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Off The Cuff: The Ghosts Of 2008 Have Returned To Haunt Us

Not only are the same risks still here, they're bigger
Thursday, July 9, 2015, 4:18 PM

In this week's Off The Cuff podcast, Chris and Nomi Prins discuss:

  • The Ghosts Of 2008
    • Are suddenly returning en masse to haunt us
  • Growing Central Bank Insecurity
    • Beginning to realize that they've cornered themselves
  • The War On Cash
    • Central planners continue to tighten restrictions
  • No Solutions For The Status Quo
    • A massive reset is the best we can hope for

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more



Greece: Where To From Here?

Amidst the turmoil, some hard predictions can be made
Monday, July 6, 2015, 10:23 PM

It’s pretty hard keeping up with the rapid-fire developments in Greece. Things change every hour it seems; rumors abound and confusion runs deep.

At this point, it all depends on what Greece is prepared to accept and what the EU is prepared to offer. So from here, we could see anything from a full financial pardon from the EU (very unlikely) to a full Greek exit (still quite possible). » Read more


They're Coming For Your Cash

Liquidity-starved banks will take your savings via bail-ins
Friday, July 3, 2015, 12:19 PM

Executive Summary

  • The banking system runs on liquidity
  • Banks will do anything to keep it flowing -- including raiding their depositors
  • The risks of a global liquidity crunch are dangerously high today
  • Why extracting physical cash from the system is highly advised

If you have not yet read Part 1: In A World Of Artificial Liquidity – Cash Is King available free to all readers, please click here to read it first.

It's All About Liquidity For The Banks

Liquidity is the buzz-word that central banks used to justify their policies of keeping short term rates at zero (give or take) percent and buying bonds from banks in return for giving them more of it. Central banks say their primary responsibility is to balance full employment with low inflation, but that’s just code for being able to keep the largest banks solvent in times of emergency by all means possible. This current emergency has lasted nearly seven years and counting.  

Here are my laws of liquidity behavior:

The first law of liquidity – when it is most needed, it will be least available.

The second law of liquidity – the easier it is to get, the less value it holds for the recipient.

The third law of liquidity – the harder it is to find, the greater its systemic cost.

Banks gain on multiple fronts from “accommodative” monetary policy with respect to their liquidity needs. First, they can borrow money at next to nothing. Second, they can hoard that extra cash under the guise of complying with capital reserve requirements and get brownie points for passing stress tests because they are holding the cash or high quality assets bought with the cash, that central banks provided them to begin with. Third, they can sell bonds they don’t want or need at full value to central banks, and afterwards mark similar bonds at higher levels than the market would otherwise value them.

This is all shell-game finance. It is why people should be diligent about... » Read more



Off The Cuff: Suddenly Queasy Markets Everywhere

Downside risk is flaring in China, Europe & the US
Thursday, July 2, 2015, 6:28 PM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Queasy Markets
    • Deflationary forces appear to have gained the upper hand
  • Big Trouble In Not-Little China
    • Suddenly, its stock and real estate markets are in violent correction
  • Greece And The Future Of Europe
    • Who is going to take the losses of a Grexit?
  • The Path To Collapse
    • Is Greece giving the rest of us a preview of what to expect?

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more


Jim Barber/Shutterstock

ALERT: Markets Are Highly Unstable, China Is Crashing

Our first alert in over a year
Monday, June 29, 2015, 4:41 PM

The multiple global bubbles in search of a pin may have found one in Greece.  The carnage there is clearly accelerating, and the central planners are straining mightily to get control back.

While the odds favor them doing so, the risk is very high that they may not and that we are now in the 'descent' phase that follows the inevitable ending of the 'virtuous' phase (if we can call it that) of the money-printing experiment.



What Awaits Us In The Future Of Higher Interest Rates

Having an action plan will be the key to preserving wealth
Friday, June 26, 2015, 12:53 PM

Executive Summary

  • Expect a bond market bloodbath as rates rise
  • Municipal, corporate and sovereign defaults will soon follow
  • Liquidity suffers as necessary goods prices rise, but securities prices fall
  • The new, nuclear risk of a derivatives market collapse

If you have not yet read Part 1: The Global Credit Market Is Now A Lit Powderkeg available free to all readers, please click here to read it first.

You may remember that what caused then Fed Chairman Paul Volcker to drive interest rates up in the late 1970’s was embedded inflationary expectations on the part of investors and the public at large. Volcker needed to break that inflationary mindset. Once inflationary expectations take hold in any system, they are very hard to reverse.

A huge advantage for Central Bankers being able to “print money” in very large magnitude in the current cycle has been that inflationary expectations have remained subdued. In fact, consumer prices as measured by government statistics (CPI) have been very low in recent years.

When Central Bankers started to print money, many were worried this currency debasement would lead to rampant inflation. Again, that has not happened for a very specific reason. For the heightened levels of inflation to sustainably take hold, wage inflation must be present. I've studied historical inflationary cycles and have not been surprised at outcomes in the current cycle in the least, as in the current cycle, continued labor market pressures have resulted in the lowest wage growth of any cycle in recent memory. But is this about to change at the margin?

The chart below shows us... » Read more



Off The Cuff: When The Bond Market Fails, Everything Will Fail With It

Why financial collapse is all about the credit markets
Thursday, June 25, 2015, 8:37 PM

In this week's Off the Cuff podcast, Chris and Brian Pretti discuss:

  • Bonds Are For Dough
    • The size of the risk in the credit market is staggering
  • The War On Cash
    • Will going cashless help the credit bubble live longer?
  • Greece & Derivatives
    • How a Grexit could trigger Armageddon
  • The End Of Confidence
    • When it arrives, the collapse will happen swiftly


The Price of Everything & The Value of Nothing

Is all we know in a bubble-driven market
Tuesday, June 23, 2015, 4:50 PM

My view is that the stock market is simply pegging itself to the idea that the central banks have backed themselves into a corner and that there’s no other option but to keep the liquidity spigots open. I cannot fault that view, as it has been right for the past 6 years.

However, it cannot be true forever. And we all know that a day of reckoning is out there somewhere.  » Read more


The Warning Indicators To Watch For Trouble In The Bond Market

The signals that will tell when the rout is on
Friday, June 19, 2015, 12:50 PM

Executive Summary

  • Liquidity is drying up
  • Volatility is returning
  • HFT has dramatically increased crash risk
  • The key takeaways for investors

If you have not yet read Part 1: Credit Market Warning available free to all readers, please click here to read it first.

Financial assets are worth what someone will pay for them.  A corollary of this is that you’d much rather be trying to buy or sell in markets that are deep and liquid.  Thin markets provide bad prices at best, and no bids or offers at worst.

Low trading volumes are worrisome because they are usually accompanied by higher volatility. And those two can easily become dance partners that whirl each other ever faster. 

There are numerous warning signs coming from all asset markets, but especially from the bond markets.

Low Liquidity

The issue of low liquidity really jumped out at me roughly a year ago with the news that the utterly broken Japanese government bond (JGB) market had gone an entire 36 hours without a single trade(!!).

Japan bond market liquidity dries up as BoJ holding crosses ¥200tn

Arp 15, 2015

The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.

The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.

Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.


Thus comes the law of unintended consequences.  The main reason for buying JGB’s by the Bank of Japan (BoJ) was to inject a lot of liquidity into ‘the system’ in hopes that the Japanese economy would take off.

While that may have happened to some (slight) extent what also happened was that ... » Read more



Off The Cuff: More On The War On Cash

Plus the growing threat of Greece & the bond markets
Thursday, June 18, 2015, 2:48 PM

In this week's Off the Cuff podcast, Chris and Charles Hugh Smith discuss:

  • The War On Cash
    • Why governments are so interested in a cashless society
  • Grexit
    • Why the EU power structure fears it
  • The Bond Bomb
    • This one will be for all the marbles
  • Too Many Risks
    • There's little gain to remaining long in this market

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more