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Image | Currency Swaps Spell Trouble?
Currency Swaps Spell Trouble?
 PREVIEW
by Chris Martenson

It was recently announced that the Fed planned to re-open lines with other central banks, allowing them to swap for dollars.  We’ve been down this path before.  I want to review what happened last time, because if that pattern repeats, we are about to begin a brand-new stage of financial system stress and stock market losses.

To begin, you should review this article I wrote on September 25, 2009, which describes currency swaps and does a post-mortem on the relationship between dollar swap volumes and strength in the US dollar index.  The correlation was pretty tight.

Here’s the primary image from that article with some of the text that followed it:

Currency Swaps Spell Trouble?
 PREVIEW by Chris Martenson

It was recently announced that the Fed planned to re-open lines with other central banks, allowing them to swap for dollars.  We’ve been down this path before.  I want to review what happened last time, because if that pattern repeats, we are about to begin a brand-new stage of financial system stress and stock market losses.

To begin, you should review this article I wrote on September 25, 2009, which describes currency swaps and does a post-mortem on the relationship between dollar swap volumes and strength in the US dollar index.  The correlation was pretty tight.

Here’s the primary image from that article with some of the text that followed it:

Image | I’ve got that sinking feeling…
I’ve got that sinking feeling…
 PREVIEW
by Chris Martenson

I’ve been struggling lately with balancing my role as a responsible information scout and commentator on the current economic situation with this sinking feeling that I’ve been carrying for awhile.  There have been a couple of times in the past where I’ve had a similar sense of apprehension.

One was in the Fall of 2008, when I sent out an Alert advising people to take cash out of the bank due to my fears of an imminent banking holiday.  A bank holiday never happened, but a year after my Alert, we learned from Hank Paulson and Mervyn King that we were literally hours away from a full blown banking melt-down at the exact time I sent out the Alert.

The mechanism by which my ‘spidey-senses’ get triggered is largely based on data and evidence, but there’s also a component to it that I cannot fully describe.  Mainly I am watching the news with incredible attention, trying to note both what is being said and what is being left out.  Looking for the ‘negative space’ takes a lot of attention, experience, and good old-fashioned thinking.  And I am glued to the markets, looking for changes in old patterns, trying to see the first signs of stress before they become common knowledge.

Based on widening credit spreads, a still-unexplained market glitch, a blow-out eco-disaster in the Gulf of Mexico, an already-failed trillion-dollar euro bailout that really wasn’t (vaporware, as Machinehead puts it), and the inexorable rise in gold, I come to the simple conclusion that these data points reveal a loss of faith in both our markets and our economic prospects.

Well, if you are running a Ponzi system, there is nothing more important than faith.  Which is why I spend so much time trying to gauge the winds of confidence as they swirl and eddy about.

I’m about as worried as I’ve ever been.

I’ve got that sinking feeling…
 PREVIEW by Chris Martenson

I’ve been struggling lately with balancing my role as a responsible information scout and commentator on the current economic situation with this sinking feeling that I’ve been carrying for awhile.  There have been a couple of times in the past where I’ve had a similar sense of apprehension.

One was in the Fall of 2008, when I sent out an Alert advising people to take cash out of the bank due to my fears of an imminent banking holiday.  A bank holiday never happened, but a year after my Alert, we learned from Hank Paulson and Mervyn King that we were literally hours away from a full blown banking melt-down at the exact time I sent out the Alert.

The mechanism by which my ‘spidey-senses’ get triggered is largely based on data and evidence, but there’s also a component to it that I cannot fully describe.  Mainly I am watching the news with incredible attention, trying to note both what is being said and what is being left out.  Looking for the ‘negative space’ takes a lot of attention, experience, and good old-fashioned thinking.  And I am glued to the markets, looking for changes in old patterns, trying to see the first signs of stress before they become common knowledge.

Based on widening credit spreads, a still-unexplained market glitch, a blow-out eco-disaster in the Gulf of Mexico, an already-failed trillion-dollar euro bailout that really wasn’t (vaporware, as Machinehead puts it), and the inexorable rise in gold, I come to the simple conclusion that these data points reveal a loss of faith in both our markets and our economic prospects.

Well, if you are running a Ponzi system, there is nothing more important than faith.  Which is why I spend so much time trying to gauge the winds of confidence as they swirl and eddy about.

I’m about as worried as I’ve ever been.

Image | The Financial Crisis Is Far From Over
The Financial Crisis Is Far From Over
by Chris Martenson

I give really, really boring advice. For years it has not changed a whit, and that’s just not the way to run a newsletter business.  There should be some movement, some pizazz, new things to ponder.  Instead I just keep saying the same thing over and over again.

Buy gold (and silver, too).

This is what I’ve been saying for the past seven years, ever since gold was in the $300’s and silver was under $5, so you might be tempted to think I am simply another gold bug.  While I confess to finding a certain allure in heavy bullion coins – they sound great tossed on a counter and feel good in my hand – I am not really a gold bug.

Instead, what I am is a gigantic, unrelenting, anti-fiat-currency bug.  Well, at least I am anti-mismanaged fiat currencies, but that pretty much encompasses them all to varying degrees.

As with all investment,s I have an exit strategy in my mind that will dictate when I sell my gold and silver to place those funds in other productive investments.  Unfortunately, that day seems further away than ever.

Let me explain why.
The Financial Crisis Is Far From Over
 by Chris Martenson

I give really, really boring advice. For years it has not changed a whit, and that’s just not the way to run a newsletter business.  There should be some movement, some pizazz, new things to ponder.  Instead I just keep saying the same thing over and over again.

Buy gold (and silver, too).

This is what I’ve been saying for the past seven years, ever since gold was in the $300’s and silver was under $5, so you might be tempted to think I am simply another gold bug.  While I confess to finding a certain allure in heavy bullion coins – they sound great tossed on a counter and feel good in my hand – I am not really a gold bug.

Instead, what I am is a gigantic, unrelenting, anti-fiat-currency bug.  Well, at least I am anti-mismanaged fiat currencies, but that pretty much encompasses them all to varying degrees.

As with all investment,s I have an exit strategy in my mind that will dictate when I sell my gold and silver to place those funds in other productive investments.  Unfortunately, that day seems further away than ever.

Let me explain why.
Image | A Cure Worse Than The Disease
A Cure Worse Than The Disease
 PREVIEW
by Chris Martenson

Recently I’ve argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and…) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

A Cure Worse Than The Disease
 PREVIEW by Chris Martenson

Recently I’ve argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and…) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

Image | Market Not Buying The Fat-Fingered Excuse
Market Not Buying The Fat-Fingered Excuse
 PREVIEW
by Chris Martenson

Well, it’s another day with another bout of exceptional volatility.

As I type this, the S&P 500 is down -23 points, the Dow is off by -240, no -183, no-210, no -91….oh never mind.  Let’s just watch while sitting on our trading thumbs.

Meanwhile, gold is stubbornly hanging around the $1200 mark and the news out of Europe is awful.

This is the news that makes me the most worried:
Market Not Buying The Fat-Fingered Excuse
 PREVIEW by Chris Martenson

Well, it’s another day with another bout of exceptional volatility.

As I type this, the S&P 500 is down -23 points, the Dow is off by -240, no -183, no-210, no -91….oh never mind.  Let’s just watch while sitting on our trading thumbs.

Meanwhile, gold is stubbornly hanging around the $1200 mark and the news out of Europe is awful.

This is the news that makes me the most worried:
Image | Full-Blown Panic
Full-Blown Panic
 PREVIEW
by Chris Martenson

Ouch!!  Look at the markets!!!

And I don’t normally use exclamation points.

Gold is back over $1200 and the stock market is undergoing a full-blown rout, with the S&P down more than 60 at present.

I’m quickly trying to analyze what this means and what’s happening, but wanted to open this thread up for immediate discussion.

Ooops.  The S&P is now down more than -72.  Make that -78.  No, -96!!!!  Yikes!

This is one of the biggest one-day moves in my experience.

 
Full-Blown Panic
 PREVIEW by Chris Martenson

Ouch!!  Look at the markets!!!

And I don’t normally use exclamation points.

Gold is back over $1200 and the stock market is undergoing a full-blown rout, with the S&P down more than 60 at present.

I’m quickly trying to analyze what this means and what’s happening, but wanted to open this thread up for immediate discussion.

Ooops.  The S&P is now down more than -72.  Make that -78.  No, -96!!!!  Yikes!

This is one of the biggest one-day moves in my experience.

 
Image | Power Outage: Lessons Learned
Power Outage: Lessons Learned
by Chris Martenson

On Tuesday afternoon (5/4/2010), while I was engaged in my weekly biology class with a group of homeschoolers, the wind suddenly kicked up out of nowhere with a single strong gust.  Looking out the window, all eight of us were struck by what looked like a yellow cloud lifting up over the nearest ridge about a mile away.

It wasn’t a yellow cloud; it was soil, lifted violently from the fields in the valley below, its color highlighted by the dark clouds above.  Suddenly, the tree tops on the ridge to our west all bent over in unison, as if brushed by a giant invisible hand.  There was a pause, and then we got hit with a blast of gritty air, probably in the vicinity of 50 mph, that toppled trees in our yard and turned out the lights.  Boom.  Just like that.  We had about 2 minutes to react and prepare, from start to finish.
Power Outage: Lessons Learned
 by Chris Martenson

On Tuesday afternoon (5/4/2010), while I was engaged in my weekly biology class with a group of homeschoolers, the wind suddenly kicked up out of nowhere with a single strong gust.  Looking out the window, all eight of us were struck by what looked like a yellow cloud lifting up over the nearest ridge about a mile away.

It wasn’t a yellow cloud; it was soil, lifted violently from the fields in the valley below, its color highlighted by the dark clouds above.  Suddenly, the tree tops on the ridge to our west all bent over in unison, as if brushed by a giant invisible hand.  There was a pause, and then we got hit with a blast of gritty air, probably in the vicinity of 50 mph, that toppled trees in our yard and turned out the lights.  Boom.  Just like that.  We had about 2 minutes to react and prepare, from start to finish.
Image | Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
by Chris Martenson

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.

By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
 by Chris Martenson

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.

By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Image | “What Shall We Buy Today?” – Everything!
“What Shall We Buy Today?” – Everything!
 PREVIEW
by Chris Martenson

Once again, we find that a moment of market reality is met with an astonishing wall of liquidity, as evidenced by the past two days of gains in, well, everything.  I’ve seen this particular behavior more than a few times over the past eight years, and I’m pretty confident that I know what it is and where it originates.

On Tuesday, the market reality was the sudden realization that instead of everything getting unequivocally better, there was solid evidence of rot in the debt superstructure of much of Europe, concentrated (for the moment) in southern Europe

Well, wouldn’t you know it.  That realization only lasted a single day, as stock futures were mysteriously repaired that night, bonds remained well above their pre-mini-crisis levels, and commodities came roaring back.

One might be tempted to ask, “How is it possible that such a crisis can only last for a single trading day?”

“What Shall We Buy Today?” – Everything!
 PREVIEW by Chris Martenson

Once again, we find that a moment of market reality is met with an astonishing wall of liquidity, as evidenced by the past two days of gains in, well, everything.  I’ve seen this particular behavior more than a few times over the past eight years, and I’m pretty confident that I know what it is and where it originates.

On Tuesday, the market reality was the sudden realization that instead of everything getting unequivocally better, there was solid evidence of rot in the debt superstructure of much of Europe, concentrated (for the moment) in southern Europe

Well, wouldn’t you know it.  That realization only lasted a single day, as stock futures were mysteriously repaired that night, bonds remained well above their pre-mini-crisis levels, and commodities came roaring back.

One might be tempted to ask, “How is it possible that such a crisis can only last for a single trading day?”

Image | Major Market Move – 4/27/10
Major Market Move – 4/27/10
 PREVIEW
by Chris Martenson

As I write this, the Dow is down 170 points and the S&P 500 is down 23.  The dollar is up 0.89 (a big move), and (here’s the surprising note in this symphony) gold is up $8.

The explanation being trotted out by the media for this big move is the fact that S&P (the rating company) downgraded Greece and Portugal’s debt.

NEW YORK (MarketWatch) — U.S. stocks caved on Tuesday after Standard & Poor’s cut its rating on Greece. “If followed by Moody’s, Greek bonds will no longer be able to be used as collateral in borrowing from the European Central Bank,” said Peter Boockvar, equity strategist at Miller Tabak. The Dow Jones Industrial Average

(Source)

I rather doubt this explanation.

Major Market Move – 4/27/10
 PREVIEW by Chris Martenson

As I write this, the Dow is down 170 points and the S&P 500 is down 23.  The dollar is up 0.89 (a big move), and (here’s the surprising note in this symphony) gold is up $8.

The explanation being trotted out by the media for this big move is the fact that S&P (the rating company) downgraded Greece and Portugal’s debt.

NEW YORK (MarketWatch) — U.S. stocks caved on Tuesday after Standard & Poor’s cut its rating on Greece. “If followed by Moody’s, Greek bonds will no longer be able to be used as collateral in borrowing from the European Central Bank,” said Peter Boockvar, equity strategist at Miller Tabak. The Dow Jones Industrial Average

(Source)

I rather doubt this explanation.

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