Bill Gross: The Global Monetary System Is Reaching Its Breaking Point
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 efficiently and equitably to promote economic growth and the fair distribution of its benefits. Future changes, which lie on a visible horizon, may not be so beneficial for our ocean’s oversized creatures. Both the lower quality and lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. Neither condition was considered feasible as recently as five years ago. Now, however, with even the United States suffering a credit downgrade to AA+ and offering negative 200 basis point real policy rates for the privilege of investing in Treasury bills, the willingness of creditor whales – as opposed to debtors – to support the existing system may soon descend. Such a transition occurs because lenders either perceive too much risk or refuse to accept near zero-based returns on their investments. “There she blows,” screamed Captain Ahab and similarly intentioned debt holders may soon follow suit, presenting the possibility of a new global monetary system in future years, or if not, one which is stagnant, dysfunctional and ill-equipped to facilitate the process of productive investment.Albert Edwards Has Some Words Of Discouragement: Welcome To S&P 500 Hell
"Expect the S&P500 to decline decisively below its March 2009, 666 intraday low. All hope will be crushed."
Market Shocked By Recessionary PMI Print, Gold Pummeled, Apple Slides, FaceBerging Continues
Down.
ES is testing 1300. Gold pushing back down to $1550 (and the rest of
the commodity complex plunging with WTI at $86.60), credit gapping
wider, Treasury yields plunging to new records (10Y <1.57%!! and 30Y
-20bps this week). FB -2.8%, AAPL -1.2% (down $12 fdrom opening highs),
MS -1.3%. JPY below its 200DMAChicago PMI Plunges To 52.7, Lowest Print Since September 2009
Submitted by Tyler Durden on 05/31/2012 - 09:47 Chicago PMI China Markit Volatility
The latest economic data point comes out, which is the Chicago PMI, not
to be confused with the meaninglessly duplicate MarkIt ISM
Manufacturing PMI which was released earlier this month, and sure enough
it confirms once again we are on a full glideslope to more QE. At
52.7, it collapsed from the prior print of 56.8, and missing
expectations of 56.2. This was the lowest print since September of 2009. And scene. NEW QE is now 100% assured.Investors Must Own Gold, But Sentiment Is Negative
Admin at Marc Faber Blog - 50 minutes ago
Investors must own some gold but as I have maintained for the last six
months or so, we are still in a correction period and maybe gold breaks
down below the low that we reach on the december 29th, 2011, which was 1522
USD/ounce. That's a possibility.
Related stocks and ETF`s: SPDR Gold Trust ETF (GLD), Newmont Mining (NEM),
Goldcorp (GG), Barrick Gold (ABX)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
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Announced U.S. Job Cuts Jump 67% From Year Ago, Challenger Says
Eric De Groot at Eric De Groot - 1 hour ago
The public is beginning to realize what Insights readers already know, the
labor market is weak and the economy is slowing. The slow uptick in the
announced layoffs since 2010 illustrates this point (chart). Chart:
Challenger, Gray, and Christmas Announced Layoffs (ALO) And YOY Change
Headline: Announced U.S. Job Cuts Jump 67% From Year Ago, Challenger Says
Job cuts...
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content, and more! ]]
Today’s Items:
Yields on Spain’s sovereign debt are
rising and the economy is falling deeper into recession. In fact,
Madrid was considering directly injecting government bonds to pay for
the rescue of Bankia. So, does Spain need a bailout? Hell, with 281.6 tonnes in gold reserves, that is exactly what is going to be offered.
We’ll have to start calling “unexpectedly”
the “U” word. Contracts to purchase previously owned homes unexpectedly
fell 5.5 percent in April to a four-month low. The debt-fueled housing
bubble is forcing home prices to fall; such that, millions of Americans
owe more on their homes than they are worth. Experts are saying that
that the deflation in housing prices are bottoming out.
The fuel for gold and silver to go up did
not go away. What is happening is people, worldwide, are throwing their
money around hoping to find something that will stick. The banking
system in China, that is actually worse than in the West, is forcing
Chinese to grab as much physical gold and silver as possible. Wealthy,
private investors and Central Banks are buying physical. And if you have
the means, so should you.
In an interview with Harvey Organ, he discusses that GLD
vaults hold physical gold; however, it is not owned by GLD. It has been
be re-swapped back to the Bank of England and is; in fact, probably
Arab investor’s gold! Also, he says that the COMEX,
the LBMA, and the Bank of England is only one physical inventory of
gold. Just imagine the fun when they all want it back. In addition, it
turns out that JP Morgan’s unfolding hedging crisis could bring down the
whole financial system of the world. In short, prepare first and keep
stacking.
Here are a few…
1. In 1947, the U.S. government wiretapped one or two phones… today virtually everything is recorded.
2. In 1947, the U.S. debt was $248 billion after World War II, today it is nearly $16 trillion.
3. In 1947, dependency on the government was virtually unheard of, today it is nearly 50 million.
1. In 1947, the U.S. government wiretapped one or two phones… today virtually everything is recorded.
2. In 1947, the U.S. debt was $248 billion after World War II, today it is nearly $16 trillion.
3. In 1947, dependency on the government was virtually unheard of, today it is nearly 50 million.
Well, we now know that Charlie will not be vacationing near California for tuna that taste good. In fact, Charlie may opt out of the Northern Pacific since Cesium 137 has been detected in Tuna off the California coast. Sorry Charlie.
Investors See The US Dollar As A Safe Heaven
Admin at Jim Rogers Blog - 2 hours ago
I do own the U.S. dollar. People see it as a safe haven, but it is not a
safe haven. But people think that, and so therefore I own the dollar. There
is more turmoil coming out of Europe and other currency markets, so people,
when they try to look for a place to flee, they flee to the dollar, so I
fled to the dollar, too. The dollar is terribly flawed, terribly flawed
over the next few years, so be very careful. - *Moneynews.TV *
*
*
*Related: PowerShares DB US Dollar Index Bullish (UUP) *
*Jim Rogers is an author, financial commentator and successful
international investor. He has be... more »
U.S. 10-year yield sinks to record low
Eric De Groot at Eric De Groot - 2 hours ago
The 10-year bond diffusion index (DI) inches closer to generating a sell
signal as fear and panic grow. A lot of investors are rushing into the
safety of bonds while yields plunge to 60-year lows. The falling DI trend,
often seen in but not limited to the precious metals market, illustrates a
transfer from strong to weak hands. Chart: US 7-10 YR (IEF) And US 10YR
Diffusion Index (DI)...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]Europe's "Teleportation To Safety" In One Chart
While
European credit markets have been a roller-coaster today - returning
back to their wides now - there is one thing that has remained
constant. The inexorable flood of money into Switzerland. Rather
shockingly 2Y Swiss interest rates have dropped to -26bps
(yes, no typo - you pay 26bps to allow the Swiss government to borrow
your money). These are obviously record lows and suggest that events are
unfolding extremely rapidly (and those bets on the unsustainability of
the SNB peg may be gathering pace).Gold Rises $40 As Markets Fall Sharply - Safe Haven "Tipping Point"?
Gene Arensberg of the Got Gold Report says that the COT data “suggests that dips for gold and silver should be exceedingly well bid just ahead. Indeed, the structure of the COT is about as bullish as we have seen it for silver futures.” The supply demand fundamentals remain very sound with gold demand expected to exceed supply again this year, according to the World Gold Council who have said that gold has bottomed or close to bottoming. Gold will extend annual gains for a 12th year as bullion is “near” a bottom and demand will keep exceeding mine output, according to the World Gold Council. Mine production will grow 3% this year from last year’s 2,800 metric tons, while demand may be unchanged or slightly lower from a record 4,400 tons, said Marcus Grubb, managing director of the WGC in an Bloomberg interview in Tokyo. Mine supplies will remain in a deficit “for a foreseeable future,” Grubb said. Bullion is “near to the bottom at current prices, indicating gold will move back up again,” he said. Recycling has risen to make up for the gap between demand and mine output, he said. “Some of the drivers of the increase in demand are structured, central banks for example, the rise of Chinese demand and the wealth increase in Asia, including India and China as well as smaller economies,” he said. Central banks have increased gold purchases on concern about the dollar, the euro and the sovereign debts, Grubb said. The banks’ net purchases last year were the most since 1964. In 2010, they turned to a net buyer for the first time in 15 years.10Y Treasury Under 1.6% - Record Low Yields Continue
With
10Y rates under 1.6%, new record low yields, we suspect Bernanke's
'keep rates low to help housing via QE' argument is going to be a tough
one. Perhaps its just 'print money to save the world for 3 more months'
honesty will just have to come out...First Q1 GDP Revision In Line With Expectations; Initial Claims Spike
And so the preparation for a disappointing NFP print continues. While the first revision to Q1 GDP came precisely in line with expectations of a 1.9% print, below the first GDP print of 2.2% (which was expected to print at 2.5% on April 27), it is largely irrelevant as it is backward looking. Instead, what matters is today's ADP miss, and the just released initial claims number which as we explained minutes ago has to come in bad to prepare us for a horrible NFP number tomorrow which in turn unleashed the NEW QE, $130 gas, and all those other things which made Einstein define insanity. Sure enough, initial claims printed at 383K, up from the upward revised 373K (370K before), which is a 13K miss of expectations. Continuing claims came at 3242K on expectations of 3250K, and down from an upward revised 3278K. What is odd is that in the week ended May 12 we did not see another weekly plunge in the 60-70K ballpark of those dropping off from EUCs and Extended claims, and instead the number was a tiny positive. Expect the sell-side brigade to cut its NFP forecasts in advance of tomorrow's number even more.
ADP Private Payrolls Print At 133K, Miss Expectations; Manufacturing Jobs Drop Two Months In A Row
That the ADP would miss today's expectations of 150K is no surprise: after all as we have been explaining for a while, the only way the Fed will have a green light to proceed with NEW QE if it so chooses at the June 19-20 meeting, is if the economic data suddenly turn horrendous. Which means tomorrow's NFP data is make or break: in fact, as far as markets are concerned, the worse the better - should a -1,000,000 NFP print come in, stocks will soar. Which is why the ADP print, which indeed was a miss, of 133K raised eyebrows that it wasn't bigger. Still, 3rd consecutive miss of expectations in a row, and 4th out of the last 5, it gives the BLS enough rope with which to hang itself, and potentially the president, who may have no choice but to sacrifice job creation "momentum" heading into the presidential race, in order to keep stocks higher.Bankia No Longer Throwing In The Towel
Yesterday's post of the day was
the revelation that nationalized Bankia was throwing in the proverbial
(free, Spiderman-embossed) towel with every €300 deposit account. To
anyone who managed to take advantage of this once in a lifetime offer
(the other one of course being Goldman's trade reco to buy stocks and
short bonds from March 21, which as noted yesterday has lost 29% in two months): as of today, the offer has been pulled. Did
the bank run out of towels? Was it embarrassed at exposing its dirty
linen? Or did the bank have to pledge all remaining towels as its only
remaining collateral at the ECB for tens of billions in €s? Sadly, we
will likely never know.Frontrunning: May 31
- Dublin in final push for EU treaty Yes vote (FT)
- Spain cries for help: is Berlin listening? (Reuters)
- Crisis draws squatters to Spain's empty buildings (Reuters)
- EU World Bank Chief Urges Euro Bonds (WSJ)
- but... EU: Current Plan Is Not To Let ESM Directly Recapitalize Banks (WSJ)
- Graff pulls Hong Kong IPO, latest victim of weak markets (Reuters) - was MS underwriter?
- EU Weighs Direct Aid to Banks as Antidote to Crisis (Bloomberg)
- Dewey's bankruptcy: Let the rumble begin (Dewey)
- More are cutting off Greek trade: Trade credit insurers balk at Greek risk (FT)
- Rosengren wants more Fed easing; Dudley, Fisher don't (Reuters)
- EU throws Spain two potential lifelines (Reuters)
- Fed's Bullard says more quantitative easing unlikely for now, warns on Europe (Reuters)
Overnight Sentiment: Selling Exhaustion
Due to lack of apocalyptic headlines in the overnight session, and some speculation that Spain will get a one year reprieve in hitting its fiscal pact targets, risk has seen a modest rebound, even if the economic data across Europe was sideways at best, and Goldman even released a note titled "Increasing signs that the improvement in the German labor market is coming to an end." Yet the market, desperate for good news, took reports of German retail sales and French consumer spending, which came slightly above expectations, as an indication that somehow, somewhere Europe may be getting better and ran with it. Of course, with the EUR oversold to record levels, not much is needed for a brief covering spree. That said, with lots of economic news on the docket, including the Irish Fiscal Pact referendum, expect much headline kneejerk reactions during the trading day, which will likely make for a very volatile session.Mere Mortals In A Central Banker World
Plus 5% or minus 5%? That is the question and frankly it hinges far more on central bank and political policy than on any economic data, earnings, new products, etc. So it feels like TARP week all over again. We may not get the 8% swings we got then, but the volatility is picking up and it is difficult to do much in the short term when the real driver, like it or not, will be what decision a bunch of politicians and central bankers, each with their own agenda, goals, and baggage come up with.Please Donate
Thank You
Today John Embry told King World News, “This situation is
unprecedented. The world has never, ever been in a condition like
this.” Embry, who is Chief Investment Strategist of the $10 billion
strong Sprott Asset Management, also told KWN, “anyone that is
complacent will be shocked at the chaos that is heading our way.” Here
is what Embry had to say about the situation: “I think we’re in
an extraordinary place. It’s becoming obvious that Europe is
imploding, and the powers that be really don’t have any solutions. I’m
very worried about China. Lawrence Summers recently said China may have
a year in which it only grows 7% in the next decade.”
In what CNBC calls ‘a stupid decision‘,
JP Morgan has reportedly sold $25 billion in profitable bonds and
securities to offset trading losses from its IG9 derivatives crisis.
Louis James:
Welcome, ladies and gentlemen. Here with us is Greg Weldon of Weldon
Financial, who has just given a talk. Why don’t you give us the quick
version for our viewers who didn’t make it today?
Why
invest in silver rather than something else? Last year the gray metal
scaled its 1980 high and reached an all-time high of $48.78 an ounce as
investor demand swelled. “Prices have pulled back, but we expect them to
retest the recent high at some point, “Hanlon says. “Though silver’s
usage in photography has declined, new industrial applications are being
discovered for it all the time.”
The euro zone should move toward a banking union and consider
recapitalizing its banks using its permanent bailout fund, the European
Stability Mechanism, the European Commission said on Wednesday, in
remarks that briefly boosted stocksand the euro.
In what appears to be a growing movement in the United States
Congress, at least two different pieces of legislation have been
introduced during the course of this year that would involve the
stripping of travel rights and the possession of passports for a variety
of reasons.
Darn! Day after day, the Dow is headed down.
While the 1% slogan of OWS was catchy, the real power players and
enemies of humanity reside in a much, much smaller 0.0001% or so. This
group includes dynastic banking families as well as a lot of European
royals who supposedly have “no power.” If you believe that, I’ve got a
bridge to sell you. In light of the fact that the Bilderberg meeting is
being held in the United States starting today through June 3, I
suggest everyone watch this one minute video.
Recently, Bill 
Today top Citibank analyst, Tom Fitzpatrick, spoke with King World
News about global markets, gold and the US dollar. Fitzpatrick, a 28
year veteran and top analyst at Citibank, which has $1.3 trillion in
assets, said that, despite bounces, stock markets will continue to head
lower in the coming weeks. Fitzpatrick included two important charts,
but first, here is what he had to say about the moves in the US dollar
and the euro: “Our bias, as it has been for a number of weeks,
is that we’ve started another down-move in euro/dollar, very similar to
what we saw in late August, early September of last year. That yielded
quite a move once we made the technical break.” 
It
seems the Muppets have been well-and-truly Oscar'd this time.
Combining Goldman's once-in-a-lifetime equity buying opportunity
position recommendation with their short Treasuries trade has produced
an astoundingly un-positive return of -29% in just 48 days
(based on SPY (stocks) and TBT (ultra-short TSYs given duration and
beta). Extrapolated using the only tool that counts (Birinyi's famous
ruler) this means your account is Corzined by Thanksgiving - happy holidays.
"People need to stop expecting simple solutions"
is how David Santschi succinctly describes to Charles Biderman the
delusion that so many European leaders (and seemingly US and European
investors) perceive our world. The prevalence of lying and delusion in
Europe is what worries the TrimTabs' chaps the most - especially since
in a Fiat money system (where money is backed by nothing but
confidence) - with the people running the system lying on a grand scale, the chance of systemic failure are very high.
He is careful to point out that this is not just a European issue, we
in the US are just as delusional, but the European issues are simply
more acute. Simply put, "losses have to be recognized honestly" and
Biderman's bro' asks rhetorically "why on earth are we five years on
still trying to bailout bondholders and banks so they don't lose money
on their crappy debt - it's crazy." The two gentlemen of the Bay Area then describe why money-printing does not solve the problem
as Europe faces solvency, not liquidity, problems (detailing exactly
our thoughts on the fact that so many of the supposed solutions
have/will fail and "there aren't any painless solutions to a debt problem".
Avoiding all EUR-exposure, holding USD cash/TSYs short-term, and gold
as a long-term insurance cover is how they suggest one is positioned.
While the tone is less 'ranty', the content is just as pithy - six
minutes well-spent for a summary of why Europe's (and the US) problems
are far from over - no matter how much hope is placed in CB largesse.
Between
headlines of Bankia's demise and the growing deposit outflows from
Spanish banks, perhaps the market is doing its job. According to the 
If
we had a penny for every equity rally away from credit reality that
converged back to credit's less-hopiness, we would now have made 5
pennies in the last 6 trading days. We pointed out last night that
equities surged into the close on small average trade size as credit
remained far less sanguine and the now-ubiquitous open in Europe started
the reversion as stocks fell rapidly, below Friday's close - tracking back with high-yield credit's deterioration. HYG gave up yesterday's gains and pops back under fair-value but rather notably, investment grade credit (IG) underperformed significantly today
- which is unusual in a sell-off day and signals either more fallout
from JPM reaching for hedges (IG9 10Y 166bps offered +5bps) or
investors grabbing the cheapest macro overlay from a carry perspective.
Gold and Silver outperformed admirably on the day, however the upward
move appears to be more of a reaction back to equity, treasury, and USD
reality as the afternoon saw the 4 markets recouple and trade together
(after disconnecting notable yesterday). Treasury yields dropped the most in 7 months to new record lows in 10Y and close for 30Y. Both implied correlation (systemic risk) and VIX (normal vol) jumped higher
today as the latter moved almost 3 vols to close above 24% (its biggest
pop in almost 3 months). A heavier volume open at highs, close at lows
day for stocks with little to signal capitulation in terms of trade size
- and across broader risk-assets, stocks appear to have room to fall - even after ES suffered its worst loss of the year today.
While it may come as no surprise to market-watchers, the market for over-priced internet IPOs seems to have become a little soft. 
A
$27 handle... that is all. Just two brief (billionaire-list-demoting)
weeks ago, Mark Zuckerberg passed 28 years old, any guesses where the FB
stock price will be when he passes 29?
With
Europe now seemingly in exile from even the bravest knife-catcher
value-manager, and, despite media protestation, US equities facing weak
macro data and a fiscal cliff of epic proportions; it is no surprise
that everyone and their mom thinks emerging markets are the place to be.
However, as UBS notes today, not all EM balance sheets (whether
government, corporate, or private) are the same and they break down the low, medium, and high risk balance sheets across Asia, LatAm, and EMEA.
As is evident in Europe, high debt levels are detrimental to economic
growth and equity returns. Solid government accounts generally reward
policymakers in such markets with valuable policy flexibility, while
healthy consumer balance sheets allow credit growth to be a strong
domestic growth driver. In a slow and uncertain global growth
environment, pillars to support growth are crucial and are market
differentiators - especially if global contagion spreads as we suspect
A quick glance at today's cross asset class market moves shows a clear standout. The massive outperformance of Gold
(relative to USD strength, Stock weakness, and Treasury yields
tumbling). However, focusing on a slightly longer-term context shows
that it appears you can't keep a good gold market down
as it has merely recovered from its over-zealous selling pressure of
earlier in the week - to resync with FX, stocks, and bonds. Most
importantly, 
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
