My Dear Friends,
All you are looking at is the mirror image event in the US dollar as a product of Mrs. Merkel’s "Open Mouth" euro intervention as a part of the ongoing currency war and profit making short play. Hong Kong equity traders got excited over Mrs. Merkel’s lip service and sold off, putting secondary pressure on gold.
It means very little as gold is going to $1650 and beyond.
Respectfully,
Jim
Jim Sinclair’s Commentary
The Green Hornet advises us to turn off the quote machine if the dollar-gold action bothers you.
Of course his is perma-on and nothing bothers him.
Dollar May Drop 11% in 2011 as Treasuries Fall, Citigroup Says
December 15, 2010, 12:24 PM EST
By Catarina Saraiva
Dec. 15 (Bloomberg) — The dollar may drop 11 percent versus the euro next year as investors shun U.S. assets and drive bonds lower, according to Citigroup Inc.
“It’s a bearish U.S. asset dynamic led by the bond market,” Tom Fitzpatrick, chief technical analyst, said in a telephone interview. “This period has a set-up that is amazingly like what we saw in the ‘70s, and is similar to what we saw around 1993.”
The dollar will follow trading patterns from the 1970s, when the housing market experienced a decline similar to the recent drop, and the 1990s, which also saw a slump in the bond market, technical analysts led by New York-based Fitzpatrick wrote in a note to clients. U.S. two-year yields doubled from a low of 3.7 percent in September 1993 to a high of 7.7 percent in December of 1994, pushing bond prices lower.
The greenback will follow Treasuries lower next year as investor concern mounts the housing market recovery will remain constrained and as the Federal Reserve pumps $600 billion into U.S. debt to help a slowing economic recovery, they wrote. Two- year Treasury notes fell two basis points today to 0.63 percent.
The dollar rose 0.5 percent today to $1.3312 and has gained 7 percent versus the euro this year.
Jim Sinclair’s Commentary
With today’s enormous concentrations of wealth this may not be a sovereign position.
One Company Holds at Least 90% of LME Copper Stocks
By Claudia Carpenter – Dec 14, 2010 1:15 PM MT
One unidentified company holds 90 percent or more of copper stockpiles in warehouses monitored by the London Metal Exchange, the latest bourse data shows.
The so-called dominant position indicated in the Warrant Cash Banding Report was previously 50 percent to 79 percent and moved to the higher band on Dec. 10, according to data from the bourse. The figure includes stockpile holdings and open positions for the next three trading days. Each warrant represents one lot of metal, equal to 25 metric tons.
The fee to borrow copper for next-day delivery, also known as the tom-next spread, jumped to a premium of as much as $13 today, the most since July 2009. It was last at a discount of 50 cents. LME rules oblige holders of dominant positions to lend metal at fixed rates.
“The dominant long is even longer than they were previously, and it’s having an impact,” Robin Bhar, an analyst at Credit Agricole SA’s investment-banking unit in London, said by phone today. “It’s forcing short-term rates to borrow metal to go higher.”
The bourse’s lending guidance applies to a separate notice, called the Warrant Banding Report. That comprises of stockpiles and open positions for the next two trading days. The dominant position in that report was still at 50 percent to 79 percent on Dec. 10.
Jim Sinclair’s Commentary
The time is approaching when various members of the 40 states identified as bankrupt when the awful financial condition can no longer be hidden from view.
Jerry Brown: California Budget Is "Much Worse Than I Thought — We’ve Been Living In Fantasy Land"
Gus Lubin | Dec. 15, 2010, 10:24 AM
You know it’s a bad sign when the outgoing California governor announces a fiscal emergency and everyone ignores him.
Now incoming governor Jerry Brown has realized how screwed the state is and he’s announcing his own budget emergency, according to the LAT.
He said last night: "I’m going to try to get the budget agreements done within about 60 days. I don’t think we have a lot of time to waste… It will be a very tough budget, but it will be transparent… We’ve been living in fantasy land. It is much worse than I thought. I’m shocked."
Hear that, last year’s $20 billion budget cuts amounted to living in fantasy land.
Brown implied he would apply major cuts to the education system and other programs. He also refused to rule out new taxes. And it’s got to add up to at least $29 billion in cuts.
Jim Sinclair’s Commentary
John Williams’ must have subscription service makes the following points:
- Beware Unstable Economic Reporting!
- Inconsistent Seasonal Factors Depressed CPI
- Bulk of Gain in November Retail Sales Was from Higher Prices
"No. 339: November Inflation, Retail Sales, Production"
http://www.shadowstats.com
Jim Sinclair’s Commentary
Hyperinflation will produce similar distribution problems that to the public look like shortages.
Portugal Tries to Prevent Sugar Hoarding Amid Shortage, FT Says
By Alan Purkiss – Dec 14, 2010 11:23 PM MT
Portugal faces a sugar shortage, the first European country to find itself in this position in more than three decades, the Financial Times reported.
Agriculture Minister Antonio Serrano asked people not to hoard the commodity after a breakdown in imports to refineries led to a run on supplies in the shops, the newspaper said.
Global sugar prices have reached a 30-year high.
Jim Sinclair’s Commentary
Our Gold delivery man, JB Slear, asks if we think Mother Nature might be angry over how we are treating Earth and all that abide in it.
Natural disasters kill nearly 300,000 in Latin America
Nearly 300,000 people have died as a result of natural disasters that hit Latin America this year, according to a UN report released on Tuesday.
The death toll is the highest in Haiti where a Force 7 earthquake killed an estimated 220,000 people earlier this year.
Chile was hit by a divesting temblor measuring 8.8 on the Richter scale.
In all, almost 14 million people across Latin America became homeless due to natural calamities that hit the continent since January.
Jim Sinclair’s Commentary
They execute derivative traders in China!
China Needs to Develop More Currency Derivatives, Nafmii Says
December 15, 2010, 1:32 AM EST
By Bloomberg News
Dec. 15 (Bloomberg) — China needs to develop more currency derivatives based on the yuan, the dollar, euro and yen, Feng Guanghua, deputy secretary-general of the National Association of Financial Market Institutional Investors, said today at an industry conference in Hainan.
The nation should also develop derivatives contracts based on international bonds and loans, he said, without providing a timetable for these objectives.
Jim Sinclair’s Commentary
You must be your own Central Bank and depository to insure your financial well being.
Safe sales soar as worried bank customers keep money at home
By Michael Brennan Deputy Political Editor
Tuesday December 14 2010
SAFE sales are soaring as more and more worried bank customers stash their cash at home.
AIB said last month that the amount of money on deposit at the bank has fallen by €13bn since the start of the year — although it blamed most of the reduction on withdrawals by companies and financial institutions.
Another reason for the increased use of home security safes is a growing fear of burglaries because of the recession.
The AllSafes.ie company, one of the largest suppliers in the country, said its sales of home safes had increased by 80pc over the past three months compared with the same period last year.
Its founder, Neil Donnelly, said that most customers did not reveal their purpose for buying one –except to say they wanted it to store cash or jewellery. But some of them had specifically cited their fears about the banks while buying a home safe.
Jim Sinclair’s Commentary
Don’t let yourself get glued to a quote screen. Gold is going to $1650 and beyond.
Expect new gold price highs
15 December 2010
Written by: Leon Esterhuizen
Uncertainty abounds, with ongoing concerns over eurozone sovereign debt, nervousness in global financial markets, and the potential for increased concern over deflationary pressures. In the current economic and global-political environment, we see potential for gold to re-test all-time highs, above $1,424/oz (£903.32) and push to $1,500/oz in early 2011.
We expect contagion from the eurozone debt crisis and for Portuguese, Spanish and Italian debt to be restructured over the next three to six months. As long as this crisis remains unresolved, and the elevated levels of risk around North Korea and the Middle East remains, we believe the gold price should remain well supported.
Central banks are now net buyers of gold. The estimated 191 tons of gold that the IMF is expected to sell as part of the third European Central Bank Agreement should easily be absorbed by the market. To date, we estimate 125 tons have been sold with some 66 tons, about three months of sales, remaining.
In addition, seasonal demand trends created by year-end and Chinese New Year buying are expected to have a positive impact. The next likely signal for a pause in the current gold rally would be a hike in the Fed Funds rate, which we now assume to be likely to occur towards the end of 2011 or even into early 2012. We continue to believe the very accommodative fiscal and monetary policy will ultimately prove inflationary and positive for the gold price.
Jim Sinclair’s Commentary
The Green Hornet says this article run today in the Asia Times is the trend maker, and not the vocal Mrs. Merkel and her euro pound manipulation.
US takes Greek path
By Martin Hutchinson
The insouciant approach which President Barack Obama and the US budget negotiators have taken to the federal deficit, adding around US$900 billion to deficits over the next two years with no countervailing spending cuts, has been greeted by a sharp rise in Treasury bond yields.
This brings into focus a very delicate question: at what point does the US government’s credit cease being the world’s "safe haven" and become merely a much larger and more dangerous version of Greece?
For the past two years, anti-Keynesians such as this columnist have warned that massive federal deficits run the risk of crowding out the private sector, especially the small business private sector, which has the most difficulty accessing funding.
With dollar interest rates generally declining and Chinese and other foreign investors happily piling in to fund budget deficits of $1.3-$1.4 trillion, this had appeared a purely theoretical problem. However, with commercial and industrial loans (including small business, but also including the relatively active leveraged buyout sector) declining by 25% to $1.22 trillion in the two years since 2008, the problem has been a real one.
With the supply of long-term government debt so overwhelming, the yield curve between short-term and long-term interest rates has been artificially steep for over two years. Thus banks have been able to borrow in the short-term markets and invest in long-term bonds, picking up a 3% interest spread for doing so, which they leverage 15-20 times.
Jim Sinclair’s Commentary
China bashers are wrong one more time.
China looks at keeping bank lending high
By Jamil Anderlini in Beijing
Published: December 14 2010 17:46 | Last updated: December 14 2010 17:46
Chinese policymakers are examining bank lending targets for next year that will equal or even exceed their 2010 quota, despite fears about overheating amid the highest inflation in the country in more than two years.
Most analysts had expected a significant reduction from Beijing’s 2010 target of Rmb7,500bn ($1,130bn) in total new loans, especially after inflation hit 5.1 per cent in November and the government promised to tighten monetary policy.
But on Tuesday, a leading Chinese official newspaper reported that the government’s lending quota was likely to be Rmb7,500bn again in 2011.
Officials close to the process stressed that the final quota decision has not been made and the Rmb7,500bn figure is just “one opinion”.
The various regulatory agencies responsible for economic policy are meeting “every day” to discuss how much credit the state-controlled banking sector will be allocated for 2010, officials said.
Jim Sinclair’s Commentary
This is more of the standard operating process in the euro manipulation.
These fellows take no risk, they are not great traders. The entire show is a set up.
Euro slips as Moody’s warns on Spain downgrade
By Jamie Chisholm in London and Song Jung-a in Seoul
Published: December 13 2010 04:03 | Last updated: December 15 2010 06:55
Early-rising European dealers have been rattled by the return of eurozone fiscal angst after Moody’s said it may downgrade Spain’s credit rating.
The euro’s legs were whipped away and forecasts for opening prices of the continent’s bourses have been pulled back as dealers once again have to cope with the chronic irritation of the currency bloc’s budgetary woes.
The FTSE All-World index is down 0.3 per cent and commodities are lower as the dollar rallies, partly in response to the recent sharp move higher in US sovereign debt yields. US stock futures are down 0.4 per cent.
The credit rating agency said it was putting Spain’s Aa1 rating on review for a possible downgrade, citing Madrid’s large debt and its funding requirements in 2011.
The reaction to the news shows that investors remain extremely skittish about the festering fiscal difficulties in Europe and the deleterious impact that accompanying austerity measures and financial system anxiety may have on growth.
Jim Sinclair’s Commentary
The purchase of influence is perfectly legal, but totally amoral.
Money talks, but only the few walk.
Goldman Sachs Hires New York Fed’s Lubke, Pointman on Derivatives Reform
By Matthew Leising and Shannon D. Harrington – Dec 15, 2010 12:01 AM ET
Theo Lubke, who headed the Federal Reserve Bank of New York’s efforts to reform the private derivatives market, joined Goldman Sachs Group Inc. to help Wall Street’s most profitable firm navigate the looming overhaul of financial regulations.
Lubke, 44, started this month as chief regulatory reform officer in Goldman Sachs’ securities division, according to a memo obtained by Bloomberg News. The newly-created role will allow Lubke to “work closely with divisional and firm-wide leadership to implement regulatory reform legislation,” the memo said.
Goldman Sachs is hiring Lubke five months after Congress mandated the regulation of the $583 trillion over-the-counter derivatives market, which complicated efforts to resolve the financial crisis. The reforms threaten to cut profits at dealers because they will make swaps prices known to the public. Lubke’s new firm employs a former New York Fed president and has an ex- Fed board chairman as a director. The current president of the New York Fed, William Dudley, also worked there.
“It’s a pattern,” said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, who has written about Wall Street’s history. “It’s troublesome stuff and there needs to be some regulation so people don’t do it and undermine public policy.”
Michael DuVally, a spokesman for Goldman Sachs who confirmed the contents of the memo, declined to comment.
Lubke Reassigned
Jim Sinclair’s Commentary
Open mouth currency intervention is a speciality of Mrs. Merkel. Ever wonder where she is?
Apparently the manipulation of the euro has some time to go, but not price. In the final analysis Germany will fall in line. Right now they take prestige by being the strongest of the weakest. That seems a tad lame.
Germany Stiffens Opposition to Aid Boost in Face-Off With ECB
By James G. Neuger – Dec 14, 2010 6:00 PM ET
Germany stiffened its opposition to expanding government-financed aid for debt-plagued euro nations, leaving the European Central Bank to shoulder the bulk of the burden of fighting the crisis.
With Chancellor Angela Merkel ruling out an increase in the euro area’s 750 billion-euro ($1 trillion) emergency fund, Germany yesterday put the spotlight on the ECB by endorsing a possible boost in its capital.
Discord between Merkel and ECB President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker on the eve of a European Union summit evokes the tensions during the first phase of the debt crisis, when Germany held out for more than two months before consenting to a loan package for Greece.
“The consequence is a stalemate that leaves us with a familiar sense of déjà vu,” Ken Wattret, chief euro-area economist at BNP Paribas SA in London, said in a note to investors. “Market tensions are likely to resurface, as governments remain very publicly divided on the appropriate way forward.”
European bond markets fell yesterday. Spain’s 10-year borrowing costs remained 248 basis points over Germany’s. Portugal’s spread, a measure of risk, rose 6 basis points to 339 basis points. Both spreads were the highest since Dec. 1.
Jim Sinclair’s Commentary
I call your attention to the statement made by key Chinese personalities concerning the price of gold as China was accumulating by every means possible.
Maybe if China is paying present prices they will not be present for long, but rather go to $1650 and beyond.
China’s Golden Surprise: A Glittering Opportunity?
December 13, 2010
Jim Trippon
This is the kind of thing that the Chinese usually keep a secret. No one knows why Beijing broke with tradition. But perhaps the news was too big to contain behind the usual wall of silence.
If you hadn’t already heard, China’s gold imports are up – way, way up. In the first ten months of the year, China’s gold imports jumped fivefold. With two months to go in the year, China had quintupled its intake of gold compared to the full year of 2009.
This is big! Remember, China is already the world’s largest producer. Yet its gold imports rose to 209 tonnes in the first ten months – up dramatically from just 45 tonnes the year before.
Clearly Chinese mines are hitting the limits of their ability to satisfy internal demand. And make no mistake, consumer demand is booming.
Not long ago, I mentioned that Beijing was actively encouraging consumers to buy gold as an investment through banks and retail outlets. The plan worked beyond anyone’s wildest dreams. Tiny gold ingots, stamped with the image of a rabbit, are suddenly flying off the shelves.
(2011 is the year of the rabbit in China, a year in which some say "
Jim Sinclair’s Commentary
You must admit that Aldous Huxley was a visionary. His predictions of government by Big Brother have become reality to those that are not among the sheeple.
Maybe Oman’s approach is more functional.
"Technology can be among the most powerful weapons in the dictator’s armory. Propaganda, the suppression of the truth, particularly in democratic societies, will bring upon an age of enslavement where instead of yokes and chains, people in celebrated “free” societies like America will be bound by the soft restraints of ignorance, incuriousness, distraction and irrationality."
–Aldous Huxley
“Great is truth, but still greater, from a practical point of view, is silence about truth. By simply not mentioning certain subjects, by lowering what Mr. Churchill calls an ‘iron curtain’ between the masses and such facts or arguments as the local political bosses regard as undesirable, totalitarian propagandists have influenced opinion much more effectively than they could have done by the most eloquent denunciation, the most compelling of logical rebuttals.”
–Aldous Huxley
Jim Sinclair’s Commentary
The problem already exists. There is no means of meeting the requirements.
QE to infinity is not a choice, it is the only choice.
Mounting Debts by States Stoke Fears of Crisis
By MICHAEL COOPER and MARY WILLIAMS WALSH
Published: December 4, 2010
The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.
While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.
“It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.
Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.
Municipal bankruptcies or defaults have been extremely rare — no state has defaulted since the Great Depression, and only a handful of cities have declared bankruptcy or are considering doing so.
