Posted at 2:19 AM (CST) by & filed under Bill Holter.

Dear CIGAs,

I recently had a long and very interesting conversation with John Embry of Sprott Resources. It is always good to speak with him as I consider him one of the five sharpest economic/precious metals minds I know of and certainly value his opinion. John’s name came up a couple of days ago when someone asked “where is all this silver coming from” to meet the outsized physical demand? I said “this is the number one question John Embry and Eric Sprott have been asking for about a year now”.

Our conversation was quite broad but let’s zero in on the “silver supply” aspect because I believe it is more important than anything else in our world today. That is a very big statement but stay with me as you will see toward the end why I believe this. John asked where IS all the silver coming from? Let me first say what follows was my best educated “guess” and I know of no one who has the firm and hard answer; I told him during the 80′s and early 90′s the amount of “scrap” could be a very logical explanation. Then during the 90′s and early 2000′s the silver deficit could be explained by the huge amount of silver recovered from the “Manhattan Project” estimated to be nearly 1 billion ounces. I also believe the Chinese lent somewhere around 300 million ounces of silver to the U.S. back in 2003 for a 10 year term which expired in that “magical year” 2013. If this was true, it would explain the massive paper takedown in May of 2013 because the lease was “up”. I believe silver had to be taken down as the price was getting away and threatening $50. A collapsing price would allow the U.S. to say “don’t worry, you will get your silver back as we have the price under control”.

Here is where I believe the silver to meet delivery has come from, CHINA! But why? First and foremost, China was a “silver nation” and had used silver as money for longer and in greater quantity than any other nation. In other words, the silver has come from the only place it could have because China had it. OK, but even if China was the only large stockpile, why would they “throw good money after bad” if they were already defaulted on? I believe they wanted the crowned jewel of the West, Gold! They had silver but the West had the gold accumulated during the 1900′s and especially after WWII. Yes the U.S. dishoarded in the 50′s and 60′s but we did still have 8,000 plus tons left and are (were?) custodian for other Western gold holdings. It is my contention a deal was made where silver has been supplied by China to prevent the Achilles heel (silver) from defaulting and blowing up everything. In other words, keeping the game going for longer would allow China to accumulate gold and drain what is left, had the game blown up in 2013, China would not have had the ability to accumulate what they have since then. Call this “dropping pennies to pick up dollars”.

Getting back to what I said at the beginning where I said “silver is more important than anything else in the world”, please follow this through. Silver is a very small market, some would say unimportant except for its various technological, medical, etc. uses. However, in no way could silver’s price get away to the upside without dragging gold with it. Were the price of gold to get away to the upside, demand would explode (particularly in China where they are known as speculators and “chasers”). Were this to happen, the existing supply would be chewed up and the uncomfortable request “please deliver my gold” would become prevalent. At this point the game would be over as the scam of fractional reserve gold (and silver …and everything else) would be public knowledge.

You see, “trust” is at the heart of it all. Our entire financial system is based on trust. Trust in government, trust in fiat currency, trust in cross trading partners, trust in your bank or your broker… it is ALL TRUST! What would happen to this trust if it turned out that a Ponzi scheme turned up somewhere? Not just any Ponzi scheme like Madoff but one where the exchange itself was running a fractional reserve fraud and could not deliver? Trust …IN EVERYTHING would fail!

As usual I am sure I will be trolled for the above and called an idiot but I must ask you this- If global gold supply has not met demand for 20 years or more, where can the metal have come from to meet the deficit? The same goes for silver and even more so because the supply/demand deficit has been even more severe and longer in duration? The answer is most obvious, the metal had to come from the only place available, above ground supplies. For gold, that can only mean “official” stockpiles (vaults). For silver, I believe the only large above ground stockpile left was legacy silver in China.

Please do not point at the price and say “see, there are no shortages” as we have seen shortages, rationing and backwardation in both silver and gold over the last two years. If you gave me 100 billion counterfeit shares of IBM I could sell whenever I wanted, I am pretty sure I could make IBM look like a falling down drunk whenever I wanted and the price would certainly be depressed! Herein lies the fault, gold nor silver can be “printed” and when all is said and done investors holding receipts for same will be in for a very big and very bad surprise!

To finish, if I am correct about the silver for delivery coming from the most likely of all places, China, then I believe this will be looked back on by historians as “the Chinese silver fox in the West’s golden hen house! Am I correct? I don’t know but we will soon see as the global paper financial edifice is quaking on its own. John Embry told me, “of all the many theories I have heard so far, yours makes the most sense and is the most logical”. I mentioned this topic to Jim yesterday and he told me when we first talked about it six months back he was skeptical but the more he has thought about it …the silver can ONLY be coming from where it exists…Chinese legacy silver!

I think China has done some very intelligent maneuvering particularly since the 2008 crisis. They figured out our fractional reserve scheme was toast but they played along anyway. They even levered up as much or more than we did since then. However, with this increase in credit they have built infrastructure in the form of roads, bridges, cities, plant and equipment …all for and with future uses. The West on the other hand has thrown a “standard of living party” and neglected infrastructure to the point of dilapidation. Yes China’s financial system will implode with all the rest, they may even lead it! But, they will be left with new infrastructure and “money” (our gold) to get started again. President Xi has even said this to his people and to the world. He said the short term would be difficult but the long term beneficial. I think he is telling the truth!

Standing watch,

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

Posted at 2:16 AM (CST) by & filed under Jim's Mailbox.

Jim,

What if EVERYONE declared bankruptcy?

Citizens, College Students, Corporations, Banks, Municipalities, States, and the Federal Government?

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Everyone would get a fresh start!

And only those with gold wouldn’t care what happens. Their wealth is eternal!

CIGA Wolfgang Rech

Posted at 7:21 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Those who have been reading my work for any length of time know I have been adamant we would someday face a “global margin call”.  I believe this call was issued last week!  No matter how you look at the world, whether financially, geopolitically, macro, micro or whatever …what underlies everything in our world today is “credit”.  Credit is used to build, wage war, to produce and deliver, to consume or to trade, EVERYTHING runs on credit.  As a side note, in order for credit to be extended, the borrower must have some sort of “collateral”.  This collateral can be physical, financial, or simply “faith”, meaning a good credit rating or at least trust by the lender.

We’ve now arrived at a point very similar to where we were in the fall of 2008 with several very grave exceptions.  The world is facing a global margin call again, only this time there are no sovereign entities left with a clean balance sheet that can be levered up further.  There are also no tools left available to the various central banks to administer monetary policy.  They have already printed, monetized debt and lowered rates to zero.  Richard Fisher has even admitted they have no ammunition left!  As a side note, rates were cut to zero to make the higher debt balances serviceable but now even zero percent rates are not enough.  From a macro standpoint, real economic activity is not generating enough cash flow (profits and tax revenues) to support this current debt.  Lastly, there is no more “collateral” left to borrow against.  Whether it be stocks, bonds, real estate, commodities or even “faith”, we are at the end of the road in the collateral department.

We have recently found out (not that we did not already know) through admission that many statistics have been wrong, and wrong for many years.  What was reported and paraded as fantastic employment news on Friday turned out to really be a stinker as the truth turned out to be a whopping 11,000 job gain http://davidstockmanscontracorner.com/newsflash-from-the-december-jobs-report-the-us-economy-is-dead-in-the-water/!  What would have been considered heresy just 10 years ago is now “normal”, the Swiss National Bank has become a huge global hedge fund http://www.zerohedge.com/news/2016-01-08/hedge-fund-known-swiss-national-bank-posts-record-23-billion-loss-down-4-eur-aapl-vr along with the PBOC http://www.zerohedge.com/news/2016-01-10/chinas-plunge-protection-team-bought-%C2%A518-trillion-stocks-2015 and Bank of Japan.  Does anyone doubt the Fed is not deeply in U.S. equity markets also?  What kind of monetary policy is this?  Sovereign “money” (currency) is foundationed on stock markets?  Please keep in mind that global trade is crashing with the Baltic Dry Index making all time lows this past week and reports of tankers (non oil) all over the world being docked and empty.  As for oil, there is such a global glut there are now fears of lack of storage space.  All of this points toward a collapsing real global (depression) economy …which must service the most financial debt in the history of history!

This past week, markets all around the globe convulsed greatly with almost nothing left unscathed.  There was a different excuse each day for the drops.  We first heard about the Saudi/Iran disconnect of diplomatic ties, then, everything was down because of the yuan devaluation and their market hitting the 7% circuit breakers.  I even heard someone say that everyone has such great profits they wanted out …but not until the 2016 tax year which is why they waited until the first week.

I do not believe any of it and would instead say we are simply receiving a global margin call.  This had to come sooner or later as the world sits upon the greatest credit build in all of history.  We are simply at the end of a “credit cycle” …unfortunately the largest credit cycle EVER!  Everyone “knew” this day would come yet no one paid attention to it in their daily lives as “life just went on” as if nothing was wrong!  I am sure we will hear reason after reason in the future …the real reason being too much debt with not enough collateral left nor enough economic activity to support it.  Simple!

Now, the margin call comes.  Now comes the great unwind!  “Collateral” of all sorts will be questioned.  The questions will be of the “strength, liquidity, ownership and even whether the collateral even exists”.  Everything will be questioned and nothing taken for granted or even at face value.  The issue of “trust” and even “who” can you trust will come forward.  Institutions who have traded with each other for decades will suddenly be looking at each other with different eyes.  Questions like “will I get paid” or “will I receive what I paid for” will be an everyday exercise.

There will surely be “blame” but what will it be?  Several years into the future it will be understood for what it really is, too much debt, leverage and financially modified products such as derivatives.  In the immediate, the blame might go on anything or anyone.  We could see a banking collapse  http://www.zerohedge.com/news/2016-01-08/35-trillion-neutron-bomb-keeps-kyle-bass-night in China, Europe or start somewhere insignificant like “Pottersville”.  It could be some sort of military action.  Maybe in the Middle East, Eastern Europe, China South Sea.  It could involve any number of characters from the US/China/Russia or Saudis/Israelis/Iran/Syria/Iraq?  Who knows?  It could begin with oil.  It could begin with gold.  It could begin with “truth” coming out in the form of a “truth bomb” and finger pointing.  We might see a global trade war or outright currency war.  Do the Chinese/Russians/and Saudis have enough Treasury securities to dump and cause an interest rate spike?  Are the Saudis still U.S. allis or do they view us now as pro Iran and they switch alliances?  Will, and which treaties will be honored when push comes to shove?  If I had to guess, whatever happens will certainly not be “petro dollar” friendly!

All of these questions and many more will be asked.  The most important of course being whether or not “you” can meet the margin call or whether you do business with a cross partner who cannot meet the call.  When I write “you” I mean to say everyone, every entity, and every sovereign government.  This is how we will get the long awaited reset, the markets will close and accounts will be settled and liquidated if necessary, only upon the reopenings will you understand what you really have.  The great global unwind is here and now with the most dreaded of all phrases about to be announced “MARGIN CALL GENTLEMEN”!

Standing watch,

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

Posted at 12:23 PM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Something Afoot in the Banking System?
- Post-FOMC Rate Hike, Excess Reserves in Historic Plunge; Monetary Base Dropped to 28-Month Low in Record Annual Decline
- December Year-to-Year Broad Money Supply Growth Fell to 4.5% from 5.2% in November
- Employment and Unemployment Reality Remained Bleak
- Year-to-Year Payroll Growth Held at 19-Month Low
- Headline Payrolls Heavily Skewed by Unpublished Seasonal Shifts
- Household-Survey Revisions Were Unusually Minimal
- November 2015 Unemployment Levels Unchanged: U.3 held at 5.0%; U.6 at 9.9%, and ShadowStats at 22.9%
- Fourth-Quarter Industrial Production Faces Quarterly and Annual Contractions in Week Ahead

“No. 779: December Labor Numbers, Shifting Monetary Conditions and Money Supply M3 ”
Web-page: http://www.shadowstats.com

 

Newsflash From The December ‘Jobs’ Report—–The US Economy Is Dead In The Water
January 9, 2016

Here’s a newsflash that CNBC didn’t mention. According to the BLS, the US economy generated a miniscule 11,000 jobs in the month of December.

But on the apparent theory that December is colder than November, and notwithstanding that almost nobody works outside anymore, the BLS fiction writers added 281,000 to their headline number to cover the “seasonal adjustment.”

Of course, this December was much warmer, not colder, than average. Likewise, Christmas season bricks and mortar retail is in turmoil and in secular decline due to Amazon and its e-commerce ilk; export based sectors have been thrown for a loop in the last few months by a surging dollar; and construction activity has been so weak in this cycle—-and for the good reason that both commercial and residential stock is vastly overbuilt owing to two decades of cheap credit—–that its not remotely comparable to historic patterns.

Never mind. The BLS always adds the same big dollop of jobs to the December establishment survey come hell or high water. In fact, the seasonal adjustment has has averaged 320,000 for the last 12 years!

For crying out loud, folks, every December is different—–and not just because of the vagaries of the weather. Capitalism is about incessant change and reallocation of economic activity and resources, and the now globalized ebbs and flows of economic activity have only accentuated the rate and intensity of these adjustments.

Yet the statistical wizards at the BLS think they can approximate a seasonal adjustment factor for December that at +/- 300k amounts to just 0.2% of the currently reported 144.2 million (NSA) establishment survey jobs, and an even smaller fraction of the potential adult work force which is at least 165 million.

More…

Posted at 5:12 PM (CST) by & filed under In The News.

The Hedge Fund Known As The Swiss National Bank Posts A Record $23 Billion Loss, Down 4%, On EUR, AAPL, VRX
Tyler Durden on 01/08/2016 14:01 -0500

To some it is the independent and impartial Swiss National Bank; to others it is the world’s biggest hedge fund with $584 billion in assets or about the same as the Swiss GDP, whose former chief suddenly resigned in 2012 following a family FX trading scandal.

Whatever it is, the SNB had an abysmal year: first and foremost it was its terrible bet on maintaining a EURCHF floor which imploded almost exactly a year ago, when the bank was forced to scrap its attempts to keep the Swiss Franc weak, in the process suffering tens of billions in losses.

Then it was its unprecedented buying spree of US stocks, which in the first quarter of 2015 saw the SNB become one of the world’s biggest buyers, and holders, of AAPL. Since then the stock price entered a bear market, having tumbled to levels not seen since late 2014.

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Among its other holdings, the SNB also had substantial exposure not only to the crushed US shale and energy sector, but to the recent bete noire of the US pharma industry, the company everyone now loves to hate, after loving to love for years, leveraged roll-up expert, Valeant.

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More…

Posted at 4:52 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Based on the title, you might be guessing “who said what”?  It could be thought we are discussing one of the many ridiculous quotes by Jim Cramer.  His latest was a rant about how our market should not be down this morning “because” North Korea allegedly lit off and tested a nuke.  He went on to say “look at earnings, they can’t be the problem, Monsanto and Sonic beat handily”… Really?  Good earnings at Sonic are a sign of economic and financial health?

We could also be talking about president Obama’s speech yesterday where he actually mentioned a few folks have been killed by guns in Chicago of all places.  I could be wrong, but I have never heard him mention any problems in that utopian metropolis?  Amongst the many points he tried to make, he spoke of the children in Sandy Hook who were “killed” with tears in his eyes.  I don’t recall seeing any tears over the heroes who were actually killed in Benghazi?  These were true heroes and not part of a drill.

(As an addendum, partner Jim Sinclair made comments to this paragraph):

“Where are the tears for the 2 volunteers who gave their lives to defend our flag and embassy. Where is the bronze statue that should be on the ground on the green now in Washington showing them in action. These volunteers set up a cross fire position and took out over 70 terrorists before they were overrun by shear numbers. They knew their end before they began. How about a statue to the two snipers that came out of a safe helicopter repelling down ropes to defend Blackhawk down pilots held down under severe incoming fire. These four men knew that what they were doing was going to end their lives painfully, but as modern day patriots were proud to give up their safety and lives for the honor of defending the American Flag and the US ambassador. What has become of repayment we all owe to our vets for all these boutique wars over oil and politics? Oh my what has happened to our country. This comment is probably not politically correct, will bring in hoards of liberal trolls, but does bring tears to my eyes.”
–Jim Sinclair

No, these two are not what has me baffled because I would expect what they said.  Yesterday, former Dallas Fed President Richard Fisher was on CNBC.  PLEASE watch this video  https://www.youtube.com/watch?v=7nuzT3rchPU  ! I can’t believe what he said and I can’t believe there was no “power outage” at CNBC to shut him off!  I can believe CNBC “edited for space” the 7:28 recording down to under four minutes where some of the “juice” was removed.

In a nutshell, Mr. Fisher admitted “What The Fed did, and I was part of it, was front-loaded an enormous rally market rally in order to create a wealth effect…” and followed with  “The Fed is a giant weapon that has no ammunition left.”!!!   I do want to point out the term “front loading” could be replaced with many other words such as “rigged, manipulated, supported or even forced” and the meaning would still be the same!

Why would he say this?  And why now?  I am sure these two questions, (the first in particular) are being asked all over in elite land.  The “wizard” behind the curtain must be none too happy with Mr. Fisher’s confession!  To bluntly answer the two questions, Mr. Fisher must have a guilty conscience and wants to separate himself from “blame” just as Alan Greenspan has attempted.  Put simply, “he knows”!  He knows what they (the Fed) did, he knows the result (bubbles everywhere you look) and he knows the “timeline” to the unwind (now)!

I don’t want to do a complete review of everything he said for the sake of time.  Please view the video for yourself as the entire seven minute interview is as inflammatory and full of truth as any interview I could do in 30 minutes.  The phrases “over valued, unwind, front loaded, giant weapon, no ammunition, horrible crisis, over inflated, we went one step too far, we had already purchased $1 trillion in securities by March 2009, that was sufficient and we had launched the rocket, it was the Fed the Fed the Fed and other central banks …that’s not the way markets should be working, markets were juiced up by central banks” were all included.  I could go on and on but you get the picture.  Mr. Fisher in one 7:00 interview wrapped up and confirmed everything us “nutjobs” have been saying all along!

He did stop one step short of the reality we nutjobs see mathematically coming.  He got close when using the term “unwind” but stopped short and did not go all the way.  This “unwind” is going to end in the closure of markets all around the globe.  Forget about circuit breakers, the only way to stop the selling once it gets out of control …will be to take control by pulling the plug out of the wall!  THANK YOU Mr. Fisher, now when someone laughs at me I will send them a link to your interview!

Standing watch,

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

Posted at 4:48 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Fourth-Quarter Real Trade Deficit Continued on Track for Worst Showing Since Third-Quarter 2007, Indicative of Looming Hit to GDP
- Real Construction Spending Now on Track for Fourth-Quarter 2015 Contraction, Consistent with Other Signals for a Drop in Fourth-Quarter GDP
- Corrected for “Processing Errors” Headline Construction Spending Was Higher, but With Weaker and Declining Growth Across-the-Board
- Reporting Mistakes: A New Era in the Quality of Headline Government Reporting? Next Month We Get to See the Bureau of Labor Statistics’ Corrections for “Processing Errors” in Income Estimates

“No. 778: November Trade Deficit and Construction Spending ”
Web-page: http://www.shadowstats.com

Posted at 5:42 AM (CST) by & filed under Q&A Sessions.

Dear CIGAs,

Happy New Year to Everyone! We are preparing to get back on the road for our next round of Q&A Sessions!

Jim will be joined by his partner Bill Holter and also bullion specialist Andy Schectman of Miles Franklin. We believe this is an historic turn in nearly all markets and the questions of many need to be answered.

We are tentatively looking into Boston, MA (Feb 6) and Tampa, FL (Feb 21) and would like your feedback with respect to interest in attending.

Please email Anna Stoerzinger at [email protected] and indicate in the subject line – Boston or Tampa.

We are looking forward to seeing everyone!