Bill Holter’s Commentary
“Central banks are now all in and no longer even have the option of not protecting asset prices from falling” – Tyler Durden
“Liquidity Dies In Darkness”: Trillions In Assets Have No Financial Disclosure To Support Them
September 15, 2019
While there has been extensive discussion of the passive/ETF/index fund bubble, most recently by Michael “Big Short” Burry, who most recently joined the parade of skeptics warning of the implicit and explicit dangers the passive investing bubble carries with it, perhaps the most interesting angle of the ETF stampede into fixed income securities – which include junk bonds and leveraged loans in addition to the recent frenzy for investment grade debt – is the fact that a substantial portion of it now trades with virtually no fundamental information. In other words, assets are being bought (if not so much sold) simply to accommodate the flood of investor money, with no regard for actual financial data or corporate newsflow.
This is highlights in a recent note by TCW’s Chief Investment Officer of Fixed Income, Tad Rivelle, who currently manages some $170 billion in AUM, and who writes that as a result of the above, “not only have the debt markets ballooned in size, but the growth has come disproportionately from those segments of the debt market where financial disclosure is poor.”
As a result of this, Rivelle observes that “If democracy dies in darkness, so does liquidity in that embodiment of economic democracy, i.e., the capital markets.” His conclusion is jarring: this lack of underlying information, while ignored when the tide is rising, leads to an immediate collapse in liquidity when the selling begins and results in a scramble for information, to wit:
When information is scarce, investors must color in between the lines. That which is not known nor well quantified must be assumed or modeled. The door is therefore open to different investors reaching quite different conclusions about the underlying value of an asset leading, of course, to illiquidity.
J. Johnson’s Latest – Are The Algos Prepared For This In Silver?
September 16, 2019
Great and Wonderful Monday Morning Folks,
Gold is trading higher after that “unplanned” short attack on Friday failed miserably, unless they really wanted us to know they planned this ahead of time, with the trade now at $1,511.70, up only $12.20 after reaching up to $1,519.70 before the Algo’s came in to set things straight with the low down at $1,506.30. Silver is held in check as well and by the same Algo team with its trade at $17.92, up 35.1 cents after breaking thru and up to $18.065 with the low at $17.69. The September US Dollar trade, which ends today, is currently at 98.345, up 9 points and is literally at the high with the low at 98.055. All of this was done before 5 am pst, the Comex open, and the London close.
In Venezuela, Gold is now priced at 15,098.10, showing a loss of 25.97 Bolivar with Silver now gauged at 178.976 Bolivar proving a 2.996 loss in value. In Argentina, Gold is now priced at 84,739.02 showing a loss of 200.54 Peso’s with Silver now valued at 1,004.51 losing 17.64 in Peso value. Turkey’s Lira now has Gold priced at 8,645.04, it too losing from Friday mornings early price check by the tune of 61.08 T-Lira with Silver at 102.481 showing it lost 0.793 in T-Lira value. It must be remembered here that the drop in price occurred on Friday during Comex’s trading times and after my post. Precious metals are recovering from that “unplanned” Friday hit but has yet to fully restore its value. We still stay Resolute in our beliefs that the buyers are winning.
It looks like all the activity in the September Silver Deliveries last Friday was all about clearing demands off the board with the total count at 389 fully paid for contracts waiting for physicals here or in London showing a drop of 136 in count. So far this morning we have a Volume of 4 posted up on the board with no trading range. This is supposed to be a spread trader exiting a spread in the delivery month, which should have a price attached to it, but alas, those that break the rules are the ones that are supposed to enforce them.