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Miracles. Such as the Saudis backing off on oil or China adding more stimulus or a big stimulus package from Congress (I very much doubt that one) or reduced number of new infections in China and South Korea giving hope that the worst is over. You have to keep looking over your shoulder and consider the possibilities. I really think this is going to be a relentless grind lower except for a few bounces because it will take a some time to play out.
Gold price hovering back around $1,600 as Federal Reserves pumps massive liquidity into markets : https://www.kitco.com/news/2020-03-12/Gold-price-hovering-back-around-1-600-as-Federal-Reserves-pumps-massive-liquidity-into-markets.html
Excerpt:
Kitco News) - Gold prices are well off their lows hovering near $1,600 an ounce as the New York Federal Reserve pumped massive liquidity into the financial system.
U.S. equity markets were looking at their worst one-day selloff since the 1987 market crash before the New York Federal Reserve announced that it would conduct a $500B 3-month repo operation. The regional central bank also said that it will also expand Treasury purchases beyond bills -- that's fresh QE.
"That's a big number. It's good the Fed is on the ball, but it also suggests there are major liquidity strains.," said Adam Button, managing director of Forexlive.com. "This needs a bit of perspective. The Fed's balance sheet in 2011, after two years of QE, was $2.1 trillion. They're doing $1.5 trillion in one shot here. Now, this is a bit different because the vast majority of it is short term.
Button added that the risk in the latest Fed move could signal another panic among investors.
The Fed is panicking. The Fed announced $1.5Trillion in short term liquidity today. There are just too many holes in the dike (US Treasury market under pressure, oil collapsing, national debt to balloon higher, etc.) for the Fed to manage. And their response is to use a water hose to put more water behind the dike.
Yep, Italy is insolvent. If I knew a way to short Italian sovereign debt, I would do it. The ECB today announced 120Billion in liquidity. None of this is going to prevent a global financial crisis.
I trust you are not referring to me. My post was my cynical take on the markets and the interventions by the CBs and the government. I'm not holding long financial stock positions. I'm totally in PM mining shares and I keep buying as they get cheaper.
Yeah, what we need is for the Fed to lower rates QUICKLY and we also need a lot more QE and we need the Democrats to pass a tax cut. And if that don't work, then we'll have to suspend the election.
It's happening -
Late Day Treasury Futs Crash, Sparks Speculation Of Risk Parity Liquidation : https://www.zerohedge.com/markets/treasury-future-crash-sparks-speculation-risk-parity-liquidation
My comment : US Treasuries are NOT safe havens
Excerpts:
After initially bonds were strongly bid for much of the Asian, European and morning US session, there was a sharp reversal before Europe closed for the day, with 10Y yields blowing out from a low of 0.65% around the time Europe opened, to a high of 0.85% by the European close, then following a modest dip, the selling resumed, sending the 10Y just shy of 0.90%.
What is perhaps just as notable, is that whoever was puking duration did so until the very close with an accelerating liquidation and erratic futures price action observed in the late U.S. afternoon and peaking by 4pm, when the ultra-long bond futures plunged nearly 6 points in less than an hour - an unprecedented move - and the Ultra contract closed well in the red even as stocks crashed into a bear market.
Was today's bizarre balanced portfolio unwind a one-time event, or have forced liquidations finally made it to risk parity funds? We'll know tomorrow, if not overnight, but if for whatever reason US Treasurys are no longer a safe haven if one or more forced sellers are set to drag prices lower, then watch as the real safe haven - gold - jumps above its all time high on very short notice.
Also, as I recall the markets were closed for awhile just after 9-11.
How about 50% off the all time highs ? There will be bounces, but the global bubbles have burst. Coronavirus is not the real issue. It's the global debt and unlimited credit the CBs have created for the past 30 plus years. They have created something they will not be able to control.
Au Contraire. As I recall, shorting of bank stocks was prohibited during the 2008 financial crisis.
Italy's Salvini Calls For Short Selling Ban, Citing "Soros Who Built His Fortune Betting Against Italy" : https://www.zerohedge.com/markets/italys-salvini-calls-short-selling-ban-citing-soros-who-built-his-fortune-betting-against
My Comment : Markets are only allowed to go up. Is this a preview of US markets ?
re: High Yield Bonds -
Assume Crash Positions: Goldman Cuts Brent Price Target To $30 "With Possible Dips Near $20" :
https://www.zerohedge.com/energy/assume-crash-positions-goldman-cuts-brent-price-target-30-possible-dips-near-20
Excerpt:
Below are the highlights from the Goldman note which, if correct, would spell the apocalypse for the US shale sector and potentially result in millions of unemployed shale workers in the coming months coupled with a catastrophic selloff in junk bonds, because as Vital Knowledge's Adam Criasfuli writes, "energy is the ‘FANG’ of high-yield, accounting for >10% of the entire market, the extreme stress facing credit is shaking the foundations of the whole financial system."
Correction -
TBF for US Treasuries and SJB for high yield short funds
re: Bonds, I think it is time to START shorting bonds, especially BBB corporate bonds, but also Treasuries. Anyone have some good ways to do that ? I've looked at PBBBX (for BBB corporates) and SJB (for Treasuries).
BTFD. Remember: the Fed has your back. Being facetious, of course.
I've read that the Coronavirus, unlike the flu, is unaffected by warmer weather. The following is an excerpt from John Mauldin's latest report at : https://www.mauldineconomics.com/frontlinethoughts/covid-19-a-crisis-the-fed-cant-fix
Excerpt:
COVID-19 is unlikely to disappear in warm weather. Hong Kong is always warm and that does not seem to be stopping the virus. The likeliest scenario is that the world now has, in effect, another flu-like virus that will be with us for years. If clinical trials are positive, one or more of the vaccines currently in development could be ready later this year. Many biotech companies are working on it. Moderna said it plans Phase 1 trials to start in April. Dr. Kim cautiously (which is his way) said Inovio’s trials should begin in late spring or early summer.
Yeah, it's due to the Fed rate cut. I expect gold to give back it's gains just as the stock market has after the rate cut announcement. Sellers will get liquidity where ever they can (even from selling gold) and they'll throw the baby out with the bathwater. I'm ready to catch the baby.
The emperor has no clothes.. The Fed's credibility is damaged (they are NOT omnipotent). So, should we expect a heavy dose of QE ?
I would like to see gold get crushed even though I have a large position in the PM mining shares. I bought more shares on Friday and I'm waiting for lower prices to buy even more.
Boeing is in a really bad position given all of their production fiascos and now the impact of coronavirus on air travel.
Jim Rogers: Dow’s crash has nothing to do with coronavirus, buy the dip : https://www.kitco.com/news/2020-02-28/Jim-Rogers-Dow-s-crash-has-nothing-to-do-with-coronavirus-buy-the-dip.html
My comment : Dumb, really dumb
Jim Rogers is not very smart :
https://www.kitco.com/news/video/show/Kitco-NEWS/2718/2020-02-28/Coronavirus-gold-market-meltdown-Jim-Rogers-says-keep-your-money-safe-here#_48_INSTANCE_puYLh9Vd66QY_=https%3A%2F%2Fwww.kitco.com%2Fnews%2Fvideo%2Flatest%3Fshow%3DKitco-NEWS
My comment : Jim Rogers is not very smart. In the above interview he says to buy this market (mind you he is not a trader) because it has fallen so much. I don't think you buy a market just because it is cheap. It can get a lot cheaper, so there needs to be a fundamental reason for a long term investor. He says we are due for a recession due to the length of the economic recovery. What he does not say is that that "recovery" has been CB liquidity driven and not based on economic fundamentals (ie the timing of the recession has been Fed dependent). He also says a lot of people die from the flu every year so why worry about the coronavirus. That is really, really dumb. Businesses don't shut down, countries are quarantined for the flu but they are for coronavirus. I personally expect some early market weakness on Monday to be followed by a bounce. Anyway I think Rogers is not very smart.
Yes in the national interest of course
I doubt tomorrow will be an up day. Investors will be skiddish about being long over the weekend. Then there's the margin calls.
The hubris of the Fed to think they can cure the economic fallout from the Coronavirus.
The real worry for the markets will not be the Corona virus, but the global debt that will collapse. All of which I think will lead to a financial crisis. I'm expecting the US market indices to fall by 50% from their highs. The CBs will be powerless to prevent a major crisis. They have no real option other than to print which may do more harm than good.
So, what kind of rabbits will they pull out of the hat to save the election for Trump ? It's the economy stupid. I have been expecting a global slowdown due to the Corona virus which would last into mid summer. At that point Trump would try to get another tax cut through Congress and the CBs would print at will. That should be enough to engender a small economic recovery. But watch out below after the election. There should be a vaccine by year end, but the damage will be done by then. I'm buying up more mining shares as the get hit hard. I just wait for them to fall to my price because I don't think the Corona virus impact on the markets is going away anytime soon.
I think it will take more than this outbreak to break the market. If causes major financial problems in China then it could break the markets. I suspect it will have only a transient effect.
A vaccine for the Coronavirus is being developed but it takes weeks to get into production. I think it will take more than this outbreak to
I would expect at least a small relief rally once Trump is acquitted (within next two weeks).
Condor Resources (CNRIF/v.CN) up 50% today. Also Irving Resources up 9% today.
Here's a post related to Irving : https://stockhouse.com/companies/bullboard?symbol=c.irv&postid=30595684
Disclosure: I own 800K shares of CNRIF and 20K shares of IRVRF.
My comment: It would not take much news to move CNRIF higher (especially news regarding start of drilling on Pucamayo property)
Gold closed down $16 to $1459 -
The large cap miners took the brunt of the decline while my small cap miners were flat to up (some significantly up).
Modern Art Investors are Nuts -
My Comment : I went to a local auction of modern art last night. People buy the name, not the art. Without the artist's name, the art would be considered junk. I find most of it to be ugly as best. And most of it requires no real talent … the more it looks like a child did the work, the higher the price. I think the artists must be laughing all the way to the bank given the enormous prices some people will pay. A case in point was most of the works were sold to online bidders for 10s of thousands of dollars, while the floor buyers would only pay $10 for some of the works.
The World Has Gone Bananas : https://www.zerohedge.com/markets/world-has-gone-bananas
Excerpts:
Apparently, because duct-taping a banana to a wall is all the rage in the world of high-end art. This may sound like something out of The Onion, but this week at Art Basel Miami Beach, a banana duct-taped to a wall sold for $120,000. Even worse, a second banana duct-taped to a wall sold for $120,000. Yet even worse than that, a third banana duct-taped to a wall is expected to sell for $150,000 because...art.
Watch China...they are under increasing political (Hong Kong) and economic stress (global slowdown and trade negotiations)
November 27 – CNS (Terence P. Jeffrey): “The federal debt has increased by $1,303,466.578.471.45 since last Thanksgiving,.. That is the largest Thanksgiving-to-Thanksgiving increase in the debt in nine years. The last time the debt increased more from Thanksgiving to Thanksgiving was in 2010, when it increased by $1,785,995,360,978.10. It also equals approximately $10,137.48 per household in the United States.”
My Comment: $2Trillion annual deficits coming soon. $40Trillion national debt between 2026 and 2028.
re: Doug Noland and when to expect the next recession -
In your earlier post, you stated that Doug Noland had been predicting a global recession since 2017. I've been reading Doug Noland every week for many, many years (including prior to 2017) and I have never seen him predict if or when there would be a global recession. He has assiduously avoided making such predictions as he only states the current status of the Global Credit Bubble and comments on it's sustainability. He leaves such predictions up to others. As for my prediction of when the next recession will occur, I have no idea. It all depends on how long the CBs can keep the global economy artificially inflated and I am prepared to wait with my positions in PM mining shares for as long as it takes. Here's something to think about as it addresses your faith in the Fed's ability to prevent a market downturn :
"This Is An Entirely Different Bubble" - Veteran Short-Seller Warns "Central Banks Are Losing Control" : https://www.zerohedge.com/markets/entirely-different-bubble-veteran-short-seller-warns-central-banks-are-losing-control
Excerpt:
Every bubble has a belief system, a unifying narrative. This time it’s that the central bankers are all powerful.
What do you mean by that?
It’s this idea that there is a free lunch when it comes to printing money. That’s what Modern Monetary Theory is all about: We can have our cake and eat it, too. We don’t have to feel the pain of a recession or the pain of a severe bear market. Anytime we get close to a downturn, central banks can just print money. Of course, we know that’s sheer nonsense. There is no free lunch. Polices like negative interest rates and Quantitative Easing are doing damage to the underlying economic engine. They misallocate capital, discourage thrift and promote fast money over slowly building wealth. At the end of the day, central banks are not all powerful. They are not immune to the laws of economics.
What does that mean for investors?
Let’s go back to the last couple of bubbles and compare them to the current one. We know that the seeds of these bubbles are artificially low interest rates. The last two bubbles were sector specific: You had the tech bubble and then the housing and credit bubble. But this one is an entirely different animal. This time, the center of the bubble is the bond market. You can even say at its core is the sovereign debt bubble. Then, you have all these other bubbles at the periphery: the high yield bubble, corporate bonds, auto finance, large cap technology, passive investing, private equity – bubbles everywhere. That’s what we’re looking at: Something on a much greater scale than anything we’ve seen before.
Since the financial crisis, we went through similar growth scares before. Each time central banks printed more money and a global recession was avoided. Why do you think it’s different this time?
With $16 trillion of the world’s bonds priced at negative yields a few months ago, it felt like all of this policy stimulus into the bond market had reached the climactic point. Since then, bond investors have started feeling some pain. One of the signatures of this bubble is the price insensitive buyer, with central bankers at the top of the list. The idea is that if the markets are on autopilot you might as well get rich by front running the central bankers and the index investors who are just blindly buying the index. It’s this narrative that we have a massive steamroller in terms of monetary policy and easy money is there for the taking. But beware the old saying about picking up pennies in front of a steamroller.
Then again, interest rates have been declining for almost four decades. Why do you think we’re at an inflection point?
Besides the absurdity of creditors paying for the privilege of lending money to governments, we’re seeing wild disconnects typical of major inflection points. In this regard, I think a lot about what happened in the late 1970s and early 1980s. At that time, you had severe price inflation and Fed Chairman Paul Volcker coming in to try to break the back of that. The first sign of a change in sentiment was the gold bubble starting to unwind in the spring of 1980. Yet, the stock market floundered and the bond market continued to decline into September of 1981. In other words, investors ignored the early signals of disinflation. The gold market was telling them that something was changing fundamentally. But at first, the other markets were completely disconnected. Then, the bond market started to get in sync and rally because it sniffed out that something was changing. The stock market continued to go down for another eleven months before it turned. That’s a classic example of these disconnects.
How is it going to play out this time?
My thesis is that when this bubble bursts, gold should rally, while bonds and stocks should crash. Against this backdrop, it’s remarkable that gold seems to have bottomed right around late April when Bloomberg BusinessWeek came out with its «Is Inflation Dead?» cover. Yet, this signal from gold was widely ignored and we got this blow-off in the bond market. Since this crazy rally peaked in August, we’ve seen a pretty good decline in bonds. Maybe this is telling us that a change is afoot. Yet, the stock market is breaking out to new highs. These markets can just disconnect for a while and it looks like stocks will be the last to get in line.
Couldn't the recent rally in stocks and the decline in bonds also be a signal that the worst of the global slowdown is behind us and the economic picture is improving?
I think that’s not really the case. That’s not what the economic evidence is showing. We’re ten years into a recovery. It’s not like we went through an economic trough and now we’re just going to have a classic business cycle where the economy starts to recover and rates go up. Something different is happening.
What is happening?
I tend to focus on things like the fact that we have all this easy money which went into malinvestments. To me, that’s more of a forward look compared to, let’s say, labor market statistics which are backward looking. Also, I do a lot of bottom-up work by looking at companies. There, it’s fairly obvious what’s going on: You see growth rates coming down pretty much across the board. Take a look at Apple’s numbers, for instance: Annual gross profits are down over the past twelve months, yet the stock is up close to 70% year-to-date.
re: I dont think there will be a global recession as it has been normally defined -
My comment : So you think a global recession can be prevented forever ? I expect a global recession that will overwhelm the CBs and that the longer it takes to have a recession, the worse the consequences will be. The CBs have only one tool : money printing. And more money will not resolve the ever increasing debt problem (it only exacerbates it). Debt cannot continue to accumulate indefinitely just as trees cannot grow to the sky. I would not put much faith in the Fed's ability to prevent a market crash. The best they can do is delay it, but that will only mean a more severe downturn.
It's the new normal and I expect it to get a lot worse. Just wait till the global recession/depression hits. Add to that the circus in DC which continues with Trump now angry with Pompeo for not reining in his people at the state department. Of course, Trump blames everyone else for his predicament which is the result of his own actions. Trump is the one who needs to be reigned in before he gets the US in really big trouble.
Trump's impeachment ire turns on Pompeo amid diplomats' starring roles : https://www.msn.com/en-us/news/politics/trumps-impeachment-ire-turns-on-pompeo-amid-diplomats-starring-roles/ar-BBWVTD5?ocid=spartanntp_edu
Central Bank Liquidity Injections -
The following are excerpts from Dough Noland's CreditBubbleBulletin.blogspot.com
November 15 – Reuters (Marc Jones): “Global debt is on course to end 2019 at a record high of more than $255 trillion, the Institute of International Finance estimated on Friday — nearly $32,500 for each of the 7.7 billion people on planet. The amount, which is also more than three times the world’s annual economic output, has been driven by a $7.5 trillion surge in the first half of the year that shows no signs of slowing. Around 60% of that jump came from the United States and China. Government debt alone is set to top $70 trillion this year, as will overall debt (government, corporate and financial sector) of emerging-market countries. ‘With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,’ the IIF said…”
November 14 – Bloomberg: “China’s central bank unexpectedly added liquidity to the banking system Friday to help lenders through the tax season, a move that analysts saw as a sign that larger-scale stimulus is unlikely in the near term. The People’s Bank of China offered 200 billion yuan ($29bn) of one-year loans to banks Friday. It kept the interest rate unchanged at 3.25%, showing restraint in monetary policy after this week’s worse-than-expected economic data. Liquidity in the banking system is at a ‘reasonable, sufficient’ level as the operation offsets companies’ need for funding to pay tax…”
Curious, isn’t it, that the world’s two great Credit engines are currently both requiring extraordinary central bank liquidity injections…
The Road to Default : https://www.mauldineconomics.com/frontlinethoughts/the-road-to-default
My Comment : Wiping out the debt by printing a lot of money just does not work. The Fed has been printing for over thirty years and the debt just keeps expanding exponentially. If the Federal government bails out state pensions and healthcare liabilities, then the federal government just adds to it's own debt.
Excerpts:
Since there isn’t enough money to fund these pension and healthcare obligations, there will likely be an ugly battle to determine how much of the gap will be bridged by 1) cutting benefits, 2) raising taxes, and 3) printing money (which would have to be done at the federal level and pass to those at the state level who need it). This will exacerbate the wealth gap battle.
Perhaps even worse, conducting a currency war implies directing monetary policy to something other than domestic price stability. There ceases to be a domestic anchor to constrain the expansion of central bank balance sheets.
Should this lead to growing suspicion of all fiat currencies, especially those issued by governments with large sovereign debts, a sharp increase in inflationary expectations and interest rates might follow. How this might interact with the record high debt ratios, both public and private, that we see in the world today, is not hard to imagine.
Learn to deal with change and take advantage of it. Oh yeah, and consider slowly increasing your allocation to physical gold. I don’t think of gold as an investment. I think of it as central bank insurance. And after meditating on today’s letter, I think I may need a little more insurance. Just a thought