The collision of global markets and social mood

Thursday, June 9, 2016

Thursday -- Mervyn King, Alan Greenspan, Brexit, Scenarios

S&P E-mini Futures:
Another overnight reversal, this time down.

Former head of the Bank of England Mervyn King is making the rounds touting his new book The End Of Alchemy, which sounds increasingly like the end of central banking.

The headline of course is that he advocates owning gold. But I think it should be this:

"...when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept."

Accidental subtext, or an informed prediction?

What if it's already known that England will leave the EU. The EU crumbles, peripheral EU debt markets collapse, global equity markets crater, the USD soars, and so does gold for a short while, until massive deflation and debt deleveraging sparks a scramble for cash which results in gold plunging below 1,000 for a spell.

Guess who benefits? Central banks, especially the Fed, who instantly avoid blame for the crisis.

King also hinted that in a crisis, the US could conceivably annul all of its Chinese debt. Interesting.

What if it was taken further.

Suppose several governments in developed countries annulled entitlements.

Alan Greenspan recently stated on Fox Business News: “Our problem is not recession which is a short-term economic problem. I think you have a very profound long-term problem of economic growth at the time when the Western world, there is a very large migration from being a worker into being a recipient of social benefits as it is called. And this is legally mandated in all of our countries."

Another great reason for a crisis from an external source not to go to waste, but instead become the ideal excuse for emergency powers to annul "onerous obligations."

Turns out the warning from CHF and JPY was accurate once again. Equity markets in Asia fell en masse last night, and Europe is well red. Commodities are under pressure. AUD, CAD, NOK, and MXN ditto. JPY is still showing strength, but CHF has eased.

The culprit? USD.

Prices need more volume if they are to continue materially higher without a correction.

Neither WTI crude nor NG have escaped the USD trubs.

Nor have copper, platinum, and palladium, each down. But gold and silver remain firm thus far.

S&P Outlook:
A very weak open with strong down ticks and weak A/Ds has just occurred.

It looks like a close below 2108 is needed for things to truly reverse, however.

The rising VIX served as a good warning to take some longs off the table as the market ghosted higher.

Added some SPY 212 calls to go with SPY 207 puts. Just banked SPY 212 puts at the open.

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