Posted at 5:13 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

John Williams shares the following with us.

- Weakest Since 2008 Economic Collapse, Plummeting Holiday Retail Sales Reflected Liquidity-Restrained Consumers
- December Sales Plunged by a Statistically-Significant 0.9% (-0.9%), Down by 1.4% (-1.4%) before Prior-Period Downside Revisions
- Monthly Sales Contraction Will Hold in Real Terms, Net of Inflation, Despite Falling Gasoline Prices
- Annual Growth Again at Traditional Recession Level

“No. 687: December Retail Sales”
Web-page: http://www.shadowstats.com?

 

Jim Sinclair’s Commentary

China knows a bargain when they see it and they act.

China Buying Up Latin American Oil
By Colin Chilcoat
Posted on Mon, 12 January 2015 21:52 

As the world’s number one energy consumer China is enjoying the low prices while they last. Never one to settle however, China is finding still more ways to take advantage of the dire straits gripping several oil producers.

China’s slowdown is real – preliminary data suggests 2014 will mark the weakest GDP growth in 24 years – but the country still has plenty of money to play with that is taking it places the World Bank and the International Monetary Fund (IMF) wouldn’t dare. Their reward? More oil of course. With tough conditions and greater access to raw commodities, China looks to turn the high risk into equal or greater returns.

In Russia, much has been made of the deepening energy ties with its neighbor to the south. With western financing no closer to a return and a hesitancy to dig deeper into its foreign exchange reserves, Russia turned to China for a bailout. China has obliged, agreeing to finance state-owned Rosneft’s debt in addition to opening a $24 billion currency swap program, which could expand further. For its part, China gains access to Russia’s tightly held upstream sector – in the form of the giant Vankor field – and fulfills its needs downstream with favorable long-term oil and gas deals. Further loans and infrastructureinvestments are likely moving forward – one of China’s biggest debt-rating agencies Dagong believes Russian debt is a safer investment than US government debt.

More…

 

Jim Sinclair’s Commentary

Planning on getting a refund from 2014 taxes? Don’t!

IRS Warns Of Delayed Refunds, Long Waits For Taxpayers & Possible Shutdown
1/13/2015 @ 8:17PM

With a week to go before tax season opens, taxpayers were already bracing for a potentially “miserable” filing season. It turns out that it could live up to the hype.

Internal Revenue Service (IRS) Commissioner Koskinen has advised employees that the budget cuts will result in reduced services to taxpayers. In an email to employees sent earlier today, Commissioner Koskinen advised that “realistically we have no choice but to do less with less.”

What does that mean for taxpayers?

Identity theft could increase. Despite the need for increased taxpayer protections against identity theft, the implementation of additional measures will be delayed. That’s bad news for taxpayers since, despite the efforts of IRS and other agencies to stem the tide of identity theft, scammers have grown more bold. TIGTA reported that telephone scammers, posing as IRS representatives, managed to steal more than $5 million from taxpayers last year. And as quickly as the scams are picked up, they change. IRS-Criminal Investigation has responded to what has been termed an “epidemic” of identity theft by ramping up investigations – but with wholesale cuts to IRS, expect those investigations to dip, too.

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Jim Sinclair’s Commentary

For our Canadian family.

Electronic Funds Transfer Reporting

What is Electronic Funds Transfer Reporting?

International tax evasion and aggressive tax avoidance are costly to taxpayers worldwide, and are unfair to businesses and individuals who follow the rules. The Government is committed to growing Canada’s tax base by searching out tax cheats, while simultaneously lowering the tax burden for businesses and families.

Economic Action Plan 2013 introduced important new measures to combat international tax evasion and aggressive tax avoidance. These measures included the requirement for financial institutions to report international electronic funds transfers (EFTs) of $10,000 or more to the Canada Revenue Agency (CRA) beginning in January 2015. This information helps the CRA to identify taxpayers who may be participating in aggressive tax avoidance or who may be attempting to conceal income and assets offshore.

This new requirement to report to the CRA applies to the same financial intermediaries that are already reporting information on international EFTs to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). That means no added administrative burden or red tape.

What is considered an international electronic funds transfer?

An international electronic funds transfer means the transmission of instructions for the transfer of funds, other than the transfer of funds within Canada. This transmission can be done through any electronic, magnetic or optical device, telephone instrument or computer. In the case of Society for Worldwide Interbank Financial Telecommunication messages, only SWIFT MT 103 messages are included.

Reporting entities must report only EFTs of $10,000 or more. They must also report two or more EFTs of less than $10,000 each that are made within 24 consecutive hours by or on behalf of the same individual or entity when they total $10,000 or more, as these are considered to be a single transaction.

Which financial intermediaries are required to report electronic funds transfers to the CRA?

Financial intermediaries that must report are defined as “reporting entities” in the Income Tax Act (ITA). They include banks, credit unions, caisses populaires, trust and loan companies, money service businesses and casinos.
To find out more about who should report an electronic funds transfer to the CRA, go to Part XV.1 – Reporting of electronic funds transfer.

How to report electronic funds transfers

To ensure the new requirement imposes no added burden or red tape, reporting entities will submit EFTs electronically to both FINTRAC and the CRA simultaneously. This will happen simultaneously through a shared component of the existing FINTRAC reporting system. This consists of the F2R and batch reporting systems. The EFT reporting requirements for the CRA and FINTRAC are identical. Reporting entities must file EFTs no later than five working days after the day the transfer occurred.

For more information on how to submit EFTs to the CRA through the shared reporting process, go to Reporting to FINTRAC on the FINTRAC website. FINTRAC will continue to manage the existing reporting channels and provide user support to reporting entities. Reporting entities will continue to enroll only with FINTRAC.

If you have any questions related to EFT reporting requirements, call the CRA at 1-800-959-5525.

Paper reporting

If you can’t report EFTs electronically, you must report using the CRA’s Form RC438, International Electronic Funds Transfer Report. If you are submitting a paper form, you must send it separately to both FINTRAC and the CRA.

http://www.cra-arc.gc.ca/eft/

 

Jim Sinclair’s Commentary

Government economic figures would have you believe that the US economy is a bed of roses, which it is not.

RETAIL EARTHQUAKE: All these big-name stores closing
Macy’s, JCPenney, others laying off hundreds of thousands of employees

WASHINGTON – Christmas is over. Now get out.

That was the word this week as two of the nation’s giant retailers announced to employees and shoppers the closings of dozens of stores.

Macy’s is closing 14 of its 790 stores across the country.

JCPenney is closing 39 of its stores and laying off 2,250 workers.

And that’s just the beginning of the retail earthquake hitting America, say analysts.

“I believe that we are on the verge of a number of business failures of specialty retailers as well as some national general retailers which in turn will have a domino effect on those dealing with the retail industry,” says bankruptcy expert Chuck Tatelbaum. “Because of the changes in buying habits of U.S. consumers, as a result of the continuing hesitancy to spend, the 2014 holiday season was not sufficiently successful for many retailers that have either over expanded, fell out of favor or had insufficient capital and merchandise.”

The last few years have not been kind to major store chains. Many once revered brands have been closing stores. Apparently some were only staying open through the Christmas season, which will prove to be their last.

“Our business is rapidly evolving in response to changes in the way customers are shopping across stores, desktops, tablets and smartphones,” explained Terry Lundren, Macy’s chief executive officer. “We must continue to invest in our business to focus on where the customer is headed – to prepare for what’s next.”

Sears has been around for 122 years, but it, too, is closing 235 under-performing stores. Sears and Kmart lost $296 million in 2014.

Sears Holdings, which has more than 1,830 Sears and Kmart stores, said in its earnings announcement that the company “expects to migrate the shopping activity of highly engaged members who previously shopped closed stores to alternative channels.”

More…

 

Jim Sinclair’s Commentary

GDP making great gains? Who are they kidding?

Retail Sales Slump in Broad-Based December Retreat
1/14/2015 8:35:00 AM

Retail sales in the United States slumped in December by the most in almost a year, reflecting a broad-based retreat that probably will prompt economists to cut growth forecasts.

The 0.9% drop, the biggest since January 2014, followed a 0.4% gain in November that was smaller than previously estimated, Commerce Department figures showed Jan. 14. Last month’s decrease was almost twice as large as the most pessimistic estimate of 87 economists surveyed by Bloomberg.

Electronics and clothing stores were among the nine of 13 major categories that showed a drop in receipts last month as American consumers decided to save instead of spend the windfall from lower gasoline prices. Continued improvement in the labor market and a pick-up in wage growth will be needed to support demand at retailers such as Family Dollar Stores Inc.

“Weakness in core retail spending is at risk of confirming the wage deterioration is more severe than perhaps thought,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. at New York, said before the report. “We had very strong job growth last year, but wage growth left something to be desired.”

The median forecast of economists surveyed by Bloomberg called for a 0.1% decline. Estimates ranged from a 0.5% drop to a 0.7% increase.

November retail sales previously were reported as a gain of 0.7%. October data also were revised down to show a 0.3% increase from a previously reported 0.5% gain.

Purchases increased 4% in 2014 after a 4.1% gain the previous year.

In addition to electronics and clothing, sales also fell at auto dealers, building material merchants, sporting goods and general merchandise stores.

The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, decreased 0.4%, the worst performance since snow covered much of the country in January 2014, after rising 0.6% in November.

More…

 

Jim Sinclair’s Commentary

This is a step that took guts. Nations were bombed for just making this suggestion.

Russia Just Pulled Itself Out Of The Petrodollar
Tyler Durden on 01/14/2015 12:45 -0500

Back in November, before most grasped just how serious the collapse in crude was (and would become, as well as its massive implications), we wrote “How The Petrodollar Quietly Died, And Nobody Noticed”, because for the first time in almost two decades, energy-exporting countries would pull their “petrodollars” out of world markets in 2015.

This empirical death of Petrodollar followed years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.

We added that in 2014 “the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations.”

clip_image002

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Jim Sinclair’s Commentary

The storm clouds are becoming visible to the markets.

The Perfect Storm for Wall Street Banks
By Pam Martens and Russ Martens: January 14, 2015

JPMorgan Chase reported 2014 fourth quarter earnings this morning, missing analyst estimates. Analysts had expected $1.31 per share while the actual number came in at $1.19. Listening to the conference call this morning, there was the impression that the $1.19 would have been worse had the bank not released loan loss reserves in a number of business areas.

Jamie Dimon, CEO of JPMorgan Chase, was back to characterizing the bank’s P&L as the “fortress balance sheet.” The London Whale credit derivatives traders almost blew up the fortress in 2012 and the markets are becoming skeptical as to just how much visibility there is on energy and emerging market loans souring on the books of the mega Wall Street banks.

In early December, Oppenheimer analyst Chris Kotowski noted in a report that plunging oil prices could be the greatest threat to the largest U.S. banks since the epic financial turmoil in 2008 while also warning that visibility into the banks’ loan exposure to the oil and exploration industry is limited.

That’s a very valid point. Another valid point is that visibility into the big banks’ exposure as counterparties to derivatives tied to plunging oil and commodity prices and shaky emerging market debt is also being kept under wraps – at least for now. The only clue as to which banks may take a hit, either from direct exposure or from loans to hedge funds taking a bath in the sectors, is the price action of the bank shares in the open market.

In a December 15 article by Patrick Jenkins in the Financial Times, readers learned that data from Barclays indicated that “energy bonds now make up nearly 16 per cent of the $1.3 trillion junk bond market — more than three times their proportion 10 years ago,” and “Nearly 45 per cent of this year’s non-investment grade syndicated loans have been in oil and gas.” Raising further alarms, AllianceBernstein has released research suggesting that the deals were not fully subscribed by investors with the potential that “as much as half of the outstanding financing from the past couple of years may be stuck on banks’ books.”

More…

 

Jim Sinclair’s Commentary

Finance is a business of Terrorists.

Massive search underway for top AIG exec who disappeared from his Marriott Hotel room as police discover his wallet and jacket on golf course
By Ted Thornhill for MailOnline
Published: 04:40 EST, 13 January 2015 | Updated: 11:30 EST, 13 January 2015

Police are using bloodhounds and divers as part of a huge search for a missing AIG executive, last seen at a Californian hotel on Thursday.

Omar Arce Meza, 33, from Los Angeles, was last seen at around 11pm at the JW Marriott Desert Springs Resort in Palm Desert.

Police divers have searched a pond at the hotel, but to no avail. They have, however, found his jacket and wallet on the hotel golf course.

His wife, Diane, described him as ‘highly responsible and reliable’, with his disappearance completely out of character.

More…

Posted at 4:05 PM (CST) by & filed under USAWatchdog.com.

By Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Renowned analyst Charles Nenner says the biggest cycle he sees coming is the war cycle.  Nenner says, “For the last couple of years, I have been saying, in the second decade of the new century, we will have a big war.  Why, because there is a 100 year cycle.  If you go back 100 years to the first world war in 1914 to 1918, that led to the second world war.  That was actually one big war with peace in the middle.  It you go back 100 years before that, you get Napoleon. . . . If you put ‘big war’ in Google, you see always in the second decade of the new century, there is a huge war.   Nenner goes on to say, “The fear has started already.  So, this is going to be exploding soon into a major war. . . . Based on the weaponry that becomes better in every war, I guess that’s why we get more dead bodies in every war.”

Other troubling signs are the tensions between China and Japan that should not be underestimated.  Nenner says, “That’s a biggie because if you look at the aerospace index in the area, China, Vietnam and Japan, it has outperformed for a long time.  So, something is cooking over there, and we know there is a conflict about the Islands (in the South China Sea).  Japan has to be protected by the United States–that’s the agreement, and if Japan gets into a war with China, who knows where the end is.  That would be a big one.”

On the deflation question, Nenner says you have to look at the big picture.  Nenner contends, “In a cycle, all things that can go wrong, go wrong.  All this has to be combined into the deflation scenario.  This is all deflation.  Corn price came down, wheat price came down, cotton is coming down, gas is almost at the low, the oil price is coming down and copper price is almost at a new low.  I don’t understand why people don’t understand there is a problem with deflation.  Europe is in deflation, and we have a strong dollar and that means deflation over here.  I don’t think people understand you can’t do anything against deflation.  If you have inflation, then you can do something about interest rates.  If you have deflation and interest rates are already at zero, what are you going to do about it?  You can’t do anything about it. . . . You have huge deflation coming up.”

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Posted at 3:03 PM (CST) by & filed under Jim's Mailbox.

Jim,

The boys must be trying to knock the bullion down by selling the stocks. It makes no sense as we have had up days in gold and silver stocks when the market turned down recently. Also, they are trying to keep silver tame.

Nenner is looking to $1245 and $1269. 

Respectfully Yours,
CIGA Dr. K.

Dr. K,

The bottom is in at $1138. The price objective on gold is $2100 – that is more important.

You sell the rallies and buy the breaks. When the general equities look questionable, all equities come under pressure so gold shares temporarily suffer.

Gold equities will follow the gold. That is the whole story.

Jim

Posted at 10:57 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The low price of oil is not the boon Financial TV suggests.

First Of Many: Standard Chartered Hit By Billions In Losses From Commodity Crash
Tyler Durden on 01/13/2015 08:23 -0500

Now that even the pundit brigade has confessed that crashing crude may not be the “unambiguously good” event all of them had sworn as recently as a month ago it surely would be, and stocks are beginning to comprehend that plunging oil may well be rather “unambiguously bad” because without EPS growth (energy is well over 10% of S&P EPS), without multiple expansion (rumor has it the Fed will hike this year), without a jump in stock buybacks (energy companies account for 30% of the buyback growth in 2015 according to Goldman) and without a boost to GDP (energy capex plans are imploding), the only way is down. But there was one key element missing from the “bad” scenario: impaired banks. At least until now, because as Reuters reports, Asia-focused bank Standard Chartered is the first (of many) bank facing billions in losses resulting from the crude crash.

The bank, which recently has been on a firing spree and even exited its entire equity business, will likely need $4.4 billion of extra provisions to cover losses from commodities loans, potentially forcing it to raise billions of dollars from investors, analysts said on Monday.

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Jim Sinclair’s Commentary

This is true and has occurred too often to be remain comfortable.

American shakedown: Police won’t charge you, but they’ll grab your money
U.S. police are operating a co-ordinated scheme to seize as much of the public’s cash as they can
By Neil Macdonald, CBC News Posted: Sep 11, 2014 5:00 AM ET

On its official website, the Canadian government informs its citizens that “there is no limit to the amount of money that you may legally take into or out of the United States.” Nonetheless, it adds, banking in the U.S. can be difficult for non-residents, so Canadians shouldn’t carry large amounts of cash.

That last bit is excellent advice, but for an entirely different reason than the one Ottawa cites.

There’s a shakedown going on in the U.S., and the perps are in uniform.

Across America, law enforcement officers — from federal agents to state troopers right down to sheriffs in one-street backwaters — are operating a vast, co-ordinated scheme to grab as much of the public’s cash as they can; “hand over fist,” to use the words of one police trainer.

Roadside seizure

It usually starts on the road somewhere. An officer pulls you over for some minor infraction — changing lanes without proper signalling, following the car ahead too closely, straddling lanes. The offence is irrelevant.

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Jim Sinclair’s Commentary

Government statistics versus reality.

New study paints bleak picture of manufacturing rebound
Scott Cohn

One of the most encouraging aspects of the U.S. economic recovery is the halo effect on manufacturing, which accounts for 1 in 6 private-sector jobs. Yet a new study is dismissing that renaissance as little more than a “myth.”

The report by the nonpartisan Information Technology and Innovation Foundation, a Washington-based think tank, asserts that the sector’s growth has been fueled in part by free trade advocates and government statistics that mask a sharp decline in manufacturing activity since 2000. The foundation says manufacturing’s recovery has been merely tepid since the Great Recession ended in 2009.

“American manufacturing has still not recovered to 2007 output or employment levels,” the study says.

“Moreover, the lion’s share of growth that has occurred appears to have been driven by a cyclical, rather than structural, recovery, and as such may represent only a temporary trend.”

The report flies in the face of what many analysts consider a broad-based recovery in manufacturing, jump-started in large part by booming U.S. oil and gas production.

More…

Posted at 6:00 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

John Williams shares the following with us.

- Revisions to Unemployment Seasonal-Adjustments Demonstrated Concurrent-Seasonal-Factor Reporting Issues
- Payroll and Unemployment Data Both Heavily Skewed by Unstable and Inconsistent Seasonal Adjustments
- December Unemployment Rates: 5.6% (U.3), 11.2% (U.6), 23.0% (ShadowStats)
- Annual Money Supply M3 Growth Jumped to 5.2% in December, Highest Since July 2009

“No. 686: December Employment and Unemployment, Money Supply M3″
Web-page: http://www.shadowstats.com

 

Jim Sinclair’s Commentary

Energy (fracking) and auto OTC subprime derivatives. Now there is a natural pair to destroy what is left of the American Dream

Here They Go Again—-Subprime Delinquencies Rising In Autoland
by David Stockman • January 9, 2015

Yesterday’s WSJ article on rising auto loan delinquencies had a familiar ring. It focused on sub-prime borrowers who were missing payments within a few months of the vehicle purchase. Needless to say, that’s exactly the manner in which early signs of the subprime mortgage crisis appeared in late 2006 and early 2007.

More than 8.4% of borrowers with weak credit scores who took out loans in the first quarter of 2014 had missed payments by November, according to the Moody’s analysis of Equifax credit-reporting data. That was the highest level since 2008, when early delinquencies for subprime borrowers rose above 9%.

To be sure, subprime auto will never have the sweeping impact that came from the mortgage crisis. The entire auto loan market is less than $1 trillion compared to a mortgage market of more than $10 trillion at the time of the crisis.

Yet the salient point is the same.The apparent macro-economic recovery and prosperity of 2004-2008 rested on the illusion of an unsustainable debt fueled housing boom; this time its the auto sector.

Indeed, delete the auto sector from the phony 5% GDP  SAAR of Q3 2014 and you get an economy inching forward on its own capitalist hind legs. Q3 real GDP less motor vehicles was up just 2.3% from the prior year (LTM); and that’s the same LTM rate as recorded in Q3 2013, and slightly lower than the 2.4% growth rate posted in Q3 2012.

Aside from autos, there has been no acceleration, no escape velocity. Furthermore, the 2%+/- growth in the 94% balance of the economy after the 2008-09 plunge has nothing to do with the Fed’s maniacal money printing stimulus and the booster shot from cheap credit that is supposed to provide.

The reason is straight forward. There is no such thing as Keynesian monetary magic. Central bank interest rate repression either encourages households to supplement income based spending with incremental borrowings— or it has no direct impact on measured GDP.

The fact is, outside of autos and student loans, households have reached peak debt. That is after a 30-year spree of getting deeper and deeper into hock, middle class households stopped adding to leverage on their wage and salary incomes at the time of the financial crisis; and since then they have actually deleveraged slightly—albeit at levels that are still way off the historical charts.

More…

 

Oil Derivatives Explosion Double 2008 Sub-Prime Crisis-David Morgan
By Greg Hunter On January 7, 2015

By Greg Hunter’s USAWatchdog.com

Precious metals expert David Morgan says the plunge in oil prices is not good news for big Wall Street banks.  Morgan explains, “The amount of debt that is carried by the fracking industry at large is about double what the sub-prime was in the real estate fiasco in 2008.   In summary, we’re looking at an explosion in potential that is greater than the sub-prime market of 2008 because, number one, oil and energy are the most important sectors out there.  Number two, the derivative exposure is at least double what it was in 2008.  Number three, the banking sector is really more fragile . . . and we have less ability to weather the storm.”

Morgan, who is also “a big-picture macroeconomist,” says oil derivatives could take down the system just like mortgage-backed securities back in the last financial meltdown.  The Fed said the sub-prime crisis would be “contained.”  It was not.  So, could oil derivatives take down other derivatives in a daisy chain type of collapse?  Morgan says, “Absolutely, there is no question about it.  The main problem is the overleverage of the system as a whole.  Warren Buffett calls derivatives weapons of financial mass destruction, which is a true statement.  Secondly, look at how derivatives are interconnected.  Derivatives can tie a financial instrument to another financial instrument or a financial derivative can be tied to an oil derivative.   This is just a flavor of how complicated these mathematical equations really are, and no one really knows the risk in them.”  So, underwater oil derivatives in one bank could bring down the financial system?  Morgan says, “Absolutely, because it is all tied together, all the banks are interconnected.”

So, if the oil sector unraveled, what would happen to gold and silver prices?  Morgan thinks, “Gold, I am pretty sure, would maintain right where it’s at, and that would be the worst case scenario, or it would go up and go up rapidly.  Gold and silver may go down temporarily like we saw in 2008, but they will catch a bottom and come up.  Silver in a deflationary environment has not done that well in the past. . . . Gold and silver are crisis hedges.  People will say I don’t know what is happening.  I’m scared.  I need something I can trust.  You can trust money that has been money for 5,000 years.  That’s something you can trust. . . . You can’t escape the truth.  The truth wins out in the end.  We are getting to that point, an inflection point.  I think gold will go up, and I think silver would follow and probably go up more rapidly once people caught on there is uncertainty.  There is an unbelievable lack of trust in the system.  People need something they can trust.  Physical gold and silver is something you can trust, and it’s been that way for thousands of years.  People aren’t that stupid, they understand that.”  Morgan goes on to say, “I am not implying this is going to unravel tomorrow.  I think it’s going to take a longer time frame than you might expect.  I really think it’s going to take four or five months from now.  I am thinking May or June before you start looking for the repercussions of this sub $50 (per barrel) oil.”

More…

Posted at 2:56 PM (CST) by & filed under Jim's Mailbox.

Jim,

It looks like what is happening in Venezuela with empty shelves in the stores and no detergent available should make us all wonder when this will be coming to America.

CIGAs Larry and Miki

Dear Larry & Miki,

The empty shelves come as a partner with Currency Induced Cost Push Inflation by disturbing the means of distribution.

Jim

Venezuelans Throng Grocery Stores Under Military Protection
By Andrew Rosati and Noris Soto Jan 9, 2015 2:08 PM MT

Shoppers thronged grocery stores across Caracas today as deepening shortages led the government to put Venezuela’s food distribution under military protection.

Long lines, some stretching for blocks, formed outside grocery stores in the South American country’s capital as residents search for scarce basic items such as detergent and chicken.

“I’ve visited six stores already today looking for detergent — I can’t find it anywhere,” said Lisbeth Elsa, a 27-year-old janitor, waiting in line outside a supermarket in eastern Caracas. “We’re wearing our dirty clothes again because we can’t find it. At this point I’ll buy whatever I can find.”

A dearth of foreign currency exacerbated by collapsing oil prices has led to shortages of imports from toilet paper to car batteries, and helped push annual inflation to 64 percent in November. The lines will persist as long as price controls remain in place, Luis Vicente Leon, director of Caracas-based polling firm Datanalisis, said today in a telephone interview.

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Jim,

You have talked often in your Q&As about the broken link in netting of derivatives contracts.

This article warns about it.

CIGA Evan

How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper
Submitted by Tyler Durden on 11/01/2011 13:49 -0400

A little over a month ago, Zero Hedge started an avalanche in the financial sector, and an unprecedented defense thereof by the “independent” financial media and conflicted sell side, by being simply the messenger in pointing out that the gross exposure of one Morgan Stanley to the French banking sector is $39 billion. The firestorm of protests, which naturally focused on the messenger, and not the message, attempted to refute the claims that Morgan Stanley (and many others) are overexposed to Europe (both banks and countries) by stating that gross is not net, and that when one nets out “hedges” the real exposure is far, far lower. The logic is that bilateral netting, as the principle behind this argument is called, should always work – no matter the market, and that counterparty risk, especially when it comes to hedges, should always be ignored because banks will always honor their own derivative exposure. Obviously that this failed massively when AIG had to be bailed out, to preserve precisely the tortured and failed logic of bilateral netting was completely ignored, after all things will never get that bad again, right? Well, wrong. Because the argument here is precisely what the exposure is when the chain of netting breaks, when one or more counterparties go under (such as MF Global for example, which filed bankruptcy precisely due to its hedged (?) European exposure – luckily MF was not in the business of writing CDS on European banks or else all hell would be breaking loose right now). So little by little the story was forgotten: after all when everyone says gross is not net, contrary to what history shows us all too often, everyone must be right. Today it is time to refresh this story, as none other than Bloomberg pulls the scab right off and while confirming our observations, also goes further: yes, banks are not only massively exposed to Europe, but they are in essence misrepresenting this exposure to the public by a factor of well over ten!

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Morning Jim,

There you have evidence of what you had warned years ago — CICPI.

Take care,
CIGA Ryan.

Apple Changes App Pricing Worldwide After Currency Swings
By Tim Higgins, Ari Altstedter and Daniele Lepido January 11, 2015

(Bloomberg) — Apple Inc. changed the prices of software applications from Canada to Europe today, in one of the company’s more comprehensive global responses to currency swings in recent years.

With the U.S. dollar rising, Apple earlier this week told software makers selling programs through its online App Store that it’s increasing app prices in the European Union, Norway, Canada and Russia because of foreign exchange rates and taxes. The changes took effect today, with the entry-level price for apps in Canada rising to $1.19 from 99 cents. In Europe, the basic app price jumped to 0.99 euro from 0.89 euro.

The moves across two continents — coupled with Apple boosting iPhone prices in Russia last month after briefly halting online sales there when the ruble plunged — amount to one of the more concentrated worldwide actions by the Cupertino, California-based company to currency movements. While Apple has previously raised the prices of programs in its international app stores, the company is typically reluctant to make such changes, said Slaven Radic, chief executive officer of app-developer consultancy Tapstream Network Inc.

“This is very unique,” Radic said. “They’re very measured about this — sometimes they’ll lose money if they can avoid showing too much price movement on things.”

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Posted at 2:10 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

All of this cannot be Baby Boomers

Labor Participation Rate Drops To Fresh 38 Year Low; Record 92.9 Million Americans Not In Labor Force
Submitted by Tyler Durden on 01/09/2015 08:52 -0500

Another month, another attempt by the BLS to mask the collapse in the US labor force with a goalseeked seasonally-adjusted surge in waiter, bartender and other low-paying jobs. Case in point: after a modest rebound by 0.1% in November, the labor participation rate just slid once more, dropping to 62.7%, or the lowest print since December 1977. This happened because the number of Americans not in the labor forced soared by 451,000 in December, far outpacing the 111,000 jobs added according to the Household Survey, and is the primary reason why the number of uenmployed Americans dropped by 383,000.

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Jim Sinclair’s Commentary

Pay from savings? What savings?

Most Americans Don’t Have Savings to Pay Unexpected Bill
9:46 am ET
Jan 7, 2015

More than three in five Americans wouldn’t have money in their savings accounts to pay for an unexpected car repair or medical emergency, according to a survey released Wednesday.

Only 38% of those polled said they could cover a $500 repair bill or a $1,000 emergency room visit with funds from their bank accounts, a new Bankrate report said. Most others would need to take on debt or cut back elsewhere.

“A solid majority of Americans say they have a household budget,” said Bankrate banking analyst Claes Bell. “But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help.”

The survey found that an unexpected bill would cause 26% to reduce spending elsewhere, while 16% would borrow from family or friends and 12% would put the expense on a credit card. The remainder didn’t know what they would do or would make other arrangements.

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Russia’s “Startling” Proposal To Europe: Dump The US, Join The Eurasian Economic Union
Submitted by Tyler Durden on 01/05/2015 06:02 -0500

Slowly but surely Europe is figuring out that as a result of the western economic and financial blockade of Russian, it is Europe itself that is suffering the most. And while Germany was first to acknowledge this late in 2014 when its economy swooned and is now on the verge of a recession, now others are catching on. Case in point: the former head of the European Commission, and Italy’s former Prime Minister, Romano Prodi who told Messaggero newspaper that the “weaker Russian economy is extremely unprofitable for Italy.”

The other details from Prodi’s statement:

Lowered prices in the international energy markets have positive aspects for the Italian consumers, who pay less for the fuel, but the effect will be only short-term. In the long-term however the weaker economic situation in countries producing energy resources, caused by lower oil and gas prices, mostly in Russia, is extremely unprofitable for Italy, he said.

“The lowering of the oil and gas prices in combination with the sanctions, pushed by the Ukrainian crisis, will drop the Russian GPD by five percent per annum, and thus it will cause cutting of the Italian export by about 50%,” Prodi said.

“Setting aside the uselessness or imminence of the sanctions, one should highlight a clear skew: regardless of the rouble rate against dollar, which is lower by almost a half, the American export to Russia is growing, while the export from Europe is shrinking.”

In other words, just as slowly, the world is starting to grasp the bottom line: it is not the financial exposure to Russia, or the threat of financial contagion should Russia suffer a major recession or worse: it is something far simpler that will lead to the biggest harm for Europe’s countries. The lack of trade. Because while central banks can monetize everything, leading to an unprecedented asset bubble which if only for the time being boosts investor and consumer confidence, they can’t print trade – that all important driver of growth in a globalized world long before central banks were set to monetize over $1 trillion in bonds each and every year to mask the fact that the world is deep in a global depression.

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Posted at 11:41 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Arctic vortex, a one-time event?

Governor Activates State Severe Weather Protocol
Tuesday, Jan 6, 2015 • Updated at 4:04 PM EST

As the temperatures plunge, Gov. Dannel Malloy has activated the state’s severe cold weather protocol from today through Saturday.

“We must continue to protect the most vulnerable during these severe cold weather outbreaks,” Malloy said in a statement. “I urge anyone in need of shelter to call 2-1-1 and encourage local communities to consider opening warming centers or other facilities to assist people in need.”

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Treasury Yield Plunge Approaches Flash Crash Pace
Submitted by Tyler Durden on 01/06/2015 12:25 -0500

Few will ever forget the ferocity of the October short-squeeze in US Treasuries that flash-crashed yields. As Nanex notes however, today’s yield plunge (price surge) is starting to shape up as an extreme flight-to-safety squeeze. As we noted earlier, US Treasury short positioning into this week was its highest in over 4 years…

Today vs October’s yield flash crash…

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The surge in futures prices is getting extreme

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Global worries spur gold price jump
PUBLISHED: 8 HOURS 0 MINUTES AGO | UPDATE: 4 HOURS 34 MINUTES AGO

NEW YORK: Hedge funds are stepping back onto the gold bandwagon as political turmoil in Greece and government actions in Asia helped send prices to their biggest monthly advance since June.

Bullish wagers on the metal increased for the first time in three weeks and have more than doubled since mid-November, US government data show. Short holdings dropped for the sixth week in seven. Bullion rose for a second straight month in December.

While cheap oil has kept inflation in check, gold’s appeal as an alternative asset got a boost on Greek opposition to austerity measures that may prompt the country’s exit from the euro area.China has lowered interest rates and waived some bank lending requirements to help spur growth, while Japan expanded stimulus measures. Bullion prices are up 7.1% since touching a four-year low in early November.

"People are running to gold because it’s the last haven after the dollar," said George Gero, a New York-based precious metals strategist who helps manage $500 million at RBC Capital Markets.

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