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According to one hedge-fund manager, known for his “doom and gloom” economic outlooks, the federal government may soon make stashing gold away illegal for individuals. Crispen Odey believes that governments will ban the possession of gold if they lose control of inflation of their fiat currency.

Odey says that gold is a great way to protect your wealth from the inflation that central banks won’t be able to control as they continue to print money. “History is filled with examples where rulers have, in moments of crisis, resorted to debasing the coinage,” said Odey, who has raised his gold position in his flagship Odey European fund all the way up to 39.9% as of the beginning of the month from 15.9% at the end of March.

“It is no surprise that people are buying gold. But the authorities may attempt at some point to de-monetize gold, making it illegal to own as a private individual. They will only do this if they feel the need to create a stable unit of account for world trade,” he added according to a report by Market Watch.

Bloomberg News said that the fear of government confiscation of gold is often discussed among serious gold bugs. It happened in the U.S. in 1933. But with major currencies no longer linked to gold, there are no signs such a move is realistically being considered by central banks. However, Bloomberg News is a mainstream media outlet and will say what the powers-that-shouldn’t-be tell them to, so take their opinion with a grain of salt.

With far too many Americans believing the government has the right to confiscate their wealth, it wouldn’t come as a surprise if they attempted this kind of theft. Not enough Americans even question the morality of taxation, let alone confiscation of their morally acquired property.

…click on the above link to read the rest of the article…

Paul Tudor Jones: “This Market, Which Is Reminiscent Of The 1999 Bubble, Is On The Verge Of A Significant Change”

December 3, 2017

Paul Tudor Jones: “This Market, Which Is Reminiscent Of The 1999 Bubble, Is On The Verge Of A Significant Change”

Just hours after Neil Chriss announced that his $2.2 billion Hutchin Hill hedge fund is shuttering due to underperformance and admitted that “we fought hard, but did not deliver the performance that you expected from us”, another legendary hedge fund announced it was undergoing a significant restructuring as a result of relentless investor withdrawals: citing a November 30 letter, Bloomberg reported that Paul Tudor Jones’ Tudor Investment Corp, which lost 1.6% YTD, was closing its Discretionary Macro fund “and letting investors shift assets to the main BVI fund as of Jan. 1” with the letter clarifying that “Jones will also principally manage Tudor’s flagship BVI fund, which will be the firm’s only multi-trader fund next year.”

The restructuring took place as clients pulled half a billion dollars from Tudor in the third quarter, leaving the firm’s assets at $7 billion, roughly half the level it managed in June 2015, Bloomberg News reported previously. As part of the sweeping overhaul, Andrew Bound and Aadarsh Malde, formerly co-CIOs of the Tudor Discretionary Macro Fund, would depart. In a move reminiscent of George Soros’ recent return to more active management, Jones, who ran the BVI fund with a team of managers, would now have a smaller team and will assume a more dominant role in the fund.

“I will be the largest risk taker and will manage a notional capital account equal to the AUM of the Tudor BVI strategy itself,” Jones said in the letter, referencing assets under management. “This means that my results will have a one-for-one performance impact on Tudor BVI. I relish this challenge.”

Jones and other Tudor partners are the largest investors in the BVI fund, which unlike the soon to be shuttered TIC, is up 0.8% through Nov. 3. More details from Bloomberg:

…click on the above link to read the rest of the article…

Finding the Root Cause of Recessions

August 27, 2017

Finding the Root Cause of Recessions

Two things bear most of the blame: external shocks and economic volatility.

Beware of shocks.
Photographer: Gary Hershorn/Getty Images

The U.S. managed to avoid recession after the financial crisis, but Japan has succumbed to three contractions since 2009. Economic volatility is a key reason for this divergence, and that tells us a great deal about the risk of future U.S. recessions.

During this decade, both the U.S. and Japan have experienced multiple growth rate cycles, which consist of alternating periods of rising and falling economic growth. Japan had four growth rate cycle (GRC) downturns, three of which turned into recessions; the U.S. experienced three GRC downturns, none of which were recessionary. Why not?

In 2011, a Federal Reserve paper estimated the U.S. economy’s “stall speed,” below which it would plunge into a recession. U.S. growth promptly dropped below that threshold, yet no recession followed. So the concept — which seemed to have worked quite well since the 1950s — broke down and dropped out of the discourse.

Specifically, that estimate of the economy’s stall speed was 2 percent two-quarter annualized growth in real gross domestic income. In theory, the GDI is equal to real GDP, but is measured differently. While GDP adds up what the economy produces, such as goods and services, GDI sums up incomes, including wages, profits and taxes. The chart shows two-quarter annualized growth in real GDP for Japan (red line) and the U.S. (blue line), along with the 2 percent stall speed estimate

Most believe recessions are caused by shocks that then propagate through the economy. In contrast, our research shows that endogenous cyclical forces periodically open up windows of vulnerability for the economy, and that, once it is cyclically vulnerable, almost any exogenous shock can easily tip it into recession. Because such shocks tend to arrive sooner or later, an economy’s entry into a susceptible state is almost always followed by recession.

…click on the above link to read the rest of the article…

I’m in Awe of How Fast Deutsche Bank is Falling Apart

October 1, 2016

I’m in Awe of How Fast Deutsche Bank is Falling Apart

Counterparties lose confidence, withdraw cash.

Deutsche Bank, with $2 trillion in assets, amounting to 58% of Germany’s GDP, one of the most globally interwoven banks, with gross notional derivatives exposure of €46 trillion, right at the top along with JP Morgan (booked as €41 billion in derivative trading assets after netting and collateral) – this creature of risk and malfeasance, is finally starting to scare its counterparties.

This is how Lehman came unglued. Slowly and then all of a sudden.

Bloomberg News today:

[S]ome funds that use the bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Millennium Partners, Capula Investment Management, and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, said a person familiar with the situation….

So far, these are just the first of Deutsche Bank’s 200 hedge-fund clients that use it to clear their derivatives transactions. Banking is a confidence game. When confidence sags, the whole construct comes tumbling down. And the first movers have a big advantage in getting their cash out in in time. Bloomberg:

Clients review their exposure to counterparties to avoid situations like the 2008 collapse of Lehman Brothers Holdings Inc. and MF Global’s 2011 bankruptcy when hedge funds had billions of dollars of assets frozen until the resolution of lengthy legal proceedings.

As the leak ricocheted around the world, Deutsche Bank shares plunged 6.6% in late trading today in Frankfurt to €10.25, having been down 8% at one point earlier. Shares are at the lowest level since they started trading on the Xetra exchange in 1992. They’re down 68% from April 2015. Just before the financial Crisis, they briefly traded at over €100 a share. By that measure, they’re down over 90%!

…click on the above link to read the rest of the article…

This Is The End: Venezuela Runs Out Of Money To Print New Money

April 27, 2016

This Is The End: Venezuela Runs Out Of Money To Print New Money

Back in February, when we commented on the unprecedented hyperinflation about the be unleashed in the Latin American country whose president just announced that he would expand the “weekend” for public workers to 5 days…

… we joked that it is unclear just where the country will find all the paper banknotes it needs for all its new physical currency. After all, central-bank data shows Venezuela more than doubled the supply of 100-, 50- and 2-bolivar notes in 2015 as it doubled monetary liquidity including bank deposits. Supply has grown even as Venezuela has fewer U.S. dollars to support new bolivars, a result of falling oil prices.

This question, as morbidly amusing as it may have been to us if not the local population, became particularly poignant recently when for the first time, one US Dollar could purchase more than 1000 Venezuela Bolivars on the black market (to be exact, it buys 1,127 as of today).

And then, as if on cue the WSJ responded: “millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived here from countries around the world in recent months to service Venezuela’s crippled economy. But instead of food and medicine, the planes carried another resource that often runs scarce here: bills of Venezuela’s currency, the bolivar.

The shipments were part of the import of at least five billion bank notes that President Nicolás Maduro’s administration authorized over the latter half of 2015 as the government boosts the supply of the country’s increasingly worthless currency, according to seven people familiar with the deals.

More planes were coming: in December, the central bank began secret negotiations to order 10 billion more bills which would effectively double the amount of cash in circulation. That order alone is well above the eight billion notes the U.S. Federal Reserve and the European Central Bank each print annually—dollars and euros that unlike bolivars are used world-wide.

…click on the above link to read the rest of the article…

Marc Faber Fears No Soft-Landing Of China’s “Credit Bubble Of Epic Proportions”

October 26, 2015

Marc Faber Fears No Soft-Landing Of China’s “Credit Bubble Of Epic Proportions”

“Investors should (and most don’t) realize China is a credit bubble of epic proportions,” warns an anxious Marc Faber during a brief Bloomberg TV interview. “China is not just a country, it’s an empire,” Faber adds, and warns that while some sectors may have growth (“just ask Yum Brands” he jokes), “but other very important sectors like industrial production aren’t growing at the present time.” In fact, Faber warns “I don’t think China’s economy is growing at all,” and while policy-makers may be able to “cushion the downturn somewhat,” he warns that achieving any soft-landing will be “very difficult,” even as he expects China to continue devaluing the Yuan.

Faber speaks to Bloomberg TV’s Stephanie Ruhle,

Some key excerpts…

On the mythical soft-landing…

FABER: I think it’s very difficult if you had the kind of bubble like you had in China, and the credit bubble, to then engineer a soft landing. You could maybe cushion the downturn somewhat, but the fact is I don’t believe that the economy isn’t growing at all, but I think that I have argued and this for the last 18 months that the economy was slowing down meaningfully, and that growth would be roughly at three to four percent, which it is at the present time, I would imagine.
Is China an accident waiting to happen?

FABER: Well it depends what an accident is in terms of definition, but I would say this. We have had very heavy capital flight over the last eight, nine months coming out of China. And if I had to bet on someone, the local knowledge or some economy somewhere in the world talking up China and how great it is, I would bet on the locals, who are shifting money out of China at the record level at the present time.

…click on the above link to read the rest of the article…

$6.5 Billion in Energy Writedowns and We’re Just Getting Started

October 23, 2015

$6.5 Billion in Energy Writedowns and We’re Just Getting Started

The oil and gas industry’s earnings season is barely underway, and already there’s been $6.5 billion in writedowns.

On Thursday, Freeport-McMoRan Inc. reported a $3.7 billion charge for the third quarter, while Southwestern Energy Co. — which has a market value of $4.5 billion — booked $2.8 billion. And that’s just the beginning. Barclays Plc estimated in an Oct. 21 analysis that there could be $20 billion in charges among just six companies. Southwestern’s writedown was double Barclays’ forecast.

Oil prices have tumbled 44 percent in the past year, and natural gas is down 35 percent, making the write-offs a foregone conclusion from an accounting standpoint. The companies use an accounting method that requires them to recognize a charge when estimates of future cash flow from their properties falls below what the companies spent buying and developing the acreage. The predictions of future cash flow have fallen along with prices.

Since it’s no secret oil and gas prices have plunged, “the majority of write-offs are typically non-events,” said Barclays’ analysts led by Thomas R. Driscoll in the report.

Share Plunge

Southwestern’s shares have declined 64 percent in the past year, and Phoenix-based Freeport-McMoRan’s are down 61 percent.

Barclays predicted ceiling-test impairments for Apache Corp., Chesapeake Energy Corp., Devon Energy Corp., Encana Corp. and Newfield Exploration Co. All five companies are scheduled to report third-quarter results in November.

“Many companies will have writedowns as the price of oil is about half of where it once was and gas is also down,” Timothy Parker, a Baltimore-based fund manager at T. Rowe Price Group Inc., said in an e-mail. “However, it won’t generally hurt the companies because very few have debt covenants that are linked to book value, which the writedowns affect.”

Russia “Confirms” It Has Plans To Restore Assad Government In Syria

October 20, 2015

Russia “Confirms” It Has Plans To Restore Assad Government In Syria

Watching the US attempt to explain to the public why Washington can’t join the Russians in targeting extremists in Syria has been entertainment gold. The fundamental PR problem revolves around the fact that the West has gone out of its way to hold up ISIS as the quintessential example of pure, unadulterated evil that must be eradicated at all costs and yet when Moscow began bombing ISIS targets and publicly implored the US to join in, Washington said no.

If you’re the public that seems strange. To be sure, everyday Westerners are accustomed to Russophobic propaganda in the news and in cinema and the public is thoroughly conditioned to think of The Kremlin as a weird, multi-colored palace complex staffed with hundreds of James Bond villains in a country where it’s always dark, and always snowing. That said, Western leaders have had a difficult time explaining why that’s somehow worse than ISIS, whose slickly-produced videos have so far depicted a series of beheadings, a Jordanian pilot being burned alive, “spies” being drowned in a cage, and four men being packed into a Toyota Corolla which is then destroyed at close range by a rocket launcher.

The answer, of course, is that ISIS and the various other extremist groups battling for control of Syria have almost all received training and funding from the US and its regional allies at one point or another and at the end of the day, destroying ISIS nets nothing for Washington in terms of geopolitics. In fact, were the group to go the way of the dinosaurs, it would help to restore the Assad regime which is the worst possible outcome in the eyes of the US, Saudi Arabia, and Qatar.

…click on the above link to read the rest of the article…

EU Aims to Lure Greek Deposits Back to Banks With Bail-in Shield

August 15, 2015

EU Aims to Lure Greek Deposits Back to Banks With Bail-in Shield

Euro-area finance ministers shielded Greek bank depositors from any losses resulting from the restructuring of the nation’s financial system, as part of Friday’s deal on an 86 billion-euro ($96 billion) bailout.

Senior bank bondholders will be in the crosshairs if Greek lenders tap into any of the financial stability funds set aside in the new bailout. Euro-area finance ministers agreed to a deal that would next week place 10 billion euros in Greece’s bank recapitalization fund, with another 15 billion euros available if needed.

“Bail-in of depositors will be explicitly excluded” from European Union rules to make private investors share the cost of fixing troubled banks, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem told reporters after the six-hour meeting in Brussels.

By shielding all depositors, the euro area will protect small and medium-sized enterprises who have more than 100,000 euros in their accounts and aren’t covered by government deposit insurance, Dijsselbloem said. This prevents “a blow to the Greek economy” that ministers wanted to avoid, he said. Instead, the focus will turn to bond investors.

“When so much money must be invested in banks, in the first place, banks must take part of the risks,” Dijsselbloem said.

Alpha Bank AE’s 400 million euros of 3.375 percent notes due 2017 traded at 70.5 cents on the euro Friday to yield 25.4 percent. Those securities are up from a low this year of 27.5 cents in July.

Firewall Fund

At the start of the new aid program, the bank funds will be placed in a designated account at the European Stability Mechanism, the currency bloc’s firewall fund. Bank supervisors can tap the money as required once Greece’s banks have gone through stress tests and an asset-quality review.

After Greece’s lenders are recapitalized, the subsequent bank holdings will be transferred to the nation’s planned privatization fund, which will then be able to sell off the stakes and use the proceeds to pay back bailout funds.

…click on the above link to read the rest of the article…

China Black Swans Not So Rare Anymore as PBOC Shocks Markets

August 13, 2015

China Black Swans Not So Rare Anymore as PBOC Shocks Markets

Investors should prepare for more surprises out of China after the yuan’s devaluation became the country’s latest unexpected policy move to roil global markets.

That’s the advice from Fraser Howie, co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.” He says Chinese policy decisions are becoming “erratic” as authorities struggle to combat the nation’s deepest economic slowdown in more than two decades.

This week’s tumble in the yuan — the biggest devaluation since 1994 — comes just a month after unprecedented state intervention in the stock market deepened a $4 trillion sell-off. Two years ago, authorities triggered the country’s worst modern-day cash squeeze by restricting the supply of funds to the banking system. The failure of China’s decision makers to telegraph and explain those policy changes has increased volatility worldwide as traders struggle to forecast what happens next in Asia’s biggest economy, Howie said.

“This complete lack of signaling has investors, both foreign and domestic, completely spooked about what’s going on,” Howie, a former managing director at CLSA Asia-Pacific Markets, said in a phone interview from Singapore. “China has a huge influence globally and markets don’t like shocks.”

While investors parse every word in Federal Reserve statements for clues on future U.S. monetary policy, the People’s Bank of China provides few such details, while decisions are often the result of political wrangling, according to Howie.

“We don’t know what their policy is,” he said. “We don’t see minutes of meetings. We don’t get regular announcements, so we get a tremendous lack of transparency.”

Yuan Plunge

The PBOC took markets by surprise when it cut the daily fixing for the yuan by 1.9 percent on Tuesday, ending a four-month peg against the dollar. The currency tumbled 2.9 percent in two days, the most since the country ended a dual-currency system in 1994, while it now trades at the biggest discount to the offshore yuan since 2010.

…click on the above link to read the rest of the article…

4 Mainstream Media Articles Mocking Gold That Should Make You Think

July 29, 2015

4 Mainstream Media Articles Mocking Gold That Should Make You Think

Screen Shot 2015-07-29 at 11.20.51 AM

For those of you who have been reading my stuff since all the way back to my Wall Street years at Sanford Bernstein, thanks for staying along for the ride. I appreciate your support immensely considering that I essentially no longer write about financial markets at all, and for many of you, that remains your profession and primary area of interest.

There are many reasons why I stopped commenting on markets, but the main reason is that I started to recognize I wasn’t getting it right. In fact, in some cases I was getting it spectacularly wrong. Whenever this happens, I try to isolate the problem and fix it. In this case there was no fix, because much of why I was no longer getting it right was rooted in the fact that my heart, soul and passion had moved onto other things. My interests had expanded, and I started a blog to express myself on myriad other matters I deemed important. Providing relevant market information needs intense focus, and my focus had shifted elsewhere. I recognized that I wasn’t intellectually interested enough in centrally planned markets to provide insightful analysis, and so I stopped.

This doesn’t mean I won’t start up again. When central planners do lose control, I may indeed become far more interested in opining on such matters. Time will tell. In the interim, financial markets do still play an important role in the bigger picture of social, political and economic trends I passionately care about. The stability and increase in financial assets (stocks and bonds) is of huge importance to the propaganda machine, in particular keeping the non-oligarchic, non-politically connected 1% in line and believing the hype (see: The Stock Market: Food Stamps for the 1%).

…click on the above link to read the rest of the article…

Saudis Pump Record Crude as OPEC Sees Stronger Demand in 2016

July 13, 2015

Saudis Pump Record Crude as OPEC Sees Stronger Demand in 2016

Saudi Arabia told OPEC it raised oil production to a record as the organization forecast stronger demand for its members’ crude in 2016.

The world’s biggest oil exporter pumped 10.564 million barrels a day in June, exceeding a previous record set in 1980, according to data the kingdom submitted to the Organization of Petroleum Exporting Countries. The group expects demand for its crude to rise in 2016 compared with this year as supply elsewhere falters and consumption growth quickens.

OPEC said it expects global oil markets to rebalance as diminished output from rival producers such as U.S. shale drillers whittles away a glut. The strategy is taking time to have an impact, with crude prices remaining 46 percent below year-ago levels and annual U.S. production forecast to reach a 45-year high.

“An improvement towards a more balanced market” is likely in 2016 as consumption grows faster than supply, OPEC’s Vienna-based research department said Monday in its monthly market report. “Momentum in the global economy, especially in the emerging markets, would contribute further to oil demand growth in the coming year.”

Brent crude futures fell 1.8 percent to $57.70 a barrel at 10:51 a.m. local time on the London-based ICE Futures Europe exchange, extending a 2.6 percent loss last week.

The Biggest Winner From The Greek Tragedy

July 7, 2015

The Biggest Winner From The Greek Tragedy

Long after Greece has left the Eurozone and Germany is using the Deutsche Mark as its currency, the people of the two nations, antagonized to a level unseen since World War II, will be accusing each other of benefiting more from the brief but tumultuous period of the common currency.

In reality, nobody had put a gun to Greece’s head and told it to lever up, enriching local oligarchs and corrupt politicians, taking advantage of credit that was artificially cheap only due to the common currency and an implicit monetary, if not fiscal, union.

Germany, whose exports account for nearly 50% of GDP, on the other hand experienced an unprecedented exporting golden age, made possible only due to an artificial currency, the Euro, that was by definition created to be weaker than the Deutsche Mark and benefitted from any bout of weakness in Europe’s periphery, such as the past 5 years.

The truth is, when things were good nobody second-guessed any decisions for a second, and since the rising economic tide lifted all boats, nobody cared.

And then the tide rolled out, displaced by trillions in bad loans and gargantuan mountains of sovereign and financial debt, which ultimately would lead to the first, then second, then third and then an all-out cascade of sovereign defaults.

Sadly, the losers – regardless of the propaganda and jingoist rhetoric – are the ordinary, common, taxpaying people of Germany and Greece (and every other European nation), who enjoyed a few brief years of artificial prosperity, which in retrospect was entirely due to debt, masked well by the “currency swaps” and other financial engineering concocted by banks such as Goldman Sachs, in clear violation of the Maastricht treaty which is now a long-forgotten memory of the founding ideals behind the Eurozone.

…click on the above link to read the rest of the article…

Why Would Bloomberg News Completely Disappear the February, 2014 Ukraine Coup?

May 27, 2015

Why Would Bloomberg News Completely Disappear the February, 2014 Ukraine Coup?

Bloomberg says in a post today that the “confrontation between Russia and the US” over Ukraine was “provok[ed]” by Putin’s annexation of Crimea:

“…Putin annexed the Black Sea peninsula of Crimea last March, provokingthe biggest confrontation between Russia and the U.S. and Europe since the Cold War.”

That’s odd, though, because the reintegration of Crimea into Russia (after a vote in favor – but remember democracy is what we say it is) happened, as Bloomberg says and BBC confirms, in March, 2014, about five months after violent, US-backed protests began in November 2013, and ended in the the elected Ukrainian president, Victor Yanukovych, being driven out of the country by, as BBC put it, “radical groups”, including neo-Nazis: see BBC’s “Neo-Nazi Threat in Ukraine“, Feb. 28, 2014. (“BBC Newsnight’s Gabriel Gatehouse investigates the links between the new Ukrainian government and Neo-nazis.” Later articles covering the topic were published by, among many others, Glenn Greenwald,Robert Parry, and even, albeit 8 or 9 months too late to make a difference, NBC)

It’s also strange that BBC would say the following (even in a piece rife with the British state-run outlet’s typical pro-Western spin):

Pro-Russian forces [ie the Russian troops already stationed in Crimea by agreement] took control of Crimea in February. They moved in after Ukraine’s pro-Moscow president Viktor Yanukovych was ousted after street protests.

So, they reacted to the US-backed overthrow of elected Yanukovych. To be precise, Russian troops began the process of, in US political-speak, liberating and securing Crimea on “February 23rd, 2014“.

Yet, again oddly, here is Time on February 22nd, 2014:

“Ukraine protesters seize Kiev as President flees”

“Yanukovych fled to the eastern city of Kharkiv where he traditionally has a more solid base of support…”

It is noted in Wikipedia that Yanukovych had “won election in 2010 with strong support in the Autonomous Republic of Crimea and southern and eastern Ukraine.”

…click on the above link to read the rest of the article…

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