Tuesday, 31 March 2020

The Greatest Depression: Keep Crying.

We haven't got a hope in hell. Let's start with global statistics: 700 trillion in OTC derivatives, 300 trillion in debt, of which 250 is in bonds.

Moving to the United States: 10 trillion in derivatives, another ten in corporate debt, with 16 trillion in government debt.

Thus far, The Fed's balance sheet is at 6 trillion spent while market losses are 7 trillion, with valuations down roughly 30%.

That's like using your finger to try and stem the Hoover Dam. What if we lose another 7 trillion in value? Remember that during The Great Depression stocks dropped 89%. There's no way that The Fed can even come close to printing its way out of this.

 

Saturday, 28 March 2020

Throw The Banks And The Fed In Jail.

Once we get out of The Greatest Depression, our only solace will be if bank management and Fed members are thrown in jail. But, of course, just like in 2008, nobody will end up on the inside. Too bad that.

First off, financial and credit derivatives traded by banks over the OTC market are not regulated by The Fed nor legislation enacted by Congress. Exchange-traded derivatives are subject to SEC and CFTC regulation. No one is minding the store to control, limit or ban OTC leverage derivative trading between banks.

As for the banks, they are willing advocates of inflating the Ponzi stock markets, more particularly, inflating their own stock price through share buybacks and the payment of special and increasing dividends to shareholders. In short, that's where bank capital reserves went, leading to last September's freezing up of the bank-traded Repo Market. Hence, trillions upon trillions of Fed phoney money injected each night, otherwise the largest American banks go into immediate insolvency. And lately, those nightly drops have become classified. Wonder why?

In short, we've learned absolutely nothing about banking and financial services' robust regulation requirement, such as that Dodd-Frank, the Volker Rule, etc. are as essential to market confidence as a strongly beating heart is to a human being. But no, banks and its allies in Congress and the Administration propose and/or roll-back regulation as much as they can. Remember, greed always remains king in crony-capitalism.

Another example of why Fed members are quite deliberately complicit in this con job is to examine bank financial reserve requirements: they were set by The Fed at 10% of reserves for the largest banks and 3% for medium-sized banks. Small banks were not required to maintain a Fed reserve minimum. But surprise, surprise, earlier this month, The Fed took the capital reserve ratio down to zero for all domestic banks.

So, what's the end game? Frankly, The Fed can inflate its balance sheet for only so long. They can buy Treasuries, bonds, mortgage-backed securities, debt, ETFs and stocks but that can't and won't reverse the current downward trend in markets and bond yields.

The bond market is already singing the theme from The Titanic. Only The Fed and stock markets remain entirely clueless as to the inevitable end-game, that will make 1929 look like a walk in the park.




Thursday, 26 March 2020

The Ultimate Ponzi Scheme: Don't Get Suckered.

We can debate whether this Depression is worse than 1929. You know it's a Depression from the moment Powell calls it a Recession.

Almost four million Americans newly unemployed. Then what about this tidbit: how we've fallen faster to this point than they did in 1929.

This is a cyclical bear market with false positives known as rallies. We're in a three-day rally and that should promote panic -- instead it engenders a false sense of security and a rallying mentality. Just nuts.

Remember that in the Great Depression, over four years we had FIVE false-positives, or if you prefer, bear-market rallies.

This three-day wonder is one of those. Why?  Because the Fed has moved on from only buying every bond and debt asset class to also buying ETFs and stocks. Guess who was likely the only one buying that Boeing stock today, when the price doubled?

There's no intelligence on Wall Street, only a deluded herd mentality. They are actually stupid enough to bid up this market based solely on Fed panic. In other words, buying up Treasuries and debt instruments was an unmitigated disaster, so let's try this!

The greed-driven stock market screams we're out of the bear, based on a narrow technical definition, while the bond market sees the Titanic iceberg on the horizon.

Well, guess what? The bond market is ten times as large as the stock market and it's telegraphing negative T-bill rates across the board. Now, who should you believe?

Add to that the Fed claming up on the amount of nightly Bank Repo injections and you should get the picture pretty fast. Is that now classified?

It's a tale of two stock markets: the Ponzi buy-back inflated traditional stocks versus gold and silver stocks. Guess which one I'm betting on?

Wednesday, 25 March 2020

FINANCIAL EMERGENCY!

For God's sake, get all your money out of the Bond Market now that one and three-month T-Bills have a negative interest rate.

Do it as quickly as you can because this disastrous trend will soon affect all the other terms. You will quite literally lose everything if you stay in bonds.

Saturday, 21 March 2020

2.5 Quadrillion: Why The World Is Truly and Firmly Fucked.

2.5 Quadrillion. That's the likely Derivative and other financial aggregate exposure across the globe. Then just imagine if official figures are under-reported, or double that and you quickly get the picture why this thing is going south -- deeper down for longer, rather than the reverse.

Derivative contracts, more often that not leveraged, make up a huge part of bank portfolio exposure. The poster child these days is Deutsche Bank, which at best, is already on life support. When Commerz wouldn't go along with the Merkel-encouraged merger with Deutsche, you knew it was already all over in Germany. Other rumblings about HSBC, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Wells Fargo are enough to keep us up at night.

But back to the bad boys: in addition to derivatives, other negative-priced underlying instruments or financial exposure include debt, bonds, stocks, currencies, mortgage-backed securities and other asset classes. You've got the Fed buying-back treasuries, corporate bonds and mortgage instruments like it was going out of style with allegations that its trading desk is already buying stocks -- which is not authorized under current legislation. If Congress authorizes that and Trump signs it, then that's the ultimate black swan telling us that we're done as dinner. There's one hell of a lot of fear out there in the markets right now but that doesn't compare to panic and market capitulation which is probably only a few weeks off.

Then add to that the national debt and deficits meaning the American government is already broke unable to finance in a prolonged financial crisis Social Security and Medicare, while the states won't be able to adequately meet Medicaid demand even with partial federal funding. We won't even go there as regards the deliberate shortfalls in corporate pensions.

Interest-rate swaps, forward contracts and credit-default swaps are the canaries in the coal mine. The risk of counter-party default is high and growing.  The mega-mistake of 2008 was not either fully regulating all derivative contracts or abolishing them altogether.  Instead, Bush, Obama and Congress looked the other way, thereby satiating and encouraging endless corporate and bank greed. Trump is no better.

Financial calamity won't repeat itself exactly in 2020 but it certainly will rhyme.








Wednesday, 18 March 2020

Repo...

It only gets worse what with The Fed now printing 1 trillion per night for Repo payments. And that's just them getting warmed up: Repo demand is likely to reach, at minimum, 2.5 trillion per day.

Well, to sum it all up in terms everyone can understand: I'm calling for Dow 10,000 within the next three weeks.

It's a cold-blooded massacre out there.

Monday, 16 March 2020

Repo Madness.

Well, The Fed has met the clinical definition of insanity: doing over and over exactly the same thing but expecting different results.

Repo injections demonstrate a) Fed panic and desperation and b) serve to show The Fed's own lack of confidence in banks, and more broadly, the Bond and Stock Markets.

Sooooo...they were at it again today, this time with a mid-day cash injection of 500 billion,  and it didn't make one iota of difference: stocks continued to slide with The DJ experiencing the largest point drop in its history.

That's like taking a bicycle tire and trying to install it on a car. Just wait until the other real shoe drops, namely, banks leveraged 100 to 1 on derivatives. That will be the mother of all stock market drops when that sucker finally bursts -- and it will, likely sooner than later.

If you're a praying person, it would be a good idea to start now and keep it up.

Meanwhile, limited bank runs have already begun in NYC. And that's just the beginning. 

Sunday, 15 March 2020

The Fed Surrenders To The Inevitable Depression.

This is what's key: reserve requirement ratios for a large group of banks has been cut to zero-- that is a tacit admission that those banks are already insolvent and simply unable to meet normal reserve requirements. In English, they likely have less than one dollar on deposit for every ten dollar loan made. The above makes an eventual run on the banks inevitable.

Meanwhile, the guillible will focus on a Fed Funds Rate now set at 0.25%. The Fed will also purchase Treasuries and Mortgage-backed Securities to the tune of 700 billion dollars.

If you weren't previously inclined to panic, might as well start now because this Depression is totally out of control.

The Insanity Continues.

Fed Bank Repo hits 500 billion a night, while asset purchasing amount allocated is now 5 trillion.

The markets and American economy are now in free fall.

Saturday, 14 March 2020

This Blog: For Now, All Depression, All Of The Time.

If you're looking for financial bullshit delivered with rose-coloured glasses, don't waste your time here.

Here's where we stand:  we have countries in recession including Mexico and Japan. Others like Germany, France, Italy and the UK are, at the very least, wobbly.

Then you've got the continually expanding Bank Repo cash injection by The Fed, which has exploded from 100 to 150 billion dollars a day to over 300 billion, with 1.5 trillon planned by The Fed.

Trump and The Fed have failed miserably to instill long-term confidence in the American economy or the state of the financial system.

Lebanon has defaulted on the Eurobond and some of its banks have closed, with questions still swirling about such heavyweights like Goldman Sachs and Wells Fargo. Ditto in Europe concerning DB, Commerz and HSBC.

Next comes the disaster of The Fed Funds Rate which now sits at 1.25%. With the FOMC expected to cut at least a full percentage point next week, we are rapidly on our way to the economic carnage resulting from negative interest rates, which Trump strongly advocates.

And if all of that weren't enough, the US Ten Year Treasury is hovering below 1 percent, down 51% from last year.

So, the worldwide outlook looks grim with the EU, United States and Canada likely to tip into recession, to say the very least.

It may feel like an impending recession but it smells of depression what with the unknown variable of international bank stress tests -- which notably, US banks have been lobbying to weaken.

At best, blood is already in the water with Rumsfeld's unknown unknowns likely to impact all of us, sooner rather than later.

God help us.






Monday, 2 March 2020

I'm Going To Swing Me An Election!

Make no mistake, you're already on dangerous ground when you try to provoke an early election.

Minority parliaments are by necessity tailor made for elections -- but more to the point, for parliamentary cooperation first.

That's the gist of the game: you're expected to make a genuine effort to get meaningful things done for the country. Point One.

Then comes the strategic imperative of having an opposition issue, or at least a legitimate one that you can rally the country with. If you've got that, then timing is secondary. Under that type of righteous indignation scenario, your protest vote in defeating the government could quite conceivably work, even after only several months in for the Liberal minority.

But failing that, you're on thin ice politically. Governments generally defeat themselves, goes the old adage -- so you better be damned sure that you've already got it in the bag before you pounce politically. Otherwise, it's likely curtains for the emboldened and a returned and reinvigorated mandate for the besieged.

If it's not 1979 all over again, then you're royally screwed.


Sunday, 1 March 2020

Wet'suwet'en Draft Agreement.

Thank God.

It's the right thing to do. Never thought the Liberals would pull it off. Give credit where credit is due. Don't play politics going forward. Be cautiously optimistic.