After a burst of volatility in the developed market over the past month, one odd outlier was China, where after a surge of gut-wrenching moves in both its currency and equity markets (recall that it was China’s troubles with marketwide circuit breakers at the start of January that may have catalyzed the global volatility wave), Chinese stocks remained relatively quiet and resilient, levitating quietly day after day. That all changed overnight when the Shanghai Composite plunged by 6.4% with the drop accelerating into the close. This was the biggest drop in over a month and was big enough to almost wipe out the entire 10% rebound from the January lows in one session.

 

There was confusion about what catalyzed the selling with several theories proposed.

According to one, the catalyst was a jump in money market rates: the overnight repo rate jumped as much as 33 bps which led to a tightening in financial conditions. The cash squeeze was caused by banks’ reserve submission and corp. tax payments for 2015 due this week: Commerzbank economist Zhou Hao

“Market confidence is very weak so an increase in money-market rates triggered a sell-off today,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. “Technically speaking, the rebound has reached its target and a new round of declines is resuming. The valuations of smaller companies are still too high and that’s the basic reason behind the plunge. I am not too sure that the government will step in to buy stocks now.” Judging by the final result, he was right.

A second theory speculated that losses accelerated after regulators banned Zhongrong Life from adding to its equity investments, according to Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “Zhongrong Life can’t add to holdings as its solvency ratios fall into criteria of insolvent insurers”, China’s Insurance Regulatory Commission said.

This is a problem because “the government is trying to make sure all insurance companies need to meet potential demand for claims from clients and keep liquidity ample,” says Pang. “But almost all insurers which heavily bought shares last year when the Shanghai Composite was at high levels” are facing problems. As a result, the latest black swan to appears in China in the form of Zhongrong Life’s situation, is fueling concern further selling pressure in stock market: Pang

“A big jump in Shanghai turnover implies investors turned risk averse and want to dump holdings en masse,” Pang says. “Investors are scared of further declines. The government may try to step in to calm investors’ nerves. It may help moderate losses but can’t reverse the trend.”

A third, far less credible theory postulated that stocks were tumbling on concerns that there may be negative news from the G-20 tomorrow. Since that would be patently impossible as the G-20’s only concern is to stabilize markets we would discount this idea.

Whatever the reason, it appears that Chinese stocks were just waiting for a catalyst to dump and they got it: “The market is in a quite fragile state when everyone scrambles for an exit,” said Central China Securities Co.’s Shanghai-based strategist Zhang Gang, who accurately predicted last year’s June selloff. “None of the news in the market is sufficient enough to trigger such a slump.”

* * *

Elsewhere in the world, the sentiment was initially of the risk-off variety, with treasuries rallying gold rose and crude oil falling after the Chinese rout. U.S. stock-index futures were little changed, while European equities advanced as banks rebounded.

As Bloomberg writes, global equities have swung between gains and losses in the past week as investors tried to get a handle on the world economy’s prospects. So far they are failing, and yet it is only massive short squeeze that manage to provide support under the increasingly jittery market. Crude’s gyrations and concern that China can’t regain momentum have dominated financial markets this year, spurring central banks to ponder further stimulus. U.S. Treasury Secretary Jacob Lew said Group-of-20 finance ministers wouldn’t deliver an “emergency response” to the market turmoil when they meet this week as we aren’t in a crisis environment.

“The conversation has shifted from an accelerating economy to one possibly falling into recession,” said Kully Samra, who manages U.K. clients for Charles Schwab Corp. in London. “Our outlook for the year is still good, but what happens over the next few days in the stock market depends on how much those worries intensify.”

At last check, S&P 500 futures were up 0.1%, to 1933, before data that is forecast to show durable goods orders expanded in January, while initial jobless claims increased in February.

Europe’s Stoxx 600 benchmark gauge of European equities added 1.4% before the Euronext broke as reported previously, a gain that has since jumped to 1.8% as the market remains broken: go figure. Lloyds rallied as much as 11 percent after raising its dividend, introducing a special payout and indicating it may have reached the end of charges for wrongly sold payment protection insurance that cost it 4 billion pounds ($5.58 billion) last year.

* * *

Looking at regional markets, Asian equity markets traded mixed, having shrugged off the positive lead from Wall St where gains in oil prices post-DoE spurred risk-on sentiment, with renewed Chinese concerns leading to the downbeat tone in the region. Nikkei 225 (+1.4%) traded in positive territory supported by JPY weakness. Elsewhere, ASX 200 (+0.1%) traded range-bound amid a mixed bag of earnings reports. While the Shanghai Comp (-6.4%) underperformed amid profit-taking and increasing money market rates with the overnight Shibor up 2.45%, subsequently signalling at tighter liquidity. Alongside this, a total of CNY 960b1n of reverse repurchase agreements are due to mature this week, again further squeezing liquidity. Finally, 10yr JGBs fell amid gains in riskier assets in Japan, while the latest securities transactions figures also showed foreign purchases of Japanese debt nearly halved. However, prices pulled off their worst levels following the 2yr note auction where the auction average yield declined to its lowest on record.

European equities are in the green (Euro Stoxx: +1.4%) paring some of yesterday’s gains after benefitting from the positive close and Wall St. and a spate of earnings this morning. Europe shrugged off the significant losses seen in China, to see financials and energy names outperform. Both these sectors were among the worst performers yesterday, so while much of the move could be put down to profit taking, financials have also benefitted from significant gains Lloyds (+9.0%) in the wake of their earnings, while energy names continue to see upside in tandem with WTI’s move higher during US hours.

In FX it has been a tight session in early London today, the pound halted its steepest decline in more than six years as data confirmed that the U.K. economy gained momentum at the end of last year. Australia’s dollar weakened for a third day, dropping 0.1 percent to 71.89 U.S. cents, after a government report showed businesses’ annual investment plans fell to the lowest level in nine years.

The sharp reversal in Wall Street adds to the conflicting signals in FX. Oil also turned sharply higher on what was a marginal miss in the DoE Crude build, so all points to a short squeeze in risk (in general), spelling some USD weakness against all currencies with the exception of the JPY. Early selling in USD/CAD saw us dip under 1.3700 as locals decided to cut their longs established at the lows. GBP continues to grind lower against the EUR, but Cable looks to be finding some support below 1.3900 for now. Larger EUR/USD support seen down in the 1.0950 area, but for now, pre 1.1000 is finding some bids coming in. USD/JPY has been very quiet around 112.00, with S&P futures more or less flat to give little away in the US session ahead.

In commodities, WTI crude initiall declined modestly on the day after gaining 0.9 percent on Wednesday following a massive API and a modest DOE inventory build; it has since regained all of its losses and was at last check green on the day. Stockpiles of gasoline in the U.S. fell 2.24 million barrels to 256.5 million, according to the Energy Information Administration, as demand climbed on pump prices near a seven-year low. American crude inventories, however, rose by 3.5 million barrels to an 86-year high of 507.6 million last week.

U.S. natural gas slipped for a third day, extending a decline from a two-month low, amid forecasts for a warmer weather. Futures for March delivery, which expire Thursday, fall as much as 2 percent to $1.742 a million British thermal units on the New York Mercantile Exchange.

Gold extended its biggest monthly advance in four years, on speculation that U.S. interest rates remaining lower for longer.

On today’s US calendar we have Initial (Exp 262K) and Continuing (Exp 2.273MM) jobless claims, as well as the latest durable goods report, the FHFA House Purchase Index, the latest Bloomberg Consumer Comfort report, and the Kansas Fed report. Speaking will be Fed’s Lockhart and SF Fed’s John Williams

Bulletin Headline Summary from Bloomberg and RanSquawk

• Shanghai Comp. slumped over 6% to post its largest loss in over a month amid increasing money market rates, consequently signalling tighter liquidity, alongside a bout of profit-taking.
• European equities shrugged off the losses in China to pare some of yesterday’s losses with strong earnings from Lloyds bolstering financial names.
• Looking ahead, highlights income US weekly jobs data, Durable Goods Orders, Fed’s Lockhart and Williams and ECB’s Linde.
• Treasuries higher in overnight trading as Chinese equities and oil slide lower; today’s data includes durable goods orders, and Treasury concludes this week’s auctions with sales of $28b 7Y notes, WI yield 1.50%, compares with 1.759% awarded in January.
• China’s stocks tumbled the most in a month as surging money- market rates signaled tighter liquidity and the offshore yuan declined for a fifth day. The Shanghai Composite Index sank 6.4% at the close
• China will allow domestic banks to issue up to 50 billion yuan ($7.7 billion) of asset-backed securities based on their non-performing loans, the first quota for such sales since 2008
• Lloyds Banking Group Plc surged after the lender increased its dividend payout and indicated it may have reached the end of charges for wrongly sold payment protection insurance that cost it £4 billion ($5.6 billion) last year
• Europe’s biggest banks face a stress test this year that will have no pass mark to identify capital shortfalls, a break from previous practice, because banks have emerged from the financial crisis, the European Banking Authority said
• Euro-area consumer prices rose 0.3%, less than the 0.4% initially estimated in January, increasing the pressure on the European Central Bank to take steps to sustain the region’s recovery
• The U.S. government has urged some of the nation’s largest banks to refrain from helping Russia sell bonds, according to people with knowledge of the situation, as helping the nation obtain foreign funding risks undermining sanctions
• Amid conversations about central bank policy and algorithmic trading, it was concerns about diminishing liquidity that dominated discussions this week at the TradeTech FX conference in Miami
• No IG corporates priced yesterday (YTD volume $256.9b) and no HY priced (YTD volume $11.375b)
  Sovereign 10Y bond yields mostly steady; European, Asian markets rise (except China); U.S. equity-index futures little changed. Crude oil falls, copper and gold rise

US Event Calendar

• 8:15am: Fed’s Lockhart speaks in Atlanta
• 8:30am: Initial Jobless Claims, Feb., est. 270k (prior 262k); Continuing Claims, Feb. 13, est. 2.253m (prior 2.273m)
• 8:30am: Durable Goods Orders, Jan. P, est. 2.9% (prior -5%)
  • Durables Ex Transportation, Jan. P, est. 0.3% (prior -1%)
  • Cap Goods Orders Non-def Ex Air, Jan. P, est. 1% (prior -4.3%)
  • Cap Goods Ship Non-def Ex Air, Jan. P, est. -0.5% (prior 0.2%)
• 9:00am: House Price Purchase Index q/q, 4Q (prior 1.3%)
  • FHFA House Price Index m/m, Dec., est. 0.5% (prior 0.5%)
• 9:45am: Bloomberg Consumer Comfort, Feb. 21 (prior 44.3)
• 11:00am: Kansas City Fed Mfg Activity, Feb., est. -6 (prior -9)
• 12:00pm: SF Fed’s Williams speaks in New York
• 1:00pm: U.S. to sell $28b 7Y notes

DB’s Jim Reid concludes the overnight wrap

Yesterday felt pretty bad in the European session again (Stoxx 600 -2.30%) but a turnaround in Oil actually helped lift the mood by the time the US closed (S&P 500 +0.44% after being as much as -1.60% at the earlier lows). Despite that positive momentum for risk emanating from the US session last night, it’s been a bit of a mixed follow up in Asia this morning. With the Yen a bit weaker, the Nikkei is leading the way with a +1.09% gain, while the ASX is currently +0.26%. However as we head into the midday break it’s a big selloff in China which has rippled through other markets (despite there being a lack of newsflow) with the Shanghai Comp (-3.61%) and Shenzhen (-4.76%) both a steep leg lower. That’s taken the Hang Seng (-1.21%) and Kospi (-0.08%) with them, while Oil markets have retraced a touch.

Meanwhile the CNY fix was set little changed this morning. With the G20 Finance Ministers Meeting kicking off tomorrow in Shanghai expect a lot of focus not just on global growth and negative rate concerns, but also on the transparency of the PBoC’s FX policy. It’s far too early for coordinated fiscal policy to gain much traction but it’ll be interesting if there’s any chatter on this.

A lot of the volatility yesterday was centered on oil. It had initially continued the downward trajectory it had been on from Tuesday afternoon in what’s been a fairly wild week so far, touching a low yesterday of $30.56/bbl on the new contract which was nearing a 4% drop on the day (and nearly 9% off Tuesday’s high) before a sharp reversal sparked by the latest inventory data saw it bounce off the lows to close up +0.88% on the day and back above $32/bbl. Despite the latest EIA data showing crude stockpiles building on their 86-year high, much of the commentary was focusing on the larger than expected decline in Gasoline stockpiles last week which fell 2.2m barrels while demand for Gasoline and other refined products were up. That helped Gasoline futures climb over +4.5% yesterday. Credit markets were subject to similar swings in sentiment. In Europe we saw Main and Crossover finish 3bps and 13bps wider respectively with financials also under pressure. CDX IG initially opened up a sharp 4bps wider before paring all of that move to finish 1bp tighter on the day.
Moving on. We’d previously highlighted last week that the various US economic surprise indices that we monitor had been trending up in the last couple of weeks. Well over the last two days we’ve seen them hit of a bit of a wall as after Tuesday’s much softer than expected consumer confidence print, yesterday’s flash February services PMI dipped unexpectedly into contractionary territory (49.8 vs. 53.5 expected, -3.5pts from January) for the first time since October 2013 and just the second time since 2009. The reaction to this was fairly mixed. Some pointed towards this as being evidence of the much talked about weakness in the manufacturing sector now leaking into the larger services component, while others pointed towards the poor winter weather in January being a major factor as well as highlighting the still supportive employment sub-component in the data (-0.1pts to 54.2). In any case it’s another reason to keep a close eye on the ISM services data this time next week. It could be a pivotal release.

Away from this, US new home sales for January also disappointed yesterday, declining 9.2% mom last month (vs. -4.4% expected) although the trend in sales has continued to remain fairly positive of late. Treasury yields were once again subject to another big high to low range (11bps) before they eventually settled up a couple of basis points on the day at 1.749%.

Closer to home, in the UK we saw CBI reported sales fall 6pts to 10, while French consumer confidence was a little softer than expected at 95 (vs. 97 expected), falling a couple of points from January. Moves in core European rates markets reflected the largely risk off tone with 10y Bunds finishing 3bps lower at 0.152% and extending the recent lows to levels only lower in the mad frenzy around April last year. Remember yields closed as low as 7.5bps then, so we’re getting close. Speaking of levels, Sterling continues to get hit hard with the $1.40 level showing little resistance as the Pound smashed through it during the Asia session yesterday and edged lower as the day went on, eventually closing -0.68% at $1.393 (and -0.63% vs. the Euro) which is where its hovering this morning.

Over at the Fed, yesterday we heard from Dallas Fed President Kaplan who again reiterated his need to remain patient while leaving all options on the table in saying that he has no predetermined timetable in mind for the policy rate path. Kaplan also made special mention of the possibility of Brexit, noting that it is another potential tail risk that the Fed needs to keep a close eye on.

Meanwhile, Richmond Fed President Lacker was a bit more upbeat, saying that much of the recent decrease in market measures of inflation expectations ‘could represent a decline’ in risk premium, while his 10y expected inflation estimate forecast is ‘consistent with a belief that inflation will move back to the Fed’s target’. Finally, overnight the St Louis Fed President, Bullard, has become the latest Fed official to voice his opposition against negative rates in the US.

Looking at today’s calendar, the early data out of Europe this morning will be the preliminary reading on UK Q4 GDP along with the associated trade components. Shortly following this we’ll get the final revision to the July CPI data for the Euro area and Germany. It’ll also be worth keeping an eye on the Euro area money and credit aggregates data ahead of the ECB meeting next month. The highlight this afternoon in the US will be the preliminary readings for durable and capital goods orders (headlines for both expected to be +2.9% mom and +1.0% mom respectively). Away from this we’ll see the latest initial jobless claims reading, the FHFA house price index for December and finally the Kansas City Fed manufacturing activity print. Fedspeak wise we’ll hear from Lockhart (at 1.15pm GMT) who is due to give opening remarks at a banking conference, while this evening Williams (at 5.00pm GMT) is due to speak.

via Zero Hedge http://ift.tt/1Lf1q4r Tyler Durden

On Monday, while European stocks were soaring derivatives traders found they couldn’t put any trades in when the largest European derivatives market, the Eurex Exchange, announced trading had been suspended until further notice. Then yesterday, as stocks were crashing, the NY Fed announced that “due to technical difficulties”, it would cancel its 11:15 am Agency MBS POMO which unleashed the latest whopper of a short squeeze.

Now, moment ago, the Euronext exchange has likewise decided to break, announcing that the “Euronext is currently experiencing technical issues and has decided to halt part of the market. The list of impacted instruments is enclosed.”

There are 2222 securities impacted and are listed in the linked file.

* * *

Once again, we can’t help but wonder if the developed world isn’t learning from China, where any time a surge of volatility emerges, markets are just quietly shut down, or worse.

Whatever the case, we fully expect futures and cash markets to ramp in the time when this latest market has an “unexpected outage.”

via Zero Hedge http://ift.tt/1KNc5mS Tyler Durden

 

 

 

Hold your real assets outside of the banking system in a private international facility  –>  http://ift.tt/1M1FiG5 

 

A Tale of Two Crashes, Part 1

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

 

By now, regular readers are familiar with the eight-year, bubble-and-crash cycles in our markets and economies which are manufactured by the crime syndicate known as “the One Bank.” The reason the cycles are roughly eight years long has also been explained: to coincide with the U.S. political cycle, and the rotation of its two puppet parties.

With the last crash being the almost-terminal Crash of ’08, readers have been warned on many occasions that the Next Crash is scheduled for this year. With that manufactured collapse now being only a few months (weeks? days?) away, it is instructive to compare these two cycles of financial crime.

The analysis of patterns can yield insights in two opposing manners. Value can be gleaned in looking at how these repeating cycles are the same, but perhaps more revealing is how and why they differ. In this particular piece, the focus will be on (hard) commodity prices in each of these cycles, and how and why the bubble-and-crash pattern have been significantly different in this respect.

Most readers will recall the spiral in prices which occurred in nearly all commodity markets – hard and soft – right up to the eve of the Crash of ’08, as seen in the table above. This analysis will examine strictly hard commodity prices, since soft commodity markets (and their prices) are affected by several other variables totally outside the economic cycle.

There were two reasons for the spiral in commodity prices which occurred leading into the Crash of ’08, but only one of those reasons is ever discussed by corporate media. The known reason is a massive spike in global demand, the catalyst for which being the rapid industrialization of “BRICS” nations, as well as a number of other, so-called “Emerging Market” economies.

The rapid dilution/debasement of the world’s paper currencies, especially in the West, has been hidden from us. These corrupt regimes have had the audacity to refer to this destruction of our currencies as“competitive devaluation” – a race to see which central bank can destroy its own currency first.

The concept of “dilution” is well understood in the corporate world, when it comes to the paper instrument known as “stock.” When a corporation prints more stock, (all other things being equal) it thus dilutes its share structure, and all shares lose value.

Incredibly, the concept of dilution is virtually entirely unknown with respect to the paper instrument known as “currency,” despite the fact that the principal of dilution applies in an identical manner. When a government (via its central bank) creates more currency, all existing currency loses value. This is the true meaning, and correct definition of the term “inflation.”

Western governments, in particular, were already accelerating the pace of their currency-creation (andcurrency dilution ) in the years immediately prior to the Crash of ’08. Therefore, the great spike in commodity markets which occurred immediately prior to the crash was not a simple function of demand. Rather it was the more complex product of demand and (central bank) inflation.

It is important that readers are fully clear on the fact that these commodity prices are supposed to be strongly influenced by the extremely excessive money-printing of our central banks. This explains how and why it was necessary (for the One Bank) to modify the 2009–2016 bubble-and-crash cycle.

The importance of this point becomes even more apparent when we view a chart of the hyperinflationary explosion of U.S. money-printing. This is the infamous “helicopter drop” which B.S. Bernanke warned and promised the world, back when he was first appointed as a Federal Reserve Governor. Below is the last, legitimate representation of the U.S. monetary base, before the chart and data were falsified beyond recognition, in order to hide the unequivocal picture below.

As has already been explained on numerous occasions, this is a chart of a currency which has already been hyper-inflated ( past tense ). In any legitimate monetary system, the supply of money is a virtually flat, horizontal line – as we saw with the U.S. money supply, until approximately 20 years ago. The extreme, parabolic curve leading into a near-vertical line is the mathematical and economic representation of hyperinflation. The U.S. dollar is already fundamentally worthless, beyond any possible argument .

Federal Reserve-generated inflation was already a serious factor for the U.S. (and global economy) in the years leading up to ’08. Yet, as the chart above indicates, U.S. dollar-based inflation should have been a much more significant factor in the current 2009—2016 cycle. Why has this not been the case?

Once again, there are two answers to this question. Once again, we never see the second answer from the mainstream media propaganda machine.

Part of the answer is, again, demand. Prior to the Crash of ’08, demand for most commodities was near or at record levels. Conversely, in the current eight-year cycle we have seen what could be described (at best) as anemic demand. In the fantasy-world of the mainstream media, demand has “fallen.” In the real world, it has been deliberately destroyed.

Many readers will be skeptical of such an assertion. How can a crime syndicate, even one as large and malevolent as the One Bank, destroy global demand for commodities? In conceptual terms, the answer is actually quite simple. If one sabotages many of the world’s economies (especially larger economies), then obviously those nations will consume far less commodities, and aggregate demand will fall.

In fact, readers have already seen it explained and documented how the One Bank has engaged in extreme acts of economic terrorism against first India, then Russia, and now even China. In each of these three campaigns of economic terrorism, sabotaging the exchange rate of that nation’s currency has been a large or central part of the overall terrorism.

Again, this will come as no surprise to regular readers. The Big Banks of the West—the principal tentacles of crime of the One Bank—were recently convicted of serially manipulating all of the world’s currencies, going back to at least 2008.

Showing the endemic corruption of our entire system, these financial terrorists were destroying the Russian ruble at precisely the same time they were receiving their slap-on-the-wrist fines from our “regulators.” The One Bank would never allow a little thing like a sham-prosecution to interfere with “business.”

What hasn’t been reported in previous commentaries is that this rampant economic terrorism (primarilyU.S.-based) isn’t restricted to just these three, major nations, but rather it is global in scope. Look around the world, and see how many nations outside of the corrupt West are currently in the midst of a “currency crisis,” or at the least, dealing with what is called (by the media) a “weak currency.”

One does not have to be Sherlock Holmes in order to connect the world’s most notorious currency-manipulators to each and every one of these “currency crises.” Does no one think it strange that thebankrupt Western nations, with their hopelessly crippled economies, and near-zero interest rates have (supposedly) the world’s “strongest currencies,” while the healthy and productive nations of Asia, South America, and elsewhere all have “weak currencies,” despite much higher interest rates? Not in the feeble world of the mainstream media.

Not once will you see it suggested that any of these “currency crises” could be even slightly connected to the serial manipulation of all of the world’s currencies, by the convicted currency-manipulators of Western Big Banks. Why is such serial currency manipulation completely censored by the corporate media propaganda machine?

The answer to the previous question is, in fact, also the answer to the following question. Why is currency manipulation such an important element in “the tale of two crashes?” It is because if you manipulate the exchange rate of a currency higher, the price of everything else dominated in that currency automatically goes lower.

Each time the One Bank pushes the exchange rate of the worthless U.S. dollar up to an even more absurd level, the price of every other asset on the planet valued in dollars (including all commodities) goes lower. Via the one tool of currency manipulation, these economic terrorists can literally destroy economies, and simultaneously move any and all prices.

Manipulate the value of currencies higher, and “prices” fall. Manipulate the value of currencies lower, and “prices” rise. Now take a look at an updated table of commodity prices:

Based upon the market principle and the economics principle and the mathematics principle and the common sense principal of “dilution,” commodity prices (in U.S. dollars) should have been exploding higher at a much more rapid rate during the current bubble-and-crash cycle than during the previous one. The exponential explosion in Federal Reserve money-printing drowns out any and all changes in demand, by literally orders of magnitude.

What we see, however, is nothing more than an anemic rise in prices, which abruptly halted in 2011, at which point all of these commodity markets began descending lower in price. How? Why?

Part II of this series will explain the extreme manipulation of commodity markets/prices which has taken place since 2009, and then complete the explanation of how and why this bubble-and-crash cycle has been significantly different from the last.

 

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

A Tale of Two Crashes, Part 1

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

 

via Zero Hedge http://ift.tt/1Q3qHgO Sprott Money

As policy errors pile up – just as they did in 2007/8 – around the world, we thought the following three charts might warrant the use of the most important word in modern central banking… "Contained"

 

Haruhiko, You Are Here…

 

Mario, You Are Here…

 

And Janet, You Are Here…

It does make one wonder, with all this carnage and so little action, whether "coordinated" inaction is the post-Davos decision – Don't just do something, stand there and jawbone!!

With the goal being a big enough catastrophe to warrant unleashing the war on cash, then NIRP, then the unlimited money drop… because as we stand, no matter what crazy policy has been imagined by the Keynesian "seers" – inflationary (well deflationary now) expectations have collapsed.

via Zero Hedge http://ift.tt/1p6uP7b Tyler Durden

By EconMatters

Some mixed components in this week`s EIA Inventory report. Oil builds are bearish due to storage concerns, but the gasoline demand numbers are robust, and U.S. Oil production is starting to roll over which is bullish.

 

via Zero Hedge http://ift.tt/1p6uNfo EconMatters

Submitted by Brandon Smith via Alt-Market.com,

At the very onset of what would become the Soviet Empire, Vladimir Lenin decreed the creation of a national internal army called the “Cheka.” The Cheka were handed very broad police powers and tasked with the disruption and elimination of any form of dissent within the communist system. Lenin launched what would later be known as the “Red Terror”, in which nearly every Russian population center had an established Cheka office of operations using surveillance, infiltration, nighttime raids, imprisonment, torture and execution to silence opposition to the authority of the state.

Some of these people were active rebels, some were outspoken political opponents and journalists, others were merely average citizens wrongly accused by neighbors or personal enemies. The Cheka created a society of fear and suspicion in which no one could be trusted and little criticism was spoken above a whisper anywhere, even in one’s own home.

It is important to note, however, that the dominance of the Cheka was established incrementally, not all at once.

Agents of the state began their “cleansing” of the Russian population by targeting specific groups at opportune times and worked their way through the citizenry at an exponential pace. The most intelligent, effective and dangerous activists and rebels were slated for destruction first, as they represented a kind of leadership mechanism by which the rest of the population might be mobilized or inspired. More innocuous organizations (like Christian churches and rural farmers) were persecuted as background noise while the political mop-up was underway.

Through this incrementalism, the communists were able to intern or eradicate vast numbers of potential opponents without the rest of Russians raising objections. The general populace was simply thankful that the eye of the Cheka had not been turned upon them, and as long as it was some other group of people unrelated to their daily life that disappeared in the night, they would keep their heads down and their mouths shut.

I would point out that the communists were very careful and deliberate in ensuring that the actions of the internal police were made valid through law and rationalized as a part of “class struggle.” Such laws were left so open to interpretation that literally any evil committed could later be vindicated. Man-made law is often a more powerful weapon than any gun, tank, plane or missile, because it triggers apathy within the masses. For some strange reason, when corrupt governments legalize their criminality through legislation or executive decree, the citizenry suddenly treats that criminality as legitimate and excusable.

Incremental prosecution and oppression is effective when the establishment wishes to avoid outright confrontation with a population. Attempt to snatch up a million people at one time, and you will have an immediate rebellion on your hands. Snatch up a million people one man at a time, or small groups at a time, and people do not know what to think or how to respond. They determine to hope that the authorities never get to them, that it will stop after a few initial arrests, or they hope that if they censor themselves completely, they will never be noticed.

In fact, corrupt governments issue warrants of arrest for a handful of dissenters and initiate imprisonment in a very public manner in the beginning with the express purpose of making examples and inspiring self censorship in the masses so that the authorities do not have to expend large amounts of resources to fight a more complex rebellion.

I bring up the historic example of the Cheka and incrementalism because a trend is brewing within our current establishment by which I believe a similar (if not more sterilized) brand of oppressive action is being planned against the liberty movement.

After the debacle in Burns, Oregon during the refuge standoff, federal officials immediately began a subtle campaign in the media promoting internal police powers that when examined in an honest light, are truly anti-liberty.

It remains my personal position according to the evidence I have seen that the refuge standoff was likely influenced by at least one if not more federal provocateurs and that Ammon Bundy was “encouraged” in his choice of actions and location by this person or persons. The goal? I can only guess that the intent was to trap the liberty movement in a Catch-22 scenario; either we join the poorly planned and executed standoff on some of the worst defensive ground possible and risk everything on one centralized event, or, we refuse to participate in the strategy and watch helplessly as a group of people, many with good intentions but little tactical sense or training, are arrested or killed. Either we gamble everything on the worst possible terms, or, we avoid the gamble and watch as the entire movement is made to look weak or incompetent by association with a few.

The majority of the movement chose the latter action, rightly I feel. Burns was no Bundy Ranch — everything about it felt rigged. And though there were many angry anonymous voices calling us “sunshine patriots” and “keyboard warriors” because we would not participate, apparently none of those loud mouths ever showed up in Burns either, so I am assuming they finally saw the wisdom in our decision.

It would seem as though the feds did not get exactly what they wanted out of the refuge standoff, but they have decided to squeeze as much advantage out of the event as possible.

Cliven Bundy was arrested after arriving by plane in Portland, Oregon, not on any charges relating to the refuge and his son Ammon, but on charges stemming from the Bundy Ranch standoff of 2014.

These charges include a strange and very broad legal measure relating to “interference with the duties of federal officials.” This in particular should be disconcerting to all of us, for “interference” could be any number of activities.

Any duties of federal officials that are not moral or constitutional should be interfered with in a tactically intelligent manner whenever possible. Such charges are a deliberate anathema to civil disobedience designed to counter immoral actions by government authorities. For any opposition could be deemed “interference” given a twisting of precedence, and thus treated as illegal.

In my recent article “Liberty Activists And ISIS Will Soon Be Treated As Identical Threats,” I examined statements made by the Justice Department’s chief of national security, John Carlin, in an article published by Reuters. Carlin and the Justice Department have made it clear that they intend to apply rules of prosecution used for foreign terrorist organizations to “domestic extremists.” The Oregon standoff was specifically mentioned as an example of such extremism.

Carlin claimed that domestic extremists represent a “clear and present danger,” alluding to the “Clear And Present Danger Doctrine” allowing the government in “times of national crisis” to prosecute almost any citizen giving “material support” to enemies of the state. “Material support” in the past has even included verbal opposition to government policies. Meaning, Carlin is testing the waters of material support laws and such tests may target liberty movement speakers and journalists along with anyone involved in physical opposition. As with the Cheka, no one is really safe.

These charges are also being brought in a retroactive manner, long after the supposed crimes have been committed as we have seen with Cliven Bundy. Meaning, the feds plan to retain warrants and prolong charges, only arresting people later when they think they can get away with it. This is where the incrementalism comes in…

Rumors of further indictments have surfaced possibly including dozens of people involved in the Bundy Ranch standoff. And because of the nature of the incremental game the government is playing, verification is difficult until the arrests are activated.

It has come to my attention from personal sources that there may be a lot of truth to the rumors of pending or retroactive indictments, and that the FBI in particular may be biding its time and waiting to bring charges when particular people are at their most vulnerable and when the movement is less likely to react. These sources have indicated that the federal government is seeking to work around the public relations problems of standoff scenarios like Ruby Ridge, Waco, and Bundy Ranch. The feds may claim that they have “seen the light” in terms of avoiding outright mass murder, but I believe they have just found a better way to sneak past public opinion.

If they can manipulate the liberty movement into participation in poorly planned standoffs like Burns, Oregon, they will. Such standoffs are doomed from their inception and can even be controlled from within by agents provocateur. They are not a real threat.

If a standoff occurs organically, as it did at Bundy Ranch in Nevada, and public support is on the side of the liberty movement, then the establishment will simply back off and pluck activists from their homes or at the airport months later.

It is incumbent upon me to offer a warning to federal agencies in the event that incremental prosecution of liberty activists is truly a strategy they are planning to carry out: It is the general consensus of many in the liberty movement that ANY further arrests predicated on activism at Bundy Ranch or similar opposition events in the past to Bureau Of Land Management abuses of power will result in further and expanded engagements by activists. That is to say, such arrests and indictments will not be allowed to continue.

This is not a threat, this is fair warning to government agencies that they are walking a razor’s edge. Incremental prosecutions and dismantling of the liberty movement will not be tolerated; they represent a non-negotiable line in the sand. The feds may or may not care what the consequences will be for crossing this line. They may even think they want such consequences. Regardless, consequences there will be.

While the refuge occupiers essentially handed their heads to the feds on a platter, and the movement was not able to salvage the situation in any viable manner, this does not mean that liberty activists will not take measures during future events depending on the circumstances. Federal agencies may be quick to forget the massive response at Bundy Ranch. This is a mistake. They should probably expect a similar response, if not a more aggressive one, if further arrests are undertaken.

With the ethereal nature of criminal charges like “material support” or “interference with federal officials,” due process becomes a bit of joke. You see, federal agents and agencies, you have to take into account the reality that the liberty movement is well aware of the government push to remove due process altogether. With the AUMF and the NDAA, among other executive actions, we realize that the friendly mask of due process is worn by government today, but not necessarily tomorrow.

If the movement gives ground and does nothing while dozens or more are retroactively imprisoned one case at a time for opposing federal abuse, then how long will it be before the rest of us are imprisoned on even broader charges? How long before the mask comes off and the rendition and indefinite detention provisions of the AUMF and the NDAA come into play? Do you really expect the movement to put faith in due process given the circumstances? Of course you do not.

I would venture to guess that the feds think that any opposition that does arise during the execution of warrants against liberty activists will be “easily managed.” This would be a mistake.

We have seen this all before in the passive sublimation of past societies. We recognize the signs of trespasses to come. And if such trespasses are brought upon the liberty movement or the population at large, then many of us will adopt the attitude that there is not much left to lose.

Personally, I do not look forward to this kind of fight, but I have no illusions that it can be avoided given the course our country has taken. Federal agencies have deemed it a matter of national security to watch us all very closely. They should keep in mind, though, that we are also watching them.

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Yesterday, during his speech at CERAWeek in Houston, Saudi oil minister Ali al-Naimi made it explicitly clear that Saudi Arabia would not cut production, instead saying that it is high-cost producers that would need to either “lower costs, borrow cash or liquidate” adding that there is “no need for cuts as marginal barrel will get out of the market.” He was right.

Today his wish is slowly coming true after news that North Dakota’s largest producer, Whiting Petroleum, would suspend all fracking, and that Continental Resources has effectively done the same after reporting that it no longer has any fracking crews working in the Bakken shale.

As Reuters reports, Whiting said it would “suspend all fracking and spend 80 percent less this year, the biggest cutback to date by a major U.S. shale company reacting to the plunge in crude prices.”

It was also confirmation that the Saudi plan to put high-cost producers on ice is working, if only temporarily.

After sliding 5.6% to $3.72, Whiting stock jumped 8% to over $4 per share in after-hours trading as investors cheered the decision to preserve capital, even if it means generating far less revenue.

Whiting’s cut is one of the largest so far this year in an energy industry crippled by oil prices at 10-year lows. The cuts will have a big impact in North Dakota, where Whiting is the largest producer.

The Denver-based company said it would stop fracking and completing wells as of April 1. Most of its $500 million budget will be spent to mothball drilling and fracking operations in the first half of the year. After June, Whiting said it plans to spend only $160 million, mostly on maintenance.

Rival producers Hess Corp and Continental Resources Inc have also slashed their budgets for the year, though neither has cut as much as Whiting.

As noted above, during its earnings report, Continental said that in 2016, the Bakken drilling program will continue to focus on high rate-of-return areas in McKenzie and Mountrail counties, targeting wells with an average EUR of 900,000 Boe per well.  Based on the higher EUR and a lower targeted completed well cost of $6.7 million per well, the Company expects capital efficiency to increase 17% and finding cost to decrease 15% in 2016.

Given its plans to defer most Bakken completions in 2016, Continental expects to increase its Bakken DUC inventory to approximately 195 gross operated DUCs at year-end 2016. However, Continental also said that while the Company currently has four operated drilling rigs in the North Dakota Bakken and plans to maintain this level through year end, it noted that it currently has no fracking crews deployed in the Bakken, which led some, including Bloomberg to believe, that Continental too has halted Bakken shale fracking.

One thing is certain: the cuts will drag down production and likely reverberate in the economy of North Dakota, the second-largest U.S. oil producing state after Texas, which currently pumps 1.1 million barrels per day. It means that after the 250,000 oil workers already laid off (according to Credit Suisse estimates), tens of thousands of new pink slips to highly paid workers are about to be handed out.

And another thing: as of this moment, Saudi’s oil minister is taking a victory lap in his Lamborghini – after all his plan to push the price of oil so low that marginal oil producers have no choice but to mothball production is starting to bear fruit.

There is just one problem.  Whiting Chief Executive Officer Jim Volker said that “we believe this conservative strategy should help us to maintain our liquidity position and leave us well positioned to capitalize on a rebound in oil prices.”

In other words, the moment oil prices rebound even modestly, and according to many the new breakeven shale prices are as low at $40-$50/barrel, the Whitings and Continentals will immediately resume production, forcing Saudi Arabia to go back to square one, boosting supply even higher, and repeat the entire charade from scratch.

And so on.

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"Everybody should be worried.. and be prepared," warns legendary investor Jim Rogers, as he sees the market "facing a bigger collapse than in 2008," and the central banks will be unable to kick the can much longer. "This is the first time in recorded history where you have Central Banks & governments setting out to destroy the people who save & invest," Rogers exclaims and "the markets are telling us that something is wrong – we're getting close."

"The central bankers haven't given up yet… they think they are smarter than you and me and the market… they're not!"

Full interview with FutureMoneyTrends below…

Detailed breakdown

• 1:20 Is this Market Crash Different?
• 5:00 Cashless Society – it gives 'them' more control, it is bad for you and me. There is now way to exit from this.
• 7:20 Crash will be Bigger – eventually the market is going to say "enough is enough"
• 8:40 Gold – going much higher, may be opportunity to buy more lower first
• 10:10 2016 Election, Donald Trump
• 11:20 Where Jim is Investing – Short US equities, Short Junk bonds, Shorting Europe into rally
• 12:30 China's Economy
• 17:30 One investment over five years, sugar or rice or Russian Ruble

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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When a currency peg breaks, it unleashes shock waves of uncertainty and repricing that hit the global financial system like a tsunami.

The U.S. dollar has risen by more than 35% against other major trading currencies since mid-2014:

If all currencies floated freely on the global foreign exchange (FX) market, this dramatic rise would have easily predictable consequences: everything other nations import that is priced in dollars (USD) costs 35% more, and everything the U.S. imports from other major trading nations costs 35% less.

But some currencies don't float freely on the global FX markets: they're pegged to the U.S. dollar by their central governments. When a currency is pegged, its value is arbitrarily set by the issuing government/central bank.

For example, in the mid-1990s, the government/central bank of Thailand pegged the Thai currency (the baht) to the USD at the rate of 25 baht to the dollar.

Pegs can be adjusted up or down, depending on a variety of forces. But the main point is the market is only an indirect influence on the peg, not the direct price-discovery mechanism as it is with free-floating currencies.

If central states/banks feel their currency is becoming too strong via a vis the USD, they can adjust the peg accordingly.

Why do states peg their currency to the U.S. dollar? There are several potential reasons, but the primary one is to piggyback on the stability of the dollar without having to convince the market independently of one's stability.

Another reason to peg one's currency to the USD is to keep your currency weaker than the market might allow. This weakness helps make your exports to the U.S. cheap/ competitive with other nations that have weak currencies.

Nations defend their peg by selling dollars and buying their own currency. The way to understand this is supply and demand: if nobody wants the currency, the demand is low and the price falls. If there is strong demand for a currency, it rises in purchasing power if the supply is limited.

By selling USD and buying their own currency, nations put downward pressure on the dollar and put a floor under their own currency.

The problem is you need a big stash of dollars to sell when you want to defend your peg. If you run out of dollars (usually held in U.S. Treasury bonds), you can't defend your peg, and the peg breaks.

This is why China amassed a $4 trillion stash of U.S. Treasuries. Now that the USD has soared, China's yuan (RMB) has also soared against other currencies because it's pegged to the USD. This has made Chinese goods more expensive in other currencies.

Currently, the government/central bank of China is attempting to adjust its currency peg to weaken the yuan vis a vis the dollar. To avoid showing signs of losing control, China is attempting to defend the yuan against a break in the peg, and it has burned over $700 billion of its stash of USD in the past few months defending the yuan peg.

Here is a chart of the yuan in USD. Note that China moved the peg from 8.3 to 6.8 to the dollar to strengthen the yuan when the U.S. complained that it was undervalued. The yuan rose to 6 to 1 USD in early 2014, and has since started to weaken as the dollar has soared.

The problem with currency pegs is they have a nasty habit of breaking. The Seneca Cliff offers a model for the way pegs appear stable for a long time and then collapse:

Why the Chinese Yuan Will Lose 30% of its Value

When a currency peg breaks, it unleashes shock waves of uncertainty and repricing that hit the global financial system like a tsunami. When Thailand's 25-to-1 peg to the USD broke in 1997, it triggered the Asian Contagion that nearly pushed the world economy into recession.

Now that China's peg to the dollar is under assault, what happens to the global economy when a weakening China finds it can't stop a rapid devaluation of its currency?

Gordon Long and discuss this and other critically important aspects of currency pegs in THE U.S. DOLLAR & THE GLOBAL "PEG PAIN TRADE" (28:36 min.)

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