Jim Sinclair’s Commentary
My former Chicago Floor partner, Yra, makes some very important points here.
Notes From Underground: The Fed breaks new ground
By Yra
The FOMC press release did not surprise anyone except some financial television pundits. However, there are two items that are new as we do our scatological analysis of the entrails of FED SPEAK. First is the following line:
“Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”
This is the only time we can remember the Bernanke Fed explicitly stating its concern about events outside the U.S. Yes, we know the FED extended its DOLLAR SWAP LINES last month but we can’t remember anything alluding to weakness abroad as a reason to maintain a soft FED policy. Furthermore, the FED added the words, “prices of energy and other commodities have declined in recent months.”
This gives greater credence to the Bernanke FED being an output gap-oriented FED and it’s for that reason the extended period is based on the employment situation and the capacity utilization numbers come in behind. It’s interesting that the FOMC actually mentioned energy and other commodities because we doubt that if OIL was $100 a barrel that the FED would have moved to tighten. Who were they trying to assuage with that language?
PUT THIS ON YOUR RADAR SCREEN: The British POUND performed well after OSBORNE brought the austerity budget forward. The question must be asked: If the POUND was rewarded for fiscal austerity, is the DOLLAR going to be punished for continual profligacy? Our initial thought that was that Britain would be punished for promoting austerity over growth and that the U.S. might be the recipient of investment money as they went the route of economic growth at all costs. We don’t know what the technical picture says about the POUND but from the action we urge those looking for a change in the risk on/risk off paradigm to do their homework.
Dear CIGAs,
In response to The Farce and The Fact.
I have no quarrel with the posted analysis. In order to finish the analysis and illustrate the complete dominance of capital flows, I suggest that dividends be included when comparing the performance of gold with U.S. equities. The enclosed chart illustrates the relative performance between the two asset classes with dividends included in the total return. The dotted blue line marks the 1971 reference point.
Despite the variation of the calculation, the modified relative performance between the two assets does not alter your assertion that gold has and continues to attract capital over equities since 2000.
Regards,
CIGA Eric
![clip_image001[1]](http://jsmineset.com/wp-content/uploads/2010/06/clip_image001112.jpg "clip_image001[1]")
Jim,
President Clinton acknowledged that he was wrong to take the advice of those advising him against regulating derivatives.
“On derivatives, yeah I think they were wrong and I think I was wrong to take [their advice] because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency,” Clinton told me.
“And the flaw in that argument,” Clinton added, “was that first of all sometimes people with a lot of money make stupid decisions and make it without transparency.”
The former President also said he was also wrong about understanding the consequences if the derivatives market tanked. “The most important flaw was even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect a 100 percent of the investments, and indeed a 100 percent of the citizens in countries, not investors, and I was wrong about that.”
Click here to read the full article…
Best regards,
CIGA Christopher
5-Year Treasury Auction Trends
CIGA Eric
No change in participation trends. Direct bidders continue to represent an increasing portion of the accepted bids since 2009.
5-Year Treasury Auction Trends 
Source: treasurydirect.gov
Jim,
"The Australian and Canadian dollars are becoming reserve currencies for central bankers seeking alternatives to deteriorating government credit quality in Europe, the U.S. and Japan."
Not good for the US dollars.
Best regards,
CIGA Christopher
Central Banks Show Euro Losing Reserve Status as Loonie Gains
By Oliver Biggadike and Mary Childs – Jun 22, 2010
The Australian and Canadian dollars are becoming reserve currencies for central bankers seeking alternatives to deteriorating government credit quality in Europe, the U.S. and Japan.
"They’ll gain an increasing place in reserves because of diversification," European Central Bank governing council member Christian Noyer said in a June 16 interview with Bloomberg News in Paris.
Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. currency and euro, Alexei Ulyukayev, the first deputy chairman of the nation’s central bank, said in an interview in Moscow on June 15. The International Monetary Fund may add the Aussie and loonie to a basket of currencies it uses in transactions, strategists at UBS AG, the world’s second largest foreign-exchange trader, predict (Bloomberg).
