Paraphrasing Bill Gross, Zerohedge Sums It Up In A Sentence

ZeroHedge | On a long enough timeline the survival rate for everyone drops to zero

And that's it folks: Europe will never submit to a federalist union controlled by Germany. And even if it does, it is not just Europe that is broken. It is the entire world.

Welcome to the "Survival Period"

The Golden Truth

My advice: We are moving closer and closer to what I call "survival period" -- the period where the magic of compounding turns into what will be the poison of compounding. This isn't a time for timing. This is a time for action. Reduce your exposure to bonds and all items that provide fixed interest rates. Similarly, reduce your exposure to stocks except the gold miners. Look to expand your positions in inflation-protected assets, especially gold. Those who are holding stocks in the hopes of the usual rebound are going to be terribly disappointed in the years ahead. This bear market is going to be unlike anything we've ever seen before. In the end my survival vehicle will be gold. I say again, timing is hopeless. Gold will have purchasing power and true wealth as almost everything else is destroyed by this unprecedented bear market. The US Government is now so loaded with ever-growing debt that it has become a mathematical freak. We return to different times, when rising interest rates will eat up the US government. With $55 trillion in assorted debts, the US is in no shape to deal with rising interest rates. We are in a state of reverse compounding, leading to inevitable bankruptcy on a massive scale.

SilverGoldSilver on Metals "Its pretty simple from here. They will print."

BF, SI, OWS - SilverGoldSilver

On to the metals.  Seems like we are going through a pretty tight and manipulated phase.  Its pretty simple from here.  They will print.  And when they do we are good to go again for another 6 months.  Then we will resume all this bullshit again all over.  Realize we are in a money printing/save the financial system cycle.  And the longer they do it, the more we will win in the long term.  So if you are to pray for anything, pray for printing.

BF, SI, OWS - SilverGoldSilver

User Comments Comment by strannick on 2011-11-26 21:40:22

If they print, its showtime! Gold/silver are starting to disengage from the Euro, and join the USD in safe haven land. After the next US-is-bankrupt headline blitz, the USD will be joining the Euro on the 'trash heap of history'.

BF, SI, OWS - SilverGoldSilver

Comment by bflowers on 2011-11-26 22:40:14 I guess

Several of my closest friends had a little meeting last week, and didn't invite me.. My partner from work told me about it.. I guess they are all a little worried about me and think I'm going over the edge and don't know reality anymore.. Lmao...

 

They are the ones who are over the edge and need an intervention - LOL!  I call that "Agent Smithing" - if you recognize it, it has a lot less power over you.  ~ CGT

As Predicted...Germany Printing Deutsche Marks

Germany printing Deutsche Marks, British Foreign Office warns of euro chaos « ArabianMoney

Germany has its printing presses working overtime but they are not printing euros but Deutsche Mark notes in case the eurozone sovereign debt crisis ends in a return to national currencies.

Argentina's Experience Should Minimize PIIGS fears of Default

"Because of everything Argentina has been through economically, they have an acute sense of what it means to be faced with huge debts, a future of deflation, a government that favours foreign banks over local citizens. Argentineans know the only way out of the crisis is some dramatic action.
Argentina has experienced 10 straight years of solid economic growth since it defaulted and abandoned its currency link with the US dollar. Every person I met said that this was the right thing to do. But interestingly they admit that they did not support the default and devaluation policy before it happened. Like many tens of thousands of Irish people, they could see that they couldn't pay all the debts and that they couldn't be competitive with a currency that pegs one to one with the dollar, but they were afraid to act. They were scared of the unknown. The entire establishment told them that if Argentina defaulted the country would never grow again.
In the event, Argentina defaulted and 70pc of their debts were wiped out. The currency fell dramatically. My friends, all of whom are local small business people in Mendoza, said the first two months were traumatic as no one knew what to do. But then the economy started to recover. Having had three years of recession from 1998 to 2002, the default happened in December 2002. By April, the economy started to grow and it has not stopped since.
Looking back, they all agreed, although they never wanted it to happen, that the default and the devaluation was the best thing for Argentina. The economy grew again and the people responded with a burst of entrepreneurial activity. They went back to basics. Exports took off and from having a perennial trade deficit, importing all sorts of finery with other people's money, Argentina began running a trade surplus. Agriculture and wine became competitive again and all the people I spoke to also said that there was a profound sense of national sovereignty when you stood up to foreign loan sharks which, in Argentina's case, was the IMF.
Argentina is clearly supportive of the dramatic course of action its government took in 2002, even though no one wanted to do it because everyone was scared of the future.
However, at a personal level, what about the millions of Argentineans who had dollar mortgages? Initially everyone with a mortgage panicked as the currency fell. They saw their mortgage repayments still in dollars but their pay in the new devalued peso. But then the government just cancelled all dollar mortgages and turned them into peso mortgages. So who paid? The foreign banks . The foreign banks who had made a fortune in Argentina lending in the boom, (sound familiar?) lost out.
And as for the local banks, didn't they get hammered? Well, yes they did, said all my friends (and one is a banker) -- "but they deserved it". The government just issued them with government bonds, IOUs to replace their dollars and they began lending pesos again. The football fans last night over a few beers said that it was all surprisingly straightforward, even though they worried that the world would end.
In classic fans' talk they compared economic problems to the problems of a team. If the team is losing and you know where the problem is either you fix it, change tactics and players or you continue to lose. Simple.
However, showing a keen knowledge of the realities of life inside a currency union as they had been for 10 years with the US, the local fans here told me that you can't do any of this without your own currency. Unless you can print money, backed by local government debt to reflate an economy suffering deflation and inject liquidity into an economy which has none, you are screwed. So they agreed that Ireland, Greece and Portugal have a choice: What are you going to do?
Argentineans have a much better understanding of economics and financial dilemmas than most citizens. The fans last night concluded that either we go for a massive default, together with the Greeks, Portuguese and others and stay in the euro or we leave the euro and default less spectacularly. They suggested that the price we should try to extract for staying in the euro would be a more significant default, because they understand the point is to improve your balance sheet so that you can start again. There is no point "half defaulting", they laughed; "it's like being half pregnant", quipped one fan.
As we left the Malvinas Stadium, I wasn't sure about taking advice from Argentinean football fans but the knowledge of our plight, the empathy and the sharpness of their analysis, was more impressive than much I have heard from so-called "experts" in Ireland. These people have lived through economic chaos which they never believed could happen to them and we are living through economic chaos which we never believed could happen to us.
That's why it's interesting to listen to them.
After all, the stuff you learn from experience can never be taught."
- David McWilliams
Irish Independent

Turd Tells You How to Communicate to the Simple Minded Ones You Will Face Tomorow - Thank You Turd!!!!

Absolute Advice For Relatives

If you're like The Turd, you will most likely get peppered tomorrow with questions from pseudo-intellectual relatives regarding the current world/market environment. Your over-educated yet under-informed cousin or brother-in-law will seek out your current "wisdom" on investing, politics, etc. He or she will then feign interest while you speak but you will feel certain that, in the end, they just don't "get it" as your absolute conviction overwhelms their status quo mindset. You could probably talk for hours about the failure of Keynesianism, Quantitative Easing, the criminal political class, the fallacy of TBTF, POMO and the PDs, the infallibility of gold, etc...but why even try? Your cousin's husband doesn't understand any of this anyway and your show of intellect will only make him feel threatened. He'll quickly tune you out and run off to the family room to watch the Cowboys.

So what do you talk about tomorrow when someone asks? What kind of simple advice can give someone to prepare them for what is certain to be a very challenging year ahead? I plan to dial it back a bit and talk about one thing...inflation. And not just any old, run-of-the mill 3% inflation but serious inflation. I'm talking 20-30% inflation. Milk to $5/gallon kind of stuff. That is what's coming and its a topic most folks can actually get their arms around. Even the fuzzy-headed new boyfriend of your divorcee sister understands inflation and he might even be able to understand why its coming if you explain it well. (This is a chance for you to show off some of your worldly knowledge, too.)

Most folks with a high school-level understanding of economics (this includes your Fed governors) only understand and recognize demand-pull inflation. This is the classic demand side, Phillips Curve inflation that says rising wages, employment and wealth cause economic expansion which leads to more money chasing a static amount of goods. New, excess demand "pulls" prices up and the result is price inflation. Pretty simple stuff. What is coming in 2011, however, is the forgotten beast of cost-push inflation. This type of price inflation is caused by producers and merchants being forced to pass along through higher prices the rising cost of inputs to their products. Consumers, particularly the lower-and-middle income, bear the brunt of the pain.  Your income isn't rising to keep pace with rising expenses and you get squeezed. Hard. And its not luxury items that are going up in price, its the staples. Bread, milk, gasoline, clothes, eggs, meat...the basics that no one can realistically live without. It's going to hurt and 2011 is going to be a mean year.

Why will input costs go up? Simple, they are all dollar-dominated and with our Fed now engaging in their final policy option, "QE to Infinity", all dollar-dominated assets are going up in price. Significantly. Your crazy uncle Henry may never take your advice to sell his stocks and buy precious metals but he just might take your advice to stock up now on essentials, before the prices skyrocket. Tell him that if he's going out to buy a new pair of pants, he should buy two. Tell your sister that instead of just buying her kids' winter coats for this year, she should buy coats for next year, too. Tell your cousin that instead of buying groceries every week to, instead, buy a whole dressed-out cow and put it in the freezer along with all the other dried and canned goods she can store.

Still, most crazy relatives won't listen but at least, come next Thanksgiving, they'll remember that you were right. One down side, however. Because you'll end up being the only member of the family that will have prepared and, most likely, the only one with affordable food to eat, you'll probably have to host everyone at your house next Thanksgiving. Oh well, there's a cure for that, too. Wine. Lots and lots of wine. Keep a couple of good Pinots on reserve and you'll be able to handle just about anybody.

"Every Province in China is Greece" - Finance Chair Larry Lang, Chinese University Hong Kong

Things that Make you go Hmmmm...

20 November 2011 p. 12
C hina’s economy has a reputaon for being strong and prosperous, but according to a well-known Chinese television personality the country’s Gross Domesc Product is going in reverse.Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that hedidn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brinkof bankruptcy. In his memorable formulaon: every province in China is Greece

Kyle Bass Behind YouTube's "unlisted" Velvet Rope VIP Area

Meet RT's Financial Markets Hottie

Silver Surge Soon: Various Tea Leaves Telling Me We Should Expect A Silver Surge Soon

 

Some Mish Quotes from the Second Half:  

"All fiat currencies are DOOMED!"

"Eurozone breakup is inevitable"

"Euro is destined to go back to parity with the US Dollar - that's a pretty significant haircut"

"Germany will let the PIIGS have the Euro"

"Euro itself is structurally unsound"

Currency unions, historically have never worked without fiscals union, and importantly, the Bond market says Eurozone won't be the first.

MF Global = Fraudulent Conveyance (pre bankruptcy bonuses)

"You can't legislate against stupidity, but you can take action against fraudulence"

"This goes beyond what Bernie Madoff did"

"People keep asking me: How do these economic illiterates get into positions of power?" - Mish's Poster Girl: Christina Romer

"They get in BECAUUUUSE, not in spite of the fact that they are incompetent.  They say the thing the government wants to hear."

follow him on Twitter @mishgea https://twitter.com/#!/MishGEA

"Being prepared while watching the inferno blazes soar higher and higher is the best we can all do" ~ ZH

Blast From The Past: Kyle Bass Was Right About Everything... Again | ZeroHedge

This weekend, the EU and the IMF effectively went all?in with a bad hand in the highest stakes game of financial poker ever played with the world. We believe the agreement released was nothing more than a Potemkin agreement in order to placate bond investors. In the end (and there will be a reckoning for many countries) nations, including the United States, need to dramatically cut spending and get their fiscal balances in order. Unfortunately, our elected officials are on the hamster wheel of electoral cycles and are not able to make tough decisions like this as they would likely not be re?elected without a “sea change” in public opinion towards government spending and deficits. We are therefore on the path to significant currency devaluation around the world that will likely result in significant inflation. We increased our holdings of gold on Monday morning as well as taking other steps to position ourselves for the most likely outcome over the next few years. Interestingly enough, based upon the market reaction in the last 36 hours, it seems the law of diminishing returns applies to bailouts as well

 

Blast From The Past: Kyle Bass Was Right About Everything... Again | ZeroHedge

"From now on, it seems everything will be deemed to be a liquidity crisis that will be met with more "bail?outs" and debt financed spending. This will eventually break traction in a violent way and facilitate severe inflation or even hyperinflation. The one thing the EU taught us this weekend is that paper money will be worth less (maybe much less) in the future."

Capital Controls = Panic = Gold/Silver Bullish

On Capital Flight and Forced Repatriation | ZeroHedge

We have a situation developing where the technocrats in Brussels are trying to institute capital controls. They have put a gun to the Swiss government to achieve their objectives. They will likely succeed. The fear of broader capital controls and more repatriation will spread like wildfire. The fact is, capital flight is a very reasonable response in our current environment. Capital controls that either stop or reverse it will undermine confidence and create a panic. Those officials in Brussels have no idea what they are unleashing.

Time to Get Over to Your Coin Dealer

As expected, JP Morgan continues to "sit on silver" while all the MF Global investors are locked out. Physical Silver is a SCREAMING BUY at these prices and you should be loading up the boat, the wagon and your pockets with the shiny metal!
 
I'm not saying they can't force the price further down but anything under $30 you won't be able to get your hands on any physical so waiting them out might not pay off.
 
I have revised one of the most popular articles on the Public Road for all you gold investors as we are at a prime spot to "make the switch" from gold to silver. The following outlines the reason WHY:
 
Melt the Witch (Revised!)
 
With the current silver/gold ratio over 54-1 you should be running down to your local coin shop with you gold coins, bars and fillings hoping and praying that they will swap all your gold for silver.
 
Here's some of the near term events that will bring silver to the forefront:
 
1) The CFTC is about to define the word "swap" which starts the 60 countdown to the Position Limit Rule.
 
2) The recent press release from the CFTC about the 3 year long silver investigation was a pre-announcement of charges being brought against JPM.
 
3) The resolution of the MF Global situation will bring silver longs back into the market that will try to "reestablish"  their long positions after being forced out by the Trustee (via JPM).
 
4) JP Morgan will have to turn into a BUYER to close out their over sized position in silver shorts within the 60 day Position Limit window.
 
All of these reasons for buying silver NOW are silver focused and may not necessarily help gold. Over the next few months we SHOULD see silver rightfully rocket past the gains in gold and streak towards a silver/gold ratio of 10-1 (for starters).
 
Time is short to "Change Your Financial Stars".
 
Go load up on physical silver!
 
May the Road you choose be the Right Road.
 
Bix Weir

CDS are now almost useless except as a fear gauge

Contagion: Default probabilities blow out right across Europe | Credit Writedowns

Contagion: Default probabilities blow out right across Europe MARKETS | EDWARD HARRISON | 14 NOVEMBER 2011 12:00 Look at this chart of the sovereign credit default swap wideners today. Every single name is European. The only one with a sub-10% default possibility is Sweden, and they are not in the euro zone. That tells you something, doesn’t it? I think Warren Buffett is on to something. I like CDS as a gauge of market distress. For example, Belgian, French and Spanish CDS are at record highs. That tells you contagion is getting worse. But these sovereign CDS are products that are dangerous though. Europe has already eviscerated the sovereign CDS market with its ‘non-default’ in Greece. The Council on Foreign Relations blog thinks we should kill sovereign CDS off. Imagine life insurance contracts that wouldn’t pay off if officials declared heart attacks to be “voluntary.” Welcome to the world of sovereign credit default swaps, or CDSs.  When the Greek debt deal was announced on October 27, the eurozone leadership insisted that the banks were taking a 50% write-down “voluntarily,” meaning that Greek CDS contracts would not be triggered.  This was done to protect official creditors like the ECB and IMF, to avoid rewarding speculators, and to prevent possible financial contagion.  In response, Greek CDS prices plunged 20 percentage points.  Policymakers didn’t seem to care, but they should.

CDS in general were called weapons of financial mass destruction for a reason.

Euro Reality In Simplest Terms

ZeroHedge | On a long enough timeline the survival rate for everyone drops to zero

Is there anything that hasn't already been said about the Eurozone's structural flaws and the absurdity of the half-baked "solutions" tossed together by its frenzied, fumbling leadership? Perhaps not, but we can fruitfully boil the mess down to a simple double-bind. The double-bind can be stated thusly: 1. If the European Central Bank (ECB) tries to save the private banks and bondholders by printing trillions of euros to buy up the mountain of hopelessly impaired sovereign bonds, then Germany will rebel and renounce the euro as an act of self-preservation. Germany knows that money-printing robs savers and the productive via the stealth theft of inflation, and its people will not stand idly by while their wealth is destroyed by ECB euro-printing. 2. If the ECB renounces money-printing, then the only economy solvent enough to fund the 3-trillion-euro bailout with actual cash is Germany, which will rebel against this debt-serfdom by renouncing the euro. There are only two paths, and they both lead to the same end-state: dissolution of the euro and the EU's monetary union.

Lessons from Argentina's economic collapse

The Silver Bear Cafe
Lessons from Argentina's economic collapse  (Editor's note: the article that follows is a very sobering account of the effect that the collapse of the Argentine economy (1999 - 2002) had on its citizens, as seen through the eyes of one of them. The economic collapse wiped out the middle class and raised the level of poverty to 57.5%. Central to the collapse was the implementation of neo-liberal policies which enabled the swindle of billions of dollars by foreign banks and corporations. Many of Argentina's assets and resources were shamefully plundered. Its financial system was even used for money laundering by Citibank, Credit Suisse, and JP Morgan (sound familar?). The net result was massive wealth transfers and the impoverishment of society which culminated in many deaths due to oppression and malnutrition. I am not sure the same thing is about to happen here, but I am sure that there is a distinct possibility that it might. Just food for thought - JSB)
DO READ ON......

Stevia! Brazil! Tonka Trucks for Grownups! - Ahh the Good Life.***

George Soros, Jim Rogers love Agriculture, Investors should be Sweet on Stevia (POT, STEVIA & CAT) : Small Stocks Radar
George Soros, Jim Rogers love Agriculture, Investors should be Sweet on Stevia (POT, STEVIA & CAT) Stevia Corp is an Agriculture Stock with Great Upside By Jonathan Yates Published: October 17, 2011 6:53:01 AM PDT Tweet 1 Print Email  0  Comment(s) - Post a Comment Rating StockHQ: POT $46.86 +$0.65 +1.41% CAT $96.13 +$3.93 +4.26% AGRO $8.74 +$0.13 +1.51% STEV $0.71 -$0.10 -12.35% Stocks in the agriculture sector such as Caterpillar Inc (NYSE: CAT), Potash Corporation of Sascathewan (NYSE: POT), Adecoagra SA (NASDAQ: AGRO) and Stevia Corp. (OB: STEVIA) have drawn support from impressive backers. As reported in previous articles on www.smallcapnetwork.com, earlier this year, legendary investor George Soros became the largest shareholder of Adecoagra, a Brazilian agriculture concern.  Soros owns more than 27 million shares, which represents an investment of close to $400 million.  This was detailed in a prevous article on www.smallcapnetwork.com.

***BRAZILIAN GIRLS SOLD SEPARATELY:  http://goo.gl/5uIfX

Argentina's Financial Collapse -- Documentary -- FULL MOVIE

At these levels, even a 4% drop in asset prices wipes out equity

Europe. Is. Finished. | ZeroHedge

super-leveraged banking system (26 to 1). At these levels, even a 4% drop in asset prices wipes out equity.

 

To wit, Spain, Portugal, and Italy have all relied heavily on the ECB to buy their debt at recent auctions. Germany actually just had a failed debt auction this morning.  And in this environment , these nations need to meet the following debt roll over obligations:

 

 

And this is just maturing debt that’s due in the near future: it doesn’t include unfunded liabilities.

 The Great debt Implosion will hit Europe within the next 14 months and likely much much sooner. When it dues, we will see numerous debt defaults and restructuring on both the corporate and sovereign levels. We’re also very likely going to see significant portions of the European banking system collapse “Lehman-style” along with subsequent HUGE losses of capital.

 

The impact of this will be global in nature. The EU, taken as a whole, is:

 

1)   The single largest economy in the world ($16.28 trillion)

2)   Is China’s largest trade partner

3)   Accounts for 21% of US exports

4)   Accounts for $121 billion worth of exports for South America

 

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding.

 

 

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

CME MARGIN DETAILS and ZH Analysis of the True Expected Consequences

CME Issues Clarification On Margins: To Usher More Risk, Less Liquidity In MF Aftermath | ZeroHedge

"The intent and effect of these changes is to decrease the size of any margin calls resulting from the bulk transfer of MF Global customers to new clearing members, not to increase them." So basically the CME is implicitly putting all of its existing and current clients and customers at further risk by onboarding the accounts of those clients who, like lemmings, held on to their MF Global accounts until after it was too late. Because while the lower Initial margin may apply to MF accounts, it will also apply to any Tom, Dick and Harry beginning Monday, who will suddenly see a 30% reduced gating threshold to put on a position. Any position, no matter how risky.

CME Issues Clarification On Margins: To Usher More Risk, Less Liquidity In MF Aftermath | ZeroHedge

Naturally, if enough people suddenly jump to put on risk, and the market flips and all new positions end up underwater, who will bail out CME accounts if, like MF, there is just not enough capital on the balance sheet? MF Global? That the CME has opted for this highly disturbing path is very troubling, and just as in Europe, where three months after the financial short selling ban, financials are trading lower than they have ever been, so the unintended consequences from this action will result in even greater stress to the system, as not a single local will leave any excess money in their account, and likely will force all specs to trade within a hair of triggering maintenance margin, due to fears of what may happen at the CME itself, now that is has implicitly onboarded moral hazard from the otherwise insolvent MF Global accounts. It also means the systemic liquidity is about to drop to even lower and more depressed levels.

CME FLIP-FLOPS FROM A MARGIN RAISE TO A CUT!!!

I told you it was about to get CRAZY out there...the CME has suddenly reversed the margin increase and CUT MARGINS!
The BATTLES behind the scenes are RAGING. Word coming to me is that the Good Guys shut down the coordinated move by the CME and Banking Cabal to slam silver on Monday morning. Who knows what the real story is but these back-to-back CME releases show just how chaotic it is behind closed doors at the CME.
They are looking foolish as they scramble to SURVIVE. I wonder that they announce next..maybe that THERE'S NO SILVER IN THE COMEX WAREHOUSES!
Is it time for a sing-a-long? :-)
Anything can happen next week as the gamesmanship rages on.
Stay safe...STAY OUT OF THEIR SYSTEM!
Bix Weir

Trader Dan Norcini Analyzes The Mother of All Margin Calls

Trader Dan's Market Views
We could be in for a very wild and unsettling round of price volatility starting Sunday evening. This is unprecedented in my own personal trading career so I am not certain what exactly we are going to get as a result of all this.
One last thing - it should be kept in mind that if the markets open strongly to the upside in general on a round of RISK ON trades, it is the SHORTS who are going to be hurt by the margin change. That would force additional short covering. The flip side to all this is that a great number of the transferred MF Global accounts are mainly on the long side of the market and the RISK OFF trades are what come on Sunday evening. Then the longs are in trouble... What a stinking mess caused by these ***&&$ at MF Global.
Trader Dan's Market Views
Traders who are not margined up to their teeth and have a sufficient cushion in their accounts, will be okay. Those who are not are going to get hurt on any adverse price action. What I mean by this is simple - if a trader is long and the market sells off, his paper losses or loss of profits will cut into his account balance perhaps bringing the total margin requirements of his active positions below his account balance. He is going to get a margin call that day if not Monday morning or even Sunday evening. Once "called", the money is going to have to be wired that day or the positions will be liquidated. Quite frankly, seeing this occuring is very unnerving as I wonder if there is more stress out there from the MF Global debacle than meets the eye. The Clearinghouses obviously want to make certain that they are well capitalized. My guess is that many of the accounts from MF Global that were transferred and have not gotten the ENTIRETY of their former account balances reinstated, are going to be forced into liquidating unless they have adequate capital on hand elsewhere that is easily accessible and very liquid.

Impending Portuguese Implosion?

Italian Bond Yields and Spreads at Euro-Record High; Massive and Growing 2-10 Inversion a Sign of Pending Portuguese Implosion

Italian Bond Yields and Spreads at Euro-Record High; Massive and Growing 2-10 Inversion a Sign of Pending Portuguese Implosion

Coming Confidence Crisis for Brokerage Industry!?! ~ Hypothecation/Rehypothecation

The Golden Truth

Once people understand what hypothecation/rehypothecation is - if they care about their money they will, that is - the MF situation could lead to a confidence crisis in the brokerage industry.

The Golden Truth

Almost everyone who opens a margineable brokerage account, from little guys to sophisticated hedge funds, knowingly or typically unknowingly also signs a hypothecation agreement, which enables the brokerage firm to take the securities in your margin account and re-pledge them as collateral to obtain bank financing for your margin account.  It looks like MF was taking this collateral and obtaining financing but using that money for other purposes - like investing in short term Greek sovereign paper paying 50% now that pays 100%, which means MF's investment was wiped out and now the bank that provided the funds for those investments has the customer securities as collateral for the MF trade and the customer is screwed.  Please note, I don't know for sure that is exactly what happened, but I'm 90% certain that is generically what was going at MF and why at least $700 million in customer cash and $1 billion in collateral is missing and possibly more.

The Golden Truth

I will say that based on the most recent news flowing out of Jeffries securities, if you have an account there I would move it.  Jeffries was downgraded by Egan-Jones recently to BBB-.  S&P has not budged.  Usually the ratings agencies are way behind the curve in downgrading financial firms.

The Golden Truth

Jeffries has an unsavory history and culture.   The current CEO originally worked as a junk bond trader directly for Michael Milken at Drexel Burnham.  Remember that saga?  A lot of ex-Drexel guys who didn't get thrown in jail ended up at Jeffries.  If you keep your brokerage account there just remember that "when you lie down with dogs..."

Jim Sinclair: Gold is headed now into the $2000s with EXTREME VIOLENCE

In The News Today

Dear Extended Family,

Gold is headed now into the $2000s with extreme violence.

Regards, 
Jim

http://www.jsmineset.com/

Europe has no choice but to pursue QE and print money to recapitalize European banks; Expected Result: Same as US QE

Jim Sinclair's Mineset

Europe has no choice but to pursue QE and print money to recapitalize European banks. In the final analysis, we do not see any other alternative to solve Europe’s problems than for Europe to engage in a lot of QE, and that is exactly what has been happening; from the UK, from Switzerland, and now from European Central Bank itself. Whether it comes from the various European central banks, some institution/fund backed by European taxpayers, or if it comes from individual countries who have to nationalize their banking systems, it will be QE. Others may quibble about the individual events on a day to day basis; we liken this to focusing on the trees in the forest. We are focused on the forest itself and we are confident that in the name of self interest, Europe will act as we suggest. In our view, there is no other alternative that any politician would find even remotely palatable.  Letting the banks fail is not an option.  Doing so would be the end of a prime minister’s political career, the end of their party’s influence, and possibly the end of their party’s role in government for years to come. Since it will be QE, we believe that the reaction of world markets will be much like the last time QE was introduced on a grand scale (by the U.S. in early 2009). At that time the U.S. did the QE; this time it will be Europe and European nations. After the U.S. QE in 2009, developed market stocks, emerging market stocks, commodities, commodity (Canadian, Australian, and Brazilian) currencies, and especially gold went up and stayed up for over a year. We expect a similar outcome this time.

Beware Coming Bull Trap in Equites: "Smart money knows that seasonality must coincide with accumulation." ~ De Groot

Eric De Groot

Be careful of easy logic. Smart money knows that seasonality must coincide with accumulation. They know that seasonality under the veil of distribution is a bull trap.

As long as distribution persists, the risk-on trade as defined by seasonal strength is vulnerable. That means unless the message of the market changes smart money will setup the weak hands by distributing into strength.

Germany Watch: A technical break in the German stock market will send a financial shockwave that will quickly engulf global markets

Eric De Groot

Germany Is The Epicenter of Unfolding Crisis As the economic leader of Europe, Germany is the epicenter of the debt crisis. Negative divergences with price and trend in the German stock market, similar to 2007, foreshadow problems ahead. The collective voice of concern, however, is easily drowned out by the parade of talking heads selling the plateau of prosperity provided by the miracle of perpetual bailouts, stimulus, and endless debt creation. Watch the epicenter close. The negative divergences illustrate distribution and a growing imbalance between price and trend energy. A technical break in the German stock market will send a financial shockwave that will quickly engulf global markets.

Deutsche Mark Watch: German Commentators Say Euro End Near

The World from Berlin: 'The Common Currency Endgame Has Begun' - SPIEGEL ONLINE - News - International

Greece has backed away from holding a referendum on the euro bailout package. This week's tumult, however, shows that Europe is still far away from solving the euro crisis. German editorialists on Friday warn that the worst-case scenario may arrive sooner rather than later.

Nearly $1.6 trillion in liquidity removed from broad circulation

 

Behind The Scenes European Panic As Interbank Liquidity At Worst Level Ever | ZeroHedge

 nearly $1.6 trillion in liquidity removed from broad circulation and parked with either just the Fed or the ECB. Translated: as goes democracy, so goes confidence.

ECB Deposit Facility Usage:

Combined European liquidity placed with "safe" institutions, ECB and Fed, and removed from broad circulation:

 

HOLY MOTHER OF ALL MARGIN CALLS ON MONDAY BATMAN!!!

CME Goes To Margin DefCon 1: Makes Maintenance Margin Equal To Initial For... Everything!?

Tyler Durden's picture



The most important news announcement of the day was not anything to came out of Cannes  (as nothing did), nor from Greece (the merry go round farce there continues unabated). No, it was a brief paragraph distributed by the CME long after everyone had gone home, and was already on their 3rd drink. It is critical, because not only is this announcement a direct consequence of what happened with MF Global several days ago, but because also it confirms one of our biggest concerns: systemic liquidity is non-existanet. We confirmed interbank liquidity in Europe was at an all time low earlier today, and can only assume the same is true for US banks. But what is very disturbing is that this is just as true at the exchange level, where it appears the aftermath of the MF collapse is just now being felt. What exactly was the announcement. Unless we are completely reading it incorrectly, it is nothing short of a margin call for tens if not hundreds of billions worth of product. Because as of close of business on November 4, today, the CME just made the maintenance margin, traditionally about 26% lower than the initial margin for specs, equal. For everything. Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America... and the world. Just like when Lehman blew up, it took 5 days for Money Markets to break. Is this unprecedented elimination in the distinction between initial and maintenance margin the post-MF equivalent of the first domino to fall this time around?
From the CME (source):

Gold ready to attack prior highs in the 1900’s

Gold ready to attack prior highs in the 1900’s | ZeroHedge

Gold ready to attack prior highs in the 1900’s

The Eurozone "DEAL" 101: Easy Trade for our Poor Country Pipster Cousins? - NOT!

Get Ready to Short the Euro Again | MadHedgeFundTrader on ZeroHedge
The move has triggered a “feel good” rally for the European currency, which has soared to the low $1.41’s. Herein lies the opportunity. Wait for this rally to exhaust itself, then sell the daylights out of the Euro. They next move on European interest rates has to be down. Now that the can has been kicked down the road on the debt problem the European Central Bank can now focus on the distressed economy.

Here are the details in summary:

*Capital for the European Financial Stability Fund will be increased to €1 trillion.
*Greek debt will be written down 50%, halving the country’s debt to GDP ratio in one fell swoop.
*European bank capital ratios must be raised from 6% to 9% by June next year. 
The package raises more questions than it answers. It delivers less than what the optimists were hoping for, but more than what the pessimists dreaded. You really have to wonder
Where are banks are going to raise $120 billion in private capital in this environment. As a result,
Asian sovereign debt funds will probably end up owning large stakes in European banks at fabulous discount prices.
While the cut in Greece’s debt load to only 120% of GDP is welcome, it offers no clear path on how the beleaguered country is going to cope with the heavy burden of the remaining balance.

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