In The News Today

Posted at 10:27 AM (CST) by & filed under In The News.

My Dear Extended Family,

QE is attacked as ineffective.

It was for Main Street, but not for Wall Street.
It was for Main Street, but not for the bond markets of the Western world.
It was for Main Street, but not for the mountain of eternally growing OTC derivatives.

QE is a trap that once embarked upon cannot be stopped or even tapered. We are approaching the point of no return.

To taper QE will open the cracks that have begun to show in the bull bond market of generations.
To taper QE will turn business psychology as negative as indicators are now pointing.
To taper QE will end the bull market in equities.

The try and restart QE will be totally futile in terms of markets. The point of no return is the point of losing control of markets, from currency to equities. The point of no return could easily be any day now.

The biggest mistake of the moment is that to taper is a meaningless event.

Sincerely,
Jim

 

Jim Sinclair’s Commentary

The latest from John Williams’ www.ShadowStats.com.

- Production Activity Remained Consistent with Renewed Economic Downturn
- Neither Banking-System nor Economic Developments Suggest Fed “Tapering,”
But Heavily-Managed Market Expectations Indicate Near-Term Action

"No. 556: August Industrial Production, FOMC Meeting"
Web-page: http://www.shadowstats.com

Jim Sinclair’s Commentary

Get ready for the next implosion.

BIS veteran says global credit excess worse than pre-Lehman
Extreme forms of credit excess across the world have reached or surpassed levels seen shortly before the Lehman crisis five years ago, the Bank for International Settlements has warned.
By Ambrose Evans-Pritchard
2:24PM BST 15 Sep 2013

The Swiss-based `bank of central banks’ said a hunt for yield was luring investors en masse into high-risk instruments, “a phenomenon reminiscent of exuberance prior to the global financial crisis”.

This is happening just as the US Federal Reserve prepares to wind down stimulus and starts to drain dollar liquidity from global markets, an inflexion point that is fraught with danger and could go badly wrong.

“This looks like to me like 2007 all over again, but even worse,” said William White, the BIS’s former chief economist, famous for flagging the wild behaviour in the debt markets before the global storm hit in 2008.

“All the previous imbalances are still there. Total public and private debt levels are 30pc higher as a share of GDP in the advanced economies than they were then, and we have added a whole new problem with bubbles in emerging markets that are ending in a boom-bust cycle,” said Mr White, now chairman of the OECD’s Economic Development and Review Committee.

The BIS said in its quarterly review that the issuance of subordinated debt — which leaves lenders exposed to bigger losses if things go wrong — has jumped more than threefold over the last year to $52bn in Europe, and jumped tenfold to $22bn in the US.

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Jim Sinclair’s Commentary

You have to love technology.

Option trading is halted on all exchanges due to quote feed issues
Published: Monday, 16 Sep 2013 | 1:50 PM ET

Trading in options was halted on all exchanges after a problem was reported in feeding quotes.

The Chicago Board Option Exchange said it halted trading at 1:40 pm ET on CBOE and C2, its smaller exchange, due to problems linking with Options Pricing Authority, which disseminates quotes to vendors.

This story is developing. Please check back for further updates.

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Jim Sinclair’s Commentary

Many establishment voices are gathering with the same message.

BIS warns global economic imbalances now worse than 2008 with emerging markets most vulnerable
Posted on 16 September 2013

The only major global financial body to correctly warn that the global financial crisis was coming in 2008, the Swiss-based Bank of International Settlements is again sounding alarm bells as the Federal Reserve prepares to wind down its QE3 money printing program this week.

The BIS says many imbalances are now actually worse than in 2008 as low interest rates have taken investors increasingly into high risk instruments in pursuit of yield, reports The Daily Telegraph today.

It quotes BIS former chief economist William White who made his reputation for warning of wild behavior in financial markets in 2007 as saying: ‘This looks like 2007 all over again, but even worse…Total public and private debt levels are 30 per cent higher in the advanced economies than they were then and we have a new problem with bubbles in emerging markets.’

High-risk loans

The BIS analysis is written in arcane banker-speak but its latest quarterly review flags up high levels of ‘leveraged loans’ that are used by the weakest borrowers in the syndicated loan market. Investors are also buying up all manner of high-risk loans risking a repeat of the subprime mortgage debacle.

Credit to emerging markets is off the scale and bond issuance from these nations actually exceeds the advanced economies for the first time. It is an accident just waiting to happen in the view of the very sober and correct BIS which got this right in 2007-8 at a time when most banks just went with the flow and ended up close to drowning.

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Poland Wants Its Gold Back
September 16, 2013
By Paul Shea

Poland is looking for the gold it gave to the United Kingdom in the early days of WW2 to be returned.

A Polish group is campaigning for the return of the country’s gold from the vaults of the bank of England. The bullion has been held by the Bank of England since the outbreak of the second world war, when it was smuggled through Eastern Europe and back to Britain in order to keep it safe from Nazi invaders.

Poland is not the only country in recent years to request the return of its gold from foreign banks. As countries gain in economic power and see their faith in an international monetary system shaking, they are looking for more control over their assets. The news of the Polish group initially came from WealthCycles.com.

Repatriating gold

According to Wealth Cycles, gold is being repatriated by Romania, Germany, Ecuador, and Azerbaijan. Poland adds a growing list of countries that are talking about repatriating their gold. That list also includes Ireland, Switzerland, Belgium and the Netherlands.

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U.N. report: Syria chemical attack ‘large scale’
Oren Dorell, USA TODAY 4:31 p.m. EDT September 16, 2013

The report may not affix blame for the Aug. 21 chemical weapons attack.

United Nations inspectors confirmed Monday that a large-scale chemical attack killed hundreds of people in Syria last month. But a deal between the U.S. and Russia to dismantle Syria’s chemical stocks will likely leave the man responsible for that attack in charge, analysts and rebels say.

Andrew Tabler, a senior fellow at the Washington Institute for Near East Policy, said President Obama’s policy laid down more than two years ago that Syrian dictator Bashar Assad "must go" may itself be gone as a result of the deal.

"The problem now is Assad is part of this process which means he’s not going to go," said Tabler, author of In the Lion’s Den: An Eyewitness Account of Washington’s Battle with Syria.

"I just don’t see how this diplomatic deal solves the Syrian crisis," he said.

The U.N. report, which has yet to be made public, may not affix blame for the attack on the regime of Syrian dictator Bashar Assad as has the United States. The Associated Press said it has seen the first page of the report, which says that there is "clear and convincing evidence" that chemical weapons were used in the Aug. 21 attack in two villages outside Damascus.

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Jim Sinclair’s Commentary

Here we go. This is going to be like negotiations with Iran, frustrating.

UK, US and France call for ‘strong’ UN resolution on Syria
Countries want wording that sets precise and binding deadlines on removing President Assad’s chemical weapons
theguardian.com, Monday 16 September 2013 06.07 EDT

France, Britain and the US have agreed to seek a "strong and robust" UN resolution that sets precise and binding deadlines on the removal of Syria’s chemical weapons, the office of the French president, François Hollande, said, emerging from talks with John Kerry and William Hague in Paris.

The statement followed talks on Monday involving Hollande and the foreign ministers of the three countries in the French capital, two days after Russia and the US hammered out a deal on chemical weapons that could avert American military action over Syria.

"The idea is to stick to a firm line," said an official at Hollande’s office after the talks with Kerry, Hague and their French counterpart, Laurent Fabius.

"They’ve agreed to seek a strong and robust resolution that sets precise and binding deadlines with a calendar," said the official, who declined to be named.

Overcoming bitter differences, Kerry and the Russian foreign minister, Sergei Lavrov, struck a deal in Geneva on Saturday on removing President Bashar al-Assad’s chemical arsenal.

After months in which Moscow and Washington failed to agree a line on Syria, Kerry and Lavrov demanded that Assad account for his secret stockpile within a week and let international inspectors eliminate all the weapons by the middle of next year.

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Industrial Production Misses For 5th Month In A Row
Submitted by Tyler Durden on 09/16/2013 09:24 -0400

While headlines, we are sure, will crow of industrial production’s best gain in six months, the sad fact is that the market was expecting more. At +0.4% – against an expectation of +0.5% – this is the 5th month in a row of missed expectations for this significant indicator of economic health. Capacity utilization rose but also missed expectations printing at the worst 6-month rate of change in 10 months. It seems manufacturing and mining got a modest boost (the former bounced more than expected but only thanks to a notable prior revision downward) and Utilities dragged the headline index down – so we await the "it’s the weather’s fault" remarks.

5th miss in a row for IP…

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and while capacity Utilization rose very modestly, it also missed expectations and is hardly signalling ‘recovery’…

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as the 6-month rate of change dropped to its lowest in 10 months…

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Jim Sinclair’s Commentary

Here we go. This is going to be like negotiations with Iran, frustrating.

UK, US and France call for ‘strong’ UN resolution on Syria
Countries want wording that sets precise and binding deadlines on removing President Assad’s chemical weapons
theguardian.com, Monday 16 September 2013 06.07 EDT

France, Britain and the US have agreed to seek a "strong and robust" UN resolution that sets precise and binding deadlines on the removal of Syria’s chemical weapons, the office of the French president, François Hollande, said, emerging from talks with John Kerry and William Hague in Paris.

The statement followed talks on Monday involving Hollande and the foreign ministers of the three countries in the French capital, two days after Russia and the US hammered out a deal on chemical weapons that could avert American military action over Syria.

"The idea is to stick to a firm line," said an official at Hollande’s office after the talks with Kerry, Hague and their French counterpart, Laurent Fabius.

"They’ve agreed to seek a strong and robust resolution that sets precise and binding deadlines with a calendar," said the official, who declined to be named.

Overcoming bitter differences, Kerry and the Russian foreign minister, Sergei Lavrov, struck a deal in Geneva on Saturday on removing President Bashar al-Assad’s chemical arsenal.

After months in which Moscow and Washington failed to agree a line on Syria, Kerry and Lavrov demanded that Assad account for his secret stockpile within a week and let international inspectors eliminate all the weapons by the middle of next year.

More…

Jim Sinclair’s Commentary

QE must continue!

Cooling economy complicates Fed plans
Uneven third-quarter start defies expectations of faster U.S. growth  
By Jeffry Bartash, MarketWatch
Sept. 15, 2013, 12:02 p.m. EDT

WASHINGTON (MarketWatch) — Topsy-turvy, herky-jerky or whatever you call it, the grudging U.S. recovery just can’t seem to break out of a pattern of fits and starts.

Many economists thought the U.S. was primed to accelerate in the third quarter because of faster job growth, an uptick in wages, strong home sales and even an improved manufacturing sector.

Instead, hiring tapered off, consumers pared spending and Americans have lost some confidence. The likely result is slower growth in the third quarter compared to the late spring and early summer.

“The languid August results underscore the big picture point that I have been hammering away at for a while: the vaunted second-half acceleration in the economy ain’t happening,” wrote Stephen Stanley of Pierpont Securities, one of the few economists who’s staked out a conservative outlook.

MarketWatch consensus

See economic calendar

date

report

Consensus

previous

Sept. 13

Retail sales

0.5%

0.2%

Sept. 13

Retail sales ex-autos

0.3%

0.2%

Sept. 13

Producer price index

0.2%

0.0%

Sept. 13

Core PPI

0.1%

0.1%

Sept. 13

UMich consumer sentiment

82.1

82.1

Sept. 13

Business inventories

0.3%

0.0%

The latest economic shudder won’t make it any easier for the Federal Reserve to justify the beginning of the end for a massive stimulus program designed to boost U.S. growth. The central bank is widely expected this week to announce plans to scale back purchases of government and mortgage-related bonds.

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Empire Fed Misses; Falls To 4-Month Low As Employment Drops
Submitted by Tyler Durden on 09/16/2013 08:37 -0400

For the second month in a row, the Empire Fed has fallen and missed expectations. At 6.29 (vs 9.1 exp), this is the lowest since May as the average workweek (down from 4.81 to 1.08) and number of employees (down from 10.84 to 7.53)  subindices fall notably. In general the index was not worse because of the effect of the six-months-outlook views (which soared 3pts to 40.6 – its highest since early 2012) when, as usual, current conditions deteriorate but offset by hopium that eventually things will get better, but even there employment (number of employees outlook down from 8.43 to 4.30) was seen as weaker.

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From the September report:

The general business conditions index edged down two points but, at 6.3, remained in positive territory. The new orders index inched up two points to 2.4, while the shipments index jumped nearly fifteen points to 16.4—its highest level in considerably more than a year. The prices paid index was little changed at 21.5, while the prices received index climbed another five points to 8.6. Labor market conditions were mostly steady; the index for number of employees retreated three points to 7.5 and the average workweek index edged down to a neutral reading of 1.1. Indexes for the six-month outlook revealed increasingly widespread optimism about future business activity.

Business conditions strengthened for New York State manufacturers for a fourth consecutive month. The general business conditions index stood at 6.3—down almost two points from August but still at a level indicative of modest expansion. Slightly more than 25 percent of respondents reported that conditions had improved over the month, while 20 percent said conditions had worsened. The new orders index edged up two points to 2.4, while the shipments index surged fifteen points to 16.4, indicating that shipments picked up even as orders remained flat.

The future general business conditions index rose for the third straight month, climbing three points to 40.6, its highest level since the spring of 2012.

This month’s special question dealt with future selling prices, which continue to underperform inflation:

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