Boom: China SGE Gold Withdrawals An Enormous 1464 Tonnes So Far This Year.

  

  This is why it is so important to keep the big picture in front of you. Whatever Bubble TV is telling you by the minute people with money will define the destiny of each market. Now these people are buying Gold in enormous quantity enjoying the lower prices once they are out of margin calls in China.

Is China Moving Toward a Gold Standard? Peter Schiff on the Chinese Market Crash.

"Just like most of the products Americans buy are made in China, most of the economic problems the Chinese have are made in America," says investment guru and radio host Peter Schiff, CEO of Euro Pacific Capital. "The Chinese have decided to peg their currency to the dollar and so they have imported our monetary policy."

But as Schiff explained to Reason's Matt Welch, that may be changing. China's recent market woes may force China to change its monetary policy and Schiff believes the Chinese government is laying the groundwork to back its currency by gold.

"Quietly they have been increasing thier ownership of gold," says Schiff. "They want to untether their currency from the dollar but they don't want it to be backed by nothing."

  Nobody loves Gold any more. We have headlines about gold going down to $800 or even $350. Even I myself find it almost embarrassing to write about gold any more. We must be making the real bottom now. Actually chart above is confirming it after my previous observation. We have retested the Low on daily and now on weekly we have the very nice potential reversal in the making. Read more.

FED's Mission Impossible: "Gold Is Dead And Nobody Loves It Any More."

  Some Central Bankers in the world were popping champagne last week on the FED's Mission Accomplished and "the total meltdown of Gold". Some other Central Banks were just buying more of it. Who will be right - nobody knows for sure, but I like the sentiment. Hedge Funds are Net Short Gold for the first time, "China has announced much lower reserves than expected" and I personally tired even to think about the "barbaric relict" which is going to zero.  Before I make my best trade shorting Gold into the dust I would like to throw some charts and links for Lithium induced meditation.

  First chart above actually shows a wash out capitulation and Buy signal on Volume and Candles, all indicators are positive for reversal. Dan Popescu @PopescuCo has published few very interesting charts below and HedgehogTrader @HedgehogTrader has exceeded his monthly limits of tweets about the yellow metal on Friday. In case if rumours about Gold's Death are exaggerated, TNR Gold's "Vault" is still secured in Alaska and guarded by bears waiting for its time to come.

NOVAGOLD Reports Excellent Progress in Permitting Donlin Gold In Alaska.

  

  

  NOVAGOLD reports about the progress with permitting Donlin Gold and technical studies on Galore Creek. TNR Gold is developing Shotgun Gold project in Alaska and is looking for strategic partners to advance it.

TNR Gold: Shotgun Gold Project Development in Alaska.

 "Nova Gold has published its new presentation for PDAC 2015. Now you can find more information about Alaska as mining jurisdiction and Donlin Gold type of Gold deposit. TNR Gold owns 100% of Shotgun Gold project in Alaska, which has very similar geology to Donlin Gold, according to Greg Johnson - one of the founders of Nova Gold. Read more."

Lawrie Gold:

SGE Gold Withdrawals An Enormous 1464 Tonnes So Far This Year.

While physical gold withdrawals from the Shanghai Gold Exchange (SGE) in the latest reported week were lower than the massive 72 tonnes a week earlier at 53 tonnes it remains high for the time of year.  But the key to what has been happening with Chinese demand as represented by SGE withdrawals is where the total for the year to end-July stands compared with previous years.

Looking at this metric we can see from the chart below that SGE withdrawals this year so far have totalled a massive 1,464 tonnes – which is running around 116 tonnes ahead of the huge record 2013 year at the same time and an enormous 370 tonnes ahead of the 2014 figure at the end of July when the annual total came to 2,136 tonnes.  If the average monthly withdrawal level (49 tonnes a month so far) for the current year keeps up we will be looking at annual withdrawals totalling more than 2,500 tonnes for the full year – and with Chinese demand tending to be strongest in the last four months and the first two months of the year this level could indeed be a possibility.

If we compare this potential level of annual demand with the likely total of new mined gold this year, China would account for around 75% of the yearly total on its own!

These high SGE withdrawal levels do not necessarily mean that the gold price will pick up accordingly, as witness what happened in 2013 when the SGE figure hit a then record 2,186 tonnes, yet the gold price collapsed from $1681.50 at the beginning of the year to $1201.50 by the year end.  However what we are seeing are continuing huge gold flows from West to East (Indian gold imports too are predicted to hit over 1,000 tonnes again this year) which will continue to run down gold inventories in the West, where the price tends to be set.  At some stage any loosely held Western physical gold holdings will be depleted to the extent that the low levels will almost certainly have a positive impact on the gold price – although by that time it may well be China which is setting the price anyway."

This Has Never Happen Before: Gold Hedge Funds Aggregate Net Position Has Been Short For The First Time In History.

  

  We have very interesting developments in the Gold market recently. Do not lose the big picture with all daily noise. Here are just few dots for you to connect.

Number Of Owners Per Once Of Gold At The COMEX Is At Record High At 117 to 1.

  

  With all the games with naked shorting of Gold COMEX managed to break out to another record leverage and now we have 117 proud owners to every One Once of Gold. When the game of musical chairs will begin this time?

Is China Moving Toward a Gold Standard? Peter Schiff on the Chinese Market Crash.

"Just like most of the products Americans buy are made in China, most of the economic problems the Chinese have are made in America," says investment guru and radio host Peter Schiff, CEO of Euro Pacific Capital. "The Chinese have decided to peg their currency to the dollar and so they have imported our monetary policy."

But as Schiff explained to Reason's Matt Welch, that may be changing. China's recent market woes may force China to change its monetary policy and Schiff believes the Chinese government is laying the groundwork to back its currency by gold.

"Quietly they have been increasing thier ownership of gold," says Schiff. "They want to untether their currency from the dollar but they don't want it to be backed by nothing."

  Nobody loves Gold any more. We have headlines about gold going down to $800 or even $350. Even I myself find it almost embarrassing to write about gold any more. We must be making the real bottom now. Actually chart above is confirming it after my previous observation. We have retested the Low on daily and now on weekly we have the very nice potential reversal in the making. Read more.

FED's Mission Impossible: "Gold Is Dead And Nobody Loves It Any More."

  Some Central Bankers in the world were popping champagne last week on the FED's Mission Accomplished and "the total meltdown of Gold". Some other Central Banks were just buying more of it. Who will be right - nobody knows for sure, but I like the sentiment. Hedge Funds are Net Short Gold for the first time, "China has announced much lower reserves than expected" and I personally tired even to think about the "barbaric relict" which is going to zero.  Before I make my best trade shorting Gold into the dust I would like to throw some charts and links for Lithium induced meditation.

  First chart above actually shows a wash out capitulation and Buy signal on Volume and Candles, all indicators are positive for reversal. Dan Popescu @PopescuCo has published few very interesting charts below and HedgehogTrader @HedgehogTrader has exceeded his monthly limits of tweets about the yellow metal on Friday. In case if rumours about Gold's Death are exaggerated, TNR Gold's "Vault" is still secured in Alaska and guarded by bears waiting for its time to come.

NOVAGOLD Reports Excellent Progress in Permitting Donlin Gold In Alaska.

  

  

  NOVAGOLD reports about the progress with permitting Donlin Gold and technical studies on Galore Creek. TNR Gold is developing Shotgun Gold project in Alaska and is looking for strategic partners to advance it.

TNR Gold: Shotgun Gold Project Development in Alaska.

 "Nova Gold has published its new presentation for PDAC 2015. Now you can find more information about Alaska as mining jurisdiction and Donlin Gold type of Gold deposit. TNR Gold owns 100% of Shotgun Gold project in Alaska, which has very similar geology to Donlin Gold, according to Greg Johnson - one of the founders of Nova Gold. Read more."

ZeroHedge:

Is The "Smart Money" Ready To Bet On Gold?

For the last three weeks, gold has experienced something that has never happened before - hedge funds aggregate net position has been short for the first time in history.

However, as Dana Lyons notes, this week saw another 'historic' shift in gold positioning as commercial hedgers shifted to the least hedged since 2001... so the 'fast' money is chasing momentum and the 'smart' money is lifting hedges into them.

Via Dana Lyons' Tumblr,

It’s no secret that commodities have taken a drubbing during the deflationary spiral over the past year. And precious metals have been right up front in this beating. This includes gold, which has lost over 40% of its value the past 4 years.  So needless to say, there has not been much good news on that front. However, as we touched on in a piece two weeks ago, there are signs beginning to pop up that may provide a glimmer of hope for gold bugs. In dollar terms, the price of gold continues to leak, offering very little evidence of any impending stability or bounce. On the other hand, in Euro terms, gold prices reached a key juncture a few weeks ago, as outlined in that previous post. And while no bounce has materialized as of yet, gold has at least held at the level we noted.

Today’s Chart Of The Day offers another hopeful data point for gold bulls. The CFTC tracks the net positioning of various groups of traders in the futures market in a report called the Commitment Of Traders (COT). One such group is called Commercial Hedgers. As their name implies, their main function in the futures market is to hedge. And while the Non-Commercial Speculators tend to be trend-following funds, the Commercial Hedgers’ postions tend to move contrary to price trends. Thus, it is almost always the case that these Hedgers will be correctly positioned – and to an extreme – at major turning points in a market.

How is that relevant for gold? As of this week, Commercial Hedgers are holding the lowest net short position in gold futures since the launch of the gold bull market in 2001.

Does this mean that a reversal higher is imminent in gold? Not necessarily. The thing with COT analysis is that it is difficult to correctly determine when an “extreme” in Hedgers’ positioning will actually result in a price reversal. As is said regarding all sorts of market metrics, an extreme in COT positioning can always get more extreme. Plus, the COT positioning can peak well in advance of the turn. Consider the Hedgers’ maximum net short positioning in gold futures which occurred in December 2009, 21 months – and another 50% gold rally – before prices topped.

Thus, it is tough to time trades with accuracy based on the COT report. However, one thing we can say in the gold bugs’ favor: what had mostly been a headwind for gold for the past decade or so is no longer the case. While it may not make an immediate impact, the “smart money” Commercial Hedgers are now more aligned with them than at any point since the bull market began in 2001."

Number Of Owners Per Once Of Gold At The COMEX Is At Record High At 117 to 1.

  

  With all the games with naked shorting of Gold COMEX managed to break out to another record leverage and now we have 117 proud owners to every One Once of Gold. When the game of musical chairs will begin this time?

Is China Moving Toward a Gold Standard? Peter Schiff on the Chinese Market Crash.

"Just like most of the products Americans buy are made in China, most of the economic problems the Chinese have are made in America," says investment guru and radio host Peter Schiff, CEO of Euro Pacific Capital. "The Chinese have decided to peg their currency to the dollar and so they have imported our monetary policy."

But as Schiff explained to Reason's Matt Welch, that may be changing. China's recent market woes may force China to change its monetary policy and Schiff believes the Chinese government is laying the groundwork to back its currency by gold.

"Quietly they have been increasing thier ownership of gold," says Schiff. "They want to untether their currency from the dollar but they don't want it to be backed by nothing."

  Nobody loves Gold any more. We have headlines about gold going down to $800 or even $350. Even I myself find it almost embarrassing to write about gold any more. We must be making the real bottom now. Actually chart above is confirming it after my previous observation. We have retested the Low on daily and now on weekly we have the very nice potential reversal in the making. Read more.

FED's Mission Impossible: "Gold Is Dead And Nobody Loves It Any More."

  Some Central Bankers in the world were popping champagne last week on the FED's Mission Accomplished and "the total meltdown of Gold". Some other Central Banks were just buying more of it. Who will be right - nobody knows for sure, but I like the sentiment. Hedge Funds are Net Short Gold for the first time, "China has announced much lower reserves than expected" and I personally tired even to think about the "barbaric relict" which is going to zero.  Before I make my best trade shorting Gold into the dust I would like to throw some charts and links for Lithium induced meditation.

  First chart above actually shows a wash out capitulation and Buy signal on Volume and Candles, all indicators are positive for reversal. Dan Popescu @PopescuCo has published few very interesting charts below and HedgehogTrader @HedgehogTrader has exceeded his monthly limits of tweets about the yellow metal on Friday. In case if rumours about Gold's Death are exaggerated, TNR Gold's "Vault" is still secured in Alaska and guarded by bears waiting for its time to come.

NOVAGOLD Reports Excellent Progress in Permitting Donlin Gold In Alaska.

  

  

  NOVAGOLD reports about the progress with permitting Donlin Gold and technical studies on Galore Creek. TNR Gold is developing Shotgun Gold project in Alaska and is looking for strategic partners to advance it.

TNR Gold: Shotgun Gold Project Development in Alaska.

 "Nova Gold has published its new presentation for PDAC 2015. Now you can find more information about Alaska as mining jurisdiction and Donlin Gold type of Gold deposit. TNR Gold owns 100% of Shotgun Gold project in Alaska, which has very similar geology to Donlin Gold, according to Greg Johnson - one of the founders of Nova Gold. Read more."

Jesse's Cafe Americain:

The Gross Mispricing in the Gold Market Risks the Global Financial System - A Fraud Too Far

With a physical commodity like gold, as several others have pointed out, 'supply' is not how much there may be, since most of the gold that has ever been mined is closely held in treasuries and private vaults, and is not on offer, available for purchase. 

It is a monetary metal, a store of wealth, with some industrical applications.

The amount that has ever been mined would likely fit in a modern four bedroom house. In other words, there is not a lot of it, and the supply is increasing at a fairly slow rate over time.

Physical Supply On Offer

So 'physical supply' is that which is thought to be for sale at the current prices.

At the Comex, this bullion is designated as 'registered' or deliverable to someone who chooses to exercise a contract for it at the current price.

Demand

And also at the Comex, 'demand' is synonymous with open interest, that is, a contract that is created when someone goes long or buys a contract that had not previously been owned by another.  

Yes there are significantly larger physical markets for gold bullion, almost all of which exist outside the US.  But let us put those aside for now.

Rising open interest with rising prices and a steady or rising supply is easy enough to understand. More people are seeking to go long or buy a claim on some gold bullion, and the price rises to entice more who have their gold in storage to meet that demand.

What is also easy to understand, if you have a mind to open your eyes, is when demand is steady and historically high, but the price and the physical supply for delivery is falling. The explanation is naked shorting, the creation and selling of contracts based on increasing leverage. 

That is, speculators, of whatever size and for whatever reasons, are nakedly meeting demand with an artificial supply that ordinarily could not possibly be met in an efficient physical market.

This is why I have come to think that the Comex precious metals market is like a The Bucket Shop, although technically it does not meet the statutory definition since 'a transaction on a exchange' has been made. 

The bullion banks and the Exchange are playing 'The Bank' in a situation in which an actual physical transaction is unlikely to occur.

Leveraged Speculation

So why does it happen, and why does it matter?

It happens because gold is in this case is now being treated purely as a paper instrument, a derivative, although it is representing and price setting a vast global industry and physical market from which it has become increasingly decoupled.

This is not surprising because rampant speculation in derivatives and paper assets has become de rigueur in these financially captured markets, and radically so since 1999. 

And the same forces that blew up the collateralized debt obligations and their mispricing of risk derivatives in 2007 seems as though it is going to blow up the global commodities markets, starting with the precious metals.  The exchanges in this case may try to force settle everything in cash and for pennies on the dollar.  And so they dismiss the risks, and since the 'right people' are making money, no one will say a word.

Consequences

While the sources of new supply dry up with the decline of the mining industry, the urge to grab the available physical supply while it lasts continues to intensify.

But like the financial derivatives collapse in 2007 quickly metastasized to the global financial system, this relatively small precious metals market will also shaken the global financial system, and threaten to bring down the Too Big To Fail institutions once again.

I am not speaking of a 'default' on the exchange.  A paper exchange cannot default when cash settlement in paper can be enforced.  Rather, I am talking about a 'break in confidence' that finally persuades the rest of the world that the Anglo-American financial markets are a long con.   Let's call it 'a fraud too far.'   

We certainly have seen some mind-boggling systemic frauds and market rigging exposed in everything from derivatives pricing to LIBOR in recent memory.  We keep sloughing these events off in our walking amnesia.  But such things have long term and highly corrosive effects.

But just like the last time, while the money is flowing and the music is playing, the players will keep dancing, and the regulators and politicians will be keeping their eyes and ears closed.

'Nobody saw' the last crisis coming, except a few.   That is because they who should have known knew, but went along to get along.

Consider the consequences of repeatedly ignoring the risks of excessive speculation.  I do not think that we can afford it.

This chart is from Nick Laird at sharelynx.com.

Shanghai Gold Exchange Has 73.3 Tonnes of Bullion Withdrawn Its Third Largest Week.

  China continues to accumulate gold at record speed and FED's task is more difficult by the day: the lower price goes the more Gold Chinese are buying. This rout in the Chinese stock market will be another catalyst for Gold in China once margin calls will be settled.

Gold Catalyst: Don Coxe: Bull Market in Bonds Now Ending - Risks Ahead.

  The next catalyst for the gold market will come with the realisation that bond bull market is over and that institutional investors are losing money. Incredible concentration of the bonds holdings will ignite the volatility and when institutions will be heading to adjust the duration of their portfolios following the rising rates the buyers will be gone. No bids mean liquidity freeze and more losses in safe bonds. When mum and dad will start selling out this process will reignite itself. All we need for the gold market to return to the fireworks is 1% of those money reallocated out of bond portfolios. Read more.

TNR Gold: Shotgun Gold Project Development in Alaska.

 "Nova Gold has published its new presentation for PDAC 2015. Now you can find more information about Alaska as mining jurisdiction and Donlin Gold type of Gold deposit. TNR Gold owns 100% of Shotgun Gold project in Alaska, which has very similar geology to Donlin Gold, according to Greg Johnson - one of the founders of Nova Gold. Read more."

Jesse's Cafe Americain:

Shanghai Gold Exchange Has 73.3 Tonnes of Bullion Withdrawn Its Third Largest Week.

For the week ending July 24th there were 73.289 tonnes of gold bullion withdrawn from the Shanghai Exchange into China.

That is about 2,356,296 troy ounces in one week.

I have included the most recent statistics from the Comex Gold Warehouses below.  There are currently 351,519 ounces of gold available for delivery at these prices there for the month of August.

Nine out of ten Americans will notice that in terms of technical analysis this is 'a lot less.'

But as the very serious people like to point out, the Comex is not really 'a physical exchange.'  Yep. 

And as you may have seen in the posting from earlier today showing the sea change in leverage over even the past ten years there, it is seemingly getting a lot less physical all the time, even compared to just five or six years ago. Winning...

Even the US Mint seems to be getting in on the act.  The mint sold 202,000 ounces of gold in the form of coins for the month of July, one of its largest monthly sales totals in several years. 

That's a lot of pet rocks.

Do the math. I wonder where the poor, deluded ignoramuses who obviously do not understand finance are getting all that money to spend on such worthless trifles.  Does the US Mint take food stamps?

While they last.

This chart is from the date wrangler Nick Laird at sharelynx.com.

Gold Catalyst: Don Coxe: Bull Market in Bonds Now Ending - Risks Ahead.

  

  The next catalyst for the gold market will come with the realisation that bond bull market is over and that institutional investors are losing money. Incredible concentration of the bonds holdings will ignite the volatility and when institutions will be heading to adjust the duration of their portfolios following the rising rates the buyers will be gone. No bids mean liquidity freeze and more losses in safe bonds. When mum and dad will start selling out this process will reignite itself. All we need for the gold market to return to the fireworks is 1% of those money reallocated out of bond portfolios.

  Nobody loves Gold any more. We have headlines about gold going down to $800 or even $350. Even I myself find it almost embarrassing to write about gold any more. We must be making the real bottom now. Actually chart above is confirming it after my previous observation. We have retested the Low on daily and now on weekly we have the very nice potential reversal in the making.

FED's Mission Impossible: "Gold Is Dead And Nobody Loves It Any More."

  Some Central Bankers in the world were popping champagne last week on the FED's Mission Accomplished and "the total meltdown of Gold". Some other Central Banks were just buying more of it. Who will be right - nobody knows for sure, but I like the sentiment. Hedge Funds are Net Short Gold for the first time, "China has announced much lower reserves than expected" and I personally tired even to think about the "barbaric relict" which is going to zero.  Before I make my best trade shorting Gold into the dust I would like to throw some charts and links for Lithium induced meditation.

  First chart above actually shows a wash out capitulation and Buy signal on Volume and Candles, all indicators are positive for reversal. Dan Popescu @PopescuCo has published few very interesting charts below and HedgehogTrader @HedgehogTrader has exceeded his monthly limits of tweets about the yellow metal on Friday. In case if rumours about Gold's Death are exaggerated, TNR Gold's "Vault" is still secured in Alaska and guarded by bears waiting for its time to come. Read more.

NOVAGOLD Reports Excellent Progress in Permitting Donlin Gold In Alaska.

  

  NOVAGOLD reports about the progress with permitting Donlin Gold and technical studies on Galore Creek. TNR Gold is developing Shotgun Gold project in Alaska and is looking for strategic partners to advance it.

TNR Gold: Shotgun Gold Project Development in Alaska.

 "Nova Gold has published its new presentation for PDAC 2015. Now you can find more information about Alaska as mining jurisdiction and Donlin Gold type of Gold deposit. TNR Gold owns 100% of Shotgun Gold project in Alaska, which has very similar geology to Donlin Gold, according to Greg Johnson - one of the founders of Nova Gold. Read more."

Financial Sense:

Don Coxe: Bull Market in Bonds Now Ending - Risks Ahead

Don Coxe, Chairman of Coxe Advisors, called the dawn of the bull market in bonds in 1981. Now, 34 years later, he sees it ending as bonds enter their final mania phase marked by negative interest rates. Don discusses this historic period we are now in and both the risks and opportunities he sees ahead.

Here is a partial transcript of his recent interview that aired on the Newshour page and on our iTunes page this Friday.

Jim Puplava: "For decades it seemed like a one-way trade. If you bought bonds, interest rates went down every single decade. Now we've entered an environment where they're not only low but we actually have negative interest rates. Could this be a bubble and could the bond bull market be coming to an end?

Don, as long as I've known you, you've been bullish on bonds and, to your credit, going back to 1981, you made a strategic call to get out of your gold, get out of your hard assets and buy Treasuries. It was a great move and that strategy has worked for over three decades. But you're making a different call right now—you're saying that the bond bull market is over. Let's talk about that."

Don Coxe: "Well, what I like to think of is when you know that a bull market has gone beyond bullishness and gone into mania. I nearly destroyed my career back in 1999 telling clients to get out of tech stocks. What happened is they doubled in the next 9 months, but I stuck with it and it was the right call but I wouldn't have believed that they could go to a 150 multiple on the Nasdaq.

So manias build their own momentum and to talk of manias in bonds is sort of a contradiction in terms but…what finally convinced me that things were getting out of control was a couple of weeks ago when the yield on the German 10-year bond, which is the second most important 10-year bond next to Treasuries, climbed by 18 times in one week! We went from 4 basis points to 72 basis points before coming back. So what that showed you is that this thing is out of control because if you'd ever make a prediction that there would be a time when the yield on the second highest grade bond in the world could climb by 18 times in one week, you'd say, 'Okay, this game is over. We are in an area of wild speculation.’ […]

[Most importantly] 20 companies manage 70% of the supply of bonds in the world. This is a concentration far beyond the kind of risks we had on Wall Street with the big banks having so much of that garbage that had been created in the housing boom. So what we've got here is a situation where there's a squeeze and people are rushing out of other assets into these bonds where they have no chance of making money and they have a chance of losing fabulous amounts of money…

So, we’re in the final phase of this…and it was really startling when last week it was revealed that of the corporate bonds issued in the last 12 months, 60% of junk bonds have what's called cov-lite or light covenants. Now, it used to be that less than 10% of them had that. That means that these are bonds that can be issued where if something goes wrong you can't get the company to buy them because they don't have a covenant to do anything in the meantime to protect you. So that's also a sign that the kind of mechanisms within the bond market to reduce risk have been thrown to the four winds.

Putting it all together the bond market is the center of risk now. Of course, what you don't have is a 10-year Treasury that's going to collapse as opposed to a Nasdaq stock at 120 times earnings but because for so many pension funds and individual investors having bonds was a point of stability...it’s no longer a source of stability, it's a source of instability."

Jim: "I want to come back to something you said earlier and that is that the vast majority or 70% of the holdings of bonds globally are in the hands of 20 players. To me that spells a lot of risk, Don, in the sense that if you have 20 people who own the vast majority of bonds and you want to get out of that position, who do you sell to if everyone wants to get out at the same time? Who are going to be the buyers?"

Don: "You've summed it up. What happens is you find in any runaway bull market, the question is when you sell, who do you sell to? It has not been that way with bonds since 1978…when you could have Treasuries falling without bids by several points in a day. It was a really scary period of time…

It's been so easy to sell bonds and when it switches and people start to realize it's a risky asset class, what you're going to see is huge spreads developing and so the advice we've given is not that you panic on this but to understand that the main challenge to the stock market will come not from the stock market itself, but from the bond market, which will give a boomerang effect into the risky areas of the stock market…

More than 100% of corporate cash flow at the moment is being used in this country to buy back stock and that means that if companies continue to buy stock and support their stock they won't have that kind of support in the bond market because the Fed has quadrupled its balance sheet and is not going to be expanding it and those 70 percenters out there, they can only sell to each other because there aren't any other big buyers out there.

I have not in my lifetime (and, by the way, I'm a historian as you know) seen nothing of this character ever. We've gone to the lowest levels for the British Gilts—those are 50-year bonds issued by the UK government—they were the standard bond of the world until WWI. We went to a new low in yields there. Imagine that! Because, remember, in the last 50 years of the 19th century you had four separate depressions occur but the interest rates didn't go back to where they are now. There's not much room on the downside on yields but what you cannot see is what the restraint is on the upside. And since nobody who's managing bonds now has had experiencing with managing bonds during a depression, it's going to be a tough period..."

To listen to the entire interview, please log in and visit our Newshour page or click here to subscribe.