Jim Sinclair’s Commentary
The latest from John Williams’ www.ShadowStats.com.
- Retail Sales Collapse Continued, Both Monthly and Quarterly, Before and After Inflation
- Unusual Monthly Shifts in Seasonal Adjustments Have Masked Headline Monthly Sales Contractions Exceeding 1% (-1%)
- Underlying Economic Data Closing in on Setting a First-Quarter 2015 GDP Contraction
- U.S. Economy Cannot Support Current Dollar and Stock-Market Strength; Political and Market Positioning of Fed Policy Increasingly Is Untenable
"No. 703: February Nominal Retail Sales and U.S. Dollar, Fed and Markets "
China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" As Soon As September
Submitted by Tyler Durden on 03/09/2015 23:16 -0400
One of the recurring threats used by the western nations in their cold (and increasingly more hot) war with Russia, is that Putin’s regime may be locked out of all international monetary transactions when Moscow is disconnected from the EU-based global currency messaging and interchange service known as SWIFT (a move, incidentally, which SWIFT lamented as was revealed in October when we reported that it announces it "regrets the pressure" to disconnect Russia).
Of course, in the aftermath of revelations that back in 2013, none other than the NSA was exposed for secretly ‘monitoring’ the SWIFT payments flows, one could wonder if being kicked out of SWIFT is a curse or a blessing, however Russia did not need any further warnings and as we reported less than a month ago, Russia launched its own ‘SWIFT’-alternative, linking 91 credit institutions initially. This in turn suggested that de-dollarization is considerably further along than many had expected, which coupled with Russia’s record dumping of TSYs, demonstrated just how seriously Putin is taking the threat to be isolated from the western payment system. It was only logical that he would come up with his own.
There were two clear implications from this use of money as a means of waging covert war: i) unless someone else followed Russia out of SWIFT, its action, while notable and valiant, would be pointless – after all, if everyone else is still using SWIFT by default, then anything Russia implements for processing foreign payments is irrelevant and ii) if indeed the Russian example of exiting a western-mediated payment system was successful and copied, it would accelerate the demise of the Dollar’s status as reserve currency, which is thus by default since there are no alternatives. Provide alternatives, and the entire reserve system begins to crack.
Today, we got proof that it is the second outcome that is about to prevail following a Reuters report that China’s international payment system, known simply enough as China International Payment System (CIPS), which serves to process cross-border yuan transactions is ready, and may be launched as early as September or October.
According to Reuters, the launch of the will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.
Jim Sinclair’s Commentary
Now the algos are going nuts in the currency market.
FX Volatility Spikes As More Countries Enter Currency Wars; Euro Surges On Furious Squeeze After Touching 1.04
Tyler Durden on 03/12/2015 06:57 -0400
The global currency wars are getting ever more violent, following yesterday’s unexpected entry of Thailand and South Korea, whose central banks were #23 and #24 to ease monetary conditions in 2015, confirming the threat of a global USD margin call is clear and present (see "The Global Dollar Funding Shortage Is Back With A Vengeance And "This Time It’s Different"). But the one currency everyone continues to watch is the Euro, which the closer it gets to parity with the USD, the more volatile it becomes, and moments after touching a 1.04-handle coupled with the DXY rising above 100 for the first time in 12 years, the EURUSD saw a huge short squeeze which sent it nearly 150 pips higher to 1.0643, before the selling resumed.
Indeed, FX markets have been the main source of focus so far with once again the USD-index being the main source of price action. Overnight, the USD posted a fresh 12yr high after briefly breaking above the key 100.00 level, sending EUR/USD below 1.0500 for the first time since Jan’03. However, heading into the European open and a failed sustained break of 100.00 for the USD-index, the USD saw a bout of weakness which subsequently provided a lift to its major counterparts with EUR/USD and GBP/USD temporarily breaking back above 1.0600 and 1.5000 respectively, with RANsquawk sources noting Asian buyers in EUR/USD. One wonders if the BOJ is now also intervening on behalf of the ECB when things gets serious. However, this momentum for EUR/USD failed to sustain at the USD-index pared some of its initial losses, while GBP remained at its highs after the latest UK trade balance report showed a narrower deficit than expected. Elsewhere, NZD has held onto its gains after the RBNZ struck a less-dovish than expected tone, after leaving rates unchanged at 3.5%, as expected.
And since the ECB is all anyone can talk about these days, it is worth noting that the central bank bought €9.8 billion in eurozone bonds in the first according to Benoit Coeure. "We have already bought 9.8 billion euros in bonds in three days” Coeure said at a symposium in Paris. He said the ECB was on “precisely the right path” to attain its objective of buying 60 billion euros of eurozone government and corporate bonds a month. Coeure said the average maturity of the debt was close to nine years, which he called “very long” and which he said should “reinforce the economic effect of the intervention” by the central bank as the ECB’s injection of funds into the eurozone economy would last longer.
So if under €9 billion in ECB purchases brought the 10Y Bund to a record low 0.20%, one wonders where another €993 or so billion will take it?
Jim Sinclair’s Commentary
To our Canadian friends, welcome to the new normal.
Canadian Man Arrested For Refusing to Unlock His Smart Phone During Airport Check
A few days ago, a 38-year old Canadian man was topped while passing through routine security at Halifax Airport, Nova Scotia.
During the check, the guard demanded to know the “passcode” for his Blackberry smart phone.
The man refused, insisting that the contents of his phone was “personal”.
Thus began a very “bad day at the office” for him.
Let’s just say that he will have had better days.
It turns out, that Alain Philippon from Ste-Anne-des-Plaines, Quebec, in refusing to unlock his smart phone for officers of the Canada Border Services Agency (CBSA), when they insisted on carrying out an “in-depth security screening”, was committing a crime, under Canada’s new, draconian “Custom Act”.
Philippon was apparently “obstructing officers in the course of their duties”.
He was formally charged, had his smart phone confiscated, and was summonsed to appear in court in May.
A spokesperson for the CBSA later told Associated Free Press, that :
“Philippon refused to divulge the passcode for his cell phone, preventing border services officers from performing their duties”
Also adding, that under Section 153.1 (b) of the Customs Act, officials were authorized to search …
“all goods and conveyances, including electronic devices such as cell phones and laptops.”
In a subsequent written statement, which the CBSA emailed to CBC television.
In part it read as follows:
“Officers are trained in examination, investigative and questioning techniques … To divulge our approach, may render our techniques ineffective. Officers are trained to look for indicators of deception, and use a risk management approach in determining which goods may warrant a closer look.”
So it would appear, that in the wake of the Custom Act, the mere “suspicion” on the part of any officer, is now deemed as sufficient grounds to warrant such invasion of privacy.
The term “on what grounds”, now no longer carries any weight it would seem. There need be no “grounds” at all.
Jim Sinclair’s Commentary
This might serve as a warning to the hoard of Terrorist Internet Trolls who populate the chat site and bulletin boards of our new computer age for the singular purpose of stock manipulation.
Bill Ackman Faces FBI Probe Over Possible Herbalife Stock Manipulation
Submitted by Tyler Durden on 03/12/2015 18:05 -0400
Herbalife stock is up over 5% after hours after WSJ reports Bill Ackman (among others) made false statement about Herbalife’s business models to regulators – in order to spur investigations into the company and lower its stock price. This comes just months after Ackman kinda-sorta-didn’t-really insider-trade in the Allergan ‘scam’ that we detailed here. We suspect Whitney Tilson (and his Lumber Liquidators positions) is getting a little nervous now.
As The Wall Street Journal reports,
Federal prosecutors and the Federal Bureau of Investigation are probing potential manipulation of Herbalife Ltd. stock and have interviewed people hired by hedge-fund billionaire William Ackman, who has led a long-running campaign against the nutritional-products company, people familiar with the matter said.
Prosecutors in the Manhattan U.S. attorney’s office and New York field office of the FBI have conducted interviews and sent document requests in recent months in connection with the investigation, which is looking into whether people, including some hired by Mr. Ackman, made false statements about Herbalife’s business model to regulators and others in order to spur investigations into the company and lower its stock price, the people said. Mr. Ackman’s firm, Pershing Square Capital Management LP, has made a huge bet on Herbalife shares declining.
One of the people familiar with the matter said investigators are scrutinizing public statements and allegations relayed to regulators by the array of consultants and activists who have lobbied against Herbalife as well as any connections or potential collaboration between those people and Pershing Square.
Why The Dollar Is Rising As The Global Monetary Bubble Craters
by David Stockman • March 12, 2015
Contra Corner is not about investment advice, but its unstinting critique of the current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!
Yet I am constantly braced with questions about the US dollar and its impending demise. The reasoning seems to be that if America is a debt addicted dystopia—-and it surely is—- won’t the US dollar sooner or later go down in flames as the day of reckoning materializes? Won’t you make money shorting the doomed dollar?
Heavens no! At least not any time soon. The reason is simply that the other three big economies of the world—Japan, China and Europe—are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic—–meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead.
Indeed, Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober. So as trite as it sounds, the US dollar is the cleanest dirty shirt in the laundry. And on a relative basis, its is going to look even cleaner as two decades of monetary madness around the world finally hit the shoals.
You have to start with a stark assessment of the other three major economies.To hear the Wall Street analysts and economists tell it, Japan, China and Europe are just variants of the US economy with different mixes of pluses and minuses, experiencing somewhat different stages of the economic cycle and obviously shaped by their own diverse brands of domestic politics and economic governance. Yet despite these surface difference, the non-US big three economies are held to be just part of a global economic convoy heading for continued economic growth, rising living standards and higher stock market prices.
Jim Sinclair’s Commentary
Greece Passes Law To Plunder Pension Funds
Submitted by Tyler Durden on 03/12/2015 13:47 -0400
Having previously hinted that they might ‘dip’ into public pensions funds for some short-term cash to payback The IMF, and then confirming that the plan is to repo that cash from pension cash reserves (raising concerns about how they will unwind the repo – i.e. pay it back); the Greek government finally signed the bill today that enables them to plunder the Greek people’s pension funds (for their own good).The massive irony of this bill is the bill enables greek deposits to be fully invested in Greek sovereign bonds… which Tsipras and Varoufakis both admitted today is "unsustainable" and "will never be repaid."
*GREEK GOVT SUBMITS BILL, ALLOWING USE OF PENSION FUND RESERVES
As Bloomberg reports,
Cash reserves of pension funds and other public entities kept in Bank of Greece deposit accounts can be fully invested in Greek sovereign notes, according to amendment to be submitted in parliament, country’s finance ministry says in e-mailed statement.
Cash reserves can be used for repos, reverse repos, buy and sell-back, sell and buy-back transactions
Pension funds, public entities will be able to claim damages from Greek state in case of overdue repayment, partial repayment
Pension funds are not obliged to transfer their reserves to the Bank of Greece, according to finance ministry statement
Jim Sinclair’s Commentary
Darn that weather again.
Sales Fall as Record Cold in Parts of U.S. Hurts Retailers
March 12, 2015
(Bloomberg) — Record cold in parts of the U.S. chilled retail sales in February as the world’s largest economy began the year on weak footing.
Purchases unexpectedly dropped 0.6 percent, a third consecutive decline, Commerce Department figures showed Thursday in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 0.3 percent gain. The decrease was broad-based, with 9 of 13 major categories retreating.
Frigid temperatures and snow probably contributed to slumping demand at auto dealers, building-material merchants and department stores, opening the possibility for a rebound this month. Still, sluggish wage increases may also be playing a role by prompting Americans to use the windfall from cheaper gasoline to build up savings or pay down debt.
“It looks like a big weather effect here,” said Carl Riccadonna, Bloomberg Intelligence chief U.S. economist, noting the declines in weather-sensitive categories including apparel, restaurants, building materials and vehicles. “A lot of February data is going to look muddy. This is just a blip. The consumer is just fine.”
Other reports Thursday showed fewer Americans than forecast filed claims for jobless benefits last week, and the cost of imported goods rose in February as fuel prices rebounded.
Stock-index futures climbed, after equities had their biggest two-day selloff in six weeks, as financial companies rose and investors weighed the retail sales data. The contract on the Standard & Poor’s 500 Index maturing this month increased 0.5 percent to 2,050.4 at 9:09 a.m. in New York.
Jim Sinclair’s Commentary
You think the EU is waking up to being had? They certainly benefitted the US Dollar by crushing the Euro.
Spain: Russia sanctions ‘beneficial for no one’
By ANDREW RETTMAN
BRUSSELS, 10. MAR, 14:59
Spain on Tuesday (10 March) joined a list of EU countries which are publicly critical of Russia sanctions and keen to mend ties.
The Spanish foreign minister, Jose Manuel Garcia-Margallo, told press in Moscow after meeting his Russian counterpart, Sergei Lavrov, that “keeping or lifting sanctions depends on whether the agreements on Ukraine are being implemented or not. They [sanctions] are beneficial for no one”.
Referring to the recent “Minsk” ceasefire accord, he added: "The Minsk agreements are [being] observed, there’s good news, [heavy] weaponry is being withdrawn … so, I don’t see [any reason for] expanding sanctions”.
He also noted that Russia’s counter-ban on EU food imports is hurting the Spanish economy and said the EU must take Russia’s interests into account in its relations with Ukraine.
“Sanctions are inflicting great damage to the Spanish economy … We have big losses, especially in the agriculture sector”, he said.
“I think that we need to somehow include Russia’s interests in the association agreement between Ukraine and the European Union – this agreement needs to be complemented by co-operation with Russia.”
For his part, Lavrov told media: “We did not discuss sanctions, they were not our choice. We are not going to persuade or ask our European friends about anything. Life will arrange everything back to order.”
He added, however: “I would appreciate and prefer a situation where each EU member country would be guided by its national interests.”
Jim Sinclair’s Commentary
Yes, but are you sure they want it?
Could Europe lose Greece to Russia?
By Giorgos Christides
Deepening ties between Greece’s new government and Russia have set off alarm bells across Europe, as the leaders in Athens wrangle with international creditors over reforms needed to avoid bankruptcy.
While Greece may be eyeing Moscow as a bargaining chip, some fear it is inexorably moving away from the West, towards a more benevolent ally, a potential investor and a creditor.
Europe is not pleased. Should it also be worried?
Worst kept secret
A drove of Greek cabinet members will be heading to Moscow.
Prime Minister Alexis Tsipras will be hosted by Russian President Vladimir Putin in May, accompanied by coalition partner Panos Kammenos, defence minister and leader of the populist right-wing Independent Greeks party.
The timing has not escaped analysts.
Greece’s bailout extension expires at the end of June and the worst kept secret in Brussels is that Athens will need new loans to stay afloat.
TOO MANY DOLLARS AND YET NOT ENOUGH…AT THE SAME TIME?
Author : Bill Holter
Published: March 12th, 2015
We have watched, even marveled at how the U.S. dollar has strengthened since last September. All sorts of theories have been put forth as to "why". Some have proffered the dollar is the cleanest dirty shirt of the bunch. Others believe the interest rate differential is kicking in where dollars at least have a positive interest rate versus negative rates elsewhere. Another theory and one which I have written about in the past and believe to be the main reason for dollar strength is the "margin call" aspect. In other words, the "carry trade" which was used to leverage all sorts of trades is unwinding and dollars are needed to pay back the loans. A synthetic dollar short being covered in other words.
Looking back to my writing yesterday regarding the impossibility in my mind of the Fed actually raising rates, the strong dollar also supports this argument. If the Fed were to raise rates, wouldn’t this exacerbate an already immense currency cross problem with (for) the rest of the world? Wouldn’t higher U.S. rates explode the dollar higher (short term) versus foreign currencies? The answer of course is yes, but with a stronger dollar comes other obvious problems.
The two biggest problems are A. we still have a trade deficit of close to $500 billion per year, a stronger dollar will only exacerbate this AND destroy what little manufacturing we have left. And B. the very problems we just saw with a soaring Swiss franc will be seen in many multiples throughout the dollar lending market. I might add, as the dollar moves higher and foreign currencies drop, more and much stronger inflation gets exported to foreign soil. High and rising inflation and its effects on living standards and the human psyche will create massive unrest across Europe and elsewhere.
This last point is an important one, foreigners who have borrowed in dollars have already seen their "loan balance" expand because the dollars cost more to pay back. Higher U.S. interest rates will only make matters worse. The strong dollar has had the effect of slowing the global economy as companies (and individuals) are cutting back (employment and consumption) to make ends meet.
The above is only half of the equation, the other half is described by Alan Greenspan himself. I personally watched Mr. Greenspan speak in New Orleans last October. He used the word "tinder" http://www.zerohedge.com/news/2015-03-09/alan-greenspan-warns-explosive-inflation-tinderbox-looking-spark for a coming inflation several times and spoke of the money supply and reserves of dollars that have been created and parked away on bank balance sheets. I could only think back to the Texas wildfire as he spoke of "tinder". The amount of dollars created is like some nutcase piling dry leaves, branches and dead trees in a huge pile, then pouring gasoline on it …and thinking to himself, "this will keep me warm in winter". In other words, the "fuel" is there and has already been created for a bonfire of inflation and the financial system blowing up on itself. But don’t worry, it will never catch fire?