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Jim Sinclair’s Commentary

As if I do not have enough gold bears on my back as it is. Look at what came to visit my back door – a modest sized black bear.

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Jim Sinclair’s Commentary

Here is the latest from John Williams’ ShadowStats.com.

– Core‰ CPI-U Inflation Hits Cycle High
– April Year-to-Year Inflation Softens: 2.3% (CPI-U), 2.4% (CPI-W), 9.9% (SGS)
– Real Average Weekly Earnings in Ongoing Year-to-Year Decline
– Retail Sales Were Stagnant, Statistically Insignificant

April CPI, Real Earnings, Retail Sales, Euro
Web-page: http://www.shadowstats.com

Jim Sinclair’s Commentary

If you need more reasons for owning gold then this article by Charles Smith of the Martenson Report fits quite nicely. Chris strikes me as a well grounded source that deserves respect.

"Self-Reliance, Community, and the Marketplace"

Readers here are well-acquainted with the dire consequences triggered when Central States attempt to “inflate our way to prosperity” via hyper-inflation and the destruction of currency, and with the basic investment strategy of investing in tangible assets and local enterprises. In this sense, this essay delivers no new strategy except the obvious ones of diversifying away from dependence on the Central State, as well as financial assets denominated in fiat currencies and preparing for a reduction in government services and payments, either directly or indirectly via high inflation.

The End of the Free Lunch
by Charles Hugh Smith, contributing editor
Monday, May 14, 2012

Executive Summary

How the State supplanted community enterprise with an entitlement-driven economy

Why the State’s entitlement approach is unsustainable, mathematically — and is finally imploding as we watch

What to expect at this point: more egregious abuse to keep the system working, ultimately triggering serious social unrest

How self-reliance and local enterprise will emerge as paramount once the current State system collapses

Part I: Acknowledging the Arrival of Peak Government

Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government. The central misconception of Peak Oil — that it’s not about “running out of oil,” it’s about running out of cheap, easy-to-access oil — can also be applied to Peak Government: It’s not about government disappearing, it’s about government shrinking.

Central government — the Central State — has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.

Peak Government is not a reflection of government services or the millions of individuals who work in government; it is a reflection of four key systemic forces that drove State expansion are now either declining or reversing.

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Jim Sinclair’s Commentary

A small look back is the way forward. Here is my former partner Yra Harris’ blast from the past as it applies to the future.

From my viewpoint the existence of as many OTC derivatives as there were in 2008 guarantees QE to infinity.

It is not a choice. There is no other alternative.

"If investors lose their confidence, Bernanke’s beloved PORTFOLIO BALANCE CHANNEL will be rendered null and void. Between Europe’s credit crisis and the coming fiscal cliff, the wealth effect is diminishing. The FED may not want another round of“LIQUIDITY ENHANCEMENT” but the ghosts of 1937 are rattling their chains in UNCLE BEN’S ATTIC. Wonder if there are any VINTAGE MODELS THERE."

Notes From Underground: AUGUST 30 ,2002 … A Revisit To The SOAPBOX
LETTERS TO THE EDITOR – Profit centers too big to fail.
By YRA HARRIS.
30 August 2002
Financial Times
(c) 2002 The Financial Times Limited. All rights reserved

Sir, John Plender (“How banks got in a mix”, August 21) correctly identifies the systemic dangers that accompanied the passage of the Graham-Leach-Bliley act. The repeal of Glass-Steagall has pushed the US banking system to the brink of “moral hazard”. The conglomeration of all financial services under one roof has entangled banks in numerous ethical conflicts. Additionally, Graham-Leach-Bliley has made several institutions so large that the Fed cannot allow them to fail.

A single institution’s deep involvement in every facet of financial dealings does not create greater synergy but greater risk. These large, private profit centres know they are too big to collapse. This realisation adds great uncertainty to the entire financial landscape. Rewarding private profits while socialising the risk is a pathway to disaster. Glass-Steagall should never have been repealed without a bank forfeiting its right to Federal Deposit Insurance Corp insurance.

Well, U.S. bankers have done it again. The best of the breed,JPMorgan and JAMIE DIMON, was blindsided by a  large loss in its “hedging” operation. It is amazing how, since the REPEAL OF GLASS-STEAGALL, we have seen story after story of bank trading operations bringing the global financial system to the edge of a“SYSTEMIC CLIFF.” Since the repeal of the Glass-Steagall, the international system teeters on the precipice of a calamity. Now ifCOMMERCIAL BANKS want to be aggressive and trade like the proverbial hedge fund, then BANKS that are holding companies have to surrender their FDIC INSURANCE and pay for the use of people’s money

A hedge fund uses other people’s money but at least investors are compensated for quality performance. In the case of theBANKS, the PUBLIC is saddled with the risk while the bank employees reap the greater share of the profits. If TOO BIG TOO FAIL BANKS had to shed the safety net of FDIC insurance and pay for funds based on market-determined risk, then the financial system would be much more stable. If banks wish to be proprietary traders, then their positions should be posted in a real-time manner and the appropriate risk factors assigned to its cost of money.

One of the biggest GAME CHANGERS FROM THE REPEAL OF GLASS-STEAGALL WAS THAT THE FINANCIAL SYSTEM LOST ITS FIDUCIARIES. When GOLDMAN was an investment banker rather than a peddler of trash DO YOU THINK IT WOULD HAVE EVER ADVISED A CLIENT TO PURCHASE SUBPRIME DEBT THAT WAS CONVENIENTLY AAA RATED? DODD-FRANK IS A SUPERFLUOUS PIECE OF LEGISLATION THAT IS LOADED WITH THE RANTINGS OF A HERD OF LOBBYISTS. HOW MANY BACK ALLEYS IS THE REGULATION CAN TO BE KICKED DOWN?

***HOW CAN YOU PORTFOLIO BALANCE CHANNEL WHILE STANDING ON A FISCAL CLIFF? This is the dilemma that Chairman Bernanke has left the market-challenged to resolve. At the post-FOMC press conference on April 25, Ben Bernanke warned the country that Congress needed to act in a responsible fashion to head off the coming “fiscal cliff” that would have a dramatic impact upon the economy. Economists are projecting that the FISCAL CLIFF could have a negative GDP effect of anywhere from 2-5%. It’s no small change to an economy striving to gain traction as it attempts to circumvent the headwinds of the European DEBT CRISIS.

It was a statement that Mr. Bernanke will come to regret as much as Alan Greenspan’s advising U.S. homeowners to utilize their residences as PIGGY BANKS. To offer up dire warnings and then offer little advice or leadership has done nothing but rattle the markets and shake investor confidence. As the election season commences and leadership takes a vacation, markets are deleveraging as RISK OFF is the daily clarion call.

If investors lose their confidence, Bernanke’s beloved PORTFOLIO BALANCE CHANNEL will be rendered null and void. Between Europe’s credit crisis and the coming fiscal cliff, the wealth effect is diminishing. The FED may not want another round of“LIQUIDITY ENHANCEMENT” but the ghosts of 1937 are rattling their chains in UNCLE BEN’S ATTIC. Wonder if there are anyVINTAGE MODELS THERE.

More…