Posted at 2:59 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

In the last article "An indication of PPT failure", many readers wrote in and either asked what the various acronyms were or admonished me for using so many without explaining them.  I will try in the future to assume the reader does not know what we’re talking about and at least spell out any acronym used.  As for the last article;  "PPT" = plunge protection team,  "ROW" = rest of world

Today, let’s look at China and their recent efforts at preventing their equity markets from collapsing.  First, it should be understood they are "too late".  I can say this because their PE (price to earnings) ratio even after the collapse of

25%-40% (with some stocks not even trading Friday), the Shanghai Exchange still trades at over 60 times earnings.  In other words, at today’s rate of earnings it will take 60 years worth of earnings to equal what investors are willing to pay now.  They have allowed and even fostered a bubble of epic proportions to form, no amount of effort can stop this bubble from collapsing.

This past week, China took the crazy steps of making it "illegal" for institutional accounts to sell …for the next six months!  How will pension plans make promised payments?  Will they send out IOU’s until it’s "legal" to sell again?  There were also reports of brokers refusing to accept sell orders at all.  Let’s say this, the harder China works at closing the exit doors and not allow sales will only work to put more pressure on the world’s other equity markets.   This was one of the points I was trying to make when I wrote about the crisis "crossing borders" last week.

Think of it this way, what would you personally do if you were locked into the market here in the U.S.?  What if our markets were closed, yet the Canadian or other European bourses were open?  Would you consider selling something short elsewhere as a hedge because you are trapped long in the U.S.?  Even if it is not the same company exactly, would you sell let’s say Fiat or Mercedes short as a hedge against being long shares of Ford Motor?  Or forget even being industry specific, would you at least try to sell another bourse short and do it in dollars?

Do you see my point?  China closing her markets will put pressure on other markets because being trapped can make for some "desperate people" …and you know what they say desperate people do!  

Another reason the Chinese market will not recover is that speculation has run rampant and a cleansing is coming.  Forget about opening four million retail accounts per day or hairdressers quitting their jobs to "day trade", the amount of margin built up and being used is staggering.    

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If you look at the margin debt on the Shanghai Exchange, you will see it was a very similar percentage to that of the U.S. and double that of Japan just three years ago.  Since then, margin debt rose NINEFOLD to 18%!  Just in the last month during their crash, this number has dropped nearly 4 percentage points but is still as unsustainable as is a PE ratio of 60 times earnings.  The huge margin debt suggests that selling will "FORCE" more selling because of margin calls.  China’s equity market is a wildfire already burning!

Skipping backwards as mentioned above, selling pressure from China is going to bleed over and into foreign markets.  This is how the advent of plunge protection teams will fail as "borders" will be crossed.  Today’s world is one where everything financial is truly global.  We see this and know this simply by looking at balance sheets and counterparties.  We will see this and also feel it shortly as sovereign PPTs become pressured from outside bourses.  This is no different than in trade where one nation devalues its currency to steal market share in a "beggar thy neighbor" fashion.  By the way, our "glitch" of last week in my opinion was the first surge of selling across borders, with MUCH MORE to come.

A recent article was penned comparing China to a "Field of Dreams" where

ghost cities were built in a huge miscalculation.  It was said they built these cities with the expectation of rural farmers moving in and buying up all of the overcapacity.  I highly disagree with this thought process.  For well over three years it has been my belief the Chinese knew exactly what they were doing by building roads to empty cities that had their own runways and airports, sewage, drainage and complete utility systems at the "ready". 

Why would they have done this?  It is such a waste of capital right?  Well yes, if it was "real capital" this would be correct.  It is my belief the Chinese already knew "how" this was all going to end.  They knew the financial system was a Ponzi scheme that could ONLY CONTINUE with new and more debt being added.  They also knew the credit system will ultimately collapse in a heap upon itself.  No, this is no Field of Dreams, "if we build it they will come", on the contrary … their thought process is "If we build it we will have it"!  They also have accumulated the world’s largest hoard of gold with this thought process.

Look at what China has done?  They have overcapacity everywhere.  They have unused plant, equipment, machining capability, housing and infrastructure …but guess what?  IT IS ALL NEW!!!  Now let’s make a comparison to the U.S., the only thing we have that’s new are a bunch of McMansions built all over the place.  We have little capacity to produce anything.  Our roads, bridges and mass transit systems are all old and in many cases in disrepair.  Our "grid" is a century old and at risk of being taken down by an EMP. 

Moving along to the "end game", if a financial collapse is coming and credit everywhere is defaulting, then what exactly is left?  Financial assets of all sorts will be rendered valueless, but physical "structures" will still remain.  They may (will) change ownership via default but they will still remain and be "usable".  China has played the game and used credit to build real things for the future.  We invented the game and used credit to "eat" for the here and now.  The global "game of credit" will mathematically end, and it will end badly.  The U.S. will be beaten badly in the very game we created!

China has known for many years where and how this would end. It is one of the reasons they have accumulated the largest hoard of gold in the world and are also the largest gold producer.  The credit bubble will pop and yes China will be hurt but they will be left with new infrastructure and more gold than anyone else in the world.  A pretty good position to be in if we all have to start over!

Standing Watch,

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

Posted at 7:03 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Next in line?

Spain Government Goes Full Police State; Enacts Law Forbidding Dissent, ‘Unauthorized’ Photography Of Law Enforcement

from the shut-up-citizen-or-we’ll-put-your-money-where-your-mouth-is dept

Well, Spain’s officially a police state now. On July 1st, its much-protested "gag" law went into effect, instantly making criminals of those protesting the new law. Among the many new repressive stipulations is a €30,000-€600,000 fine for "unauthorized protests," which can be combined for maximum effect with a €600-€300,000 fine for "disrupting public events."

This horrible set of statutes has arisen from Spain’s position as a flashpoint for anti-austerity protests, the European precursor to the Occupy Wall Street movement. Fines, fines and more fines await anyone who refuses to treat authority with the respect it’s forcibly requiring citizens to show it.

The law also extends its anti-protest punishments to social media, where users can face similar fines for doing nothing more than encouraging or organizing a protest. Failing to present ID when commanded is another fine. And then there’s this:

Showing a "lack of respect" to those in uniform or failing to assist security forces in the prevention of public disturbances could result in an individual fine of between €600 and €30,000.

Spain’s legislators thought of everything. To ensure these crackdowns on protests go off with a minimum of public backlash, "respected" police officers are being given a blank check to use as much force as they feel necessary when breaking up "unauthorized protests." The law doesn’t directly instruct police to behave badly, but it does provide a very helpful increase in opacity.

A clause in the wide-ranging legislation that critics have dubbed the "gag law" provides for fines of up to 30,000 euros ($33,000) for "unauthorized use" of images of working police that could identify them, endanger their security or hinder them from doing their jobs.

More…

Posted at 9:07 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Forget about Greece, they didn’t matter yesterday as the NYSE shut down for nearly four hours.  Greece does matter and

certainly will matter in the weeks to come.  Before getting to yesterday’s very peculiar "glitch", I do want to mention something quite humorous about Greece.  Ambrose Evans-Pritchard wrote yesterday the referendum actually backfired!  When Tsipras called for the referendum, he apparently expected a "yes" vote (and so did the banksters running the show!).  The "plan" was after the yes vote, Tsipras would hang his head and agree to more austerity and thus kick the can one more time.

The "cradle of democracy" threw an absolute monkey wrench in these plans!  How can Tsipras now do any deal with the Troika without being lynched in the public square?  One can only hope the Greeks stand up for themselves and not allow anyone to sell them out.  As I wrote Tuesday, I believe their best bet is to follow in an Icelandic model and default, start issuing the drachma at a fair exchange rate and exit the Eurozone.  In this manner they start over and have some very interesting trade opportunities from their east.  We will se what they choose and exactly how bad the fallout is shortly!

So what exactly happened yesterday with the New York Stock Exchange?  It was certainly a peculiar day because "glitches" turned up everywhere!  First it was United Airlines having to ground all of their flights, then both The Wall Street Journal and Zerohedge websites went down.  I also heard of many New York subway cars being halted.  Then of course the NYSE was halted for four hours.  Was all of this "coincidence"?  Or was just "glitchy"?  Let’s call this scenario number one of what I believe are three possibilities.

Then we have scenario number two, yesterday was the result of Eastern cyber attacks.  The theory goes like this, China is angry because "we topped" and rolled their markets over in a crash like fashion.  Maybe yesterday was a test to see what they could actually do?  You may pooh pooh this if you will but it only took 15 minutes for the talking heads on CNBC to deny any scenario except the "glitch".  It wasn’t China, it wasn’t a hack, it was not terrorism we were carefully told.  I personally have believed in the theory Mr. Putin would release some sort of "truth bomb" calling BS on various false flags, fraudulent dealings and the Western Ponzi scheme in general.  I still believe this will come as the U.S. looks surely to square off with Russia/China/(even ROW) at some point in the not to distant future.  I believe there is some merit to this scenario but let’s leave it at that for the moment and then revisit at the end.

Scenario number three seems to me to be the meatiest.  I spoke to Jim Sinclair while the market was in closure to see what his take was.  He immediately said to me; "it’s like if in a casino and everyone starts winning, mysteriously either the lights go out of someone pulls a fire alarm …no more gambling!  I think the PPT knew they were going to be overwhelmed, if this were the case and I was the chairman of the NYSE, I would run upstairs and pull the plug out of the wall.  …Problem solved …for now!".

Let’s look at this a little closer.  There are without any doubt "plunge protection teams" all over the world.  In the U.S., it is by an executive order signed in 1988 by Ronald Reagan.  The Bank of Japan has openly said they buy everything including equities.  China, who has been having very serious (25%-42% drops in just 16 trading days) market problems.  In fact, it could be said China has already crashed.  They are making it illegal for institutions to sell, the PBOC has actively been in their markets and everything they have tried has not worked until today.  Then we have Europe and Mr. "we’ll do anything necessary" Draghi.  Strangely, even though he is a politician, this is something out of his mouth I believe.

That said, I have a question.  Is it possible that we are seeing a global PPT failure?  You see, the "fires" are no longer compartmentalized, they have jumped borders!  It is this "crossing of borders" I believe which is causing problems.  For example, if we look at currencies, what happens if both the ECB and the Fed are trying to support their own currencies, aren’t they actually trading against each other?  Another thing to ponder is this, if one market closes (yesterday it was China), will this bring "trapped sellers" into the next market that opens and thus on the shoulders of their plunge protection team?

My personal take on these three differing scenarios is the truth lies as a combination of two and three, I guess I’m just too cynical to fall for the "glitch excuse".  Whether you want to believe it or not, we (the U.S.) are at war with the East and desperately hanging on to the dollar remaining as king.  This has been going on for years, only now it is becoming obvious.  Would one country try to electronically harm another country financially?  Is the Pope Catholic?  I do believe there is something to yesterday being either a trial run or a test, maybe even a "shot across the bow".  I also believe the plug was pulled on purpose.  Maybe it had to be or was forced, I do not know.  I do believe we are watching as the various PPT’s fail to hold the lines.  I’m pretty sure we will find the answers out and shortly.  The real answers may not be pleasant!

Standing watch,

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

Posted at 1:15 PM (CST) by & filed under In The News.

Don’t Worry About The NYSE: If The CBIP Fails, It’s Time To Panic
Submitted by Tyler Durden on 07/08/2015 12:18 -0400

The NYSE crashed and almost nobody noticed (for a few minutes) because market levels were stable (and because retail is long gone). Why? Because most trading these days is done via derivatives anyway on exchanges like the CME,  where one specific program may be the buyer of last reserve today: the CBIP.

What is the CBIP (first discused here)? Here is a reminder.

1. What is the Central Bank Incentive Program?

The Central Bank Incentive Program (“CBIP”) allows Qualified Participants to receive discounted fees for their proprietary trading of CME Group products. All trading activity under the CBIP must be conducted directly through accounts registered to the Qualified Participant or separate accounts managed by a third party on behalf of the Qualified Participant. Qualified Participants receive discounted fees on CME, CBOT, and NYMEX products and COMEX futures products for electronic trading only. Qualified Participant will receive discounted fees January 1, 2015 through December 31, 2015.

2. How does an applicant qualify for the CBIP?

To qualify for and become a participant in CBIP (a “Qualified Participant”), the applicant must:

Be a non-U.S. central bank, multilateral development bank, multilateral financial institution, sub-regional bank, aid coordination group, or an international organization of central banks

Complete a CBIP application and be approved by CME Group

Execute all trades in the Qualified Participant’s name

Register one or more portfolio managers

Have a relationship with a CME Group clearing member

Have authority to participate in a fee incentive program (i.e. no public or internal policies prohibit participation)

More…

 

Jim Sinclair’s Commentary

What is the difference between animals and people? A lot.

The Hug of the Century
Published: July 14, 2014

A woman found a badly injured lion in the forest. She took it with her and nursed it back to health. When it was better, she made arrangements with a zoo to take the lion and give it a new and happy home. This video was taken when she returned to the zoo some time later to see how her lion was doing. Watch the lion’s amazing reaction when he sees her!

http://www.youtube.com/watch?v=NLB_u695wTg

Posted at 1:08 PM (CST) by & filed under Jim's Mailbox.

Jim,

This says it all, about how our government treats us!

Bigger Jackpot in total dollar terms for the government, harder for consumer to win, BUT… easier to win a measly $4.00.

When I visited Germany years ago, they had a different Lotto system. The maximum you could win was $2 million. If there were no winners week after week, the lower tiers would increase.

All amounts over $2 million were divvied up amongst the lower levels.

For example, hitting 3 correct numbers out of 6 usually paid you about $5-$15.

If no winners in the subsequent weeks, that payout began creeping higher to around $40 or $50 or even $100. Nice return for a 50 cent bet.

Not so here. One person gets to win a billion dollars (and gets taxed to hell). And … because it’s so difficult now to win, the governments sit on the accumulated proceeds for weeks and months, collecting enormous interest or utilizing the funds to meet state expenses.

CIGA Wolfgang Rech

Procter & Gamble’s big deal, Powerball odds and NYSE day 2
By Yahoo Finance

The U.S. may soon get its first ever one billion dollar Powerball jackpot, according to new analysis by website FiveThirtyEight.com. That’s because the New York State Lottery Commissioners approved tweaks to the Powerball jackpot odds…it’s now more difficult to win the big prize. But the odds of winning $4? That will improve from 1 in 111 to 1 in 92. The new rules will take effect for the October 7 drawing.

More…

 

Jim,

It’s coming! GOTS!

CIGA Wolfgang Rech

Systemic "Holidays" Are Coming to Banks, Money Market Accounts and More in the Weeks Ahead
Submitted by Phoenix Capital Research on 07/08/2015 12:21 -0400

This morning both the NYSE broke (canceling all open orders) and China outlawed selling stocks for large investors.

These two items seem completely unrelated… however, the reality is they are both based on a them we outlined back in May 2015.

That theme is as follows: that as the next Crisis unfolds, it will more and more difficult to get your money out of the financial system.

The reason for this concerns the actual structure of the financial system. As we’ve outlined previously, that structure is as follows:

1)   The total currency (actual cash in the form of bills and coins) in the US financial system is a little over $1.36 trillion.

2)   When you include digital money sitting in short-term accounts and long-term accounts then you’re talking about roughly $10 trillion in “money” in the financial system.

3)   In contrast, the money in the US stock market (equity shares in publicly traded companies) is over $20 trillion in size.

4)   The US bond market  (money that has been lent to corporations, municipal Governments, State Governments, and the Federal Government) is almost twice this at $38 trillion.

5)   Total Credit Market Instruments (mortgages, collateralized debt obligations, junk bonds, commercial paper and other digitally-based “money” that is based on debt) is even larger $58.7 trillion.

6)   Unregulated over the counter derivatives traded between the big banks and corporations is north of $220 trillion.

When looking over these data points, the first thing that jumps out at the viewer is that the vast bulk of “money” in the system is in the form of digital loans or credit (non-physical debt).

More…

Posted at 10:48 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Now some hacker is going to start a war in Germany.

‘Hackers’ give orders to German missile battery
Published: 07 Jul 2015 15:00 GMT+02:00

German-owned Patriot missiles stationed in Turkey were briefly taken over by hackers, according to media reports on Tuesday.

The attack took place on anti-aircraft ‘Patriot’ missiles on the Syrian border. The American-made weapons had been stationed there by the Bundeswehr (German army) to protect Nato ally Turkey.

According to the civil service magazine, the missile system carried out “unexplained” orders. It was not immediately clear when these orders were carried out and what they were.

The magazine speculates about two weak spots in the missile system which could be exploited by hackers.

One such weakness is the Sensor-Shooter-Interoperability (SSI) which exchanges real time information between the missile launcher and its control system.

The second exposed point is a computer chip which controls the guidance of the weapon.

Attackers might have gained access in two different ways, one that takes over the operating of the missile system and one that steals data from it.

The patriot missile has been in service in the US army since 1984 and was first used in operation in the first Gulf war in 1991.

In 2012 Turkey asked that its Nato partners support it by stationing Patriot missile systems there, after the civil war in Syria drew closer to its southern border.

In June 2015 Germany announced that it would replace its Patriot missiles with MEADS, an air defence system designed in cooperation with the USA and Italy.

More…

Posted at 5:51 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

The Greeks voted "no" and should be applauded for their valor! Knowingly or not, their no vote has added extra cards to their hand. They now have more options than they would have had with a yes vote. In fact, Greece still has the only option they would have had with a yes vote (cut a deal for "more aid" and austerity), plus many other which pressure the lenders. I must say, a "vote" coming from the cradle of democracy CONTRARY to what the banksters wanted is a breath of fresh air!

Now what? Greece basically can go down three very different roads. They can use their "new freedom" to either negotiate new aid and restructuring, they can stay in the Eurozone while not paying on their debt and using a new drachma or, …they can go full Iceland! Please understand this, no matter what they choose, their banking system is inedible toast and they cannot pay their debt service let alone the principal. The bottom line is "someone" will have to eat the losses. Whether it be the ECB itself, European banks or whomever, the debt will not be paid and someone, somewhere will have to "lose". Keep in mind this is happening while liquidity is already quite tight.

It is possible we could see some sort of deal where "the world is saved" and a violent short covering rally in everything ensues. Should this occur, do not be fooled because nothing can nor will be fixed. Can they buy a month or three months time with Greece? Probably but as liquidity is drying up, accidents are more likely to happen. Countering this thought process, Greece does also have an "out" should they decide to turn toward any help offered by Russia and China. If this is the choice, I believe it’s a very good bet that rioting and even a coup may be "helped" from the shadows. I won’t elaborate on this but should it appear Greece is moving away from the West, unrest of all sorts will surely be "stirred" up!

Of their options available, I personally believe they should go "whole hog Iceland". What is best for Greece for the future would be to put a moratorium on payments and outright default. They would then be forced to issue a new drachma to conduct commerce with. I also believe they should leave the Eurozone and focus trade toward the East where their new drachma would be more likely to be accepted. Greece would be forced to "start over" from ground zero, not a happy prospect but one where at least a foundation exists. The "old" world order will not stand in the long run, it may fall apart piece by piece or all at once.

The piece by piece scenario would include Portugal, then Spain, and then Italy (with France mixed in there) wanting to go down the same Greek road. We very well may see national referendums becoming the new fad. All of these countries will want some sort of relief from their debt as the numbers are clearly unsustainable. Talk of the situation being contained is laughable. So laughable, the whole system could go from "normal" to "over" in 48 hours in my opinion.

Look around the world, China is now down 25+% in just over three weeks. Europe, it’s currency and even the Union itself is in question …and the Federal Reserve needs to do something in the credibility department. What I am saying is this, can the Fed really tighten ANYTHING in the current environment? As I mentioned previously, liquidity is rapidly going away …in an over indebted system this is the most potent of poison! As I see it, a massive dose of new QE will have to be administered just to keep the doors open. Watch for this!

Meanwhile, "we" look like idiots to those we have tried to help. While the credit market is on the cusp of breakdown and full seizure, gold and silver prices got smashed again today. Funny thing though, even though there has been so much "selling", the U.S. Mint has apparently suspended sales of Silver Eagles! I will ask the question again as I have before, if there is so much "selling" of silver, why can’t the Mint source it to sell? It is their mandate! It is the law (which matters not anymore)!

Are we moving into a zone where COMEX prices will get hit further …while the mint sells nothing until August (if we even make it to August) …and then we see some sort of credit/financial/international event where force majeure is declared? For whatever reason the Mint can conjure …can’t source metal …can’t keep up with demand …or whatever, a suspension of sales does not jibe with massive panic selling of "metal". Unless of course they say "we are suspending sales because there is no demand". I am sure a statement like this could be spun as Gospel truth!

Folks, we stand on the verge of the global credit markets coming to a grinding halt. In our current world, NOTHING that we consider "normal" will transact or transpire without credit. Our lives will change literally overnight without credit. We are about to live through a massive wildfire of credit values burning to the ground, gold and silver will still be standing when the smoke clears. It is completely laughable to see gold and silver forced down when the fear of credit collapse is rising. Mother Nature doesn’t work this way, central banks wish she did! I hope you have the will to "see through it", the coordinated efforts to support paper markets and suppress gold and silver have been truly impressive. The currency of the biggest, most indebted and "brokest" issuer in the world is attracting safe haven bids. I assure you, once control is lost and we go into all out panic, even those pulling the levers will be moving against their own central banks!

Standing watch,

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

Posted at 5:07 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Mounting Global Instabilities in a System Increasingly Out of Control 
- May 2015 Trade Deficit Showed Minimal Deterioration; Advance-June Trade Estimate Should Rattle Second-Quarter GDP 
- Headline June Reporting on Production and Retail Sales Also Should Soften GDP Expectations
- Late-Month Jump Pushed June M3 Annual Growth to 5.2%, Up from 5.0% in May

"No. 733: May Trade Deficit, June M3, Systemic Uncertainties" 
Web-page: http://www.shadowstats.com