Saturday, June 30, 2012

Greyerz – Greatest Financial Collapse The World Has Ever Seen

from KingWorldNews:

With global stock markets trading in the red, today Egon von Greyerz told King World News that people are going to witness the greatest financial collapse the world has ever seen. Egon von Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also said, “…investors are under the illusion that the system will continue, but it won’t.” Here is what Greyerz had to say about the the coming financial collapse: “As always, Eric, I’m focusing on the big picture. We are in a crisis, and the outcome is absolutely certain. What is not certain is how we get there. The problem is it’s not only one crisis, it’s a number of crises. We have the first one which is the sovereign crisis.”

“Almost every single major country in the world is bankrupt, and no one has the tools or a plan to get these countries out of this crisis. So countries will go bankrupt by default or by printing excessive money. This situation will continue to get worse and ultimately lead to a hyperinflationary depression.

Egon von Greyerz continues @

John Manfreda – Why Oil Is Down And Why It’s Going Back Up

from FinancialSurvivalNet

John Manfreda believes that oil prices are headed higher, especially when the next round of money printing begins in earnest. John recently authored a report that explores the trends and future prices in depth. He’s unconcerned about US and European demand, as he believes the developing world has more than picked up the slack and will continue to do so. Oil seems to have fallen into an interim sweet spot of $75-85. Each time the price has gone above that $85, it’s been beaten back, and it hasn’t gone below $75 for long periods of time. One thing is certain, the world will need ever increasing amounts of oil, and while we may not suffer shortages due to so-called peak oil, the costs of extraction will increase over time.

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The next huge investment bubble could be happening here

Investors seem to have a bottomless appetite for investment grade (IG) corporate paper. Issuers are coming to market to borrow money at ridiculously low rates. Even for the longer maturities the spreads are 1-2% above the corresponding treasury yield. Here are some examples:
  • Tyco: 10-year notes at Treasuries + 190bp
  • Markel: 10-year notes at Treasuries + 225bp (this firm is BBB)
  • John Deere: 10-year notes at Treasuries + 122bp
  • Caterpillar: 10-year notes at Treasuries +110bp
People are lending to CAT at 2.7% for 10 years! Who is buying this paper? Institutional investors of course, but also mutual funds, and ETFs. The ETF situation is particularly scary because it is driving some of these low yields and should be viewed as short-term money.

Below is a chart of shares outstanding for LQD, the iShares IBOXX investment grade corporate bond ETF. This thing is now $22.3 billion in assets (growing rapidly as new money pours in), and Larry Fink is opening the Champagne - again. LQD paid out 1.7% in dividends YTD (3.4% annualized) and investors can't get enough of it. People are betting that rates/spreads will go down even further and they will get capital appreciation on top of the crummy interest income. This looks like another crowded trade that is not going to end well.

LQD shares outstanding

Crude Oil Price Bubbleomics Impact on EP Valuations

By Andrew Butter, The Market Oracle:

The news is that Peak Oil didn’t come to town just yet, at least not according to the 2011 world oil production reported in the latest BP Statistical Review of World Energy.

That’s shown here along with lines for America, Canada, Saudi Arabia and other GCC countries (UAE, Qatar, Kuwait and Oman) on the right hand scale, in 2011 together all those places accounted for 37% of world production.

So the peak wasn’t in 2005 like Dr. Campbell predicted or even in 2006 which is what the IEA said last-year. It may turn out to have been in 2011 but we are going to have to work through 2012 to find that out, or even longer, depending mainly on how the European experiment with getting to work on donkeys plays out.

From the chart it looks like Saudi Arabia is not such a big swinger as they were in the 1970’s and 1980’s. Nowadays they and the other GCC states are just milking that cow for all she is worth while the good times roll.

Read More @

Adrian Douglas: A Good Time to Buy Gold

By Adrian Douglas, GATA:

Dear Friend of GATA and Gold:
GATA board member Adrian Douglas, publisher of the Market Force Analysis letter, who has been sidelined in recent months as he has been recovering from illness, returned this week.

Many investors are unsure as to whether gold is a good investment and if gold will continue its rise in price that started twelve years ago. Those who have not invested in precious metals may well be thinking that their investment is too late. Other investors who hold the metal are wondering if gold will fail to reach new highs.
A reassurance that precious metals are nowhere near their potential is that the world has in no way started to resolve the massive debt burden that has been created. Precious metals are one of the few things that can be purchased that have no counter party risk. I prefer to look at precious metals from the different view point that paper money is being debased at an alarming rate due to excessive issuance of paper and it is the precious metals that are not altered. By holding precious metals, one is able to preserve purchasing power. In fact, when panic sets in, the rush for precious metals will actually increase purchasing power.

Read More @

Doug Casey on the Coming Eurocrash

by Louis James, Casey Research:

(Interviewed by Louis James, Editor, International Speculator)

L: So Doug, you’re off to FreedomFest 2012 shortly, where people will be able to hear your latest thoughts on many subjects. Maybe you can give us a sneak preview on whatever is uppermost on your mind today.

Doug: FreedomFest should be especially outrageous, since I’ll be tag-teaming with my friend Jeff Berwick of the Dollar Vigilante for a featured lunch. I’m not sure exactly what topics we’re going to discuss, but I hope we aren’t prosecuted for breaking too many federal, state, and local statutes at one sitting.

Anyway, lately I’ve been thinking about the EU’s rising tide of troubles. We talked about this last January, when I said it was coming, but it seems to me that at this point it’s rapidly coming to a head. A major financial and economic catastrophe in Europe is unavoidable. From there, it’s likely to spread out to the whole world.

L: I fear you’re right, but the latest headlines have it that the EU bigwigs are taking measures to make it easier for Greece’s new pro-bailout government to honor its austerity obligations. Doesn’t that mean the EU has dodged the bullet for now?

Doug: As far as I can tell, they’re doing absolutely nothing except print up more currency, in hope that will move the problem further into the future, when a deus ex machina device will magically appear.

Read More @

Brent & WTI Curves are not Converging any Time Soon

By Walter Kurtz, Sober Look

The Brent-WTI crude oil spread has dropped materially from the peak, but managed to stay above $11/barrel. It has now recovered to $13. What’s more interesting is the difference in the shapes of the two curves – particularly given that Brent and WTI are essentially the same products.

Brent is in backwardation, while WTI is in contango. Backwardation generally means tighter supply (more demand for the spot product) – a bullish indicator, while contango tends to indicate the opposite. It says that the crude market in the US (particularly in Cushing, OK) is well supplied, which is not the case with Brent (at least not nearly as much).

Brent and WTI futures curves

There is talk however that the gap between these two curves will close fairly soon (ht John A).

Bloomberg/BW: – The energy guys at Goldman Sachs, led by analyst David Greely, think that by the end of 2012 the price of WTI will be just $5 below Brent, largely because new pipeline projects, such as the recently reversed Seaway, will allow more domestic crude to reach refineries along the Gulf Coast, making WTI more valuable. In essence, the more domestic crude that reaches the Gulf Coast, the stronger the floor beneath the price of WTI becomes.

Some people doubt Goldman’s forecast however. If traders truly believed in this rapid convergence, the two curves above would be approaching $5 spread six months out. Instead the difference in the January 2013 contracts is above $11.Analysts instead are looking at brisk US crude production that has been on the rise this year (we had signs of that increase earlier in the year).

US crude oil production (thousands of barrels per day; source EIA)

It means that in spite of the reversed Seaway pipeline that is delivering US crude to the Gulf Coast (to the large US refineries), there is still not enough pipeline capacity to accommodate this increased production, putting downward pressure on WTI.

Bloomberg/BW: – “Five dollars is not likely,” says Fadel Gheit, an analyst at Oppenheimer. “And even if it does go to $5, it’s not going to stay there.” Gheit points out that as long as WTI stays above $70, drilling companies can still make money producing new wells, which in turn, he says, will keep WTI anywhere from $8 to $12 below the price of Brent.

Art Cashin – Shorts Squeezed in Dear God Get Me Out Moment

from King World News

With global stock markets on the move, while gold and oil exploded to the upside, today Art Cashin told King World News that for the shorts, “It is a kind of ‘Dear God get me out of here and I promise not to do this again.’ So a general panic along those lines.” Cashin, who is Director of Floor Operations for UBS, which has $612 billion under management, also commented on the spectacular rally in gold and oil. Here is what Art Cashin had to say: “Expectations for this summit were so low that if they came out of it without a fist-fight, we probably would have had a rally. The idea that they may have gotten something moving, caused a spectacular short-covering rally in the euro and put pressure on the dollar. You can see oil is up 8%.”

Continue Reading at…

Sprott – We’re Being Lied To, Even The 1% Is Having Problems

from KingWorldNews:

Today billionaire Eric Sprott gave King World News an extraordinary interview, and it’s not the kind of thing you are going to see in the mainstream media. Sprott told KWN, “…as much as we knew the 99% was having a problem, I can guarantee you the 1% is having a big problem today.” Sprott, who is Chairman of Sprott Asset Management, also said, “the markets go up because the central planners want the markets to go up … The system is imploding on itself, but the central planners want everyone to think it’s fine. They just lie to us.”

He also stated, “…there is no plan, no formalized plan, no agreed to plan. It’s all just vaporware.” Here is what Billionaire Sprott had to say about what is happening: “Today’s rally (end of quarter window dressing), even though there is no agreement by the way, but the markets go up because the central planners want the markets to go up. But the fundamentals for the market are deteriorating by the day. We have more and more warnings, retail sales are plunging.”

“There’s no way to stimulate things. We’ve already got a zero interest rate policy, now they are talking about a negative interest rate policy. We don’t have the room to stimulate because we’ve already got massive deficits. So I don’t see a way of pulling the world out of its economic funk any longer.

Eric Sprott continues @