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Offline Golden Oxen

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Big Slide v2.0 Begins
« on: May 29, 2012, 04:56:33 PM »
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Re Whether Inflation is a thing of the Past or not I won't predict, but check out the Elliot Wave on the S&P 500

Looks to me like we are on the right shoulder and skiing downhill in a big  hurry here.
Quote
 

No doubt about it S&P looks terrible. If I did not think the Fed was going  to step in I would be worried. I try to see the big picture. My feeling is you got your deflation and it happened so quick you missed it. We have been in crisis mode since it happened and this I feel is the result. The derivatives market collapsed and the banking system imploded and froze up in 2008. The fed got caught off guard and panicked. They started the greatest reflation ever seen by mankind from the terror caused by their glimpse of deflation. so far it has been somewhat successfull and still being formulated. The bull shit in Europe is a smoke screen to keep attention away from the real problem. Here is a brief report card on Helicopter Ben's work.   :icon_study:
Since early 2009, we predicted that the central banks of the world would engage in massive printing and stimulus in order to avoid the only other alternative, a global depression.  Over $20 trillion of stimulus was promised by the major countries.  Our TARP program was mostly used to recapitalize the global banking system; the primary stimulus in the last round came from China.


Let us take a look at what ensued starting with technology.  During the week of March 9th, 2009, Google bottomed at $289.  Today it trades at $603.  Apple bottomed out at $82.57.  Today, despite a 10-15% pullback from the recent high, it trades at $561.


Turning to oil, The key economic input, it traded as low as $33.55 per barrel during the week of February 9th of  2009.  Oil is now trading at roughly $90 per barrel for West Texas Intermediate crude.


Next up are gold and silver.  Gold hit a low of $801.50 during the week of January 12th 2009.  Gold is now trading at $1,547 in spite of all the hysteria spread by the U.S. media insisting gold is a ‘useless, volatile’ asset.  Silver hit bottom during the week of December 22nd, 2008 at $10.11.  It is now at $27.54, even after the savage attacks against the metal in beginning in May of last year.


Last, we have the mining companies.  The HUI is an Amex-sponsored index of mining companies.  It bottomed at 241.78 during the week of January 12th, 2009.  The index currently stands at 411.57 despite severely lagging the prices of the underlying metals that they produce.


It might be hard for strategists to defend the holdings in the short-term, but the fundamental strategy and the thinking behind it have worked spectacularly well since the bottoms in 2008-09. 


The volatility that we are experiencing is derived from several sources.  The first is that interest rates have been driven to zero and even negative in some cases.  Zero interest rates make all assets very volatile.

Quote from KWN Article

Offline RE

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Re: Re: Frostbite Falls Daily Rant
« Reply #1 on: May 29, 2012, 08:46:55 PM »

Next up are gold and silver.  Gold hit a low of $801.50 during the week of January 12th 2009.  Gold is now trading at $1,547 in spite of all the hysteria spread by the U.S. media insisting gold is a ‘useless, volatile’ asset.  Silver hit bottom during the week of December 22nd, 2008 at $10.11.  It is now at $27.54, even after the savage attacks against the metal in beginning in May of last year.


You think the S&P looks bad?  Let's look at the chart for your personal favorite, Gold.



After topping out at a bit over $1900, Gold is now also seeing price declines, and this DESPITE what should be a massive run to "safety" out of the Euro.

2008 was a "scare", but Lehman is chump change compared to the deleveraging that goes down in the face of Spanish Bankruptcy, both of its Banks and of the Nation State itself.  This again pales in comparison to what occurs when the Euro as a whole collapses.

I agree that to date Helicopter Ben has done a pretty decent job with propping up the market prices of everything, including Gold.  However, his Helicopter isn't big enough to fly around all the Dollars necessary for covering all the margin calls when Spain goes Belly Up.  After that, he still has the crash of the Euro and then the WMD of Derivative collapse.

The charts indicate a delevering phase is beginning again here, and compared to what is coming down the pipe, 2008 was a cakewalk.

RE
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Re: Re: Frostbite Falls Daily Rant
« Reply #2 on: May 29, 2012, 09:09:43 PM »
More grist for the Deflation Mill, from Reuters:

Brent stays below $107, heading for worst month in 2 years

Related News

U.S. gas futures down 2 percent midday, pre June expiry
Tue, May 29 2012

IMF says Saudi economy "buoyant" but growth to slow
Tue, May 29 2012

By Luke Pachymuthu

SINGAPORE | Tue May 29, 2012 10:41pm EDT
 
(Reuters) - Oil prices fell for a second straight session on Wednesday, with Brent staying under $107 per barrel, as risk aversion gripped markets after Spain's credit rating downgrade stoked fears of a worsening euro zone crisis denting demand outlook.
 
A shaky euro, which hit a near two-year low versus the dollar after Egan-Jones Ratings cut Spain's credit rating for the third time in less than a month, also dragged down oil prices. A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies. <USD/>

"There is definitely renewed concerns of a contagion in the euro zone with the debt crisis, there is real pressure now on Spain's banks, it's a crisis of confidence," said Ric Spooner, chief market analyst at CMC Markets.

Brent crude eased 35 cents to $106.33 per barrel by 0231 GMT, heading for the biggest monthly drop in two years, while U.S. crude fell 40 cents to $90.36.

U.S. crude was on track for a more than 13 percent drop this month, also the biggest monthly decline since May 2010, with a surge in domestic stockpiles weighing on prices.

Crude stocks at Cushing, Oklahoma storage hub, delivery point of the U.S. crude oil future contract, have risen to a record high of 46.8 million barrels. <EIA/S>

However, oil price losses may be checked by supply concerns as Iran's dispute with the West over Tehran's nuclear program remains unresolved and easing worries about a messy Greek exit from the euro zone after an opinion poll showed leads for Greece's pro-bailout conservatives.

EU leaders have warned Greece of the consequences of renouncing the bailout, saying they will pull the plug on funding - a move that would lead to rapid bankruptcy and an ignominious exit from the single currency.

"Honestly at the moment there doesn't seem to be an adequate contingency in dealing with Greece," Spooner said.

IRAN TENSIONS

A drop in oil prices was limited by concerns over rising tensions between Iran and the West after talks failed to resolve a dispute over the Islamic republic's nuclear program last week.

"Iran continues to remain a significant factor but for the moment with a short to medium term outlook the focus is on Europe and the demand side picture if the crisis continues to deteriorate," Spooner said.

Tehran is refusing to grant United Nations inspectors access to a facility at Parchin which is suspected of being used to develop nuclear weapons. Iran says its aims are entirely peaceful.

Iran has ramped up its production of low-enriched uranium, in the last five years and it could be used for at least five nuclear weapons if refined further, the U.S.-based Institute for Science and International Security (ISIS) said.
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Re: Re: Frostbite Falls Daily Rant
« Reply #3 on: May 29, 2012, 11:52:23 PM »
Here's an MSM report just chock full of Good Newz for the markets tomorrow.  That Italian Bond Auction could be entertaining.

Spanish Bonds hitting 7%. Facepalm now down below $29.  Syrians massacring children. Flash Crash anyone?

<a href="http://www.youtube.com/v/WrxlVjZJawQ" target="_blank" class="new_win">http://www.youtube.com/v/WrxlVjZJawQ</a>

RE
------------
Europe Shares Seen Dropping on Spain Worries
Published: Wednesday, 30 May 2012 | 1:19 AM ET Text Size By: Shai Ahmed
CNBC Associate Editor

The FTSE 100 [.FTSE  5391.14    34.80  ( 0.65%)   ] is expected to open lower by 27 points, the DAX [.GDAXI  6396.84  ---  UNCH  (0)   ] is seen lower by 10 points and the CAC [.FCHI  3084.70  ---  UNCH  (0)   ] is seen down by 18 points.

The Financial Times is reporting that the European Central Bank has blocked a Spanish plan to recapitalize Bankia, the troubled lender, by that would have indirectly tapped the ECB for funds. European officials told the paper that the ECB had told Spain that proper capital injection was needed for the bank and that its plans were in danger of breaching an ECB ban on “monetary financing.”

Spain’s borrowing costs have been the cause of intense concern in recent days as they near the crucial 7 percent level, a range that forced other countries to seek international financial aid.

In Greece, latest opinion polls for the upcoming elections, scheduled for June 17, show pro-bailout parties inching ahead of Syriza, the leftist anti-bailout party, but still too close to predict a decisive winner.

Euro zone debt worries are likely to see Italy’s borrowing costs edging higher Wednesday when the country tenders up to 6 billion euros ($7.5 billion) in five- and 10-year bonds at 10:00 a.m. BST (5:00 a.m. New York time).

The massacre of over 100 civilians in Houla, Syria, saw Western powers united in expressing their outrage at the Syrian government by expelling diplomats. The anger has been particularly pronounced because almost half those murdered were children. UN peace envoy Kofi Annan met with Syrian President Bashar Al-Assad, who has denied his regime’s involvement in the massacre, Tuesday to express his concerns.

Facebook [FB  28.84    -3.07  (-9.62%)   ] shares fell to a new low below $29 as investors fled the social network’s stock over concerns of an unrealistic valuation at its float and worries about its long-term viability. Facebook debuted on the market at $38 a share.
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Offline RE

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Re: Re: Frostbite Falls Daily Rant
« Reply #4 on: May 30, 2012, 12:09:28 AM »
From Zero Hedge

RE

Japanese Bond Curve Inverts For First Time Ever As 3Y Cash Is Now King
Submitted by Tyler Durden on 05/30/2012 00:29 -0400



BondCentral BanksEuropean Central BankYield Curve

For the first time ever, 3 year Japanese government bond (JGB) yields are trading below 1 year JGB yields as the world's inexorable desire to repatriate, delever, and seek safety while reaching for as much term yield as is still 'safe' come home to roost. With Swiss rates already grossly negative and German rates rapidly converging, the world's (d)evolution (since evolution conjures a rebirth into something better) is shifting investors out the yield curve as ZIRP is here to stay forever, wherever you look in so-called developed economies (who can print their own money). In the last 4-5 weeks, 3Y Japanese bond yields have dropped 6bps to around 10bps (pretty much the same as every other maturity inside of 3Y) as the entire yield curve gradually flattens pushing out investor's perception of 'cash' to longer- and longer-maturities. The inversion (i.e. 3 year rates below 1 year) is also interesting given its maturity coincides with the maturity of Europe's LTROs as perhaps some round-about funding mechanism to avoid EUR-USD basis swap detection is forcing money into the Japanese bond market. Of course the lower and lower rates are forced by this unintended consequence of Central Bank signaling, the further out investors will creep, accepting more and more duration, which given its generally monetized by the Central Bank ensures rates cannot rise since the jump in the cost of funds would destroy Japan's QE-driven economy. Be careful what you wish for US equity investors, as the Keynesian Endpoint is upon us (and perhaps, just perhaps that is why Central Banks of the world are checking to the Fed, the ECB is playing hardball, and the Fed remains on hold unless apocalypse occurs - which by the way is not an 8% retracement of a 30% straight line rally).

3Y JGBs trade below 1Y JGBs - leaving the short-end inverted...
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Offline Golden Oxen

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Re: Re: Frostbite Falls Daily Rant
« Reply #5 on: May 30, 2012, 01:27:33 AM »

Next up are gold and silver.  Gold hit a low of $801.50 during the week of January 12th 2009.  Gold is now trading at $1,547 in spite of all the hysteria spread by the U.S. media insisting gold is a ‘useless, volatile’ asset.  Silver hit bottom during the week of December 22nd, 2008 at $10.11.  It is now at $27.54, even after the savage attacks against the metal in beginning in May of last year.


You think the S&P looks bad?  Let's look at the chart for your personal favorite, Gold.



After topping out at a bit over $1900, Gold is now also seeing price declines, and this DESPITE what should be a massive run to "safety" out of the Euro.

2008 was a "scare", but Lehman is chump change compared to the deleveraging that goes down in the face of Spanish Bankruptcy, both of its Banks and of the Nation State itself.  This again pales in comparison to what occurs when the Euro as a whole collapses.

I agree that to date Helicopter Ben has done a pretty decent job with propping up the market prices of everything, including Gold.  However, his Helicopter isn't big enough to fly around all the Dollars necessary for covering all the margin calls when Spain goes Belly Up.  After that, he still has the crash of the Euro and then the WMD of Derivative collapse.

The charts indicate a delevering phase is beginning again here, and compared to what is coming down the pipe, 2008 was a cakewalk.

RE
RE, You have a deflation bias in your analysis ,so you view the chart frpm the top to it's last price.
I have an inflation bias, so I view the chart from the bottom to the last price.
Of course with the benefit of hindsight and history my bias has been the correct one so far.
The recent correction in the Dollar gold price has been mostly caused by the dim hiding in the dollar to escape the decline in the Euro. That makes as much sense as hiding in the closet when the house is on fire. Turning in pink toilet paper for green toilet paper.
Your deflation is a longshot possibility IMHO and will only happen from a unforeseen accident that prevents immediate response. In taking the deflation view you are fighting both the Fed and History, the latter being the more formidable opponent.      :icon_study:

Offline Golden Oxen

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Re: Re: Frostbite Falls Daily Rant
« Reply #6 on: May 30, 2012, 06:47:49 AM »
 They are taking the sledge hammer to all of them. Dow Down 130 S&P 15.00 Oil 2 bucks, Gold 15, ditto for Europe & Asia. Looks like a bad one. :violent1:

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Re: Re: Frostbite Falls Daily Rant
« Reply #7 on: May 30, 2012, 01:47:55 PM »
RE, You have a deflation bias in your analysis ,so you view the chart frpm the top to it's last price.
I have an inflation bias, so I view the chart from the bottom to the last price.
Of course with the benefit of hindsight and history my bias has been the correct one so far.
The recent correction in the Dollar gold price has been mostly caused by the dim hiding in the dollar to escape the decline in the Euro. That makes as much sense as hiding in the closet when the house is on fire. Turning in pink toilet paper for green toilet paper.
Your deflation is a longshot possibility IMHO and will only happen from a unforeseen accident that prevents immediate response. In taking the deflation view you are fighting both the Fed and History, the latter being the more formidable opponent.      :icon_study:

GO, my hypothesis is not that at some point you might get your HI in the Dollar.  It may happen.  I am pointing out that what we are looking at NOW is another round of what we saw in 2008, just this time even more pervasive.  Good Grief man, look at the CHARTS and stop holding on to your long term bias here.  As Europe implodes, the selling pressure on those markets is enormous, and that will force a lot of margin calls.  Assets will have to be liquidated, and that includes Gold.

Can/will Helicopter Ben step in to stop a market implosion that has its roots in $Trillions in bad Spanish and Italian debt?  I don't think even the Helicopter Man has that kind of Chutzpah.

The ECB and PBoC have already stated they aren't going to backstop with more monetary easing.  HB is not the only player in the CB game, he's just the one with the Biggest Bazooka.  He can't print in isolation though, it has to be a coordinated print between all the CBs or the inter-currency valuations go all out of tilt.

I really don't think they can stop a Euro implosion.  You just do not get more deflationary than that.  OK, when the dollar finally implodes, that would be more deflationary, but it's still a ways off.  After the Euro collapses, next down the Toilet is the Yen.

We are getting REAL CLOSE now to Flash Crash territory.

<a href="http://www.youtube.com/v/WrxlVjZJawQ" target="_blank" class="new_win">http://www.youtube.com/v/WrxlVjZJawQ</a>

SHORT THE PHONE BOOK!

RE
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Re: Re: Frostbite Falls Daily Rant
« Reply #8 on: May 30, 2012, 09:39:04 PM »
<a href="http://www.youtube.com/v/WrxlVjZJawQ" target="_blank" class="new_win">http://www.youtube.com/v/WrxlVjZJawQ</a>

SHORT THE PHONE BOOK!

RE

Anybody take my advice?  Ross?  GO?  I think Ben Lichtenstein's call is going to be a regular feature for a while.  This is not a good week to quit drinking.  :wc:

Every day this smells a little more like Lehman.  Main difference in that case was that Da Fed could go in and pretty much directly backstop AIG, Fannie & Freddie et al to stop the contagion.  In this case, you have a cross border collapse going on which nobody wants to pick up the tab for.  It ain't just Greece anymore.  Spain is fully in the thick of it now and the Italian Bonds are approaching 6%.  Denmark has now been hit with major downgrades from Moodys and their Banks look to be in shambles.  Facepalm is DOWN with Bullet, well on its way to Penny Stock territory.  Facepalm isn't the only tech getting the shit kicked out of it either, RIM down 7%. Oil is getting HAMMERRED:

Quote
Crude Oil, Gasoline, Heating Oil Plunge: Commodities at Close
 
By Aaron Clark on May 30, 2012

The Standard & Poor’s GSCI gauge of 24 commodities fell 2.3 percent to 603.28 at 5 p.m. New York time. The UBS Bloomberg CMCI index of 26 raw materials decreased 1.5 percent to 1,448.983.

CRUDE OIL

Oil tumbled to a seven-month low on speculation that U.S. crude stockpiles climbed to the highest level since 1990 and as the euro weakened on concern that the debt crisis will overwhelm Spain.

Oil for July delivery fell $2.94 to $87.82 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 21. Prices have decreased 16 percent this month, heading for the biggest drop since December 2008.

Brent oil for July settlement declined $3.21, or 3 percent, to end the session at $103.47 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since Dec. 16.

OIL PRODUCTS

Gasoline fell to a four-month low as the dollar surged and Brent crude sank 3 percent, reducing the cost to make the fuel.

Gasoline for June delivery declined 4.83 cents, or 1.7 percent, to $2.8582 a gallon on the Nymex, the lowest settlement since Jan. 26. Futures have dropped 10 percent in May, trimming this year’s gain to 6.4 percent. The more actively traded July contract fell 2.1 percent to $2.7739.

June-delivery heating oil fell 6.9 cents, or 2.5 percent, to $2.7398 a gallon, the lowest intraday level since Oct. 4, and have tumbled 14 percent in May. The more actively traded July contract sank 2.5 percent to $2.7438.

This should be no surprise, since Eurotrash demand for Oil is set to CRATER here.  Along with the Greeks, take the Spics and the Ities off the road here folks.  Besides the fact the multitudes of UE don't have money to buy gas, the Eurotrash Banks have no CREDIT left to issue for it either.

USTs my personal favorite are pushing yields down so low now they are below anything recorded since the 60s, and might have only been lower directly post WWII.

Can the Helicopter Man stop the Cascade?  The PPT better get on the stick TOMORROW and buy up everything from Hong Kong to the City of London or the margin calls are gonna be coming over the dyke too fast for the laptop to handle. "Here they come to SELL 'EM AGAIN!".

Yup, I hear the air escaping from the Balloon now.  All those $trillions Helicopter Ben printed over the last 4 years?  On fire AGAIN.   I smell the SMOKE of the Greatest Bonfire of Paper Wealth in All of Recorded History.

KATY BAR THE DOOR!

RE



Quote
Europe worries stalk Wall Street; Dow loses 161

By DANIEL WAGNER

Stocks are closing sharply lower amid fear that Europe's debt crisis might fracture the financial system there.

Strong demand for safe investments Wednesday pushed the yield on the 10-year Treasury note to its lowest level since World War II.

Spain's borrowing costs spiked to the highest level since Spain joined the euro currency. Last week, the nation's fourth-largest lender said it needed nearly $24 billion in government aid.

Greece's future in the euro is uncertain ahead of elections next month.

The Dow closed down 161 points at 12,419. The S&P 500 index was down 19 at 1,313. The Nasdaq composite average was down 34 at 2,837.

About 13 stocks fell for every two that rose on the New York Stock Exchange. Trading volume was heavy at 3.47 billion shares.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Fearing a financial rupture in Europe, investors around the world fled from risk Wednesday. They punished stocks and the euro, and the yield on a benchmark U.S. bond hit its lowest point since World War II.

In the United States, where concerns about Europe have already wiped out most of this year's gains for stocks, major averages fell more than 1 percent. The Dow Jones industrial average was down as much as 184 points.

European stocks lost even more, and the euro dropped below $1.24, its lowest point since the summer of 2010.

"Everyone's just afraid that if Europe doesn't get its act together, there will be a big spillover in the U.S.," said Peter Tchir, manager of the hedge fund TF Market Advisors.

He said the uncertainty over Europe's future was reminiscent of the financial crisis in the fall of 2008, when it was briefly unclear whether banks would be bailed out and "we had these giant swings up and down."

The trigger Wednesday was Spain, where the banking system is under strain a week after its fourth-largest lender required $23.8 billion in government aid to cover souring real estate loans.

Wall Street, which woke up to increased anxiety over higher Spanish borrowing rates, was down from the opening bell.

In the final half-hour of trading, the Dow was down 163 points at 12,416. The Dow has had a miserable May, losing more than 6 percent, and is on track for its first losing month since September.

The Standard & Poor's 500 index lost 20 points to 1,312. The Nasdaq composite index fell 36 to 2,834.

Investors are increasingly worried that problems at the bank, Bankia, might recur at other Spanish banks. Many lent heavily during the nation's real estate bubble. Losses from the real estate crash might be too big for Spain's government to shoulder.

Spain has enacted harsh government spending cuts to bring its budget deficit within strict new European guidelines. But the country is in a recession and has 25 percent unemployment, and might need a bailout, like Greece, Ireland and Portugal.

On Wednesday, borrowing rates rose sharply for Spain and Italy, both seen as the next problem cases in a debt crisis that has rocked Europe for more than two years. Traders dumped bonds issued by those governments.

The yield on Spain's 10-year bonds, a key indicator of market confidence in a country's ability to pay down its debt, shot as high as 6.69 percent, the highest since the euro currency was launched in 2002.

Intense demand for low-risk, easily tradable securities led investors to buy U.S. government debt. The yield on the 10-year Treasury note to 1.62 percent, a big decline from 1.74 percent late Tuesday.

That appeared to be the lowest since 1945, said Bill O'Donnell, head of U.S. Treasury strategy at the Royal Bank of Scotland, citing data from the European Central Bank and other sources.

Federal Reserve daily records only go back to 1962, and those reflect a previous record of 1.70 percent, set May 17.

"There's just a massive flight to safe-haven assets today," O'Donnell said.

He characterized the rush into U.S. bonds by citing a well-known, unsavory analogy made by Richard Fisher, the head of the Federal Reserve's Dallas bank: "The U.S. is the prettiest horse in the glue factory."

Yields on German government bonds, also seen as safe, turned lower.

Concern about Europe lurked around every corner: The European Commission said consumer confidence fell sharply across the region last month. Spaniards withdrew money from their banks, spreading fear about that nation's ability to go on without bailouts. Spain's main stock index closed down 2.6 percent.

An opinion poll in Greece showed that the far-left Syriza party is gaining support ahead of key elections June 17. Syriza opposes the system of bailouts and sharp budget cuts that have kept Greece afloat but also gutted its economy.

If the party wins, Greece may be forced to exit the euro currency. The shock waves could reach nations that have received bailouts, like Portugal, and those that might need them, like Italy.

Until the Greek elections next month, things will be too uncertain for the market to sustain a meaningful rally, said David Kelly, chief market strategist at J.P. Morgan Funds.

If the bailouts continue and European governments start spending to spur growth, Kelly expects the market eventually to rise. If Syriza wins and Greece is expelled from the euro, he sees stormy waters for months to come.

Amid the tumult, Europe's executive branch called on the 17 countries that use the currency to create a "banking union" that can centrally oversee and, if needed, bail out national banks.

If Europe's financial crisis plunges it into a deep recession, global economic growth will likely falter, reducing demand for commodities and machines that power growth.

Fearing that outcome, traders pushed the stocks of heavy equipment maker Caterpillar and aluminum company Alcoa to among the biggest declines among the 30 companies that make up the Dow.

The euro fell as low as $1.2360, the lowest since the summer of 2010. Benchmark stock indexes closed down 2.2 percent in France, 1.8 percent in Italy and Germany.

When banks and big investors get frightened, they sell stocks or bonds and park the money in the safest government debt markets. They buy Japanese yen, German bonds and especially U.S. Treasurys.

It's no longer about turning a profit, said O'Donnell of RBS. That's why German government two-year notes are paying zero percent: People are simply handing their money over for safekeeping.

The U.S. Treasury market is still considered one of the safest places in the world to stash a billions in a hurry. At $11 trillion, no other market is as large, so there's always somebody ready to buy or sell them.

"When people just want to get their money back, there's not a lot of competition," O'Donnell said.

Food and energy commodities fell sharply. Crude oil lost more than $3 to below $88 a barrel. Crude has been falling steadily since the beginning of May, when it traded as high as $106 a barrel.

Kelly, of J. P. Morgan Funds, said investors should remember that the U.S. is on firmer economic footing than Europe, and make sure their portfolios could withstand either possible outcome.

"Things could be much better, or much worse, than the markets have priced in," Kelly said. "The only logical investment strategy is to be balanced -- to get to the middle of the boat."

Among U.S. stocks making moves:

-- Monsanto, the agricultural company, was one of the few big gainers in a sea of red. It jumped more than 3 percent after its CEO said this year's earnings will likely surge 25 percent, far more than Wall Street had been expecting. Sales were strong in its seed and chemicals business, including Roundup herbicides.

-- Research in Motion, maker of the BlackBerry, plunged 7 percent after the company said late Tuesday it had hired a team of bankers to help it weigh its options -- Wall Street jargon for a possible sale or reorganization. RIM's business has been crumbling as smartphone users move to iPhone and Android devices.

-- Whirlpool rose, reversing an earlier loss, after the Department of Commerce ruled that the South Korean government provided illegal subsidies to producers of clothes washers that sold their products in the U.S. The stock gained 1.5 percent to $63.73.


Europe worries stalk Wall Street; Dow loses 161

By DANIEL WAGNER

Stocks are closing sharply lower amid fear that Europe's debt crisis might fracture the financial system there.

Strong demand for safe investments Wednesday pushed the yield on the 10-year Treasury note to its lowest level since World War II.

Spain's borrowing costs spiked to the highest level since Spain joined the euro currency. Last week, the nation's fourth-largest lender said it needed nearly $24 billion in government aid.

Greece's future in the euro is uncertain ahead of elections next month.

The Dow closed down 161 points at 12,419. The S&P 500 index was down 19 at 1,313. The Nasdaq composite average was down 34 at 2,837.

About 13 stocks fell for every two that rose on the New York Stock Exchange. Trading volume was heavy at 3.47 billion shares.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Fearing a financial rupture in Europe, investors around the world fled from risk Wednesday. They punished stocks and the euro, and the yield on a benchmark U.S. bond hit its lowest point since World War II.

In the United States, where concerns about Europe have already wiped out most of this year's gains for stocks, major averages fell more than 1 percent. The Dow Jones industrial average was down as much as 184 points.

European stocks lost even more, and the euro dropped below $1.24, its lowest point since the summer of 2010.

"Everyone's just afraid that if Europe doesn't get its act together, there will be a big spillover in the U.S.," said Peter Tchir, manager of the hedge fund TF Market Advisors.

He said the uncertainty over Europe's future was reminiscent of the financial crisis in the fall of 2008, when it was briefly unclear whether banks would be bailed out and "we had these giant swings up and down."

The trigger Wednesday was Spain, where the banking system is under strain a week after its fourth-largest lender required $23.8 billion in government aid to cover souring real estate loans.

Wall Street, which woke up to increased anxiety over higher Spanish borrowing rates, was down from the opening bell.

In the final half-hour of trading, the Dow was down 163 points at 12,416. The Dow has had a miserable May, losing more than 6 percent, and is on track for its first losing month since September.

The Standard & Poor's 500 index lost 20 points to 1,312. The Nasdaq composite index fell 36 to 2,834.

Investors are increasingly worried that problems at the bank, Bankia, might recur at other Spanish banks. Many lent heavily during the nation's real estate bubble. Losses from the real estate crash might be too big for Spain's government to shoulder.

Spain has enacted harsh government spending cuts to bring its budget deficit within strict new European guidelines. But the country is in a recession and has 25 percent unemployment, and might need a bailout, like Greece, Ireland and Portugal.

On Wednesday, borrowing rates rose sharply for Spain and Italy, both seen as the next problem cases in a debt crisis that has rocked Europe for more than two years. Traders dumped bonds issued by those governments.

The yield on Spain's 10-year bonds, a key indicator of market confidence in a country's ability to pay down its debt, shot as high as 6.69 percent, the highest since the euro currency was launched in 2002.

Intense demand for low-risk, easily tradable securities led investors to buy U.S. government debt. The yield on the 10-year Treasury note to 1.62 percent, a big decline from 1.74 percent late Tuesday.

That appeared to be the lowest since 1945, said Bill O'Donnell, head of U.S. Treasury strategy at the Royal Bank of Scotland, citing data from the European Central Bank and other sources.

Federal Reserve daily records only go back to 1962, and those reflect a previous record of 1.70 percent, set May 17.

"There's just a massive flight to safe-haven assets today," O'Donnell said.

He characterized the rush into U.S. bonds by citing a well-known, unsavory analogy made by Richard Fisher, the head of the Federal Reserve's Dallas bank: "The U.S. is the prettiest horse in the glue factory."

Yields on German government bonds, also seen as safe, turned lower.

Concern about Europe lurked around every corner: The European Commission said consumer confidence fell sharply across the region last month. Spaniards withdrew money from their banks, spreading fear about that nation's ability to go on without bailouts. Spain's main stock index closed down 2.6 percent.

An opinion poll in Greece showed that the far-left Syriza party is gaining support ahead of key elections June 17. Syriza opposes the system of bailouts and sharp budget cuts that have kept Greece afloat but also gutted its economy.

If the party wins, Greece may be forced to exit the euro currency. The shock waves could reach nations that have received bailouts, like Portugal, and those that might need them, like Italy.

Until the Greek elections next month, things will be too uncertain for the market to sustain a meaningful rally, said David Kelly, chief market strategist at J.P. Morgan Funds.

If the bailouts continue and European governments start spending to spur growth, Kelly expects the market eventually to rise. If Syriza wins and Greece is expelled from the euro, he sees stormy waters for months to come.

Amid the tumult, Europe's executive branch called on the 17 countries that use the currency to create a "banking union" that can centrally oversee and, if needed, bail out national banks.

If Europe's financial crisis plunges it into a deep recession, global economic growth will likely falter, reducing demand for commodities and machines that power growth.

Fearing that outcome, traders pushed the stocks of heavy equipment maker Caterpillar and aluminum company Alcoa to among the biggest declines among the 30 companies that make up the Dow.

The euro fell as low as $1.2360, the lowest since the summer of 2010. Benchmark stock indexes closed down 2.2 percent in France, 1.8 percent in Italy and Germany.

When banks and big investors get frightened, they sell stocks or bonds and park the money in the safest government debt markets. They buy Japanese yen, German bonds and especially U.S. Treasurys.

It's no longer about turning a profit, said O'Donnell of RBS. That's why German government two-year notes are paying zero percent: People are simply handing their money over for safekeeping.

The U.S. Treasury market is still considered one of the safest places in the world to stash a billions in a hurry. At $11 trillion, no other market is as large, so there's always somebody ready to buy or sell them.

"When people just want to get their money back, there's not a lot of competition," O'Donnell said.

Food and energy commodities fell sharply. Crude oil lost more than $3 to below $88 a barrel. Crude has been falling steadily since the beginning of May, when it traded as high as $106 a barrel.

Kelly, of J. P. Morgan Funds, said investors should remember that the U.S. is on firmer economic footing than Europe, and make sure their portfolios could withstand either possible outcome.

"Things could be much better, or much worse, than the markets have priced in," Kelly said. "The only logical investment strategy is to be balanced -- to get to the middle of the boat."

Among U.S. stocks making moves:

-- Monsanto, the agricultural company, was one of the few big gainers in a sea of red. It jumped more than 3 percent after its CEO said this year's earnings will likely surge 25 percent, far more than Wall Street had been expecting. Sales were strong in its seed and chemicals business, including Roundup herbicides.

-- Research in Motion, maker of the BlackBerry, plunged 7 percent after the company said late Tuesday it had hired a team of bankers to help it weigh its options -- Wall Street jargon for a possible sale or reorganization. RIM's business has been crumbling as smartphone users move to iPhone and Android devices.

-- Whirlpool rose, reversing an earlier loss, after the Department of Commerce ruled that the South Korean government provided illegal subsidies to producers of clothes washers that sold their products in the U.S. The stock gained 1.5 percent to $63.73.
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Re: Re: Frostbite Falls Daily Rant
« Reply #9 on: May 31, 2012, 03:27:15 AM »
Anybody take my advice?  Ross?  GO?  I think Ben Lichtenstein's call is going to be a regular feature for a while.  This is not a good week to quit drinking.  :wc:

Things are most certainly reaching panic proportions. We risk the chance of a worldwide deflationary collapse, it may have already started. For this reason RE, my feeling is the Fed is shitting in their pants from fright and is in constant 24 hour around the clock consultation with all other major governments. I expect a world wide coordinated response to these current events. My feeling is it will be decisive, massive in its scope and will be designed to teach the shorts in the Euro and Sovereign Debt a lesson they will never forget. Your opinion is respected RE, it is one I am most familiar with, if I am wrong and they sit back and let the world end here, it will not be the first time my judgement was flawed. What worries me most about my prediction being in error is the idea I have that they may have miscalculated and waited too long to act. I have always claimed they are ass holes, and we both know they have only one tool in their box.
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Re: Big Slide v2.0 Begins
« Reply #10 on: May 31, 2012, 04:36:08 PM »
I split off the chatter about the current Market Slide from the Daily Rant to this thread in Market Flambe.

Anyhow, more from Graham Summers on the ongoing Euro Collapse follows below.

RE

Spain Just Gave Us a Glimpse Into the True State of the EU Banking System
Submitted by Phoenix Capital Research on 05/31/2012 13:55 -0400


Borrowing CostsBudget DeficitdefaultEuropean Central BankNationalizationSovereign DefaultUnemploymentUnited Kingdom


 

The following is an excerpt from my most recent client letter.

 

In case you missed it, Spain just gave the entire world a glimpse of what’s happening “behind the scenes” in the financial system.

 

I am of course referring to the Bankia nationalization,  the largest bank nationalization in Spain’s history.

 

Bankia was formed in 2010 when the Spanish Government merged seven insolvent cajas  So it’s no surprise that Bankia was a trainwreck waiting to happen… at least to anyone with a working brain.

 

However, both the bank and the Spanish Government decided to maintain the charade that the bank was in great form right up until it collapsed (only one month ago Bankia was talking about paying its dividend).

 

On May 9th the Spanish Government stepped in to nationalize the bank. Its first step was to convert its (the Spanish Government’s) €4.5 billion worth of preferred shares to common shares, thereby taking a 45% stake in the bank.

 

Then Bankia announces €17 billion of new write-downs as well as €7 billion of mark-downs on investments, thereby rendering the bank insolvent. It also revised its 2011 results from a €309 million profit to a €3 billion LOSS.

 

The end result… Bankia just received a €19 billion Euro bailout, the largest in Spain’s history. That’s not the problem however. The REAL problem is that Spain itself is broke…

 

…so where is the €23.5bn for the Bankia rescue going to come from? The state's Fund for Orderly Bank Restructuring (FROB) is down to €5.3bn, and there are many other candidates for that soup kitchen.

 

Spain must somehow rustle up €20bn or more on the debt markets. This will push the budget deficit back into the danger zone, though Madrid will no doubt try to keep it off books – or seek backdoor funds from the ECB to cap borrowing costs. Nobody will be fooled…

 

The Centre for European Policy Studies in Brussels puts likely write-offs at €270bn. We could see Spain's public debt surge into triple digits in short order.

 

As I wrote in my column this morning, the Spanish economy is spiralling into debt-deflation. Monetary and fiscal policy are both excruciatingly tight for a country in this condition. The plan to slash the budget deficit from 8.9pc to 5.3pc this year in the middle of an accelerating contraction borders on lunacy.

 

You cannot do this to a society where unemployment is already running at 24.4pc. Either Europe puts a stop to this very quickly by mobilising the ECB to take all risk of a Spanish (or Italian) sovereign default off the table – and this requires fiscal union to back it up – or it must expect Spanish patriots to take matters into their own hands and start to restore national self-control outside EMU.

 

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100017477/spain-runs-out-of-money/

 

In addition to this, Spain’s regional governments are seeking bailouts:

           

            Spain's Catalonia seeks government help to pay debt

 

Spain's wealthiest autonomous region, Catalonia, needs financing help from the central government because it is running out of options for refinancing debt this year, Catalan President Artur Mas said today.

 

"We don't care how they do it, but we need to make payments at the end of the month. Your economy can't recover if you can't pay your bills," Mas told a group of reporters from foreign media.

 

A spokesman for the Catalan government later emphasised that Mas was referring to payments that must be met routinely each month and not a specific deadline this month.

 

The debt burden of Spain's 17 highly devolved regions, and rising bad loans at the country's banks, are both at the heart of the euro zone debt crisis because investors are concerned they could strain finances so much that Spain, the currency bloc's fourth biggest economy, will need an international bailout.

 

Catalonia, which represents one fifth of the Spanish economy, has more than 13 billion euros in debt to refinance this year, as well as its deficit.

 

All of the regions together have 36 billion euros ($45 billion) to refinance this year, as well as an authorised deficit of 15 billion euros.

 

Last year many of the regions financed debt by falling months or even years behind in payments to providers such as street cleaners and hospital equipment suppliers.

 

http://www.buenosairesherald.com/article/101796/spains-catalonia-seeks-government-help-to-pay-debt

 

Thus, Spain has illustrated the true nature of the EU Crisis in just one week. Specifically…

 

1.Both governments and banks are lying about the real risks to their balance sheets (Bankia passed the EU’s stress tests).
2.We have reached the point at which Governments can no longer bailout their own failing banks as the Governments themselves are bankrupt (see Catalonia and Spain as a whole).
 

To recap… Spain has only €5 billion left in its own bailout fund… at a time when its largest bank needs €19 billion (at the least)… and its regional government have begun asking for bailouts too.

 

Oh, and the Spanish banking system needs to write off another €270 billion…  if Spain cannot cobble together €19 billion, where on earth will it get the money needed to support its collapsing banking system which is on the verge of having to write down hundreds of billions of Euros?

 

This is the state of affairs in Europe: bankrupt nations trying to bailout bankrupt banks or looking for bailouts from funds that are backed by other bankrupt nations.

 

What could go wrong?

 

On that note, Spain will take down the EU, guaranteed. I’ve been warning about this for months and everything is unraveling exactly as I forecast. So if you’re not preparing for an end to the EU in its current form as well as a European banking collapse, you need to get moving.

 

I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

« Last Edit: May 31, 2012, 04:47:09 PM by RE »
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Top Gold Bug is Depressed
« Reply #11 on: May 31, 2012, 04:50:55 PM »
Here from a disappointed and frustrated top Gold Bug, Eric Sprott

RE

Eric Sprott: The Real Banking Crisis, Part II
&nbsp;


Submitted by Tyler Durden on 05/31/2012 19:36 -0400





From Eric Sprott and David Baker of Sprott Asset Management


The Real Banking Crisis, Part II


Here we go again. Back in July 2011 we wrote an article entitled "The Real Banking Crisis" where we discussed the increasing instability of the Eurozone banks suffering from depositor bank runs. Since that time (and two LTRO infusions and numerous bailouts later), Eurozone banks, as represented by the Euro Stoxx Banks Index, have fallen more than 50% from their July 2011 levels and are now in the midst of yet another breakdown led by the abysmal situation currently unfolding in Greece and Spain.


EURO STOXX BANKS INDEX





Source: Bloomberg


On Wednesday, May 16th, it was reported that Greek depositors withdrew as much as &euro;1.2 billion from their local Greek banks on the preceding Monday and Tuesday alone, representing 0.75% of total deposits.1 Reports suggest that as much as &euro;700 million was withdrawn the week before. Greek depositors have now withdrawn &euro;3 billion from their banking system since the country's elections on May 6th, seemingly emptying what was left of the liquidity remaining within the Greek banking system.2 According to Reuters, the Greek banks had already collectively borrowed &euro;73.4 billion from the ECB and &euro;54 billion from the Bank of Greece as of the end of January 2012 - which is equivalent to approximately 77% of the Greek banking system's &euro;165 billion in household and business deposits held at the end of March.3 The recent escalation in withdrawals has forced the Greek banks to draw on an &euro;18 billion emergency fund (released on May 28th), which if depleted, will leave the country with a cushion of a mere &euro;3 billion.4 It's now down to the wire. Greece is essentially &euro;21 billion away from a complete banking collapse, or alternatively, another large-scale bailout from the European Central Bank (ECB).


The way this is unfolding probably doesn't surprise anyone, but the time it has taken for the remaining Greek depositors to withdraw their money is certainly perplexing to us. Official records suggest that the Greek banks only lost a third of their deposits between January 2010 and March 2012, which begs the question of why the Greek banks have had to borrow so much capital from the ECB in the meantime.5 Nonetheless, we are finally past the tipping point where Greek depositors have had enough, and the past two weeks have perfectly illustrated how quickly a determined bank run can propel a country back into crisis mode. The numbers above suggest there really isn't much of a banking system left in Greece at all, and at this point no sane person or corporation would willingly continue to hold deposits within a Greek bank unless they had no other choice.


The fact remains that here we are, in May 2012, and Greece is right back in the exact same predicament it was in before its March 2012 bailout. Before the bailout, Greece had approximately &euro;368 billion of debt outstanding, and its government bond yields were trading above 35%.6 On March 9th, the authorities arranged for private investors to forgive more than &euro;100 billion of that debt, and launched a &euro;130 billion rescue package that prompted Nicolas Sarkozy to exclaim that the Greek debt crisis had finally been solved.7 Today, a mere two months later, Greece is back up to almost &euro;400 billion in total debt outstanding (more than it had pre-bailout), and its sovereign bond yields are back above 29%. It's as if the March bailout never happened&hellip; and if you remember, that lauded Greek bailout back in March represented the largest sovereign restructuring in history. It is now safe to assume that that record will be surpassed in short order. It's either that, or Greece is out of the Eurozone and back on the drachma - hence the renewed bank run among Greek depositors.


Meanwhile, in Spain, bank depositors have been pulling money out of the recently nationalized Bankia bank, which is the fourth largest bank in the country. Depositors reportedly withdrew &euro;1 billion during the week of May 7th alone, prompting shares of Bankia to fall 29% in one day.8 The Bankia run coincided with Moody's issuance of a sweeping downgrade of 16 Spanish banks, a move that was prompted over concerns related to the Spanish banks' &euro;300+ billion exposure to domestic real estate loans, half of which are believed to be delinquent.9 The Spanish authorities were quick to deny the Bankia run, with Fernando Jim&eacute;nez Latorre, secretary of state for the economy stating, "It is not true that there has been an exit of deposits at this time from Bankia&hellip; there is no concern about a possible flight of deposits, as there is no reason for it."10 Funny then that the Spanish government had to promptly launch a &euro;9 billion bailout for Bankia the following Wednesday, May 24th, an amount which has since increased to a total of &euro;19 billion to fund the ailing bank.11 Deny, deny some more&hellip; panic, inject capital - this is the typical government approach to bank runs, but the bailouts are happening faster now, and the numbers are getting larger.


The recent bank runs in Greece and Spain are part of a broader trend that has been building for months now. Foreign depositors in the peripheral EU countries are understandably nervous and have been steadily lowering their exposure to Eurozone sovereign debt. According to JPMorgan analysts, approximately &euro;200 billion of Italian government bonds and &euro;80 billion of Spanish bonds have been sold by foreign investors over the past nine months, representing more than 10% of each market.12 The same can be said for foreign deposits in those countries. Citi's credit strategist Matt King recently reported that, "in Greece, Ireland, and Portugal, foreign deposits have fallen by an average of 52%, and foreign government bond holdings by an average of 33%, from their peaks."13 Spain and Italy are not immune either, with Spain having suffered &euro;100 billion in outflows since the middle of last year (certainly more now), and Italy having lost &euro;230 billion, representing roughly 15% of its GDP.14


As we've stated before, no matter what happens in the Eurozone, the absolute worst case scenario for the authorities is a bank run. It terrifies all involved, because they can spiral out of control faster than governments can react to stop them, save for the most Draconian measures. They also prompt banks to liquidate whatever assets they can, revealing the truth about what their "assets" are actually worth. In this environment, no one wants to find out what the market will really pay for them. We're seeing this now in Spain, where according to Bloomberg, "Many Spanish banks are avoiding property sales so they don't have to "mark to market" valuations. Instead, they're giving developers new loans to pay debt coming due to prevent defaults."15 Sound familiar? We're now at the point where a bank run in one Eurozone country could quickly seize up the entire system - not just in Greece or Spain, but throughout the entire Eurozone and beyond. Greek and Spanish banks are just like all the others; they operate with leverage ratios averaging 25x their equity capital. They are all so overleveraged that it takes very little in deposit withdrawals to cause instantaneous liquidity issues. This is why we'll likely see another ECB-induced printing program announced (with a new abbreviation, hopefully) before a broader bank run can take root. The Eurozone authorities simply cannot risk the consequences of bank runs in countries like Spain, Portugal or Italy, which are far too big to bailout for the over-stretched ECB. It's not about Greece staying or leaving the European Union anymore, it's about the bailout ability of European banking system to survive the impact of massive money transfers.


Nothing is really being solved here, and everyone knows it. We're essentially in the same place we were when the crisis erupted back in 2010, only now there's more total debt outstanding. Bank of Canada Governor Mark Carney remarked in a December 2011 speech that "the global Minsky moment has arrived", and it's now plain for all to see.16 The "Minsky moment" refers to the work of Hyman Minsky, a deceased American economist who developed theories on how debt accumulation eventually leads to financial crises. You don't have to be an economist to understand the crux of Minsky's theories. As an economy grows it takes on increasing amounts of debt. The point eventually comes when the cost of servicing that debt can no longer be met by that economy's productive capacity - that's the Minsky Moment, and we're watching it play out all over the world today. When Greek bond yields spiked back in February 2012, bond investors looking at the country's &euro;368 billion of debt outstanding, its population of 11 million people, and its nominal GDP of $312 billion realized that it couldn't possibly work. There was no way Greece could pay the interest on its debt load. There was no way the bond market could keep pretending everything was ok, like it currently does with the UK, US and Japan&hellip; for now.


Greece clearly needs another large-scale bailout, and we think they'll get one. Greece's exit from the Eurozone represents a Lehman-like scenario to the global banking system - why wait to see what carnage it will unleash? It's always easier to print money, and printing another couple &euro;100 billion is nothing compared to the trillions that have been printed since last November. Where this will get tense, however, is when the market acknowledges the Minsky moment in a larger EU economy, like Spain or Italy. As we go to print, Spanish bond yields are now trading back above 6.5%, signaling the market's non-confidence in the country's ability to back-stop its own banking system. Spain has a population of 47 million, a GDP of roughly $1.3 trillion, national debt of roughly $1.1 trillion, debt owed to the ECB and various bailout funds totaling &euro;643 billion, and now, a banking system that also appears close to collapsing.17 Their Minsky Moment has already arrived, and it's simply a matter now of how the market will react to it, and how long it takes the ECB to come to Spain's rescue.


Without a doubt, the most counterintuitive aspect of the Greece/Eurozone debacle has been its impact on the price of gold. Gold is now back below $1600 for the third time since August 2011; each time has coincided with severe banking stress within Greece and the broader Eurozone. Some pundits have suggested that various European banks are selling gold to raise liquidity, and this would make sense if the Eurozone banks had gold to sell, but we cannot find any evidence of large physical sellers out of Europe. Also, ever since the unlimited US-dollar SWAP agreement was launched in November 2011, USD liquidity has not been the key issue in Europe - rising sovereign bond yields and deposit withdrawals have. On the contrary, the selling pressure in gold once again appears to be expressed primarily through the futures markets, which are highly levered and rarely involve any physical transactions involving actual bullion. The futures market sell-off also appears to be waning now, since the European banking crisis has provided central banks with a politically-palatable excuse to take action if it deteriorates any further.


The recent gold price has been particularly frustrating given the continuation of bullish demand trends out of China. China posted another record Hong Kong gold import number in March of 62.9 tonnes. Gold imports into China have now totaled 135.5 metric tonnes between January and March 2012, representing a 600% increase over the same period last year.18 We don't have to connect the dots here - China is stockpiling the precious metal while investors in the West scratch their heads wondering why the spot price is so low.


CHINA HONG KONG GOLD IMPORTS AND GOLD SPOT PRICE
Source: UBS, Bloomberg


Non-G6 central banks have also continued to accumulate physical gold, with the latest reports revealing another 70 tonnes of gold purchases completed in March and April by the central banks of Philippines, Turkey, Mexico, Kazakhstan, Ukraine and Sri Lanka.19 We won't bore you with the exercise of annualizing those numbers and comparing them to the annual global mine supply, but suffice it to say that the fundamentals still remain firmly intact. It's now simply a matter of improving sentiment towards gold in the West, and if the current banking crisis in Europe gets any worse, or if we see another large-scale policy response, it will likely happen on its own accord.


Although the last eight months have not played out the way we would have expected for gold, they have played out the way we envisioned for the banks. The question now is how long this can go on for, and how long gold can remain under pressure in a banking crisis that has the potential to spread beyond Greece and Spain? So much now rests on the policy responses fashioned by the US Fed and ECB, and just as much also rests on what's left of European citizens' confidence in their local banking institutions. Neither of these things can be precisely measured or predicted, but we continue to firmly believe that depositors in Greece and Spain will choose gold over drachmas or pesetas if they have the foresight and are given the freedom to act accordingly. The number one reason we have always believed gold should be owned, and why we believe it will go higher, is people's growing distrust of the banking system - and we are now there. We will wait and see how the summer develops, and keep our attention firmly focused of the second phase of the bank run now spreading across southern Europe.&nbsp;
1Hope, Kerin and Wigglesworth, Robin (May 16, 2012) "Greek banks see steady deposits outflow". Financial Times. Retrieved May 22, 2012 from:
http://www.ft.com/intl/cms/s/0/3d588c2e-9f3c-11e1-a455-00144feabdc0.html#axzz1v3uDr3Vw
2Smith, Helena and Treanor, Jill (May 16, 2012) "Greeks withdraw &euro;3bn in 10 days since election". The Guardian. Retrieved May 22, 2012 from:
http://www.guardian.co.uk/world/2012/may/16/greeks-withdraw-3bn-10-days
3Rueters (May 28, 2012) "Greece Pours $22.6 Billion Into Four Biggest Banks". Reuters. Retrived May 29, 2012 from:
http://www.cnbc.com/id/47591006
4Paris, Costas and Paris, Jenny (May 22, 2012) "Former Greek PM Papademos: Risk of Greece Leaving Euro is Real". Dow Jones. Retirved on May 23, 2012 from:
http://www.dowjones.com/products/djfxtrader/articles/FormerGreekPMPapademosRiskOfGreeceLeavingEuroIsReal.asp
5Smith, Helena and Treanor, Jill (May 16, 2012) "Greeks withdraw &euro;3bn in 10 days since election". The Guardian. Retrieved May 22, 2012 from:
http://www.guardian.co.uk/world/2012/may/16/greeks-withdraw-3bn-10-days
6Becatoros, Elena and Steinhauser, Gabriele (March 9, 2012) "Greece secures biggest debt deal in history" Associated Press. Retrieved May 20, 2012 from:
http://news.yahoo.com/greece-secures-biggest-debt-deal-history-193537156.html
7Reuters (March 9, 2012) "Sarkozy says Greek problem solved". Reuters. Retrieved May 20, 2012
http://www.reuters.com/article/2012/03/09/us-eurozone-greece-sarkozy-idUSBRE8280QV20120309
8Vigna, Paul (May 17, 2012) "Whatever You Do, Don't Say 'Bank Run'". Wall Street Journal. Retrieved May 22, 2012 from:
http://blogs.wsj.com/marketbeat/2012/05/17/whatever-you-do-dont-say-bank-run/
9Reuters (May 17, 2012) "Moody's cuts Spanish banks ratings". Reuters. Retrieved May 22, 2012 from: http://www.reuters.com/article/2012/05/17/idUSL1E8GHGOZ20120517
10Johnson, Miles (May 17, 2012) "Spain denies bank run reports". Financial Times. Retrived May 20, 2012 from:
http://www.ft.com/intl/cms/s/0/b6705296-a01c-11e1-94ba-00144feabdc0.html#axzz1vn7yKh26
11Giles, Ciaran and Woolls, Daniel (May 28, 2012) "Spanish PM adamant bank sector won't need European Union as Bankia shares plunge". The Associated Press. Retrieved on May 28, 2012 from: http://www.canadianbusiness.com/article/85633--bankia-bailout-plan-sends-shares-plunging-10-year-spanish-bond-yield-soaring
12Milne, Richard (May 23, 2012) "Bond exodus on a par with eurozone bank run". Financial Times. Retrieved on May 24, 2012 from:
http://www.ft.com/intl/cms/s/0/8b954e82-a4db-11e1-9a94-00144feabdc0.html#axzz1vn7yKh26
13Field, Richard (May 21, 2012) "Citi's Matt King on deposit flight likely to pick up speed in the EU". Trust Your Instincts Blog. Retrieved on May 24, 2012 from:
http://tyillc.blogspot.ca/2012/05/citis-matt-king-on-deposit-flight.html
14Milne, Richard (May 23, 2012) "Bond exodus on a par with eurozone bank run". Financial Times. Retrieved on May 24, 2012 from:
http://www.ft.com/intl/cms/s/0/8b954e82-a4db-11e1-9a94-00144feabdc0.html#axzz1vn7yKh26
15Smyth, Sharon and Callanan, Neil (May 29, 2012) "Spain Delays And Prays That Zombies Repay Debt: Mortgages". Bloomberg. Retrieved on May 29, 2012 from:
http://www.bloomberg.com/news/2012-05-28/spain-delays-and-prays-that-zombies-repay-debt-mortgages.html?ftcamp=crm/email/2012529/nbe/AlphavilleLondon/product
16Carney, Mark (December 12, 2011) "Growth in the Age of Deleveraging". Bank of Canada. Retrieved on May 20, 2012 from:
http://www.bankofcanada.ca/2011/12/speeches/growth-in-the-age-of-deleveraging/
17Taylor, Anthony (April 19, 2012) "Spanish Debt as at April 19th 2012 vs GDP". British American Marketing. Retirved on May 20, 2012 from:
http://www.britishamericanmarketing.com/consultancy/globaleconomicnews/spainish-debt-as-at-april-19th-2012-vs-gdp-florida-investors-macro-financ-view/
18Bloomberg News (May 8, 2012) "China's Gold Imports Jump As Country May Become Biggest User". Bloomberg. Retrieved on May 20, 2012 from:
http://www.bloomberg.com/news/2012-05-08/china-s-gold-imports-advance-as-country-may-become-biggest-user.html
19Williams, Lawrence (May 25, 2012) "Central Banks boost gold holdings yet again". Mineweb. Retrieved on May 26, 2012 from:
http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=152096&amp;sn=Detail&amp;pid=102055

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Offline RE

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Re: Re: Frostbite Falls Daily Rant
« Reply #12 on: May 31, 2012, 05:33:32 PM »
Things are most certainly reaching panic proportions. We risk the chance of a worldwide deflationary collapse, it may have already started. For this reason RE, my feeling is the Fed is shitting in their pants from fright and is in constant 24 hour around the clock consultation with all other major governments. I expect a world wide coordinated response to these current events. My feeling is it will be decisive, massive in its scope and will be designed to teach the shorts in the Euro and Sovereign Debt a lesson they will never forget. Your opinion is respected RE, it is one I am most familiar with, if I am wrong and they sit back and let the world end here, it will not be the first time my judgement was flawed. What worries me most about my prediction being in error is the idea I have that they may have miscalculated and waited too long to act. I have always claimed they are ass holes, and we both know they have only one tool in their box.

It really looks to be getting into full swing here now.  The collapse in Spanish and now also Italian Debt is pretty much beyond the capacity of Helicopter Ben to handle on his own, and right now the ECB, PBoC or SNB do not appear ready to do a concerted action printing spree.

Bonus, we haven't even really got started on the Derivatives yet.  BOOM!

<a href="http://www.youtube.com/v/GydJiD7v76w" target="_blank" class="new_win">http://www.youtube.com/v/GydJiD7v76w</a>

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Offline RE

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The End Game
« Reply #13 on: May 31, 2012, 06:02:42 PM »
The End Game
The End Game
Right on cue, the scariest document ever re: derivatives.  Enjoy

Scribd link on the right  side here and no I cannot figure out how to get it to format differently here inside SMF.  Peter?
RE

The End Game
Quote
Submitted by Tyler Durden on 05/31/2012 20:02 -0400


BondChinaETCFractional Reserve BankingGermanyGoldman Sachsgoldman sachsGross Domestic ProductJapanUnited Kingdom


If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn't. The founder of Global Macro Investor "previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe... Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes." It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen....

And we see a lot of those.

Consider this:

•We are here...


•We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
•With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
•There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
•The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
•Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
•From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
•And then do you think Japan and China would not be next?
•And then do you think the US would survive unscathed?
•That is the end of the fractional reserve banking system and of fiat money.
•It is the big RESET.
It continues:

•Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
•The whole bond market will be dead.
•Short selling on bonds - banned
•Short selling stocks – banned
•CDS – banned
•Short futures – banned
•Put options – banned
•All that is left is the Dollar and Gold
It only gets better. We use the term loosely:

•We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.
•Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.
•After that…we put on our tin helmets and hide until the new system emerges
And the punchline

From a timing perspective, I think 2012 and 2013 will usher in the end.

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Offline Golden Oxen

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Re: Big Slide v2.0 Begins
« Reply #14 on: May 31, 2012, 07:13:19 PM »
"Right on cue, the scariest document ever re: derivatives.  Enjoy"

That sure wasn't any nursery rime. Nothing to argue about, right where we are headed if the dim that rule us don't move quickly and decisively. People are panicking now from the constant never ending BS and lack of coherent response. Oil cracking here and falling like a granite boulder is a sign of great stress and contraction in the system. It is the most accurate chart of the fragile condition we are in IMHO.           :icon_study:

sc