Posted at 8:30 AM (CST) by & filed under In The News.

Bill Holter’s Commentary

Spoiler alert…In a “de grossing world” the answer is a definitive and very ugly YES!

Will Risk Parity Blow Up…???
October 11, 2021

For four decades, the US stock market has traded up and to the right. During those brief moments of setback, treasuries rallied strongly. The fact that these two asset classes seemed to offset each other, creating a smoothed-out return profile, was not lost on certain fund managers who created portfolios comprised of the two. Then, to better market this portfolio to the sorts of institutional investors who cannot bear drawdowns, the overriding strategy was given the pseudo-intellectual sounding Risk Parity moniker. Over time, the reliability of Risk Parity funds has astonished most observers, especially after being tested by fire during the GFC. As a result, portfolio managers took the logical next step and added copious leverage—because in finance, when you do a back-test, every return stream works better with leverage. Naturally, as Risk Parity continued to produce returns, inflows bloated these funds. Risk Parity strategies, in one form or another, now dominate many institutional asset allocations. While everyone makes their sausage a bit differently, trillions in notional value are now managed using this strategy—long equities, long treasuries. Are they highly-leveraged time-bombs??

Taking a step back, it’s important to ask, what created this smooth stream of Risk Parity returns? Was it investor brilliance or was it a four-decade period of declining interest rates that systematically increased equity market multiples while reducing bond yields? What if all the sausage-making was just noise? This then brings out the next logical question; what happens if the rate cycle has now turned and we have an extended period of both increasing interest rates and declining equity market multiples?

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Bill Holter’s Commentary

We have continually told you to watch “credit” as that is where the fire will be no matter where the smoke is. Shortly we will be witnessing a world going through bankruptcy, do you own money that cannot bankrupt?

“It’s A Disastrous Day” – All Hell Breaks Loose In China’s Bond Markets
October 12, 2021

The US bond market may be closed, but it was fully open in China, and locals took advantage of this fact to do one thing: sell.

In the aftermath of our viral post “”Catastrophic” Property Sales Mean China’s Worst Case Scenario Is Now In Play”, China property firms bonds were hit with another wrecking ball on Monday as Evergrande was set to miss its third round of (offshore) bond payments in as many weeks and rival Modern Land became the latest scrambling to delay deadlines.

Having already suffered the fastest drop on record, Chinese junk bond markets – where property developer issuers dominate – were routed once again as fears about fast-spreading contagion in the $5 trillion sector, which drives a sizable chunk of the Chinese economy, continued to savage sentiment. Meanwhile, China Evergrande Group’s offshore bondholders still had not received interest payment by a Monday deadline Asia time, Reuters reported citing sources.

But while Evergrande’s default is now just semantics, and one week after Fantasia shocked bondholders with a surprise announcement it too would stuff creditors just weeks after it had said its liquidity was fine, which sent its bond plunging from par to 74 cents in seconds…

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Bill Holter’s Commentary

Oh the heresy!

DIMON: Bitcoin ‘Worthless’…

October 12, 2021

Jamie Dimon, JPMorgan Chase chairman and CEO, isn’t a fan of bitcoin, the largest cryptocurrency by market value.

“I personally think that bitcoin is worthless,” Dimon said during an Institute of International Finance event on Monday, CNBC Pro reported.

But, “I don’t want to be a spokesperson — I don’t care. It makes no difference to me,” he said. “Our clients are adults. They disagree. That’s what makes markets. So, if they want to have access to buy yourself bitcoin, we can’t custody it but we can give them legitimate, as clean as possible, access.”

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Posted at 9:51 AM (CST) by & filed under USAWatchdog.com.

By Greg Hunter‘s USAWatchdog.com (Saturday Night Post)

Geo-political and financial analyst Bo Polny has long said “. . . Nothing can stop these people aside from a Biblical intervention from God.”  According to Polny’s Biblical cycle and timing charts, that’s exactly what is likely going to happen by the end of the year.  It all centers around the value of the U.S. dollar.  Polny explains, “Bitcoin, years ago, was under a dollar.  Then it was a dollar.  Then it was ten bucks.  Then it was a hundred, and then it was a $1,000.  All they can do is keep bashing it with news and say how horrible it is.  Ultimately, the most horrible currency in the world is the U.S. dollar.  The U.S. dollar is the root of all evil.”

Polny says America’s story is about to run parallel to the Bible story of Lazarus, who was brought back to life by Christ after four days buried in a dark tomb.  Polny says, “In the United States right now, we have gone in the wrong direction.  We have been controlled by evil, and so the United States must fall.  This is going to be like the Baptism moment.  You die to be reborn.  So, the United States is about to fall, and it’s going to look horrible.  It’s going to look like God has abandoned us.  How do you think it looked for Lazarus when he was in the tomb?  He was dead.  Lazarus and the United States are playing similar rolls.  These are cycles, and that which has been will be again. . . . I am going to continue with the story, and it all ties in with the dollar and the United States.  Jesus said, ‘This illness (for Lazarus) does not lead to death.’ . . . The fall of the United States is for the glory of God so that the Son of man can be glorified through it. . . .When the United States falls, people are ultimately going to wake up.  This is about waking up the church.”

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Posted at 9:50 AM (CST) by & filed under Jim's Mailbox.

Some uglies from Dismal Dave.

Bill

Behold, the fool saith, ‘Put not all thine eggs in the one basket’ which is but a manner of saying, ‘Scatter your money and your attention,’ but the wise man saith, ‘Put all your eggs in the one basket and watch that basket.’ Mark Twain. (1835-1910).

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Posted at 9:54 AM (CST) by & filed under Jim's Mailbox.

M2 Money Supply says it all!

Bill

‘Don’t worry about the world coming to an end today. It’s already tomorrow in Australia.’ Charles M. Schulz. (1922-2000).

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Posted at 8:34 AM (CST) by & filed under Jim's Mailbox.

Dave, 
I guess you could call these collectively…one big OOPS!

Bill


You can avoid reality, but you cannot avoid the consequences of avoiding reality.’
Ayn Rand. (1905-1982).

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A good analogy from Pastor Stanley.

Bill

The Fed Portrays The Greek God Atlas By Attempting To Hold Up The World Through Its Record Intervention In The Commercial Paper Markets & Will End Up Like Sisyphus
October 06, 2021

By Stan Szymanski

If I read this right, it looks like the federal reserve has just set a new record for the amount of overnight reserve repos, 1.6 trillion dollars as if the end of the September quarter. According to ICI Global, the total amount of money market funds worldwide is 4.54 trillion dollars measured in the same time frame. Since I am only good at simple math: 1.6 / 4.54 = .3524 (35%). That mean that United States Federal Reserve is providing slightly over 1/3 of the liquidity to the entire Commercial Paper market! Does that mean that the banks are far beyond being able to trust each other, even for 12 hours that they are refusing to lend to each other??

When you look at the FRED graph for the reverse repos above it just looks parabolic. I remember that it was the commercial paper market that froze up first in 2008 before Lehman happened which looks like Evergrande this time, but now Fantasia Holdings Group Co. has failed to pay coupons on their bonds this week (Bloomberg Quint article by Ken McCallum (10/5/21@ 10:33am IST) so there may be a competition for who the fall guy will be. Thanks to Bill Holter at www.jsmineset.com for letting me bounce my thoughts off of him; Bill shared that this is also the Fed’s effort to keep rates from going negative because negative rates would positively illustrate the clown show we live in!

It is beginning to look like the Fed is the ‘lender of last resort’ for the entire Commercial Paper Market. If so, they have taken on the persona of the Greek god Atlas and are literally attempting to hold up the whole world via providing liquidity to corporations via overnight reverse repos.

Thinking about the Fed’s actions brings to mind another lesson in absurdity and another story of Greek Mythology: Sisyphus. According to Ancient Origins (https://www.ancient-origins.net/myths-legends-europe/myth-sisyphus-lessons-absurdity-009805) : …’The legend of Sisyphus begins with a man who, if we are to believe Homer, was one of the wisest and most prudent of mortals. Nonetheless he would fall out of favor with the gods of ancient Greece. He was taken to the kingdom of the underworld and was forced to endure one of the most pointless and excruciating punishments of ancient mythology. Every day, he would carry a massive boulder up a mountain, straining and sweating all the while. When Sisyphus reached the top of the mountain, the boulder would immediately roll back down the hill in a matter of moments. Sisyphus would then make his tired march down the hill where he would start this task over again. It is said that Sisyphus would be forced to endure this for all of time, performing a pointless, tired task until the end of existence.’…

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Posted at 12:19 PM (CST) by & filed under In The News.

Bill Holter’s Commentary

I have just one, very legitimate question. Does this mean my platinum eagle is also worth $1 trillion? I didn’t think so. The real solution of course is this, IF we really did have the gold Treasury claims to have, why not mark up the price of gold so that their holdings are worth trillions? And thus repair completely broken balance sheets. Could it be because we no longer have the claimed gold? Maybe we should have had an aut or two since the 1950’s but, oh well!

Trillion-Dollar Platinum Coin Could Be Minted At The Last Minute
October 5, 2021

A trillion-dollar platinum coin could be minted “within hours of the Treasury Secretary’s decision to do so,” Philip Diehl, former director of the United States Mint, tells Axios.

Why it matters: Congressional solutions to the debt-ceiling problem could take weeks to implement, especially if the reconciliation process is used — and time is running out. In case of emergency, a trillion-dollar coin could be deployed to bridge any gap between the money running out and the debt ceiling being raised.

How it works: The U.S. Mint, which Diehl ran from 1994 to 2000, already produces a one-ounce Platinum Eagle and has no shortage of platinum blanks already in stock.

Producing a trillion-dollar Eagle would require only the denomination to be changed. “This could be quickly executed on the existing plaster mold of the Platinum Eagle,” says Diehl. Then an automated process would transfer the new design to a plastic resin mold.

Even if Janet Yellen, the Treasury secretary, has no intention of minting such a coin, there is no reason for her not to quietly instruct the Mint director to take those steps a day or two in advance.

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Posted at 8:25 AM (CST) by & filed under Jim's Mailbox.

Bill,

Very concisely:

China has but 3 ways to go.

1/ Ignore the problem, which is impossible for a Maoist State long term about to survive as a staged planned economy.

2/ Do what we would try to do via debt self monetization.

3/ Use a balance sheet solution. They do not officially increase the price of gold but in partnership (so to say) open gold Monday $3500 bid – $3500 offered in terms of their external currency. They stand and take all offerings and fill all bids. This way the marketplace fixes the price of gold. No country by mandate. China has 2 reserves of gold, the official one and the public one. China now has the formal reserve and informal reserve that they can call on. The gold of the people and the gold of the state. This is like poker, calling the hand of all the other country gold liars.

The Comex cannot open but rather has only one choice. That is settle all open gold and silver contracts at the dollar price of the prior close and closed themselves. No short cover can be made except trading at $3500 bid – $3500 offered at the close of the day before in cash.

Now, where do you buy significant gold or silver? The answer is nowhere, except Russia or China.

This tanks the entire fiat system except for Russia and China, as they have used a balance sheet fix to handle the sovereign bankruptcy problem They immediately set up two companies. Good Property Company and Bad Property company. They immediately start to remediate the good and liquidate the bad. The good can issue bonds denominated in the good and bad property companies are transferred to the old bondholders. The stockholders are totally screwed.

China calls in the people’s unofficial gold reserve in exchange for the value of $3500 in an instrument to be paid overtime. Those that tender their gold go to the top of the Maoist state get top ratings in their index of Social Order with an adjunct membership in the CCP for their act a good Maoist citizen.

This will via credit collapse tank the dollar in its only real measure against gold, not the phony USDX.

China’s currency will emerge stronger than the dollars against its massive gold holding. True also for Russia if they play along with China on Monday’s opening, if they are enlightened economically and do as I say, any Monday or Friday.

Try and pick my thesis apart. You cannot, as the above is just the skinny of what I would do if I ran China. Win the economic war in one day. The USA would today not win a hot war with China and Russia because our two enemies have HYPERSONIC ICBMs plus leadership.

What you cannot catch you cannot kill. Our laser weapons are deficient in aiming and strength control at the target.

Number 3 wins the economic and political war in one-day choice #3.

Regards,

Jim

Jim,

The balance sheet option has been the only option since the 2008 life support action, which can never go away. It is the only action available because central banks have nothing else they can revalue to repair past stupidity. Once gold becomes “unobtanium”, the only place for gold exposure will be the miners themselves. Not a bad deal though because you then get leverage without the margin Man!

Best,

Bill

Dismal Dave with visuals of the outliers we live!
Bill

‘In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.’ Rüdiger Dornbusch. (1942-2002).

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