Posted at 9:54 PM (CST) by & filed under In The News.





JPMorgan Sees ‘Lehman Moment’ for Russia If Ukraine Deteriorates
By Jason Corcoran
August 29, 2014 8:38 AM EDT

Russia’s equity markets may face a “Lehman moment” if the Ukraine conflict deteriorates further, according to Alexander Kantarovich, head of research for JPMorgan Chase & Co. in Moscow.

“With the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock,” Kantarovich wrote in an e-mailed report today. “Revisiting the post-Lehman lows would imply downside of 50 percent from an index perspective.”

Russia’s ruble-denominated Micex Index has fallen 6.6 percent this year. The stock gauge posted the worst monthly drop in July since 2012 as the U.S. and the European Union escalated sanctions targeting Russia’s $2 trillion economy after the downing of a passenger jet on July 17 over Ukrainian territory controlled by pro-Russian insurgents.

The Micex lost 67 percent in 2008, the biggest decline among benchmarks in the 30 largest stock markets, as Lehman Brothers Holdings Inc.’s collapse triggered a global recession and foreign banks cut credit. It rebounded by 120 percent in 2009, data compiled by Bloomberg show.


Jim Sinclair’s Commentary

Statistics have become cartoons.

Researchers: Unemployment rate isn’t accurate
August 27, 2014, 5:30 AM

The U.S. jobs report, a key measure of how well the economy is doing, has gotten increasingly less accurate in the past 20 years. The fix for that problem could be in a surprising place: Twitter.

Those are the conclusions of two separate reports out this month. The first report, published by the National Bureau of Economic Research, found that the unemployment number released by the government suffers from a problem faced by other pollsters: Lack of response. This problem dates back to a 1994 redesign of the survey when it went from paper-based to computer-based, although neither the researchers nor anyone else has been able to offer a reason for why the redesign has affected the numbers.

What the researchers found was that, for whatever reason, unemployed workers, who are surveyed multiple times are most likely to respond to the survey when they are first given it and ignore the survey later on.

The report notes, "It is possible that unemployed respondents who have already been interviewed are more likely to change their responses to the labor force question, for example, if they want to minimize the length of the interview (now that they know the interview questions) or because they don’t want to admit that they are still unemployed."


Jim Sinclair’s Commentary

It is clearly not all roses out there.

U.S. Consumer Spending Falls for First Time in Six Months
By Lorraine Woellert
August 29, 2014 4:27 PM EDT

American consumers have become thriftier, trimming spending as bigger wage gains fail to materialize and using every opportunity to rebuild nest eggs. The result may lower economic growth.

Household purchases unexpectedly decreased 0.1 percent in July, the first drop in six months, after rising 0.4 percent the prior month, Commerce Department figures showed today in Washington. Incomes rose at the slowest pace of the year and savings climbed to the highest level since the end of 2012.

While an improving job market is lifting confidence, it has yet to spur the broad-based increases in pay that will boost demand at retailers such as Williams-Sonoma Inc. (WSM) and Guess? Inc. (GES) The weak start for consumer spending, which accounts for almost 70 percent of the economy, prompted some economists to cut third-quarter growth estimates even as other data showed manufacturing was strengthening.

“This is not going to be a consumption-driven quarter,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York. “We need to see sustained faster payroll growth and wage growth.”

Stocks rose, extending the biggest monthly gain since February, led by advances among financial, health-care and technology shares. The Standard & Poor’s 500 Index climbed 0.3 percent to 2,003.37 at the close in New York.


Rand Paul Slams US Interventionists’ "Unhinged Foreign Policy" For Abetting The Rise Of ISIS
Submitted by Tyler Durden on 08/29/2014 14:44 -0400

Authored by Dr. Rand Paul, originally posted at The Wall Street Journal,

As the murderous, terrorist Islamic State continues to threaten Iraq, the region and potentially the United States, it is vitally important that we examine how this problem arose. Any actions we take today must be informed by what we’ve already done in the past, and how effective our actions have been.

Shooting first and asking questions later has never been a good foreign policy. The past year has been a perfect example.

In September President Obama and many in Washington were eager for a U.S. intervention in Syria to assist the rebel groups fighting President Bashar Assad’s government. Arguing against military strikes, I wrote that "Bashar Assad is clearly not an American ally. But does his ouster encourage stability in the Middle East, or would his ouster actually encourage instability?"

The administration’s goal has been to degrade Assad’s power, forcing him to negotiate with the rebels. But degrading Assad’s military capacity also degrades his ability to fend off the Islamic State of Iraq and al-Sham. Assad’s government recently bombed the self-proclaimed capital of ISIS in Raqqa, Syria.

To interventionists like former Secretary of State Hillary Clinton, we would caution that arming the Islamic rebels in Syria created a haven for the Islamic State. We are lucky Mrs. Clinton didn’t get her way and the Obama administration did not bring about regime change in Syria. That new regime might well be ISIS.


Dethrone ‘King Dollar’

WASHINGTON — THERE are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

The reasons are best articulated by Kenneth Austin, a Treasury Department economist, in the latest issue of The Journal of Post Keynesian Economics (needless to say, it’s his opinion, not necessarily the department’s). On the assumption that you don’t have the journal on your coffee table, allow me to summarize.

It is widely recognized that various countries, including China, Singapore and South Korea, suppress the value of their currency relative to the dollar to boost their exports to the United States and reduce its exports to them. They buy lots of dollars, which increases the dollar’s value relative to their own currencies, thus making their exports to us cheaper and our exports to them more expensive.

In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.


Posted at 9:49 PM (CST) by & filed under Jim's Mailbox.


Just wondering if this could be a precursor of things to come and a repeat of 2008 – 2009

CIGA Larry


Yes, it is.


World’s Biggest Wealth Fund Says U.S. Corporate Debt Boom Ending
By Saleha Mohsin Aug 28, 2014 6:19 AM MT

The head of debt investment at Norway’s $880 billion sovereign wealth fund, the world’s largest, said a rally in U.S. corporate bonds may be coming to an end.

Looking at “American corporate investment grade bonds, we see that the spread lies around 100 basis points, that is nearly just as low as they were before the financial crisis,” Ole Christian Froeseth, head of fixed-income at the oil fund, said in a lecture in Oslo today. “One can argue that there isn’t much juice left in this spread, especially not in relation to where we were during the financial crisis.”

The wealth fund, which gets its investment guidelines from Norway’s government, said its corporate bond portfolio returned 2 percent last quarter. Debt issued by companies in the U.S. made a “negative contribution to the relative return,” according to the fund.




The UK gets very little energy from Russia so countersanctions against it does not hurt much. Cameron is repeating O’s game plan.

Moving one step closer to pricing energy in Rubles and Yuan.

Keep an eye open tomorrow on the EU leaders meeting in Brussels.

CIGA Craig

U.K. Wants EU to Block Russia From SWIFT Banking Network
By Robert Hutton and Ian Wishart Aug 29, 2014 4:00 PM MT

The U.K. will press European Union leaders to consider blocking Russian access to the SWIFT banking transaction system under an expansion of sanctions over the conflict in Ukraine, a British government official said.

The Society for Worldwide Interbank Financial Telecommunication, known as SWIFT, is one of Russia’s main connections to the international financial system. Prime Minister David Cameron’s government plans to put the topic on the agenda for a meeting of EU leaders in Brussels tomorrow, according to the official, who asked not to be named because the discussions are private.

“Blocking Russia from the SWIFT system would be a very serious escalation in sanctions against Russia and would most certainly result in equally tough retaliatory actions by Russia,” said Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory.“An exclusion from SWIFT would not block major trade deals but would cause problems in cross-border banking and that would disrupt trade flows.”



I just finished watching an old Frank Sinatra movie titled "Von Ryan’s Express", about an American POW (Sinatra) leading a group of mainly British prisoners to escape from the Germans in WWII. A quote at the end of the film reminded me of GOTS and I just had to send it your way:

"I once told you Ryan, if only one gets out, it’s a victory." ~ Maj. Eric Fincham, played by British actor, Trevor Howard.


Posted at 10:44 AM (CST) by & filed under General Editorial.

Dear CIGAs,

We are looking for your feedback as to where to hold our next Q&A Sessions. We are currently looking at holding a session in one of the following cities the weekend of October 18th:

  • Chicago, Illinois
  • Atlanta, Georgia
  • Jackson Hole, Wyoming

If you are interested in attending any of these sessions, please email us at [email protected] and let us know in the subject line which session you are interested in attending.

Thanks for your feedback and we look forward to seeing you there!

Dan Duval
JSMineset Editor

Posted at 12:00 AM (CST) by & filed under General Editorial.

Dear CIGAs,

The upcoming Q&A session in Nashville has a venue change. The session is now going to be held at the Hilton Garden Inn. The address is below. The time has not changed.


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


Hilton Garden Inn
412 Royal Parkway
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 11:53 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

John Williams shares the following with us.

- Economic Bluff and Bluster versus Reality, Politics and Elections 
- Minimal Upside Revision to Second-Quarter GDP Left Gimmicked Growth Even More Heavily Overstated 
- Underlying Reality Remains a Severely Impaired Consumer and Economy 
- Monthly Economic Series to Turn Increasingly Negative

"No. 653: First Revision to Second-Quarter 2014 GDP" 


Russia Sanctions Hit German Consumers, “Economic Expectations Completely Collapse”
by Wolf Richter • August 27, 2014

It starts out un-alarmingly. The optimism of German consumers weakens somewhat, according to the forward-looking Gfk survey, conducted on a monthly basis for the European Commission. So the overall index fell to 8.6 for September, from 8.9 in August. It was the first decline since January 2013.

The index bottomed in late 2008 below 2, after a breathtaking crash during the financial crisis. In late 2007, it had hovered above 9. Early 2014 was the first time since the prior bubble that the index broke above 8. And August’s level of 8.9 represented an “extremely optimistic economic outlook,” as Gfk calls it. German consumers have been feeling good, and according to the headline index, they’re still feeling good up there somewhere in the rarefied air above 8.

But beneath the surface, there is serious trouble. Gfk reports that the sub-index of economic expectations, “in light of the intensified state of international affairs, completely collapses.”

It plunged 35.5 points to 10.4. The worst monthly plunge since the beginning of the survey in 1980. In a single month, it nearly wiped out all the gains of the boom of the last 12 months. Gfk cites the escalation of the situation in Iraq, Israel, the Eastern Ukraine, and particularly “the faster rotating sanctions spiral with Russia.”

Since there appears to be no sustainable solution to any of the trouble spots, consumers are showing increased uncertainty about the possible consequences for the German economy, Gfk reports. “Particularly the sanctions against Russia, which have already hit exports noticeably, could become a real danger for the German economy.”




Ukraine: emergency UN, Nato, EU meetings after Russian invasion claim
Nato says 1,000 Russian troops fighting in Ukraine as Kiev accuses Moscow of de facto invasion and opening second front

Shaun Walker in Kiev
The Guardian, Thursday 28 August 2014 20.02 BST

World powers have called a succession of emergency meetings to step up the international response to Russia after Kiev accused Moscow of a de facto invasion and of opening up a second front in the conflict in eastern Europe.

The UN security council was meeting in emergency session, and Nato and EU leaders will consider a response on Friday, amid signs that hundreds of Russian soldiers are actively involved in the insurrection against Kiev’s rule.

Russia denies that any of its troops are in eastern Ukraine. But on Thursday Nato said it estimated there were now more than 1,000 Russian soldiers fighting in Ukraine. The organisation released satellite images that it said showed Russian armoured vehicles and artillery had been crossing into Ukraine for at least a week.

The Ukrainian president, Petro Poroshenko, said: "Russian forces have actually entered Ukraine," while Ukrainian fighters in the south-east said Russian forces had helped separatists take over the border town of Novoazovsk.


China vows to respond to US surveillance flights
Aug. 28, 2014 | 02:59 PM

BEIJING: China said Thursday it will continue responding to U.S. military surveillance flights off its coast, rejecting American accusations that one of Beijing’s fighter jets acted recklessly in intercepting a U.S. Navy plane last week.

Defense Ministry spokesman Yang Yujun said China’s military would closely monitor U.S. flights and reiterated calls for the U.S. to scale back or end such missions altogether.

"According to different situations we will adopt different measures to make sure we safeguard our air and sea security of the country," Yang said at a monthly news briefing.

China has long complained about U.S. surveillance flights that just skim the edge of China’s territorial airspace. However, Yang said such flights this year have become more frequent, are covering a wider area and are coming even closer to the Chinese coast.

U.S. sea and air surveillance missions occur most frequently during Chinese military exercises or weapons tests, raising the risk of accidents and misunderstandings, Yang said.

That was a likely reference to an incident last December in which China accused a U.S. Navy cruiser, the USS Cowpens, of having veered too close to China’s sole aircraft carrier in the South China Sea during sea drills. That nearly led to a collision with a Chinese navy ship in the most serious sea confrontation between the two nations in years.


FBI examining whether Russia is tied to JPMorgan hacking

The Federal Bureau of Investigation (FBI) is investigating whether Russians had any links with recent cyber intrusions against US banking giant JPMorgan Chase and other American banks.

The FBI is investigating whether the attacks, discovered in mid-August, were in retaliation for Western sanctions levied on Russia over the crisis in Ukraine, according to Bloomberg.

Security experts say the sophistication used to bypass multiple layers of security to steal data, is far beyond the capability of ordinary criminal hackers.

Some analysts however believe retaliatory attacks involve destruction or disruption of networks, not theft of data.

The attack on JPMorgan resulted in the loss of gigabytes of sensitive data, said two people familiar with the FBI’s probe, who asked not to be identified because the investigation is still preliminary.

Authorities are investigating whether recent infiltrations of major European banks using a similar vulnerability are also linked to the attack, one of the people said.

A third person familiar with the probe said the National Security Agency is cooperating with the FBI in the investigation.



Posted at 11:52 AM (CST) by & filed under Jim's Mailbox.


It’s got someone’s attention.

Excerpt #1:

“Gas is not an appropriate sector for sanctions because it is a lose-lose situation for all: Russia, Ukraine and the European Union,” Oettinger said.

Excerpt #2
On Wednesday, Russian business daily Kommersant reported that Russian oil company Gazprom Neft has agreed to export 80,000 tons of oil from the Novoportovskoye field to Europe, accepting payment in rubles.

Click here to read the full article…

CIGA Perry

Posted at 11:51 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The latest from John Williams’

- 22.6% Gain in July Durable Goods Orders Was Just 0.8%, Net of an Irregular 318.0% Surge in Commercial-Aircraft Orders 
- Booked Years in Advance, Commercial-Aircraft Orders Have Negligible Impact on Near-Term Economic Activity 
- July Existing-Home Sales in Ninth Month of Annual Decline 
- July New-Home Sales Held in Pattern of Stagnation, Amidst Ongoing Reporting Instabilities

"No. 652: July 2014 Durable Goods Orders, New- and Existing-Home Sales" 


Jim Sinclair’s Commentary

The Yuan is knocking on the dollar door.

British Columbia, Ontario to cooperate on Yuan trading hub
Christopher Donville, Bloomberg
2:38 PM, E.T. | August 27, 2014

Business leaders in British Columbia and Ontario agreed to cooperate in promoting Canada as a currency trading hub for the yuan.

AdvantageBC International Business Centre-Vancouver and the Toronto Financial Services Alliance, a group representing business and financial representatives, said today in a statement they will work together with the governments of Canada and the provinces to make the country the first trading hub for the Chinese currency in North America.

“While Canada’s financial industry is headquartered in Toronto, much of the country’s Canada-China trade passes through Vancouver, making it critical for both jurisdictions to work collaboratively so that Canadian businesses are able to take full advantage of this initiative,” Colin Hansen, AdvantageBC’s chief executive officer, and Janet Ecker, CEO of the Toronto alliance, said today in the statement.

Financial centers around the globe are vying to establish trading hubs for the yuan. China has already signed agreements to trade the yuan more freely with Singapore, London and Frankfurt as part of an economic restructuring that includes taking steps to loosen exchange controls.

AdvantageBC is a non-profit organization promoting international business in British Columbia, according to the statement.



Russia’s Gazprom Neft to Sell Oil for Rubles, Yuan

MOSCOW, August 27 (RIA Novosti) – The Russian oil company Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers, the Russian business daily Kommersant reported Wednesday.

Last week, Russia began to ship oil from the Novoportovskoye field to Europe by sea. Two oil tankers are expected to arrive in Europe in September. According to Kommersant, the payment for these shipments will be received in rubles.

Gazprom Neft will not only accept payments in rubles; subsequent transfers via the ESPO may be paid for in yuan, the newspaper reported.

According to the newspaper, the change in currency was made because of the Western sanctions against Russia.

As a protective measure, Russia decided to avoid making its payments in US dollars, which can be tracked and controlled by the United States government, Kommersant reported.


Merkel Slams US Hegemony? "America Can’t Solve All The World’s Problems Anymore"
Submitted by Tyler Durden on 08/27/2014 18:29 -0400

First Russia and China, then UAE, Egypt, and Turkey… and now it appears Germany (following a phone call with Putin) is pulling the rug out from under US hegemony – just as Obama’s warmongery ramps up…


Which is odd because just yesterday, President Obama (who never lies) stated "The United States is and will remain the one indispensable nation in the world…" adding that "no other nation can do what we do." Perhaps he is wrong?

“Even a superpower can’t solve all of the problems alone anymore,” German Chancellor Angela Merkel says.

Merkel did not stop there…






Seems like she is returning to the offensive from the defensive…


Will There Be a ‘New Gold Rush?’ — Ian Gordon, Longwave Analytics

Ian Gordon created Longwave Analytics, which studies the Longwave principle, by which economies obey long-term cyclical trends of expansion and contraction. Eric Sprott is an avid reader — he suggested I interview Ian Gordon for his take on the role of Kondratiev’s ‘long wave cycle’ in explaining the economic environment we are seeing today.

Ian said ‘winter’ was coming for the world economy, though it has been staved off by the flexibility provided by paper money. As a result, a depression will be very different today than in 1929 or 1873, he believes. But now, as then, we could see a massive push for new gold discoveries.

Mr. Gordon explained how he got to know Eric Sprott over 10 years ago:

“I was writing about long-term economic cycles, referred to as ‘Kondratiev’ cycles. In 1998, I realized that we were close to the top of a bull market; we were somewhere akin to 1928 – immediately preceding the Great Depression. Eric appreciated my work, because it helped explain an imminent bull market for gold, which he saw as well.”

I asked: Do these ‘long wave’ economic patterns explain today’s bear market for gold – and the recent rally in general stocks?

“Well, they didn’t predict this – but they can help explain why it’s happening. Over the course of one entire ‘long wave’ economic cycle, covering a full expansion and subsequent contraction, you have what I call four ‘seasons.’ Winter is the period where debt is wiped out of the economy. It happened after 1929, which caused the US banking system to collapse. During the 1920’s, there had been a big build-up in consumer and corporate debt, as well as sovereign debt.

“During the Great Depression and the previous depression of 1873, we were on a gold standard system, so the ability to create money was limited. This time around, we are in a pure credit-based system, so the ability to create money withstands the ravages of the winter. Effectively, governments have been creating more debt. This will ultimately cause a more horrendous economic decline than in either 1929 or 1873, as debt levels are far greater today – and because the world is much more inter-connected financially.”


The Nail In The Petrodollar Coffin: Gazprom Begins Accepting Payment For Oil In Ruble, Yuan
Submitted by Tyler Durden on 08/27/2014 13:57 -0400

Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar’s stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.

This changed in late June when first Gazprom’s CFO announced the gas giant was ready to settle China contracts in Yuan or Rubles, and at the same time the People’s Bank of China announced that its Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin held a meeting in which they discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.

And yet, while both sides declared their operational readiness and eagerness to bypass the dollar entirely, such plans remained purely in the arena of monetary foreplay and the long awaited first shot across the Petrodollar bow was absent.

Until now.

According to Russia’s RIA Novosti, citing business daily Kommersant, Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers. Meaning Russia will export energy to either Europe or China, and receive payment in either Rubles or Yuan, in effect making the two currencies equivalent as far as the Eurasian axis is conerned, but most importantly, transact completely away from the US dollar thus, finally putin’(sic) in action the move for a Petrodollar-free world.

More on this long awaited first nail in the petrodollar coffin from RIA:



Pentagon warns that Isis has global aspirations as US continues Iraq strikes
US effort to build international coalition against Isis advanced, as UK and six other nations agreed to arm the Kurdish peshmerga
Spencer Ackerman in New York, Tuesday 26 August 2014 16.36 EDT

Obama spoke about Isis before a group of American military veterans on Tuesday.

The Pentagon warned on Tuesday that Islamic State (Isis) militants have global aspirations, ratcheting up already dire US rhetoric against the jihadist army that has overrun much of Iraq and Syria.

“Quite frankly, we’re not turning a blind eye to their global aspirations as well,” said Rear Admiral John Kirby, the Pentagon press secretary.

Isis has not conducted attacks outside of Iraq – its gestation ground – and Syria, where its successes brought it global attention. Its own rhetoric imagines a global Islamic caliphate, obliterating man-made borders, but its capabilities – which include access to oil wealth – fall significantly short.

Yet Isis’s attraction of as many as thousands of western passport holders has convinced US intelligence that Isis fighters will plot attacks against the US and Europe.

“Much has been made about the threat they pose, and how imminent it is, and you don’t need to look any further than the recruitment of foreign fighters and the degree to which not just the United States government but many western governments are concerned about these foreign fighters leaving their shores, going over there, getting radicalized, trained, and then coming back and executing attacks, which is not out of the realm of the possible,” Kirby told reporters.

US warplanes continued to strike Isis targets on Tuesday. US Central Command said that its planes, supporting Kurdish and Iraqi forces, destroyed two Isis armed vehicles near the Iraqi Kurdish capital of Irbil and damaged a third.


Jim Sinclair’s Commentary

Popular equity market delusions may run iron economic reality.

Treasury Curve Collapse Signals Multiple Expansion Exuberance Is Over
Submitted by Tyler Durden on 08/26/2014 18:29 -0400

Thanks to buybacks, multiple expansion has been the driver of equity market strength as non-economic actors know one thing – buying stocks at record highs pays better than ‘investing’ in Capex or growth. However, the Treasury market’s yield curve is sending a message loud and clear that multiple-expansion is due to end. As Wells Fargo’s Gina Martin Adams notes, "Index P/E is likely to fall," as the spread between 10Y and 2Y yields compresses. Historical data shows the P/E ratio contracted in seven out of eight periods when the curve flattened since 1975.


As Bloomberg adds, Martin Adams expects the S&P to close 2014 -7.5% from here at 1850 (tied with Deutsche’s David Bianco for lowest prediction among 20 strategists).


Jim Sinclair’s Commentary

And so on we go.

Ukraine-Russia talks in Minsk fruitless — Yatsenyuk
August 27, 16:51 UTC+4

KIEV, August 27. /ITAR-TASS/. Talks between Ukraine and Russia in Minsk, the capital of Belarus, on Tuesday were fruitless, Ukrainian Prime Minister Arseniy Yatsenyuk told a government meeting on Wednesday.

No results had been expected from the meeting, but the event had to take place, he added.

Ukraine currently faces three challenges — war, exchange rate and energy, the premier said, adding that the first could be settled only by restoring control over the border with Russia.

Ukraine’s cooperation with NATO

Yatsenyuk said the government would debate a plan for developing cooperation with NATO. “The Ukrainian president will attend the NATO summit in Wales on September 4-5,” the prime minister said.

“NATO is our partner. We expect the Western countries and NATO to provide practical assistance. We also expect decisions to be made at the NATO summit,” he said.

Deterioration of Ukrainian currency

Ukraine’s currency breached the psychological barrier in exchange rate trading on Wednesday, with the rate of 14 hryvnia to the US dollar, Ukrainian media reported, as Yatsenyuk warned ministers that the national economy could not withstand more than 12 hryvnia for $1.


Russian Central Bank prepares bill to create SWIFT analog in Russia
August 27, 15:06 UTC+4

MOSCOW, August 27. /ITAR-TASS/. The Russian Central Bank and the government’s financial and economic departments have prepared a bill to create a Russian analog of the SWIFT international financial message system, Deputy Finance Minister Alexei Moiseyev said on Wednesday.

“We have prepared a bill. We have consulted with the banking industry and the Central Bank,” Moiseyev said.

Russia will go ahead with the bill as soon as it becomes clear that the Central Bank is technologically prepared “to transfer all operations to internal processing inside Russia.”

Central Bank First Deputy Chairman Georgy Luntovsky said in July that SWIFT was discussing a possibility with the Russian regulator to establish an operational center in Russia. SWIFT Director for Russia, CIS and Mongolia Matvei Gering confirmed this information at that time.

Moiseyev said in April that the Finance Ministry was going to initiate amendments to the legislation to transfer electronic settlements to Russia to ensure their reliable and uninterrupted nature. The system should be registered in Russia and comply with the requirements of the Russian Central Bank, Moiseyev told Rossiya-24 TV channel at the time.


Posted at 1:09 PM (CST) by & filed under In The News.

Russia’s position to remain unchanged at meeting on gas transit with EU — minister Novak
August 26, 17:02 UTC+4

MINSK, August 26. /ITAR-TASS/. Russia will not change its position on key issues at a meeting on gas transit with the EU scheduled for August 29, Russian Energy Minister Alexander Novak said on Tuesday.

“The situation remained unchanged as compared with June 16 after the switch to a prepayment system for gas deliveries,” Novak told ITAR-TASS.

The minister said the meeting would be held in Moscow. “We will discuss issues concerning our energy cooperation and energy dialogue, including mutual relations on gas transit through Ukraine, reliable gas supplies, the construction of South Stream [gas pipeline] and the expansion of access to the capacity of OPAL pipeline,” he said.

Novak cited experts’ data proving that Ukraine “could not survive without Russian gas”.



Jim Sinclair’s Commentary

Equity markets today are historical "popular delusions and the madness of the crowd."

Housing Price Gains Hit The Brakes In June, S&P/Case-Shiller Says
8/26/2014 @ 9:05AM

In another indicator that the double-digit housing price gains of 2013 appear to be behind us, price increases continued to slow in June, S&P/Case-Shiller home price data released Tuesday shows.

The National Home Price Index gained just 6.2% in the 12 months ending June 2014, while the 10-City and 20-City Composites gained 8.1%. That’s a dramatic shift from the double-digit, year-over-year price increases that had become the norm in the second half of 2013 and the first part of this year. All three indices saw their rates slow significantly from last month, when the year-over-year price changes for 10-City Composite stood at 9.4%, the 20-City at 9.3%, and the National Index at 7.1%.

“Home price gains continue to ease as they have since last fall,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators – starts, existing home sales and builders’ sentiment – are positive. Taken together, these point to a more normal housing sector.”

To be clear, home prices are not dropping, simply rising at a slower rate. Economists like to look at year-over-year data for a better picture of the overall market trend than month-to-month data. The S&P/Case-Shiller Indices measure home prices across the nation as well as in 10 and 20 specific cities. While all cities saw home prices increases in June, every city the indices track recorded slower year-over-year price increases than in the prior month.

“In San Francisco, the pace of price increases halved since late last summer,” Blitzer noted. “The Sun Belt cities – Las Vegas, Phoenix, Miami and Tampa – all remain a third or more below their peak prices set almost a decade ago.”


Investor Net Worth Drops To New All Time Low, NYSE Reveals
Tyler Durden on 08/26/2014 15:25 -0400

One can debate whether or not margin debt as reported by the NYSE has any relevance in a world in which the retail investor is long gone, and where the marginal buyer are hedge funds (and primary dealers who use excess reserves as collateral for marginable derivatives and futures) who fund themselves using far more arcane "shadow" repo conduits as we have explained previously, it is indisputable that the leverage statistics disclosed monthly by New York Stock Exchange provide a useful glimpse into how the broader market is obtaining "dry powder" to keep BTFATH.

And while in July margin debt did dip modestly from near all time highs hit back in June when total margin debt was virtually tied with the previous record, at $464 billion, it was that other metric tracked by the NYSE, namely Investor Net Worth, calculated by subtracting margin debt from the notional represented in free credit cash accounts and credit balances in margin accounts, that was the notable highlight in the July report: at a negative $182.1 billion, a decline of $6.3 billion from the prior month, investor Net Worth has never been lower.


Swiss Gold Referendum on November 30
22 August 2014 – Egon von Greyerz

One of the very few remaining proper democracies in the world will vote on bringing the Swiss Gold back to Switzerland on November 30.

This is an initiative that could only happen in Switzerland. An influential member of parliament, Luzi Stamm, representing the biggest Swiss party SVP (Swiss People’s Party) started this initiative with two other parliamentarians.

In order to have a national referendum on an issue in Switzerland, 100,000 supporting signatures are required. The ‘Swiss Gold Initiative’ already achieved this requirement in early 2013.
Not only will the referendum deal with gold repatriation but also seeks to stop all gold sales by the SNB (Swiss National Bank) and to require the SNB to hold 20% of its assets in gold.

The Swiss Parliament and the SNB are against the initiative since it would stop their ability to freely print money. Swiss monetary policy used to be the soundest in the world, but in recent years Switzerland has joined other countries in abandoning a policy of sound money. Switzerland had 2,600 tons of gold in 1999 which was a significant amount in relation to the size of the country. At that time it was decided to sell 50% of the holding. Most of this was sold at the low of the market just like in the UK.

But not only did Switzerland dispose of half of their gold over ten years ago, but a major part of their remaining gold has either been leased out or sold. And some of the gold , if it is still there, is stored in other countries. As most other central banks, the SNB refuses to carry out a proper and official audit of the Swiss gold. Until an audit is done there is no certainty that all of the gold is still there.

Most governments and central banks officially dislike gold because it reveals the decline in the value of paper money. Since 1913 when the Fed in the USA was founded, all major currencies, including the Swiss Franc, have lost between 97% and 99% of their value against gold.



Jim Sinclair’s Commentary

You have to love statistics.

Durable Goods Orders Surge 22.6% in July
Jonathan House and Josh Mitchell
Aug. 26, 2014 8:36 a.m. ET

WASHINGTON—Orders for big-ticket manufactured goods surged in July to a record thanks to a jump in aircraft purchases, though underlying readings showed softening business spending last month.

Purchases of durable goods-products like airplanes, cars, and heavy machinery that are designed to last at least three years-rose a seasonally adjusted 22.6% to $300.1 billion in July from the prior month, the Commerce Department said Tuesday.

That was the sharpest increase and highest level in a data series dating back to 1992.

Surging demand for new aircraft drove most of the increase, likely reflecting stronger sales at Boeing Co. BA +0.68%The aircraft manufacturer had reported taking orders for a record 324 planes last month.

Excluding transportation, orders fell 0.8%, though the prior month’s gain was revised up to 3%.

Economists surveyed by The Wall Street Journal had forecast an overall rise in orders of 7.5% last month.