Posted at 11:46 AM (CST) by & filed under Jim's Mailbox.


Here is another reason for foreign companies NOT to have operations in the US. Just another step towards self-imposed isolation.

CIGA Craig

Obama administration says the world’s servers are ours
US says global reach needed to gut "fraudsters," "hackers," and "drug dealers."
by David Kravets – July 14 2014, 12:12pm MST

Global governments, the tech sector, and scholars are closely following a legal flap in which the US Justice Department claims that Microsoft must hand over e-mail stored in Dublin, Ireland.

In essence, President Barack Obama’s administration claims that any company with operations in the United States must comply with valid warrants for data, even if the content is stored overseas. It’s a position Microsoft and companies like Apple say is wrong, arguing that the enforcement of US law stops at the border.

A magistrate judge has already sided with the government’s position, ruling in April that "the basic principle that an entity lawfully obligated to produce information must do so regardless of the location of that information." Microsoft appealed to a federal judge, and the case is set to be heard on July 31


Posted at 10:11 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The latest from John Williams’

- Net of Inflation, Headline Real June Retail Sales Likely Contracted
-  Although Real Retail Sales Appear to Have Gained in Second Quarter; Contracting Second-Quarter GDP Outlook Remains Intact

"No. 640: June Retail Sales"

Emerging nations plan their own World Bank, IMF
Jul. 14, 2014 5:44 PM EDT

WASHINGTON (AP) — Fed up with U.S. dominance of the global financial system, five emerging market powers this week will launch their own versions of the World Bank and the International Monetary Fund.

Brazil, Russia, India, China and South Africa —the so-called BRICS countries — are seeking "alternatives to the existing world order," said Harold Trinkunas, director of the Latin America Initiative at the Brookings Institution.

At a summit Tuesday through Thursday in Brazil, the five countries will unveil a $100 billion fund to fight financial crises, their version of the IMF. They will also launch a World Bank alternative, a new bank that will make loans for infrastructure projects across the developing world.

The five countries will invest equally in the lender, tentatively called the New Development Bank. Other countries may join later.

The BRICS powers are still jousting over the location of the bank’s headquarters — Shanghai, Moscow, New Delhi or Johannesburg. The headquarters skirmish is part of a larger struggle to keep China, the world’s second-biggest economy, from dominating the new bank the way the United States has dominated the World Bank.


The Next Domino: Espirito Santo Holding Company Preparing To File Bankruptcy
Tyler Durden on 07/15/2014 10:49 -0400

While Banco Espirito Santo continues to exist on fumes and life support (that last ditch equity injection by Baupost a week ago may not have been Seth Klarman’s wisest investment), a key link in the Espirito Santo Holding Company structure is preparing to default. According to Reuters:


For those confused, "creditor protection" =  bankruptcy.

Which one is RioForte again? We showed this handy org chart a few days ago, here it is again.


The good news: as every single European bank "expert" predicted last week when scrambling to avoid a panic, there is no fear of contagion. Aside from this one of course. Remember: there is always only one cockroach.

The full report from Reuters:

Rioforte, a holding company of Portugal’s troubled Espirito Santo banking clan, is preparing to file for creditor protection, sources familiar with the matter said on Tuesday, hours before Rioforte was due to repay over $1 billion in debt to Portugal Telecom. The filing will be made with a court in Luxembourg, where Rioforte is registered, one source close to the process said, adding that the filing is aimed at preventing insolvency that would entail uncontrolled asset sales at any price.

Rioforte declined to comment. The sources would not comment

The timing of the filing depends on lawyers working on it in Luxembourg, the sources said.


Dear CIGAs,

Gold found a bottom a year ago at $1180 on June 30 at precisely 10:00 AM EST, the final London fix of the quarter. This price was tested again on the last day of 2013, clearly being driven by predatory speculators.

Since then, the gold market has changed markedly. During the two-and-a-half year decline, price tended to fall during Western hours, as speculators sold and shorted, and to rise in Eastern hours as Asia exploited soft prices to buy physical metal. That pattern has reversed, with gold tending to be strong in the West, as speculators re-enter the market, and soft in the East, as credit troubles in China and elsewhere slow purchases.

Bank analysts, such as at Societe Generale, have seized on weak physical markets – meaning the flow of gold to Asia has slowed marginally – to repeat bearish prognostications. But the story is once again Western speculators and the fact that the massive transfers of gold to the East over the past two years have left a lot less gold in the West to speculate on.

Western speculators have re-entered the market in part because, as argued in the attached report, there has been a shift in perception such that inflation has become the primary risk to the debt markets, not deflation.

Myrmikan’s investment thesis (Click here to view the report…) is based on the premise that interest rates have been artificially low, debt levels too high, and that gold is the antithesis of debt. Debt bubbles burst either through inflation or deflation, and either way benefits gold as against all other financial assets – investing in gold and unlevered gold mining stocks permits agnosticism as to the method of debt default.

Looking back some time hence, it may well be that the shift from a deflationary to inflationary mindset helped cause gold’s huge correction. But, whereas gold does well in real terms in a deflationary debt default, it really flies in nominal terms during inflationary defaults. This is the prospect before us.

Regarding yesterday’s $30 decline in gold prices, it is worthy of note that 10% of yesterday’s volume occurred in the span of just 11 trading minutes. As the chart below shows, it produced little damage to the chart of the gold miners.

CIGA Bill Holter



Santelli Goes Berserk, Slams Fed Which Was "Not Created To Be A Feel-Good Institution"
Submitted by Tyler Durden on 07/14/2014 21:04 -0400

It started as a discussion about the reality of inflation versus propagandized "noise" and devolved into what is possibly Rick Santelli’s most epic rant. First,Santelli says the Fed has done enough (and it hasn’t worked "but to get the market higher") to which Liesman’s "but higher interest rates won’t help" argument is backed up by more counterfactuals of "just think how bad it would have been" without the Fed. Santelli’s screamfest rightly attests that we do not know – we might have been well on our way to recovery by now… and adds that – despite Liesman’s imploring, "the Fed was not created to be a feel-good institution."


Finally, slamming the herd of zombified analysts and talking-heads that follow sheep-like the Fed’s every word off the inevitable cliff, Santelli blasts (unafraid to stand up for the jobless Americans not driving their new Rolls-Royce on the back of levered ‘wealth creation’ in stocks), "This is America! We don’t follow consensus, we set it!"

This is what Santelli is upset about… Who is the Fed working for? Main Street or Wall Street?


The "people" never caused the crisis that the Fed bailed the banks out of… Liesman cannot let "low rates" go and Santelli explains how capital will come out if it can get a decent return and the status quo thinkers have it backwards… "The Fed was not created to be a feel good instituion"



“Where should I go?" -Alice. "That depends on where you want to end up." – The Cheshire Cat.”
Lewis Carroll, Alice’s Adventures in Wonderland & Through the Looking-Glass

US Fed expects to retain ‘unusually accommodative’ monetary policies
July 14, 2014

The Federal Reserve will still need to deliver "unusually accommodative" monetary policy even once the U.S. economy returns to "where we want it to be," Fed Chair Janet Yellen was quoted as saying in a magazine article.


Jim Sinclair’s Commentary

This is the strangest global economic recovery in history.

Puerto Rico Utility May Default on January Interest Payment
By Michelle Kaske Jul 14, 2014 5:55 PM GMT-0300

The Puerto Rico Electric Power Authority may miss a January interest payment to investors, according to Municipal Market Advisors, potentially triggering the largest restructuring ever of state and local debt.

The agency, called Prepa, used $41.6 million of reserve funds to help make a $417.6 million payment to bondholders on July 1. With the reserve now depleted by about 10 percent, “we expect the bond trustee is unlikely to make any more distributions to bondholders, reserving cash for likely litigation expenses,” Matt Fabian, a managing director at Concord, Massachusetts-based MMA wrote today in a report.

The next payment is due Jan. 1, according to Fabian. Unless the utility replenishes the reserve, investors in uninsured Prepa bonds “have likely seen their last cash in awhile,” wrote Fabian, who’s been analyzing the municipal-debt market for 18 years.

While a new law aims to restructure some Puerto Rico public-corporation debt outside of a bankruptcy filing, Prepa’s $8.6 billion alone exceeds the $8 billion of general obligations and water-and-sewer debt in Detroit’s record bankruptcy and Jefferson County, Alabama’s $4.2 billion failure.


Portugal Contagion Spreads: Espirito Santo To Default On Portugal Telecom Loan, Business Lending Drops Most On Record
Tyler Durden on 07/15/2014 08:27 -0400

Despite reassurances from US asset-gatherers and TV ‘personalities’ that Portugal must be fixed (because US equities are up), it is anything but. Today’s triple whammy from the ‘recovered’ Portugal starts with Banco Espirito Santo bonds and stocks hitting new record lows (down over 10% more on the day). The contagion has rippled across to Rioforte, which controls Grupo Espirito Santo’s non-financial arm – and is likely to default on a EUR 847 million payment to Portugal Telecom. And just to add further salt to that wound, Portuguese business lending in May collapsed at a record pace (down 8.23%). But apart from that, yeash Portugal is all fixed and their sovereign bonds are worth every penny…

Step 1 – Banco Espirito Santo bonds and stocks continue to collapse…



Posted at 9:12 AM (CST) by & filed under Jim's Mailbox.


This is a game changer! It sounds like President Xi Jinping is feeling more powerful every day.

Putin is setting the stage perfectly for his new Chinese best friend


China pushes for developing world’s rights as BRICS summit opens
BEIJING Tue Jul 15, 2014 9:58am EDT

(Reuters) – China will dedicate itself to "perfecting" the role developing countries play in international affairs to give them better representation and a greater say, President Xi Jinping said ahead of a summit of BRICS nations in Brazil.




As the US chooses to isolate itself, Russia achieves its objective of putting a wedge between the US and EU. I can’t believe Exxon, Chevron, etc. are thrilled with these planned sanctions.

CIGA Craig

U.S. preparing unilateral sanctions on Russia

The United States is considering imposing unilateral sanctions on Russia over its threatening moves in Ukraine, a shift in strategy that reflects the Obama administration’s frustration with Europe’s reluctance to take tougher action against Moscow, according to U.S. and European officials.

Until now, the U.S. has insisted on hitting Russia with penalties in concert with Europe in order to maximize the impact and present a united Western front. The European Union has a far stronger economic relationship with Russia, making the 28-nation bloc’s participation key to ensuring sanctions packages have enough teeth to deter Russia.


Posted at 7:20 PM (CST) by & filed under General Editorial.

My Dear Extended Family,

Manipulation such as the sale of $1.3 billion dollars worth of paper gold at an illiquid time period today is not to protect the dollar or bull the general equity market. It is to make money for the manipulators that want here to cover their shorts and initiate to expand their long positions. That sale was a pure construct as there was no news to sustain the sell or to initiate it in the time span of its occurrence.

Long term cycles in gold are in the process of turning long term positive. That is fact. There is a strong possibility that this is the last take down before gold trades at a new highs. I feel this is the situation.

The economic dislocation internationally in banking exposure to its risk profile is at levels greater than 2007-2008, and is the subject basis of the letter attached here from the "Sovereign Man" as an example of what success can be expected from the certain program of Bail-In for the entire Western financial system.

Clearly we are witnessing the popular delusions and madness of the crowd in general markets and today in the reverse in the gold price. This will make new highs after the failure of this clearly false price construct of this morning’s illiquid time period.


Sovereign Man
July 14, 2014
Istanbul, Turkey

It’s been over a year since the banking system in Cyprus officially went bust.

On Friday, March 15, 2013, practically everyone in the country went to bed thinking that everything was just fine.

Many had probably gone to the bank that very day to do business, or logged on to an Internet banking platform.

Yet the very next morning, they woke to a completely new reality: the nation’s banks were broke, and the government was in no position to rescue them.

All the promises they had been told about government guarantees and having a ‘well-regulated’, sound banking system turned out to be lies.

The government proclaimed a bank holiday, and banks remained closed for the next several days. Accounts were frozen and ATM withdrawals were limited to only 100 euros a day.

Eventually the plan materialized: substantial portions of deposits over 100,000 euros would be confiscated in exchange for equity in the banks.

(Just imagine—Bank of America, RBC, or Lloyds takes your money and gives you stock certificates that subsequently plummet in value!)

And for everyone else, severe capital controls were instituted—some of the worst in decades.

After more than a year, some capital controls have been lifted. Though it’s still not possible to transfer money out of Cyprus without the central bank’s approval.

And what does the banking system have to show for sixteen months of capital controls, bailouts, and deposit confiscation?

It turns out that banks in Cyprus are still pitifully capitalized.

The country’s largest bank, the Bank of Cyprus, was at the epicenter of the calamity last year. And they still face a mountain of bad loans.

A staggering 55% of the bank’s loan portfolio is delinquent. And now they’re having to sell stock in order to raise an additional billion euros in capital.

Bear in mind, the shareholder equity for the bank right now is only 2.7 billion to begin with. So they’re having to increase that by a whopping 37%!

Needless to say, this is not something that a healthy bank in a healthy banking system has to do.

Wealth tax next?

There are two key lessons here:

1) Banks and governments will –never– tell you the truth about the system. They will lie all the way through to a full collapse.

2) A banking relationship cannot be taken for granted. It’s important to conduct due diligence, just as you would with any important financial decision.

We’re led to believe that banks are prudent and safe institutions. That they’re insured by the government. That they’re “risk-free”.

Subsequently, most people expend more energy in choosing a brand of toothpaste than in selecting the financial steward who controls their life’s savings.

Remember: this decision doesn’t have to be limited by national borders.

Just as you might move somewhere for more lucrative job opportunities and better schools for your kids, you can also move savings to a place with better financial opportunities and stronger banks.

It’s hard to imagine you’ll be worse off holding some funds at a foreign bank that’s 20 times more liquid and 4 times more solvent than where you bank now.

But if the worst happens and you get Cyprus’d tomorrow morning, it could turn out to be one of the smartest financial decisions you could make.

And unless the past several years have given you 100% confidence in your government and banking institutions, this is an important step I recommend you consider.

Until tomorrow,
Simon Black

Posted at 12:02 PM (CST) by & filed under In The News.

Russia Considering ‘Surgical Strike’ on Ukraine – Report

MOSCOW, July 14 (RIA Novosti) – Moscow is considering “surgical retaliatory strikes” on the Ukrainian territory after the standoff has led to first civilian victims among Russians on Russia’s territory, a Kremlin source told Kommersant Monday.

“Our patience is not boundless,” the source told the newspaper, stressing that “this means not a massive action but exclusively targeted single strikes on positions from which the Russian territory is fired at.”

The Russian side “knows for sure the site where the fire comes from,” the source said.

The proposed plan echoes a statement by a deputy speaker of Russia’s upper house, Yevgeniy Bushmin, who told RIA Novosti Sunday that using precision weapons in response to Ukraine’s shelling would prevent further Kiev’s attacks of Russia’s territory.

«There is a feeling that if before firing was not aimed against Russian border guards, now provocations have been on the rise as there is no other means of forcing us to join in the standoff with Ukraine’s security troops," said Bushmin who represents Rostov Region in the Federation Council.



Banco Espirito Santo Bonds Sink to Record After Stake Sold
By John Glover Jul 14, 2014 1:09 AM MT

Banco Espirito Santo SA’s subordinated bonds fell to a record after a parent company said it had to sell 4.99 percent of the lender to meet debt commitments.

Espirito Santo Financial Group said it reduced its stake in the Lisbon-based bank to 20.1 percent to meet a margin call on a loan taken out during the bank’s 1.04 billion-euro ($1.42 billion) rights offering in June. Banco Espirito Santo’s 7.125 percent notes due November 2023 fell 2.9 cents to 84 cents on the euro to yield 9.58 percent, according to data compiled by Bloomberg.

The sale comes as Chief Executive Officer Ricardo Salgado, the 70-year-old great-grandson of the bank’s founder was replaced by Vitor Bento after the Bank of Portugal urged the country’s second-biggest lender by market value to make changes to its executive management. Markets were roiled last week after a company within the Espirito Santo group missed payments on short-term debt, prompting Standard & Poor’s to downgrade the bank.

“A weak financial position of several group entities is compounding challenges to the bank’s franchise and poses increased risks to BES’s financial position,” S&P said in a July 11 report. “We cannot, at this point, fully capture this in our forecast of the bank’s solvency, and therefore believe that it constrains our assessment of BES’ risk position.”


The Head Of ‘The Central Bank Of The World’ Warns That Another Great Financial Crisis May Be Coming
July 13th, 2014

Most people have never heard of Jaime Caruana even though he is the head of an immensely powerful organization.  He has been serving as the General Manager of the Bank for International Settlements since 2009, and he will continue in that role until 2017.  The Bank for International Settlements is a rather boring name, and very few people realize that it is at the very core of our centrally-planned global financial system.  So when Jaime Caruana speaks, people should listen.  And the fact that he recently warned that the global financial system is currently “more fragile” in many ways than it was just prior to the collapse of Lehman Brothers should set off all sorts of alarm bells.  Speaking of the financial markets, Caruana ominously declared that ”it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally” and he noted that “markets can stay irrational longer than you can stay solvent”.  In other words, he is saying what I have been saying for so long.  The behavior of the financial markets has become completely divorced from economic reality, and at some point there is going to be a massive correction.

So why would the head of ‘the central bank of the world’ choose this moment to issue such a chilling warning?

Does he know something that the rest of us do not?


China-Singapore RMB cash transfer begins
Updated: 2014-07-10 13:34

GUANGZHOU – Cross-border cash transfer of the yuan between China and Singapore began on Wednesday in Guangzhou.

The transfer by the Guangdong provincial office of the Industrial and Commercial Bank of China (ICBC) will reduce exchange costs and risk for banks in Singapore and Southeast Asia, said Niu Gang, general manager of ICBC operations. .

Singapore was the first country to sign a yuan clearance agreement with China and has massive volume of cross-border yuan businesses, said Wang Jingwu, head of the Guangzhou branch of the People’s Bank of China (PBOC).

In the first five months this year, yuan settlement between China and Singapore reached 421 billion yuan ($68.4 billion ), of which 17 percent was traded between Guangdong and Singapore, said Wang.

The PBOC, China’s central bank, will actively support yuan cross-border transfer on a regular basis and maintain an orderly flow of currency between China and Singapore, said Li Huifeng, deputy head of the PBOC currency, gold and silver bureau.

ICBC, the world’s biggest bank in terms of assets, had yuan clearance business worth more than two trillion yuan in Singapore last year.


Jim Sinclair’s Commentary

Doubled year over year.

China-Europe yuan settlement grows fast in May

BEIJING, July 12 (Xinhua) — The China-Europe settlement of Chinese currency renminbi, or the yuan, saw fast growth in May, according to a report unveiled Saturday by the Bank of China.

The yuan settlement amount between China’s mainland and four European countries — Germany, Britain, Luxembourg and France — doubled from a year earlier, with their total taking up a share of 8 percent in China’s overall cross-border yuan settlement, the report showed.

In spite of the strong growth in Europe, Asia continued to take the lion’s share. Hong Kong, Macao, Taiwan, Singapore, Japan, the Republic of Korea and Vietnam jointly took up 77.5 percent of the total, the report showed.

In May, total cross-border yuan settlement amounted to 594.2 billion yuan (96.67 billion U.S. dollars), surging 52.6 percent year on year.

"The yuan has been used abroad more extensively, with more reasonable regional distribution," the report said.

Last month, China’s central bank appointed clearing banks for yuan businesses in London and Frankfurt, and signed two memorandums of understanding on renminbi clearing with the central banks of Luxembourg and France.


BIS chief fears fresh Lehman from worldwide debt surge
Jaime Caruana says investors are ignoring prospect of higher interest rates in the hunt for returns
By Ambrose Evans-Pritchard
8:10PM BST 13 Jul 2014

The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned.

Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield.

“Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” he told The Telegraph.

Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20 percentage points to 275pc of GDP since then.

Credit spreads have fallen to to wafer-thin levels. Companies are borrowing heavily to buy back their own shares. The BIS said 40pc of syndicated loans are to sub-investment grade borrowers, a higher ratio than in 2007, with ever fewer protection covenants for creditors.


Posted at 11:59 AM (CST) by & filed under

By Greg Hunter’s

Dear CIGAs,

Economist John Williams says to forget about the so-called recovery.  What’s coming next is recession or worse.  Williams contends, “The fact that we saw a -2.9% contraction in the first quarter, in official reporting . . . you know the economy is in real bad shape.  It’s continued to the second quarter, and that will gain recognition as all the data gets published.”  Back in 2013, Williams predicted that it would be “game over” in 2014.  What are the statistics showing him now?  Williams says, “They are showing the economy continues to weaken, and it never recovered.  A second quarter contraction here would most assuredly be recognized as a new recession, and I contend we never got out of the old recession.  We had plunge, stagnation and, now, we are turning down anew.”

On recent news, the Federal Reserve ending the bond buying program in October. Williams says, “I expect the Fed will always be there to buy it.   I looked at their announcement, and the October end is preconditioned on the economy continuing to show positive economic results as the Fed expects.  That’s not going to happen.  The easings (money printing) that we’ve seen by the Fed have been aimed at propping up the banks by providing liquidity for the banking system.  It’s not stimulating the economy.  Former Fed Chairman Bernanke admitted the Fed was at a point where there was very little they could do to stimulate the economy.  The problem is keeping the banking system afloat.  A weaker than expected economy, and we are looking at something that is much weaker than expected, means the banking system is going to be under further stress.  It hasn’t recovered since the crisis of the panic of 2008.  So, the Fed will want to continue to provide liquidity.  The problem is that is not politically popular.  So, they have been using the bad economy to bail out the banking system, and that is going to continue.  I’ll be surprised if the ‘tapering’ actually comes to an end in October.”

So what happens when the second quarter economy comes in weaker than we are all being told?  Williams paints a grim picture and says, “A weaker than expected economy means the budget deficit is going to be worse than expected.  A weaker than expected economy will also tend to trigger selling pressure against the dollar.  I am still looking for a massive decline in the U.S. dollar.  A massive decline and a renewed recession can certainly be a trigger for that.”


Posted at 10:00 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

As confidence becomes fragile, even a small thing like this can have far reaching implications.

Bulgaria to allow its fourth-biggest bank to collapse
July 11, 2014 3:04 PM
By Tsvetelia Tsolova

SOFIA, July 11 (Reuters) – Bulgaria is to allow its fourth-biggest lender to collapse but could spend up to 2 billion levs ($1.39 billion) making sure customers do not lose out, as the Balkan country battles to clean up its worst financial scandal since the 1990s.

The central bank said it was removing Corporate Commercial Bank’s (Corpbank) banking licence and would hive off its healthy activities into a separate bank, marking the first banking collapse since a 1996-1997 domestic financial crisis.

The Bulgarian National Bank (BNB) is also alerting prosecutors to the possibility that Corpbank’s main shareholder stole almost 206 million levs just before the central bank took over its operations on June 20 after depositors withdrew about 1 billion levs.

The bank run was prompted by media reports accusing top shareholder Tsvetan Vassilev of shady business deals. It spread quickly to another lender, forcing Sofia to set up a protective $2.3 billion credit line for its banks – a reminder that parts of Europe’s financial system are still far from secure despite progress from the worst days of the global financial crisis.

Vassilev has denied the allegations against him.

"For several months now a massive, targeted and extremely manipulative campaign has started against me, which spilled over on everything associated with my name," he told Bulgarian news agency BGNES, echoing comments he made previously to Reuters.

But the results of an audit into Corpbank showed "actions incompatible with the law and good banking practices", BNB said. Auditors were unable to value about 65 percent of Corpbank’s 5.4-billion-lev loan portfolio because crucial documentation was missing – "most likely destroyed in the days before the central bank sent administrators there," the BNB added.



Jim Sinclair’s Commentary

This is the most logical result of recent international US dollar fines.

Gold Market Strengths

Christian Noyer, head of the French central bank and ECB governing board member, believes the global expansion of U.S. regulations will encourage diversification away from the U.S. dollar, threatening its reserve currency status. Noyer’s comments come as a result of the hefty fines the U.S. government is levying on French bank BNP Paribas after it was accused of dealings with Iran. Mr. Noyer added that trade between Europe and China does not need to use the U.S. dollar, especially now that China has agreed to the creation of an offshore renminbi clearing in Paris. Mr. Noyer concluded by stating the French central bank will now actively avoid U.S. dollar transactions in order to escape the application of U.S. regulations to its dealings.


Jim Sinclair’s Commentary

This also applies to the banking system in the USA in the degree of their leverage to uber risky OTC derivatives.

Portuguese bank crisis is the tip of the iceberg
July 11, 2014, 9:14 a.m. EDT
By Diana Furchtgott-Roth, MarketWatch

The Portuguese crisis over Banco Espirito Santo should be a reality check for European markets. Espirito Santo is just the excuse — real problems lie far deeper.

The European Central Bank has been playing with fire, with junk bonds ultimately funded by German taxpayers. Investors are waking up and smelling smoke, and at some point they will get singed.

Three companies are involved in the Espirito Santo mess. Banco Espirito Santo is the largest publicly traded commercial bank in Portugal. Its controlling shareholder, Espirito Santo Financial Group, owns 25% of its shares. The privately held parent company, Espirito Santo International, owns 49% of Espirito Santo Financial Group (and therefore part of Banco Espirito Santo). It is this parent company that is likely to default on its payments. Even if Espirito Santo International defaulted, Banco Espirito Santo does not necessarily have to go under, but it might.

The problem is that Banco Espirito Santo is a weak institution irrespective of its parent holding companies, dabbling in risky assets in emerging markets that saner banks would not touch. Its risk management department needs a major shakeup.

For instance, the bank has invested in Angola, setting up a subsidiary known as Banco Espirito Santo Angola (BESA). BESA has relied on Banco Espirito Santo for its funding, with loans in Angola amounting to 220% of deposits. Bad loans have exploded in Angola in recent years, rising by 84% from 2010 to 2013. BESA’s assets include 6 billion euros’ worth of loans payable, and Banco Espirito Santo has a 55% stake in the bank.


Posted at 8:04 PM (CST) by & filed under Jim's Mailbox.


Today’s security markets were about the most subdued I ever have seen.

Things were so quiet that for several hours half of the floor traders crowded into a small bathroom at the New York Stock Exchange to watch a new coat of paint dry. There were active discussions over whether the color was grayish green or greenish gray, but no consensus was reached. All personnel involved said that this aesthetic experience was far more exciting than floor action. The volume of shares traded was the lowest since just before the Gadsden Purchase in 1853, which immediately preceded the incorporation of Chipotle’s Mexican Grill.

I could be wrong, but this period feels rather like the far recession of water from beaches just before a Tsunami wave comes in. I have a gut hunch that we are seeing the contemplative period following yesterday’s default on a bond interest payment by Banco Espirito Santo in Portugal. I don’t know what the effect of this will be on the derivates house of cards around the world. At the very least it puts the lie to all of the European Bank stress tests, the results of which were – and I apologize here for the technical financial jargon – "Just move along. Nothing to see here."

Strangely counter-intuitive price rises in TLT over the past while suggest that there is a non-zero possibility that the Fed may not be opposed to a sharp stock market drop that could drive a lot more people into bonds, which in turn could help keep interest rates down, a useful outcome for a country that is so deeply in debt that we are borrowing money from the inhabitants of Pluto even though they no longer inhabit a planet.

Gold and mining stocks look more interesting than ever. There’s a lot to read and understand. Here’s a start:

CIGA Robert.

Massive PM-Futures Buying
Adam Hamilton
Jul 11, 2014

Both gold and silver have enjoyed massive buying by American futures speculators in recent weeks. It all started with Fed chair Janet Yellen’s cavalier dismissal of inflation, but the buying momentum persisted well after that. Happening in the midst of the summer doldrums when global precious-metals investment demand is weak, this is an exceptionally-bullish portent. It is setting up the PMs for a major autumn upleg.

A little over a month ago, I wrote an essay on the record shorting of gold and silver futures by American speculators. This one group of traders utterly dominates gold and silver price action, and therefore the fortunes of stock traders’ flagship GLD gold ETF and SLV silver ETF. Gold futures had just seen their biggest jump in spec shorts, and silver futures their highest levels of spec shorts, in at least 15.4 years!

As I said then with gold and silver loathed and languishing near ugly multi-month lows, extreme shorting is very bullish. Futures shorts contractually have to be covered before expiration, and this is done by buying offsetting longs. The higher speculators’ futures shorts get, the more near-future buying they guarantee. And since futures are so hyper-leveraged, this buying to cover often happens quite rapidly.

In early June near the gold and silver lows, speculators merely needed to keep $6000 in their account to control a single 100-ounce gold contract, and $8250 for a single 5000-ounce silver contract. But these contracts were worth a whopping $125,000 and $95,000 respectively at $1250 gold and $19 silver. So that represented maximum leverage of an insane 20.8x in gold futures and 11.5x in silver futures!




The government of the Ukraine is playing very aggressively and should beware of stomping on the bears toes.

CIGA Larry

Russia Vows to Respond After Shelling From Ukraine
By Daryna Krasnolutska and Olga Tanas Jul 13, 2014 3:00 PM MT

Russia and Germany called for a resumption of Ukraine crisis talks as President Vladimir Putin’s government condemned the shelling of its territory that left one person dead.

Putin and German Chancellor Angela Merkel agreed during a meeting in Rio de Janeiro yesterday that international representatives should meet as soon as possible, probably via video link, said Dmitry Peskov, the Russian president’s spokesman. The so-called contact group on Ukraine should work to secure a cease-fire and a resumption of monitoring, he said.

Clashes between Ukraine’s government forces and pro-Russia rebels in the east of the country have intensified since President Petro Poroshenko called off a cease-fire July 1. Putin and Merkel met as Russia warned of “irreversible consequences” after the Foreign Ministry said a Ukrainian army shell killed one person in the southern region of Rostov. Ukraine said its military didn’t fire on Russian territory and is ready to help investigate the incident.