http://www.gold-eagle.com/article/flock-black-swans-june?utm_source=Gold+Eagle+Email+Newsletter&utm_campaign=119c68b906-RSS_MON&utm_medium=email&utm_term=0_654d25a6f9-119c68b906-98163785
A Flock Of Black Swans In June?
Very soon
we will be entering the month of June. Normally June is the time of
year in the northern hemisphere when people think of picnics, parks,
water sports and the outdoors. It is a time where plans are made for
vacation, rest and relaxation. This year may be a little bit
different. I say "different" because there is a plethora of converging
events, any single one of them with the ability to take the financial
markets down to their knees!
Let's
first list the events (which may not even be all inclusive because I
either forgot something or am unaware of). What I see converging in
June is as follows; the Austrian mortgage banks and banking sector,
Greece, Ukraine, India, Russian sanctions, a Russian/Chinese
announcement, the "very secret" TPP, and let's not forget the second
largest gold expiration on COMEX.
Since
we know so little about the TPP (Trans Pacific Partnership), let's
start with this one. We know so little about it because it is being
negotiated in secrecy. So "secret" in fact, anyone who gets to see what
is written so far is threatened with jail time if they divulge anything about it.
This harks back to Obamacare when Nancy Pelosi once giggled like a
little school girl and said "we have to pass it to see what's in it!".
Fast forward and yes, we now know what was in it, a healthcare industry
in turmoil, higher premiums and a "tax" if you don't participate...
Going all the way back to NAFTA, none of these deals has been "good" for
the American worker, one can only imagine how deafening that "giant
sucking sound" will be that Ross Perot first heard in 1991? Not even
sure how this is possible, our legislative process has been
kidnapped with no ransom even requested. If this masterpiece gets
unveiled in June, a wonder as to market reaction?
Next
there is the Austrian mortgage bank Hypo Alpe Adria, will they make
their smallish payment of 500 million euros or will they start a chain
reaction? If you recall, this pinch came about when the Swiss de pegged
the franc and revalued some 20-30% higher within 10 minutes, in many
cases it made the loans in Swiss francs worth more than the underlying
properties themselves. The southern province of Carinthia has already
backed away from pledges previously made by simply saying "we can't
pay". An important understanding is how all of these banks ...own each
others debt. In other words, the "cross ownership" of debt means that
when one goes down it will act as a hit to many of the other's
portfolios. While this is not a huge trigger, all of Eastern Europe can
and will be affected by what originated from the Swiss de pegging the
franc from the Euro. With the system as illiquid as it is, there is no
telling how far this one could reverberate?
On
to Greece, they have already raided pension funds and sequestered local
monies, June 5th is the deadline according to their finance minister.
They owe 320 billion euros, they do not have the money to pay nor do
they have a printing press to create it. The only way out is to borrow
more ...or default and fall into the open arms of Russia and China. The
latter seems most likely to me. Greece is a natural trading partner
with Russia and does sit along the "old silk road", moving away from the
U.S. and even the Eurozone seems a natural. Please remember the big
"nut" here is not the 320 billion euros, it is the CDS written in
multiples on their debt AND the interest rate swaps in existence, these
are in the TRILLIONS, not chickenfeed in an already illiquid world!
Logically,
the next one to segue into is Russia and the NATO sanctions due to
expire ...in June. If a vote were to be taken today, would the
sanctions be re imposed? Would Germany vote for them? Will Greece vote
for them if they are still a member of NATO by June? Please understand
the relationship between Mrs. Merkel and Mr. Putin, they "used to" talk
on the phone daily ...until the NSA spying revelations of last year.
Will Mrs. Merkel go for more sanctions? What will she do about further
aid to Greece. Greece has the ability to ignite many things,
financially and politically all bad for the West.
Moving
along, let's look at Ukraine. The IMF is seeking a restructuring (read
haircut) on $10 billion worth of Ukrainian debt with private holders.
This the IMF says is necessary before another aid package of $40 billion
is approved http://www.reuters.com/article/2015/04/14/us-ukraine-crisis-imf-idUSKBN0N50MV20150414 .
The "haircuts" requested are in the neighborhood of 40-50%, will this
one fly? Let's not forget, Russia lent $3 billion to Ukraine in late
2013, I wouldn't bet they will be accepting haircuts any time soon. In
fact, wouldn't it behoove Russia to watch Ukraine default ...and further
pressure the financial system of the West? Interestingly, John Kerry
just met over the weekend with Russian minister Lavrov, what exactly did
they talk about? If I had to speculate, my guess would be the U.S. has
just walked away from this pink elephant. But why? Why would the U.S.
walk away now?
Again,
further speculation but it seems to me quite odd that Russia would
announce "Chinese gold holdings" of 30,000 tons via Pravda. To rehash
this, would Pravda have released this article without Moscow's
permission? Would Moscow have given permission without the approval
from Beijing? Was Mr. Kerry/Obama informed that China will announce
this 30,000 ton hoard of gold shortly? Is it a true story or not? As I
wrote a few days ago, "gold" is a financial thermonuclear weapon, able
to destroy the fiat of the West. It would not surprise me in the least
if Washington was given the "courtesy" of a heads up to some sort of
coming announcement even if a smaller sum than 30,000 tons. The point
here is this, any announcement by China raises the question of Western
holdings which of course brings Western currencies into question. It
will be very interesting to see how forceful the U.S. is regarding
Ukraine, this gold issue may just be the "softener"? I believe we will
see very soon whether or not the U.S. changes tack regarding Ukraine
(amongst others) as I suspect the Pravda announcement was no error at
all.
Another June deadline is India trying to remonetize gold
http://www.thehindu.com/business/all-you-need-to-know-about-gold-monetisation-scheme/article7224428.ece#.
They propose to allow the deposit of gold on account and interest
paid on it. This would immediately boost the economy with a shot of
adrenaline as collateral would be massively boosted and lending could
blossom. The only problem is that this is about the 5th or 6th time
such a plan has been trial ballooned and even if passed, the citizens of
India will probably not go for it en masse anyway. They have a long
history of holding their gold in hand with no counterparty risk between
them and their gold. It might work to some extent but the number of
25,000 tons being deposited is a pipe dream. It should be said however,
when China does finally announce their holdings and increase their
ability to "price" global assets, the Indians will sit at the table as
there is no doubt they hold massive quantities in total!
Lastly
but not least important is the June gold expiration on the planet's
favorite gold "pricing" mechanism, COMEX. As of today, there are
187,500 contracts open for June, this represents 18.75 million ounces of
gold or 581 tons. The "registered" for delivery category has been bled
down to about 11 tons or about 378,000 ounces of gold. The first
notice day is June 1st, only seven trading days away. Does anyone see a
potential problem here? A "problem" as in there are 50 ounces of gold
contracted for every one ounce COMEX claims to have?
Yes,
yes, I know I have gone through this exercise before and each time the
open interest just dried up and blew away. In fact, many expiration
months have seen accounts FULLY FUNDED with cash to purchase the gold on
first notice day, only to "go away" later in the month. This makes no
sense whatsoever. Why would anyone fund their account fully in order to
pay for purchase and then just walk away? On the other side, why would
any short not deliver on the 1st or 2nd day of the month as they must
pay storage costs for each day they don't deliver? The answer of course
is very simple, the gold does not exist to make delivery and the shorts
do not want to let go of what very little they have ...and instead cash
settle with a little cherry on top? Before finishing this section, it
should be pointed out that the ETF GLD has bled 17 tons over the last
few weeks where gold rose $50. How does this make any sense at all? It
only makes sense to me if someone needed the metal to deliver elsewhere
and immediately. A strange occurrence but a topic for another day.
So there you have it, June could be quite the month as many events all
converge over the 30 day timeframe, and none of them good! I have
warned and warned, you must have exactly the positions you want should
the markets close and not offer you the chance to alter. Please,
imagine a world where things actually make sense and logic counts for
something when it comes to valuing assets. Let's call it "Mother Nature
world" where values make some sense and are actually related to each
other and to reality. How would your portfolio or financial position
look like if we woke up one fine Monday morning in June to a brand new
world?
Courtesy of http://www.jsmineset.com
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