Loss of control …A Very Interesting Finish/Start!…” The complete loss of control is certainly and mathematically coming.”
By Bill Holter
GoldSeek.com
Monday, 4 January 2016
2015 was a very interesting year in its own right, the way it finished was even more interesting. As the year progressed we saw global trade, GDP and earnings weaken significantly. We saw unprecedented rhetoric geopolitically while central banks and sovereign treasuries became suspect from both credibility and in some cases solvency points of view.
As the world turns on credit and credit alone, it would be a good exercise to make this the focal point. We know the Fed “mandated” higher rates just a couple of weeks before Christmas. I use the word “mandated” because it looks like they have raised rates but done nothing as far as withdrawing collateral and actually tightening credit conditions. We saw no evidence of any tightening through year end. Then the unbelievable happened, overnight rates collapsed to .12 basis points on Dec. 31.
Specifically I believe it is important to look at what happened in the U.S. credit markets on the final day of the year because it exposes two important areas. Rates collapsed well below the recently announced new range and the Fed had a record overnight auction. As a kicker, money market rates spiked.
Why is any of this important? First, it shows the Fed is not in the complete lockdown and control of markets but more importantly it shows how far financial institutions have gone to “portray” solvency. You see, they take a “snapshot” picture of their balance sheet at year end. The huge movements of capital and rates were these institutions getting the “bad stuff” off of their books in preparation for the public picture! Suffice it to say, the movements were quite obvious to all, internally and internationally everyone saw this and they “know”.
Shifting gears to the beginning of the year’s trading, “Happy New Year”! Over the weekend, Saudi Arabia and Iran held their version of a “beheadarama” tit for tat which ended in the Saudi embassy in Tehran burned to the ground and the Saudis then breaking diplomatic ties. This all occurred with the Saudis saying “we don’t care what the White House thinks of our actions”. Can anyone say bye bye petrodollar? In case you missed the obvious here, this is further evidence of a loss of control by Washington.
As the markets opened around the world, China took the lead and dropped 7% to trip their circuit breakers to close their markets for the day. Interestingly the bozos on CNBC are saying “7% isn’t that much, China will probably change their rules and become closer to U.S. circuit breakers of 20%” …
Really? Does anyone believe our markets would even open on day two after a 20% drop? Many readers were either too young or were not paying attention in 1987. The market crashed on a Monday but it was Tuesday that was the scariest day. It was the purchase of illiquid Value Line futures with something like $6 million that turned the markets when everything else was frozen. It was this event which created the plunge protection team and the belief in the “Fed put”. The problem is this, we became so addicted to “help” on a 24/7 basis since 2008 and “risk” now has less than zero premium in it. We wake up ever single day to “it can never happen again, the government will not allow it”.
The Rest…HERE
