Saturday, January 17, 2015

Let's Recap a Wild Week

This week we saw volatility ramp up to new heights in all kinds of markets. As sometimes happens, so many events are moving so quickly it is hard to keep up in real time. Below is a list of just some of the key events unfolding right now. All of these could impact the stability of the monetary system and also be the start of events that could lead to monetary system change. That is what we follow here.

Here is a partial list of significant events happening now:

1 - concern over Greece debt and its upcoming election 

2 - court ruling that allows the ECB to start up a new QE program, more on that coming as early as next week

3 - #2 above may have prompted the Swiss National Bank (SNB) to shock world markets
by throwing in the towel on its efforts to cap the rise of the Swiss franc versus the Euro. This has caused massive market instability and a loss of confidence in central banks (even a Fed board member commented on this)

4 - world stock markets are rocked with volatility

5 - oil prices continue to look weak even after a 50% drop already. many think this is a signal that the global economy is slowing much faster than expected

6- copper prices fall sharply as well, another sign of a weak global economy

7- Japan, the EU, Russia, and China all apparently struggling economically

8 - the Ukraine debt situation is coming to head (they could default if Russia demands immediate payment on a $3 billion bond). Everyone is wating to see if the IMF puts together another bailout package for the Ukraine

9 - US economic numbers are suddenly starting to weaken withe very bad retail sales numbers and an uptick in the latest jobless numbers. After years of trying the Fed has been unable to get the 2% inflation rate it targeted. Now talks is starting up that they may have to delay rasing interest rates

10- Gold and silver explode upwards in chart breakouts from long multi-year downtrends

Clearly, the relative peace and quiet we have enjoyed in the markets for awhile now has gone away. There are so many significant events happening all at once that it is hard to know which ones may be impacting markets the most. 

We have seen market volatility before of course. Perhaps this will just be another time that things calm back down after some time passes. The problem is, we cannot know which one of these times of market volatility may trigger another serious global financial crisis. 

As we have pointed out here many times. there are all kinds of derivative products hidden out in the system that depend on stable markets and prices staying within certain ranges. When this does not happen, there is no way of knowing what derivatives have been triggered and if some too big to fail entity is once again in big trouble. Oil, commodities, some currencies, and some interest rates are all moving in volatile fashion. All of these have trillions in derivatives tied to them around the world.

There is never any warning given about this kind of thing (ask the hedge funds just bankrupted in one day by the Swiss National Bank). It is critical to stay alert and informed during these periods of market volatility. We will do our best here to help out with that process.

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