investorpolitico

This is a very complex option position on the US SP500.

With the volatility so low and tight volatility conditions make it very cheap and easy for institutions to build a gamma trade (I will not bore you with details).

It works like a spring…..there is a lot of crowded trade on the upside and with a gamma trade you can unleash hell and make really a lot of money with tiny risk. It is a perfect trap.

It can be used up or down – but as the market and crowded trades are up – it will be most likely down.

In two words: a trap! You have to watch out Vix level 12.5 and 14. The worst case scenario is Vix 28 (I do not think so and hopefully I am right!)

Gold is another very manipulated trade.

yesterday in Bloomberg an article appeared with USD15 billion of loan backed by falsified gold transaction.

On 16 January 2013 German put out a great fanfare about bringing back their gold hold in the US FED (300 tonnes) and in the French vaults (374 tonnes).

Now, 18 months later, it says some gold came back (37 tons, of which 5 from the US).

And it announced that they have haled the request to repatriate the gold, as there is no mistrust between Governments (Bundestag announcement)

The repatriation started when the Federal Reserve refused to show the gold to German officials. And nobody seen the German gold thereafter (and maybe nobody will never see it).

These news promptly did not make any appearance on the mainstream media

The fight is going on. ISIL is starting disruptive tactics in Baghdad similar to the one used in Kabul ( car bombs, terrorist attacks).

It actually looks very organized as it is opening multiple fronts to stretch the Iraq Army response.

They reached the southern district of Baghdad in heavy numbers. This is important as it cut off reinforcement from the South, were the main army is and it cannot be attacked by airplanes without causing heavy civilian casualties.

it is spreading towards south. That is an extremely important piece of information as 70% of Iraq oil fields are in South Iraq. Saudi Arabia does not have enough spare capacity to calm down the oil prices at the moment.

ISILis likely to supplant Al Qaeda in your terrorist nightmares as it has a clear organization (funnily enough it even publishes an end of year report similar to what the listed companies do) and with this attack it also got hold of over US$420 million dollar in Mosul and probably more.

So practically ISIL is a terrorist organization acting with the sophistication of a well trained army – fast deploying unit and terrorist sleeper cell. And with Syria attacking with Baghdad blessing inside Iraq (and Iran shelling rebels positions inside Iraq) the Middle East situation can really spiral easily out of control – ISIL war is already spanning from Lebanon to Iran, with Jordan in high danger as there are not any more divisions between ISIL in Iraq and Jordan.

Apart the US war of words….the war is still going in favour of the insurgents.

While the media says that Iraq is fighting back, military news paint the Iraqi Army largely in disarray – there are some troops (Iranian backed) very forceful, but the common army is in disarray and the 1,000s of untrained volunteers are just cannon fodder.

ISIL now took over the main Iraqi’s refinery and now there is a rush towards Haditha – the major Iraq’s dam that control most of the country’s electricty and could flood the entire region.

After that, the battle for Baghdad will start

The US Sp 500 made a new top.

Gold jumped USD 40 overnight

Oil Brent jumped and is trying to breach USD115 ($110, 10th June)

Do not have time to write…but it does not make much sense.

It is years that often I tell you that this market is rigged by the Central Banks. And you could always have dismissed my theory as another conspire theory.

The idea is that since the normal ways (increasing the money available to the banks so they lend it out) do not work, try to make the consumer feel better so it is the consumer that kick starts the economy.

Now, as the Financial Times reports, you can see that is all real:

The FT reports “a cluster of central banking investors has become major players on world equity markets.” The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which “could potentially contribute to overheated asset prices.” China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world’s banks try to diversify themselves and “counters the monopoly power of the dollar.”

And by the way, always the Financial Times, says that the FED is thinking to impose exit fees on Corporate Bond Funds – they are fuelling this rally so much that they are scared there could be a mass exodus from Bond Funds. Also, your money will have to go into shares.