Dear CIGAs,

The euro trading level is on the left hand side of www.jsmineset.com ^[1]. The present bids on the euro have gone from $1.29, to $1.26 and now $1.2150.

Below $1.2150, and Volcker looks right.

The German Finance Ministry today banned the use of naked CDSs as well as share and certain bond short sales.

OTC derivatives, their manufacturers and distributors, have killed the Western world. The world now knows how dangerous OTC derivative credit defaults swaps are.

If there is no global ban on OTC derivative CDS then there is no ban at all, because when banned somewhere they will just trade elsewhere while doing the same or greater damage.

 

Jim Sinclair’s Commentary

Time outs can ease a panic, but never change a trend. They in fact act to advertise that trend.

S.E.C. Proposes Circuit Breakers for S.&P. 500 Stocks

The Securities and Exchange Commission on Tuesday proposed a trial of individual circuit breakers on all of the stocks in the Standard & Poor’s 500-stock index in response to the May 6 market disruption.

More… ^[2]

Jim Sinclair’s Commentary

In one paragraph Egon has caught the gist of the entire matter.

ALEA IACTA EST
by Egon von Greyerz – Matterhorn Asset Management

Yes this is it! We have crossed the Rubicon and events in the world economy are now likely to unfold in a totally uncontrollable fashion. Clueless governments still don’t understand that it is their ruinous actions that have created a credit infested and bankrupt world. They will continue to prescribe the same remedy that caused the problem in the first place, namely more credit and more printed money. The consequences are clear; we will have hyperinflation, economic and human misery as well as social unrest.

More… ^[3]

Jim Sinclair’s Commentary

Do not be concerned by natural reactions in a gold bull market which is going to $1650 and beyond.

^[4]

 

Jim Sinclair’s Commentary

Uptick rules are infinitely more effective than a clear ban of shorting.

Merkel to announce short-selling ban -coalition source

BERLIN, May 18 (Reuters) – Chancellor Angela Merkel plans to announce Germany’s ban on short-selling on Wednesday, a coalition source told Reuters on Tuesday.

Another source said earlier that Germany would ban naked short-selling on certain stocks and euro government bonds from midnight.

"From midnight today there will be a ban on naked short selling of certain stocks and euro government bonds," a source told Reuters. No further details were immediately available.

Economy Minister Rainer Bruederele told Reuters that it was possible the short-selling ban would be quickly enacted.

No other details were immediately available.

More… ^[5]

Jim Sinclair’s Commentary

The reason you have not seen any substantial civil cases go to court regarding OTC derivatives is because all OTC derivatives fit the legal description of fraud.

That description is set in cement in the Federal Court of the Southern District of New York in the 1991 Manko case.

Greece posses a great risk to anyone that helped its financial officers hide debt or sold them any kind of derivative at all.

Whatever OTC derivatives do not do to the international investment banks litigation will. Keep in mind that litigation is both criminal and civil.

Greece blames US for snowballing debts
Sun, 16 May 2010 18:39:31 GMT

Greek Prime Minister George Papandreou says he is considering taking legal action against US investment banks for their alleged role in the snowballing Greek debt crisis.

Papandreou said Sunday that an investigation will be launched to examine whether the financial sector engaged in "fraud", leading to the spiraling of Greece’s debt, the Associated Press reported.

It is predicted that Greece will exceed 140 percent of its economic output in 2012.

Papandreou rejected international skepticism about Greece’s ability to pay back loans it acquired from Germany to manage the crisis.

Some officials in Germany have expressed dissatisfaction that Greeks are taking the easy way out.

The under-pressure prime minister, however, remains steadfast in defusing the crisis.

"We are ready to make the changes … we have made our mistakes. We are living up to this responsibility. But at the same time, give us a chance," Papandreou said.

More… ^[6]

Jim Sinclair’s Commentary

What, you expected something different?

Banks dump Greek debt on the ECB as eurozone flashes credit warnings
Foreign holders of Greek and Portuguese debt have seized on emergency intervention by the European Central Bank to exit their positions, leaving eurozone taxpayers exposed to the credit risk.
By Ambrose Evans-Pritchard, International Business Editor
Published: 6:57PM BST 17 May 2010

The Bank of New Mellon said its custodial data showed a "sharp acceleration" of net sales of debt from the two countries after the ECB began purchasing €16.5bn of bonds from southern Europe and Ireland in bid to halt market panic. "It rather suggests that investors leapt at the opportunity to clear their balance sheets of intolerable risk," said Neil Mellor, the bank’s currency strategist. "This leaves the ECB itself in an unpleasant situation since it now faces a deterioration in its own balance sheet."

While ECB action has greatly reduced bond spreads on peripheral eurozone debt, it has not yet stabilized the broader markets. The euro fell to a four-year low of $1.2260 against the dollar in early trading. Jean-Claude Juncker, the head of the Eurogroup, said on Monday that this risks becoming disorderly. "I’m not worried as far as the current exchange rate is concerned: I’m worried as far as the rapidity of the fall is concerned."

Crucially, there are still serious strains in the interbank lending market. Hans Redeker, currency chief at BNP Paribas, said the LIBOR-OIS spread in Europe used to gauge credit stress is flashing danger signals, hovering near levels seen during the Lehman crisis.

The ECB’s strategy of draining liquidity to offset the stimulus from the bond purchases risks making matters worse. "They are using one-week deposits for sterilisation and the effects of this to make short-term funding more expensive. This will force banks to sell assets to shrink their balance sheet and risks causing a credit crunch," he said.

Mr Redeker said the ECB is pursuing a contractionary policy to assuage concerns in Germany that Club Med bond purchases will stoke inflation. "They have read the German press and it made their hair stand up on their necks. The reality is that a deflationary cycle is developing in Euroland and the ECB will eventually have to start quantitative easing," he said.

More… ^[7]

Jim Sinclair’s Commentary

The Volcker type statements continue to fly.

Germany, Greece and Exiting the Eurozone
May 18, 2010
By Marko Papic, Robert Reinfrank and Peter Zeihan

Rumors of the imminent collapse of the eurozone continue to swirl despite the Europeans’ best efforts to hold the currency union together. Some accounts in the financial world have even suggested that Germany’s frustration with the crisis could cause Berlin to quit the eurozone — as soon as this past weekend, according to some — while at the most recent gathering of European leaders French President Nicolas Sarkozy apparently threatened to bolt the bloc if Berlin did not help Greece. Meanwhile, many in Germany — including Chancellor Angela Merkel herself at one point — have called for the creation of a mechanism by which Greece — or the eurozone’s other over-indebted, uncompetitive economies — could be kicked out of the eurozone in the future should they not mend their “irresponsible” spending habits.

Rumors, hints, threats, suggestions and information “from well-placed sources” all seem to point to the hot topic in Europe at the moment, namely, the reconstitution of the eurozone whether by a German exit or a Greek expulsion. We turn to this topic with the question of whether such an option even exists.

More… ^[8]