Jim Sinclair’s Commentary
Hit the pension funds to build the highways. This is a can that is reaching the end of the road.
How is Congress paying for the short-term Highway Trust Fund fix?
August 1, 2014, 10:54 AM
Congress is providing $11 billion to prevent a 28 percent reduction in federal highway and mass transit spending at the peak of the summer construction season. The Senate passed a House-written bill to augment federal gasoline and diesel fuel taxes for keeping the federal Highway Trust Fund solvent through next May. The bill raises the money through:
– Pension "smoothing." Raises $6.4 billion by allowing companies to reduce the amount that they contribute to their pension funds now and make up for it later. Since pension contributions are tax deductible, companies would owe more tax revenue in the next few years as more of their earnings are taxed. But in the later years, they would be able to claim higher deductions from larger contributions to their pension funds, costing the government revenue. Over time, the pension measure doesn’t raise revenue. But over the next 10 years – the time frame used to estimate the cost of legislation – it does. Critics warn it could cost taxpayers in the long run if federally insured pension plans can’t meet their obligations and the government’s Pension Benefit Guaranty Corp. has to cover them.
– Customs user fees. Raises $3.5 billion by extending for one year – through 2024 – various user fees paid to the Customs Service for goods, vehicles and people entering the U.S. Critics say it’s a gimmick that allows lawmakers to spend the money now and not pay it back for 10 years.
– Leaking underground storage tanks. Transfers $1 billion from an overfunded trust fund established to pay for cleaning up sites fouled by pollution from leaking underground storage tanks, including those at gas stations. Most problem sites have been cleaned up and the leaking tanks fund runs a surplus of about $200 million a year.
Jim Sinclair’s Commentary
There are two sides to sanctions – geopolitical pressure and self injury.
Russia sanctions risk British jobs, warns JCB boss
By Ben Wright
9:00PM BST 03 Aug 2014
One of the UK’s most influential businessmen has hit out at European Union and US sanctions against Russia, claiming that they are ill-conceived and may result in the loss of British jobs.
Lord Bamford, chairman of JCB, said it was “absurd” that his company, a major exporter to Russia and the market leader for construction equipment there, would be hurt by sanctions “coming out of Brussels”. He added that the decisions being made by EU diplomats could put “British jobs at risk”.
Lord Bamford’s comments come days after EU governments decided to impose further economic sanctions against Russia after the downing of Malaysia Airlines flight MH17 in eastern Ukraine last month.
In the latest escalation of the worst tensions between the West and Moscow since the Cold War, the sanctions are aimed at Russia’s oil industry, defence, dual-use goods and sensitive technologies. However, there are growing fears that the sanctions will have knock-on repercussions for the European companies and the region’s economy.
Lord Bamford said: “Russia is a very important market for JCB and has been for more than 30 years. It appears that JCB is going to be affected by the decision to impose sanctions, but to what extent we are unable to say at the moment.
“We ship both machines and spare parts to Russia and are the market leader for construction equipment in the country. If sanctions restrict sales of machines and spare parts, there will be obviously be a major impact on JCB, which could put hundreds of British jobs at risk.
“It seems absurd that a leading UK exporter, successfully selling machinery to construction companies and farmers in Russia, could be affected so dramatically by EU sanctions coming out of Brussels.”
August 4, 2014
There’s nothing more permanent than a temporary government measure, as the old saying goes.
I was reminded of it when I came back to Kiev over the weekend and that the Ukrainian government imposed a series of “temporary” taxes to help the war effort.
And boy does this government need money.
According to both Ukrainian and Russian news sources, several hundred solders were left without weapons or ammunition and crossed the border into Russia.
The Ukrainian news suggests that this was a forced withdrawal after being routed by rebel forces. The Russian news suggests that the troops were seeking asylum, no doubt tired of war.
So the Ukrainian government is in a hurry, trying to raise at least $1 billion (a lot of money here).
They’ve jacked up wage taxes, natural resource taxes, and even taxes on farming exports.
But even if they collect the money they’re aiming for, Ukraine and its government are in a serious pinch.
For the last few months, even before the turmoil began, Ukraine has been in an inflationary cycle. Both retail and asset prices were spiraling higher.
Now they’ve entered a stagflationary period. The currency has gone into freefall. Unemployment is rising. The economy is contracting (6% by phony government estimates). And inflation is a whopping 19%… and rising.
These people are getting abused. And the worst is yet to come.
The banking system is borderline insolvent. The head of the local Citigroup branch here said that the non-performing loan ratio in Ukraine is as high as 40%.
And potentially up to 4% of all bank assets are now locked down in Crimea, which may or may not even be part of Ukraine any longer.
If the banking system collapses (and many here suspect it will), this place will become unglued. Asset prices will collapse, yet retail prices will surge even higher.
I can already see it on the street; so many businesses have closed. Hopeless unemployed youths are now roaming the city or joining the war effort.
And the entire populace has been mobilized to support the fight.
Of course, it’s pretty damn easy to cheer on the bloodshed when it’s not your blood. War can seem glorious when you only have to read about it in the newspapers.
There’s so much more I need to tell you about—the only way for me to capture this was in another podcast, probably the most emotional I’ve ever done.
Come listen for yourself:
Senior Editor, SovereignMan.com
Ukrainian troops cross into Russia to avoid fighting, talks underway
BY NATALIA ZINETS AND RICHARD BALMFORTH
KIEV Mon Aug 4, 2014 12:53pm EDT
(Reuters) – Ukraine said on Monday it was in talks with Moscow over the return of 311 Ukrainian soldiers and border guards who had been forced by fighting with separatists to cross into Russia, but Russian border authorities said the troops were seeking asylum.
Both sides seemed set to use the fate of the troops to score propaganda points as Ukrainian government forces extended steady gains it has made against the pro-Russian separatists since a Malaysian airliner was downed over a rebel-held area on July 17.
Ukrainian defence spokesman Andriy Lysenko said a group of soldiers and border guards, who had been caught between the Russian border to the east and rebel positions in the west, had crossed into Russia in the early hours of Monday.
He put their number at 311, telling a news briefing they had retreated into Russia for safety reasons after helping their comrades break through rebel lines.
Kiev, he said, was now negotiating with Russian authorities for their return.
Jim Sinclair’s Commentary
The only reason for firm car sales is very soft loans.
GM unit gets subpoena over subprime auto loans
WASHINGTON Mon Aug 4, 2014 12:33pm EDT
(Reuters) – The U.S. government is investigating General Motors Co’s (GM.N) auto financing arm over subprime auto loans it made and securitized since 2007, the company disclosed on Monday.
General Motors Financial Co Inc said it was served with a subpoena from the Department of Justice directing it to turn over documents related to underwriting criteria.
The subpoena, which the company said was in connection with an investigation into possible violations of the civil fraud law FIRREA, also asked for information on the representations GM made about the criteria when the loans were pooled into securities.
Financial services firms have paid billions of dollars to resolve investigations under FIRREA into questionable mortgages pooled into securities in the run-up to the financial crisis. The new subpoena could be one of the first public acknowledgements that investigators are also looking at the securitization of subprime auto loans.
FIRREA, the Financial Institutions Reform, Recovery and Enforcement Act, allows the Justice Department to sue over fraud affecting a federally insured financial institution.
Separately, regulators have brought some recent cases against auto lenders over allegations of discrimination.
Lebanese army advances in border battle with Islamists
BY ALEXANDER DZIADOSZ
OUTSKIRTS OF ARSAL Lebanon Mon Aug 4, 2014 1:14pm EDT
(Reuters) – The Lebanese army advanced on Monday into a border town attacked by Islamists at the weekend in the most serious spillover of the three-year-old Syrian civil war into Lebanon, and the Beirut government said the deadly assault would not go unpunished.
With army reinforcements arriving in Arsal, Prime Minister Tammam Salam, a Sunni Muslim, said there could be no political deal with gunmen identified as members of the Nusra Front and the Islamic State, which has seized parts of Syria and Iraq.
"The only solution proposed today is the withdrawal of the militants from Arsal and its environs," said Salam, the most senior Sunni in the Lebanese government.
Flanked by the rest of the cabinet, Salam accused the militants of seeking to "move their sick practices to Lebanon".
"We confirm that the attack on Lebanese national dignity will not go unpunished," he said.
Lebanon, still rebuilding from its own 1975-1990 civil war, has been buffeted by violence linked to the Syrian conflict, including rocket attacks, suicide bombings and gun battles.
But this was the first major incursion by hardline Sunni militants who have become leading players in Sunni-Shi’ite violence that has unfolded across the Levant, destabilising Lebanon by inflaming its own sectarian tensions.
Jim Sinclair’s Commentary
Sanctions are going to hurt Europe big time.
Russian sanctions crushing German business
Published time: August 01, 2014 11:20
The West is tightening the financial screws on Moscow, but German companies are already feeling the kickback of a slowing Russian economy and weakening ruble.
Russia is Europe’s third-largest trading partner, so a spluttering Russian economy, exacerbated by the Ukraine crisis, is seriously affecting German companies. In 2013, Germany exported 36 billion euro worth of goods to Russia.
A higher value ruble and inflation risk consumer spending in the region, and are cutting German involvement in the market accordingly.
German sports retailer Adidas lowered financial targets for the next two years, citing conditions in Russia as a major stumbling block.
“The recent trend change in the Russian ruble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia/CIS,” the company’s financial outlook said.
Chinese Gold Demand 1063 MT YTD
Total Chinese Reserves Reach 15,000 Tonnes
Published: 04-08-2014 20:32
For ten days I’ve been on vacation without internet, hence I missed one week to report on withdrawals from the Shanghai Gold Exchange (SGE) vaults. Here is a quick overview of what happened in the Chinese gold market in week 29 and 30.
In week 29 (July 14 -18) 32 metric tonnes were withdrawn from SGE vaults and in week 30 (July 20 – 25) 33 tonnes were withdrawn. Both lower than the year to date average of 35.4 tonnes, but higher than the five week moving average trend (5 WMA). In total 1063 tonnes has been withdrawn year to date. The premium on gold at the SGE is still hovering around zero.
Patient in NYC being tested for Ebola at Mount Sinai Hospital
By TINA SUSMAN
New York’s Mount Sinai Hospital was performing tests Monday on a patient who had traveled recently in West Africa, where an Ebola outbreak has killed hundreds of people, after he arrived at the emergency room with symptoms of the disease.
The hospital said in a statement that he had a high fever and gastrointestinal symptoms when he came to the emergency room in the early hours of Monday. He was put in isolation until test results are back.
"The patient had recently traveled to a West African country where Ebola has been reported," the hospital said. "The patient has been placed in strict isolation and is undergoing medical screenings to determine the cause of his symptoms. All necessary steps are being taken to ensure the safety of all patients, visitors and staff.
"We will continue to work closely with federal, state and city health officials to address and monitor this case, keep the community informed and provide the best quality care to all of our patients."
An Ebola outbreak in four West African countries has killed hundreds of people and sickened more than 1,000, including two American aid workers in Liberia. One of them, Dr. Kent Brantly, was flown back to the United States on Saturday and is being treated at Emory University Hospital in Atlanta. The other, Nancy Writebol, is expected to be brought to Atlanta on Tuesday.