprise will emerge as paramount once the current State system collapses
Part I: Acknowledging the Arrival of Peak Government
Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government. The central misconception of Peak Oil — that it’s not about “running out of oil,” it’s about running out of cheap, easy-to-access oil — can also be applied to Peak Government: It’s not about government disappearing, it’s about government shrinking.
Central government — the Central State — has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.
Peak Government is not a reflection of government services or the millions of individuals who work in government; it is a reflection of four key systemic forces that drove State expansion are now either declining or reversing.
More…
Jim Sinclair’s Commentary
"If investors lose their confidence, Bernanke’s beloved PORTFOLIO BALANCE CHANNEL will be rendered null and void. Between Europe’s credit crisis and the coming fiscal cliff, the wealth effect is diminishing. The FED may not want another round of“LIQUIDITY ENHANCEMENT” but the ghosts of 1937 are rattling their chains in UNCLE BEN’S ATTIC. Wonder if there are any VINTAGE MODELS THERE."
Notes From Underground: AUGUST 30 ,2002 … A Revisit To The SOAPBOX
LETTERS TO THE EDITOR – Profit centers too big to fail.
By YRA HARRIS.
30 August 2002
Financial Times
(c) 2002 The Financial Times Limited. All rights reserved
Sir, John Plender (“How banks got in a mix”, August 21) correctly identifies the systemic dangers that accompanied the passage of the Graham-Leach-Bliley act. The repeal of Glass-Steagall has pushed the US banking system to the brink of “moral hazard”. The conglomeration of all financial services under one roof has entangled banks in numerous ethical conflicts. Additionally, Graham-Leach-Bliley has made several institutions so large that the Fed cannot allow them to fail.
A single institution’s deep involvement in every facet of financial dealings does not create greater synergy but greater risk. These large, private profit centres know they are too big to collapse. This realisation adds great uncertainty to the entire financial landscape. Rewarding private profits while socialising the risk is a pathway to disaster. Glass-Steagall should never have been repealed without a bank forfeiting its right to Federal Deposit Insurance Corp insurance.
Well, U.S. bankers have done it again. The best of the breed,JPMorgan and JAMIE DIMON, was blindsided by a large loss in its “hedging” operation. It is amazing how, since the REPEAL OF GLASS-STEAGALL, we have seen story after story of bank trading operations bringing the global financial system to the edge of a“SYSTEMIC CLIFF.” Since the repeal of the Glass-Steagall, the international system teeters on the precipice of a calamity. Now ifCOMMERCIAL BANKS want to be aggressive and trade like the proverbial hedge fund, then BANKS that are holding companies have to surrender their FDIC INSURANCE and pay for the use of people’s money
A hedge fund uses other people’s money but at least investors are compensated for quality performance. In the case of theBANKS, the PUBLIC is saddled with the risk while the bank employees reap the greater share of the profits. If TOO BIG TOO FAIL BANKS had to shed the safety net of FDIC insurance and pay for funds based on market-determined risk, then the financial system would be much more stable. If banks wish to be proprietary traders, then their positions should be posted in a real-time manner and the appropriate risk factors assigned to its cost of money.
One of the biggest GAME CHANGERS FROM THE REPEAL OF GLASS-STEAGALL WAS THAT THE FINANCIAL SYSTEM LOST ITS FIDUCIARIES. When GOLDMAN was an investment banker rather than a peddler of trash DO YOU THINK IT WOULD HAVE EVER ADVISED A CLIENT TO PURCHASE SUBPRIME DEBT THAT WAS CONVENIENTLY AAA RATED? DODD-FRANK IS A SUPERFLUOUS PIECE OF LEGISLATION THAT IS LOADED WITH THE RANTINGS OF A HERD OF LOBBYISTS. HOW MANY BACK ALLEYS IS THE REGULATION CAN TO BE KICKED DOWN?
***HOW CAN YOU PORTFOLIO BALANCE CHANNEL WHILE STANDING ON A FISCAL CLIFF? This is the dilemma that Chairman Bernanke has left the market-challenged to resolve. At the post-FOMC press conference on April 25, Ben Bernanke warned the country that Congress needed to act in a responsible fashion to head off the coming “fiscal cliff” that would have a dramatic impact upon the economy. Economists are projecting that the FISCAL CLIFF could have a negative GDP effect of anywhere from 2-5%. It’s no small change to an economy striving to gain traction as it attempts to circumvent the headwinds of the European DEBT CRISIS.
It was a statement that Mr. Bernanke will come to regret as much as Alan Greenspan’s advising U.S. homeowners to utilize their residences as PIGGY BANKS. To offer up dire warnings and then offer little advice or leadership has done nothing but rattle the markets and shake investor confidence. As the election season commences and leadership takes a vacation, markets are deleveraging as RISK OFF is the daily clarion call.
If investors lose their confidence, Bernanke’s beloved PORTFOLIO BALANCE CHANNEL will be rendered null and void. Between Europe’s credit crisis and the coming fiscal cliff, the wealth effect is diminishing. The FED may not want another round of“LIQUIDITY ENHANCEMENT” but the ghosts of 1937 are rattling their chains in UNCLE BEN’S ATTIC. Wonder if there are anyVINTAGE MODELS THERE.
More…
Hi Jim,
This is a very interesting and ominous scientific observation regarding derivatives and the inability of their creators to control them.
As the article states, the banksters have “created a monster they cannot control—a monetary system that operates at a level beyond human comprehension.”
It doesn’t get much scarier than that, does it?
Best regards,
CIGA Black Swan
Chaos, Derivatives, and Quantum Physics By Cris Sheridan
05/11/2012
Every day the financial markets get more chaotic—a fact that couldn’t be made any more clear than with a recent revelation given by ex-physicist and author, Nick Dunbar, in describing a new level of complexity facing banks and derivatives. Ironically, Thurdsay night’s emergency conference call by JP Morgan of a massive $2 billion unavoidable loss is perhaps a confirmation of what banks are now starting to grapple with.
After attending a recent conference in Barcelona featuring some of the top thinkers in quantitative analysis, Dunbar says that the financial crisis has now left "quants grappling with a new landscape…that has turned the old world upside down."
What is this new landscape he’s referring to? One in which derivatives have become so chaotic that they no longer obey the classical laws of physics. The derivatives world now, he says, is beginning to operate at a level of mathematical complexity associated with quantum physics—specifically, a field known as "Quantum Chromodynamics".
Up until now derivatives mostly obeyed "simple" and definable mathematical models first invented in the 1970s. However, today, in the aftermath of the financial crisis, a new level of hyperconnectedness has resulted where "complex interactions between banks and within portfolios dominate the pricing of derivatives, as opposed to the behavior of the assets the contracts are supposedly ‘derived’ from." This math, he says, is the same for "unseen particles" like quarks and gluons "trapped within atomic nuclei."
More…
Greece Gets Hint of Leeway From Euro Officials CIGA Eric
Liquidity floats all boats until the public can no longer afford to eat.
Headline: Greece Gets Hint of Leeway From Euro Officials
European governments hinted at giving Greece extra time to meet budget-cut targets, as long as the financially stricken country’s feuding politicians put together a ruling coalition committed to austerity. Calling talk of a Greek pullout from the euro “nonsense” and “propaganda,” Luxembourg Prime Minister Jean-Claude Juncker said only a “fully functioning” Greek government would be entitled to tinker with the conditions attached to 240 billion euros ($308 billion) of rescue aid. “The government would have to stand by the program,” Juncker told reporters after chairing a meeting of euro-area finance ministers in Brussels late yesterday. “If there are dramatic changes in circumstances, we wouldn’t close ourselves off to a debate over extending the deadlines.” Greece’s post-election impasse multiplied the signs of stress in European markets yesterday. The euro fell for the 10th time in 11 days and stocks surrendered a two-day gain. Bond yields in recession-wracked Spain, the next potential candidate for financial support, touched a five-month high.
Source: bloomberg.com
More…
Jim,
Perhaps an ancillary question about derivatives which approach 1 trillion trillion is not just how they relate to global GDP but also how they relate to the global total of equity and fixed income markets. This leads one not totally familiar with the situation to believe that derivatives are not much more than a huge amount of side bets one may see occur while watching professional sports-and some participants in the betting may not be able to pay off. What even justifies the entire structure (besides greed and corruption so perhaps I asked and answered my own question)?
CIGA Hal
Hal,
One quadrillion, one hundred and 44 trillion before the BIS changed their computer simulated valuation model. All are unfunded specific performance contracts.
You can’t compare that to any real market that clears. How do you think these institutions got their billions? By commissions? That is nuts.
OTC derivatives began this problem and are the end game of this misadventure.
Jim
Dear CIGAs,
Click here to read the full article on KingWorldNews.com
Embry – This is One of the Greatest Statements of All-Time
With global stock markets tumbling, along with gold and silver, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry discussed gold and other major markets, but first, here is what Embry had to say regarding recent derivatives turmoil: “This makes me very uncomfortable because I’ve always been very wary of the whole derivative situation. I believe the notional value of the outstanding derivatives is comfortably north of one quadrillion dollars. The Bank of International Settlements changed the definition, so they said there is only $700 trillion worth of them, rather than one quadrillion.”
John Embry continues:
But it doesn’t make any difference, these (derivatives) are many, many multiples of the world GDP. If these things get in any trouble, and I think the JP Morgan thing may be the first sign of significant trouble again, it’s fantastically important to the whole financial situation. In a rational market the gold price should have been up $100, not down $40 in the wake of this.
I would defer to Jim Sinclair, who I have the utmost respect for on this one. He has said for a long time that the derivative situation ‘guarantees quantitative easing to infinity,’ which is one of the great statements of all-time….
“I think this JP Morgan revelation just confirms that everything Jim’s been saying for a long time on this subject is dead right. The fact that we will have QE to infinity would suggest that an intelligent person would be buying every single ounce of gold and silver he can get his hands on at these prices.
They are trying to sell this idea that gold goes down on the ‘risk off’ trades that we are experiencing now. And that the ‘risk off’ buyers all go running into the US dollar and the US bond market. I think those are two of the riskiest things on the planet. But somehow they are still getting this ‘Pavlovian response’ that when things are bad out there, you should sell your gold and buy US bonds. It’s ridiculous.
It’s important, at this time, that people who have been around, and have a pretty good grasp of what’s unfolding, should express their views to the public just to counteract the propaganda they are receiving from mainstream media. It’s tough enough out there without being lied to all of the time.”
More…
Jim Sinclair’s Commentary
A whale in the waters of negative yields By Bill Gross
In nature, the mighty whale depends upon the lowly plankton for its survival and the same analogy rightly applies to global developed economies, which have dominated trade and finance at the expense of developing nations. Now the tides may be turning as once minuscule global economies find themselves in possession of a plethora of reserves. The hunted may be turning into the hunter and the global monetary system, which has evolved and morphed over the past century – but always in the direction of easier, cheaper and more abundant credit – may have reached a point at which it can no longer operate in the same way. Major changes to our global monetary system may lie on a visible horizon.
The struggle between financial whales and plankton – powerful reserve-ladened creditors and much weaker debt-ladened borrowers – is significantly dependent on the successful functioning of how the world conducts and pays for commerce (our global monetary system). Historically, several different systems have been employed but they have either been commodity-based systems – gold and silver primarily – or a fiat system – paper money. After rejecting the gold standard at Bretton Woods in 1944, developed nations accepted a hybrid based on dollar convertibility and the fixing of gold at $35 per ounce.
When that was overwhelmed by US fiscal deficits and dollar printing in the late 1960s, President Nixon ushered in a rather loosely defined system that was still dollar-dependent for trade and monetary transactions but relied on the consolidated “good behaviour” of G7 central banks to print money parsimoniously and to target inflation close to 2 per cent.
Heartened by Paul Volcker in 1979, markets and economies gradually accepted this implicit promise and global credit markets and their economies grew like baby whales, swallowing up tonnes of debt-related plankton as they matured. The global monetary system seemed to be working smoothly, and instead of Shamu, it was labelled the “great moderation”.
More…
Total Donations this year...$10.00 Thank You James
I'm PayPal Verified
When we last visited this price area on gold in December 2011, I challenged the loud-mouthed gold bears to wager $1 million dollars on gold hitting $2,000 before $1,000. I offered the world’s worst gold forecaster and the “Tokyo Rose” of the gold market to double that bet, but instead he/she did his/her usual “duck and cover” dribble (Jon, the public knows how bad your track record is no matter how much a few in the media make you think your past forecasts were forgotten).
Since then, an avalanche of bearish forecasters have hit the gold market (including one that comes and goes with his gold his only worth $800 or usually half the going price) and many former bulls have gone into hiding and/or are hedging their forecasts so not to look like they are ardent bulls anymore.
Well, this former “legend in my own mind” who was once CEO and Chairman of the “Me, Myself and I” society may appear to be brash, but with what I believe is one of the most crucial junctions in the mother of all gold bull markets upon us (Please recall the flack I took when I boldly said the same when we couldn’t stay above $500, $800 and then the crap that flew around $1,000), I feel like John Belushi in Animal House.
Read More @ Grandich.com
Jim Sinclair’s Commentary
Here is the latest from John Williams’ ShadowStats.com.
- Core‰ CPI-U Inflation Hits Cycle High
- April Year-to-Year Inflation Softens: 2.3% (CPI-U), 2.4% (CPI-W), 9.9% (SGS)
- Real Average Weekly Earnings in Ongoing Year-to-Year Decline
- Retail Sales Were Stagnant, Statistically Insignificant
April CPI, Real Earnings, Retail Sales, Euro
Web-page: http://www.shadowstats.com
Jim Sinclair’s Commentary
If you need more reasons for owning gold then this article by Charles
Smith of the Martenson Report fits quite nicely. Chris strikes me as a
well grounded source that deserves respect.
"Self-Reliance, Community, and the Marketplace"
Readers here are well-acquainted with the dire consequences triggered when Central States attempt to “inflate our way to prosperity” via hyper-inflation and the destruction of currency, and with the basic investment strategy of investing in tangible assets and local enterprises. In this sense, this essay delivers no new strategy except the obvious ones of diversifying away from dependence on the Central State, as well as financial assets denominated in fiat currencies and preparing for a reduction in government services and payments, either directly or indirectly via high inflation.
The End of the Free Lunch by Charles Hugh Smith, contributing editor
Monday, May 14, 2012
Executive Summary
How the State supplanted community enterprise with an entitlement-driven economy
Why the State’s entitlement approach is unsustainable, mathematically — and is finally imploding as we watch
What to expect at this point: more egregious abuse to keep the system working, ultimately triggering serious social unrest
How self-reliance and local enterprise will emerge as paramount once the current State system collapses
Part I: Acknowledging the Arrival of Peak Government
Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government. The central misconception of Peak Oil — that it’s not about “running out of oil,” it’s about running out of cheap, easy-to-access oil — can also be applied to Peak Government: It’s not about government disappearing, it’s about government shrinking.
Central government — the Central State — has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.
Peak Government is not a reflection of government services or the millions of individuals who work in government; it is a reflection of four key systemic forces that drove State expansion are now either declining or reversing.
More…
Jim Sinclair’s Commentary
A small look back is the way forward. Here is my former partner Yra Harris’ blast from the past as it applies to the future.
From my viewpoint the existence of as many OTC derivatives as there were in 2008 guarantees QE to infinity.
It is not a choice. There is no other alternative.
"If investors lose their confidence, Bernanke’s beloved PORTFOLIO BALANCE CHANNEL will be rendered null and void. Between Europe’s credit crisis and the coming fiscal cliff, the wealth effect is diminishing. The FED may not want another round of“LIQUIDITY ENHANCEMENT” but the ghosts of 1937 are rattling their chains in UNCLE BEN’S ATTIC. Wonder if there are any VINTAGE MODELS THERE."
Notes From Underground: AUGUST 30 ,2002 … A Revisit To The SOAPBOX
LETTERS TO THE EDITOR – Profit centers too big to fail.
By YRA HARRIS.
30 August 2002
Financial Times
(c) 2002 The Financial Times Limited. All rights reserved
Sir, John Plender (“How banks got in a mix”, August 21) correctly identifies the systemic dangers that accompanied the passage of the Graham-Leach-Bliley act. The repeal of Glass-Steagall has pushed the US banking system to the brink of “moral hazard”. The conglomeration of all financial services under one roof has entangled banks in numerous ethical conflicts. Additionally, Graham-Leach-Bliley has made several institutions so large that the Fed cannot allow them to fail.
A single institution’s deep involvement in every facet of financial dealings does not create greater synergy but greater risk. These large, private profit centres know they are too big to collapse. This realisation adds great uncertainty to the entire financial landscape. Rewarding private profits while socialising the risk is a pathway to disaster. Glass-Steagall should never have been repealed without a bank forfeiting its right to Federal Deposit Insurance Corp insurance.
Well, U.S. bankers have done it again. The best of the breed,JPMorgan and JAMIE DIMON, was blindsided by a large loss in its “hedging” operation. It is amazing how, since the REPEAL OF GLASS-STEAGALL, we have seen story after story of bank trading operations bringing the global financial system to the edge of a“SYSTEMIC CLIFF.” Since the repeal of the Glass-Steagall, the international system teeters on the precipice of a calamity. Now ifCOMMERCIAL BANKS want to be aggressive and trade like the proverbial hedge fund, then BANKS that are holding companies have to surrender their FDIC INSURANCE and pay for the use of people’s money
A hedge fund uses other people’s money but at least investors are compensated for quality performance. In the case of theBANKS, the PUBLIC is saddled with the risk while the bank employees reap the greater share of the profits. If TOO BIG TOO FAIL BANKS had to shed the safety net of FDIC insurance and pay for funds based on market-determined risk, then the financial system would be much more stable. If banks wish to be proprietary traders, then their positions should be posted in a real-time manner and the appropriate risk factors assigned to its cost of money.
One of the biggest GAME CHANGERS FROM THE REPEAL OF GLASS-STEAGALL WAS THAT THE FINANCIAL SYSTEM LOST ITS FIDUCIARIES. When GOLDMAN was an investment banker rather than a peddler of trash DO YOU THINK IT WOULD HAVE EVER ADVISED A CLIENT TO PURCHASE SUBPRIME DEBT THAT WAS CONVENIENTLY AAA RATED? DODD-FRANK IS A SUPERFLUOUS PIECE OF LEGISLATION THAT IS LOADED WITH THE RANTINGS OF A HERD OF LOBBYISTS. HOW MANY BACK ALLEYS IS THE REGULATION CAN TO BE KICKED DOWN?
***HOW CAN YOU PORTFOLIO BALANCE CHANNEL WHILE STANDING ON A FISCAL CLIFF? This is the dilemma that Chairman Bernanke has left the market-challenged to resolve. At the post-FOMC press conference on April 25, Ben Bernanke warned the country that Congress needed to act in a responsible fashion to head off the coming “fiscal cliff” that would have a dramatic impact upon the economy. Economists are projecting that the FISCAL CLIFF could have a negative GDP effect of anywhere from 2-5%. It’s no small change to an economy striving to gain traction as it attempts to circumvent the headwinds of the European DEBT CRISIS.
It was a statement that Mr. Bernanke will come to regret as much as Alan Greenspan’s advising U.S. homeowners to utilize their residences as PIGGY BANKS. To offer up dire warnings and then offer little advice or leadership has done nothing but rattle the markets and shake investor confidence. As the election season commences and leadership takes a vacation, markets are deleveraging as RISK OFF is the daily clarion call.
If investors lose their confidence, Bernanke’s beloved PORTFOLIO BALANCE CHANNEL will be rendered null and void. Between Europe’s credit crisis and the coming fiscal cliff, the wealth effect is diminishing. The FED may not want another round of“LIQUIDITY ENHANCEMENT” but the ghosts of 1937 are rattling their chains in UNCLE BEN’S ATTIC. Wonder if there are anyVINTAGE MODELS THERE.
More…
Hi Jim,
This is a very interesting and ominous scientific observation regarding derivatives and the inability of their creators to control them.
As the article states, the banksters have “created a monster they cannot control—a monetary system that operates at a level beyond human comprehension.”
It doesn’t get much scarier than that, does it?
Best regards,
CIGA Black Swan
Chaos, Derivatives, and Quantum Physics By Cris Sheridan
05/11/2012
Every day the financial markets get more chaotic—a fact that couldn’t be made any more clear than with a recent revelation given by ex-physicist and author, Nick Dunbar, in describing a new level of complexity facing banks and derivatives. Ironically, Thurdsay night’s emergency conference call by JP Morgan of a massive $2 billion unavoidable loss is perhaps a confirmation of what banks are now starting to grapple with.
After attending a recent conference in Barcelona featuring some of the top thinkers in quantitative analysis, Dunbar says that the financial crisis has now left "quants grappling with a new landscape…that has turned the old world upside down."
What is this new landscape he’s referring to? One in which derivatives have become so chaotic that they no longer obey the classical laws of physics. The derivatives world now, he says, is beginning to operate at a level of mathematical complexity associated with quantum physics—specifically, a field known as "Quantum Chromodynamics".
Up until now derivatives mostly obeyed "simple" and definable mathematical models first invented in the 1970s. However, today, in the aftermath of the financial crisis, a new level of hyperconnectedness has resulted where "complex interactions between banks and within portfolios dominate the pricing of derivatives, as opposed to the behavior of the assets the contracts are supposedly ‘derived’ from." This math, he says, is the same for "unseen particles" like quarks and gluons "trapped within atomic nuclei."
More…
Greece Gets Hint of Leeway From Euro Officials CIGA Eric
Liquidity floats all boats until the public can no longer afford to eat.
Headline: Greece Gets Hint of Leeway From Euro Officials
European governments hinted at giving Greece extra time to meet budget-cut targets, as long as the financially stricken country’s feuding politicians put together a ruling coalition committed to austerity. Calling talk of a Greek pullout from the euro “nonsense” and “propaganda,” Luxembourg Prime Minister Jean-Claude Juncker said only a “fully functioning” Greek government would be entitled to tinker with the conditions attached to 240 billion euros ($308 billion) of rescue aid. “The government would have to stand by the program,” Juncker told reporters after chairing a meeting of euro-area finance ministers in Brussels late yesterday. “If there are dramatic changes in circumstances, we wouldn’t close ourselves off to a debate over extending the deadlines.” Greece’s post-election impasse multiplied the signs of stress in European markets yesterday. The euro fell for the 10th time in 11 days and stocks surrendered a two-day gain. Bond yields in recession-wracked Spain, the next potential candidate for financial support, touched a five-month high.
Source: bloomberg.com
More…
Jim,
Perhaps an ancillary question about derivatives which approach 1 trillion trillion is not just how they relate to global GDP but also how they relate to the global total of equity and fixed income markets. This leads one not totally familiar with the situation to believe that derivatives are not much more than a huge amount of side bets one may see occur while watching professional sports-and some participants in the betting may not be able to pay off. What even justifies the entire structure (besides greed and corruption so perhaps I asked and answered my own question)?
CIGA Hal
Hal,
One quadrillion, one hundred and 44 trillion before the BIS changed their computer simulated valuation model. All are unfunded specific performance contracts.
You can’t compare that to any real market that clears. How do you think these institutions got their billions? By commissions? That is nuts.
OTC derivatives began this problem and are the end game of this misadventure.
Jim
Dear CIGAs,
John Embry has paid me a great compliment. Please check out the article below.
Jim
Click here to read the full article on KingWorldNews.com
Embry – This is One of the Greatest Statements of All-Time
With global stock markets tumbling, along with gold and silver, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry discussed gold and other major markets, but first, here is what Embry had to say regarding recent derivatives turmoil: “This makes me very uncomfortable because I’ve always been very wary of the whole derivative situation. I believe the notional value of the outstanding derivatives is comfortably north of one quadrillion dollars. The Bank of International Settlements changed the definition, so they said there is only $700 trillion worth of them, rather than one quadrillion.”
John Embry continues:
But it doesn’t make any difference, these (derivatives) are many, many multiples of the world GDP. If these things get in any trouble, and I think the JP Morgan thing may be the first sign of significant trouble again, it’s fantastically important to the whole financial situation. In a rational market the gold price should have been up $100, not down $40 in the wake of this.
I would defer to Jim Sinclair, who I have the utmost respect for on this one. He has said for a long time that the derivative situation ‘guarantees quantitative easing to infinity,’ which is one of the great statements of all-time….
“I think this JP Morgan revelation just confirms that everything Jim’s been saying for a long time on this subject is dead right. The fact that we will have QE to infinity would suggest that an intelligent person would be buying every single ounce of gold and silver he can get his hands on at these prices.
They are trying to sell this idea that gold goes down on the ‘risk off’ trades that we are experiencing now. And that the ‘risk off’ buyers all go running into the US dollar and the US bond market. I think those are two of the riskiest things on the planet. But somehow they are still getting this ‘Pavlovian response’ that when things are bad out there, you should sell your gold and buy US bonds. It’s ridiculous.
It’s important, at this time, that people who have been around, and have a pretty good grasp of what’s unfolding, should express their views to the public just to counteract the propaganda they are receiving from mainstream media. It’s tough enough out there without being lied to all of the time.”
More…
Jim Sinclair’s Commentary
Do not be discouraged by the gold enemies within and outside of the
community. No problems have been solved. In fact they have gotten worse.
Stay the course!
A whale in the waters of negative yields By Bill Gross
In nature, the mighty whale depends upon the lowly plankton for its survival and the same analogy rightly applies to global developed economies, which have dominated trade and finance at the expense of developing nations. Now the tides may be turning as once minuscule global economies find themselves in possession of a plethora of reserves. The hunted may be turning into the hunter and the global monetary system, which has evolved and morphed over the past century – but always in the direction of easier, cheaper and more abundant credit – may have reached a point at which it can no longer operate in the same way. Major changes to our global monetary system may lie on a visible horizon.
The struggle between financial whales and plankton – powerful reserve-ladened creditors and much weaker debt-ladened borrowers – is significantly dependent on the successful functioning of how the world conducts and pays for commerce (our global monetary system). Historically, several different systems have been employed but they have either been commodity-based systems – gold and silver primarily – or a fiat system – paper money. After rejecting the gold standard at Bretton Woods in 1944, developed nations accepted a hybrid based on dollar convertibility and the fixing of gold at $35 per ounce.
When that was overwhelmed by US fiscal deficits and dollar printing in the late 1960s, President Nixon ushered in a rather loosely defined system that was still dollar-dependent for trade and monetary transactions but relied on the consolidated “good behaviour” of G7 central banks to print money parsimoniously and to target inflation close to 2 per cent.
Heartened by Paul Volcker in 1979, markets and economies gradually accepted this implicit promise and global credit markets and their economies grew like baby whales, swallowing up tonnes of debt-related plankton as they matured. The global monetary system seemed to be working smoothly, and instead of Shamu, it was labelled the “great moderation”.
More…
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