Category Archives: Financial markets

Saudi Arabia Retreats From The Troubles Its Clown Prince Caused, by Moon of Alabama

Mohammad bin Salman is young, spoiled, and has made some big mistakes. From Moon of Alabama at moonofalabama.org:

When the Saudi King Salman promoted his son Mohammad bin Salman (MbS) to Defense Minister and then Crown Prince the expectations were high. But three of the major projects Muhammad launched since then soon ran into trouble. Now initiatives are under way to limit the damage he caused. The end of the five year old Saudi war on Yemen is coming into sight. The public offering of the Saudi state owned ARAMCO oil company is finally happening but with a much lower valuation than originally planned. The thirty month spat with Qatar is under repair.

On August 17 2019 a Yemeni drone attack on Saudi Arabia’s oil installations proved that the Saudis had lost the war. Moon of Alabama’s headline empasized the effect that it would have:

Long Range Attack On Saudi Oil Field Ends War On Yemen

Today’s attack is a check mate move against the Saudis. Shaybah is some 1,200 kilometers (750 miles) from Houthi-controlled territory. There are many more important economic targets within that range. […]

The attack conclusively demonstrates that the most important assets of the Saudis are now under threat. This economic threat comes on top of a seven percent budget deficit the IMF predicts for Saudi Arabia. Further Saudi bombing against the Houthi will now have very significant additional cost that might even endanger the viability of the Saudi state. The Houthi have clown prince Mohammad bin Salman by the balls and can squeeze those at will.

A month later another large scale attack disabled half of the Saudi oil output.

The Saudis have since procured additional U.S. military units to provide more air defenses around their oil installations. But U.S. air defenses are not effective against the kind of attacks the Yemenis launched. The Saudis had no choice but to sue for peace.

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Three Major Imbalances – Financial, Trust and Geopolitical, by Michael Krieger

Many things are out of whack and it’s only a matter of time before everything falls apart. From Michael Krieger at libertyblitzkrieg.com:

But greed is a bottomless pit
And our freedom’s a joke
We’re just taking a piss
And the whole world must watch the sad comic display
If you’re still free start running away
Cause we’re coming for you!

– Conor Oberst, “Land Locked Blues”

It’s hard to believe 2020 is just around the corner. If the last ten years have taught us anything, it’s the extent to which a vicious and corrupt oligarchy will go to further extend and entrench their economic and societal interests. Although the myriad desperate actions undertaken by the ruling class this past decade have managed to sustain the current paradigm a bit longer, it has not come without cost and major long-term consequence. Gigantic imbalances across multiple areas have been created and worsened, and the resolution of these in the years ahead (2020-2025) will shape the future for decades to come. I want to discuss three of them today, the financial system imbalance, the trust imbalance and the geopolitical imbalance.

Recent posts have focused on how what really matters in a crisis is not the event itself, but the response to it. The financial crisis of ten years ago is particularly instructive, as the entire institutional response to a widespread financial industry crime spree was to focus on saving a failed system and then pretending nothing happened. The public was given no time or space to debate whether the system needed saving; or more specifically, which parts needed saving, which parts needed wholesale restructuring and which parts should’ve been thrown into the dustbin. Rather, unelected central bankers stepped in with trillions in order to prop up, empower and reward the very industry and individuals that created the crisis to begin with. There was no real public debate, central bankers just did whatever they wanted. It was a moment so brazen and disturbing it shook many of us, including myself, out of a lifetime of propaganda induced deception.

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“The Fed Was Suddenly Facing Multiple LTCMs”: BIS Offers A Stunning Explanation Of What Really Happened On Repocalypse Day, by Tyler Durden

This is far and away the best article SLL has seen on the explanation behind the explosive move in the repo market that saw repo rates go from 2% to 10% in a matter of minutes on September 16, and has forced the Federal Reserve to essentially liquify the repo market. The repo market is where banks, hedge funds, and other institutions finance various instruments, putting up those instruments as collateral for loans for a set term by selling them and agreeing to repurchase the instruments at a higher price that embeds an interest rate. It’s a little known but incredibly important part of the financial markets. From Tyler Durden at zerohedge.com:

About a month ago, we first laid out how the sequence of liquidity-shrinking events that started about a year ago, and which starred the largest US commercial bank, JPMorgan, ultimately culminated with the mid-September repo explosion. Specifically we showed how JPM’s drain of liquidity via Money Markets and reserves parked at the Fed may have prompted the September repo crisis and subsequent launch of “Not QE” by the Fed in order to reduce its at risk capital and potentially lower its G-SIB charge – currently the highest of all major US banks.

Shortly thereafter, the FT was kind enough to provide confirmation that the biggest US bank had been quietly rotating out of cash, while repositioning its balance sheet in a major way, pushing more than $130bn of excess cash away from reserves in the process significantly tightening overall liquidity in the interbank market. We learned that the bulk of this money was allocated to long-dated bonds while cutting the amount of loans it holds, in what the FT dubbed was a “major shift in how the largest US bank by assets manages its enormous balance sheet.”

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The Fed Detests Free Markets – 2, by Raúl Ilargi Meijer

You can have market-driven financial markets or you can have central bank-driven financial markets, but you can’t have both. From Raúl Ilargi Meijer at theautomaticearth.com:

It wasn’t really the plan to make this a series, but it seems to have turned into one. Part 1 is here: The Fed Detests Free Markets. Part 3 will follow soon. And yeah, I did think perhaps I should have called this one “End The Fed” Is No Longer Enough. Because that’s the idea here. But what’s in a name?

Okay, let’s talk a bit more about finance again. Though I still think this requires caution, because the meaning of the terminology used in such conversations appears to have acquired ever more diverse meanings for different groups of people. Up to the point where you must ask: are we really still talking about the same thing here?I’ve said multiple times before that there are no more markets really, or investors, because central banks have killed off the markets. There are still “contraptions” that look like them, like the real thing, but they’re fake. You can see this every time a Fed chief opens their mouth and every single person involved in the fake markets hangs on their lips.

They do that because that Fed head actually determines what anything will be worth tomorrow, not the markets, since the Fed buys everything up, and puts interest rates down so more people can buy grossly overpriced property and assets, and allows companies to buy their own shares so nobody knows what they’re worth anymore.

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The Giant Debt-for-Equity Swap, by Colin Lloyd

The world’s debt load is by far its most threatening issue. From Colin Lloyd at aier.org:

Since the mid-1990s, the number of companies listed on US stock exchanges has been steadily shrinking. There are currently just over 4,000 companies listed, up from the 2012 low but way down from a peak of more than 8,000 in 1996. Europe has not been immune; only 84 companies have listed this year, the lowest in a decade and the lowest by deal value since 2013. European capital markets have always been less equity-centric than the US, but even here the number of listings has shrunk by 29 percent since 2000.

Source: World Bank, Financial Times

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See You On the Dark Side of the Moon, by Jim Quinn

Pink Floyd’s groundbreaking, blockbuster album, The Dark Side of the Moon, had much to say about contemporary conditions…46 years ago! From Jim Quinn at theburningplatform:

And if the cloud bursts thunder in your ear
You shout and no one seems to hear
And if the band you’re in starts playing different tunes
I’ll see you on the dark side of the moon

 Brain Damage, Pink Floyd


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And if the dam breaks open many years too soon
And if there is no room upon the hill
And if your head explodes with dark forebodings too
I’ll see you on the dark side of the moon

Brain Damage, Pink Floyd

Pink Floyd’s 1973 Dark Side of the Moon album is considered one of the greatest albums of all-time. It stayed on the Billboard 200 charts for 937 weeks. Roger Waters concept was for an album that dealt with things that “make people mad”. The Dark Side of the Moon’s themes include war, conflict, greed, the passage of time, death, and insanity, the latter inspired in part by former band member Syd Barrett’s worsening mental state.

The five tracks on each side reflect various stages of human life, beginning and ending with a heartbeat, exploring the nature of the human experience, and empathy. The themes of this album are timeless and are as germane today as they were forty-six years ago, if not more relevant. The country and world are awash in conflict, driven by the greed of evil men. Decent, law abiding, hard-working, critical thinking Americans see the world going insane as the passage of time leads towards the death of an American empire.

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The Fed’s Answer to the Ghastly Monster of its Creation, by MN Gordon

In politics and central banking, nothing succeeds like failure. The Fed’s answer for the problems its creating is more of the same, only bigger and better. From MN Gordon at economicprism.com:

The launch angle of the U.S. stock market over the past decade has been steep and relentless.  The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent.  New highs continue to be reached practically every day.

Over this stretch, many investors have been conditioned to believe the stock market only goes up.  That blindly pumping money into an S&P 500 ETF is the key to investment riches.  In good time, this conditioning will be recalibrated with a rude awakening.  You can count on it.

In the interim, the bull market may continue a bit longer…or it may not.  But, to be clear, after a 370 percent run-up, buying the S&P 500 represents a speculation on price.  A gamble that the launch angle furthers its steep trajectory.  Here’s why…

Over the past decade, the U.S. economy, as measured by nominal gross domestic product (GDP), has increased about 50 percent.  This plots a GDP launch angle that is underwhelming when compared to the S&P 500.  Corporate earnings have fallen far short of share prices.

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