The global stock selloff intensified today as investors and sought safety in government bonds and gold surged more than 4 percent. The large shift in Gold and disappointing Spooz sentiment warns that further losses maybe in store for the US Dollar and global stock markets.
Todays S&P 500 Chart
Bank shares dragged markets lower but energy shares helped the Averages pare losses on a 'rumor' that OPEC may move to cut oil production. Interesting note is the Oil/Gold ratio back to 1865 and we find that the Gold price has just hit an all time high at around 44 times the price of Oil.
NEW YORK (Reuters) - Bank shares dragged Wall Street lower on Thursday on concerns the a slowing global economy will continue to pressure interest rates, but energy shares helped the market pare losses on a report that OPEC may move to cut oil production.
WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits fell more than expected last week, suggesting the labor market remains on solid footing despite slowing economic growth and a stock market rout.Â Â Â
TORONTO (Reuters) - Fiat Chrysler Automobiles said on Thursday at a Toronto auto show that it has invested C$3.7 billion since September 2014 and created 1,200 jobs in Canada to develop and produce its Pacifica minivan. The Pacifica, which is also being developed as Fiat Chrysler's first hybrid minivan, is in the early production stages at the company's plant in Windsor, Ontario, said Reid Bigland, president and chief executive of FCA Canada.
SAN FRANCISCO (Reuters) - Networking giant Cisco Systems Inc reported it is weathering a global slowdown in information-technology spending, but signs potential customers are putting some projects on hold exacerbated concerns about broader IT growth.
LONDON (Reuters) - Gold surged more than 4 percent on Thursday to its highest in a year as fears about financial uncertainty, a lower dollar and U.S. Treasury yields persuaded investors to seek refuge in the precious metal.
NEW YORK/SAN FRANCISCO (Reuters) - Shares of social media website Twitter Inc hit an all-time low on Thursday after the company said late Wednesday that user growth stalled for the first time since the company went public in 2013.
WASHINGTON (Reuters) - Federal Reserve Chair Janet Yellen returned to Congress with a brave face on Thursday amid a worsening meltdown in global markets and growing skepticism the U.S. central bank can carry out its long-planned pivot to "normal" monetary policy.
First, it was The BoJ's utter collapse from omnipotence to impotence. Then came the collapse of The Fed's credibility in the short-term. And now, in the most egregious example of total central bank failure - the 'market' has priced out any chance of a rate hike through 2018... and in fact, there is now a greater chance of a rate-cut (than rate-hike) into 2017.
Based on the Eurodollar market...
And while some hoped that Janet would clear it all up in 2 days of testimony, she just made it worse:
YELLEN: OUTLOOK HASN'T SUFFICIENTLY SHIFTED TO WARRANT RATE CUT
Talking of Oil and Gold, last week Deutsche Bank showed a long-term graph of Oil in real adjusted terms, showing that the average real price since 1861 was $47.
Following on from that, Deutsche notes one ratio they occasionally look at is the ratio of various assets to the price of Gold...
Today we update the Oil/Gold ratio back to 1865 and find that the Gold price has just hit an all time high at around 44 times the price of Oil.
The previous high of 41 in 1892 has just been exceeded.
For perspective, the ratio was at 6.6 in June 2008 and only 12 in May 2014. The long-term average is 15.5. While this says nothing about where the ratio is going in the short-term surely this looks a good trade to exploit over the longer-term for those who care about such things.
However, as we noted recently, it merely predicts a crisis and according to the chart above it is the biggest crisis in history...
Submitted by Jeffrey Snider via Alhambra Investment Partners,
Part 1 here...
The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity reserves. As noted last week, AIG's "toxic waste" positions ended up registering some $20 billion profits to the Federal Reserve and the government via its (illegal) Maiden Lane SIV's. AIG just could not withstand the liquidity demands brought about by increasing calculated volatility.
Another famous episode offers the same interpretation while providing some further insight into the world of leverage and liquidity as it exists now. Orange County went into bankruptcy with assets that were all still money good. The county's investment fund, run by Robert Citron, was holding paper from mostly government agencies and even UST's. Out of the nearly $20 billion in the fund close to its demise, $16.7 billion was UST's, agency fixed rate bonds, agency floating rate bonds, CD's and commercial paper. The problem was the combination of the floating rate FNMA's and that the fund was increasingly leveraged as Citron's bets were further imperiled.
Throughout the early 1990's, Orange County's fund was handsomely beating every benchmark. So much so that municipalities throughout the coun ...
Federal Reserve Chairwoman Janet Yellen said the U.S. central bank is studying the feasibility of pushing short-term interest rates into negative territory should it need to give the economy a stronger boost.
FireEye Inc. closed out a year that saw it lose about half its market capitalization with a slight fourth-quarter earnings beat, and the volatile stock resumed its swings as investors digested the 2016 forecast.
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