Jim Sinclair’s Commentary
An evening on the back porch chaise around the fire pit.
Interview With James Rickards: China Planning to Displace Dollar
The author of the best-selling book ‘Currency Wars’ and the forthcoming ‘The Death of Money’ talks about how China uses gold and the IMF to remove the dollar as reserve currency
By Valentin Schmid, Epoch Times | February 18, 2014
Last Updated: February 18, 2014 2:47 pm
Epoch Times: Mr. Rickards, in our last interview (Part 1, Part 2), we talked about gold and why it should rally. You also said the Chinese are behind buying a lot of physical …
James Rickards: I met with the largest gold refinery in the world, the head of precious metals operations. He’s recently expanded his own capacity; they put a whole new area in their factory and it’s highly automated. And he’s working triple shifts, he is working 24 hours a day to produce gold.
He is producing 20 tons a week and half of that is going to China. So that’s 10 tons a week, which is about 500 tons a year. And that’s just one refinery, not counting all the others, that’s a lot of gold.
He said the Chinese want more, but he won’t supply it because he has regular customers. He supplies Rolex watches and other high net-worth individuals and institutions; these are all long standing customers. He can’t refuse to fill their orders.
He said: “I’m making all the gold I can, working 24 hours a day, sending as much gold as I possibly can to China, 500 tons a year and the Chinese still want more.”
Epoch Times: How can supply keep up?
Mr. Rickards: So where is the gold coming from? It’s coming from mining output, scrap, and 400 ounce bars. The Chinese are basically turning their back on the London gold market and creating a new standard. So the old standard was the 99 percent pure gold 400 ounce bar, the new standard is a 99.99 percent pure gold one kilogram bar.
Jim Sinclair’s Commentary
Buddy contemplates the chart of the price of dog food.
Hong Kong gold exchange eyes 1,500-tonne warehouse in mainland China
February 16, 2014
The Chinese Gold & Silver Exchange Society (CGSE), based in Hong Kong, aims to launch a physical bullion trading exchange and a 1,500-tonne depository in mainland China within the next year, its president said on Thursday. The century-old firm, which runs Hong Kong’s only physical bullion trading exchange, is looking to tap the burgeoning demand for gold in China, which last year toppled India from its ranking as the world’s top gold consumer.
Its 171 members include dealers, banks and jewellers, among them Chow Tai Fook Jewellery Group Ltd, the world’s most valuable jewellery retailer. It has been in talks to open a warehouse in China’s free trade zone in the Qianhai district of Shenzhen that has struggled to take off some three years after it was first touted as a new "mini-Hong Kong".
But talks are finally getting serious after last year’s launch of the Shanghai free trade zone, CGSE President Haywood Cheung told Reuters. "Three years ago we started negotiating with them to build a vault for gold and silver. It is now finally down to an ad hoc committee," said Cheung, adding that Qianhai officials had asked for CGSE’s plans and proposals.
"Within the next six to 12 months we are hopeful of launching the vault." Despite the lengthy delay getting the project off the ground, Cheung said he preferred Qianhai to Shanghai since there are about 4,000 jewellery manufacturers in Shenzhen. The warehouse, which will initially have a capacity of 1,500 tonnes, will primarily serve the jewellery makers, some of whom are already trading members of CGSE in Hong Kong.
At the Fed, The More Things Change, the More They Stay the Same
Written by Ron Paul
Last week, Federal Reserve Chairman Janet Yellen testified before Congress for the first time since replacing Ben Bernanke at the beginning of the month. Her testimony confirmed what many of us suspected, that interventionist Keynesian policies at the Federal Reserve are well-entrenched and far from over. Mrs. Yellen practically bent over backwards to reassure Wall Street that the Fed would continue its accommodative monetary policy well into any new economic recovery. The same monetary policy that got us into this mess will remain in place until the next crisis hits.
Isn’t it amazing that the same people who failed to see the real estate bubble developing, the same people who were so confident about economic recovery that they were talking about “green shoots” five years ago, the same people who have presided over the continued destruction of the dollar’s purchasing power never suffer any repercussions for the failures they have caused? They treat the people of the United States as though we were pawns in a giant chess game, one in which they always win and we the people always lose. No matter how badly they fail, they always get a blank check to do more of the same.
It is about time that the power brokers in Washington paid attention to what the Austrian economists have been saying for decades. Our economic crises are caused by central bank infusions of easy money into the banking system. This easy money distorts the structure of production and results in malinvested resources, an allocation of resources into economic bubbles and away from sectors that actually serve consumers’ needs. The only true solution to these burst bubbles is to allow the malinvested resources to be liquidated and put to use in other areas. Yet the Federal Reserve’s solution has always been to pump more money and credit into the financial system in order to keep the boom period going, and Mrs. Yellen’s proposals are no exception.
Every time the Fed engages in this loose monetary policy, it just sows the seeds for the next crisis, making the next crash even worse. Look at charts of the federal funds rate to see how the Fed has had to lower interest rates further and longer with each successive crisis. From six percent, to three percent, to one percent, and now the Fed is at zero. Some Keynesian economists have even urged central banks to drop interest rates below zero, which would mean charging people to keep money in bank accounts.
Jim Sinclair’s Commentary
QE4 or whatever Chair Yellen selects to call it must go to infinity.
U.S. Foreclosure Activity Increases 8 Percent in January Driven by Double-Digit Percentage Increases in Foreclosure Starts and Scheduled Foreclosure Auctions
February 11, 2014
(www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its U.S. Foreclosure Market Report™ for January 2014, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 124,419 U.S. properties in January an 8 percent increase from December but still down 18 percent from January 2013. The report also shows one in every 1,058 U.S. housing units had a foreclosure filing during the month.
January marked the 40th consecutive month where U.S. foreclosure activity declined on an annual basis, but the annual decline of 18 percent was the smallest annual decline since September 2012, and the 8 percent monthly increase was the biggest month-over-month increase since May 2012.
“The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust,” said Daren Blomquist, vice president at RealtyTrac. “The foreclosure rebound pattern is not only showing up in judicial states like New Jersey, where foreclosure activity reached a 40-month high in January, but also some non-judicial states like California, where foreclosure starts jumped 57 percent from a year ago, following 17 consecutive months of annual decreases.”
Jim Sinclair’s Commentary
Every step forward for the Yuan is a step backwards for the US dollar.
Toronto and Vancouver battle to house yuan trade
Last updated Monday, Feb. 17 2014, 7:55 PM EST
Two Canadian cities are vying to become North America’s primary centre for trading the Chinese yuan, an effort that has received federal backing amid a broader desire by Ottawa to strengthen ties with Beijing.
Leaders in banking, government and economic development in Toronto and Vancouver are pushing to make their cities hubs for settlement of the renminbi in hopes of establishing a centre for trade in the currency. Though London, Taipei, Singapore and Hong Kong have risen as important RMB trading zones, no city in North or South America has yet developed as a major settlement centre.
Toronto and Vancouver want to beat them to it. Hosting an RMB settlement centre in Canada could benefit the country by attracting greater trade, bringing in highly-skilled workers and reducing currency-exchange costs to domestic companies, which could better convert Canadian dollars directly into RMB instead incurring the fees from first passing through U.S. dollars. (The Chinese currency can be referred to either as yuan or renminbi, or RMB for short.)
“There is no centre in the Americas and we see huge first mover advantage for Toronto and Canada should Toronto be awarded as a settlement centre,” said Neil Tait, a former banking executive in China who now serves as vice-chair of the Canada China Business Council.
Jim Sinclair’s Commentary
Today’s dollar battle at .80.
Capital One says it can show up at cardholders’ homes, workplaces
The credit card company’s recent contract update includes terms that sound menacing and creepy.
By David Lazarus
February 17, 2014, 4:32 p.m.
Ding-dong, Cap One calling.
Credit card issuer Capital One isn’t shy about getting into customers’ faces. The company recently sent a contract update to cardholders that makes clear it can drop by any time it pleases.
The update specifies that "we may contact you in any manner we choose" and that such contacts can include calls, emails, texts, faxes or a "personal visit."
As if that weren’t creepy enough, Cap One says these visits can be "at your home and at your place of employment."
The police need a court order to pull off something like that. But Cap One says it has the right to get up close and personal anytime, anywhere.
Rick Rofman, 71, of Van Nuys received the contract update the other day. He was spooked by the visitation rights Cap One was claiming for itself.
"Even the Internal Revenue Service cannot visit you at home without an arrest warrant," Rofman observed.
Indeed, you’d think the 4th Amendment of the Constitution, which guards against unreasonable searches and seizures, would make this sort of thing verboten.
Investment banker jumps to death from JP Morgan’s headquarters in Central
UPDATED : Tuesday, 18 February, 2014, 10:37pm
George Chen, Clifford Lo and Jeanny Yu
An investment banker on Tuesday jumped to his death from the roof of Chater House in Central, where Wall Street bank JP Morgan has its Asia headquarters, several witnesses told the South China Morning Post.
Witnesses said the man initially went to the roof of Chater House, a 30-floor building in the heart of Hong Kong’s central business district – and later jumped. The incident happened between 2pm and 3pm, one witness said.
Several policemen were seen on the roof but apparently failed to convince the man not to jump, one of the witnesses said. Police later confirmed to the Post that a 33-year-old man was found in a dangerous position on the roof of Chater House on Connaught Road Central at 2.08pm. Li threw himself off the building before the city’s emergency crew arrived.
A source last night named the man as Li Junjie.
The man landed on the four-lane western-bound carriageway outside the building. A police spokeswoman said the man was taken to Ruttonjee Hospital, where he was declared dead at 2.31pm. Police are investigating the case.
According to several JP Morgan employees, the man was a junior-level investment banker.
A Hong Kong-based JP Morgan spokeswoman said the bank was aware of the incident but it could not confirm at this stage whether the deceased was an employee of the bank. The bank is working with other parties including the police and the property manager of Chater House to follow up on the case, she added.
Weekend Report : Silver…The St. Valentine’s Day Breakout
Posted on February 16, 2014, 7:43 pm by Rambus
In this Weekend Report I would like to show you the Chartology of silver that you won’t see anywhere else on the planet. Some of these charts might not conform to the classic textbook scenarios most chartists believe are the only correct ways to construct a chart pattern. I have learned through many years of charting the markets that there are areas in this field that can be opened up for further interpretation and still fall within the loose confines of what is considered a chart pattern. Keeping an open mind in any of the trading disciplines of the markets from Elliot Wave, to cycles or charting can give one more insight and clarity than any one book can give you. Real time analysis and interpretation is the only way to really get to know your chosen field for investing in the markets.
With that said lets look at some silver charts. We’ll start with the short term charts and work our way out to the very long term charts that hopefully will put what silver is doing right now into perspective . When you look at the quarterly chart going back to the 1970′s, What happened those many years ago still has a direct impact on what is happening today , even though this seems impossible.
Lets start with a 10 month daily chart for silver that has a lot of information on it. If you’ve been follow the precious metals sector you know that silver had a huge day on Friday February 14. Happy St. Valentine’s day silver.
What makes Friday’s big move so special? There are several very good reasons. First, silver broke out from a red 2 1/2 month long rectangle reversal pattern to the upside. This breakout also took out the brown shaded support and resistance zone that had been in place since July and August from last year. Note how the brown shaded support and resistance zone acted as resistance back in August and then once it was broken to the upside it reversed its role and held support back in October and November. This support and resistance zone gave way to the downside when silver made its ultimate low in December, again reversing its role from support to now resistance. As you can see on the chart below silver was unable to penetrate that brown shaded support and resistance zone until Friday of this past week. For 2 1/2 months silver was trapped in the narrow rectangle while the precious metals stocks were racing higher. The top rail of the downtrend channel was also taken out this week which has now cleared the way for silver to run higher. Whenever you see a huge spike like we seen on Friday this tells us the bears have become exhausted and have no fight left. If you want to kick them while their down now is a good time to get your licks in.
Report: India’s gold demand up 13% at 975 tonnes in 2013
MUMBAI, FEB 18:
India’s gold demand remained buoyant in 2013 and rose by 13 per cent to 975 tonnes compared to 2012 despite the Government putting in several restrictions to curb imports, according to a World Gold Council report.
Gold demand in the country was 864 tonnes during 2012, according to data given in the WGC ‘Gold Demand Trends 2013’ report.
“India’s gold demand was up 13 per cent in 2013, compared to 2012. Demand in the second half was lower due to the effect of the supply curbs introduced in that period, but, equally, it was due to households having met a large part of their annual gold requirements in the first half, using the price drop in April as a buying opportunity,” WGC Managing Director India Somasundaram PR told PTI here.
The total jewellery demand in the country in 2013 was up by 11 per cent at 612.7 tonnes valued at Rs.1,61,750.6 crore compared to 552 tonnes valued at Rs. 1,58,359.1 crore in 2012.
The total investment demand for 2013 was up by 16 per cent at 362.1 tonnes from 312.2 tonnes in 2012.
In value terms, gold investment demand rose by six per cent at Rs. 95,460.8 crore against Rs. 90,184.6 crore in 2012.
Recycled gold, however, declined by 10.79 per cent to 100.8 tonnes in 2013, compared to 113 tonnes in 2012.
Will look into easing gold import curbs – Chidambaram
NEW DELHI Mon Feb 17, 2014 4:54pm IST
(Reuters) – India will look into relaxing gold imports curbs, but won’t let its current account deficit (CAD) balloon, Finance Minister P. Chidambaram said on Monday.
"There are pros and cons (on easing gold import curbs), we will weigh them carefully, the goal is to contain the CAD at a level where it can be fully and safely financed," Chidambaram told reporters after presenting the interim budget in parliament earlier.
"The operative word is, we will look into it," he said.
India, desperate to trim a gaping current account deficit, took a slew of measures last year to curb demand for bullion, its second-biggest import after oil.
Due to the restrictions on imports, China has surpassed India as the world’s biggest buyer of gold.
Industry participants had expected a cut in import duty from the record 10 percent on gold in the interim budget.
Jim Sinclair’s Commentary
From Richard Russell.
I hesitate to say this because it’s so extreme, but I believe the world is in a depression. We’re being lied to by a frightened and desperate government and Federal Reserve. Sooner or later the US public is going to realize that we’re in a depression. The government and the Fed will fight the gathering depression with lies and propaganda. To fight the depression, the Fed will open the money spigots wide, creating new trillions of "dollars."
Some wise investors are aware of all this, which is why gold continues to push higher (over $1300 an ounce today). IF we had the actual gold, I feel that the US would unilaterally raise the price of gold to $5,000 or $10,000 an ounce. The government is not doing this because we don’t have the gold. Once the news of the US gold reserves being depleted is out, this will result in an unbelievable scandal. Once the dollar index closes below 80, the fireworks should start. How many items can the Fed manipulate? Sooner or later the Fed will lose its grip on bonds, the dollar, stocks or gold. I think gold over 1300 suggests that the Fed is losing its grip.
Actual physical gold is becoming scarce. With gold climbing over $1300 today, we’ve seen the end of bargain-priced gold.
A serious step backwards for the Petro-Dollar.
Iran seeks new Russia reactor in exchange for oil
By Dmitry Zaks | AFP – Mon, Feb 17, 2014
Moscow (AFP) – Iran’s ambassador to Moscow on Monday said Russia could build the Islamic republic a second nuclear power reactor under a proposed oil-for-goods swap that has raised grave concern in Washington.
Ambassador Mehdi Sanaei said the two close trading partners have been negotiating Iran’s delivery of hundreds of thousands of barrels of oil a day since a meeting at a regional summit in September between Russian President Vladimir Putin and his counterpart Hassan Rouhani.
Russian officials have neither confirmed nor denied the discussions while stressing that they would not break existing UN sanctions on the Islamic state.
But Washington and the European Union have imposed their own restrictions over Tehran’s disputed nuclear programme that also penalise countries and companies dealing in certain areas with Iran.
The White House has raised "serious concern" about the potential deal — which one Russian report said involved the delivery of 500,000 barrels of crude per day — because it would boost Iran’s oil exports by more than 50 percent.
Iran’s crude shipments are believed to have shrunk under the impact of the unilateral Western sanctions to less than one million barrels per day from the 2.5-million-barrel figure they reached in late 2011.
Jim Sinclair’s Commentary
QE or whatever Yellen calls it to Infinity.
U.S. Feb. Empire State Manufacturing Index (Text)
By Editor: Kristy Scheuble February 18, 2014
Following is the text of the Empire State Manufacturing Index.
The February 2014 Empire State Manufacturing Survey indicates that business conditions improved marginally for New York manufacturers. The general business conditions index fell eight points, but remained positive at 4.5. The new orders index fell to about zero, indicating that orders were flat, and the shipments index declined thirteen points to 2.1. The unfilled orders index remained negative at -6.3. The prices paid index fell twelve points to 25.0, pointing to a slowing pace of input price increases, while the prices received index climbed two points to 15.0, suggesting a faster pace of selling price increases. Employment indexes were little changed, indicating a modest increase in employment levels and slightly longer workweeks. Indexes for the six-month outlook continued to convey fairly robust optimism about future conditions, even as the capital spending index fell ten points to 2.5, a multiyear low.
Business Conditions Improve Marginally
Business conditions improved marginally for New York manufacturers, according to the February 2014 survey. After rising ten points last month, the general business conditions index gave up most of those gains, falling eight points to 4.5. This month, 29 percent of respondents reported that conditions improved over the month, while 25 percent reported that conditions worsened. The new orders index fell to near zero, declining eleven points to -0.2, suggesting that orders were flat. The shipments index fell thirteen points to 2.1, and the unfilled orders index was little changed at -6.3. The delivery time index rose to 1.3, indicating that delivery times held steady, and the inventories index fell to -5.0, pointing to a small decline in inventory levels.
Homebuilder Confidence Crashes By Most On Record
Submitted by Tyler Durden on 02/18/2014 – 10:16
Surprise! For the 3rd time in the last 20 years, homebuilder sentiment got way ahead of reality… and as the February NAHB data shows, reality is starting to catch up to them. The NAHB sentiment index crashed by its most on record in Feb, missed expectations by its most on record, and fell back below the crucial 50-level, as it starts to play cyclical catch-down to home sales and mortgage apps. Think it’s the weather? nope…It’s across every region (with The West dropping the most on record – hot dry weather?)
Yet again hope fades…
Biggest miss and biggest drop on record….
China Sells Second-Largest Amount Of US Treasurys In December: And Guess Who Comes To The Rescue
Submitted by Tyler Durden on 02/18/2014 10:29 -0500
While we will have more to say about the disastrous December TIC data shortly, which was released early today, and which showed a dramatic plunge in foreign purchases of US securities in December – the month when the S&P soared to all time highs and when everyone was panicking about the 3% barrier in the 10 Year being breached and resulting in a selloff in Tsy paper – one thing stands out. The chart below shows holdings of Chinese Treasurys (pending revision of course, as the Treasury department is quite fond of ajdusting this data series with annual regularity): in a nutshell, Chinese Treasury holdings plunged by the most in two years, after China offloaded some $48 billion in paper, bringing its total to only $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013!
This was the second largest dump by China in history with the sole exception of December 2011.
That this happened at a time when Chinese FX reserves soared to all time highs, and when China had gobs of spare cash lying around and not investing in US paper should be quite troubling to anyone who follows the nuanced game theory between the US and its largest external creditor, and the signals China sends to the world when it comes to its confidence in the US.
Yet what was truly surprising is that despite the plunge in Chinese holdings, andJapanese holdings which also dropped by $4 billion in December, is that total foreign holdings of US Treasurys increased in December, from $5716.9 billion to 5794.9 billion.