You have to wonder at the irrational behaviour of the market - and the media. Just two weeks after saying that everything's fine because 'consumer confidence is up" the New Zealand Herald says that people 'CONTINUE' to be pessimistic about the job market. What has changed in the last two weeks; it was just as apparent two weeks ago as today that the economy is in crisis and headed over the cliff - we've been saying it for months, others for years.
It is obvious that there is a lot of manipulation going on - the story a couple of weeks ago about the devaluation by the Swiss bank makes that obvious.
There is no doubt that the elite will try anything in their power to frighten, or drive people away from precious metals (to US treasuries) - this shows to the world that the emperor has no clothes.
Here are the comments by Michael Ruppert:
“They are trying to scare everyone out of gold. Don't fall for it. This is an orchestrated, manufactured panic into Treasurys. This is what the Fed wanted. Right about now the financial elites are likely buying all the gold they can get their hands on. Gold's big loss today was probably a result of a direct, intentional manipulation and weaker fish liquidating gold positions to cover shorts and margin calls. Don't let gold distract you and don't fall for this obvious ploy.....
Lloyd's is deliberately triggering a banking collapse. And Mohammed El Arian is one of the big players now running around screaming panic, along with the Bernank, Soros...
Yes, this is collapse. But do not run in the directions you're being pointed. This is theater and we do not yet see the full battle plan. -- I have no sympathy for anyone still in the markets.
The next days will be extremely turbulent. “. -- MCR
Global Meltdown: Investors Are Dumping Nearly Everything
Thursday, 22 Sep 2011 | 12:16 PM ET
With no solution in sight for Europe and new fears of a global recession, investors dumped stocks and commodities and ran to the safety of U.S. Treasurys.
Treasury yields , as a result, slipped to historic lows with the 10-year yielding 1.75 percent and the 30-year at 2.86 percent.
The dollar was also a beneficiary of a massive fear trade that sent U.S. stocks sharply lower, on the heels of steep sell-offs in equities markets around the globe.
The worst performing stock market sectors mirrored the sell-off in global commodities markets, with materials down 4.6 percent and energy stocks down 4.1 percent.
Copper, hit by concerns of a Chinese slowdown, tumbled 7 percent to a 1-year low. Gold, usually a safety play, was sold into the maelstrom as investors raised cash. The euro [EUR=X 1.3496 0.0036 (+0.27%) ], broke below 1.35, a recent bottom of its range. It was trading in the 1.346 area, an eight-month low against the dollar. The dollar index [.DXY 78.50 0.05 (+0.06%) ] was 1.4 percent higher.
"People are finding it really isn't gold. It isn't precious metals. It's not currencies. U.S. Treasurys are where people are flocking to at a time of extreme concern about risk, and we continue to see Treasurys continue to get bid up," said Zane Brown, fixed income strategist at Lord Abbett.
The selling in risk assets picked up momentum after the Fed's statement Wednesday, in which it characterized risks to the economy as "significant" and noted that "strains in global financial markets" (or Europe) could be a catalyst. Then overnight, a preliminary China manufacturing data showed moderating growth.
The Fed unveiled the much anticipated "Operation Twist" program in an effort to drive down rates. The program got a lukewarm reception even though the Fed surprised markets with a plan to also buy mortgage securities.
The Fed intends to swap $400 billion in shorter dated Treasurys for the same amount in the 6-year to 30-year range. For the most part, traders worry the "twist" will do little to help the struggling economy.
"The Fed will have to go on a publicity tour over the next few weeks, coming out and stating what is the metric by which they will judge this as a success or failure," said Kevin Ferry of Cronus Futures.
"The metrics we look at—the financial conditions index—it's worse today," Ferry said. Spreads on a whole range of credit market indicators widened, including investment grade corporates, emerging market sovereigns, high-yield corporates, and municipal bonds.
Brown said he does not see the U.S. falling into recession , as the markets fear.
"The combination of consumers spending what they can, durable goods improving just at the margin, exports improving just at the margin and what the Fed does to promote lending should help us avoid a recession," he said. Brown said the Fed may spur some increase in bank lending, driving some economic activity.
"The activity on the part of the Fed is really going to make it difficult for banks to make money unless they start lending. That's what the Fed hopes will happen. Their rationale for doing this is to promote risk taking," he said.
The lack of resolution on Europe , however, remains the biggest culprit as investors worry the exposure of European banks to the sovereign crisis will kick off a global banking crisis. The EU, IMF and European Central Bank put off until October to determine what will be done about the next payment to Greece, without which it will default. Markets have been disappointed with the lack of a bigger plan of action from European leaders.
"I think it's about the lack of leadership anywhere in the world. We're seriously distressed about the lack of leadership and constant squabbling in Washington," Brown said.
The animosity between political parties was once more in the headlines Thursday as the House defeated a spending billi that would keep the government running. Republican majority leader Rep. John Boehner said he expects the bill to pass and blamed Democrats.
Third Biggest Weekly DJIA Drop In History
21 September, 2011
A dearth of knife-catchers and bottom-callers suggests that our views on a broad swathe of investors being caught unhedged and offside by Bernanke's relative inaction was correct. By the look of today's huge selloff, investors will become increasingly aware of our recent post on the difference (risks) between owning stocks and bonds.
The equity market remains a market in chaos as the following charts show. We can only assume they must be extremely good at discounting whatever it is that talking-heads believe on a tick-by-tick basis - just look at the flip-flopping in the last two months (and in 2008/09).
Private sector slowdown heightens recession fears
(Reuters) - Private sector business activity in Europe and China declined sharply this month, and new claims for U.S. jobless benefits remained high, underlining fears that the global economy could lapse back into recession.
The euro zone's dominant service sector saw a shock contraction in September, its first in two years. Its manufacturing sector, which drove most of the bloc's recovery, shrank for the second month running, surveys showed on Thursday. For details, see
In the United States, new claims for jobless benefits fell last week, but the decrease was not enough to alleviate recession worries.
"This just adds to the plethora of bad news in recent weeks, and it is not good for the outlook," said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.
Data from China showed once-booming manufacturing contracted for a third consecutive month, suggesting the world's No. 2 economy may not be able to provide much of a counterweight to slowdowns in Western economies.
Lloyd’s of London Pulls Deposits From Banks on Debt Crisis
21 September, 2011
Lloyds of London concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution.
“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”
EL-ERIAN WARNS: 'These Are All The Signs Of An Institutional Run On French Banks'
21 September, 2011
This is not helping French bank stocks today.
21 September, 2011
This is not helping French bank stocks today.
PIMCO's Mohammed El-Erian has a dramatic post up at FT on the various signs of trouble in French bank land.
You have reports of banks not trading with French banks. You have equity prices at 50-% of books, and stories about CEOs going around the world for cash.
Here's the money quote:
“These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion. Retail depositors would get edgy and be tempted to follow trading and institutional clients through the exit doors. Europe would thus be thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession, and significantly worsens the outlook for the global economy.”
If Europe doesn't fix this fast, all hell could break loose.
IMF chief tells Europe: you must bail out the banks again
22 September, 2011
Christine Lagarde, the managing director of the International Monetary Fund, urged Europe's leaders to bail out their fragile banks, as the boss of the eurozone's biggest bank, BNP Paribas, rejected fears that the financial sector was "in peril".
Addressing journalists in Washington at the opening of the IMF's annual meeting, Lagarde said that Europe must tackle "this twin problem of sovereign debt and the need to strengthen capital buffers".
She said: "It is critical that to fuel growth, banks be in a position to finance the economy, to finance enterprises, to finance households, to finance local governments. To do that they need to have the balance sheet that will actually support credit to the economy."