The Super Summer Liquidation Spectacular
It's Wild! It's Crazy! It's the super, stupendous, big-time summer liquidation! Everything must go and we have got it all! Intervention condescension! Sell your stocks, sell your gold and just get into cold hard cash.
Talk about making the $85.00 area in crude oil the hard way. Oil prices get crushed as the rush to liquidation created a situation that put the market into crisis mode. Uncertainty, in part inspired by the European Central Bank and word they were back in the bond buying business, helped raise fears that Italy and Spain were sinking the drowning European banks. Instead of buying pricey Spanish and Italian bonds they were buying bonds from Portugal and Ireland. The move back to adding liquidity from the central banker that was talking out of the other side of his mouth was a sign that the crisis in Europe is getting out of control.
The slide created major losses in portfolios that were emphasized as traders dramatically reduced their exposure to gold after it hit record highs to get into cash, most likely to cover mounting losses in their overall portfolio. The mood was made even more dire as word that Bank of New York told its large clients that they were going to charge their large customers money to hold their money. As reported by the Wall Street Journal, "The letter said Bank of New York finds its deposits "suddenly and substantially increasing" as investors are in a mass "de-risk" mode. The bank said the decision was driven by the fact that it cannot invest much of the new deposits because clients have the ability to move the funds out at any moment." In other words, they will lose money by holding money. The one month t-bill also found that the de-risk mode went negative for the first time since the Lehman crisis, a sign that investors want out and want to be in cash.
When banks charge, you to hold cash, that is deflation and is basically forcing the markets to act. A bad jobs number will have to get the Fed off of the sideline and nearly insures QE3d. The EU, as well as China and Japan, is now calling for a global response to the European debt crisis which could inspire another round of global liquidity injection the likes of which we haven't seen since the dark days in 2008. The move could spike oil as we know that adding liquidity is like throwing gasoline - or barrels of oil! - on fire!
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.