Posted at 9:27 AM (CST) by & filed under In The News.

Jim,

Hey, I’m gonna produce as much oil as possible, no matter what the price, to fund our budget. But it would be nice to overcome supply and demand and get higher prices for it.

Let me think now… I’ll consult a good friend of mine.

(Whisper) “Start a war in the Mideast. That should do it.”

CIGA Wolfgang

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Oil Surges To $45 After Saudi Troops Invade Yemen
Submitted by Tyler Durden on 08/28/2015 – 10:30

For the 3rd day in a row, crude oil prices are spiking as the short squeeze morphs into a war premium. Heberler reports that Saudi ground troops have entered Northern Yemen and seized control of two areas in the Saada province. WTI is now above $45…

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Jim,

The ULTIMATE bailout… negative interest rates.

Does this mean we pay financial entities to borrow as much money as they can? Where does the line begin?  I wanna get on it!

If indigent freeloaders can get free money, then why not the well-to-do financiers?

CIGA Wolfgang Rech

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Gold Surges On NIRP Hint
Submitted by Tyler Durden on 08/28/2015 – 09:45

The Fed’s ultimate dove has been unleashed and this time he means business. Faced with the inevitable rate hike, Kocherlakota has come out swinging to explain how cataclysmic inflation is and why The Fed should use its asset-purchase tools and lower interest rates further… i.e. to negative… Gold reacted instantly…

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Posted at 10:42 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Two weeks back I asked the question whether or not the “Final War” had started, between the EAST AND WEST. I was called a number of politically incorrect names for suggesting the Tianjin explosion might have been an “attack” and took even more heat,… because I included the word “nuclear”. Since then there have been many theories as to what happened, some of them pretty far fetched. Yesterday another article was published in Veterans Today, http://www.veteranstoday.com/2015/08/25/confirmation-tianjin-was-nuked/ which scientifically suggests the explosion was in fact “nuclear.” I am inquiring as to whether the science used as proof is in fact sound. In the meantime, I would like to hear from readers why or why not the science used in this article is correct or is not. Please do not send me “opinion” or tell me Veterans Today is a poor source. Please specifically attack the science!

I would like to use the Tianjin explosion as a mid point in my review of what happened before and since the tragic event. Prior to the Tianjin explosion, China announced they had accumulated 600 more tons of gold over the last 6 years. On the face of it; this number is clearly bogus as China mines 400 tons per year and none of this product leaves their border for export. I termed this 600 tons….a “polite number”. Seemingly, the number was enough to demand a place at the IMF table but not enough to be a threat to the “sacrosanct” 8,133 tons the U.S. claims. This was followed almost immediately by the IMF announcing it would review China’s inclusion in the SDR in another 9 months. Just two days later China began a series of three yuan devaluations, on day two the Tianjin explosion occurred.

Since then, China announced another 19 tons of gold accumulated. One week later the chemical explosion in Shandong destroyed one of China’s main trading cities (this chemical explosion looked nothing at all like Tianjin). Yes, I understand, different chemicals explode differently but the videos clearly look like fuel ordnance. Coincidentally, two days after the Shandong explosion… a U.S. munitions depot in Tokyo exploded. Maybe I have been sleeping or just haven’t been paying attention but when was the last time a U.S. munitions depot exploded by accident?

As we know so well; over the last two weeks, the chaos in global markets finally reached the shores of Manhattan. Market chaos, that had previously been quite widespread and headlined by China, finally gripped U.S. markets. Now we find out China has exited over $100 billion of U.S. Treasury bonds in just the last two weeks and has indicated it is dumping more through Belgium and elsewhere.

http://www.zerohedge.com/news/2015-08-27/its-official-china-confirms-it-has-begun-liquidating-treasuries-warns-washington. We knew they had been selling over past months to the tune of nearly $150 billion, but $100 billion compressed into just two weeks is mammoth! I would also add “smart” because China did this selling while fear capital was clamoring to seek “safety” in risk free U.S. Treasuries. China traders appear to have effectively used the fear bid to their advantage as an exit. Please note I wrote “two weeks” several times above. Is it just coincidence Tianjin experienced the explosion “two weeks” ago?

A total of $250 billion worth of Treasury bonds have been sold, what does this imply? The T-bond selling appears to indicate a number of things, with possible multiple ramifications. First and foremost it says “they are not buying”! Of course the next logical questions follows;….”who” will step in to fund the U.S. deficits now that China has turned from buying to selling…In China they call it a Yin Yang. Also, who will the buyers be if China keeps selling? The logical conclusion; after answering the two above questions is…. “the Federal Reserve.” The follow on question is; will the Federal reserve need to commence another round of stimulus, QE 4 and more?

No matter how you look at China’s current financial position and about face, they will clearly no longer fund U.S. budget deficits in the foreseeable future. This leaves us with the misunderstood truth “the Federal Reserve is THE Buyer of last resort.” Worse yet; the Emerging Markets have had to jump the gun and have already started to unload U.S. Treasury’s as their currency falls to reflect lower trade and China’s devaluation of the Yuan.

Apparently, the U.S. has now crossed the Rubicon of sorts and will be forced to “print” deficit spending as a last resort. It is called MONETIZATION and has ALWAYS led to hyperinflation with existing “paper currency” becoming diluted and ever more worthless. The current situation is far more troubling and far reaching than any before it, because the entire world will be fearing a dilution of their “reserve base.” Dollar instruments (U.S. Treasury issues, etc.) are held by nearly ALL central banks and act as a foundation for all other fiat currencies, “infecting balance sheets all over the world.” For what ever reason; I would call a run from the Dollar “a plague,” but in fact, the situation is more like an infestation, the effects of a diluted dollar could well be… far more than any plague in history.

I would like to ask you a few questions. Is there any way you can look at the chronological events over the last month and not conclude they are connected? Is it not clear China/Russia and the U.S. are in a trade, currency, military confrontation, one that might lead to a shooting war? Even the mainstream media reports on U.S. spying and SinoRuso hacking. The West, led by the U.S. have evolved entirely into a “credit based” society …funded in large part by China. Can you look at China’s sales of Treasury securities and say they are not pulling the credit plug? Can you in any way, from a U.S. standpoint, say this is beneficial, or helpful to the U.S.? Or, might it be overt financial war?

China is building military bases throughout the Pacific on man made islands and telling the U.S. to mind their own business, in spite of Pres. Obama’s pivot to the Pacific. The U.S. and NATO are amassing troops and hardware on Ukraine’s border. On the other side Russia is doing likewise. Now we are seeing aerial attacks in Syria, etc. John Kerry has even said; ” If the U.S. does not ratify the deal with Iran, the dollar will lose it’s reserve currency status.” He said this because five nations in Europe have already agreed and sent delegations to Iran to open trade channels. Would this not isolate the U.S. further in energy, trade and finance? As for the series of explosions, could they be coincidence? Yes. Do you believe they are? Or,.. maybe “too coincidental?”

Are there too many coincidental technological, financial and geopolitical dots lined up to come to any conclusion other than we are already in the early stages of war? I believe this is in fact the case. I still believe the Chinese would prefer to “win” via financial means, rather than physical means, but this remains to be seen. Would a ” 9/11 truth bomb,” which is now rumored more often out of Russia, be another way to neuter American hegemony without military use?

As a final thought, I believe global markets are beginning to discount or recognize the war behind the scenes. This is the reason for the chaos in equity and credit markets. Can you imagine what it looks like behind the derivatives curtain? Guaranteed;…. there are dead bodies strewn all over,… with no ability to perform or settle. When history looks back upon August 2015, I believe the consensus view will agree THE WAR had already started!

Standing watch,

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

Posted at 4:39 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Gross Domestic Income (GDI) Confirmed Stagnant First-Half Economy, Largely Consistent with Reporting of Industrial Production and Real-Retail Sales
- Upside Revision to Gross Domestic Product (GDP) Was Unstable and Nonsensical
- Second-Quarter GDP Now Shows Above-Average Economic Growth; Headline First-Quarter Activity Was Stagnant
- GDI Activity Was Stagnant in Both First- and Second-Quarter Reporting
- GDP and GDI Are Theoretical Equivalents and Equally Legitimate Measures of Broad U.S. Economic Activity

“No. 747: Revised Second-Quarter GDP ”
Web-page: http://www.shadowstats.com

 

Jim Sinclair’s Commentary

Don’t go anywhere Jesse Venture.

Donald Trump trounces GOP field, Biden leads general election match-ups
By Theodore Schleifer, CNN
Updated 9:52 AM ET, Thu August 27, 2015

Washington (CNN)Vice President Joe Biden fares better against top GOP candidates in hypothetical general election match-ups than Hillary Clinton, according to a new national survey.

The Quinnipiac University poll, released Thursday, also shows Donald Trump smashing the GOP presidential competition garnering 28% support from registered Republican voters in the 17-member field. The real estate mogul’s closest competitor is retired neurosurgeon Ben Carson, who tallies 12%.

Just 7% said they would vote for former Florida Gov. Jeb Bush, a record low since November 2013.

Those results show just how far both Trump — now the Republican front-runner — and Bush — the old one — have come. Bush led national polls for much of the first half of 2015, but was quickly dislodged by Trump, after he announced his presidential ambitions this June.

Sens. Ted Cruz of Texas and Marco Rubio of Florida both are tied with Bush at 7%, the polls shows, with Wisconsin Gov. Scott Walker at 6% and former tech CEO Carly Fiorina and Ohio Gov. John Kasich tied at 5%.

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Jim Sinclair’s Commentary

This thinking is globally correct.

What China’s Treasury Liquidation Means: $1 Trillion QE In Reverse
Submitted by Tyler Durden on 08/27/2015 18:45 -0400

Earlier today, Bloomberg – citing the ubiquitous “people familiar with the matter” – confirmed what we’ve been pounding the table on for months; namely that China is liquidating its UST holdings.

As we outlined in July, from the first of the year through June, China looked to have soldsomewhere around $107 billion worth of US paper. While that might have seemed like a breakneck pace back then, it was nothing compared to what would transpire in the last two weeks of August. Following the devaluation of the yuan, the PBoC found itself in the awkward position of having to intervene openly in the FX market, despite the fact that the new currency regime was supposed to represent a shift towards a more market-determined exchange rate. That intervention has come at a steep cost – around $106 billion according to Soc Gen. In other words, stabilizing the yuan in the wake of the devaluation has resulted in the sale of more than $100 billion in USTs from China’s FX reserves.

That dramatic drawdown has an equal and opposite effect on liquidity. That is, it serves to tighten money markets, thus working at cross purposes with policy rate cuts. The result: each FX intervention (i.e. each round of UST liquidation) must be offset with either an RRR cut, or with emergency liquidity injections via hundreds of billions in reverse repos and short- and medium-term lending ops.

It appears that all of the above is now better understood than it was a month ago, but what’s still not well understand is the impact this will have on the US economy and, by extension, on US monetary policy, and furthermore, there seems to be some confusion as to just how dramatic the Treasury liquidation might end up being.

Recall that China’s move to devalue the yuan and this week’s subsequent benchmark lending rate cut have served to blow up one of the world’s most popular carry trades. As one currency trader told Bloomberg on Tuesday, “it’s a terrible time to be long carry,increased volatility — which I think we’ll stay with — will continue to be terrible for carry. The period is over for carry trades.”

Here’s a look at how a rules-based carry strategy designed to capture yield differences would have fared in the universe of G10 CCYs (note the blow ups around the SNB’s franc shocker and the yuan deval):

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Jim Sinclair’s Commentary

Could this be the financial world of today?

The Devil’s Advocate (1997 film)
From Wikipedia, the free encyclopedia

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Jim Sinclair’s Commentary

Don’t laugh. Like in the USA, every pissed off person is going to line up with him and Trump if he calls a spade, a spade.

All Varofake need to do is to go to the Trump school of political action, which teaches how not to be a politician. Be proud of your tin hat.

There may be a whole entire market for them across the pond. Crank the rates in the US before the election is a sure way to have President Trump and Pan-European president Varoufakis. Jesse Venture should not give up yet.

Former Greek FinMin Varoufakis Launches Pan-European Anti-Austerity Political Party
Tyler Durden on 08/27/2015 12:15 -0400

Varoufakis’ fans get ready! The ex finance minister is preparing to launch a European movement that will develop into a political party. Yanis Varoufakis will push for a Pan-?uropean network for fight austerity. Instead of running for the upcoming elections, he will put his energy into political action on European level.

Speaking to Late Night Live program of Australian ABC National Radio, Yanis Varoufakis described the elections campaign as “sad and fruitless” and said that he will not be running for Greek parliament in the September elections, as he no longer believes in what Syriza and its leader, Tsipras, are doing.

‘The party that I served and the leader that I served has decided to change course completely and to espouse an economic policy that makes absolutely no sense, which was imposed upon us.

I don’t believe that we should have signed up to it, simply because within a few months the ship is going to hit the rocks again. And we don’t have the right to stand in front of our courageous people who voted no against this program, and propose to them that we implement it, given that we know that it cannot be implemented.”

Varoufakis indirectly described Alexis Tsipras as a ‘fool’ saying that Tsipras was like mythical Sisyphus “carrying on pushing the same rock of austerity up the hill, against the laws of economics and against very profound ethical principles.” He added “as a child I considered Sisyphus a fool. I would have simply stopped pushing the rock.”

He expressed sympathy for the SYRIZA rebels of Panagiotis Lafazanis and the Popular Unity, but he added that he fundamentally disagrees with their ‘isolationist’ stance of desiring a return to the drachma.

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Jim Sinclair’s Commentary

Now what could go wrong in our world today?

It’s Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington
Submitted by Tyler Durden on 08/27/2015 14:27 -0400

On Tuesday evening, we asked what would happen if emerging markets joined China in dumping US Treasurys. For months we’ve documented the PBoC’s liquidation of its vast stack of US paper. Back in July for instance, we noted that China had dumped a record $143 billion in US Treasurys in three months via Belgium, leaving Goldman speechless for once.

We followed all of this up this week by noting that thanks to the new FX regime (which, in theory anyway, should have required less intervention), China has likely sold somewhere on the order of $100 billion in US Treasurys in the past two weeks alone in open FX ops to steady the yuan. Put simply, as part of China’s devaluation and subsequent attempts to contain said devaluation, China has been purging an epic amount of Treasurys.

But even as the cat was out of the bag for Zero Hedge readers and even as, to mix colorful escape metaphors, the genie has been out of the bottle since mid-August for China which, thanks to a steadfast refusal to just float the yuan and be done with it, will have to continue selling USTs by the hundreds of billions, the world at large was slow to wake up to what China’s FX interventions actually implied until Wednesday when two things happened: i) Bloomberg, citing fixed income desks in New York, noted “substantial selling pressure” in long-term USTs emanating from somebody in the “Far East”, and ii) Bill Gross asked, in a tweet, if China was selling Treasurys.

Sure enough, on Thursday we got confirmation of what we’ve been detailing exhaustively for months. Here’s Bloomberg:

China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.

Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales, said another person. They didn’t reveal the size of the disposals.

The latest available Treasury data and estimates by strategists suggest that China controls $1.48 trillion of U.S. government debt, according to data compiled by Bloomberg. That includes about $200 billion held through Belgium, which Nomura Holdings Inc. says is home to Chinese custodial accounts.

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Jim Sinclair’s Commentary

There goes the boat, the house, our first born and my mother in law. How do you think we had so much money in the stock market?

Margin Calls Mount On Loans Against Stock Portfolios Used To Buy Homes, Boats, “Pretty Much Everything”
Submitted by Tyler Durden on 08/27/2015 15:40 -0400

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

In a securities-based loan, the customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral. But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education.

The result was “dangerously high margin balances,” said Jeff Sica, president at Morristown, N.J.-based Circle Squared Alternative Investments, which oversees $1.5 billion of mostly alternative investments. He said the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.

From the Wall Street Journal article: Margin Calls Bite Investors, Banks

Today’s article from the Wall Street Journal on investors taking out large loans backed by portfolios of stocks and bonds is one of the most concerning and troubling finance/economics related articles I have read all year.

Many of you will already be aware of this practice, but many of you will not. In a nutshell, brokers are permitting investors to take out loans of as much as 40% of the value from a portfolio of equities, and up to a terrifying 80% from a bond portfolio. The interest rates are often minuscule, as low as 2%, and since many of these clients are wealthy, the loans are often used to purchase boats and real estate.

At the height of last cycle’s credit insanity, we saw average Americans take out large home loans in order to do renovations, take vacations, etc. While we know how that turned out, there was at least some sense to it. These people obviously didn’t want liquidate their primary residence in order to do these things they couldn’t actually afford, so they borrowed against it.

In the case of these financial assets loans, the investors could easily liquidate parts of their portfolio in order to buy their boats or houses. This is what a normal, functioning sane financial system would look like. Rather, these clients are so starry eyed with financial markets, they can’t bring themselves to sell a single bond or share in order to purchase a luxury item, or second home. Of course, Wall Street is encouraging this behavior, since they can then earn the same amount of fees managing financial assets, while at the same time earning money from the loan taken out against them.

I don’t even want to contemplate the deflationary impact that this practice will have once the cycle turns in earnest. Devastating momentum liquidation is the only thing that comes to mind.

So when you hear about margin loans against stocks, it’s not just to buy more stocks. It’s also to buy “pretty much everything…”

From the Wall Street Journal:

Loans backed by investment portfolios have become a booming business for Wall Street brokerages. Now the bill is coming due—for both the banks and their clients.

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Jim Sinclair’s Commentary

Now what do you do? In Washington it is easy, spend and borrow more money, declaring the recession over based on bogus numbers. That should fix everything for good while trusting the Chinese not to sell US debt and instead buy it?

CBO report forecasts unsustainable debt in long term
By Stephen Dinan – The Washington Times – Tuesday, August 25, 2015

The economy is sluggish but growing and inflation remains low, painting a decidedly mixed picture for the federal government, the Congressional Budget Office reported Tuesday, saying the fiscal situation is improving this year but will snap back by 2018 to swelling deficits and unsustainable debt.

The inflation rate is so low that Social Security beneficiaries probably won’t get a cost-of-living raise after this year, the CBO said. But tax revenue is up and spending has stayed pat, which is helping reduce the pool of red ink in the federal budget.

Combined, those numbers mean the government will run a deficit of $426 billion in fiscal year 2015, down about $60 billion from 2014 and marking the smallest deficit of President Obama’s tenure.

The good news will continue for a couple of years as the economy belatedly but fully rebounds from the recession of December 2007 to June 2009. By 2018, though, debt will rise as government spending grows and the economy will cool again, the CBO said.

“The growth in debt is not sustainable,” CBO Director Keith Hall said in presenting the estimates. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.”

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Jim Sinclair’s Commentary

What was immoral is now virtue. What was clearly illegal (and still is), is now business as usual

Exchanges, Barclays win dismissal of U.S. high-frequency trading case

Major U.S. stock exchanges and Barclays Plc on Wednesday won the dismissal of nationwide litigation in which pension funds and other investors accused them of rigging markets to benefit high-frequency traders.

U.S. District Judge Jesse Furman in Manhattan said federal law affords exchanges “absolute immunity” from the plaintiffs’ key claims, including over the creation of “complex order types” and proprietary data feeds that can benefit rapid traders, because of their status as self-regulatory organizations.

In a 51-page decision, Furman also said the plaintiffs did not show they reasonably relied on Barclays’ misrepresentations about the safety of its Barclays LX “dark pool,” including that they were not at risk of being exploited by fast traders.

The lawsuit accused Barclays and seven exchanges including Nasdaq, Intercontinental Exchange Inc’s New York Stock Exchange, BATS Global Markets and CHX Holdings Inc’s Chicago Stock Exchange of giving high-frequency traders favoured treatment, costing less-favoured investors billions of dollars.

Several regulators are also investigating dark pools, and New York Attorney General Eric Schneiderman has sued Barclays.

High-frequency traders use computer algorithms to gain split-second trading advantages, and were accused of rigging markets in Michael Lewis’ 2014 best-seller “Flash Boys.”

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Jim Sinclair’s Commentary

No problem. Call the Fed.

Oil Industry Needs Half a Trillion Dollars to Endure Price Slump

At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.

The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.

If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London. West Texas Intermediate crude was up 2.8 percent at $39.68 a barrel at 8:10 a.m. in London.

“The look and shape of the oil industry would likely change over the next five to 10 years as companies emerge from this,” Wood said. “If oil prices stay at these levels, the number of bankruptcies and distress deals will undoubtedly increase.”

Debt repayments will increase for the rest of the decade, with $72 billion maturing this year, about $85 billion in 2016 and $129 billion in 2017, according to BMI Research. A total of about $550 billion in bonds and loans are due for repayment over the next five years.

U.S. drillers account for 20 percent of the debt due in 2015, Chinese companies rank second with 12 percent and U.K. producers represent 9 percent.

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Posted at 11:48 AM (CST) by & filed under Jim's Mailbox.

Jim,

If we all know this, that the public is not in stocks to any great extent, then of course the Fed knows it also.

Then why would the Fed would step in and support stocks if it doesn’t benefit the public?

Answer: To support the institutions again, just like the last time. However, this time the FX markets will take notice and make the Dollar pay the price. After all, the only way to provide support is to print more money.

Will it work? Simply look at China. After a Trillion in support, their market is still on shaky legs.

CIGA Wolfgang Rech 

How exposed are American households to the stock market?
Aug 26th 2015, 21:22 by H.C. | WASHINGTON, DC

Should the Federal Reserve worry about tanking stock markets? One reason for calm is that they do not much affect household finances. Just over half of Americans say they are invested in the stock market, but their direct stock holdings are small, making up only 14% of household balance sheets (see chart). That means the effect of this week’s stock market falls on household spending, and on the American economy, is probably limited.

Stocks tend to be held by high earners, who are less likely to cut spending in response to falls in their wealth. Mom-and-pop investors are also unlikely to fund their investments with borrowing. That is in contrast to investments in houses, which are typically levered by mortgages, magnifying losses when prices fall. In 2009 collapsing house prices, rather than tanking markets, did for household finances.

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Jim,

Some serious stuff going on. Makes you wonder if this a purposeful chess move to undermine the Dollar, or to wreak havoc on the US economy by raising US interest rates to burden the Treasury with increased interest expense on those treasuries?

Either way, fasten your seatbelts. The Dollar is going down!

CIGA Wolfgang Rech

It’s Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington

On Tuesday evening, we asked what would happen if emerging markets joined China in dumping US Treasurys. For months we’ve documented the PBoC’s liquidation of its vast stack of US paper. Back in July for instance, we noted that China had dumped a record $143 billion in US Treasurys in three months via Belgium, leaving Goldman speechless for once.

We followed all of this up this week by noting that thanks to the new FX regime (which, in theory anyway, should have required less intervention), China has likely soldsomewhere on the order of $100 billion in US Treasurys in the past two weeks alone in open FX ops to steady the yuan. Put simply, as part of China’s devaluation and subsequent attempts to contain said devaluation, China has been purging an epic amount of Treasurys.

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Jim,

Can you smell it? I love the smell of inflation in the morning!

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CIGA Wolfgang Rech

Silver Is Soaring
Submitted by Tyler Durden on 08/27/2015 11:40 -0400

Shortly before 10amET, amid USD strength, futures prices for Copper, Crude, and Silver suddenly started spiking higher…

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Posted at 10:55 AM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Financial-Market Turmoil Heralds Likely Systemic Instabilities
- July Durable Goods Orders Fell Year-to-Year for Sixth Straight Month, Irrespective of Considerations for Commercial Aircraft Orders or Inflation
- Flat-to-Minus Real Orders Continued Below the Peak Activity Seen before Both the 2001 and 2007 Formal Recessions
- A Decade of Collapsed Housing Activity: New- and Existing-Homes Sales Still Down Respectively by 63% (-63%) and 23% (-23%) from Pre-Recession Peaks in June/July 2005

“No. 746: July Durable Goods Orders, New- and Existing-Home Sales, Market Turmoil ”
Web-page: http://www.shadowstats.com

 

China Loses All Control: Arrests Journalist, Financial Executive Over Market Crash
Tyler Durden on 08/26/2015 08:31 -0400

For two months, China has been on a quest to control both the stock market itself and the narrative around the stock market.

After an unwind in the CNY1 trillion back alley margin lending complex sparked a late June selloff, China cobbled together a plunge protection team run by China Securities Finance (an arm of CSRC) and began intervening in the market.

That effort has cost an estimated CNY900 billion so far.

On July 20, Caijing magazine suggested that CSF was setting up to scale back the market interventions which many believed had kept the SHCOMP from collapsing altogether. Here’s what happened next:

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That suggestion caused futures to slide in China and in short order, the “rumor” was denied by CSRC. Now, the reporter who penned that story has been arrested for, as Bloomberg put it earlier today, “spreading fake stock and futures trading information.”

BREAKING: China’s well-respected Caijing magazine confirmed 1 of its reporters was arrested by police for a stock market story denied by Gov

— George Chen (@george_chen) August 26, 2015

This comes on the heels of a move by Beijing earlier this week to suppress discussion of Monday’s market rout, which, along with the selloffs it triggered in bourses across the globe, was dubbed “Black Monday.”

Of course this isn’t the first time – and it probably won’t be the last – that China has cracked down on the media for “subversive” coverage of financial markets. Early last month, Beijing reportedly banned the use of the phrases “equity disaster” and “rescue the market.” That said, throwing reporters in jail marks a new escalation in the war on financial reporters, or, as the managing editor of The South China Morning Post put it, “you already know it’s risky to be political journalists in China – Now financial reporter is risky job too.”

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Dudley Says “We Are A Long Way From Additional QE”
Tyler Durden on 08/26/2015 11:06 -0400

And scene:

FED’S DUDLEY SAYS “WE ARE A LONG WAY FROM” ADDITIONAL QUANTITATIVE EASING

So, how far is the “away”: another 5% drop in the S&P “data”? 10%? 20%? And what is measured in: milliseconds or nanoseconds. Inquiring frontrunning vacuum tubes want to know.

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Dudley Just Killed The Rate Hike: “September Less Compelling; I Hope We Can Raise Rates This Year”
Submitted by Tyler Durden on 08/26/2015 10:42 -0400

Goodbye September rate hike. From the much anticipated Dudley Q&A:

DUDLEY: CASE FOR SEPT RATE HIKE LESS COMPELLING

DUDLEY:INTNL DEVELOPMENTS TIGTHEN FINL CONDNS, MAY HURT ECON

DUDLEY: RATE HIKE CASE COULD BE MORE PANICKY BY SEPT FOMC

DUDLEY SAYS INTL DEVELOPMENTS HAVE RAISED DOWNSIDE RISKS

10:36 08/26  DUDLEY: HAVE TO CONSIDER INTNL DEVELOPMENTS; CAN AFFECT ECON

Transitory:

DUDLEY: EXPECTS DOLLAR, OIL EFFECTS TO BE TRANSITORY ON U.S. INFLATION

On inflation:

DUDLEY: LOW INFL APT TO BE TRANSITORY

Because it is only a matter of time before the money paradrops begin?

DUDLEY: US DATA GOOD, BUT CAN’T JUST LOOK AT DOMESTIC DATA

Yes, have to also look at domestic stocks. Oh but wait:

DUDLEY: I DON’T HAVE A VIEW ON WHY THE STOCK MARKET IS DOING WHAT IT IS DOING

DUDLEY: STOCK DROP HAS LITTLE S-TERM EFFECT ON U.S. ECON

And the punchline:

DUDLEY: I REALLY HOPE WE CAN RAISE RATES THIS YEAR

But the markets won’t allow us.

TSYs jumping on the news, USDJPY dumping on USD weakness with stocks shocked, and waiting until the algos reverse the correlation trackers so tthey can push stocks higher on a weaker dollar, resulting from this latest admission of Fed policy failure.

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“Central Bankers Look Naked… & Investors Have Nothing Else To Believe In”
Submitted by Tyler Durden on 08/26/2015 10:16 -0400

Via RBS’ Alberto Gallo,

“Policymakers responded to the financial crisis with easy monetary policy and low interest rates. The critics — including us — argued against ‘solving a debt crisis with more debt.’ Put differently, we said that QE was necessary, but not sufficient for a recovery. We are now coming to the moment of reckoning: central bankers look naked, and markets have nothing else to believe in.”

The Emperor Is Naked…

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As The FiscalTimes details,

Gallo believes an overreliance on excess liquidity has actually hindered capital investment — as companies have focused on debt-funded share buybacks and dividend hikes instead — limiting the global economy’s potential growth rate.

Now, contagion from China — lower commodity prices, lower demand, currency volatility — has revealed the structural vulnerabilities. More stimulus, in his words, “could be self-defeating without fiscal and reform support.”

As for Fed hike timing, Gallo sees the odds of a September liftoff at just 30 percent, down from 36 percent last week, based on futures market pricing. December odds are at 60 percent.

The open question is: Should the Fed delay its rate hike and the People’s Bank of China ease, will stocks actually rebound? Or has the Pavlovian reaction function been broken by a loss of confidence? We’re about to find out.

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Recession Watch – Durable Goods Growth Slows In July, Core Capex Orders Decline 6 Straight Months
Submitted by Tyler Durden on 08/26/2015 08:40 -0400

Durable Goods Orders rose a better than expected 2.0% in July (but that is notably slower than the 4.1% revised growth in June) mostly driven by another surge in aircraft orders which however was nowhere near last year’s bumper Boeing-driven surge, resulting in a 20% drop Y/Y in the headline data. A more realistic assessment came from the durables ex-transports series, which rose just 0.6%, better than the 0.3% expected, and down 2.5% from a year ago. This is the 6th consecutive drop in the annual data.

Non-defense Capital Goods growth remains stagnant as core capex orders have also now been in deceline 6 straight months year-over-year.  Finally, durable goods ex aircraft shipments also moderated, rising 0.6%, down from last month’s upward revised 0.9%, and a paltry 0.5% up from a year ago.

The big Boeing order from last year washes through the NSA data:

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But ex-Transports the data remains ugly YoY:

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Non-defense Capital Goods remain stuck in a recessionary slump:

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Posted at 7:16 AM (CST) by & filed under USAWatchdog.com.

By Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Legendary gold expert Jim Sinclair says what is going on right now in the stock market is just the warm-up act. Sinclair contends, “This is a pre-crash, and we are not making it through September without the real thing. Everybody is on credit. Main Street is on credit. This seems to be a bubble of historical proportion when it comes to the amount of money supporting the accepted lifestyles as being the new normal. Raising interest rates is impossible today. The market is so fragile. Nothing can come out that causes people any concern or derivatives any change, nothing whatsoever. We are going through a period of time where expecting nothing meaningful is a dream. These are times never experienced in financial history. . . .It is very possible that we are going to have a super civilization change. ”

The US Plunge Protection Team is losing control of the markets, and Sinclair warns, “They got the dickens scared out of them. They actually backed off providing the funds necessary. . . . That’s your warning. The warning is markets can overrun plunge protection teams. Markets can and will overrun the manipulation of metals and currencies. The market will overrun the false strength in the US dollar. The idea that a lift in interest rates would be beneficial to the dollar is absolutely incorrect. We do know the limits of the Plunge Protection Team, and we do know the omnipotent power of the Fed is a total fallacy.”

On gold, Sinclair says, “I didn’t call the top in gold in 1980 because of any kind of a system. I was told, I acted on what I was told.”

His sources are talking again, and Sinclair says he was told: “Number one, the downside on gold is extraordinarily limited here. Two, the rally we are facing that will come in gold is going to be stupendous. Three, they tell me we may never call you back because this may be the rally you don’t sell. This may be the rally you don’t sell because gold is moving from a currency form to a valuation form. . . . This may be the last time we call you means this is a rally that is not meant to be sold. What is coming up in front of us is the Great Reset where currencies wear their gold like ladies wear a necklace, and the most beautiful necklace will be the strongest currency. The ladies without the necklace won’t be invited to the ball. Huge changes are coming. The dollar is always going to be with us, and the yuan and all of the currencies are still going to be there. We are not going to one single currency. The SDR (Special Drawing Rights) is nothing more than a glorified index of currencies. It’s a cure to nothing. How can a package of junk cure the problem of junk? It can’t. The two last men standing will be gold and gold on steroids—silver.”

Sinclair stands by his prediction last year of an eventual gold price of $50,000 per ounce. Sinclair explains, “You have to understand we are going into unprecedented deflation, and it’s the reaction of central banks around the world to the concept of deflation that brings about hyperinflation. . . . There will be debt monetization of all kinds of debt to maintain some sort of equilibrium. The price of gold is going to go to a level that is going to surprise everybody. I was told that this is a rally that you won’t sell. That means gold will go to a level and not react violently down from that level. . . . This is when gold is going to levels that today are considered more mental illness than monetary analysis. Silver is best understood as gold on steroids because whatever potential and direction is taken up by gold, silver will be multiplied by 2 or by 5. . . .Silver will outperform gold.”

Join Greg Hunter as he goes One-on-One with renowned gold expert Jim Sinclair of JSMineset.com.

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Posted at 7:09 AM (CST) by & filed under Jim's Mailbox.

Jim,

Peter Schiff believes higher interest rates will drive the final nail into the coffin.

CIGA Wolfgang Rech

Dear Wolfgang,

Of course, as I said in today’s Greg Hunter interview, when the PPT team loses control of the US debt market as part of what I said. Now we know markets can overrun the PPT in any market they are operating in. Now we know the PPT has limits and is not omnipotent. Now we know there is no Fed at the back of the equity market, and can also be overrun by markets.

That goes for the dollar as well.

Jim

Peter Schiff: The market’s ‘pipe dream’ is ending
By Stephanie Yang 1 hour ago

“For awhile, people thought that the stock market can handle higher interest rates. That was just a pipe dream. They can’t,” Schiff said Tuesday on CNBC’s ” Futures Now .” “That’s the only thing propping up the market.”

According to Schiff, the prospect of rising interest rates is the main driver behind the selloff.

“There has been a lot of technical damage done, and if the Fed isn’t going to come out and come clean about the fact that it’s not raising rates, I think this correction will turn into a bear market,” he added.

Schiff is known for his bold predictions, including his call on the 2007 housing crisis. He also previously said that gold will go to $5,000.That has yet to happen, but Schiff is sticking to his bullish call.

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Jim,

This is a dangerous situation. When stocks get hammered, money always flows into Treasuries.

It appears, if you think about it, that someone (China?) has been using the cover of “flight to safety” as an opportunity to dump their US bond holdings.  When the stock market crashed and people sold in panic, they purchased treasuries in large quantities.  This gave China the opportunity to sell its holdings into the strong demand.

Some astute analysts have been telling people to watch the action of the bond market. If the yields keep rising, then China must be unloading it holdings of US Bonds and that spells trouble for us. Who will be left to buy and finance the massive U.S. debt position?

Rising rates, as a result of fewer buyers of our debt, will crush any hope for an economic recovery! The only possible solution left will be to physically start up the printing presses. Excellent article below.

Welcome Weimar,

CIGA Wolfgang Rech

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Devaluation Stunner: China Has Dumped $100 Billion In Treasurys In The Past Two Weeks
Submitted by Tyler Durden on 08/26/2015 07:24 -0400

There you have it: in the past two weeks alone China has sold a gargantuan $106 (or more) billion in US paper just as a result of the change in the currency regime!

But wait, there’s more: recall that one months ago we posted that “China’s Record Dumping Of US Treasuries Leaves Goldman Speechless” in which we reported that China has sold some $107 billion in Treasurys since the start of 2015.

When we did that article, we too were quite shocked at that number. However, we – just like Goldman – are absolutely speechless to find out that China has sold as much in Treasurys in the past 2 weeks, over $100 billion, as it has sold in the entire first half of the year!

Should the current pace of liquidity outflows continue, and require the dumping of $100 billion in FX reserves, read US Treasurys, every two weeks this means China has, oh, call it some 18 weeks of intervention left.

What happens when China liquidates all of its Treasury holdings is anyone’s guess, and an even better question is will anyone else decide to join China as its sells US Treasurys at a never before seen pace, and best of all: will the Fed just sit there and watch as the biggest offshore holder of US Treasurys liquidates its entire inventory…

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Jim and Bill,

Someone sent this to me last night, and thought I would share it with you!  

The definition of the word Conundrum is: Something that is puzzling or confusing. Here are six Conundrums of the political/social environment in the United States of America today:

1. America is capitalist and greedy – yet half of the population is subsidized.
2. Half of the population is subsidized – yet the subsidized think they are victims.
3. The subsidized think they are victims – yet their representatives run the government.
4. Their representatives run the government – yet the poor keep getting poorer.
5. The poor keep getting poorer – yet they still have things that people in other countries only dream about.
6. They still have things that people in other countries only dream about – yet they want America to be more like those other countries.

And that, my friends, pretty much sums up the USA in the 21st Century.
And two final thoughts:

1. Seems we constantly hear about how Social Security is going to run out of money. But we never hear about welfare or food stamps running out of money! What’s interesting is the first group “worked for” their money, but the second didn’t.

And, last but not least:

2. Why are we cutting benefits for our veterans, no pay raises for our military, but we are not cutting the payments or benefits to illegal aliens?

Something to think about.

CIGA Buz