Posted at 6:04 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Mounting Concerns for U.S. Economy Have Begun to Trouble the Dollar, Boosting Gold and Silver
- Significant Weakness Ahead in Headline Economic Reporting Increasingly Should Roil the Markets
- Minimal Headline Gain in Nominal Retail Sales Generated by Shifting and Inconsistent Seasonal Adjustments
- Level of Early-February 2016 Consumer Sentiment Index Fell 1.4% (-1.4%), Down 4.9% (-4.9%) Year-to-Year
- January 2016 Cass Freight Index Showed Continuing Non-Recovery and Renewed Downturn

“No. 785: U.S. Dollar and Gold, Nominal Retail Sales, Consumer ”
Web-page: http://www.shadowstats.com

Posted at 5:47 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Hopefully you have read between the lines of my writings over the last few weeks and felt the urgency of the situation. Markets all over the world are coming apart at the seams and “control” is rapidly being lost. I would like to mention, over the years there has been one “rule” never broken. Almost ALWAYS, whenever the president of the U.S. speaks, or whenever the Fed meets and issues a policy statement …or whenever the Chairman of the Fed speaks …”control” is at its greatest.

What have we seen this time? Janet Yellen testified yesterday and is doing so again today. The markets have come unglued. In particular, gold is now up $56 dollars for the largest gain since 2009 http://www.telegraph.co.uk/finance/personalfinance/investing/gold/12151847/Market-panic-pushes-gold-buying-to-highest-level-since-financial-crisis.html. Mrs. Yellen is now out of her league as many of her comments are not making sense and are actually contradictory of what she may have just said.

For example, her prepared remarks speak of tightening rates at future meetings. She was asked “is the Fed out of bullets” and she goes into the talk about negative rates. “Negative rates” are NOT ammunition. Negative rates are outright panic and desperation. I would also mention, the Fed has been at zero percent rates for 6-7 years, any lower rates (negative) are at this point the only plan B. But Mrs. Yellen said yesterday (and probably again today) the Fed does not know the “legality” of negative rates. How is this even possible? They have had all these years to research negative rates …yet to this day she doesn’t know if it is even legal? I would also add, Mrs. Yellen is so clueless she does not understand their rate hike was the spark that lit this thing up in the first place. Please don’t get me wrong, the fire was going to start somewhere, I just didn’t think the Fed would be the one striking the match!

Folks, let me put this into plain speak for you. If to this day the Fed does not know if negative rates (which has been a potential topic for well over two years) are legal, does this mean there is no plan “B”? Actually, does this mean there HAS BEEN no plan B all along??? Legal or not legal, were the Fed to move to negative rates, a “run” on everything will occur. A run on the banks and a run on the currency and thus a RUN ON THE CENTRAL BANK ITSELF! The big problem is this, the dollar is the lynchpin “reserve” currency for the entire world, what would it say if we had to move to negative rates …because NOTHING ELSE WORKED?

Of course, negative rates are a hypothetical at this point. I say “hypothetical” because the markets must be open in order to even try this “plan B”. You can now completely forget about technical levels for anything and everything as fundamentals are trumping everything. In case you do not understand what I am saying here, the fundamentals of “BROKE IS BROKE” will trump buying the dips, selling the rallies blah blah blah. We are at the point where “trust” is breaking down and “get me out” at any price is beginning to take over.

Much of the selling is being forced. As I wrote three or four weeks back, this is a margin call which is now self-propelled in motion. Sales to meet margin calls are further depressing asset prices and creating yet more calls in a reinforcing and now a continuous negative loop. As I mentioned above, “control” is being broken and with it the thought process “the government will never let it happen” is also being broken. As everything financial is “levered” or done with borrowed money, how much larger are the actual losses to “equity” and how much longer can it go until we see trading defaults? This I believe accounts for gold’s huge move today. Gold cannot “default” and default is exactly where the entire system is headed. You are now getting the answer to your question of where capital will flee once REAL FEAR begins because the levers don’t work anymore!

Let me finish with this, you are watching the system implode upon itself. At a time when liquidity on a global basis is very tight, a global margin call (created by the Fed) is being issued. They have started a process in motion that will not be stopped. The morning will soon come when markets simply cannot meet the call and will not open. At this point, credit of all sorts will freeze up. The stark reality that has been hidden for so long by so many “tricks” will finally hit the world square between the eyes like a 2×4! As we have tried to guide you for so long, the “day of reality” is arriving and the “reality” is truly ugly. Are you ready for reality?

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  [email protected]

Posted at 5:11 PM (CST) by & filed under In The News.

Yellen on negative rates: ‘We wouldn’t take those off the table’
Jeff Cox

As recession fears mount in the U.S., Fed Chair Janet Yellen conceded there’s a “chance” of a downturn ahead.

She also said the central bank is studying whether negative interest rates would help should conditions worsen.

“There is always some chance of recession in any year,” she said. “But the evidence suggests that expansions don’t die of old age.”

Asked by Republican Sen. Bob Corker whether the monetary policy-making Federal Open Market Committee would consider going to negative interest rates, which would entail charging banks to store reserves at the Fed, Yellen left the door open. She repeated a statement she said Wednesday that the Fed had considered negative rates in 2010 but decided that wouldn’t be the best course at that time.

“In light of the experience of European countries and others that have gone to negative rates, we’re taking a look at them again, because we would want to be prepared in the event that we would need (to increase) accommodation. We haven’t finished that evaluation. We need to consider the institutional context and whether they would work well here. It’s not automatic,” she said.

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Yellen on negative rates: ‘We wouldn’t take those off the table’
Jeff Cox

As recession fears mount in the U.S., Fed Chair Janet Yellen conceded there’s a “chance” of a downturn ahead.

She also said the central bank is studying whether negative interest rates would help should conditions worsen.

“There is always some chance of recession in any year,” she said. “But the evidence suggests that expansions don’t die of old age.”

Asked by Republican Sen. Bob Corker whether the monetary policy-making Federal Open Market Committee would consider going to negative interest rates, which would entail charging banks to store reserves at the Fed, Yellen left the door open. She repeated a statement she said Wednesday that the Fed had considered negative rates in 2010 but decided that wouldn’t be the best course at that time.

“In light of the experience of European countries and others that have gone to negative rates, we’re taking a look at them again, because we would want to be prepared in the event that we would need (to increase) accommodation. We haven’t finished that evaluation. We need to consider the institutional context and whether they would work well here. It’s not automatic,” she said.

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It’s Not Just Deutsche Bank…
Tyler Durden on 02/11/2016 11:17 -0500

While broad-based contagion from Deustche Bank’s disintegration is clear in European, US, and Asian bank risk, there is another major financial institution whose counterparty risk concerns just went vertical…

Credit Suisse…

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With the stock at 27-year lows, it appears investors are seriously questioning Chief Executive Officer Tidjane Thiam’s restructuring plans.

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Posted at 10:33 PM (CST) by & filed under In The News.

Yellen Hints At Slowing Economy, Dropping Stocks But Does Not Go Full Dove
Tyler Durden on 02/10/2016 08:35 -0500

With world markets begging for moar, Janet Yellen’s prepared Humphrey-Hawkisn Testimony was a disappointment:

*YELLEN: FED EXPECTS ECONOMY TO WARRANT ONLY GRADUAL RATE RISES (everything is fine)

*YELLEN: JOB, WAGE GAINS SHOULD SUPPORT INCOMES AND SPENDING (everything is awesome)

*FED REPORT: LEVERAGE RISKS IN FINANCIAL SECTOR `REMAIN LOW’ (so don’t worry about banks)

*YELLEN: FINANCIAL STRAINS COULD WEIGH ON OUTLOOK IF PERSISTENT (so, there’s chance)

The bottom line this is simply a rerhash of the Jan FOMC Statement and does not offer enouigh dovishness for the market.

As we detailed last night,

The dovish surprise is if she explicitly removes March from the hiking calendar(which would be Draghi-esque in front running the FOMC), broadly hints at a delay or expresses concern on downside risk to long term inflation or structural stagnation. The intention would be to show US households, business and investors that the Fed has their back.

This is not what she gave, and markets are disappointed.

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Posted at 11:09 PM (CST) by & filed under Q&A Sessions.

Dear CIGAs,

We are sorry to announce the Tampa Q&A Session has been cancelled until further notice. Due to unexpected scheduling conflicts with corporate duties in Tanzania, Jim will not be able to attend.

Refunds have been issued. If you have any questions or concerns, or did not receive your refund, please email Anna at [email protected].

Thanks for your understanding. We hope to see you at the rescheduled even in the future!

Dan Duval
JSMineset Editor

Posted at 1:18 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

After my last article we received two logical questions from readers. The first one pertaining to “gaps” and the Deutsche Bank derivative exposure, the second pertaining to Japan’s strong currency with negative yields while the debt to GDP levels are astronomical. Below is the first question;

“In the past you have warned about derivative exposure and now gapping.

One of my worst fears as a day trader on a derivatives platform is gapping. That is why I will never have an open position when the market is closed. Even then, that is not guaranteed.

A lot of trading platforms got hammered when the Swiss franc was revalued.

Could you put out a letter for your readers explaining why for example the Deutsche Bank derivatives exposure is so dangerous in terms of gapping.”

In my opinion, this is a very astute observation. The reader will not carry overnight positions because as he says, “the Swiss franc revaluation killed many” within less than 10 minutes of the markets opening. That said, even if not in any overnight position and the great leveling moment comes, how does anyone know if their broker even survives the carnage …with YOUR MONEY? But this is another topic entirely.

As for Deutsche Bank, we know they have been recently screaming about negative interest rates hurting their operations. This very well may be so, but it is my opinion it is not so much negative interest rates killing them. I believe it is off balance sheet derivatives. Not only has DB denied any problem, the German finance minister has now chimed in with reassurance! http://www.zerohedge.com/news/2016-02-09/german-finance-minister-joins-db-ceo-says-not-worried-about-deutsche-bank Where have we seen this before? Does Bear Stearns or Lehman Bros. ring a bell? Doth the Germans protest too much? By the way, their credit spreads are stretching out, and stock price has now taken out the 2008 lows!

The second question regarding confusion of Japan’s 10 yr. yield hitting 0% and their currency strengthening while being the fiscal basket case of the world is also a good one but very simple to explain. http://www.zerohedge.com/news/2016-02-08/japanese-10y-yield-hits-zero-first-time-ever-yen-strongest-2014-stocks-crash. Japan has a debt to GDP ratio of 260%, if you add in corporate debt it approaches 400%, how could they not have a crashing currency and 20% (or higher) interest rates? The simple answer is this, the global “carry trade” is unwinding. The Japanese yen was a major tool used to create and float the carry trade which inflated assets. Now, as asset prices are falling, this trade is being unwound (think of it as a margin call). Previous yen that were borrowed are now being bought back to settle the trade. This was a synthetic short similar to the dollar short being covered. A quick question and very short answer, why would anyone in their right mind invest money for 10 years at zero percent in a currency who’s issuer publicly states their goal is to grossly debase? Answer: BECAUSE THEY HAVE TO!

The problem is this, as the yen strengthens from short covering it is putting more and more of these carry trades under water and actually forcing more sales of assets and more buying of yen. This will end in one of two ways …both badly! Either the trades get unwound with asset prices collapsing and the yen at truly stupid levels, or someone “fails” and the derivatives chain breaks. I would personally bet the farm on option number two.

While writing this, CNBC is parading guest after guest as to whether a recession is “likely” …IDIOTS! This is not about a “recession”, this is about whether the entire system fails or not! Can Deutsche Bank “fail” while being counter party to over $70 trillion in derivatives? Can even a small counter party fail without causing a cascade? Just look at the volatility in markets, junk bonds are collapsing, credit spreads blowing out, currencies making wild swings, $7 trillion worth of sovereign debt trading at negative interest rates …not to mention stock markets moving from all time highs into bear markets within just a couple of months. (While editing this, CNBC is actually questioning if DB is a “one off” situation? Is this even possible? Do they even understand what they are asking?!!!)

Do you think “someone” might have lost some money since January 1st? Enough to bankrupt them? THIS is the question! The answer in my opinion is this, there are dead bodies strewn all over the place yet are hidden from view. They are being hidden from view because if they are seen, the entire system comes into question with answers being delivered within probably a 48 hour period. The answer of course will be the biggest “gaps” in all of history …both in price AND time! By this I am saying the re-opening gaps will be larger in percentage and the time to reopen longer than ever before.

Whether you want to see it or not, the financial system is in a forced unwinding. It took some 70 years to build this great credit edifice, when it goes it may take less than 48 hours to take it ALL down. To finish I leave you with a short clip of what the collapse might look like …and how quickly it can get there! https://www.youtube.com/watch?v=KUsj7EdZigM

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  [email protected]

Posted at 1:14 PM (CST) by & filed under Jim's Mailbox.

Jim/Bill,

What a dilemma!

If the Fed raises rates, how will corporations fund the interest expense when they have to roll over their bond obligations at much higher interest rates? Not only will the coupons have to be significantly higher, but the business environment will be sluggish due to the tightening, leaving less profits, if any, to pay out the higher interest expense.

4) Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

Subsequently, increased defaults in the bond markets will be seen, as being witnessed currently by the oil patch travails. Those declining bonds, primarily nat gas fracking obligations, will trigger Credit Default Swaps, bringing us closer to the abyss.

Furthermore, if the Fed does nothing, or even lowers rates into negative territory, then the FX carry trade market, which is mind boggling huge, implodes. We are already seeing the effects of this as the Yen carry trade unwinds, sending it much higher. This would put severe pressure on the US Dollar as Yen are repurchased and Dollars sold, as well as the underlying investments, which the carry trade was used for, are being unloaded.

Perhaps I’m making much ado about nothing, but it certainly looks serious to me.

CIGA Wolfgang Rech

Dear Wolfgang and Bill,

As Bill explained, the world is coming apart financially and many other ways at the seams right in front of your eyes.

This is it. It is here and now, clear and present.

We are all screwed to some degree royally by our esteemed financial leaders who are of course absolutely safe from having drained the physical gold market for years.

Respectfully,
Jim

Posted at 4:17 PM (CST) by & filed under In The News.

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65,000% Spike In Reported Radioactivity After Tritium Leaks At Indian Point Nuclear Power Plant
Tyler Durden on 02/06/2016 17:51 -0500

Two years after being fined for falsifying safety records, nine months after a transformer exploded at the Indian Point Nuclear Reactor just 37 miles from midtown Manhattan, and two months after Entergy – the plant’s operator – shut down the Unit 2 reactor after a major power outage cut power to several control rods (when the company assured that no radioactivity was released into the environment), this afternoon NY Governor Andrew Cuomo said he learned that “radioactive tritium-contaminated water” had leaked into the groundwater at the nuclear facility in Westchester County.

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Cuomo, in a letter Saturday to the state Health Department and the Department of Environmental Conservation, called for the probe into the Indian Point NPP after he said Entergy, the plant’s owner, reported “alarming levels of radioactivity” at three monitoring wells, with one well’s radioactivity increasing nearly 65,000 percent.

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As Madoff Airs On TV, Two Anonymous Whistleblowers Are Pounding On The SEC’s Door Again
Submitted by Tyler Durden on 02/05/2016 19:00 -0500

Submitted by Pam Martens and Russ Martens via WallStreetOnParade.com,

Last night ABC began its two-part series on the Bernie Madoff fraud. Viewers will be reminded about how investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings.

Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities.

The two anonymous authors have one thing going for them that Markopolos did not. They are represented by a former SEC attorney, Peter Chepucavage, who was also previously a managing director in charge of Nomura Securities’ legal, compliance and audit functions. We spoke to Chepucavage by phone yesterday.  He confirmed that two of his clients authored the series of letters. Chepucavage said further that these clients have significant experience in trading ETFs and data collection involving ETFs.

Throughout their letters, the whistleblowers use the phrase ETP, for Exchange Traded Product, which includes both ETFs and ETNs, Exchange Traded Notes. In a letter that was logged in at the SEC on January 13, 2016, the whistleblowers compared some of these investments to the subprime mortgage products that fueled the 2008 crash, noting that regulators and economists were mostly blind to that escalating danger as well. The authors wrote:

“The vast majority of ETPs have very low levels of assets under management and illiquid trading volumes. Many of these have illiquid underlying assets and a large group of ETPs are based on derivatives that are not backed by physical assets such as stocks, bonds or commodities, but rather swaps or other types of complex contracts. Many of these products may have been designed to take what were originally illiquid assets from the books of operators, bundle them into an ETP to make them appear liquid and sell them off to unsuspecting investors. The data suggests this is evidenced by ETPs that are formed, have enough volume in the early stage of their existence to sell shares, but then barely trade again while still remaining listed for sale. This is reminiscent of the mortgage-backed securities bundles sold previous to the last financial crisis in 2008.”

The authors also note in this same letter that they have been presenting their evidence of “significant red flags” and “fundamental flaws” to the SEC since March 2015 and that the industry has not disputed the evidence. However, disclosures of these risks in the product offerings has not been forthcoming either.

To underscore to the regulators just how serious they are about cleaning up the ETP market, in a cover letter dated March 24, 2015, Chepucavage copied every member of the Financial Stability Oversight Council (F-SOC), the body created under the Dodd-Frank financial reform legislation to monitor financial stability in the U.S., including Federal Reserve Chair Janet Yellen, U.S. Treasury Secretary Jack Lew, and SEC Chair Mary Jo White.

The detailed March 24, 2015 letter from the whistleblowers pointed out that the very act of allowing some of these illiquid product offerings to be listed on U.S. stock exchanges is lending an air of legitimacy to them since stock exchanges in the U.S. are also mandated to police their own markets. The whistleblowers wrote:

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Jim Sinclair’s Commentary

Goodbye Petro Dollar.

Exclusive: Iran wants euro payment for new and outstanding oil sales – source
Mon Feb 8, 2016 12:02pm EST
BY NIDHI VERMA

Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month’s sanctions relief.

A source at state-owned National Iranian Oil Co (NIOC) told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa and Litasco, the trading arm of Russia’s Lukoil.

“In our invoices we mention a clause that buyers of our oil will have to pay in euros, considering the exchange rate versus the dollar around the time of delivery,” the NIOC source said.

Lukoil and Total declined to comment, while Cepsa did not respond to a request for comment.

Iran has also told its trading partners who owe it billions of dollars that it wants to be paid in euros rather than U.S. dollars, said the person, who has direct knowledge of the matter.

Iran was allowed to recover some of the funds frozen under U.S.-led sanctions in currencies other than dollars, such as the Omani rial and UAE dhiram.

Switching oil sales to euros makes sense as Europe is now one of Iran’s biggest trading partners.

“Many European companies are rushing to Iran for business opportunities, so it makes sense to have revenue in euros,” said Robin Mills, chief executive of Dubai-based Qamar Energy.

Iran has pushed for years to have the euro replace the dollar as the currency for international oil trade. In 2007, Tehran failed to persuade OPEC members to switch away from the dollar, which its then President Mahmoud Ahmadinejad called a “worthless piece of paper”.

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Jim Sinclair’s Commentary

I think Yellen and the hawks should just stay inside the Fed and keep quiet.

Treasury Yield Curve Crashes To 8-Year Lows, Financials Follow
Tyler Durden on 02/08/2016 13:47 -0500

The US Treasury yield curve has plunged further today (2s10s -5bps at 107bps)  breaking to its flattest since January 2008.

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The curve has been flattening since The Fed began to taper QE3 and as financials begin to catch down to that ugly reality…

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Jim Sinclair’s Commentary

It is here and now again.

Europe Closes “On The Lows”: Deutsche Bank Plunges 11% To 7 Year Lows
Tyler Durden on 02/08/2016 11:45 -0500

BTFD? Deutsche Bank stock crashed over 11% today (the most since July 2009) to its lowest since January 2009 record lows. We have detailed at length why this is a major systemic problem and we wonder how anyone can view this chart and not question their full faith in central planners engineering of the ‘recovery’. Nothing is fixed and it’s starting to become very obvious!

Does this look like a buying opportunity? At EUR13.465 today, DB is within pennies of the all-time record lows of EUR13.385…

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As we explained earlier, since Europe unleashed their “Bail-In” regulations, European banks have utterly imploded with Deustche most systemically affected as it seems more than one person is betting that Deutsche will be unable to raise enough capital and will be forced to haircut depositors on up in the capital structure.

Finally – for those desperate dip-buyers hoping for another move from Draghi – don’t hold your breath… As Deutsche Bank itself warned, any more easing by The ECB or BOJ will only hurt banks (and certainly Deutsche). In other words, they are all officially trapped now.

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Jim Sinclair’s Commentary

Welcome back to 2008, and in a much bigger way.

After Crashing, Deutsche Bank Is Forced To Issue Statement Defending Its Liquidity
Tyler Durden on 02/08/2016 14:33 -0500

The echoes of both Bear and Lehman are growing louder with every passing day.

Just hours after Deutsche Bank stock crashed by 10% to levels not seen since the financial crisis, the German behemoth with over $50 trillion in gross notional derivative found itself in the very deja vuish, not to mention unpleasant, situation of having to defend its liquidity and specifically assuring investors that it has enough cash (about €1 billion in 2016 payment capacity), to pay the €350 million in maturing Tier 1 coupons due in April, which among many other reasons have seen billions in value wiped out from both DB’s stock price and its contingent convertible bonds which are looking increasingly more like equity with every passing day.

DB did not stop there, but also laid out that for 2017 it was about €4.3BN in payment capacity, however before the impact of 2016 results, which if recent record loss history is any indication, will severely reduce the full cash capacity of the German bank.

From the just issued press release:

Ad-hoc: Deutsche Bank publishes updated information about AT1 payment capacity

Frankfurt am Main, 8 February 2016 – Today Deutsche Bank published updated information related to its 2016 and 2017 payment capacity for Additional Tier 1 (AT1) coupons based on preliminary and unaudited figures.

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