Credit Markets




Distortions and Crazy Ideas

We have come across a few articles recently that discuss some of the strategies investors are using or contemplating to use as a result of the market distortions caused by current central bank policies. Readers have no doubt noticed that numerous inter-market correlations seem to have been suspended lately, and that many things are happening that superficially seem to make little sense (e.g. falling junk bond yields while defaults are surging; the yen rising since the BoJ adopted negative rates; stocks rising amid a persistent decline in earnings growth; bonds, gold and stocks moving in unison, etc., etc.).


puzzled-man-scratching-headUnknown veteran trader experiences another WTF moment.

Photo credit: Everett Collection


Read the rest of this entry »




A First Step Toward Sound Money

The Arizona House of Representatives has convened an Ad Hoc Committee on Gold Bonds. The purpose is to explore if and how the state could sell a gold bond.


fourth-liberty-loan-50-gold-bond-of-1933-1938-8A United States gold bond of yore: the 4.25% Liberty Loan of 1933-1938


Read the rest of this entry »




Insanity Rules

Bond markets are certainly displaying a lot of enthusiasm at the moment – and it doesn’t matter which bonds one looks at, as the famous “hunt for yield” continues to obliterate interest returns across the board like a steamroller. Corporate and government debt have been soaring for years, but investor appetite for such debt has evidently grown even more.


Perfect-InvestmentThe perfect investment for modern times: interest-free risk!

Illuustration by Howard McWilliam


Read the rest of this entry »





BALTIMORE –  Barron’s, in a lather, says the market is facing the “Two Horsemen of the Apocalypse.” Huh?


Apocalypse_vasnetsovOnly two? There were four last time!


Read the rest of this entry »




A Sucker’s Deal

The yield on the 10-Year Treasury note’s accelerating its descent toward zero.  The last we checked the yield was at about 1.56 percent.  But in every practical sense, for income investors, a yield of 1.56 percent may as well be zero.


1 - 10 year treasury note yieldEven though the US treasury note is like the one-eyed man in the land of the blind these days, it still is a guarantee to lose money in real terms if held to maturity – click to enlarge.


Read the rest of this entry »




The Sharp Move in the VIX Accelerates

In Monday’s trading session, the upward move in the volatility index VIX (which measures the implied volatility of SPX options) continued unabated, vastly out of proportion with the move in the underlying stock index. “Brexit” fears continue to grow, which has apparently been the driving force behind this move.


Una manifestazione a favore di Brexit a LondraThe “Brexiteers” are gaining support as the referendum date draws closer – global financial markets are getting somewhat upset over this.

Photo credit: Neil Hall / Reuters


Read the rest of this entry »




Money Printing and Price Inflation

Ten years back when the central banks around the western world—as elsewhere—were printing money with abandon, it was claimed by rational observers that this would lead to hyper-inflation. It was claimed that the best the central banks could do was to control short-term interest rates, surreptitiously expropriating the wealth of citizens.

Eventually the market had to find out, directly or indirectly, what was happening — as newly printed currency played havoc in the market — and prices in nominal terms would rise. Long-term yields on sovereign bonds were expected to sky-rocket, to account for increasing inflation.


800px-Salon_de_Madame_GeoffrinThe Age of Reason: Salon de Madame Goeffrin, a painting by Anicet Charles Gabriel Lemonnier, showing distinguished French thinkers of the Enlightenment gathered in one room.


Read the rest of this entry »




Loan Losses and Rumors

We want to briefly comment on recent news about a rise in loan loss provisions at US banks and rumors that have lately made waves in this context.


iceberg, ClevengerThe iceberg – an excellent simile for what we know and what we don’t know… or rather, what we don’t know just yet.

Image credit: Ralph A. Clevenger


Read the rest of this entry »




Trouble in High Yield Bonds Begins to Spread

It has become clear now that the troubles in the oil patch and the junk bond market are beginning to spread beyond their source – just as we have always argued would eventually happen. Readers are probably aware that today was an abysmal day for “risk assets”. A variety of triggers can be discerned for this: the Chinese yuan fell to a new low for the move; the Fed’s planned rate hike is just days away; the selling in junk bonds has begun to become “disorderly”.


288205Photo credit: ORF


Read the rest of this entry »




While the Stock Market is Partying …

There are seemingly always “good reasons” why troubles in a sector of the credit markets are supposed to be ignored – or so people are telling us, every single time. Readers may recall how the developing problems in the sub-prime sector of the mortgage credit market were greeted by officials and countless market observers in the beginning in 2007.


oil rigPhoto credit: Getty Images


Read the rest of this entry »




[Ed. note: for a change, we are presenting a post by a stock market bull below, namely Sid Riggs, via Bonner & Partners. It is always refreshing to see a well-reasoned argument that is contrary to one’s own opinion – after all, no-one really knows the future and Sid makes a number of important points, which deserve to be given attention. Sid is actually quite correct with respect to the historical correlation between rate hikes and the stock market. The strongest counter-points we can offer are these: 1. the market is extremely overvalued, 2. long-term positioning data show that everybody is “all in” already and 3. a rate hike would not be the first act of tightening monetary policy, but in fact the third. Act one was the “taper”, act two the cessation of QE. Given the paramount importance of money supply growth to stock prices, we would argue that the decisive factor will be whether or not commercial banks decide to expand credit.]


A Powerful Lesson from the Recent Past

There is a lot of lip service being paid to the stock market crash that we’re supposed to expect once the Federal Reserve starts raising rates. Every time we get close to a regularly scheduled Federal Reserve statement, financial pundits pontificate about the nuances of what the Fed chair might say, not say, or imply. It’s like clockwork.



Read the rest of this entry »




No-One is Paying Attention – Yet

Almost exactly one year ago, we penned several articles on what we believed to be a dangerous bubble in corporate debt. The boom in both prices and bond issuance was primarily driven by the desperate “hunt for yield” of investors starved of interest-income by the inane ZIRP and NIRP policies enacted by major central banks all over the developed world.

There is no need to rehash all the arguments we made at the time – as a refresher, readers may want to revisit “A Dangerous Boom in Unsound Corporate Debt” and “Comfortable Myths About High Yield Debt” for the details. So far, the potential dangers we identified at the time haven’t become fully manifest yet, but there are now signs that this may be about to change.


i promiseI promise!

Image credit: Minerva Studio


Read the rest of this entry »

Most read in the last 20 days:

  • 5-cotmmrangegc03Ganging Up on Gold
      So Far a Normal Correction In last week's update on the gold sector, we mentioned that there was a lot of negative sentiment detectable on an anecdotal basis. From a positioning perspective only the commitments of traders still appeared a bit stretched though, while from a technical perspective we felt that a pullback to the 200-day moving average in both gold and gold stocks shouldn't be regarded as anything but a normal - and in this case actually long overdue -...
  • gold_bullionGold Sector Correction – Where Do Things Stand?
      Sentiment and Positioning When we last discussed the gold sector correction (which had only just begun at the time), we mentioned we would update sentiment and positioning data on occasion. For a while, not much changed in these indicators, but as one would expect, last week's sharp sell-off did in fact move the needle a bit.   Gold - just as nice to look at as it always is, but slightly cheaper since last week. Photo via The Times Of India   The commitments of...
  • wryAustralian property bubble on a scale like no other
      Australian property bubble on a scale like no other Yesterday Citi produced a new index which pinned the Australian property bubble at 16 year highs:   Bubble trouble. Whether we label them bubbles, the Australian economy has experienced a series of developments that potentially could have the economy lurching from boom to bust and back. In recent years these have included:    the record run up in commodity prices and subsequent correction;  the associated...
  • "What if we don't change at all ... and something magical just happens?"Prepare for the Unthinkable
      Red Ink Growth and profits mask a variety of problems.  They hide business inefficiencies and the money suck of corporate adminis-trivia.  They also conceal unproductive staff.   The final career leap   But most of all growth and profits obscure the extreme value subtracting forces of bloated management teams.  During good times it is unclear what these smug fellows do.  During bad times it is lucidly clear that most of them ain’t worth a darn. When the...
  • andy-duncan-and-claudio-grassA Looming Banking Crisis – Is a Perfect Storm About to Hit?
      Andy Duncan Interviews Claudio Grass Andy Duncan of has interviewed our friend Claudio Grass, managing director of Global Gold in Switzerland. Below is a transcript excerpting the main parts of the first section of the interview on the problems in the European banking system and what measures might be taken if push were to come to shove.   Andy Duncan of (left) and Claudio Grass of Global Gold (right)   Andy Duncan: How do you see the...
  • spankinggoodtimeUS Stock Market - a Spanking May be on its Way
      Iffy Looking Charts The stock market has held up quite well this year in the face of numerous developments that are usually regarded as negative (from declining earnings, to the Brexit, to a US presidential election that leaves a lot to be desired, to put it mildly). Of course, the market is never driven by the news – it is exactly the other way around. It is the market that actually writes the news. It may finally be time for a spanking though.   Time for some old-fashioned...
  • www-usnewsLove him or Hate him: Trump is the Revolution Against the Establishment
      The U.S. Elections: The Latest Crack in the System The 2016 U.S. presidential elections are unprecedented: I don’t believe we have ever witnessed before a campaign year so toxic, so dangerously divisive and full of ad hominem attacks. Both camps have vilified the opposition and their followers, creating a schism in society. There has been no rational dialogue on the issues that truly concern the American public.   The schism Illustration by : M. C....
  • larry-1Meet Your New Stimulus Allocation Czar
      March Towards Midnight The march towards midnight is both stirring and foreboding.  Like a death row inmate sitting down to savor his last meal, a grim excitement greets the reality of impending doom.  Thoughts of imminent mortality haunt each bite.   Tic-toc, tic-toc...   As far as the economy’s concerned, there’s no stopping its march towards midnight.  The witching hour’s rapidly approaching.  We intend to savor each moment and make the best of...
  • state_police_980_600_s_c1_t_c_0_0_1Are the Deep State’s Drones Coming for You?
      What’s Aleppo?   Look out kid Don’t matter what you did Walk on your tip toes Don’t try "No Doz" Better stay away from those That carry around a fire hose Keep a clean nose Watch the plain clothes You don’t need a weather man To know which way the wind blows – “Subterranean Homesick Blues,” Bob Dylan   The entrance to Baghdad's “Green Zone”. Photo credit: Karim Kadim / AP   DELRAY BEACH, Florida – Biggest foreign policy blunder...
  • chairman-tienanmen-square-beijingDonald is Right – The System is Rigged
      Scams and Flimflams BALTIMORE – For weeks, the top news headlines have been about politics. And politics has been all about the Republican Party candidate for president of the United States, Donald Trump.   Two very different elections...   The Establishment, the media, and most right-thinking people look around and sniff the air. Something stinks. And the smell, they say, is coming from that skunk, Trump. Meanwhile, Hillary, all greased up with expensive...
  • speculatorInterview with Doug Casey
      Natalie Vein of BFI speaks with Doug Casey   Our friend Natalie Vein recently had the opportunity to conduct an extensive interview with Doug Casey for BFI, the  parent company of Global Gold. Based on his decades-long experience in investing and his many travels, he shares his views on the state of the world economy, his outlook on critical political developments in the US and in Europe, as well as his investment insights and his approach to gold, as part of a viable strategy for...
  • where-to-goThe Bamboozled Middle Class
      Gassy and Bloated BALTIMORE – What a great time for an observer with a sense of mischief! This year’s presidential campaign is the most absurd and remarkable we have ever witnessed. After more than two centuries, Americans are finally getting the democracy they deserve – one that is grotesque... slimy... and immensely entertaining, albeit in the mud-wrasslin’ genre.   The mud-wrestlers – well, we did promise you in these pages it would be entertaining like never...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank




Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Buy Silver Now!
Buy Gold Now!