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Wednesday, January 21, 2015

Michael Pento: Flocking Back into Hard Money Gold

Donetsk Terror Trauma: civilians living in fear for lives

Bank Of Japan "At Risk Of Losing Credibility"

Over the weekend, we asked rhetorically whether "The BoJ is The Next SNB?" after one BOJ official was overheard warning that "we have caused tremendous trouble for the financial industry," and many others growing anxious about continuing its massive purchases of government bonds and pressure from the financial industry is strengthening by the day "to scale back monetary easing soon." Overnight, it was none other than Goldman who reiterated precisely what we said, however when looking at the BOJ from the "other" angle - that of the central bank not doing enough to convince markets it will do everything in its power, i.e., print, until inflation is a "stable" 2%. 
Here is Goldman's Naohiko Baba with why the "BOJ at risk of losing credibility over its price commitment"
The Bank of Japan (BOJ) kept its monetary policy unchanged, as we expected, at the Monetary Policy Meeting on January 20-21. Two noteworthy points from Governor Kuroda’s subsequent press conference were as follows:

1. The BOJ released its interim assessment of the October Outlook Report at the MPM, and sharply lowered its core CPI outlook – for FY2014 to +0.9% from +1.2%, and for FY2015 to +1.0% from +1.7% – reflecting the recent slide in crude oil prices. However, the BOJ maintains its view that its 2% price stability target is likely to be achieved by around FY2015. 

2. The MPM did not discuss lowering the 10 bp interest rate on excess bank reserves, despite heightened expectations among foreign investors in particular ahead of the meeting.

We think the first point increases the risk of a loss of confidence in the BOJ. Like us, the BOJ expects a pickup in crude oil prices from midway through FY2015 and for this to result in renewed yoy core CPI growth. However, with the large downward revision to its core CPI outlook, the bank is more or less acknowledging a much lower possibility of achieving the 2% price stability target by around FY2015. Yet, at the press conference following the MPM, Governor Kuroda said he still held the view that 2% could be achieved by around FY2015. Domestic investors have been skeptical of the BOJ’s target from the outset, and now foreign investors are also beginning to question the BOJ’s logic and communication with the marketWe believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank.

With regard to the second point, we believe a thought process has taken place within the BOJ even if the latest MPM did not discuss lowering the rate. We think the bank has weighed up the costs and benefits of cutting the rate and ultimately concluded that 10 bp is necessary to maintain the existing quantitative/qualitative easing program under which it is effectively monetizing debt by purchasing close to 100% of newly issued JGBs. 

We expect the feasibility of the BOJ’s scenario to diminish over time, prompting the bank to take further easing action once it can no longer put off the inevitable, either in July 2015 (when it releases its interim assessment of the April Outlook Report) or when it publishes the October Outlook Report. In our opinion, it is getting to the point where further yen depreciation and stock market gains are the only mechanisms that might allow inflation to move nearer to the 2% price target. However, with the bank’s hands tied in terms of accelerating the pace of JGB purchases, it may search for suitable alternative financial assets to buy.
Well, there is always crude, and both Putin and Maduro (assuming there hasn't been a military coup in Venezuela in the interim) not to mention countless shale junk bond investors, will be delighted by that kind of "out of the box" thinking.
As for the BOJ, it suddenly finds itself in a no way out situation: damned if it continues QE, and damned if it doesn't. How long until the "market" begins discounting this, and refuses to wait until the JPY becomes the next CHF? Because as so many FX brokers and their clients found out the hard way - it is always better to close short positions when you can, not when you have to...
Credit to Zero Hedge

Iran and Hezbollah are planning 'imminent' joint invasion of Israel's northern Galilee region

Senior Iranian and Hezbollah figures killed in an airstrike in Syria this weekend were likely planning an 'imminent' attack on Israel, security sources have claimed.

Six Iranian army chiefs died alongside five Hezbollah militants after an Israeli helicopter fired rockets at a convoy in the Golan Heights region on Sunday.

Among those killed was Iranian General Mohammed Allahdadi, as well as commander Abu Ali Tabatabai, who is known to have worked with both Hezbollah and Iran.

Today Major General Eyal Ben Reuven, a former deputy head in the Israeli Defense Forces, accused the senior military figures of meeting to plot an attack on Israel.

Top Hezbollah and Iranian commanders killed in an Israeli airstrike on Sunday were meeting to discuss a plan to invade Galilee, according to a former Israeli general (pictured, Israel deploys troops today)

Major General Eyal Ben Reuven said that a 'high-level' and 'sophisticated' attack on northern Israel could be 'imminent', a week after Hezbollah's leader threatened to bring war to the region

He added that the commanders' decision to meet in Syria could mean that a 'high-level' and 'sophisticated' attack on Israel's northern border is 'imminent'.

Research group The Israel Project came to a similar conclusion, saying that the presence of Tabatabai 'probably indicates operations aimed at overrunning Israeli border towns.'

The warnings come just a week after Hassan Nasrallah, leader of Lebanon's Hezbollah, warned that the group 'is ready and prepared for a confrontation in the Galilee and beyond the Galilee.'

Jihad Mughniyeh (pictured), the son of a prominent Hezbollah leader, died alsongside Iranian General Mohammed Allahdadi on Sunday

Iran has also promised a 'crushing response' to the weekend strike, without laying out exactly what action will be taken.

General Mohammad Ali Jafari, head of Iran's Revolutionary Guards, said: 'These martyrdoms proved the need to stick with jihad. The Zionists must await ruinous thunderbolts.

'The Revolutionary Guards will fight to the end of the Zionist regime... We will not rest easy until this epitome of vice is totally deleted from the region's geopolitics.'

Israeli troops have been marshalled along the country's northern border, while an Iron Dome missile launcher has been deployed to destroy any incoming rockets.

Senior Iranian politicians are said to be incensed at the death of Allahdadi, which they confirmed yesterday, saying he had been 'martyred' in the name of his country.

Officials also denied that he had been planning any kind of attack, instead saying he had been in Syria to advise the government on how to tackle extremists such as Islamic State, who control much of the country's north.

Hezbollah said that Jihad Mughniyeh, the son of a prominent commander, and Mohammed Issa, who was responsible for the group's operations in Syria and Iraq, died alongside Tabatabai.

Jihad Mughniyeh was the son of Imad Mughniyeh, a senior Hezbollah figure killed in Damascus in 2008. Hezbollah accused Israel of assassinating him, but Israel has not claimed responsibility.

The latest strike, which Israel has also not officially accepted responsibility for, has seen tensions in the already volatile region come to a head.

Credit to Dailymail.co.uk


Swiss Shocker Triggers Gigantic Losses For Banks, Hedge Funds And Currency Traders

The absolutely stunning decision by the Swiss National Bank to decouple from the euro has triggered billions of dollars worth of losses all over the globe.  Citigroup and Deutsche Bank both say that their losses were somewhere in the neighborhood of 150 million dollars, a major hedge fund that had 830 million dollars in assets at the end of December has been forced to shut down, and several major global currency trading firms have announced that they are now insolvent.   And these are just the losses that we know about so far.  It will be many months before the full scope of the financial devastation caused by the Swiss National Bank is fully revealed.  But of course the same thing could be said about the crash in the price of oil that we have witnessed in recent weeks.  These two “black swan events” have set financial dominoes in motion all over the globe.  At this point we can only guess how bad the financial devastation will ultimately be.
But everyone agrees that it will be bad.  For example, one financial expert at Boston University says that he believes the losses caused by the Swiss National Bank decision will be in the billions of dollars
The losses will be in the billions — they are still being tallied,” said Mark T. Williams, an executive-in-residence at Boston University specializing in risk management. “They will range from large banks, brokers, hedge funds, mutual funds to currency speculators. There will be ripple effects throughout the financial system.”
Citigroup, the world’s biggest currencies dealer, lost more than $150 million at its trading desks, a person with knowledge of the matter said last week. Deutsche Bank lost $150 million and Barclays less than $100 million, people familiar with the events said, after the Swiss National Bank scrapped a three-year-old policy of capping its currency against the euro and the franc soared as much as 41 percent that day versus the euro. Spokesmen for the three banks declined to comment.
And actually, if the total losses from this crisis are only limited to the “billions” I think that we will be extremely fortunate.
As I mentioned above, a hedge fund that had 830 million dollars in assets at the end of December just completely imploded.  Everest Capital’s Global Fund had heavily bet against the Swiss franc, and as a result it now has lost “virtually all its money”
Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.
Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private.
This is how fast things can move in the financial marketplace when things start getting crazy.
It can seem like you are on top of the world one day, but just a short while later you can be filing for bankruptcy.
Consider what just happened to FXCM.  It is one of the largest retail currency trading firms on the entire planet, and the decision by the Swiss National Bank instantly created a 200 million dollar hole in the company that desperately needed to be filled…
The magnitude of the crisis for U.S. currency traders became clear Friday when New York-based FXCM, a publicly traded U.S. currency broker, and the largest so far to announce it was in financial trouble after suffering a 90-percent drop in the firm’s stock price, reported the firm would need a $200-$300 million bailout to prevent capital requirements from being breached. Highly leveraged currency traders, including retail customers, were unable to come up with sufficient capital to cover the losses suffered in their currency trading accounts when the Swiss franc surged.
Currency traders worldwide allowed to leverage their accounts 100:1, meaning the customer can bet $100 in the currency exchange markets for every $1.00 the customer has on deposit in its account, can result in huge gains from unexpected currency price fluctuations or massive and devastating losses, should the customer bet wrong.
Fortunately for FXCM, another company called Leucadia came riding to the rescue with a 300 million dollar loan.
But other currency trading firms were not so lucky.
For example, Alpari has already announced that it is going into insolvency
Retail broker Alpari UK filed for insolvency on Friday.
The move “caused by the SNB’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity,” Alpari, the shirt sponsor of English Premier League soccer club West Ham, said in a statement.
“This has resulted in the majority of clients sustaining losses which exceeded their account equity. Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm that it has entered into insolvency.”
And Alpari is far from alone.  Quite a few other smaller currency trading firms all over the world are in the exact same boat.
Unfortunately, this could potentially just be the beginning of the currency chaos.
All eyes are on the European Central Bank right now.  If a major round of quantitative easing is announced, that could unleash yet another wave of crippling losses for financial institutions.  The following is from a recent CNBC article
One of Europe’s most influential economists has warned that the quantitative easing measures seen being unveiled by the European Central Bank (ECB) this week could create deep market volatility, akin to what was seen after the Swiss National Bank abandoned its currency peg.
“There was so much capital flight in anticipation of the QE to Switzerland, that the Swiss central bank was unable to stem the tide, and there will be more effects of that sort,” the President of Germany’s Ifo Institute for Economic Research, Hans-Werner Sinn, told CNBC on Monday.
As I have written about previously, we are moving into a time of greatly increased financial volatility.  And when we start to see tremendous ups and downs in the financial world, that is a sign that a great crash is coming.  We witnessed this prior to the financial crisis of 2008, and now we are watching it happen again.
And this is not just happening in the United States.  Just check out what happened in China on Monday…
Chinese shares plunged about 8% Monday after the country’s securities regulator imposed margin trading curbs on several major brokerages, a sign that authorities are trying to rein in the market’s big gains. It was China’s largest drop in six years.
Sadly, most Americans have absolutely no idea what is coming.
They just trust that Barack Obama, Congress and the “experts” at the Federal Reserve have it all figured out.
So when the next great financial crisis does arrive, most people are going to be absolutely blindsided by it, even though anyone that is willing to look at the facts honestly should be able to see it steamrolling directly toward us.
Over the past couple of years, we have been blessed to experience a period of relative stability.
But that period of relative stability is now ending.
I hope that you are getting ready for what comes next.
Credit to Economc Collopse

Russia may send S-300 missile system to Iran

Russia might deliver a long-overdue S-300 air defense missile system to Iran, honoring a contract that was cancelled in 2010 following strong pressure from the West, Iranian and Russian media said on Tuesday.

Russian Defense Minister Sergei Shoigu is visiting Tehran and signed an agreement with Iranian Defense Minister Brigadier General Hossein Dehqan to boost cooperation, Iran's Fars semi-official news agency said.

S-300 missile sytem. (Photo: EPA)

Fars said the two countries would resolve problems with the delivery of the advanced missile system, while Russia's RIA state news confirmed the issue was once again under discussion.

"A step was taken in the direction of cooperation on the economy and arms technology, at least for such defensive systems such as the S-300 and S-400. Probably we will deliver them," RIA quoted Colonel General Leonid Ivashov as saying.

Ivashov is the former head of the defense minister's department of international cooperation. No further details were immediately available.

Dmitry Medvedev, then the Russian president, cancelled a contract to supply Tehran with the advanced missile system in 2010 in the wake of UN sanctions imposed on Iran over its disputed nuclear program.

The United States and Israel heavily lobbied Russia to block the missile sale, saying it could be used to shield Iran's nuclear facilities from possible future air strikes. Iran in turn has taken Russia to arbitration to finalize the sale.

Ivashov said that Russia's ties with Iran had strengthened recently due to Western sanctions that they are both now facing and added that the two countries were looking to expand their cooperation in other areas.

The S-300 advanced missiles have a 125-mile (200-km) range and Russia has stoked tensions with the West by trying to sell the system to other Middle Eastern countries, including Syria.

Credit to Ynetnews

Scientist fears return of ‘mini ice age’

NASHIK: The fewer sunspot activities on the Sun witnessed since the last two solar cycles might lead to a "mini ice age-like situation" in coming years, Shrinivas Aundhkar, the director of Mahatma Gandhi Mission, Centre for Astronomy and Space Technology, Nanded, said here on Tuesday.

"The sunspots that can be seen on the Sun have comparatively less temperature compared to other surfaces on it (Sun)," he said while addressing a gathering for a lecture, Get Ready for Little Ice Age, held as part of the Narendra Dabholkar lecture series.

Aundhkar, who has worked with scientists across the world on Sun-Earth connection, said, "The Sun undergoes two cycles that are described as maximum and minimum. The activity alternates every 11 years, and the period is termed as one solar cycle. At present, the Sun is undergoing the minimum phase, reducing global temperatures."

He said winter temperatures have dropped in the northern polar cap and is leading to severe winters. "This has also triggered the jet stream, which is active in the northern parts of the globe to shift in inter tropical climate zone like India. As a result, cold wind conditions were witnessed during the last two years. The unseasonal hailstorms in November and December are a result of the influence of the jet stream. This has also led to steady weakening of magnetic energy of the Sun, leading to mini ice age like situation," he said.

"The Sun, our energy source, goes through phases of violent (maximum phase) and quiet (minimum phase) activity every 11 years, which is called one solar cycle. The effects of minimum activity of a solar cycle are seen for about a year. However, it has been revealed that the minimum activity was seen for more than four years in the recently concluded solar cycle. Thus, it was the longest and quietest minimum phase in the past 100 years," the scientist said.

"The Earth may be heading towards a mini-ice age period, which is similar to what was observed in the 17th century. During the time, the sunspots on the Sun were absent. This led to a drop in northern hemisphere temperature by 2-3 degrees. The current scenario is almost same. Such climatic conditions might affect the agricultural pattern and health and trigger disasters in the worst scenario," he added.

Credit to Times of India

U.S. Government/Central Bankers Push Agenda, Ukraine Offensive Has Begun

Saxo Bank Warns "This Is The Endgame For Central Banks" checkmate

  • Why oh why do we trust central banks?
  • Central bankers are politicians' puppets
  • This is endgame for the central banks
The Swiss National Bank's removal of the franc's peg to the euro last week had far-reaching consequences because we were all taken by surprise. The fact that it would (and should) happen eventually was not lost on the market, but the SNB was as late as last week end talking tough and telling the market that the floor was an integral part of Swiss monetary policy – until it suddenly wasn't any more.
I fully understand the rationale for the move (Jakobsen: SNB move is rationality itself) but like most of the market I'm extremely disappointed in the SNB’s communication and handling of the issue, but that’s the bigger lesson: Why is it most people trust or bother to listen to central banks?
Major central banks claim to be independent, but they are totally under the control of politicians. Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s all well and good in principle until the economy spins out of control – at zero-bound growth and rates central banks and politicians becomes one in a survival mode where rules are broken and bent to fit an agenda of buying more time.
Just looks to the Eurozone crisis over the past eight years – if not in the letter of law, then in spirit, every single criterion of the EU treaty has been violated by the need to “keep the show on the road”. No, the conclusion has to be that there are no independent central banks anywhere! There are some who pretend to be, but not a single one operates in true independence.
cb hands tied
 Let's get real — central bankers aren't autonomous. Pic: Jakob Ammentorp Lund
That’s the reality of the moment. I would not be surprised to find that the Swiss Government overruled the SNB last week and the interesting question for this week is of course if the German government will overrule the Bundesbank on quantitative easing to save face for the Eurozone? Probably….
The new dimension of central banking is the “communications policy” which is not only the poorest policy but also only really a front for “talking the market into believing our dream” without any further action.
Look at the Federal Reserve forward-looking guidance: They are constantly over-optimistic on growth and inflation. Constantly. The joke doing the rounds is that to get the proper GDP and inflation forecast you merely take the Fed's own forecasts and deduct 100-150 bps from both growth and inflation targets andvoila! You have best track record over time.
Studies shows that the business cycle was less volatile before the Federal Reserves was born. The birth of the Fed meant leverage (gearing) which of course has resulted in bigger and bigger collapses of the economy, but with a trend of major crashes increasing in frequency: 1987 stock crash, 1992 ERM crisis, 1993 Mexico “Tequila crisis”, 1998 Asian crisis and the Russian default, 2000 NASDAQ bubble, 2008 stock market crash, and now 2015 SNB, ECB QE, Russia and China and what's the next crisis?
I don’t know, but clearly the world of finance and the flow of money is increasing its velocity meaning considerably more “volatility”. By the way, the only guarantee I issued at the end of 2014 looking into 2015 was:
main themes
 Where does this all bring me? The SNB's action was really the culmination of bigger and bigger moves at the end of a low volatility paradigm. I have been trading currencies for more than 30 years, Thursday’s move was single biggest move I have experienced in one market. But let’s look at other remarkable moves this year:
Oil has dropped more than 50%
 Source: Bloomberg
Russian ruble falls off a USD cliff

Credit to Zero Hedge

Military cyborg biker presented to Putin