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When Everybody Knows Something, Nobody Knows Anything

Re-examining the stability of the status quo
Tuesday, July 2, 2013, 7:43 PM

Once upon a time, everybody knew that the earth was flat.  Then they all knew that it was round, but at the center of the universe.  In 1929, everybody was sure that a new permanent prosperity had been discovered. The next decade proved how wrong that assumption was.

As is repeatedly borne out in life, when everybody knows something, nobody knows anything.  » Read more


Iceland - The Model the Bankers Would Like to Forget

The one successful victor over the banks
Friday, June 28, 2013, 2:27 AM

As the 2008 banking crisis unfolded, a lot of secret decisions were made that essentially boiled down to this: The bankers did not want to absorb the losses that resulted from their decisions.  The name of the game was who is going to eat the losses? And the early target, as always, was taxpayers. » Read more


Off the Cuff: What Comes Next

For stocks, bonds & gold
Thursday, June 27, 2013, 10:22 AM

In this week's Off the Cuff podcast, Adam and Charles discuss:

  • Market Turning Point?
    • Weakness seen post-"taper" rumors
  • Impact of Higher Interest Rates
    • Kryptonite for most asset classes
  • Gold & Silver's Terrible, No-Good, Very Bad Year
    • Will it get any better?

Where Will the Minsky Moment Occur?

Which country will start the next crisis?
Tuesday, June 25, 2013, 5:36 PM

Executive Summary

  • Spain: after tens of €billions in bailouts, its banks still need more
  • Germany: its largest banks are ridiculously levered
  • France: its banks are deteriorating fast with the sinking French economy
  • UK: bail-ins are now on the table

If you have not yet read Part I: Europe's Precarious Banks Will Determine the Future available free to all readers, please click here to read it first.

Spain and Bankia

The true state of the Spanish economy (i.e., it is in depression) should be uppermost in our minds when we consider recent developments at Bankia, the Spanish mortgage bank formed only thirty months ago out of the wreckage of Spain’s regional mortgage banks. Bankia underwent a subsequent bail-out only a year ago and has been a continuing disaster, as shown by the share price in the chart below.

Having fallen from an adjusted €106 to only 68 cents as recently as last November, the share price tells us that Bankia is simply bust. The new G20 bail-in rules cannot have helped Bankia hold on to its deposits; the only deposits left should be those of the small depositors prepared to rely on government insurance.

The Cyprus bail-in precedent has undoubtedly made Bankia’s position worse than it would otherwise be. At March 31st Bankia... » Read more


The Ride Down from Here

Proceed with extreme caution
Thursday, June 20, 2013, 3:56 PM

How This Might Play Out

When was the last time we saw everything selling off at the same time like this? 2008.

Instead of actual bank losses and other real things driving this liquidity-destroying event, it was mere words from the Fed that it just might not (emphasis on might) print money to feed to the markets forever.

We all knew that the free money couldn't last forever, but the markets reacted horribly the idea being spoken out loud by Bernanke nonetheless. All this tells us is that the markets were riding on hot-air money and were principally a liquidity-driven phenomenon that could only be 'saved' by the resumption of very high economic growth to (eventually) justify the extraordinarily high prices for equities and bonds.

This leaves the Fed, and other central banks, with just two choices. Print more, or let this thing fall apart... » Read more


Off the Cuff: Broken Markets

Response to the FMOC minutes reveals depth of instability
Thursday, June 20, 2013, 12:26 AM

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

  • Wedding Bells For Mish
    • Mike tied the knot last week
  • FOMC Freak-Out
    • Markets react nonsensically to the predictable
  • Where to From Here?
    • Down - and fast - seems most likely
  • The Case For Precious Metals
    • Current low prices just don't make sense

Living Two Lives

While we wait for the next big breakdown
Monday, June 17, 2013, 12:20 PM

At the Rowe seminar in 2013, when we asked the participants what they hoped to get out of the event, we heard something very different from prior years.  Where the first years of the seminar could be characterized by tactical requests such as I want to know how to store food and How and where do I buy gold?, this year we heard something very different.

One of the more pressing requests was I feel like I am living two lives; how do I manage this? » Read more


Off the Cuff: Interest Rates Getting 'Interesting'

Are central banks losing control?
Thursday, June 13, 2013, 9:12 PM

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

  • Interest Rates Breaking Out
    • The last thing the economy needs right now
  • Loose Lending = Bad Loans
    • Didn't we learn this lesson in 2008?
  • The Market vs. the Fed
    • Market forces always prevail in the end

Well, the volatility predicted in recent Off the Cuff podcasts has arrived on schedule. » Read more


The New Game-Changers for Gold & Silver

A new parade of reasons to expect higher prices soon
Wednesday, June 12, 2013, 9:19 PM

Executive Summary

  • Large players (and likely price manipulators) now have incentive for precious metals prices to rise
  • Investor demand for bullion remains at record highs
  • Competition for bullion from the East continues to heat up
  • Central banks buy more bullion as Comex inventories deplete
  • The key signs to know when it will be time to sell your gold & silver

If you have not yet read Part I: Is Gold at a Turning Point? available free to all readers, please click here to read it first.


Much has been written across the Web (including here at about whether or not the precious metals markets are manipulated in price by big players (major multi-national banks such as JP Morgan). Without delving into the many arguments on both the pro and con sides, Chris and I are of the opinion that sufficient data exists to convince a reasonable observer that price manipulation in the PM markets is indeed real, or, at the very least, highly probable. (For those remaining doubters out there, have a look at the evidence here, here, and here, and let us know if you have a rational, non-manipulative explanation.)

One of the most glaring signs of likely manipulation has been the massive short positions that a small number of large banks (JP Morgan being the most prominent among them) have held for many years, particularly in the silver market [measure positions as % of world silver production]. And not only were these unlimited positions allowed, but this cabal of banks was allowed to naked-sell PMs short (i.e., sell metal without actually owning it first). On the other side of the coin, the long side, position limits were enforced, and there was no similar ability to buy more metal than one could pay for. This imbalance of rules certainly provides the mechanism by which PM prices could be artificially jockeyed more easily to the downside. In this context, a decline from the high $40s to the low $20s looks more understandable.

Well, a very important part of this story has just shifted. The CFTC (Commodities Futures Trading Commission) publishes a monthly report illustrating the positions taken in Comex Futures Contracts

After nearly ten years of being net short in Comex gold futures, U.S. banks have been recently decreasing those short positions, and for the first time since 2004 (with the exception of a single month in 2008) they have flipped to become net long gold in May (see bottom chart below)... » Read more


Off the Cuff: Downhill from Here

Have we seen the market top?
Thursday, June 6, 2013, 12:04 PM

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

  • Have We Seen the Market Top?
    • Stocks & bonds: meet reality
  • Why Central Banks Are out of Options
    • No more magic left, just desperate measures
  • Japan's Growing Nightmare
    • A preview of coming attractions for developed economies