Jim Sinclair’s Commentary
Yra is spot on. Please read this.
Notes From Underground: Amazing Grace has appeared and it’s in Jackson Hole
By Yra
Amazing Grace! How sweet the sound,
That saved a wretch like me.
I once was lost but now am found,
Was blind, but now I see.
The markets are reacting to a Wall Street Journal article by the new FED fair-haired minion, Jon Hilsenrath, and the great dissonance that took place at the last FOMC meeting. Our readers know that we have been very critical of the FED and its reliance on models that, on a good day, are so badly flawed. The pursuit of economic policies based on poor analysis has been a major problem and the markets are waking up to the fact that the FEDis neither omniscent nor omnipotent. Today, the markets are responding to the fear that the FED is” lost in the ozone ” so risk is being taken off and the algorithm’s of the risk-off trade are in full motion.
We at NOTES must ask: If the FED and its models are so badly broken why do investors want to run to DOLLARS for safety? If the major global policy force is in disarray, why do I wish to own its financial instruments? There is going to be a great deal of discussion among the premier academics in Jackson Hole this Thursday and Friday. But we stress that the FED is losing its credibility and there is concern about the way forward.
The FED will be looking to repair its fall from grace but it doesn’t know the way forward out of the policy maze in which it finds itself. The best thing is that the GREENSPAN PUT IS DEAD. But the FED is still lost and needs to be found. No wonder the Koreans and the Chinese are diversifying away from U.S. debt. U.S. residents are pouring into BONDS as the need for the return of their capital, just like the Japanese have done during the last 15 years. But on a global basis, the U.S. is far more important than Japan. Is this the discusiion that will break the back of the risk-off PARADIGM?
Notes From Underground: Amazing Grace has appeared and it’s in Jackson Hole
CIGA Eric
A note from Jim’s former partner Yra Harris shows how a Fed dependent on MOPE or spin to maintain the illusion of control and confidence is being trumped by the secular trends.
It’s not so much that the Greenspan or the Bernanke put is dead but rather growing disconnect between reality (secular trends) and "Fed speak" is becoming too obvious. Simply put, the Fed must the secular trends, or they, like all investors, run the risk of being steamrolled by their own illusion. As a follower of the market, the Fed should do as little talking against the trend as possible. The game of MOPE or spin by definition precludes silence. Silence will always be interpreted adversely by those seeking reinforcement of the illusion.
The markets are reacting to a Wall Street Journal article by the new FED fair-haired minion, Jon Hilsenrath, and the great dissonance that took place at the last FOMC meeting. Our readers know that we have been very critical of the FED and its reliance on models that, on a good day, are so badly flawed.
Source: yrah53.wordpress.com
"Enron Accounting" Has Bankrupted America: U.S. Deficit Really $202 Trillion, Kotlikoff Says
CIGA Eric
Debt and fiscal management have bankrupted America. Enron-style accounting, supported by FASB and other regulator boards, hides the true extent of the debt burden that will never be repaid in anything close to constant dollar terms. The easy thing about denial is that it’s always the other guy’s problem.
The “real” deficit – including non-budgetary items like unfunded liabilities of Medicare, Medicaid, Social Security and the defense budget – is actually $202 trillion, the professor and author calculates; or 15 times the “official" numbers.
Source: finance.yahoo.com
U.S. Existing Home Sales Plummet
CIGA Eric
The secular trends in housing relative to some headline interpretations, mostly MOPE, inescapably leads to the following quote from Dean Wormer from Animal House (1978),
0.2… Fat, drunk and stupid is no way to go through life, son.
Do not stick your head in the sand in regards to real estate. As I suggested in my commentary entitled 15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse,
Words like total collapse and dying tends to be associated with the "selling of fear". This label, in turn, can lead to instant discredit or laughable denial.
The cyclical low in housing is not due for years (decades). While the urge to stand with crowd is strong, it’s rarely profitable to do so. As the above headline suggests, home sales remains extremely weak. The months supply (turnover relative to supply), which excludes a large shadow inventory, confirms this trend and illustrates the work to be done before the cyclical low.
Months Supply And Change YOY 
Expect more pain and corresponding "save me" stimulus in the years to come.
Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.
Purchases plummeted to a 3.83 million annual pace, the lowest in a decade of record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Demand for single-family houses dropped to a 15- year low and the number of homes on the market swelled.
Source: bloomberg.com
Dollar Plunges As Everyone Now Figures Return Of Quantitative Easing Is A Done Deal
CIGA Eric
Please refer to the three Illustrations and the explanations posted today.
Any questions?
Jim
The dollar s the senior fiat currency in which most of the world’s debt has been issued. In other words, it is the poster child for the fiat currency system. Like all fiat, the dollar is depreciating against gold in a controlled, ebb and flow manner since 2000. The dollar’s recent strength against most major currencies from December 2009 to June 2010 suggested little as the price of gold also reached new highs. Relative weakness of the dollar against other fiat, designated as QE II or any other number, is nothing more than "it’s just the dollar’s turn in fiat’s race to the bottom.
Eric
Today the weak economic data is causing dollar selling, because it’s becoming crystal clear to folks, as ForexLive notes, that quantitative easing II is now a done deal. No more baby steps or holding the balance sheet steady. There’s no excuse for the Fed Board of Governors to be have an unclear picture of the economy’s direction anymore.
Source: businessinsider.com
