Baltic Dry Index. 749 -08 Brent Crude 48.39
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon.
Tag-team Central Banksters Nil, Swizz National Bank 1.
What happens when the unmovable object, in the Great Nixonian error of
fiat money, meets up with the unstoppable force ? The unstoppable force wins,
we now know. The SNB, that only last month pledged to spend unlimited amounts
of Swiss Francs to buy unlimited amounts of euros to maintain their 1.20
currency peg to the falling euro, collapsed yesterday, probably incurring
massive losses along the way. Most likely because the ECB is now poised next
week to start printing unlimited amounts of euros to buy up unlimited amounts of
dead beat Club Med, European unrepayable debt, in a last ditch effort to keep
the wealth and job destroying, Bilderberger, United States of Europe, EUSSR project
to challenge and replace the Uncle Scam dollar, on the road to nowhere.
In the final phase of the Great Nixonian Error of fiat money, there’s no
longer honour among thieves. It’s all against all, when the chips are down. Get
long fully paid up gold and silver fast. Global fiat currency anarchy has
broken out. It’s not just a fiat currency war against the BRICs and the PIIGs
anymore. It’s a war of destruction against fiat money.
"Finance
is the art of passing customer segregated funds from hypothecation to hypothecation
until it finally disappears."
What it looks like when the Swiss rock global markets
Published: Jan 15, 2015 3:44 p.m. ET
Rough day for Swiss stocks, but gold came out on top
MADRID (MarketWatch) — It cut like a Swiss knife on Thursday.A shocker that no one saw coming -- the Swiss National Bank eliminated its cap against the euro, ending more than three years of calm waters for the Swiss foreign-exchange markets.
Amid the prominent issues dogging the markets lately — the hand-wringing around global deflation, the Russian ruble slide, plunging crude-oil fears — a Swiss move to eliminate a long-held cap on the value of its Swiss franc relative to the euro wasn’t exactly high on the radar.
The original currency cap, which aimed to ensure the euro never fetched less than 1.20 Swiss francs, was put in place to help mitigate the effect of the raging sovereign debt crisis.
A ‘tsunami, a ‘bombshell’ were among the reactions from hard-hit Swiss companies is how market watchers described the SNB’s move.
And to put the level of shock into perspective, the managing director of the International Monetary Fund, Christine Lagarde, told CNBC in an interview Thursday that she was surprised at Swiss National Bank chief Thomas Jordan’s decision.
Here’s how the Swiss decision resonated in the markets early:
The euro EURCHF, +3.21% is down
nearly 16% and the U.S. dollar USDCHF, +3.13% remains down
nearly 15% versus the so-called Swissie. The currencies had plunged even
further in the immediate aftermath of the move.
Ultimately, the Swiss delivered a huge boost to gold for
February delivery GCG5,
-0.39% which surged
$30.30, or 2.5%, to settle at $1,264.80 an ounce, its best finish since it
closed at $1,268.20 on Sept. 5.
----Meanwhile, Swiss stocks were rocked, tumbling the most in a quarter century on the Swiss central bank’s move. The Swiss Market Index SMI, -8.67% wrapped up the day 8.8% lower, with big names like watchmaker Swatch Group UHR, -16.35% down more than 16% in Thursday trade.
Ashraf Laidi, chief global strategist at City Index Ltd, a UK-based forex broker, told MarketWatch that the Swiss action today signals growing global deflation pressures.
Currency experts argue that the Swiss had little choice but to end it currency cap amid the falling euro.
The SNB’s action also occurred just one week before the European Central Bank is expected to to discuss the possibility of launching a full-blown quantitative easing plan to help juice the flagging eurozone economy.
More
World deflationary forces have swept away Switzerland's defences
A month ago the Swiss authorities were still claiming that their currency floor was crucial to prevent a deflation trap. They were right
The Swiss National Bank has lost
control. It is the latest in a list of venerable central banks to be
overwhelmed by deflationary forces and global economic disorder.
The country is already in
deflation. The Swiss franc ended Thursday 13pc higher after the SNB abandoned
its three-year efforts to defend a currency floor of 1.20 to the euro. “We have
a free exchange rate once again,” said the SNB’s president, Thomas Jordan.
Indeed, but nobody is fooled by
the SNB’s attempt to spin this as benign. “This is a huge hit to their
credibility,” said Deutsche Bank.
The official statement claimed
that the exchange floor is no longer needed and that “overvaluation has
decreased as a whole since the introduction of the minimum exchange rate”. This
is eyewash.
“They have had to throw in the
towel. They couldn’t hold the line anymore,” said David Owen, from Jefferies
Fixed Income. “This is going to cause extreme pain for parts of the Swiss
economy but the SNB are trapped.”
The franc has been level over the
past year on a trade-weighted basis. Even before Thursday morning's events, the
exchange rate was 25pc above its decade-long average. It is now 40pc higher.
Just one month ago the SNB argued in its quarterly report that currency floor
was imperative to stop Switzerland relapsing back into deflation.
----“In view of heightened deflation risks, the minimum exchange rate remains the key instrument for ensuring appropriate monetary conditions. A further appreciation of the Swiss franc would have a major impact on salary and price structures. Companies in Switzerland would be forced to cut costs drastically again to remain competitive.”
The statement was true then. The
threat is much greater now, made all too clear by the howls of protest this
morning from the Swiss export sector. Nick Hayek, head of Swatch Group, said
the collapse of the floor would cause havoc. "Words fail me. Today's SNB
action is a tsunami; for the export industry and for tourism, and for the
entire country," he said.
The Swiss economy has been
muddling through over the past year but the output gap is still -1pc of GDP,
inflation is negative and the KOF index of business sentiment has been slipping
lower for two years. On top of this, the country now has to grapple with the
likely hangover from its own domestic credit bubble.
----The SNB’s balance sheet has ballooned to 85pc of GDP. At one point it was buying half the entire sovereign bond issuance of the eurozone. While this reserve accumulation subsided for a while, it is has been building up to a new crescendo as money pours in to Switzerland from Russia, and Greek tensions return to the eurozone. Foreign reserves rose 7.5pc in the single month of December. The Swiss franc floor was already untenable.
The eurozone’s slide into
deflation in December – with 5Y/5Y swap contracts showing inflation
expectations in freefall – is the last straw for the Swiss authorities.
It means that the European
Central Bank can no longer keep dragging its feet on QE. Whether the ECB
announces a €1 trillion blitz next week, or just €500bn, funds are already
flooding into Switzerland from the eurozone.
More
Casualties From Swiss Shock Spread From New York to New Zealand
Jan 16,
2015 6:12 AM GMT
Losses mounted from the Swiss currency shock as the largest U.S. retail
foreign-exchange brokerage said client debts threatened its compliance with
capital rules and a New Zealand-based dealer went out of business. FXCM Inc. (FXCM), which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled markets worldwide. Global Brokers NZ Ltd. said losses from the franc’s surge are forcing it to shut down, while IG Group Holdings Plc (IGG) estimated an impact of as much as 30 million British pounds ($45.5 million).
“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by phone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.”
----Market turmoil from the move extended into a second day as Asian shares dropped with U.S. index futures, while Japanese and Australian government bond yields plunged to records as investors sought haven assets.
“Clients experienced significant losses” after the franc’s surge, FXCM said in a statement dated Jan. 15. That “generated negative equity balances owed to FXCM of approximately $225 million.”
The brokerage dropped 15 percent in New York trading yesterday to an almost two-year low of $12.63, leaving the company valued at about $596 million. The shares were cut to sell from neutral by Citigroup Inc., which lowered its price target to $5 from $17.
Spokeswoman Jaclyn Klein didn’t immediately respond to calls to her mobile and office phones.
The U.S. Commodity Futures Trading Commission allows investors to put down as little as 2 percent of the value of their foreign-exchange bets. Brokers may get stuck with the balance of losses suffered by clients who borrowed to bet against the franc.
----Most of FXCM’s retail clients lost money in 2014, according to the company’s disclosures mandated by the CFTC. The percentage of losing accounts climbed from 67 percent in the first and second quarters to 68 percent in the third quarter and 70 percent in the fourth quarter.
The SNB ended its three-year policy of capping the franc at 1.20 per euro a week before the European Central Bank meets to discuss government bond purchases to boost the euro-area economy.
Such a policy, known as quantitative easing, could spur pressure on the franc to appreciate against the euro. The SNB spent billions defending the currency cap after introducing it in September 2011.
----Deutsche Bank was among dealers to suffer disruptions to electronic trading, with its Autobahn platform temporarily ceasing to provide quotes, according to a dealer from outside the bank. Auckland-based Global Brokers NZ said the market for francs was disrupted for hours.
“The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity,” Global Brokers NZ director David Johnson said in a statement dated Jan. 15 and posted on the website of affiliated company Excel Markets. All of the firm’s client funds are in segregated accounts and “100 percent of positive client equity or balance is safe and withdrawable immediately,” Johnson said.
HSBC Holdings Plc is investigating reports that customers in Hong Kong bought the Swiss franc below market rates when an online banking system failed to keep up with the currency’s gains after the removal of the cap.
Apple Daily and the Hong Kong Economic Journal cited unidentified bank customers as saying that they took advantage of the mistake yesterday evening. HSBC spokeswoman Maggie Cheung said in an e-mail that the lender was looking into the reports.
More
In oil news, the reality on another oil bust has finally set in. From
Alberta to Texas and Brazil, from Angola to Scotland and the far east, life
with 45 dollar oil is finally setting in. Forget about deep sea or artic oil.
Forget about fracking in Europe. Forget about fracking in the land between the
shining seas. Forget about tar pits too. As the Great Nixonian Error of fiat
money starts coming to its end, the greatest malinvestment boom ever, is
starting to unwind. Forty four years of an orgy of self indulgent, “I want it
now” lifestyle debt is starting to correct.
The collapse that started in stock markets in 1987, spawning all the
Greenspan bubbles, market rigging, and China, has finally reached the end of
the road. Since 2007, the Great Nixonian
Error of fiat currency, has been living on borrowed time. Yesterday the SNB
headed off to the bunker ahead of the ECB opting for nuclear war next week.
Big Oil Companies Get Serious With Cost Cuts on Worst Slump Since 1986
Jan 16,
2015 5:00 AM GMT
Major oil
companies are awaking from their slumber and facing up to the magnitude of
the crash in crude prices. From Royal Dutch Shell Plc (RDSA) canceling a $6.5 billion project in Qatar to Schlumberger Ltd. firing about 9,000 people and Statoil ASA (STL) giving up exploration in Greenland, the oil industry this week concluded that the slump is no blip. Top producers follow U.S. shale developers such as Continental Resources Inc. (CLR) in unraveling a boom that produced more oil and natural gas than the world is ready to buy.
And there’s certainly more unwinding to come. For most of this month, crude oil has traded below $50 a barrel, a level few predicted even two months ago when OPEC signaled it wouldn’t cut production to defend prices. If the market stays this depressed, global spending on exploration and production could fall more than 30 percent this year, the biggest drop since 1986, according to forecasts from Cowen & Co.
“Not too many people expected these levels of oil prices, not even the companies themselves,” said Dragan Trajkov, an analyst at Oriel Securities Ltd. in London. “Now they have to deal with this new situation and the first impact will be on new investments.”
Shell, BP Plc, Chevron Corp. and other top producers are preparing to present 2014 earnings to investors at the end of this month or early February and will signal plans for this year. Their chief executive officers are faced with the challenge of assuring shareholders they can see through the depression without cutting dividend payments.
The direction of the oil market shows
companies probably need to prepare for the worst. Bank of America Corp., noting
the speed global oil inventories are building, forecast Thursday that Brent
futures are set to fall to as low as $31 a barrel by the end of the first
quarter from about $48 now. That’s even lower than the $36.30 seen during the
depths of 2008’s financial crisis.
Oil traded above $100 a barrel in
July and analysts forecast prices would stay there for years to come. The scale
and speed of the price drop has forced companies to start making significant
decisions.
More
Oil Heads for Longest Weekly Losing Streak Since 1986 Amid Glut
Jan 16, 2015 6:14 AM GMT
Oil headed for the longest run of weekly declines since March 1986 as OPEC
forecast weaker demand for its crude, adding to signs that a global supply glut
that spurred last year’s price collapse may persist. Futures swung between gains and losses in New York and are set for an eighth weekly drop. Demand for oil from the Organization of Petroleum Exporting Countries will average 28.8 million barrels a day, the lowest in 12 years, the group said in a report on Jan. 15. Venezuela, one of OPEC’s 12 members, is seeking to coordinate a plan to calm prices, according to President Nicolas Maduro.
Oil fell almost 50 percent last year, the most since the 2008 financial crisis, as supplies swelled amid the fastest pace of U.S. production in more than three decades while OPEC resisted calls to cut output. Goldman Sachs Group Inc. and Societe Generale SA were among banks to reduce their price forecasts this week.
“It’s a broader global poker game in oil markets -- the first to blink loses,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “OPEC has gotten away with its cartel actions for many decades now and there are clear signs that it’s no longer working. Their power over the oil price is being vastly eroded.”
More
If the Swiss National Bank is heading for the bunker ahead of next week’s
ECB action, Davos and the Greek election, I will join them too. This is no time
for 20th century dinosaurs like me to be walking around as prey.
Suddenly we have all entered a new end game.
One
of the queries Quakers are asked to consider, is: "Do you maintain strict
integrity in your business transactions and in your relations with individuals
and organizations? Are you personally scrupulous and responsible in the use of
money entrusted to you, and are you careful not to defraud the public
revenue?"
Probably
why there a no Quakers on Wall Street.
At the Comex silver
depositories Thursday final figures were: Registered 65.69 Moz, Eligible 108.22
Moz, Total 173.91 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
We end for the week with a downer from Morgan
Stanley. If the great commodity super cycle just ended, history suggests we are
in for a difficult transition. While past performance doesn’t guarantee future
performance, as they say in the gambling markets, that’s the way to bet never
the less. The Fedster’s talking chair was just thumped to the floor by the SNB.
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
Welcome to ‘Normal’ Crude Oil Price, Trading at 100-Year Average
Jan 16, 2015 3:35 AM GMT
The theory goes that commodity prices move in “supercycles” or bursts of
phenomenal surges, followed by longer, less-exciting periods. As such, a barrel
of oil at $50 is, well, normal. Many people think the oil price has crashed, but it has just gone back to its long-term historical trend, according to Ruchir Sharma at Morgan Stanley Investment Management Inc. That makes a barrel of oil at around $50 just about right based on a 100-year inflation-adjusted average, said Sharma, who manages $25 billion as head of emerging markets.
“The price of oil is returning to normal in its long-term 100-year history,” Sharma said in an interview from New York. “We tend to have a short memory and we tend to forget that the price of oil breached the $50 a barrel level only a decade ago.”
Brent crude oil futures, which trade in London and are used as a benchmark to set prices for more than half of the world’s oil, reached a record of $139.83 a barrel on June 30, 2008, according to data compiled by Bloomberg. By Jan. 13, the price had plunged 67 percent to $46.59.
“At times like these, it’s good to step back and look at the bigger picture, look at what it has done through a long history,” he said.
China Surge
The supercycle surge in oil prices was kicked off by China’s emergence as an industrialized economy and net oil importer in the middle of the 1990s.In 1995 it imported 343,000 barrels a day, according to BP Plc data. In 2013, it bought 5.7 million barrels a day. The nation is now the world’s biggest energy consumer and the second-biggest oil user.
“China’s oil imports took off around 2003 and it emerged as a big factor in the market,” Thina Saltvedt, an Oslo-based oil analyst at Nordea Bank AB, said in a Jan. 13 phone interview.
There’s a long time lag in oil between investments and new supply and it can take 10 years, sometimes 15 years, to balance the market and match it with demand, said Saltvedt. China (CNGDPYOY) is structurally changing its economy from big, energy-intensive industry to less so. India or perhaps Africa will start to take over the role China has played, said Saltvedt.
“We’re now close to the end of this big oil cSharma went further back with his commodity price tracking -- 200 years -- and said the trend is for prices to rise for a decade then fall for two decades.
The reason: something new comes
along that attempts to substitute a commodity or find a new way to meet demand.
More
Another weekend and a good time
to see who comes crashing out of the trees from the action of the SNB. The next
Lehman, MF Global, Bre-X is out there,
and just got a whole lot uncomfortably closer. Have a great weekend everyone.
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
The monthly Coppock Indicators finished December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
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