Posted May 18th, 2013 at 3:19 PM (CST) by Jim Sinclair & filed under In The News.

Jim Sinclair’s Commentary

Mr. Faber’s comment: "You keep your dollars and I’ll keep my gold. Let’s see which goes to zero first."

Jim Sinclair’s Commentary

Here is the best advertisement for the Animal Channel. I always leave it on for the puppies if I am out.

Strange times are these in which we live when old and young are taught in falsehood’s school. And the one man who dares to tell the truth is called at once a lunatic and fool.
– Plato (429-347 BC)

Jim Sinclair’s Commentary

Urban defense against banksters returning from a wonderful day of rape, murder and pillage: a 50 cal. hot dog.

Jim Sinclair’s Commentary

Tired of our totally criminal world of finance? Need a smile? Try being covered with puppies.

Gold Bug Hedge Funds Collectively Report Over $183mm In New Call Option Positions On Miners
May 18, 2013 | By Tekoa Da Silva

While mainstream news sources continue the war against gold and gold-related investments, three of the world’s top performing hedge fund managers have been busy at work building speculative gold positions during the first quarter.

George Soros, John Paulson, and Steve Cohen, who in aggregate control over $60 billion dollars, have been aggressively buying the most speculative vehicles associated with gold: call options on gold mining stocks.

Starting out with, George Soros, billionaire financier and chairman of Soros Fund Manangement LLC, was the target of bearish gold commentary this week issued by Bloomberg. While Bloomberg journalists correctly reported that he’s been cutting his stake in gold, what they failed to mention (which was articulated here on May 16th), was how he reallocated the proceeds.

Soros indeed cut his stake in the GLD gold fund by about $2.5mm—a paltry sum, especially given the fact that he simultaneously purchased a massive $25mm in call options on the GDXJ Junior Gold Miners Index. This purchase outweighs the physical gold sale by a factor of 10—suggesting he expects much greater gains ahead to be had in the junior mining stocks.

Reported exclusively here on February 19th, was Steve Cohen, founder of SAC Capital Partners LP, purchased a $60mm option “straddle” position on the GLD during Q4 2012, which represented the expectation of an explosive move in gold—either up or down in price. Indeed, that is exactly what occurred, and during Q1, SAC Capital Partners closed out that $60mm straddle position (no doubt at a staggering profit), while at the same time buying $66mm in call options on a major gold & copper producer. The firm also maintained over $76mm in long positions on mining equities during Q1.

The largest of the trio in terms of gold positioning for the quarter, was John Paulson, founder of Paulson & Co., which reported owning over $4.389 billion in total gold holdings. Paulson held firm his $3.3 billion stake in GLD, and further added a shocking $92mm in call options on two major gold mining companies.

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Muddled Israeli-US policies on Assad set stage for Golan offensive against Israel

Four days after a “senior Israeli official” warned Assad through The New York Times of Wednesday, May 15 that he risks forfeiting power if he retaliates for Israeli attacks on weapons supplies to terrorists, “Israeli officials” were telling the London Times of Saturday, May 18 something quite different: “An intact, but weakened, Assad regime would be preferable,” they said. “Better the devil we know than the demons we can only imagine if… extremists from across the Arab world gain a foothold there.”

The night before this report, Fox News aired footage appearing to show Israeli commandos inside Syria racing back on foot to Israeli territory. Without going into whether the two sets of “Israeli officials” were one and the same, their utterances are clearly making Israel’s policy-makers and defense leaders look muddled and uncertain – or, worse, unable to think clearly – about how to cope with the menace building up on the Syrian Golan. This could take the form of a Syrian war of attrition and/or a Hizballah offensive against Upper and Western Galilee. At all events, the Syrian civil conflict appears poised ready to spill over to one or more of its neighbors, starting with Israel as a result of six factors:

1. President Barack Obama’s inability to make up his mind on whether the US should intervene militarily in Syria – even in a limited way, such as the imposition of no-fly zones or finding a way to supply non-Islamist Syrian rebel groups with sorely needed weapons.

2.  The US president’s refusal to recognize that chemical weapons have already been used in Syria. His reaction to the file put before him in the White House Friday, May 17, by Turkish Prime Minister Tayyip Erdogan – with evidence from physicians treating wounded Syrians – remained dismissive. “The US has seen evidence of chemical weapons being used in Syria,” he said, adding however, “it is important to get more specific details about alleged chemical attacks.”

This comment was interpreted as the US president’s acceptance of the use of chemical weapons in the Syrian war so long as it was on a limited scale. Obama, like Prime Minister Binyamin Netanyahu, has therefore waved away another red line for military intervention in the Syria conflict, by closing his eyes to the evidence.

Former Israeli defense minister Binyamin Ben-Eliezer was more realistic last week when he brusquely brushed aside a radio interviewer’s query by saying: Of course, Assad has used chemical weapons and isn’t it obvious that he has already transferred to Hizballah both chemical substances and other advanced weapons?

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Jim Sinclair’s Commentary

Reputation of management is important to the valuation of a security. The US dollar is the security of the country, USA. Therefore reputation of management will factor into the dollar price regardless of short term shenanigans.

This Is No Ordinary Scandal
Political abuse of the IRS threatens the basic integrity of our government.
By PEGGY NOONAN

We are in the midst of the worst Washington scandal since Watergate. The reputation of the Obama White House has, among conservatives, gone from sketchy to sinister, and, among liberals, from unsatisfying to dangerous. No one likes what they’re seeing. The Justice Department assault on the Associated Press and the ugly politicization of the Internal Revenue Service have left the administration’s credibility deeply, probably irretrievably damaged. They don’t look jerky now, they look dirty. The patina of high-mindedness the president enjoyed is gone.

Something big has shifted. The standing of the administration has changed.

As always it comes down to trust. Do you trust the president’s answers when he’s pressed on an uncomfortable story? Do you trust his people to be sober and fair-minded as they go about their work? Do you trust the IRS and the Justice Department? You do not.

The president, as usual, acts as if all of this is totally unconnected to him. He’s shocked, it’s unacceptable, he’ll get to the bottom of it. He read about it in the papers, just like you.

But he is not unconnected, he is not a bystander. This is his administration. Those are his executive agencies. He runs the IRS and the Justice Department.

A president sets a mood, a tone. He establishes an atmosphere. If he is arrogant, arrogance spreads. If he is too partisan, too disrespecting of political adversaries, that spreads too. Presidents always undo themselves and then blame it on the third guy in the last row in the sleepy agency across town.

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Jim Sinclair’s Commentary

The physical market for gold will drain the warehouses of the futures exchange resulting in the physical market taking over the price setting mechanism of gold.

China’s Gold hunger to continue in 2013

BEIJING (Scrap Register): World’s second biggest gold buyer China’s gold hunger to continue this year, according to the latest reports.

As per latest reports, China’s gold imports from Hong Kong reached a record high in March and country’s yellow metal consumption rose by 26% in the first quarter of this year.

China’s Gold imports from Hong Kong
As per latest figures released by Hong Kong Census and Statistics Department, Mainland China’s gold imports from Hong Kong more than doubled to a record high level in March.

China boosted their gold purchases from Hong Kong by 223,519 kilograms in March including scrap, an increase of 130% compared with 97,106 kilograms a month earlier.

According to Bloomberg, China’s net gold imports reached 130,038 kilograms in March compared with 60,947 kilograms a month earlier.

China’s Gold consumption
The world’s second-largest economy China’s consumption advanced sharply by 26% year-on-year in the first three month of this year mainly due to the strong bullion sales and rising jewelry demand, as per China Gold Association.

According to the Association, China’s gold usage hit 320.54 metric tons in the first quarter of this year. Purchases of gold bars surged 49 percent to 120.39 tons, while jewelry gained 16 percent to 178.59 tons.

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Posted May 17th, 2013 at 7:27 PM (CST) by Jim Sinclair & filed under In The News.

Jim Sinclair’s Commentary

Undermine the recovery is the understatement of the millennium

Exiting QE could ‘undermine the recovery’, IMF warns
Raising interest rates to get the economy back onto a normal setting could prove so complicated it “undermines the recovery”, the International Monetary Fund has warned.
By Philip Aldrick, Economics Editor
4:00PM BST 16 May 2013

Central banks, including the Bank of England, strayed into “unchartered waters” by cutting interest rates to near-zero and launching billions of pounds of quantitative easing, and they will find the exit “difficult to control”, the IMF said. “The market response [to a rise in interest rates] will be less predictable … possibly for several months or even years.”

Long-term interest rates could spike as investors dump over-priced bonds and banks could face a fresh round of losses on both their gilt portfolios and loan books as borrowers struggle to meet higher monthly payments, it added.

“This risk makes it very important that any necessary bank restructuring and recapitalisation is completed as soon as possible,” IMF financial stability deputy chief Erik Oppers said. “Credit risk for banks may increase. Higher interest rates make it harder for bank customers to pay back their loans.”

The IMF’s analysis followed a warning earlier this week from two former members of the Bank’s Monetary Policy Committee that rate rises would result in an economic "shock" to the UK. Early signs of growth have raised the prospect of an earlier return to normal interst rate policy than the markets currently believe.

Sir Mervyn King, the Bank’s Governor, said this week that "it may be possible to raise rates faster than current market expectations" of no increase until late 2016.

The IMF also confirmed earlier work by the Bank that warned of large losses on central bank balance sheets. In a shock scenario, under which rates would need to rise by six percentage points, losses on the current £375bn QE programme in the UK could reach 4.5pc of GDP – or £70bn. Even under a “likely case” scenario where rates rose by four percentage points, the loss would be £50bn.

The Bank has previously calculated that the interest income on the £375bn of QE would more than offset the exit losses in all but the most extreme case, when the taxpayer could end up £8bn out of pocket. The IMF analysis excluded “the income from asset holdings”.

A Bank official said: "As the IMF report acknowledges, this analysis ignores capital gains and coupon income from bondholdings. That makes the results very misleading."

For the economy more broadly, though, the IMF said the risks were considerable. “The risk is interest rate volatility and overshooting in the adjustment of long-term rates. The potential sharp rise in long-term interest rates could prove difficult to control, and might undermine the recovery (including through effects on financial stability and investment),” it wrote in a policy paper.

It also argued that there was clear evidence of “diminishing returns” in continuing with existing policies like QE. The most effective policy now, it suggested, was “conditional guidance” of the sort used by the US Federal Reserve and under review by the Bank. It has also been championed by incoming Governor Mark Carney.

The IMF paper said guidance was “preferable” to “price-level or nominal-GDP targeting”.

“A possibly more promising approach may be to explicitly characterize the conditions or ‘thresholds’ leading to an interest rate lift-off. While avoiding the pitfalls of the above rules, guidance based on thresholds continues to offer an automatic stabilizer, in the sense that as the economy weakens, expectations will automatically shift to a later lift-off date,” it said.

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Jim Sinclair’s Commentary

If legacy OTC derivatives on the books of US financial institutions were properly valued, the money on depositors statements in the US financial institutions would be severely reduced or eliminated.

Demand for gold at record high in Q1
Updated: 2013-05-17 03:05
By Cai Xiao ( China Daily)

China’s gold demand jumped to a record high in the first quarter despite a global drop of 13 percent, according to a report released by the World Gold Council on Thursday.

Gold jewelry demand in China surged to a record quarterly value of 60.3 billion yuan ($9.8 billion), the council said.

Traditional Spring Festival-related gold buying and gifting was augmented by a rebound in sentiment regarding the strength of the domestic economy.

China and India accounted for a combined 62 percent of global jewelry demand in the first quarter.

China posted a new record for quarterly investment in gold bars and coins as positive seasonal factors worked in tandem with gold’s enduring investment appeal. Demand grew to 109.5 metric tons, compared with a five-year quarterly average of 43.8 tons.

The Spring Festival period fueled buying in January, but demand was supported throughout the rest of the quarter as Chinese investors, discouraged by the weak domestic stock market, increasingly relied on gold to fulfill their investment needs.

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Russia sends Syria upgraded anti-ship cruise missiles
DEBKAfile May 17, 2013, 8:55 AM (GMT+02:00)

US officials report the delivery to the Syrian government of Yakhont anti-ship cruise missile updated with advanced radar for extending its range and accuracy. It is designed to counter any effort by international forces to supply Syrian rebels from the sea, impose a naval embargo, establish a no-fly zone or carry out limited strikes. DEBKAfile adds: The improved Yakhont enables Syria to keep Israeli missile ships far from its coast and block troop landings.

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Four Russian S-300 batteries shipped to Syria
DEBKAfile May 17, 2013, 9:00 AM (GMT+02:00)

Moscow reports that four batteries of S-300 systems with 100-150 simultaneously deployable, guided anti-aircraft missiles have already been shipped to Syria complete with Russian military “adviser” crews. DEBKAfile: An Israeli strike to smash this weapon in Syria could not avoid hitting its Russian crews.

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Jim Sinclair’s Commentary

I so love animals.

The World’s Central Banks Added To Their Gold Stockpiles Even As Prices Tumbled
Mamta Badkar | May 16, 2013, 10:47 AM

Gold prices are down about 12.5% since the start of April. But global central banks have been increasing their reserves of the yellow metal.

A new report from the World Gold Council shows that central banks bout 109 tonnes of gold in the first quarter.

This was the seventh straight quarter in which they purchased over 100 tonnes of gold.

Central banks held 31,735.4 tonnes of gold as of May 2013. This was up from 31,694.8 tonnes as of April 2013.

Gold entered a bear market during that quarter. In the current quarter, gold has gone from $1,603 on April 1 to below $1,400 today.

According to the WGC, Russia and South Korea were among the biggest buyers of gold.

“The price drop in April, fuelled by non-physical moves in the market, proved to be the catalyst for a surge of buying that has left many retailers short of stock and refineries introducing waiting lists for deliveries," said Marcus Grubb managing director at World Gold Council in a press release. "Putting this into context, sales of bars and coins, jewelery and consumption in the technology sector still make up 81% of the market.

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Jim Sinclair’s Commentary

Courtesy of CIGA David Madisonstyle.com

Congressman: Department of Justice Tapped Congressional Rooms as Well as Reporters’ Offices

Has the Obama Department of Justice Violated the Separation of Powers?

California Congressman  Devin Nunes (R-CA) says that the Department Of Justice tapped phones in the rooms where Congress members speak informally and off the record, eat, sleep and socialize when they’re not on the floor of the House of Representatives or in their individual offices.

These rooms are known as “cloak rooms”, which are the spaces in which a lot of informal conversations occur … both between Congress members, and Congress members and reporters.

Congressman Nunes told Hugh Hewitt:

[Congressman  Nunes]:  I don’t think people are focusing on the right thing when they talk about going after the AP reporters. The big problem that I see is that they actually tapped right where I’m sitting right now, the Cloak Room.

[Interviewer]: Wait a minute, this is news to me.

Congressman  Nunes:  The Cloak Room in the House of Representatives.

[Interviewer]: I have no idea what you’re talking about.

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Swiss Party Puts Gold Repatriation, Protection on Ballot
May 9, 2013

The Swiss People’s Party, a nationalist political party in Switzerland, has succeeded in getting the required number of signatures to put a gold referendum on the national ballot.  The “Save Our Swiss Gold” initiative, if passed by voters, would require the Swiss central bank to double its gold reserves from 10% to 20% and repatriate all gold reserves held abroad. The measure would also forbid the sale of any gold reserves.

This would make the gold reserves worthless to the bank, according to Thomas Jordan, chairman of the governing board of the Swiss National Bank. He explained that if the gold was unsellable, it could not be counted as an asset at all, while still tying up 20% of the central bank’s reserves. He warned that the bank would have to issue treasury bills and pay interest on them in order to manage the money supply, and would lead to printing more money.

Jordan also revealed for the first time where Switzerland’s gold reserves are held – another demand by the Swiss People’s Party. Switzerland has a total of 1,040 tonnes of gold, with 70% in Switzerland, 20% in the Bank of England, and 10% in the Bank of Canada. Jordan said that keeping a portion of the nation’s gold reserves abroad was necessary for “adequate regional diversification and good market access.” Central banks will keep reserves in foreign central banks for use as collateral when buying foreign currencies.

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The US Dollar:

The one and one only real present flow of money into the dollar. It is a product of the broad discussion of what is certainly coming in finance. Bail-in is a strategy that confiscates major funds that are on the statement of large depositors to fund a bankrupt bank. Most of the public conversation about this has centered on Euroland. It would be natural for large depositors to flee Euroland for other places like the USA. That is of course falling from the frying pan into the fire.

If you shift deposits it should be to other than entities outside the Western financial system. Holding cash is quite sane when all you get on it is 1% interest and you take all the risk of the solvency of the institution.

Physical Gold:

The argument that modern wealth is so large that it is immobile and therefore will not move en masse to physical gold.

To this point I first pose a question. Where has all the physical gold gone? Central banks have gold on their books but a major percentage, maybe a shocking percentage, is leased out with counter party risk. Simply stated, if the lease is not renewed the central banks must drop the gold from their assets therefore the leases are renewed constantly knowing full well the gold is gone. The theft of gold is the second largest crime in world history, second in size to the fraudulent legacy of OTC derivatives that caused the entire mess.

The paper gold market is in its death throws right now due to the downside manipulation and the knuckle draggers do not even appreciate that. With the automatic and forthcoming elimination of paper gold as the price setting mechanism, physical gold will seek much higher prices than anyone can conceive of.

I mentioned that a price of $50,000 an ounce was possible when physical gold is emancipated from paper gold. To that a popular previous gold writer turned Trojan Horse simply dismissed it as Jim being extreme rather than argue the subject.

Jim Sinclair’s Commentary

Today’s latest from John Williams’ www.ShadowStats.com.

- Inflation Remains Very Much a Threat
- April Year-to-Year Inflation: 1.1% (CPI-U), 0.9% (CPI-W), 8.7% (ShadowStats)
- CPI Decline Boosted Real Retail Sales, Re-Intensifying Recession Still Signaled
- April Housing Starts Showed Statistically-Significant Plunge

"No. 525: April CPI, Housing Starts"
Web-page: http://www.shadowstats.com

Jim Sinclair’s Commentary

Of course the Federal Reserve can do whatever the pleases to do, but the consequences will be immediate and severe. To slow or cease QE would kick the support of the equity market and US dollar right out from under both.

Since the day QE started all we have heard is stopping it while it continued to grow. This article is nothing new, but rather a statement as old as QE itself.

Fed blame game leads to QE end game
May 15, 2013, 12:01 p.m. EDT
By John Nyaradi

The Federal Reserve’s controversial quantitative-easing (QE) program has generated a new round in the "blame game," and the Fed itself is now forecasting the end game for QE.

The Federal Reserve’s quantitative-easing program has been controversial ever since it began in 2008. Over the years, the program has drawn increasing criticism from many corners, but recently, the criticism has reached deafening levels as a series of high-profile commentators chime in to voice opposition to the program.

The chief complaint is that the program punishes those who prefer savings accounts, while the program benefits investors, big banks and institutional investors. The conclusion reached in these arguments is that QE benefits the investing class at the expense of those who rely on passbook savings accounts, thus making the program an act of class warfare. Paul Singer of Elliott Management often makes this argument, emphasizing that quantitative easing has caused a "distorted recovery" which brings great benefits to investors, while doing nothing for the middle class.

Ron Paul’s views regarding the Federal Reserve are well known, (abolish it), however, even a fellow central banker, European Central Bank President Mario Draghi, took a poke at Bernanke during a May 2 press conference in Bratislava. When questioned about the ECB’s approach to the euro-zone economic crisis (which involves imposition of an austerity mandate on countries requesting bailout funds from the ECB) Draghi distinguished the ECB approach from that of the Federal Reserve in the United States. In an obvious reference to Dr. Bernanke’s now-infamous "Helicopter Ben" speech, Draghi remarked that one does not "go around with helicopter money, throwing money."

Dissension also exists within the Fed, itself. On Thursday, May 9, Dallas Federal Reserve President Richard Fisher pointed out that the lack of job creation is a result of poor fiscal policy rather than monetary policy. Fisher explained that monetary policy had accomplished all it could in stimulating the economy and that ongoing bond buying by the Fed amounts to "overkill." Fisher’s suggestion that quantitative easing should be scaled back was the first "trial balloon" to test public reaction to the idea of weaning the economy (and more importantly, the stock market) from the liquidity pump.

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