The Fears Are Grossly Unwarranted; Gold Will Bottom Soon

If we were to move the discussion over to Deutsche Bank and their $50t in notional value derivatives book, I’d tell you there is much to fear. But the whole idea that the Fed, ECB and BOJ will all of a sudden stop propping up markets, in favor of tight monetary policy is so absurd — it borders on the delusional. I don’t know how these people are able to carry on these discussions on the teevee. I wouldn’t be able to do it for more than a minute, without having a Tourette’s style cursing outburst — accompanied by extreme acts of violence.

Gold is a buy here, even though it looks horrendous. The technicals are dreadful. The sellers are piling in and the shorts are vigorous. It has been a losing position of mine, almost immediately after buying them. But I am sticking with them, as part of an asset allocation programme, because it’s my belief that central banks cannot stop demeaning themselves or the monetary base without causing massive dislocations in the marketplace.

In other words, if they hiked rates and the ECB ceased their QE programmes, the markets would get fucked so hard and so fast, the losses I’d endure in GLD would be readily offset by both my bond and FCX short positions — with ease.

Timing bottoms is another ridiculous adventure, so don’t expect a hooker with cocaine at your front door tomorrow morning.

Here’s the predictive oscillator in Exodus. New lows. It’s worth noting, GLD isn’t oversold yet on out 12 mo algorithm so far. And, today’s drop in GLD was the 13th largest since 2009. Looking back, it reminded me of the drop on December the 14th, 2011.

Admittedly, there’s an aspect of schadenfreude on behalf of CNBC here — inviting Wall Street’s poster child for gold on a day that it’s being destroyed. Nevertheless, Schiff presses on, relentlessly, in robotic fashion — discussing topics that are near and dear to him, such as Federal Reserve chicanery, a rigged market and faux recovery, and lastly, the prospect of the Fed doing ‘what they really want to do’: enacting a negative rate policy.

It’s all fair play on the SS Titanic, whether it’s a real vessel or not is immaterial. As long as the idea of it lives, uncertainty and men like Schiff get to scare the shit out of people on a regular basis.

There are several things weighing on the precious minds of investors. First is BREXIT. Then it’s the specter of a laughable Fed interest rate hike. On December the 4th, 2016, the people of Italy get to vote on whether to say ciao to the EU or not. And, lastly, European QE is scheduled to conclude in March.

In March of 2017, the losers at the ECB will end their Frankenstonian experiment in the debt markets — paving the way for a blow out in yields for the PIGS (Portugal, Italy, Greece and Spain).

“QE is due to run until March 2017, and the most likely outcome to us is that it goes on for at least another six months at 80 billion euros per month after that,” said Marchel Alexandrovich, senior European economist at Jefferies International Ltd. in London. “Later in 2017, the ECB could think about tapering, and say try to wind down the program in March 2018, but these are hypothetical exit strategies, not something the ECB will likely implement for a while. Ultimately, the decision will be driven by the outlook for inflation.”

While the ECB’s final decision will depend on the euro area’s economic outlook, it will also be affected by the success of attempts to address a scarcity of assets to buy. The Governing Council has tasked its committees with considering adjustments to QE, such as loosening self-imposed rules that make some bonds ineligible. The next policy meetings are scheduled for Oct. 20, Dec. 8, Jan. 19 and March 9.

Even when QE finishes, the ECB’s balance sheet won’t shrink immediately. The central bank has already committed to reinvest the cash from maturing bonds. That means the stimulus effect will be maintained until the end of 2020, Dutch central bank governor Klaas Knot said last month.

I find it very hard to believe Portuguese bond wills remain low yielding after QE ends. The whole idea around QE was to rig the rates that were diverging from Germany, in an effort to save the union. All of this might be moot, if in fact the Italians vote to leave on December the 4th.

The fear of this gigantic tit being stripped away from markets is having an onerous effect on stocks and the precious metals, with the Dow off by 120 and silver cascading lower by 5.5%. Market breadth stands at 28% for the day, so the selling isn’t isolated to just a few sectors. But, for the most part, the serious damage has been cordoned off in rate sensitive industries, like utilities, REITs, gold and big dividend payers.

Ridiculously, bonds are selling off aggressively — due to comments by a non-voting Fed member who is calling for a most obscene 100bps hike.

And then there’s the issue of having to unwind the whole thing.

This is low, even for Bill. It’s caused by hubris. By violently rebuking Obamacare in this manner means the Clinton’s don’t need or want Obama’s help. Moreover, I think it speaks volumes as to their hatred for Obama, going after the poor Manchurian candidates signature legacy building piece of legislation like this. So shameful and also refreshingly truthful. Bill is a master politician, in addition to being a well versed rapist, apparently.

Bill Clinton slams ObamaCare as "craziest thing in the world" https://t.co/wiede3Jbxh pic.twitter.com/NkBFAmLYqr

— New York Post (@nypost) October 4, 2016

SHOTS FIRED.

A calamity is underway in the gold markets — following super hawkish comments out of a meaningless bench warmer at the Fed — who said he wanted to go fucking nuts and hike by 100bps.

Traders took this cocaine talk seriously and sold the shit out of gold and purchased dollars. Gold is off by more than 2% now.

Comically, the chances of a Fed hike in December are basically unchanged, aside from the fact that someone is betting small that Yellen might lose her mind and hike by 50bps. The chances of that happening is 7.7% — according to recent data.

Naturally, this is cause for alarm amongst most literary circles.

As you were.

The recent surge in WTI was predicated upon a proposed production cut amongst thieves  — who have a long rich history of backstabbing one another.

At the end of the day, prices will tell the story. All of the rhetrotic about an oversupplied market is subterfuge and meaningless drivel when the prices for said market are explicitly rigged. Notice a theme here?

OPEC crude production rose to a record in September, according to a Bloomberg survey, driven by returning output from Libya and Nigeria, members who will likely be exempt from last week’s deal to cut supply.

Overall production from the Organization of Petroleum Exporting Countries increased by 170,000 barrels a day from the previous month to 33.75 million barrels a day, the survey of analysts, oil companies and ship-tracking data showed. Nigeria and Libya added a combined 190,000 barrels a day which compensated for a drop in output from Saudi Arabia and Angola.

Libya will reach 600,000 barrels a day by the end of this month, according to Ibrahim Al-Awami, head of Libya’s National Oil Corp.’s oil measurement department. The country with Africa’s largest crude reserves produced an average of 340,000 barrels a day in September, up from 260,000 in August.

Nigeria increased production by 7.9 percent to 1.5 million barrels a day. The returning barrels came as a delivery halt was lifted on Royal Dutch Shell Plc’s Bonny Light stream early last month. Bonny Light was one of four Nigerian grades under force majeure — a legal clause that allows companies to halt shipments without breaching contracts — for reasons including attacks by militants and saboteurs who seek to thwart export-pipeline operations absent a share of the revenues.

Iran’s production rose by 10,000 barrels a day to 3.63 million barrels a day. The rapid increase in output that followed the easing of sanctions in January has slowed in recent months, as production has neared pre-sanctions levels.

Oil output in Saudi Arabia — the world’s biggest crude exporter — dropped by 60,000 barrels a day as temperatures retreated from mid-summer highs, triggering a drop in domestic air conditioning usage. Angolan production dipped 40,000 barrels a day.

The next time someone tells you supply is coming off line and how the lower crude prices have taken a lot of barrels off the market, remember what you read today. Far too often we let these mongrels (extra Gross) get away with telling lies. These people should be captured, tortured, and then killed. I don’t have patience for false tales and sophists. The time has come for wanton reductions in the population — starting with OPEC production fibbers.

I’ve never seen  a Fed throw out so many mixed signals. Just yesterday Fed’s Dudley warned about hiking rates. Today, Fed’s Lacker is talking so much shit, it’s almost unbelievable. Seriously, Lacker is calling for a 1994, Greenspan style, attack on rates — all the way up to 1.5%. It’s as if this man is unable to see how much debt we have and how our counterparts in Europe are undergoing significant easing of monetary policy.

Hey fucked face, you can’t hike rates by 100bps because you want to be Greenspan.

“While inflation pressures may seem a distant and theoretical concern right now, prudent preemptive action can help us avoid the hard-to-predict emergence of a situation that requires more drastic action after the fact,” Lacker said in a speech in Charleston, West Virginia.

“This preemptive action was successful and inflation continued to move lower…one could argue that the Fed’s preemptive moves in 1994 laid the foundation for the price stability we’ve enjoyed over the last 20-plus years,” Lacker said.

In his speech, he said the Fed was close to its targets of full employment and 2% inflation. As a result, the current target range for the federal funds rates “is extremely low” and should be 1.5% or higher.

Lacker said he expected the economy to rebound after its lackluster 1.1% growth rate in the first half of 2016, led by “solid growth in consumer outlays.” Business investment should also pickup later this year, he said.

This is truly delusional thinking, dangerous even. As such, the dollar is raging higher by 0.4% v the euro and gold is getting gobsmacked — lower by 1.2%.

That places gold at 3mo lows, below the $1,300 mark. As I mentioned yesterday, the gold miners now sport the worst technicals for the entire year. This is the season for a weaker gold market and I say this as a gold long. Perhaps this is the shakeout necessary that can put in a bottom.

In his latest treastise against negative rate policies, B. Gross likened the environment to a Vegas casino — as it pertains to credit and how it perverts everything.

“Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today’s highly levered world,” Gross said in his latest Investment Outlook titled “Doubling Down.”

“At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives,” Gross said.

“A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth,” Gross said.

He added: “Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation.”

All told, Gross said central bankers have fostered a casino-like atmosphere that present “a Hobson’s Choice, or perhaps a more damaging Sophie’s Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin’ like mongrel dogs for tidbits of return at the zero bound. This cannot end well.”

Similarly, I can relate to good olde Bill’s prognostications, as  I’ve been predicting a fleeting doom since December of last year. The prevailing wisdom had been that central banks had overstepped their boundaries and their schemes, once laid bare, would result in massive FX dislocations — which in turn would cause EM to implode and contagion spread. This occurred in early 2016, but was halted after the Fed indicated they were just kidding about hiking rates and markets took solace in easy monetary policy.

Bull markets are difficult to stop and a fool’s errand to short with regularity. If you’re comfortable applying risk to your portfolios and have proverbial lines in the sand from which you can reduce exposure to markets, in the event of a pullback, go crazy and buy stocks. I’ve said this here on numerous occasions. Personally, I’ve been investing for over 25 years in markets, more active than anyone I’ve ever known. I’ve played the craziest tapes and made plenty of money doing it. I’m not doing that in 2016, after retiring from money management and deciding to only trade Exodus signals.

The cause that I’ve found a spirited purpose in is to expose the corrupt nature of the central banks and policy makers — using iBC as my bullhorn. I’ve found there’s a greater purpose to life than simply nailing the next trade. Maybe my philosophy on life will change in the future. But for now, that’s how I feel.

In what can only be described as the greatest achievement in internet trolling history, Wikileaks founder, Julian Assange, fucked with the world — luring them into a press conference for months — only to say ‘we don’t release documents at 3am.’

In other words, he’s not going to release any damning information before the elections.

In this Wikileaks show of sheer and utter wasteful rot, several soft spoken ladies and men carried on for a few hours — speaking to the limitless virtues of Wikileaks, in addition to the unfortunate fact that Julian has been stowed away in an Ecuadorian embassy for five years eating ceviche, in an effort to escape the long, jagged, arm of the US lawman.

Consequently, we’ve all been rickrolled. It’s time for us to go back to Hillary on the verge of brain collapse and her spine cracking in half due to some mysterious ailment that is sure to buoy the Trump truck all the way to the fucking White House.

It’d be so god damned funny if I weren’t so god damned tired.

I’ll be providing updates as the information gets filtered and processed through the appropriate channels. In the meantime, BEHOLD and watch the event live streamed here.