If This Weakest, Wobbly Link Snaps…Look Out!
The Global Rout Intensifies
Well folks, the Global Stock Market/Trade/Equity/Energy/Credit rout that began with the start of 2016 has continued. Everywhere you look, asset valuations are getting completely monkey-hammered.
I intend to survey the damage, and focus on the weak link in the system here that I’ve been watching carefully. Firstly though, let’s take a gander at a laundry list of absolutely horrifying data points around the world. Let’s start with a very revealing chart, which should tell everyone with eyes to see, precisely what they need to know:
The Baltic Dry Index tracks the shipping industry in international trade. Greece factors heavily in this equation. This picture is unbelievable. I honestly keep thinking to myself:
“Wow, we made another new low in the BDI, surely it’s gotta find a bottom here somewhere,” only to find there is no bottom!
It just keeps falling!
The 700 level, which was important due to the final bottom the shipping industry found during the Great Financial Crisis of 2008, was finally taken out with gusto in the last two business quarters. Something snapped and snapped hard!
It has now dropped to nearly half the previous lowest level that global shipping had reached during the Great Financial Crisis of 2008/2009. Half of the worst level that we’d seen in the last century!
Everywhere you turn, there is excess capacity in shipping. Shipping lanes are becoming backed up, and there is far too much product waiting to make its way through the “just in time” chain of command. Poor Greece! First they were gutted by globalist bankers, then their vote to reject the newest “bailout” was literally tossed in the trash by Brussels, and now their golden-child industry, international shipping, is literally dead in the water right now.
Oh, and their pain is being shared and felt in spades throughout their continent. Just take a look at these charts(via zerohedge).
Europe’s Growing Financial Calamity
The equity bloodbath that the world is feeling, is spreading quickly over Europe. Most major stock markets there have now either reached the December lows of last year or have made new lows!
This is partially the result of cheap credit drying up all over the world(as we covered in my last article). If you look closely, the correlation between credit and their stocks is absolutely undeniable:
Credit is tightening, taking the oxygen from the primary dealer banks and large corporate buy-backs, that have helped levitate their stock markets. Tens of millions of stock-owners, pensioners, and savers are getting hosed. Their savings, their 401ks, their retirement plans are taking a beating.
If it’s any consolation though, there is a silver lining to all of what’s going on, and it should bring a smile to your face!
For as ugly as global trade and global equities are right now, the banks are faring much worse! Italy, whose banks have been bobbing for air for months, have finally succumbed to the renewed selling pressure, which is being exacerbated by the withdrawal of liquidity and credit.
Ouch, that’s a wrecking ball to the face!
What happens next though, should make you nervous. Things are getting so bad for Italian banks, that the CEO of Monte Paschi Bank said this:
*MONTE PASCHI CEO CONFIRMS FINANCIAL STABILITY OF BANK
*MONTE PASCHI CEO: STOCK DECLINE NOT JUSTIFIED BY FUNDAMENTALS
Shield brothers, there is an old saying, which you should ALWAYS keep at the forefront of your mind:
“Never believe anything until it has been officially denied”.
The fact that Monte Paschi’s CEO is coming out to assure everyone that:
1)They’re stronger than ever…
2)That the actions of investors selling their stocks, aren’t “justified” by the big picture
3)That stability and calm reign supreme…
Should have you hunkering down! Also their ridiculous assertions, do not match the actions of the Italian government, who just made this announcement:
Consob adopts a temporary ban on short selling on Banca MPS shares.The ban shall apply immediately and shall last until Tuesday 19 January 2016 end of day.
Consob decided to temporary prohibit short sales of the share Banca MPS (ISIN code IT0005092165).
The ban will apply immediately and will be enforce for the entire trading session of tomorrow, Tuesday 19 January 2016, on the MTA market of Borsa Italiana.
Yes, brothers, the Italian government has begun the policy of banning short-selling again! Now, granted, it’s only one bank, and it was only for one day, but that’s how it starts, not how it ends.
Look at the general picture of their CDS market(which is used to insure against risks on these banks):
Uh oh! Folk, that’s a huge spike, in fact the last time there was this little trust in their banking system, and this much hedging, was nearly 3 years ago, and this spike has occurred in just a few weeks’ time.
There’s a lesson here:
It doesn’t take long to lose confidence in the entire system, when that system is built on the rock-solid foundation of unicorn tears and puppy dog tails! There is absolutely nothing to this financial system of ponzi/debt pyramids, and increasingly, everyone’s putting their money in places which state that the emperor has no clothes!
The banking carnage is not contained to Europe or to Italy either….it is spreading here, and fast! Just look at a few of the major US banks:
Share price 6 weeks ago: $55
Share price today: $40.50
A decline of 28% in one month.
2) Goldman Sachs
Share price 9 weeks ago: $199
Share price today: $153.78
A decline of nearly 28% in two months.
3) JP Morgan
Share price 7 weeks ago: $67.89
Share price today: $55.51
Decline of roughly 19% in 7 weeks.
4) Bank of America
Share price 6 weeks ago: $17.80
Share price today: $13.70
Decline of 33% in 6 weeks!
Banking is bearing the worst of the brunt, because of tightening credit, and folks’ concern over the liquidity and equity picture. However, there is another huge teetering pillar that I’ve been watching for weeks(along with oil, which just caved to $26 and change per barrel, by the way), and if this wobbly pillar goes….watch out!
The Banking Cabal’s Foot Soldiers
Weeks ago, I did a video on Glencore and its founder, Marc Rich.
This Jewish mogul started up a trading house, Marc Rich & Co., in the 70’s, which dealt with various commodities, including base metals and oil. Marc Rich & Co., which eventually was morphed into Glencore, has been at the forefront of the banking cabal’s business in providing and controlling physical commodities(and their prices!) for years.
Like Bernie Madoff, he was involved in every shady and illegal activity you can imagine, including making oil deals with Iran during the embargo days. However, unlike Madoff, this man had unbelievablly powerful friends in high places, and though he was indicted by the US government for his Iranian oil deals, he received a Presidential pardon from Bill Clinton, just before he left office.
Glencore’s job has been to go straight to the source, to base metal and coal mining companies, enacting many tens of billions of forward contract agreements, in order to secure metal at certain prices, and to facilitate the sale of those metals. In 2010, their global market share of tradable copper was 50%, and their global share of tradable zinc was 60%! Unreal.
“Big deal, Watchman, so they’re a major commodity producer? What does that have to do with the broader financial system?”
Ah, a very great deal, brother!
You have to remember: the only way the manipulation in world finance continues, is if the manipulation in precious & base metals continues…and if the only way that rigging continues, is if the metal flows. The gold, silver, copper, zinc, etc must flow to everyone who wants it, or the entire game ends. For decades, Glencore & Trafigura have helped ensure for their banking masters that the metal continued to flow.
However, now that base metals and oil have been plummeting non-stop for months, the losses and debt incurred by Glencore have caught up to them! They were recently as much as $30 billion in debt!
The reason why this is a big deal, is that the corrupt ratings agency industry(which we all know is owned by the banksters, and which has historically refused to downgrade Glencore and their bonds), have recently issued warnings to Glencore to reduce their debt substantially, or face a debt downgrade!
One look at these charts will show you how deep this company has now “stepped in it”…
Copper prices have been battered so hard, that investors can see the writing on the wall, and want CDS insurance against a Glencore failure. Can you blame them? I mean, look at Glencore’s bond price action!
Remember, Glencore is both a producer and marketer of these commodities, and Marc Rich helped pioneer derivatives contracts on the underlying physical commodities. How large is their exposure in commodity derivatives? No one knows for sure, but they’re at least knee deep in many tens of billions(some suspect it could be many multiples of that).
Here’s the Catch 22 for Glencore though:
If Glencore is forced to start selling assets, like the tangible metals it has in the pipeline, at the market’s very rock-bottom prices, in order to reduce its debt...they lock in the enormous losses on those sales, and make their operational losses even greater! Furthermore, imagine the chaos that such massive, unscheduled sales would generate in the commodity derivatives world.
If they refuse to sell those assets, however, there’s an even greater chance that the ratings agencies will downgrade Glencore bonds(which at this point, are really junk). In fact, it could happen as early as next week!
There really are few good options here for Glencore, and for the rigging operations to continue much longer. The commodity titan producers are failing. Mining companies are failing. Confidence in their bonds are failing.
By the way, Glencore’s stock is sitting at roughly $71….just $5 above its all-time low last fall. If Glencore is downgraded, and their stock goes into freefall, then it could literally be the start of “chaos time”.
Watch Glencore closely!
A few nights ago, I watched the film, “The Big Short” with Mrs. Watchman. The film was an accurate, hard-hitting expose’, which blamed the banksters as the main culprits for the 2008/2009 crisis. While there is some objectionable content, it’s well worth watching for any stacker, especially!
Because one lesson of the film, was that it was easy to see what was coming if you simply paid attention to the indicators that really mattered! The key was to go with your gut instinct, and push past all the folks who laughed at your assertions, due to normalcy bias.
That’s where stackers are at right now!
Like the investors of the film, who bet early on a housing crash, yet who had to eat hundreds of millions in losses(due to the banksters manipulating the CDS and bond market), stackers of gold and silver are nearly despondent in some cases!
We know we’re right. About everything. Yet we’ve been made to lose and watch others win.
Psychologically, it’s tough, I understand that, but the takeaway for us is that these investors stuck to their guns….until the banksters’ rigging game burned out….and they all made out like bandits! They all became filthy rich due to the enormity of their bets, based on their solid convictions.
There was one last lesson though: none of these people were celebrating the moment their “ship had come in”, and the bets were made good.
Because their success meant the entire housing market, stock market, and global banking systems were being wiped out. It meant hundreds of millions suffered catastrophic losses. It meant retirees in waiting were never going to retire. It meant tens of thousands of lives were going to end.
In the end, the main characters, Mark Baum, and Michael Burry, who made BILLIONS in profits on their bets…..were humble enough to never tell any of their detractors:
“I told you so.”
WHEN that moment comes(and it’s starting to smell and feel alot like 2008), I pray we’ll all have the humility to do likewise.
The world is walking on a tightrope, a tightrope it will soon fall from.
While vindication and profit will feel extraordinary for us, let’s all remember humility. Remember, if not for the grace of God, and the boldness of a few truth-tellers….it could’ve been you who fell.
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