Posted at 2:07 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Thank you all for your questions!  We have received over 100 of them in the first 20 minutes after posting the request.  Please save your questions for the next session as we have more than enough and some are quite excellent and timely.  Thank you for your overwhelming response!

Standing watch,
Bill Holter

Posted at 12:11 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The alarm clock and security standing guard. Their marching orders are “No one shall pass.”



Jim Sinclair’s Commentary

Deleveraging? Where?


Jim Sinclair’s Commentary

These guys are anything but stupid. They know exactly what they are doing and why.

“The Fed Suspended The Laws Of The Market In Order To Save It” – What Happens Next
Submitted by Tyler Durden on 01/31/2016 19:28 -0400

That the Fed has been boxed in by unleashing destructive monetary policies to “fix” decades of prior policy mistakes, is something we have been warning about since our first day. And, with every passing day that the Fed and its central bank peers pile up error upon error  to offset prior mistakes, the day approaches when this latest bubble, which some have dubbed it the “central banks all-in” bubble, will burst as well: Friday’s shocking announcement of NIRP by the BOJ just brought us one step closer to the monetary doomsday.

However, the one saving grace for the central banks was that as long as none of the market participants who benefited from these flawed policies dared to open their mouths and point out that the emperor is naked, nobody really cared: after all, why spoil the party, especially since virtually nobody outside of finance knows, let alone cares, about monetary policy or why the Fed is the most important institution in the world.

All of that has changed in recent weeks, when just one week ago in the aftermath of the Fed’s dovish quasi-relent, the billionaires in Davos were quite clear that in light of the upcoming bursting of the latest “policy error” bubble by the central banks, “The Only Winning Move Is Not To Play The Game.” As the WSJ summarized the Davos participants’ mood so well, “their mood here was irritated, bordering on affronted, with what they say has been central-bank intervention that has gone on too long.”

There is just one problem: central bank intervention simply can not go away. Exhibit A: NIRP in Japan.

To be sure, increasingly it is become a consensus view that central banks are trapped, with further intervention no longer beneficial and yet unable to relent; over this past weekend, this perspective was best summarized by Deutsche Bank’s credit derivatives strategist, Aleksandar Kocic, who writes that the Fed had to “suspend the laws of the market in order to save it.” He also adds that the market was not saved, and all the risk that piled up and was swept under the carpet courtesy of the Fed, is merely waiting for the outlet to be released in one risk explosion.

Here is the full note previewing what the Fed hath wrought.

Beyond the fourth wall

It has been our contention for some time that when it comes to interaction between the Fed and the markets, the rules of the game have changed. There are two dimensions of this problem. One is the Fed/market communication and dynamic have been both transformed to resemble the Brechtian theatre where the fourth wall has been removed. The market is observing the Fed and the Fed is observing the market — the “audience” is actively involved in shaping the play. The actors look for clues from the audience and shape the script according to audience’s reaction. They are not merely passive spectator, but involved observers able to influence the play. The most explicit recognition of this has been the September FOMC. This type of circular reaction has been a consequence of the Fed assuming the role of a market stabilizer post-2008. However, as the stimulus is unwound, this type of interactive play will continue (this time in reverse) and stability of the markets could be compromised.





Jim Sinclair’s Commentary

CIGA Luis Ahlborn Sequeira calls our attention to the following.


Posted at 11:33 AM (CST) by & filed under Bill Holter.

Dear CIGAs,

Japan announced negative interest rates Friday which caused a bounce in Europe and then in the U.S.. It is as if “they saved the world”! I have just a couple of comments before digging in to this, first, “why didn’t someone think of this before” and “if it were only this easy!”.

Last summer as negative interest rates began to appear in Europe, especially BETWEEN financial institutions I wrote this Rather than write a complete rehash today on negative rates I encourage you to read a past missive as the mission for today is to look at this from a very broad perspective.

Of course there are all sorts of ramifications with negative interest rates. The most obvious is how it will affect the banking system? Negative rates on deposits will certainly prod some to withdraw actual currency and dig a hole in their backyard. It is said negative interest rates can (will) cause a bank run while others believe a move to digital currency will be used to stem the ability to withdraw from the system. Both of these thoughts are likely.

It must be understood that all monetary policy over the last 100 years has been an effort at “reflation”. All monetary policy has been about “growth”. Before you start screaming at me and calling me naïve, I am not talking about economic growth or “for the good of the people”, I am talking about expanding and assuring the global financial PONZI SCHEME continues! You see, for the first 70 years or so, expanding the amount of debt was easy as assets and unencumbered collateral of all sorts were available to be lent against.

As the fractional reserve/Ponzi scheme matured it hit an inflection point around 1980 as interest rates spiked. Rates have come down ever since as a means to allowing more and more debt to build up. The next inflection point was 2008 when we reached debt saturation levels and interest rates have basically been zeroed out since then. Any nominal interest rate level since that point would have blown up the game. Now, in order to keep the game going, we must have negative rates because there is nowhere else to go.

But what about the Fed raising interest rates last month? We have seen what financial markets think of that decision. Even looking at the Fed’s statement after the last meeting is “telling” as they did not include ANY “risks” in their statement. Before and after the December rate hike, various Fed officials “floated” the possibility of negative interest rates. I believe we will see another round of QE AND negative interest rates hit the U.S. as the current margin call evolves, there is no other option.

Over the weekend, Zerohedge put an article out explaining the situation in China. They are in the exact same boat but they do have room to lower rates A Chinese Banker Explains Why There Is No Way Out. The key passage as expressed by a junior banker at a Chinese commercial bank follows:

“If I don’t issue more loans, then my salary isn’t enough to repay the mortgage, and car loan. It’s not difficult to issue more loans, but let’s say in a year’s time when the loan is due, if the borrower defaults, then I won’t just see a pay cut, I’ll be fired, and still be responsible for loan recovery.”

China has the exact same problem with too much leverage as does the West. No doubt whether immediately or in the near future, China will also be forced to go the devaluation route. This will send 1 billion+ trying to exit yuan ahead of devaluation. But where will they run? Certainly we will see some funds moving into the dollar (and out as official reserves are sold) but China is a culture who understands “money”. Just as they have officially accumulated gold and urged their citizens to accumulate, a big “exit door” will be into gold. I am of the belief that this accumulated gold will be their trump card …used only after the current currency game has no more breath.

Do not be fooled by the jubilation of this past Friday. As I said earlier, “if only it could be this easy”? This goes back to the reality that no central bank or sovereign has EVER printed its way to prosperity. Yes, devaluing does help a nation’s trade in relative terms to their partners but what we have today is the entire system shrinking together. Will a larger slice of a smaller pie “be enough”? Global trade, GDP and consumption are all shrinking at a time debt levels have never been higher. This is akin to going on a buying spree all done on debt and then getting the bad news you are getting a pay cut!

As for Japan going “negative”, their action is simply part of the “race to the bottom”. We have said all along we live in a world where central banks are in a “race to the bottom” with their currencies, Japan is only the latest illustration. The world is already well into a collective margin call, the day is coming where investors will SELL into the “good news” of further rate cuts and negative rates. Once this action begins it will say loud and clear “CENTRAL BANKS HAVE LOST CONTROL”! Don’t get me wrong, this has already happened as they have no policy options left other than negative interest rates. However, the key will be when market participants head for the exits and use whatever PPT/negative rate “bids” as their exit door.

To finish, negative interest rates are not even “real”. A real and functioning system cannot exist with negative rates. The same thing is true for backwardation in precious metals. In a real system with a rule of law they theoretically cannot exist, in a correctly functioning system, backwardation certainly cannot exist. Negative interest rates are a sign of outright panic by TPTB, the reaction on Friday will not last long once this understanding sinks in. The coming global financial crash will be greater than anything ever before seen in history. The time for REAL INSURANCE has never before been this great!

Standing watch,

Bill Holter,
Holter-Sinclair collaboration
Comments welcome!  [email protected]

Posted at 10:01 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Do you recall Goldman as a massive seller of any stock you owned?

Case Sheds Light on Goldman’s Role as Lender in Short Sales

It would be easy to overlook the case against Goldman Sachs filed by the Securities and Exchange Commission on Jan. 14. It involved a complex piece of Wall Street plumbing, led to a minuscule $15 million fine and came on the same day that Goldman agreed to pay up to $5 billion to settle prosecutors’ claims that it sold faulty mortgage securities to investors.

But the smaller settlement merits close study because it sheds light on one of Wall Street’s most secretive and profitable arenas: securities lending and short-selling.

Although the firm settled the matter without admitting to or denying the S.E.C.’s, allegations, some of Goldman’s customers may now be able to recover damages from the firm, securities lawyers say.

Essentially the regulator said Goldman advised its clients that it had performed crucial services for them when it often had not. Customers who paid handsomely for those services may want their money back.

The $15 million punishment is just petty cash for Goldman, but this case tells us a lot about one of the most important duties that Wall Street firms perform for their clients — executing trades for hedge funds and other large investors. When these clients want to bet against a company’s stock, known as selling it short, they rely on brokerage firms to locate the shares they must borrow and deliver to a buyer.

Selling stock short without first locating the shares for delivery is known as naked shorting. It is a violation of Regulation SHO, a 2005 S.E.C. rule. Goldman’s failure meant that some of its clients were unknowingly breaching this important rule.

The S.E.C. has said that naked shorting can be abusive and may drive down a company’s shares. Therefore, brokerage firms are barred from accepting orders for short sales unless they have borrowed the stock or have “reasonable grounds” to believe it can be secured. This is known as the “locate” requirement.

Goldman violated the rule from November 2008 through mid-2013, the S.E.C. said. Through that period, which included the market decline of early 2009, the firm was “improperly providing locates to customers where it had not performed an adequate review of the securities to be located.”


Posted at 7:44 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Every once in a while it is a good thing to review something we already know and have known for quite a while. What we’re talking about are derivatives and the very basics of how they work… or not. We have seen massive volatility since the Fed raised rates last month. The humor (tragedy), admitted to yesterday by the Fed, the 4th quarter saw slowing economies all over the world and “Nobody Really Knows Anything Right Now” ! I say “humor” because the Fed tightened rates just as the economy was weakening again. Many have said the Fed raised rates at “exactly the wrong time”. History may agree with this, I do not. In fact, there has not been one single day since the end of 2008 the Fed “should have” raised rates simply because of the massive debt embedded in the system and those pesky weapons of mass financial destruction called DERIVATIVES! Higher rates will only serve as a “margin call” in a system with no margin left!

First, derivatives are generally a zero sum game contract between two parties “betting” on something. They can be looked at as a speculation, a hedge, or even “insurance”. For this missive, let’s look at the “insurance aspect” of derivatives as literally $10′s of trillions in gains and losses have occurred just this month alone worldwide.

For example and as you know, the price of oil has collapsed. Ignoring the gains and losses directly on oil, let’s look at companies who’s business is oil. Whether it be production, exploration, transport or even “trading”, huge sums of money have been gained or lost depending on which way your bet was. Many oil related companies have CDS (credit default swaps) written against their debt. These contracts have been rising and rising in value as oil has dropped and the possibility of bankruptcies have risen. Huge gains by owners and losses by the “writers” of CDS have accrued.

This is just ONE AREA as derivatives are everywhere and written just as bookies would regarding almost anything. In fact, CDS is even written on the debt of sovereign governments …including the U.S. Treasury. Please think this through for a moment, who, or what “company” could possibly perform and payout the “insurance” to someone who bet (and won) the U.S. Treasury would default? Would anything even be open? If the U.S. Treasury defaulted, would stock or bond markets be open? How about your bank? How about ANYTHING (including your local Walmart)! Do you see where we are going here?

Now lets talk for a moment about “collateral” as presumably this is what needs to be used or “put up” by the issuers of CDS if their exposure begins to broaden if the contract goes against them. I have spoken many times in the last few years about collateral and specifically the LACK of collateral. Whether it be QE in the U.S. or Europe soaking up too many sovereign bonds or systemically nothing left to borrow against, the lack of collateral is a direct problem for derivatives. You see, as a contract moves one way or the other, theoretically the party who is losing needs to post more collateral. It was this inability to post collateral in 2008 by Lehman Bros. that kicked off the problem.

From a broad perspective, everyone is running down the street naked while assuring everyone else they are “insured”. Greece was even aided into the ECU because they claimed their derivative positions “erased” much of their debt, fat chance! In the end, “losers” must pay winners. If losers lose so big as to bankrupt them, the winners will not get paid. Both sides are losers. When this happens on a grand scale, it will be the entire financial system and thus “us” who are the ultimate loser.

I have a topic to finish with but want to make a statement, then ask a couple of questions first. Someone recently said to me regarding the trek from 2008 to present, “the only thing that has changed since 2008 is that nothing has changed”. I would pretty much agree with this, the policies in place that put us on our knees are still in place, only being implemented with more force. I would also say the biggest change is we now have more debt, more derivatives and much more money supply. Please remember, the Fed took all sorts of substandard paper (mortgage backed securities) on to their balance sheet. What has happened to all of this paper? Much of it is non performing but sitting in a dark corner and being ignored …because it HAS TO BE! What would happen if the Fed ever sold any of this paper for a true market value? Banks would have to mark their portfolios down, that’s what! One last question, if this “bad paper” amounts to more than $100 billion in losses (it does, probably by many multiples), what would it mean if the loss was greater than the Fed’s “equity” reportedly now less than $50 billion? Just because the Fed does not ‘fess up to the losses on their books …does not mean the losses do not exist. Going one step further in this thought process, if the Fed admitted to these losses, they would be admitting to a negative net worth! Would you accept an IOU from someone you knew for fact had a negative net worth? I hate to state the obvious but, you do this every single day when you accept dollars for payment!

One last topic and I’m not 100% positive what it means. Silver flash crashed last night and the morning fix came in .84 cents below where spot was quietly trading on the LBMA ! My initial reaction was someone needed to “settle” a trade and the price had to be below $14 in order to not trigger something. In fact, it is being said that this anomalous “fix” will not be reversed but will instead stand. Why would this be? Why, if it was a “mistake” would it not be fixed?

After a five mile afternoon ride to ponder this, I can only come up with two viable scenarios. Scenario A. as I just mentioned above, it is possible some bank, broker or other entity needed to “settle” some sort of contract UNDER $14. It is possible this fishy fix enabled someone to close a short without any pain. It may have been an “accommodative” trade so to speak. Scenario B. this may have been “margin liquidation” meaning someone was long silver but received a margin call from another market that needed to be met and very sloppily liquidated all at once. This is not normally how trades are done but if it was a forced sale, the action is possible. We have had huge volatility in so many other markets, it is certainly possible this was a forced sale. The one thing I am quite sure of since backwardation now rules the day in London, this was not a “cash” fix. I am quite sure it was a paper contract “fix”. Why else is China so hell bent on creating a “cash only” exchange? Because China knows!

It is important to understand we will see things going forward we never expected or ever dreamed of. What started to happen in 2008 where counterparties lost trust in each other is exactly where we are headed again. Central banks stepped in to restore trust, I am not so sure they have enough credibility or goodwill left to turn a far larger credit tsunami than 2008. The credit bubble is again unwinding like 2008 with no White Knights large enough or credible enough to restore confidence once broken. All I can say is “gee, what rocket scientist could have figured out the greatest credit boom in the history of history would begin to unwind after an interest rate increase”?

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  [email protected]

Posted at 6:49 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The myth of an economic recovery is falling apart.

- New Orders for Durable Goods Fell in Fourth-Quarter 2015, Both Before and After Consideration for Commercial Aircraft and Inflation
- Orders Signaled Deepening Downturn and Contracting First-Quarter Production
- North American Freight Activity Has Indicated Renewed Economic Contraction in the Context of No Economic Recovery
- With Heavy Systemic Distortions Recognized in Headline Existing-Home Sales Swinging from Down by 10.5% (-10.5%) in November to Up by 14.7% in December, Consistent Sales Numbers Were Closer to Down by 4.8% (-4.8%) and Up by 1.9%
- Fourth-Quarter 2015 Existing-Home Sales Plunged by 20.0% (-20.0%) against Third-Quarter Activity, Irrespective of the Monthly Reporting Issues
- Although Not Statistically Significant, New-Home Sales Rose Month-to-Month, Year-to-Year and Quarter-to-Quarter

“No. 782: December Durable Goods Orders, New- and Existing-Home Sales “

Posted at 2:55 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The myth of economic recovery is looking somewhat tattered.

Texas Economy Collapses – Dallas Fed Survey Crashes To 6-Year Lows As “D” Word Is Uttered
Submitted by Tyler Durden on 01/25/2016 15:38 -0500

For the 13th month in a row, The Dallas Fed Manufacturing Outlook was contractionary with a stunning -34.6 print following December’s already disastrous collapse back to -20.1, post-crisis lows. With “hope” having plunged back into negative territory (-2.2) in December, January saw a complete collapse to -24.0 as one respondent exclaimed, “we expect the continued depression in the oil and gas industry to negatively impact our customer base and result in significant demand reduction.”



And its across the board with production, employment, and shipments all collapsing…


As hope is crushed…


Chart: Bloomberg

But the punchline was the respondents, virtually all of whom confirm the recession, and one even casually tossed in the “D”(epression) word:

Primary Metal Manufacturing

· The impact of the continued decline in the energy sector, compounded with several new regulations from both the Environmental Protection Agency and Occupational Safety and Health Administration, is depressing economic conditions even further from 2015. Our top 10 customers continue to indicate declines in manufacturing and new capital expenditures for 2016. Outlooks continue to be adjusted down from six months ago, and we are seeing several foundry closings in our industry due to the state of our industry and strong offshoring projects.

· Our projected increase in business is related to market-share gains at the expense of our main competitor (foreign owned) who is having service problems.

Fabricated Metal Product Manufacturing

· We expect the continued depression in the oil and gas industry to negatively impact our customer base and result in significant demand reduction.

· I believe that if the stock market continues to deteriorate, spending on housing replacement products will decrease. Large purchases on housing seem to parallel consumers’ 401k performance.

· It is getting pretty ugly, and the strength of the dollar is really making us noncompetitive.

Machinery Manufacturing

· The continued downturn in the energy sector and its impact on oilfield services companies is brutal and financially punishing, leading to significant reductions in our labor force and facility closures.

· Seasonally, it is a slower time of the year currently. There aren’t any indicators of any big change in the next six months.

· Our increases in volume do not stem as much from ideal economic conditions as much as from breadth of development in multiple states. Brand expansion and awareness are more of the catalyst than the typical industry indicators. Our customers in Texas are experiencing significant decreases in business volume. As a whole, I would rate the economic conditions in Texas and many other parts of the country as poor.

· Oil and gas prices and their impact on capital spending by our customers continue to be our biggest concern.
I expect the Fed to recognize the weakness in the economy and the fact that we are in recession and drop interest rates again.


Posted at 9:56 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

A reader recently sent me these charts.  I do not know who put this collection together to give credit to but I do want to say these charts pretty much tell the WHOLE STORY!  Please note each graph has grey shaded areas which identify recessions.  What we need to focus on is what has happened since the last “official” recession of 2008/2009.  I put the word official in quotation marks because it is clear something has gone very wrong since 2009, have we really recovered?


Taking these charts and grouping by commonality we have; student loans/federal debt/money supply, food stamps/labor force participation/worker’s share of economy/median income/home ownership, I would put healthcare costs on their own.

Starting with the first grouping “debt and money supply” we can see an explosion in each chart since 2008.  This clearly depicts the efforts made at reflating the system.  Massive amounts of debt have been taken on and accompanied by a gross quadrupling or more of the money supply.  Funny how the money supply has exploded yet the dollar has strengthened versus foreign currencies since then.  I will finish with the chart which I believe is the reason for this anomaly.

The second group, let’s call this income/cost of living also shows unprecedented deterioration.  Less people working …for lower wages and thus unable to afford a home …or even the ability to feed themselves!  How is this “better”?  Clearly, the standard of living is far more stressed today than when we entered the 2007/08 beginning of the Great Financial Crisis.

Lastly we have healthcare costs as a cherry on top of this “poo pie”.  If more debt and fixed costs along with less employment and income available to service the newfound debt were not enough, healthcare costs of 10% or more of income should be enough to put a dagger in the heart of the American dream.

These charts are very easy to decipher and understand, even a 4th grader who must budget a weekly allowance can understand it!  However, apparently Wall Street cannot understand this.  I would say the same about Washington and those who “pull their strings” but I don’t believe it to be the case.  I have said for years now, policy implemented could not have been by mistake and thus must be planned because no one could be so STUPID to have done the things our “leaders” have!

As for Wall Street, I actually think CNBC has guests on who actually believe the pabulum they spew.  In fact just today I heard a guest say he was super bullish because now we have QE behind us, we can get back to normalization and sound footings …  Really?  Would we have even “arrived” here today with markets still opened were it not for the $ trillions pumped in by the various QE’s?

I promised one last chart.  “Velocity” or lack of, explains a lot of what has already happened.  When velocity returns it will also explain a lot, we’ll get to that in a moment.

<b>Velocity</b> Of <b>Money</b>: Demand In The Current Moment by Miller Howard ...

You will notice velocity was cratering during 2008, it experienced a brief bounce and has done nothing but continue lower since then.  This is explained by the previous and subsequent buildup of debt.  People were feeling the “bite” of debt leading up to 2008.  As asset prices began to drop, people started to hold back on spending and began to hoard cash as a safety net to be able to pay on debt.  This strategy has continued.  To offset the lack of velocity, the Fed was forced to “push” more money into the system.  Which brings us to where we are now, more debt, less income and more $ trillions of money supply in the system.

I believe the lower velocity accounts for strength in the dollar.  Richard Russell called the debt buildup in terms of dollars a “synthetic short”.  This short being covered at a time of record low velocity has caused the rise in the dollar.  This by the way has occurred while foreigners have offloaded over $1 trillion of reserves in the past year and soaked up most likely by the ESF.

In my opinion, a defining event is just about to happen.  Because the Fed blinked and forced an unjustified rate hike, one of two things will happen.  Either they stay the course (and maybe hike again), in which case asset markets will implode to unrecognizable levels.  Or conversely the Fed blinks again and actually does further QE and pushes rates negative.  In this case I believe they will finally get a reaction from velocity.  I believe velocity will shoot straight up and probably to new high levels as “non-credible” monetary policy will spook a run out of dollars!  A reversal by the Fed will begin the game of hot potato where owners will want out of dollars while they still can.

Switching gears entirely, it looks like the COMEX finally did make delivery of most of the 6.44 tons they owed for December delivery.  I say “finally” because it makes no sense to wait so far into the month since the previous owner had to pay storage.  If it was truly available, there was every incentive to deliver on day one or two …which they did not.  Now, COMEX sits with a whopping 2.3 tons left of registered gold (73,000 ounces) coming into the February delivery month.  As of tonight, there are still 114,219 Feb. contracts open which represents 11.4 million ounces!  Yes of course, much of this open interest will either roll or evaporate as it has over the last two years …but with three trading days left there is 11.4 million ounces contractually open and only 73,000 ounces available for delivery!

I do want to point out the highly unusual!  Today was options expiration for gold, in the past I want to say gold was ALWAYS hit and hit very hard on this day so as to make the call options either cheaper or worthless.  This did not happen today as gold is now up over $20 in the last two days.  Also, COMEX has NEVER EVER gone into an active delivery month with such a small amount of registered gold available.  In fact, I cannot remember a time when the registered category was ever more sparse than it is now.

The amount of gold in the registered category is now roughly $80 million.    To put this in perspective for you, when I was managing a retail brokerage office with just seven brokers in a medium to small Texas town in the middle of nowhere, we had assets under management of nearly $500 million.  I personally had well over $100 million under management.  Yet COMEX, a global market and the “pricing” mechanism for the world’s gold only has $80 million worth of gold available to deliver?

Folks, this is not only scary, I cannot believe COMEX would allow these numbers to be seen.  I will surely be trolled and told “they always come up with the metal” but to advertise your vaults are virtually empty with just three days prior to first notice day?  How confidence building is that?  We will keep you informed as to how this plays out but I believe they are playing with something far hotter than fire!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome! [email protected]