In The News Today

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Jim Sinclair’s Commentary

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

- 22.6% Gain in July Durable Goods Orders Was Just 0.8%, Net of an Irregular 318.0% Surge in Commercial-Aircraft Orders 
- Booked Years in Advance, Commercial-Aircraft Orders Have Negligible Impact on Near-Term Economic Activity 
- July Existing-Home Sales in Ninth Month of Annual Decline 
- July New-Home Sales Held in Pattern of Stagnation, Amidst Ongoing Reporting Instabilities

"No. 652: July 2014 Durable Goods Orders, New- and Existing-Home Sales" 
Web-page: http://www.shadowstats.com?

 

Jim Sinclair’s Commentary

The Yuan is knocking on the dollar door.

British Columbia, Ontario to cooperate on Yuan trading hub
Christopher Donville, Bloomberg
2:38 PM, E.T. | August 27, 2014

Business leaders in British Columbia and Ontario agreed to cooperate in promoting Canada as a currency trading hub for the yuan.

AdvantageBC International Business Centre-Vancouver and the Toronto Financial Services Alliance, a group representing business and financial representatives, said today in a statement they will work together with the governments of Canada and the provinces to make the country the first trading hub for the Chinese currency in North America.

“While Canada’s financial industry is headquartered in Toronto, much of the country’s Canada-China trade passes through Vancouver, making it critical for both jurisdictions to work collaboratively so that Canadian businesses are able to take full advantage of this initiative,” Colin Hansen, AdvantageBC’s chief executive officer, and Janet Ecker, CEO of the Toronto alliance, said today in the statement.

Financial centers around the globe are vying to establish trading hubs for the yuan. China has already signed agreements to trade the yuan more freely with Singapore, London and Frankfurt as part of an economic restructuring that includes taking steps to loosen exchange controls.

AdvantageBC is a non-profit organization promoting international business in British Columbia, according to the statement.

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Russia’s Gazprom Neft to Sell Oil for Rubles, Yuan

MOSCOW, August 27 (RIA Novosti) – The Russian oil company Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers, the Russian business daily Kommersant reported Wednesday.

Last week, Russia began to ship oil from the Novoportovskoye field to Europe by sea. Two oil tankers are expected to arrive in Europe in September. According to Kommersant, the payment for these shipments will be received in rubles.

Gazprom Neft will not only accept payments in rubles; subsequent transfers via the ESPO may be paid for in yuan, the newspaper reported.

According to the newspaper, the change in currency was made because of the Western sanctions against Russia.

As a protective measure, Russia decided to avoid making its payments in US dollars, which can be tracked and controlled by the United States government, Kommersant reported.

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Merkel Slams US Hegemony? "America Can’t Solve All The World’s Problems Anymore"
Submitted by Tyler Durden on 08/27/2014 18:29 -0400

First Russia and China, then UAE, Egypt, and Turkey… and now it appears Germany (following a phone call with Putin) is pulling the rug out from under US hegemony – just as Obama’s warmongery ramps up…

*MERKEL SAYS U.S. CAN’T SOLVE ALL THE WORLD’S PROBLEMS ANYMORE

Which is odd because just yesterday, President Obama (who never lies) stated "The United States is and will remain the one indispensable nation in the world…" adding that "no other nation can do what we do." Perhaps he is wrong?

“Even a superpower can’t solve all of the problems alone anymore,” German Chancellor Angela Merkel says.

Merkel did not stop there…

*PUTIN, MERKEL URGE DE-ESCALATION IN UKRAINE, KREMLIN SAYS

*PUTIN, MERKEL DISCUSSED GAS TRANSIT VIA UKRAINE, KREMLIN SAYS

*PUTIN INFORMED MERKEL OF NEW EAST UKRAINE AID PLAN: KREMLIN

*MERKEL URGES HOLLANDE TO CONTINUE REFORMS IN FRANCE

*MERKEL SAYS HOLLANDE HAS CHANCE TO REVIVE FRENCH ECONOMIC POWER

Seems like she is returning to the offensive from the defensive…

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Will There Be a ‘New Gold Rush?’ — Ian Gordon, Longwave Analytics

Ian Gordon created Longwave Analytics, which studies the Longwave principle, by which economies obey long-term cyclical trends of expansion and contraction. Eric Sprott is an avid reader — he suggested I interview Ian Gordon for his take on the role of Kondratiev’s ‘long wave cycle’ in explaining the economic environment we are seeing today.

Ian said ‘winter’ was coming for the world economy, though it has been staved off by the flexibility provided by paper money. As a result, a depression will be very different today than in 1929 or 1873, he believes. But now, as then, we could see a massive push for new gold discoveries.

Mr. Gordon explained how he got to know Eric Sprott over 10 years ago:

“I was writing about long-term economic cycles, referred to as ‘Kondratiev’ cycles. In 1998, I realized that we were close to the top of a bull market; we were somewhere akin to 1928 – immediately preceding the Great Depression. Eric appreciated my work, because it helped explain an imminent bull market for gold, which he saw as well.”

I asked: Do these ‘long wave’ economic patterns explain today’s bear market for gold – and the recent rally in general stocks?

“Well, they didn’t predict this – but they can help explain why it’s happening. Over the course of one entire ‘long wave’ economic cycle, covering a full expansion and subsequent contraction, you have what I call four ‘seasons.’ Winter is the period where debt is wiped out of the economy. It happened after 1929, which caused the US banking system to collapse. During the 1920’s, there had been a big build-up in consumer and corporate debt, as well as sovereign debt.

“During the Great Depression and the previous depression of 1873, we were on a gold standard system, so the ability to create money was limited. This time around, we are in a pure credit-based system, so the ability to create money withstands the ravages of the winter. Effectively, governments have been creating more debt. This will ultimately cause a more horrendous economic decline than in either 1929 or 1873, as debt levels are far greater today – and because the world is much more inter-connected financially.”

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The Nail In The Petrodollar Coffin: Gazprom Begins Accepting Payment For Oil In Ruble, Yuan
Submitted by Tyler Durden on 08/27/2014 13:57 -0400

Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar’s stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.

This changed in late June when first Gazprom’s CFO announced the gas giant was ready to settle China contracts in Yuan or Rubles, and at the same time the People’s Bank of China announced that its Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin held a meeting in which they discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.

And yet, while both sides declared their operational readiness and eagerness to bypass the dollar entirely, such plans remained purely in the arena of monetary foreplay and the long awaited first shot across the Petrodollar bow was absent.

Until now.

According to Russia’s RIA Novosti, citing business daily Kommersant, Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers. Meaning Russia will export energy to either Europe or China, and receive payment in either Rubles or Yuan, in effect making the two currencies equivalent as far as the Eurasian axis is conerned, but most importantly, transact completely away from the US dollar thus, finally putin’(sic) in action the move for a Petrodollar-free world.

More on this long awaited first nail in the petrodollar coffin from RIA:

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Pentagon warns that Isis has global aspirations as US continues Iraq strikes
US effort to build international coalition against Isis advanced, as UK and six other nations agreed to arm the Kurdish peshmerga
Spencer Ackerman in New York
theguardian.com, Tuesday 26 August 2014 16.36 EDT

Obama spoke about Isis before a group of American military veterans on Tuesday.

The Pentagon warned on Tuesday that Islamic State (Isis) militants have global aspirations, ratcheting up already dire US rhetoric against the jihadist army that has overrun much of Iraq and Syria.

“Quite frankly, we’re not turning a blind eye to their global aspirations as well,” said Rear Admiral John Kirby, the Pentagon press secretary.

Isis has not conducted attacks outside of Iraq – its gestation ground – and Syria, where its successes brought it global attention. Its own rhetoric imagines a global Islamic caliphate, obliterating man-made borders, but its capabilities – which include access to oil wealth – fall significantly short.

Yet Isis’s attraction of as many as thousands of western passport holders has convinced US intelligence that Isis fighters will plot attacks against the US and Europe.

“Much has been made about the threat they pose, and how imminent it is, and you don’t need to look any further than the recruitment of foreign fighters and the degree to which not just the United States government but many western governments are concerned about these foreign fighters leaving their shores, going over there, getting radicalized, trained, and then coming back and executing attacks, which is not out of the realm of the possible,” Kirby told reporters.

US warplanes continued to strike Isis targets on Tuesday. US Central Command said that its planes, supporting Kurdish and Iraqi forces, destroyed two Isis armed vehicles near the Iraqi Kurdish capital of Irbil and damaged a third.

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Jim Sinclair’s Commentary

Popular equity market delusions may run iron economic reality.

Treasury Curve Collapse Signals Multiple Expansion Exuberance Is Over
Submitted by Tyler Durden on 08/26/2014 18:29 -0400

Thanks to buybacks, multiple expansion has been the driver of equity market strength as non-economic actors know one thing – buying stocks at record highs pays better than ‘investing’ in Capex or growth. However, the Treasury market’s yield curve is sending a message loud and clear that multiple-expansion is due to end. As Wells Fargo’s Gina Martin Adams notes, "Index P/E is likely to fall," as the spread between 10Y and 2Y yields compresses. Historical data shows the P/E ratio contracted in seven out of eight periods when the curve flattened since 1975.

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As Bloomberg adds, Martin Adams expects the S&P to close 2014 -7.5% from here at 1850 (tied with Deutsche’s David Bianco for lowest prediction among 20 strategists).

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Jim Sinclair’s Commentary

And so on we go.

Ukraine-Russia talks in Minsk fruitless — Yatsenyuk
August 27, 16:51 UTC+4

KIEV, August 27. /ITAR-TASS/. Talks between Ukraine and Russia in Minsk, the capital of Belarus, on Tuesday were fruitless, Ukrainian Prime Minister Arseniy Yatsenyuk told a government meeting on Wednesday.

No results had been expected from the meeting, but the event had to take place, he added.

Ukraine currently faces three challenges — war, exchange rate and energy, the premier said, adding that the first could be settled only by restoring control over the border with Russia.

Ukraine’s cooperation with NATO

Yatsenyuk said the government would debate a plan for developing cooperation with NATO. “The Ukrainian president will attend the NATO summit in Wales on September 4-5,” the prime minister said.

“NATO is our partner. We expect the Western countries and NATO to provide practical assistance. We also expect decisions to be made at the NATO summit,” he said.

Deterioration of Ukrainian currency

Ukraine’s currency breached the psychological barrier in exchange rate trading on Wednesday, with the rate of 14 hryvnia to the US dollar, Ukrainian media reported, as Yatsenyuk warned ministers that the national economy could not withstand more than 12 hryvnia for $1.

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Russian Central Bank prepares bill to create SWIFT analog in Russia
August 27, 15:06 UTC+4

MOSCOW, August 27. /ITAR-TASS/. The Russian Central Bank and the government’s financial and economic departments have prepared a bill to create a Russian analog of the SWIFT international financial message system, Deputy Finance Minister Alexei Moiseyev said on Wednesday.

“We have prepared a bill. We have consulted with the banking industry and the Central Bank,” Moiseyev said.

Russia will go ahead with the bill as soon as it becomes clear that the Central Bank is technologically prepared “to transfer all operations to internal processing inside Russia.”

Central Bank First Deputy Chairman Georgy Luntovsky said in July that SWIFT was discussing a possibility with the Russian regulator to establish an operational center in Russia. SWIFT Director for Russia, CIS and Mongolia Matvei Gering confirmed this information at that time.

Moiseyev said in April that the Finance Ministry was going to initiate amendments to the legislation to transfer electronic settlements to Russia to ensure their reliable and uninterrupted nature. The system should be registered in Russia and comply with the requirements of the Russian Central Bank, Moiseyev told Rossiya-24 TV channel at the time.

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