HAS A FINANCIAL MELTDOWN BEGUN?

Friday capped a week where the price of both gold and silver recovered from a massive sell off in the month of May after the dismal jobs report.

However what have to be the most interesting news were the German 10 year bond yield which hovers near zero and the shocking news that BREXIT was leading BREMAIN by 10 percentage points!

So despite the US$ going higher on Friday, gold and silver held on to their gains. The BREXIT news of  course sent the Pound falling vs the US$.

The EU financial system looks set to have greater volatility going into the BREXIT referendum, and coupled with the news of the German 10 year bond yield could ignite an exit from stocks and into the precious metals market.

Bill Gross recently issued a warning that the bond market could implode as the number of bonds with negative yields have risen to US$10T. Just a few months ago it was at US$7T. One thing for sure, bonds with negative yields are rising, and rising fast.

In Japan even Mitsubishi UFJ has indicated it might exit the JGB primary dealers club due to the negative interest rates. Could Mitsubishi UFJ lead a walkout with several banks? If it happens it could be detrimental to the Japanese bond market and raise further concerns on Japan's economy.

Next week the Fed will be having its June meeting. After having talked up the US$ with interest rates hike, the Fed cheereladers seemed awfully quite for the week. Should the Fed raise interest rates, then the US$ will spike and the stock market will tank, and the economy too. With a depressing jobs report will the Fed raise interest rates? Should the Fed decides against raising interest rates, then they could lose even more credibility. Therefore the Fed may just raise rates to maintain whatever credibility they have left. That will be cutting off the nose to spite the face. What ensure could be another market turmoil like what happened in January and February.

Looking at the issues, I doubt the Fed will raise rates sue tot he threat of a global unwinding of risky assets. Hey, haven't the Fed been pushing up the stock market recently? Why allow it to fall? Like it or not it will fall because of the inherent risks in the global financial system, the huge amount of global debt and financial derivatives,and the central banks which have driven assets to huge bubbles.But when it happens nothing the Fed nor the Treasury's PPT could do will salvage it.