"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, January 24, 2014

Emerging Markets Stress Continuing

Yesterday I mentioned that stress in emerging markets was providing strong safe haven flows into bonds and into gold. The Commodity currencies were generally under pressure as a result with Europe benefitting as well as the Japanese Yen. The Dollar is not getting much of a safe haven flow, which coming on the heels of this sort of thing is rather remarkable. US Treasury yields are sinking once again.

The Turkish Lira was a big event yesterday; today it is the Argentinian Peso. Ukranian credit markets, etc,. The list could go on. This is where the bid in gold is coming from especially as equity markets weaken.

This is one of those events where things can spiral out of control very quickly, especially in this age in which huge leveraged bets have been placed.

We will keep a close eye on this but one thing is certain - at least for now - gold is responding like one would expect it to do during times of economic uncertainty.

I am also noticing the VIX is rising once again. It is by no means in "fear/panic" territory but some of the complacency that has marked the US equity markets for so long is having some second thoughts.


  1. Canary in the US Stock Coal Mine "
    XLF has crossed under its 50 day mov avg.
    Ofcourse one has to wait till end of Friday ( and even perhaps Monday)
    to confirm any kind .....Yellin' around the corner !!

    Financial Select Sector SPDR (XLF)
    -NYSEArca Follow

    21.40 Down 0.20(0.93%) 9:47AM EST - Nasdaq Real Time Price

  2. Dan,

    Probably too early for outflows from US equity market. Not confirmed by my analysis, but it's likely coming, gold and silver are likely the vulnerable plays.


    1. Eric;

      Hello there my friend!

      Thanks for keeping us up to date on this. These credit events have made me extremely watchful and cautious ever since we saw what happened with them in 2008 and then again during the European sovereign debt crisis.

      By the way, I added a link to your blog over on the right hand side of the page here!

  3. Hubert, going short the miners for the day? Took profits on the long position and short for a bit. Steins

  4. As usual, gold stocks are hit harder than anything else.

    GDX/GLD ratio now plummeting again


    1. really … you just want to piss people off . you should get a job on tv , i m sure you ll do pretty well … have you ever heard about the turd that wont flush ? … every day , huh ?

  5. Thank you for your astute observations.
    It had to be the almighty (and KWN ) which steered me to this blog
    or else I would never benefit from your keen insight.


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