In The News Today

Posted at 11:36 AM (CST) by & filed under In The News.

Dear CIGAs,

If you want miracles in your life, then “watch” and be happy. This is the same teaching that’s in every religion. For me, this is: be brave, don’t lie, do your job, quiet your mind and at the end of the day fold the cards. Wake up the next morning, see what’s dealt and play it the best you can, don’t worry about it. See the job, do the job and stay out of the misery. If there’s anything that attracts any God, it’s having courage and having courage is doing what falls in your lap and doing it right, no matter what it is.

Jim Sinclair’s Commentary

The question is simple. Can the Fed run QE to infinity?

The practical answer is functionally, yes. The market answer basing itself on the last released Fed minutes is no.

You need to recall that this organization historically was very negative on Treasury instruments predicated on a published belief that QE would not occur in the first place.

QE has to go to infinity, or put simply the world economy will collapse, and then only gold will protect from the debacle in fiat currency.

QE is between a really hard rock, and a very bad place. Politics have run business and will continue to. There is no political willingness to accept the results of a broken US Treasury market sure to happen if Fed buying was curtailed or stopped. Look what happened at the Financial Cliff if you really believe there is any willingness to accept the hardest of hard times.

Fed bond buying is better known as QE.

It almost seems as if articles from this company are playing both sides of the question. Maybe they should decide on one mindset.

Beware the ‘central bank put’
By Mohamed El-Erian

The investment recommendations made by many financial commentators are now dominated by cross-asset class relative valuation rather than the fundamentals of the investment itself. A typical refrain runs something like this: buy X because it is cheaper than other things out there.

This is an understandable approach as unusual central bank activism has artificially elevated certain asset prices. Yet the dominance of this increasingly popular advice comes with potential risks that need to be well understood and well managed.

Several asset classes now have highly manipulated prices due to experimental central bank activities, both actual and signalled. The more this happens, the more investors come under pressure to migrate to higher risk investments in search of returns. Ben Bernanke, Federal Reserve chairman, said as much at his latest press conference, noting that the aim of policy is to “push” investors to take more risk. True to his wish, many pundits seem eager to discard fundamentals in favour of searching for (and levering) anything that “yields” more.

This situation is reminiscent of 2006-07, when hyperactive liquidity factories also pushed some asset prices to artificial levels, thus contributing to a generalised and indiscriminate compression of risk premia. In the process, investors were comforted by the then-popular notion of the Great Moderation (the belief that central banks and governments had conquered the business cycle). We all know what happened next.

This historical parallel is not perfect, however. As I wrote in March 2007 in the Financial Times, the liquidity factories then were endogenous to the markets. Leverage was created by private participants (particularly investment banks) taking on greater risk.

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Jim Sinclair’s Commentary

Budders is back in the dryer again.

Early morning temperature here have rivaled Alaska. We have to look carefully before we shut the door from September to June.

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Jim Sinclair’s Commentary

Sprott on the Fed minutes and QE.

Sprott warns of history’s biggest Ponzi scheme
Marc Howe | January 6, 2013

Eric Sprott, the chairman of Sprott Asset Management, says the US is currently mired in the "biggest Ponzi scheme of all-time," and claims that the recent release of Fed minutes was simply a ploy to restrain inflation.

Speaking to King World News Sprott says that the purpose of the release of Federal Reserve meeting minutes evincing a desire to end QE3 before the end of the year was simply for the purpose of "keep[ing] the real indicators of inflation at bay."

Sprott nonetheless believes that money printing by Western central banks will continue unabated, as will its deleterious effects upon the economy and a concomitant rise in prices for precious bullion:

If everyone continues to print like they have, and there is certainly no sense that anyone is stopping, in fact, there is even more printing now than the last time we spoke and by a large factor, the price of gold and silver have to go to new highs here. That’s fully what I expect to see happen this year.

The veteran investor further claims that 2013 could be the year that "the biggest Ponzi scheme of all-time" finally unravels, following almost five years of stimulus in the US and more than a decade of similar measures in a stagnant Japan.

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Jim Sinclair’s Commentary

The reaction in the marketplace to another downgrade of US credit rating from a recognized US rating agency will depend on how willing the Fed is to making major bond purchases (debt monetizing) so that the US Treasury market is interpreted as saying one more time, "so what?"

The fundamentals cannot be denied forever by market manipulations. The fact that this downgrade is possible is just one more reason why QE to infinity is not a choice, it is an absolute necessity to keep the low interest rate charade in operation.

Why the next U.S. downgrade will really matter
January 3, 2013, 3:46 PM

RBC Capital Markets is calling it: the U.S. is going to  lose its triple-A rating from another rating agency. And this one may matter more because it would affect how investors have to look at the government’s debt.

“In the absence of a grand bargain in the next two months, it is likely that the U.S. is downgraded,” analysts led by Tom Porcelli, RBC’s chief U.S. economist, wrote in a note Thursday.

“This downgrade is likely to have a more significant market impact than the S&P downgrade” in 2011, he said. “In particular, many investors can look towards the most common rating of an issuer, so despite the AA+ rating from S&P most issuers could still count their Treasury and agency MBS [mortgage-backed securities] exposure in their AAA bucket” because it still has that top rating from Moody’s Investors Service and Fitch Ratings.

Last time the U.S. was downgraded, in 2011, analysts noted that bond yields don’t necessarily go to the moon because investors will still want  liquidity and depth. Not to mention, a rating around AA isn’t bad at all, and fund managers still need to keep high-rated debt in their portfolios.

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Jim Sinclair’s Commentary

Those negative on the euro remain so.

Repatriation was not the cause of recent strength. They are wrong.

Euro doomsayers adjust predictions after 2012 apocalypse averted
By Noah Barkin
BERLIN | Fri Dec 28, 2012 8:29am EST

(Reuters) – Back in May, as the euro zone veered deeper into crisis, Nobel Prize-winning economist Paul Krugman penned one of his gloomiest columns about the single currency, a piece in the New York Times entitled "Apocalypse Fairly Soon".

"Suddenly, it has become easy to see how the euro — that grand, flawed experiment in monetary union without political union — could come apart at the seams," Krugman wrote. "We’re not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years."

Krugman was far from being alone in predicting imminent doom for the euro in 2012. Billionaire investor George Soros told a conference in Italy in early June that Germany had a mere three-month window to avert European disaster.

Then in July, Willem Buiter, chief economist at Citigroup and former Bank of England policymaker, raised the probability that Greece would leave the euro to 90 percent, even going so far as to provide a date on which it might occur.

Buiter’s D-Day — January 1, 2013 — falls next week. And yet no one now believes a "Grexit", or catastrophic implosion of the euro zone for that matter, is just around the corner.

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Jim Sinclair’s Commentary

The economic cheerleaders have had housing in a giant recovery for a year now that simply does not exist.

Is the threat of shadow inventory truly manageable?
Jan 03 2013

With housing markets, the elephant in the room is shadow inventory. Much has been written about the subject over the last several years. It’s been portrayed as an apparition among the housing bulls, as if the millions of delinquent mortgages simply don’t exist. Most bulls comfort themselves with fanciful notions of loan modification programs succeeding and some simply denying there is a problem at all. Well, there is a problem. Lenders underwrote trillions of dollars worth of mortgages to people who couldn’t or wouldn’t pay them back. Contrary to the popular myth in the mainstream media, it isn’t a problem of a few unemployed prudent borrowers temporarily unable to keep up with their mortgage payments. The few successes in the loan modification programs served that small group. The problem is the millions of Ponzis who can only pay their bills if a lender gives them more credit. Ponzi borrowing became a lifestyle choice during the bubble, and it’s the Ponzis who are persistently delinquent and won’t survive the amend-extend-pretend dance. Giving Ponzis a reduced payment doesn’t solve their problem. They can’t afford a payment, even a reduced one, without fresh infusions of credit. The shadow inventory problem is an indirect measure of Ponzi behavior. The fact that it has been so persistent shows just how widespread this behavior is.

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The real question isn’t whether or not shadow inventory exists.

It does.

The question isn’t whether or not loan modifications and short sales will make the problem dissipate.

They won’t.

The question is whether or not the banks can manage the flow of properties to prevent a supply imbalance on the MLS from forcing prices to move lower yet again.

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Jim Sinclair’s Commentary

Even Mickey Mouse is feeling the employment crunch.

Exclusive: Disney looks for cost savings, ponders layoffs – sources
By Ronald Grover
LOS ANGELES | Mon Jan 7, 2013 6:01am EST

(Reuters) – Walt Disney Co (DIS.N), which reported record earnings in November, started an internal cost cutting review several weeks ago that may include layoffs at its studio and other units, three people with knowledge of the effort told Reuters.

Disney, whose empire spans TV, film, merchandise and theme parks, is exploring cutbacks in jobs no longer needed because of improvements in technology, one of the people said.

It is also looking at redundant operations that could be eliminated after a string of major acquisitions over the past few years, said the person, who did not want to be identified because Disney has not disclosed the internal review.

Executives warned in November that the rising cost of sports rights and moribund home video sales will dampen growth.

"We are constantly looking at eliminating redundancies and creating greater efficiencies, especially with the rapid rise in new technology," said Disney spokeswoman Zenia Mucha.

In terms of profit margin, Disney’s studio is the least profitable of the entertainment conglomerate’s four major product divisions.

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Jim Sinclair’s Commentary

There is no privacy. If you don’t have privacy now forget getting it in the future.

If they use the words, "the business of purchasing gold" it will throw out a net on coin and bullion dealers, not just the penny crooks who melt jewelry.

From the Illinois General Assembly
Bill Status of SB3341  97th General Assembly

Short Description:  PRECIOUS METAL PURCHASING ACT

Senate Sponsors
Sen. Kirk W. Dillard

House Sponsors

(Rep. Patricia R. Bellock , Norine Hammond, Michelle Mussman and Pam Roth)

Hearings

Judiciary I – Civil Law Committee Hearing Jan 7 2013 11:00AM Capitol Building Room 114 Springfield, IL – House Committee Amendment 1 – House Committee Amendment 2 – House Committee Amendment 3

Last Action
Date Chamber Action
11/26/2012 House Assigned to Judiciary I – Civil Law Committee

Statutes Amended In Order of Appearance

New Act

Synopsis As Introduced

Creates the Precious Metal Purchasing Act. Provides that a person who is in the business of purchasing precious metal shall obtain a proof of ownership, create a record of the sale, and verify the identity of the seller. Provides that a person who is in the business of purchasing precious metal shall not pay for the precious metal in cash and shall record the method of payment. Requires the purchaser to keep a record of the sale for one year or, if the purchase amount is over $500, for 5 years. Provides that a person who violates the Act is guilty of a petty offense and subject to a fine not exceeding $500. Provides that the Attorney General may inspect records, investigate an alleged violation, and take action to collect civil penalties.

Senate Committee Amendment No. 1

Authorizes inspection of records by local police departments. Requires reports to law enforcement on a daily basis. Exempts persons licensed under the Pawnbroker Regulation Act.