Margin Call Gentlemen!
Bill Holter | Jim Sinclair's MineSet
Jan 10, 2016
http://bit.ly/1OlstXF

[snip]

We’ve now arrived at a point very similar to where we were in the fall of 2008 with several very grave exceptions. The world is facing a global margin call again, only this time there are no sovereign entities left with a clean balance sheet that can be levered up further. There are also no tools left available to the various central banks to administer monetary policy. They have already printed, monetized debt and lowered rates to zero. Richard Fisher has even admitted they have no ammunition left! As a side note, rates were cut to zero to make the higher debt balances serviceable but now even zero percent rates are not enough. From a macro standpoint, real economic activity is not generating enough cash flow (profits and tax revenues) to support this current debt. Lastly, there is no more “collateral” left to borrow against. Whether it be stocks, bonds, real estate, commodities or even “faith”, we are at the end of the road in the collateral department.

...

This past week, markets all around the globe convulsed greatly with almost nothing left unscathed. There was a different excuse each day for the drops. We first heard about the Saudi/Iran disconnect of diplomatic ties, then, everything was down because of the yuan devaluation and their market hitting the 7% circuit breakers. I even heard someone say that everyone has such great profits they wanted out …but not until the 2016 tax year which is why they waited until the first week.

I do not believe any of it and would instead say we are simply receiving a global margin call. This had to come sooner or later as the world sits upon the greatest credit build in all of history. We are simply at the end of a “credit cycle” …unfortunately the largest credit cycle EVER! Everyone “knew” this day would come yet no one paid attention to it in their daily lives as “life just went on” as if nothing was wrong! I am sure we will hear reason after reason in the future …the real reason being too much debt with not enough collateral left nor enough economic activity to support it. Simple!

Now, the margin call comes. Now comes the great unwind! “Collateral” of all sorts will be questioned. The questions will be of the “strength, liquidity, ownership and even whether the collateral even exists”. Everything will be questioned and nothing taken for granted or even at face value. The issue of “trust” and even “who” can you trust will come forward. Institutions who have traded with each other for decades will suddenly be looking at each other with different eyes. Questions like “will I get paid” or “will I receive what I paid for” will be an everyday exercise.

There will surely be “blame” but what will it be? Several years into the future it will be understood for what it really is, too much debt, leverage and financially modified products such as derivatives. In the immediate, the blame might go on anything or anyone.