Posted at 5:26 PM (CST) by & filed under General Editorial.

Dear CIGAs,

We are happy to announce the next upcoming Q&A session will be held in Nashville, TN. 


Saturday, September 20th, 2014 from 1-5pm


Courtyard Nashville Airport (Marriott)
2508 Elm Hill Pike
Nashville TN 37214


A fee of $100.00US can be made in advance with any major credit card via the PayPal button on the webpage linked below (no PayPal account required). Please be sure to print out your transaction receipt as this will be your registration, confirmation and entry ticket to the meeting. No further confirmation will be sent.

Click here to purchase tickets…

If you prefer, you may alternatively pay $100.00US by cash, bank check or money order made payable to James Sinclair at the door. If you choose this option, you must pre-register via email with Anna Stoerzinger at [email protected]. Please be sure to note your name and number of seat(s) in your email. A confirmation will be sent to you within 5 business days to confirm this pre-registration.

We look forward to seeing you there!

Posted at 5:17 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Today’s rules are you pay to play.

Lloyds fined £218m over rate rigging scandal

Lloyds Banking Group has been fined £218m for "serious misconduct" over some key interest rates set in London.

Lloyds manipulated the London interbank offered rate (Libor) for yen and sterling and tried to rig the rate for yen, sterling and the US dollar, said the US legal order.

It also manipulated submissions for another short-term rate linked to the value of UK government debt.

Lloyds said it "condemns the actions of the individuals responsible".

The fines were issued by the UK-based Financial Conduct Authority (FCA) and a US-based trading commission.

A "novel" development, setting the bank aside from competitors that have already been fined for Libor-rigging, was its abuse of the government-backed Special Liquidity Scheme, said the FCA.

"It’s another step in the cleanup," said Christopher Wheeler, a banking analyst at Mediobanca. It is "embarrassing" for Lloyds, however, as it shows the bank "is not as clean as people thought," he added.

The FCA fined Lloyds £105m. It said the fine was the "joint third-highest ever imposed" by the organisation or its predecessor, the Financial Services Authority.



U.S. and Europe Agree to Escalate Sanctions on Russia

FRANKFURT — The United States and Europe put aside their differences and agreed on Monday to sharply escalate economic sanctions against Russia in a set of coordinated actions driven by the conclusion that Moscow has taken a more direct role in the war in Ukraine.

After months in which European leaders were hesitant to go as far as the Americans, the two sides settled on a package of measures that would target Russia’s financial, energy and defense sectors. In some cases, the Europeans may actually leapfrog beyond what the United States has done, forcing Washington to try to catch up.

The agreement came during an unusual five-way video conference between President Obama and his counterparts from Britain, France, Germany and Italy in advance of a European Union meeting scheduled for Tuesday to consider new sanctions against Russia. American and European officials said the leaders agreed that Russia has not only not backed down since the shooting of a Malaysia Airlines passenger jet but has also accelerated its involvement in Ukraine’s burgeoning civil war.

“They agreed on the importance of coordinated sanctions measures on Russia for its continued transfer of arms, equipment and fighters in eastern Ukraine, including since the crash, and to press Russia to end its efforts to destabilize the country and instead choose a diplomatic path to resolving the crisis,” Antony J. Blinken, Mr. Obama’s deputy national security adviser, told reporters.

President François Hollande of France released a statement from his office saying that the leaders confirmed their intention to adopt new sanctions, and the office of Prime Minister David Cameron of Britain said it should be “a strong package of sectoral sanctions” adopted “as swiftly as possible.”


Moody’s cuts bank outlook to ‘negative’ on Ottawa’s bail-in rule
Credit ratings agency says risk of failure is remote, but it prefers option of taxpayer bailout
CBC News Posted: Jul 08, 2014 3:02 PM ET Last Updated: Jul 08, 2014 5:46 PM ET

Investor ratings service Moody’s has changed its outlook for Canada’s biggest banks to negative from stable, citing concerns over the Canadian government’s plan to implement a “bail-in” system in the event of a bank failure.

The “bail-in” rule, included as part of the 2013 omnibus budget bill, asserts that the federal government would not necessarily bail out a bank on the brink of failure with taxpayer money.

Instead bank bondholders would be expected to assume the risk, though there is no guarantee that deposit-holders would not be hurt if they had more money in the bank than the $100,000 guaranteed by CDIC.

Canada has yet to set parameters for how a bail-in might work. Mark Carney, who was Bank of Canada governor at the time, said last April it was ‘hard to fathom’ a scenario where Canadians’ deposits would be touched, as happened in the Cyprus bank failure.

Moody’s says the “negative” rating for the banking system will have no impact on the very strong individual credit ratings for the seven biggest banks – CIBC, RBC, TD, Bank of Montreal, Scotiabank, National bank and Caisse Central Desjardins.

Canada remains one of the highest rated banking systems in the world, Moody’s said in its report that recommended the downgrade in outlook. All of the banks are considered to have strong profiles in the domestic market.


Posted at 11:08 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Budders checks the price from under his blanket.


Israel Agrees to Extension of Cease-Fire, but Hamas Balks

JERUSALEM — Israel’s top ministers decided Saturday night to extend a humanitarian halt to hostilities in the Gaza Strip for 24 hours, but said their troops would continue to operate to destroy tunnels from Gaza into its territory during Sunday’s pause.

The decision came despite continued fire from Gaza into Israel during Israel’s initial four-hour extension of a 12-hour humanitarian pause on Saturday that both sides had agreed to at the request of the United Nations.

Three mortars landed in open areas near Gaza just as the original lull was expiring at 8 p.m. Before midnight, more than a dozen rockets were fired at Israel, four of them intercepted by the Iron Dome defense system.

A Hamas spokesman, Sami Abu Zuhri, rejected the expansion of the pause until midnight Sunday. “Any humanitarian cease-fire that doesn’t secure withdrawal of occupation soldiers from inside Gaza’s border, allow citizens back into homes and secure the evacuation of injuries is unacceptable,” Mr. Zuhri said. Earlier, Hamas had taken credit for sending two rockets toward Tel Aviv.


Jim Sinclair’s Commentary

The latest from John Williams’

- Despite Durable Goods Orders Turning Lower Year-to-Year, General Pattern Showed Ongoing Stagnation
- In Context of Sharp Downside Revisions to Prior Months, June 2014 New-Homes Sales Fell Month-to-Month, Quarter-to-Quarter and Year-to-Year

"No. 645: June Durable Goods Orders, New-Home Sales"

Russia threatens to hit British companies in ‘retaliation’ for sanctions
Putin could seize assets of British oil companies, Russian diplomat warns, as war of words over sanctions intensifies
By Matthew Holehouse, Political Correspondent
11:00PM BST 24 Jul 2014

Russia has issued a threat to seize the assets of British companies including BP and Shell as a retaliation against David Cameron’s demand for tough sanctions.

In a mounting war of words, a senior diplomatic source claimed Moscow would “fight back” against any industry-wide EU sanctions by putting British companies working in Russian oil on the frontline.

“We want friendly relations. We will go along as far as we can. Then we will retaliate,” the figure said.

The official measures will include seizing the assets of British firms, adding: “BP and Shell have a lot of assets in Russia.”

The two firms have major partnerships with Russia energy firms Gazprom and Rosneft.

In March, senators loyal to Mr Putin proposed freezing the assets of European and American companies in Russia, in response to Western sanctions imposed on Kremlin figures responsible for the annexation of Crimea.


U.S. Orders Americans to Evacuate Embassy in Libya
By Jim Miklaszewski and Courtney Kube

More than 150 Americans have been evacuated from the U.S. embassy in Tripoli, Libya, as violence in the region intensified between rival factions, the State Department said.

"The U.S. together with other countries have decided that because of the freewheeling militia violence that is taking place particularly around the embassy … it presents a real risk to our personnel," Secretary of State John Kerry told reporters during a trip to France. Kerry clarified that the violence was taking place near the embassy “but not on the embassy,” and diplomatic activities there were suspended, not halted.

“We are currently exploring options for a permanent return to Tripoli as soon as the security situation on the ground improves,” Department of State Spokeswoman Marie Harf said in a statement. “We did not make this decision lightly,” Harf added.

American officials told NBC News that the 158 Americans, including 80 heavily armed U.S. Marines, left the embassy compound early Saturday in a caravan of SUV’s and buses and drove west toward neighboring Tunisia.

We have temporarily relocated all of our personnel out of Libya.

— Safira Deborah (@SafiraDeborah) July 26, 2014

Besides the Marines who were the embassy’s security force, the caravan was also protected overhead by two American F-16 fighter jets and unmanned drones that shadowed the group on their drive.


Deutsche Bank, HSBC Accused of Silver Fix Manipulation
By Patricia Hurtado Jul 25, 2014 10:01 PM MT

Deutsche Bank AG (DBK), HSBC Holdings Plc (HSBA) and Bank of Nova Scotia were accused in a lawsuit of rigging the price of billions of dollars in silver, an allegation similar to earlier suits involving the London gold fix.

The banks unlawfully manipulated the price of the metal and its derivatives, an investor claims in a complaint filed yesterday in federal court in Manhattan. The banks abused their position of controlling the daily silver fix to reap illegitimate profit from trading, hurting other investors in the silver market who use the benchmark in billions of dollars of transactions, according to the suit.

“The extreme level of secrecy creates an environment that is ripe for manipulation,” according to the complaint. “Defendants have a strong financial incentive to establish positions in both physical silver and silver derivatives prior to the public release of silver fixing results, allowing them to reap large illegitimate profits.”

The lawsuit is the latest to be brought against banks alleging manipulation of a benchmark. Suits have been filed against Deutsche Bank and Bank of Nova Scotia, HSBC and other banks in federal court in New York over allegations involving the London gold fix


Israel-Gaza conflict: Hamas calls for ‘third intifada’ after violent riots in Jerusalem and West Bank
Hamas and Palestinian Authority call for "day of rage" over Israeli assault on Gaza after two Palestinians killed in overnight riots north of Jerusalem
By Inna Lazareva, Tel Aviv
9:30AM BST 25 Jul 2014

Hamas leaders, both in Gaza and abroad, have called for the start of the third intifada – or Palestinian uprising – after violent riots with live fire erupted throughout Jerusalem and the West Bank last night.

Violence flared up as thousands of Palestinians took to the streets, rioting and protesting Israel’s actions in Gaza.

Approximately 10,000 people marched from Ramallah to Jerusalem, where they clashed with Israeli police.

Two Palestinians were killed and approximately 200 were injured when protests turned violent near the Qalandiya checkpoint, just north of Jerusalem. In East Jerusalem and the Old City, 40 rioters were arrested.

“Ambulances continued to bring wounded Palestinians from Qalandiyah checkpoint to the Ramallah Government Hospital until 1.00am Friday, about three-and-a-half hours after the demonstrations began”, Israeli daily Haaretz reports.

“This is your opportunity”, said Husham Badran, Hamas spokesman based in Qatar, responding to the clashes.


Jim Sinclair’s Commentary

"Fees and Gates" should make investors in Money Market fund terrified.

SEC Adopts Money Market Fund Reform Rules
Rules Provide Structural and Operational Reform to Address Run Risks in Money Market Funds
Washington D.C., July 23, 2014 —

The Securities and Exchange Commission today adopted amendments to the rules that govern money market mutual funds.  The amendments make structural and operational reforms to address risks of investor runs in money market funds

Today’s reforms fundamentally change the way that money market funds operate. 

Floating NAV daily share prices of the money market funds fluctuating along with changes in the market-based value of the funds’ investments.

Fees and Gates money market fund boards of directors to directly address a run on a fund.  The new tools – fees and gates – would give fund boards the ability to impose liquidity fees or to suspend redemptions temporarily, also known as “gate,” if a fund’s level of weekly liquid assets falls below a certain threshold.

According to the IMF. This is what is in most money market accounts. Smoke and mirrors. Welcome to the Hotel California.


Posted at 2:33 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

A wash trade is a false price because it occurs with the buyer and seller as one and the same party or two financially related parties.

Who is to say that the huge paper gold shares at the open in the US are not wash sales? There is no risk in a wash sale. You can artificially force the price in any direction you wish with wash sales. Wash sales are illegal under present rules and regulations.

Lawsuit Stunner: Half of Futures Trades in Chicago Are Illegal Wash Trades
By Pam Martens: July 24, 2014

Since March 30 of this year when bestselling author, Michael Lewis, appeared on 60 Minutes to explain the findings of his latest book, Flash Boys, as “stock market’s rigged,” America has been learning some very uncomfortable truths about the tilted playing field against the public stock investor.

Throughout this time, no one has been more adamant than Terrence (Terry) Duffy, the Executive Chairman and President of the CME Group, which operates the largest futures exchange in the world in Chicago, that the charges made by Lewis about the stock market have nothing to do with his market. The futures markets are pristine, according to testimony Duffy gave before the U.S. Senate Agriculture Committee on May 13.

On Tuesday of this week, Duffy’s credibility and the honesty of the futures exchanges he runs came into serious question when lawyers for three traders filed a Second Amended Complaint in Federal Court against Duffy, the Chicago Mercantile Exchange, the Chicago Board of Trade and other individuals involved in leadership roles at the CME Group.

The conduct alleged in the lawsuit, backed by very specific examples, reads more like an organized crime rap sheet than the conduct of what is thought by the public to be a highly regulated futures exchange in the U.S.

The lawyers for the traders begin, correctly, by informing the court of the “vital public function” that is supposed to be played by these exchanges in “providing price discovery and risk transfer.” They then methodically show how that public purpose has been disfigured beyond recognition through secret deals and “clandestine” side agreements made with the knowledge of Duffy and his management team.

The most stunning allegation in the lawsuit is that an estimated 50 percent of all trading on the Chicago Mercantile Exchange is derived from illegal wash trades.


Russia starts reinforcing naval fleet in Crimea
July 23, 2014 10:11 AM

Sevastopol (AFP) – Russia announced Wednesday that it had begun expanding and modernising its Black Sea fleet based in Crimea with new ships and submarines, just months after annexing the peninsula from Ukraine.

"Today we have started forming a powerful Black Sea fleet with an absolutely different level of air service, coastal missile and artillery troops and marines," said Alexander Vitko, the Black Sea fleet commander, in a message to servicemen.

"We are preparing bases and crews to serve on new ships and submarines."

Vitko said the modernisation of the fleet "lays the foundation for the future of the fleet, both in the short term and looking far ahead."

Russia’s Black Sea fleet had a base at the historic port city of Sevastopol in Crimea under an agreement with Ukraine before Russia annexed the peninsula in March.

President Vladimir Putin said at a meeting with the national security council Tuesday that Russia will bolster its defences to counter the creeping influence of NATO close to its borders.

"It is necessary to implement all of the country’s defence measures fully and promptly, including of course in Crimea and Sevastopol, where we have to de facto create military infrastructure from scratch," he said.



Jim Sinclair’s Commentary

Continuous meaningful steps forward for the Chinese currency.

Swiss National Bank, China Agree on a Currency-Swap Deal
Deal Is Key to The Development of Yuan Market in Switzerland
By Neil MacLucas and Chiara Albanese
Updated July 21, 2014 12:16 p.m. ET

URICH—The Swiss National Bank SNBN.EB -0.55% and People’s Bank of China have agreed to set up a currency swap line designed to boost trade and investment between the two countries, joining a parade of countries hoping to become offshore hubs for trading the yuan.

The Swiss and Chinese central banks said Monday that the three-year agreement will allow them to buy and sell their currencies up to a limit of 150 billion yuan, also known as renminbi, or 21 billion Swiss francs ($23.4 billion). Such swap lines allow central banks to buy currencies from one another, making it easier for banks in each country to get hold of the underlying currencies when they need them.

The deal also will allow the SNB to buy up to 2 billion francs worth of Chinese bonds, helping it diversify its foreign-exchange reserves, which have swelled to almost 450 billion francs.

"Switzerland has taken a long time to figure out how it wanted to be involved with China but it is not lagging behind now," said RongRong Huo, head of renminbi business development for Europe, the Middle East and Africa at HSBC Holdings HSBA.LN +2.03% PLC. "It has actively progressed to the second stage of the process, which is to bridge the gap between onshore and offshore markets, especially on the infrastructure side."

The Swiss franc offers China a strong haven currency as an alternative to the euro, she said.

For Switzerland, the effort to promote yuan trading "is a country push rather than a location push, as the country is actively promoting both Zurich and Geneva," Ms. Huo said.

The Swiss central bank, based in Zurich, said the agreement will further strengthen collaboration between it and its Chinese counterpart and is a "key requisite for the development of a renminbi market in Switzerland."


Sales of U.S. New Homes Fell in June After Large Revision
By Victoria Stilwell and Nina Glinski Jul 24, 2014 12:46 PM ET

July 24 (Bloomberg) — Bloomberg’s Scarlet Fu reports that new home sales in June fell 8.1 percent to an annualized pace of 406,000, as the median home sale price also fell. She speaks on “Market Makers.”

Fewer U.S. new homes than forecast were sold in June and data for the prior month was revised down by a record, painting a troubling picture of a market struggling to gain traction.

Sales declined 8.1 percent to a 406,000 annualized pace, the fewest since March and lower than any projection in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. That followed a May rate of 442,000 that was 12.3 percent less than estimated last month.

Restrictive lending rules, limited land supply, higher mortgage rates and more expensive properties are restraining housing, underscoring Federal Reserve Chair Janet Yellen’s concern that the industry is underperforming. Other data showed the fewest Americans in more than eight years filed applications for unemployment benefits last week, probably reflecting a pickup in auto-making during a typically slow time of year.

“The housing data on balance has looked weaker than some of the other indicators on the economy,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York. “The tightness in credit conditions has limited the pool of prospective buyers.”


Jim Sinclair’s Commentary

Easily due to auto retooling date difference.

Jobless Claims in U.S. Unexpectedly Drop to Eight-Year Low
By Nina Glinski and Victoria Stilwell  Jul 24, 2014 8:59 AM ET 

July 24 (Bloomberg) — Nariman Behraveshm chief economist at IHS, and Bloomberg’s Scarlet Fu discuss this week’s initial jobless claims report, which fell to an eight-year low of 284,000, and what it means for the quality of job creation in the United States. They speak on “In The Loop.”

The number of Americans filing applications for unemployment benefits dropped last week to the lowest level in more than eight years, reflecting what could be a pickup in auto making during a typically slow time of year.

Jobless claims fell by 19,000 to 284,000 in the week ended July 19, the fewest since February 2006 and lower than any economist surveyed by Bloomberg forecast, a Labor Department report showed today in Washington. Applications can be volatile in July because of auto plant shutdowns, even as state data showed nothing inconsistent with prior years, a Labor Department spokesman said as the data was released to the press.

Fewer claims signal employers are reluctant to let go of staff as the talent pool shrinks and sales improve. A tightening labor market could lift wages and spur consumer spending, which accounts for about 70 percent of the economy.

“Make no mistake — the broader trend is definitely one for improvement,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, who projected claims would drop. “But there’s an asterisk that needs to be assigned to this number, and that’s broadly true for claims in July.”

Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.2 percent to 1,984.4 8:59 a.m. in New York.


US Manufacturing PMI Drops, Biggest Miss On Record
Submitted by Tyler Durden on 07/24/2014 09:50 -0400

But, but, but… the rest of the world’s PMIs are soaring as soft-survey data trumps any hard data facts. US Manufacturing dropped from 57.3 to 56.3 despite analysts that were convinced it should rise further to 57.5. This is the biggest miss on record, and the 2nd miss in a row. In spite of soaring markets proving the recoverty is just picking up and accelerating, new export orders weakened, manufacturing production fell, input costs surged, and employment tumbled to 10-month lows. But, stocks are surging on this dismal news…


as Employment tumbled to its worst of the year!


"Worryingly, job creation slid to its lowest since last September, which in part reflects concerns that current sales growth may not be sustained. A key source of concern is export sales, which continue to show disappointingly meagre gains"


Posted at 1:40 PM (CST) by & filed under Jim's Mailbox.


The Svoboda is one of the far right, ultra-nationalist parties.  Their origins go back to WW II where they fought with the Germans against the Soviets.

CIGA Craig

Ukraine Coalition Government Collapses as 2 Parties Quit
By Daria Marchak Jul 24, 2014 4:24 AM MT

Ukraine’s coalition collapsed after two parties quit during a months-long pro-Russian insurgency in the nation’s east that downed a Malaysian Air jet last week.

The UDAR and Svoboda parties said they’d leave the government and seek a snap parliamentary ballot, according to statements today on their websites. Under the constitution, the former Soviet republic has 30 days to form a new coalition or it must call early elections. The existing cabinet will remain in place in the meantime.


Posted at 8:44 AM (CST) by & filed under In The News.



U.S. ally cuts off communications with Obama and seeks new trade outside dollar
July 22, 2014

On July 21, Turkish Prime Minister Tayyip Erdogan spoke in an interview with Turkey’s ATV television, and confirmed that his office had cut off direct communications with President Obama, and in fact, were no longer even answering calls received from the White House. In addition to this startling announcement regarding a long standing U.S. ally, the Russian Ministry of Economic Development followed this up with a press release that stated that Turkey was quickly moving away from their reliance on the dollar as the global reserve currency, and is seeking increased trade with Russia in a mutually beneficial exchange of self-contained sovereign currencies.

Turkey’s cold shoulder against President Obama and the U.S. began shortly after the Syrian crisis failure by the United States back in September of 2013. And since that time, Turkey has begun to move away from its U.S. alliance and has started seeking increased trade agreements with America’s primary adversary Russia. Already the eighth ranked trading partner for Russia, Turkey is proposing an even greater share of this pie, and is willing to accede to Russia and China’s agenda for a de-dollarized trade system that cuts out the reserve currency from most or all transactions.

In 2013, the volume of trade between the countries amounted to 32.7 billion dollars. Russia is the second (after the EU) among foreign trade partners of Turkey, and Turkey – the eighth largest trade partner of Russia.

Minister Alexei Ulyukayev said that last year 4.5% drop was recorded in the Russian-Turkish trade. This is largely due to the unfavorable global economic environment. However, in January-May this year compared to the same period last year, turnover grew by 0.6%, which was due to increased deliveries of Russian exports. "Our task is to make every effort to save the positive dynamics of bilateral trade," – said the Minister.


A chessboard drenched in blood
By Pepe Escobar

"The intelligence and facts were being fixed around the policy." Everyone remembers the Downing Street Memo, which unveiled the Bush/Blair "policy" in the run-up to the 2003 bombing/invasion/occupation of Iraq. The "policy" was to get rid of Saddam Hussein via a lightning war. The justification was "terrorism" and (non-existent) weapons of mass destruction (WMD), which had "disappeared", mounted in trucks, deep into Syria. Forget about intelligence and facts.

The tragedy of MH17 – turned, incidentally, into a WMD – might be seen as a warped rerun of imperial policy in Iraq. No need for a memo this time. The "policy" of the Empire of Chaos is clear, and multi-pronged; diversify the "pivot to Asia" by establishing a beachhead in Ukraine to sabotage trade between Europe and Russia; expand the North Atlantic Treaty Organization to Ukraine; break the Russia-China strategic partnership; prevent by all means the trade/economic integration of Eurasia, from the Russia-Germany partnership to the New Silk Roads converging from China to the Ruhr; keep Europe under US hegemony.

The key reason why Russian President Vladimir Putin did not "invade" Eastern Ukraine – as much as he’s been enticed to by Washington/NATO – to stop a US military adviser-facilitated running slaughter of civilians is that he does not want to antagonize the European Union, Russia’s top trading partner.

Crucially, Washington’s intervention in Kosovo invoking R2P – Responsibility to Protect – was justified at the time for exactly the same reasons a Russian intervention in Donetsk and Luhansk could be totally justified now. Except that Moscow won’t do it – because the Kremlin is playing a very long game.



Cockpit Voice Recorder of MH17 Not Tampered With, Say Dutch Investigators
Updated: July 23, 2014 23:34 IST

The Hague:  Dutch investigators, who examined the downed MH17 flight of Malaysia Airlines in Ukraine on July 17, today said that data from the cockpit voice recorder was intact and had not been tampered with.

"The cockpit voice recorder was damaged but the memory module was intact. Furthermore, no evidences or indications of manipulation of the cockpit voice recorder were found", the Dutch Safety Board (OVV) said as the black boxes were being analysed in Britain.


German Economy Hit by US, EU Sanctions on Russia
The Boomerang Effect: Sanctions on Russia Hit German Economy Hard
By Matthias Schepp and Cornelia Schmergal

Companies like oil producer Rosneft — here, a Rosneft drill site in eastern Siberia — have been slapped with US sanctions. That has created problems for German companies.

The United States and Europe last week announced the imposition of stronger sanctions against Russia in response to the ongoing crisis in Ukraine. German industry may be among the losers.

It wasn’t that long ago that Kremlin officials could hardly avoid laughing when asked about the economic sanctions imposed on Russia by the West. As long as every NATO member state jealously sought to protect its own business interests, things "weren’t all that bad," they gloated.

But since last week, their moods have darkened. For months, the European Union in particular had been reluctant to enact effective penalties against Moscow. Last Wednesday, though, the 28 EU heads of state and government cleared a psychological hurdle: For the first time, they opted go beyond sanctions targeting individual political leaders in Moscow, adding prohibitions against doing business with specific Russian companies that contribute to the destabilization of the situation in Ukraine. A concrete list is to be presented by the end of the month. European development banks have also been banned from providing loans to Russian companies.

The US, for its part, penalized a dozen leading Russian conglomerates, including oil giant Rosneft, natural gas producer Novatek, Gazprombank and the weapons manufacturer Kalashnikov. From now on, they are forbidden from borrowing money from American monetary institutions and from issuing medium- and long-term debt to investors with ties to the US.




Jim Sinclair’s Commentary

There are many out there that should carry this label, most certainly in the zombie banking system leveraged to OTC derivatives.

U.S. Poised to Label MetLife a Potential Threat to the Financial System
By Ian Katz and Robert Schmidt Jul 22, 2014 9:00 PM MT

A U.S. council of regulators is poised to label MetLife Inc. a potential threat to the financial system, subjecting the insurer to oversight by the Federal Reserve, two people with knowledge of the matter said.

A decision by the Financial Stability Oversight Council may come as early as July 31, when the panel is tentatively planning to meet, said the people, who asked not to be identified because the process isn’t public. The vote could be delayed briefly because the council hasn’t formally closed its review of the company, the people said.

MetLife, the biggest U.S. life insurer, could be subjected to stricter capital, leverage and liquidity requirements as a result of Fed supervision. The company has been under consideration as systemically important for more than a year, and its executives have met more than 10 times with council staff members to argue it doesn’t pose a risk.

John Calagna, a spokesman for New York-based MetLife, and Suzanne Elio, a Treasury spokeswoman, declined to comment. The council’s rules prohibit it from disclosing the names of companies unless a designation is made.

MetLife shares were little changed at $55.50 yesterday, after earlier falling as much as 1.8 percent.


The Baltic Dry Index Collapses To 18-Month Lows; Worst July Since 1986
Tyler Durden on 07/22/2014 17:51 -0400

The bulls will ignore it, shrugging that it’s merely over-supply of ships that the resurgent world economy will quickly soak up as it ‘recovers’… However, World GDP growth expectations are collapsing, trade volumes are slowing, and the Baltic Dry Index has continued to slump to its lowest since the start of January 2013 (a holiday period). For some context, this is the lowest July level for the Baltic Dry since 1986… "noise"

There’s this…


and then there’s this…



Jim Sinclair’s Commentary

Food inflation is not going away.

Price of Beef and Bacon Reach All-Time High
July 22, 2014 – 11:14 AM
By Ali Meyer

( – The price of beef and bacon hit its all-time high in the United States in June, according to data released Tuesday by the Bureau of Labor Statistics (BLS).

In January 1980, when BLS started tracking the price of these commodities, ground chuck cost $1.82 per pound and bacon cost $1.45 per pound. By this June 2014, ground chuck cost $3.91 per pound and bacon cost $6.11 per pound.

A decade ago, in June 2004, a pound of ground chuck cost $2.49, which means that the commodity has increased by 57 percent since then. Bacon has increased by 78.7 percent from the $3.42 it cost in June 2004 to the $6.11 it costs now.

In one month, beef increased from $3.85 in May 2014 to $3.91 in June 2014. Bacon increased from $6.05 in May 2014 to $6.11 in June 2014.

Each month, the BLS employs data collectors to visit thousands of retail stores all over the United States to obtain information on the prices of thousands of items to measure changes for the Consumer Price Index (CPI). The CPI is simply the average change over time in prices paid by consumers for a market basket of goods and services.

The BLS found that there was a 0.1 percent change in the food index in June, which tracks foods like meats, poultry, fish, eggs and dairy, as well as many others. “The index for meats, poultry, fish, and eggs increased in June, though its 0.2 percent increase was its smallest since December,” stated BLS.

“The index for food at home has increased 2.4 percent over the past year, with the index for meats, poultry, fish and eggs up 7.5 percent,” BLS stated.



Jim Sinclair’s Commentary

When it rains, it pours.

Deutsche Bank Suffers From Litany of Reporting Problems, Regulators Said
Letter From New York Fed Said Some Reports From Deutsche Bank’s U.S. Operations Were ‘Inaccurate and Unreliable’
By David Enrich, Jenny Strasburg and Eyk Henning
Updated July 22, 2014 6:57 p.m. ET

An examination by the Federal Reserve Bank of New York found that Deutsche Bank AG DB +2.56% ‘s giant U.S. operations suffer from a litany of serious financial-reporting problems that the lender has known about for years but not fixed, according to documents reviewed by The Wall Street Journal.

In a letter to Deutsche Bank executives in December, a senior official with the New York Fed wrote that reports produced by some of the bank’s U.S. arms "are of low quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action."

The criticism from the New York Fed represents a rebuke to one of the world’s biggest banks, and it comes at a time when federal regulators say they are increasingly focused on the health of overseas lenders with substantial U.S. operations.

The Dec. 11 letter, excerpts of which were reviewed by the Journal, said Deutsche Bank had made "no progress" at fixing previously identified problems. It said examiners found "material errors and poor data integrity" in its U.S. entities’ public filings, which are used by regulators, economists and investors to evaluate its operations. The problems ranged from data-entry errors to not taking into account the value of collateral when assessing the riskiness of loans.

The shortcomings amount to a "systemic breakdown" and "expose the firm to significant operational risk and misstated regulatory reports," said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank.

The New York Fed has various tools at its disposal to address shortcomings by banks it regulates. It can issue private letters demanding action, as it did with Deutsche Bank, or, in more severe cases, impose restrictions on banks’ activities.

The letter, which hasn’t been previously reported, ordered senior Deutsche Bank executives to ensure steps were taken to fix the problems. It also said the bank might have to restate some of the financial data it has submitted to regulators.

"We have been working diligently to further strengthen our systems and controls and are committed to being best in class," a Deutsche Bank spokesman said Tuesday. As part of this, he said, the bank is spending €1 billion ($1.35 billion) globally and appointing 1,300 people, including about 500 compliance, risk and technology employees in the U.S. Mr. Muccia declined to comment.


Posted at 11:58 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The sharks are eating the sharks in the commodity market.

Credit Suisse to Exit Commodities, Posts Big Quarter Loss
By Jeffrey Vögeli and Elena Logutenkova Jul 22, 2014 4:29 AM MT

Credit Suisse Group AG said it will abandon commodities trading as a $2.6 billion fine to settle a U.S. tax investigation pushed the Swiss bank to its biggest quarterly loss since 2008.

The bank’s net loss in the second quarter was 700 million Swiss francs ($779 million), compared with a profit of 1.05 billion francs a year earlier and a 691 million-franc estimate from analysts. Zurich-based Credit Suisse posted higher-than-forecast earnings at the investment bank and lower profit in wealth management even as it attracted more net new money from rich clients than analysts had estimated.

Chief Executive Officer Brady Dougan is reporting a second quarterly loss in less than a year as Credit Suisse grapples with regulatory probes. Analysts and investors have said Credit Suisse should step up efforts to shrink its investment bank and focus on wealth management to boost returns and shore up capital eroded by the U.S. fine. The bank reaffirmed plans to cut at least 4.5 billion francs in annual costs by the end of next year compared with 2011.

“The decision to exit commodities was probably taken mainly in the light of the capital weakness,” Dirk Becker, a Frankfurt-based analyst with Kepler Cheuvreux, said by phone. “The results in the quarter weren’t that bad, with investment banking surprising on the upside. The only really negative development was the drop in wealth management gross margin.”


Jim Sinclair’s Commentary

Another step forward for the Yuan.

China signs currency swap worth 150 billion yuan with Switzerland
BEIJING Mon Jul 21, 2014 3:36pm EDT

(Reuters) – China signed a bilateral currency swap agreement worth 150 billion yuan ($24.17 billion) with the Swiss central bank, which can invest up to 15 billion yuan in China’s bond market.

The three-year swap, signed on Monday, will "provide liquidity support for bilateral economic and trade exchanges and help maintain financial stability," the People’s Bank of China (PBOC) said in a statement on its website,

The swap deal will provide liquidity support for development of the offshore yuan market in Switzerland and will be extended if needed, the PBOC said.

The Swiss National Bank (SNB) is allowed to invest up to 15 billion yuan in China’s interbank bond market under a quota given by the PBOC. "The SNB’s foreign exchange reserves can thereby be diversified even further," the Swiss central bank said in a statement.

In June, senior Swiss officials touted the SNB’s qualifications to be a hub of renminbi trading during a meeting with China’s central bank governor Zhou Xiaochuan.

Competition is fierce among Europe’s major financial centers to trade in China’s currency. Frankfurt and Luxembourg are vying with London, the favorite of many analysts, and Switzerland is trying to muscle into the competition.


NY Fed Slams Deutsche Bank (And Its €55 Trillion In Derivatives): Accuses It Of "Significant Operational Risk"
Tyler Durden on 07/22/2014 15:41 -0400

First it was French BNP that was punished with a $9 billion legal fee after France refused to cancel the Mistral warship shipment to Russia (which promptly led to French National Bank head Christian Noyer to warn that the days of the USD as a reserve currency are numbered), and now moments ago, none other than the 150x-levered NY Fed tapped Angela Merkel on the shoulder with a polite reminder to vote "Yes"on the next, "Level-3" round of Russia sanctions when it revealed, via the WSJ, that "Deutsche Bank’s giant U.S. operations suffer from a litany of serious problems, including shoddy financial reporting, inadequate auditing and oversight and weak technology systems."

What could possibly go wrong? Well… this. Recall that as we have shown for two years in a row, Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That’s a trillion with a T, and is about 100 times greater than the €522 billion in deposits the bank has. It is also 5x greater than the GDP of Europe and more or less the same as the GDP of… the world.


RMB developing quickly as major world currency
Updated: 2014-07-21 07:21
By Jiang Xueqing (China Daily USA)

The renminbi is on track to become the third-largest international currency behind the US dollar and the euro within five years as China accelerates its promotion of the yuan, said a Renmin University of China report released on Sunday.

Last year, RMB cross-border trade settlement amounted to 4.63 trillion yuan ($746 billion), up 57.5 percent from 2012. It accounted for 2.5 percent of cross-border trade settlement worldwide, the report said.

By the end of the fourth quarter of 2013, direct investment settled in renminbi amounted to 533 billion yuan, 1.9 times the same period in 2012.

The RMB is currently the fifth-most widely used currency internationally. The British pound is third and the Japanese yen fourth.

The offshore yuan market has been developing rapidly in recent years, and this year the People’s Bank of China signed a memorandum of understanding regarding yuan clearing and settlement arrangements with the central banks of the UK, Germany, Luxembourg, France and South Korea.

Chen Yulu, president of Renmin University and member of the central bank’s monetary policy committee, said the offshore yuan market in Europe has huge potential since major European financial centers are competing for the market.



FAA Temporarily Bars U.S. Carriers From Flying to Tel Aviv
Government Cites Rocket Fire Near Ben Gurion Airport; Several European Airlines Also Halt Flights
By Susan Carey, Robert Wall and Sara Toth Stub
Updated July 22, 2014 12:48 p.m. ET

The Federal Aviation Administration banned U.S. carriers from flying to Tel Aviv for at least 24 hours after a rocket attack near Ben Gurion International Airport.

Earlier Tuesday Delta Air Lines, DAL +1.25% American Airlines Group Inc. AAL +0.26% and United Continental Holdings Inc. UAL +2.18% said they were canceling flights to Israel until further notice after reports that a rocket landed near Ben Gurion Airport.

A Delta Boeing 747 from New York was flying over the Mediterranean headed for Tel Aviv on Tuesday when it turned around and flew to Paris instead. Flight 468 had 273 passengers and 17 crew on board.

United said Tuesday that was suspending its two daily Tel Aviv flights until further notice. The airline said one of its planes left Tel Aviv with passengers earlier Tuesday and the second was still on the ground there. United was working on plans to remove the second Boeing 777.


Posted at 1:19 PM (CST) by & filed under In The News.

US dollar clearing rules make gold the new green
By John Dizard
The world is finding ways to get along without the currency after punitive actions by the US

Thanks to what one (non-banker) friend of mine calls the “dangerously stupid” punitive actions and fines levied on banks using the international dollar clearing system by the US government, the world is findingways to get along without the dollar.

It is a difficult and expensive process, as the transaction costs of the dollar system have been so low, liquidity so great, and the range of instruments so convenient. Alternatives, such as the euro or the Chinese renminbi, have been less universalistic and flexible. Also, investing or paying for the exchange of goods and services in euros, Swiss francs, sterling, or renminbi is accompanied by almost as many intrusive compliance rules and oversight as one finds in the dollar world.

Arguably, gold is the most expensive and least convenient of all of the monetary alternatives to the dollar. It is very heavy to carry and often has to be re-assayed by the person accepting it as payment, since there is often a lack of trust among participants in the off-the-books transactions that use it. Not many transactions or investments are actually invoiced in gold as such; instead gold is used as the settlement medium rather than for the price quotation.

Yet its popularity as a medium of exchange for international transactions has been soaring, particularly in the past few months as the impact of US government sanctions on non-fully compliant banks has become severe.

Since the Bank for International Settlements, International Monetary Fund and US Internal Revenue Service do not have systematic records of transaction volumes, I can only go by anecdotal information from people in the gold trade whom I have known for decades.

These are not traders trying to goose the price up by 50 cents in a day, or goldbugs looking for another $1,000 this year. They are risk-averse business people who need to meet customer demands and keep a carefully hedged book. An increase in the use of gold to settle transactions leads to a widespread rise in demand for physical metal held by reliable counterparties in secure vaults in locales considered safe from confiscation by a vengeful Justice Department.


SNL points to drastic fall in new gold discoveries
Research points to a dramatic fall in new gold discoveries which are falling well behind global production levels. This will have a significant impact on gold supply ahead.
Author: Lawrence Williams
Posted: Friday , 18 Jul 2014

LONDON (MINEWEB) – SNL Metals & Mining is nowadays one of the sector’s leading suppliers of statistical information having, in recent years, absorbed the highly respected Metals Ecomomics Group, based in Halifax, Nova Scotia, and Australian headquartered Intierra, which itself had absorbed Sweden’s Raw Materials Group. Its latest major report is titled Strategies for Gold Reserves Replacement and points to some hugely significant data which will affect global newly mined gold production way into the future.

The report points out that over the past 24 years mining companies have discovered some 1.66 billion ounces of gold in 217 major discoveries, BUT – and it’s a big BUT – while this may sound a huge amount, over the same period the industry has actually produced 1.84 billion ounces of gold, so discoveries have not been keeping pace with production. But the report goes much further in showing that the number of significant discoveries (defined as deposits with a minimum of 2 million ounces of contained gold) is diminishing and this diminishing trend seems to be accelerating. In the 1990s some 124 deposits containing 1.1 billion ounces of gold were discovered while since the year 2000 this has fallen to only 605 million ounces in 93 such discovered deposits. And most recently significant new discoveries appear to have slowed to a trickle.

Further, the report notes that the amount of potential production from these major discoveries is particularly concerning when looking at the discoveries made in the past 15 years. Assuming a 75% rate for converting resources to economic reserves and a 90% recovery rate during ore processing, the 674 million ounces of gold discovered since 1999 could eventually replace just 50% of the gold produced during the same period.

Furthermore, many of these deposits face significant political, environmental or economic hurdles, so, together with only perhaps a 75% conversion rate for resources to reserves and a possibly optimistic 90% metallurgical recovery rate, the amount of gold becoming available for production in the near term almost certainly well under 50% of that currently being produced.



"Buying The Car Was The Worst Decision I Ever Made" – The Subprime Auto Loan Bubble Bursts

Tyler Durden on 07/20/2014 18:05 -0400

It has been over six months since we first highlighted the growing deterioration in the quality of auto loans and mentioned the ‘s’ word (subprime) as indicative that we learned nothing from the financial crisis. Since then, auto loans (and especially subprime in the last few months) have surged to record highs; and most concerning, recently has seen delinquencies and late payments spike. The reason we provide this background is that, thanks to The NY Times, this story is now hitting the mainstream media as subprime-quality car buyers (new and used) realize the burden they have placed on themselves thanks to exorbitantly high interest rates (and a rapidly depreciating ‘asset’). As one car ‘owner’ exclaimed, "buying the car was the worst decision I have ever made."

As The NY Times reports, Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640.


Deja vu all over again…


Russia Touts South Stream Pipeline As Europe’s Gas Lifeline
By Andy Tully | Sun, 20 July 2014 00:00

Russia is mounting a major publicity campaign in Europe for its proposed South Stream gas pipeline in an apparent effort to reassure its EU customers that they can rely on Russian gas for the indefinite future.

The reason for Moscow’s public relations efforts is the continuing unrest in Ukraine. EU countries now get about 30 percent of their gas from Russia, half of it piped through Ukraine. Twice, in 2006 and 2009, that flow has been interrupted. Gas flows to Europe through Ukraine are intact today, but that status may change depending on whether relations between Russia and Ukraine improve or decline.

Meanwhile, Russia is working on an alternative that it says will satisfy everyone, except perhaps Ukraine: the South Stream pipeline, which would bypass Ukraine, instead crossing the Black Sea into Central and Southern Europe.

On July 17, a major Italian newspaper, La Repubblica, published a full-page article based on information from Russia Beyond The Headlines (RBTH), an agency of the Russian government. The article bore the headline, “South Stream On Its Way to Going Ahead.”

The article is part of a broader Russian public relations effort elsewhere in Europe promoting South Stream as a source of 63 billion cubic meters of gas to EU customers per year, meeting 15 percent of Europe’s current needs.