In The News Today

Posted at 2:50 PM (CST) by & filed under In The News.

Dear CIGAs,

Today’s testimony that the "Bank of England never approved false lower Libor rates," is totally correct.

They approved a false but higher one slightly under 7 percent during the peak of the crisis of 2008 when there was no lending between banks and therefore no LIBOR at any rate.

This was done on the basis of the MOPE MSM rule, "Never disturb the social order with things like truth." Then it became a habit with the dealers.

Jim Sinclair’s Commentary

From Dean Harry Schultz’s recent contribution to the Aden sisters’ work. It has to deal with a readers comparison to Harry’s age in terms of Fibonacci.

"Great news! Of course, it doesn’t mean everyone who reaches 89 will live to 144. In my opinion, the things that may make great age happen include: good genes, eating a really good diet (fish, poultry, no sugar), no smoking, modest drinking, 8hrs sleep, moderate daily exercise, a positive attitude, a belief in God, and it helps a lot to have friends and a loving mate. When I showed Mark’s letter to team mate MJ he said: “Well, you’ve already been in the Guinness Book of Records; who knows maybe you’ll be in it again for being 144.” Stick around for 55 years and find out. Another old friend, Jim Sinclair, AKA Mr.Gold, heard this news and he wrote: “Only 144? I always thought you were St. Germain. Love, Jim” — I checked with abundant literature/lore and it seems St.Germain lived to a very old age (900?). Voltaire called him a legend, immortal, while looking only 40-50. An alchemist as well ‘twas said. So, perhaps, dear reader, you’ll say a prayer that I manage it to 89 in September to kick off a fabulous Fibonacci run to 144 J.

I’m ready, with vitamin bags and a prayer wheel."

Jim Sinclair’s Commentary

A very real notice.

PFGBEST Broker Notice: July 9, 2012

Due to a recent emergency involving Russell R. Wasendorf, Sr., a suicide attempt, some accounting irregularities are being investigated regarding company accounts. PFGBEST is wholly owned by Mr. Wasendorf.  Therefore, the NFA and other officials have put all funds on hold, and PFGBEST is in liquidation-only status with our clearing FCM. What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds. We will update you as any new procedures are stipulated and with any further information as it becomes available.

Jim Sinclair’s Commentary

The gang is waiting and watching.

As confident I was for gold to trade at $1650, the action around $1650 convinces me beyond a doubt Gold will trade above $3500 in the not too distant future.

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Jim Sinclair’s Commentary

Yra Harris in my opinion has the keenest intellect in markets.

I am posting his recent commentary with his clear explanation of why Operation Twist is a total joke in today’s world.

To understand this is to know why Bernanke seems so pressured, and is telling us what is going to happen with hand signals. See yesterday’s posted picture of him.

Notes From Underground: SCHAUBLE Says Spain On The Road To Salvation (IS 25% UNEMPLOYMENT REPENTANCE?)

First, the U.S. unemployment report was soft although if the ADP stats had not caused the WALL STREET ECONOMISTS to revise their guesstimates upward, the NFP would not have been such a miss from the early consensus. The average hourly earnings were above projections and while MANUFACTURING JOBS were up only 11,000, it was not a negative number. Although it wasn’t a robust number, it certainly wasn’t a huge miss from projections.

The economy is on a TEPID GROWTH PATH and the DOVISH FED PRESIDENTS are crying for added stimulus to help lift unemployment but markets will probably have to wait  to Jackson Hole in late August to find out what tools Bernanke may wish to utilize. Bloomberg had an article this morning, “Dealers Declining Bernanke Twist Invitation.” It seems that dealers and investors are wishing to HOARD Treasuries even as the issuance has grown with the budget deficits. There seems to be a fear of a shortage and all types of investors are holding on to the high quality debt instruments.

Also, as the FED BALANCE SHEET HAS GROWN TO$2.87 TRILLION, the amount of HIGH QUALITY COLLATERAL HAS BEEN LESSENED–the REPO market needs collateral to make it work. This raises two important questions about the FED’S OPERATION TWIST:

Can OPERATION TWIST be a successful in a world in which the SHADOW BANKING SECTOR AND REPO MARKET ACT AS THE MAIN CATALYSTS FOR CREDIT ?

Can OPERATION TWIST work in a world of FLOATING CURRENCY VALUES as OPPOSED TO FIXED RATE CURRENCIES?

When the FED first implemented OT in 1961, BRETTON WOODS WAS IN FORCE as were many economies operating with exchange controls. In a world where money flows at nanoseconds around the globe, the ultimate impact of OT may be far less dramatic than in 1961. Bottom line is that the markets and Chairman Bernanke may very well be overestimating the potential impact of the TWIST on monetary policy and that in today’s economy the tools of 1961 may be a relic of the STONE AGE.

This is very important to consider for it may mean that Chairman Bernanke may have to reach for a more powerful tool to counteract what may well have been a negative stimulus program.

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Jim Sinclair’s Commentary

Inside the Euro crisis is an undertone of a different end that almost every analyst on the planet labels "hog wash." Before you write the euro off due to the fact that all Eurosnobs hate each other, leave open the possibility that the final euro of this drama might be better than the entire concept ever was.

Eurozone officials move on bank watchdog, to report to ECB
by: Matina Stevis and Stephen Fidler
From: The Wall Street Journal
July 09, 2012 8:06AM

SENIOR eurozone finance officials, moving ahead on a plan to create a single overarching bank supervisor for all the countries in the 17-nation currency bloc, are settling on a framework that would create a new agency reporting to the European Central Bank (ECB) to police the largest banks in the currency union, people involved in the discussions said.

Eurozone leaders mandated the creation of the regional supervisor at a summit here in June, a significant step toward creating a future banking union among the countries that use the currency.

Disclosing the first details of how the discussions on achieving this objective were progressing, officials involved said the talks were coalescing around the idea of creating an agency under the ECB that would be charged with sole supervision of the top 25 or so largest banks.

The officials said the smaller eurozone banks would remain under the purview of their national financial-market regulators. But these national regulators would be brought under the control of the eurozone supervisor, which could be based in Brussels rather than Frankfurt, the ECB’s home.

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Jim Sinclair’s Commentary

The USA dumbed-down sheeple could not give less of a damn.

LIBOR-Gate Will Take Down Many More Bankers, And The Claims Will Spiral Into The Trillions
David Kotok, Cumberland Advisors | Jul. 7, 2012, 8:08 AM

Markets reacted to this crazy week of discredited, ADP-based employment forecasts, LIBOR revelations and central bank fizzle.  The result is plain ugly.

In Europe, post-ECB, credit spreads widened.  Good-guy yields declined; bad-guy yields rose.  See our updated EU contagion series at www.cumber.com.  Note how Swiss yields are negative until the 5-year maturity (which is a whopping 7 basis points).  For new readers, see our archives on why the Swiss 10-year government bond is now the de facto benchmark for the eurozone.  The European Central Bank demonstrated too little, too late.  This week’s Draghi Q&A did not help matters.  We continue to underweight Europe.  It is still too soon to bottom fish.

In the US, the employment statistics release shows an ongoing but weakening, very slow recovery.  A plus 80 thousand nonfarm jobs is better than minus 80 thousand.  We see nothing to alter this slow but marginally positive growth outlook.  The Fed’s additional “Twist” is a whimper, not a shout.  In fact, that is probably a good thing, since monetary policy has its limits, and we are near them.  We expect no more from the Fed for the rest of this year unless there is a seriously negative event.  In our US ETF accounts we are still holding a cash reserve.  In managed taxable and tax-free bond accounts we are slowly bringing in duration and using tactical hedging where appropriate.  Our newly launched US high-yield debt strategy is developing well.

LIBOR-gate, as Michael Lewitt titled it, is a mess.  It is potentially huge.  We expect more ugly revelations.  Other institutions may be implicated.  Critics of emerging-market governance standards need to look in the mirror.  The so-called developed markets now exude a rising stench.

We will end this weekend missive with an email exchange.

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Jim Sinclair’s Commentary

This you can be sure of this.

Top Fed officials set table for more easing
By Ann Saphir
Mon Jul 9, 2012 3:39pm EDT

Three top Federal Reserve policymakers on Monday laid the groundwork for a third round of bond purchases, saying the U.S. recovery was weak and unemployment far too high.

"We are right at that edge, that if economic data keep coming in below our expectations — and our view is we are not making progress on our mandates, or we don’t expect to make progress on our mandates — then I think we would need more accommodation," San Francisco Fed President John Williams told reporters after a speech in the resort area of Coeur D’Alene, Idaho.

But, underscoring the divisions at the U.S. central bank, Richmond Fed President Jeffrey Lacker reiterated his opposition to a new round of stimulus in an interview with Bloomberg Radio.

The Fed has kept benchmark short-term interest rates near zero since December 2008 and signaled it would keep them there until at least late 2014 to bolster the economy.

It has undertaken two unprecedented rounds of quantitative easing, buying $2.3 trillion in long-term securities to push down borrowing costs.

Last month, after a stream of disappointing economic news, the Fed slashed its outlook for growth but took only a modest step towards easing policy further, adding six months to its so-called Operation Twist, which aims to lower rates by selling short-term securities and buying long-term ones.

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