Thursday, March 15, 2012

A Sense of Unease in the Markets

Gold, and commodities sold off today. Are we seeing a wobble of huge proportions in the markets? Is this the calm before the storm? Liquidity shuffling around in anticipation of a major event.

We saw this in 2009 and in the US credit downgrade in 2011.

What makes me think this way?

Well, there are a few small announcements in the market that have some wondering if the Greek default last week is playing out under the radar in ways that will soon reveal themselves.

The media has been reporting , well, nothing about the consquences of this Greek write-down. It almost seems business as usual. The CDS problem, is minute, and the balance sheets of those taking hits are quite OK it appears.

Then there are these types of stories which get you thinking.

"CFTC Vacates CME Clearing Europe Limited Registration as a Derivatives Clearing Organization".

Why now, what does it mean? Does it have an relation to Greece last week?

To me, it could be the murmurings and shufflings of deck chairs as the pending auction of these Greek bonds takes place next week according to the dates set by the ISDA. Watch out on March 19. Remember, this is the first western nation default since World War Two. Doesn't this make it more significant than what is reported?

One commentator has mused; ""Since the default, there seems to be a raging wildfire behind the scenes as maybe the entire Credit Default Swap (CDS) market is stressed due to the Greek default. The losses may come fast and furious once the auction is held on March 19th, based on ISDA’s Big Bang Protocol."

Gold down $33 and silver $1.40 today. I'm not concerned, as Franklin Sanders says, this is most likely the bottom of the correction from February 29.

Anyway, if this CDS market blows next week, then I would rather be holding the hard yellow and white stuff and not some paper promise from JP Morgan or Goldman Sachs.

Wouldn't you?

Gold in New Zealand dollars: $2028.73 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $39.39 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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