The BIS Issues A Dire Warning: “We Are Moving From The Liquidity To The Solvency Phase Of The Crisis”

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by Tyler Durden

Tue, 12/08/2020 – 05:45

There are three certainties in life: death, taxes and the BIS – the central banks’ central bank – warning about excesses from monetary policy (the most recent amusing example of this was last October when as we wrote, “Fed Announces QE4 One Day After BIS Warns QE Has Broken The Market”). Actually, to this list of 3 certainties we can add one more: central banks roundly ignoring the warnings from the central bank mothership.

That, however, does not prevent the BIS from continuing this trend of warnings, and today the Basel-based organization did just that when in its Quarterly Review publication it cautioned that the surge in financial markets following COVID-19 vaccine breakthroughs and the U.S. election has left asset prices increasingly stretched.

Sounding surprisingly similar to Goldman, which as we reported earlier today issued an almost identical warning, when it observed that its sentiment indicator is now +2.0 standard deviations above average…

… which has left positioning extremely stretched and represents a 98th percentile reading since 2009…


Breakeven Inflation is Breaking Out

December 04, 2020

By Bryce Coward, CFA in Economy, Markets, Portfolio Management

Inflation expectations as priced by the Treasury market are hitting 18 month highs just now. As the reader can see, inflation expectations across all treasury maturities are at cycle highs. This is happening coincident with growing expectations for the $908bn bipartisan stimulus deal and widespread expectations that the Fed will ease in some additional way at their next meeting 12 days from now. That these two events are anticipated by the market does pose some near-term downside risk for inflation expectations, since there is now room for disappointment. Even still, keeping the long game in mind is useful. Indeed, there exist multiple structural catalysts for inflationary pressure that haven’t existed in quite some time:

  1. de-globalization
  2. USD which may be under continued pressure from massive twin current account and budget deficits
  3. the possibility that US oil production has peaked, or at least will not grow as it did last cycle
  4. raw material (especially base metal) inflation from the acceleration of green transport and power generation trends
  5. demand-pull inflation from fiscal stimulus


Gold, Stocks, & Bond Yields Surge As Dollar Purge Continues

by Tyler Durden

Tue, 12/01/2020 – 16:00

Since the election, and the ongoing roll out of Biden’s nominees for economic and policy teams, the dollar has been on a one-way streak lower…

The dollar is unchanged versus its fiat peers since Jan 2015…

And it appears the plunge in the dollar is being recognized by gold enthusiasts who bid the barbarous relic back above $1800, erasing last week’s end of month losses…


Inequality And The Gold Standard

11/27/2020 David Howden

Imagine that you earn $40,000 a year and your boss doubles you at $80,000 a year. Business was good to you both in 2013, and you received a 25% raise for your efforts. Not bad, and your boss gets to share in this good fortune too with an extra $25,000 (about 30%). You’re going to make $50,000 in 2014 and your boss will pull in $105,000.

Are you happy with this deal? Probably. But wait, income inequality just increased! Your boss originally outpaced you by 100%, but now his salary is 110% higher than yours.

To read the brouhaha going around right now, this situation is cause for alarm. Income inequality has increased and despite the fact that everyone is doing better than they once were, one group is doing relatively better.

What about if we reverse the example, starting from the original salaries? Instead of having a great year, imagine things were very bad and salary cuts are going around. You get a 25% pay cut so that you will now be earning $30,000 a year, and because he has more responsibility about the direction of the business and its lack of success, your boss gets a larger pay cut of $25,000. (This situation is the mirror image of the first example.)

You are making much less than you did last year. Are you upset about this? Probably. But wait, apparently there is a silver lining. Your boss now “only” makes about 80% more money than you, versus the 100% salary differential that existed last year. Income inequality decreased!


2021 Would Be A Great Time To Audit The Fed

11/24/2020 Nick Hankoff

Gone are the days of the Federal Reserve hiding in the shadows. Now it’s a woke central bank fighting for climate and racial justice. Progressives must not fall for this but instead team up with the populist right to audit the Fed and demand transparency.

Let the healing begin! If it is going to be President Joe Biden a couple months from now, then there will be all the more incentive for antiestablishment Democrats to join forces with populist Republicans. What better issue than auditing the Federal Reserve System?

There is strong precedent for progressives and the populist right to unite around an “Audit the Fed” movement. In early 2009, Congressman Ron Paul introduced the Federal Reserve Transparency Act, which garnered 320 House cosponsors by the summer of 2010.

Since then, the antiestablishment factions of both parties have grown and at least one of the 2009 House cosponsors now holds a Senate seat. Audit the Fed has passed the House on three occasions, so it could see as much or more success this coming session.

Another development over the last eleven years is the Fed’s evolving public image. Before Ron Paul’s 2008 presidential run, the central bank lurked in near-total darkness. Two thousand nine was a breakout year for its public relations campaign, and the Fed has failed to return to its prior obscurity. 

Now the secretive power center larps as a super–social justice warrior, fighting for climate and racial justice, the top pet issues of the progressive left. Many grassroots progressives expressed their distaste for Hillary Clinton and Joe Biden, but even those who held their noses to vote for them shouldn’t feel at all obliged to apologize for the Fed’s virtue signaling.


The dollar could weaken further under a Biden administration, analysts say


  • Citi Private Bank strategists predicted a weaker dollar ahead, given that a Biden administration would reduce uncertainty in international trade policy.
  • Following projections over the weekend that Joe Biden has won the U.S. presidential election, the dollar continued diving sharply, while Asian currencies strengthened.
  • JPMorgan Private Bank’s Adam Margolis said the theme at play was to continue to look for “opportunities” to trim the overweight exposure on the dollar.

SINGAPORE — The U.S. dollar is poised to further weaken, amid market views that geopolitical risks are falling after the election and that the next stimulus package will likely be smaller than expected, according to analysts.

Citi Private Bank strategists predicted a weaker dollar ahead, given that a Biden administration would reduce uncertainty in international trade policy.

“Victory for President Elect Biden means a return to more conventional governance. As the province of the President, it will result in a major shift in the way foreign policy is conducted. Alliance building will return. ‘Tariff threat first’ negotiating tactics will end,” the bank’s chief investment officer, David Bailin, and Steven Wieting, chief investment strategist and chief economist, wrote in a note published Monday.


WGC Unveils Social Responsibility Report by the Gold Industry

According to the report, the pandemic has had an impact on businesses across the globe.

SEATTLE (Scrap Monster): The Gold Responsibility & Paramount Mission” summit held in Beijing on November 6th provides social responsibility report by the gold industry on prevention and control during times of crisis. The report, prepared jointly by the China Gold Association, Shanghai Gold Exchange, World Gold Council and Sina Finance, focuses on the efforts undertaken by the Chinese gold industry in overcoming the difficulties of the time.

According to the report, the pandemic has had an impact on businesses across the globe. However, all major gold companies were holding fast to the front line of epidemic prevention and control. All these companies formulated and implemented anti-epidemic measures, which helped them to resume production in a timely and regulatory manner. Also, gold regulatory bodies and industry trade associations played leading role in mobilizing the entire industry back into action.


Biden Camp Celebrates Pfizer News, Warns Masks Better Option For Fighting COVID; Novovax Gets ‘Fast Tracked’

Update (1000ET): Nobody was more relieved to see the Biden-Harris ticket prevail last week than Dr. Anthony Fauci (arguably, the first job that Biden saved was Fauci’s). Now the good doctor is joining the vaccine market pump-fest, by telling reporters that his favorite biotech company, Moderna (which he has been pumping virtually since its first vaccine-related press release) might exhibit similarly effective results to Pfizer’s vaccine.


This, despite recently released data calling the vaccine’s effectiveness into question.

* * *

Update (0910ET): Pfizer shares are now up 16% with less than a half hour to go before the open.

Meanwhile, for traders still turning over that “90% efficacy” figure (the fact that so many infections were in the placebo group is surely a good sign, the scientists said) in their heads, CNBC has offered some helpful points of comparison.

Some good info on CNBC showing how great 90% effectiveness is for a vaccine. How effective current vaccines are:
Measles: 97%
Smallpox: 95%
Chicken pox: 92%
Seasonal flu: 40-60%— ForexLive (@ForexLive) November 9, 2020

Who else is ready for the ‘roaring twenties’ pt II?

I wrote this yesterday

IF this vaccine works and IF we get another spending package to bridge the gap between now and ppl getting it I think 2021-2022 could see a massive boom in the economy and markets

Roaring 20s are on the table— Ben Carlson (@awealthofcs) November 9, 2020

* * *

Update (0820ET): Adding to the positive COVID-19 vaccine news that has goosed stocks Monday morning, the FDA has officially awarded Novovax, considered a second-tier COVID-19 vaccine competitor, a “fast track” designation, while WSJ and other media are reporting that Pfizer’s vaccine could get emergency approval and head into distribution by the end of the month.


Gold heading back to 1872 supports as European stocks tumble

Yen and Dollar surges broadly as European stocks tumble sharp on the come back of coronavirus. At the moment, FTSE is down -1.77%> DAX is down -3.25%. CAC is down -3.07%. DOW future is also down nearly -500 pts.

Gold drops back below 1900 handle today, following the rally in Dollar. While it’s essentially still range bound, focus is back on 1872.85 support. Firm break there will suggest that whole corrective pattern from 2075.18 high is extending with another leg through 1848.39 low.