The US markets awoke to news of several big, disturbing overseas events:
Glencore implodes. Think of Swiss commodities giant Glencore as a modern version of Enron, in the sense that it owns physical assets like mines and oil wells around the world and runs perhaps the biggest commodities derivatives trading desk. And — also like Enron — it’s apparently unprepared for extreme commodity price volatility. This morning its stock price plunged even further and its credit default swaps — the cost of insuring payment on its bonds — blew out to record levels.
If Glencore loses its investment grade rating as now seems likely, its access to cheap capital will evaporate and it will fail. This matters for several reasons, the most important of which is the company’s unspecified but certainly huge derivatives book which, like AIG’s in 2008, is a serious threat to the leveraged speculating community.
Commodities from oil to gold are down hard on the news.
Saudi Arabia cashes out. The world’s dominant oil exporter can’t pay its bills with crude at $50 a barrel so it’s spending down foreign exchange reserves and borrowing hand over fist. This morning it was reported that the Saudi sovereign wealth fund — a major player in global bond and equity markets — was cashing out and bringing its money back home.
The amounts in question — $70 billion so far — are potentially a big deal for the funds that manage this money and are now seeing major outflows. According to one article: “Institutions such as State Street, Northern Trust and BNY Mellon…are therefore also likely to have been hit hard by the Gulf governments’ cash grab.”
VW execs investigated for fraud. Illustrating the difference between car makers and banks, the German government is considering criminal charges for the actual human Volkswagen executives responsible for falsifying auto emission results. That’s good for the world in general but potentially very bad for the German economy, which is a big exporter of cars, and for global equity indexes, which include the major car companies.
Stock markets around the world were spooked by these and other stories, with most major exchanges down between 1% and 2%.
29 thoughts on "The Week Begins On A Scary Note"
When all of the dollars come back to us (over 9 trillion of them were borrowed by the Emerging Markets alone) they will then need to sell their gold to pay our interest. But who will buy that gold? Not at today’s prices I assure you. Much lower, because it is worthless, but we are kind. And then we will make the rules.
The DOW is up almost 2 pts as of 12:30 est. So much for a scary week.
Wait.
This site is hilarious. The only catastrophe in sight is the one the idealogical readers of sites like this have self-inflicted upon their own retirement accounts.
yeah you know you are right Eric, you should go long the stock market and short silver, and with those brilliant investments paying you future dividends, you should buy a big big house with a 30 year variable rate mortgage….why? because people who have faith in the system always end up winners!.
see yah later (and we’ll discuss how it worked out)
The only thing that is hilarious here is your comment.
The US Economy is far from strong . It is in fact teetering on the brink of the greatest financial implosion the world has ever seen. The unwind has yet to begin in earnest but the rumblings are underway.
We’re losing breadwinner jobs by the thousands .
When do our citizens finally wake up and take action while there is some room left to maneuver? Cash is now outpacing all other investments.
Why ? Because the smart money can see what’s beginning to take shape.
It’s no longer the alternative media who’re predicting this meltdown folks, Icahn, Grant, Gross and many others are now on board and all are telling you to get your money and protect yourself while you still have time.
Oh and BTW don’t wait for another non- statement from the Fed things are well beyond their ability to control them now !
If anyone decides not to listen from this point forward they actually deserve what’s about to happen.
Agreed. So listen to this: The US is, ironically, emerging as a greater power than ever. The rest of the world has accepted our currency in exchange for their goods and now has to maintain us or they will impoverish themselves. The almighty dollar has infiltrated the entire world and effectively owns it. Default on our bonds and you will lose your sovereignty, by threat of military force. Repay your existing loans by borrowing more. China is the lynch pin. If it does not kowtow to us we will quickly collapse it back to its historical mean level of mass chaos. China has few friends, and who will be willing or able to protect it from Korea and Japan?
On August 15 , 1971 president Richard Nixon closed the Gold window thus eliminating convertibility to Gold ultimately decoupling the US Dollar from any precious metal. That action produced a Fiat Currency which is totally supported by debt . It is debt which has kept it afloat these 44 years since it’s inception. The drying up or collapse of liquidity which is underway will eventually sink this Dollar and all other Fiat Currencies.
As the Dollar deflates it collapses so the Dollar is dependent on inflation to survive. Since 1971 something that cost 20.00 then now would cost 117.69. Deflation is the kiss of death to fiat money and that’s what is occurring as we speak. This is also the reason banksters are pressing for negative Interest rates ( yes you will pay the bank ) and capital controls to force American’s to stop saving and start spending in a last ditch effort to inflate.
How dare you disparage the US dollar! Try buying your next meal without them and then we’ll talk about how worthless they are. Why would capital controls be needed if the whole world didn’t want them? Deflation means dollars are INCREASING in value.
Deflation means people are hoarding cash. The velocity of money is slowing down. People are using the dollar because the U.S. is seen as the global giant around the world, and their money is safe. The government need only raise taxes to raise money. So your money is protected by the taxing power of the federal government. And paper isn’t money. It is to the benefit of the bankers we use paper money backed by nothing. Fiat will lead to the destruction of this global giant at some point as it did with all others who have tried this experiment. It’s purpose it to transfer wealth, and what a good job the paper has done by transferring the wealth of this nation into the richest 85 families in the world.
The price action today shows what a terrible investment gold and silver are, and even a worse store of value. One would do better to lend money to Saudi Arabia (sell it bonds) and/or to buy Glencore stock on this dip. The US economy is strong and the global economy (led by China) is rebounding.
Judging by your post marijuana futures are doing great too because you and people like you are smoking it by the TON! We are days away from a major global collapse, October will see the Great Recession part deux, even though part one never ended really. And it’s a depression not a recession, all ALL income gains since Bill Clinton left office have gone to the wealthiest 10% in the economy, even though there are many millions more of us to divide up the crumbs that fall from tables of the elite oligarchs. Time for all that faux money to vanish and then what will be left will either be gold or silver or glowing in the dark.
The US dollar is the world’s reserve currency and it is becoming stronger and more valuable as all US dollar denominated debt holders scramble for the precious lucre to pay it off. EVERYTHING else is subordinate and will be sold off at any price, including the barbarous relic gold, else the credit ratings of entire nations will fall below 500. The shame in that is palpable. There is nothing wrong with being one of the wealthiest 10% who profits from our loans and buys gold with our proceeds (but being of the 1% is roughly ten times better.)
Debts, in general, are never going to be paid off, whether in dollars or any other currency. We can see cascading defaults, or we can see governments collectively devalue to facilitate nominal pay-offs in largely worthless currencies. #2 will seem preferable in the short term, so that’s what they’ll choose.
A flight to the “safety” of an unbacked currency is temporary, but as you don’t appear to have longer-term thinking, you may not be able to understand that.
Then we will confiscate the collateral that back our loans. US dollars are the only legal tender, as a matter of law, we will accept so unless dollars can be procured they will forfeit their “first borns” or have them taken by military force.
Collateral… hahaha!! Well, at least you’re a comedian!
Also, I was including our debts to others.
Our Treasury debts never die, they just get traded around and then replaced. Only fools and the desperate sell US Treasury bonds because they are worth so much and pay interest, but those who buy them are smart. The 1% has effectively confiscated the world by lending virtual money that can’t be repaid, hence confiscation of the loans’ underlying collateral. At last, we will OWN THE WORLD, and without firing a single shot!
Hey you can have my first AND second born…bad investments anyways…
Maybe I wouldn’t want them either, then what?
The Swiss government may come under a lot of pressure from other countries to bail Glencore out. No one wants a derivatives implosion, plus some of the sovereign wealth funds have invested in Glencore, including China. They’re the Swiss, though, so it’s possible they won’t do it.
Always a treat to get new JR headline articles on back to back days.
“Saudi Arabia cashes out. The world’s dominant oil exporter can’t pay its bills with crude at $50 a barrel so it’s spending down foreign exchange reserves and borrowing hand over fist.” (it seems axiomatic if your foot is bleeding stop shooting yourself in the foot- or maybe pump less oil.)
This is kind of funny given that last week I read an article about an Arab that paid 75 million dollars for a birthday/engagement cake for his daughter. You know the world is in trouble when the new record setting price for a cake the size of a normal dinner table can go to $75,000,000.00 and that breaks the old record by 25 mil.
Money to burn, chicks are free……………
What’ts really funny (well, it’s not funny to the rest of the cartel members) is that they are supposedly part of a cartel designed to keep the price of oil up.
Buy the derp! Buy the derp!