In The News Today

Posted at 6:32 PM (CST) by & filed under In The News.

Spiritual practices will do it for you! To get a taste for that kind of effort, you must keep the company of the good and great, and take delight in noble thoughts. By whatever means that is available to you, increase your stock of bliss and improve your discrimination. Try to store as many of these as possible, so that you draw up from the reservoir of your storage, whenever the need arises.
–SSB -  Sept 1, 1958

 

Jim Sinclair’s Commentary

The latest from John Williams’ www.ShadowStats.com.

– Irregular Surge in Commercial Aircraft Sales Generated Bulk of Gain in Durable Goods Orders
– Single-Unit Housing Starts, New- and Existing-Home Sales Down Respectively
by 67.1%, 65.7% and 28.7% from Pre-Recession Peaks
– Five-Year High in Confidence Still Is in Recession Territory

"No. 535: Fed Jawboning, May Durable Goods, New- and Existing-Home Sales "
Web-page: http://www.shadowstats.com

The Button Has Been Pushed…Ready Or Not
Author : Bill Holter
Published: June 24th, 2013

This week has started off miserably.  China had problems within their banking system last night as bank transfers, ATMs, online banking and wires did not work.  Europe announced that their E500 billion bailout fund for banks is no longer the case; they now say that 60 billion Euros will be the limit…retroactively.  To put this in perspective, Spain had already been promised 100 billion Euros for their banking system; I guess the money is not coming?  Our stock market has started the day down 230 points and the 10 yr. Treasury yield is now 2.64%, this is another .12 basis points higher on the day and now nearly 70% higher than it was back in April.

As I wrote over the weekend, this is “one gigantic global margin call.”  Please understand how many of these interest rate derivatives work.  When the rates go against you, “margin” must be posted.  By “margin” I mean collateral.  Collateral must be shifted from the losing institution to the one on the winning side.  When the loser “runs out” of collateral…that is when you get a situation similar to MF Global or Lehman Bros., they are forced to shut down and the vultures then come in and pick the bones clean…normally.  Now it is no longer “normal,” now a Lehman Bros will take the whole tent down.

To put in perspective what is happening, Zerohedge calculated that the Fed lost $35 billion this morning alone and $250 billion over the last 2 months.  The Fed only has (had) $65 billion of equity capital yet in just several hours they lost half of it…again…this is because they hold $3.5 trillion in assets.  This is the equivalent of a trader putting up $2 and buying $100 worth of assets, they have 50-1 leverage.  They may not even be the most egregious out there. There are derivative contracts that are over 100-1 leverage that must post collateral each day. At least the Fed doesn’t have to post any collateral against losses because they can be “trusted.”

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Jim Sinclair’s Commentary

Nenner is a force to be reckoned with.

Charles Nenner’s Gurwitz to Moneynews: Expect Stocks to Move ‘Back and Forth’
Tuesday, 25 Jun 2013 06:56 AM
By Glenn J. Kalinoski and Kathleen Walter

Investors can expect sideways movements in equities markets, according to David Gurwitz, the managing director of Charles Nenner Research.

"We don’t believe that the news affects things," Gurwitz told Newsmax TV in an exclusive interview.

"We believe the cycles indicate how people are going to react to the news, and since we feel there’s a mix of cycles now, short term and long term in equities, you’re going to have a back and forth right now."

The wide-ranging interview saw Gurwitz mention that investors must protect against losses as opposed to just looking for gains. He also discussed copper as an economic indicator.

"Copper, eight, nine months ago, we said was topping and heading down," Gurwitz said. "We have a lot of clients that are rather big in terms of being called sovereign wealth funds, and they’re not looking for trades in a week. They’re looking for trades for years," he said.

"They asked us about copper and copper came down quite a bit and we still think it’s down for years. Therefore, it’s not good for the economy."

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Jim Sinclair’s Commentary

Have you protected yourself against a bail in? Probably not! Are you coming to Chicago, Vancouver or Phoenix? What can I do if you will not help yourself?

Please protect yourself ASAP or sooner.

Central Banks Issue Warning; Citi Enters Iraq; Banks Support Bail-in
by ANDY PETERS
JUN 24, 2013 8:20am ET

Central Banks Warn Private Sector to Act: The world’s central banks have done their job; now it’s time for political leaders to do theirs. That’s the message delivered by the Bank for International Settlements, colloquially known as the central bankers’ bank, in the wake of Federal Reserve Chairman Ben Bernanke’s comments that the Fed may slow its bond-buying program later this year. "Cheap and plentiful central bank money had merely bought time," the BIS said in its annual report, and additional stimulus will only make it more difficult for the global economy to return to health, theFT reported. Two leaders of the BIS, whose members include the Federal Reserve Board and the European Central Bank, said that "returning to stability and prosperity is a shared responsibility" and the "The balance between costs and benefits is deteriorating," the Times noted. The most dangerous aspect of the efforts of central banks is that it deludes the private sector from making its own reforms, with a BIS executive saying "low interest rates and unconventional monetary policies have made it easy for the private sector to postpone deleveraging," the Journal reported. Financial Times, New York Times, Wall Street Journal

Citi to Open Office in Iraq: Iraq continues to experience outbursts of violence, but that’s not stopping Citigroup from opening an office in Baghdad—the first U.S. bank to have a physical presence there. The Citi executive tapped to run the office, Dennis Flannery, hopes "some of the political and security issues might be abated" in Iraq, the Journal reported. Both the FT and theJournal note Iraq’s oil riches and the allure for banks; Citi projects Iraq to become a $2 trillion economy by 2050, the FT says. Wall Street Journal, Financial Times

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Jim Sinclair’s Commentary

War was an anti-depressionary tool in 1940. Maybe it is part of the 2013 deal.

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Jim Sinclair’s Commentary

No comment necessary.

To our Most Valued Clients,

This email is in relation to the delays we have seen in the delivery of purchased physical gold and silver bullion and those clients whom are still waiting to receive notification that their bullion is available for collection.

Again, we would like to formally apologize and assure you that we are doing all that is possible to have your metal delivered to our facility as soon as possible.

I’m sure that many of you are aware of the enormity of transactions in the physical industry that have taken place over the last few months with the price drop. This has caused much of the delays in the delivery process as the manufacturing process of physical bullion takes time, man power and many resources.

We are waiting for Perth Mint to fulfill many of our orders, some from as far back as April. This is a situation that has been out of our control as the distributor of these products, as we too are waiting for our orders to be fulfilled.

We appreciate your patience during this time and can assure you that we have been guaranteed that all orders will be fulfilled, it is just a matter of time.

If you have any queries, please don’t hesitate to contact our office.

Best Regards,
Guardian Gold Pty Ltd

 

Jim Sinclair’s Commentary

The most endangered species on the planet is the pensioner

California on the Brink: Pension Crisis About to Get Worse
By Elizabeth MacDonald
Published June 12, 2013

A growing number of key California cities are a lot worse off than previously thought, thanks to new changes coming in the way state and local governments must account for their pension costs.

The pension changes from Moody’s, and separately the Governmental Accounting Standards Board, scheduled for this month, could result in Los Angeles, San Francisco, San Jose, Azusa and Inglewood joining fiscally troubled Stockton and San Bernardino, among others, as severe credit risks. It’s all largely due to soaring employee retirement costs, according to new analysis based on the methodology by Bob Williams and his team at State Budget Solution (SBS), a non-partisan organization that studies state budget crises.

The new rules could nearly double California’s unfunded liabilities to $328.6 billion. Moreover, California cities that have already filed for bankruptcy protection, like Stockton and Vallejo, will fall deeper into the red.

Officials in these California cities did not return calls for comment.

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Putin Rules Out Extradition for Leak Suspect in Russia Airport
Tuesday, June 25, 2013 11:19 AM EDT

President Vladimir V. Putin of Russia offered the first direct confirmation on Tuesday that Edward J. Snowden, the fugitive American national security contractor, was in a transit area at a Moscow airport, and he appeared to rule out American requests for his extradition to the United States.

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Jim Sinclair’s Commentary

Everybody does some of the right thing except for one major power.

China targets shadow bankers in credit squeeze
By Charles Riley @CRrileyCNN June 25, 2013: 6:21 AM ET
HONG KONG (CNNMoney)

China’s central bank has allowed inter-bank borrowing costs to rise rapidly over the past week, a strategy that has the country’s "shadow bankers" on the run.

Beijing’s tactics are designed to crack down on the banks, securities dealers and underground operators that make up the country’s flourishing shadow banking system.

The government’s concern is that lending has grown too big, too fast, and it hopes higher rates will restrain that expansion. At the same time, the fear among investors is that the lending crackdown could slow the economy more than expected.

In recent years, shadow banks have carved out a niche trade in China. They offer loans to small and medium-sized companies that are ignored by large state-run banks. Often, the loans are packaged and sold to investors looking for higher returns.

In many cases, the shadow lenders provide a valuable service — offering capital for run-of-the-mill projects that would otherwise go unfunded.

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Jim Sinclair’s Commentary

Anything here remind you of somewhere near?

Fascism

The only official definition of Fascism comes from Benito Mussolini, the founder of fascism, in which he outlines three principles of a fascist philosophy.

1."Everything in the state". The Government is supreme and the country is all-encompassing, and all within it must conform to the ruling body, often a dictator.

2."Nothing outside the state". The country must grow and the implied goal of any fascist nation is to rule the world, and have every human submit to the government.

3."Nothing against the state". Any type of questioning the government is not to be tolerated. If you do not see things our way, you are wrong. If you do not agree with the government, you cannot be allowed to live and taint the minds of the rest of the good citizens.

The use of militarism was implied only as a means to accomplish one of the three above principles, mainly to keep the people and rest of the world in line. Fascist countries are known for their harmony and lack of internal strife. There are no conflicting parties or elections in fascist countries.

Nazi Germany was extreme Fascism, better examples of fascist countries were Mussolini’s Italy, Iraq, Iran, and many middle eastern countries.

Jim Sinclair’s Commentary

This is chump change as compared to the cost of extending the maturing legacy 1991-2008 OTC derivatives.

BIS warns banks dangerously exposed to $10tn bond market crash, so buy gold!
Posted on 24 June 2013

Banks face another global financial crisis worse than 2007-8 warns the normally conservative Swiss-based Bank of International Settlements as a $10 trillion central bank bond mountain leaves them perilously exposed to higher interest rates.

The Federal Reserve recently triggered a global tightening of interest rates with hints it may start to wind down its money printing as soon as this September.

Bondholders

The problem is that higher interest rates mean lower bond prices, and the banks are stuffed full of this supposedly safe debt. HSBC has 42 per cent of its balance sheet in US bonds, for example, and that’s arguably the safest of the large bank balance sheets.

When interest rates go up the banks therefore make losses on their huge bond portfolios. Global central banks have accumulated $10 trillion in bonds that will also face massive losses.

‘Someone must ultimately hold the interest rate risk,’ concludes the BIS. ‘As foreign and domestic banks would be among those experiencing the losses, interest rate increases pose risks to the stability of the financial system if not executed with great care.’

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Jim Sinclair’s Commentary

Beyond bad, beyond disgusting, beyond hubris.

BUSTED: Bankers Caught On Tape, Joking About Bailout, And How They’d Never Pay It Back
Julia La Roche Jun. 24, 2013, 10:27 AM

Once again, we have more embarrassing conversations between bankers …

The Irish Independent, a Dublin-based newspaper, has uncovered tapes of an internal phone conversation from September 2008 between two executives at Anglo Irish Bank during its bailout deal and they sound pretty scandalous.  The Irish Independent points out that the recordings show they misled the Central Bank.

The executives from the recording have been identified as John Bowe (head of the bank’s capital markets) and Peter Fitzgerald (director of retail banking).

However, Bowe "categorically denied" that he misled the Central Bank and Fitzgerald, who wasn’t involved in discussions with regulators, said he was unaware of any intention to mislead, the report said.

Either way, the newly revealed recordings are still embarrassing.

Here are some partial excerpts (via the Irish Independent):

The two bankers begin their conversation jokingly comparing themselves to being able to walk on water and drink beer out of both hands.

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Jim Sinclair’s Commentary

QE to infinity, or Bernanke to Infamy.

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Here is M1 money to cheer you up:

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And here is M1 velocity to cheer you up further:

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Jim Sinclair’s Commentary

On loan means sold into the market for cash and gone, probably forever. Gold is the only asset you can lease and sell as if title had passed to you.

Belgian Central Bank Says 25 Tons Or 10% of Gold Reserves on Loan
Published in Market Update Precious Metals on 28 May 2013
By Mark O’Byrne

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Today’s AM fix was USD 1,379.00, EUR 1,067.42 and GBP 913.43 per ounce.
Friday’s AM fix was USD 1,385.25, EUR 1,068.95 and GBP 917.81 per ounce.

Yesterday a national holiday was observed in both the United Kingdom and the USA.

Gold is lower in all major currencies except the yen which is under pressure today due to ‘Abenomics’ concerns and concerns of further yen debasement.

A firmer dollar and buoyant stock markets may be contributing to gold being under pressure.

Gold is being supported by continuing currency wars and consequent diversification from central banks and robust physical demand which is countering continued ETF liquidations.

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Jim Sinclair’s Commentary

Currency induced cost push Inflation is locked, loaded and emerging. She is not wrong!

Economist Rogoff: Learn to Love Inflation
Monday, 10 Jun 2013 07:49 AM
By Michael Kling

Instead of dreading inflation, central banks need to learn to love it, advises Kenneth Rogoff, former chief economist at the IMF, in an article for Project Syndicate.

Rather than preparing to take away the punch bowl, central banks should be spiking it, argues Rogoff, a Harvard University economics professor who co-authored the book, "This Time is Different: Eight Centuries of Financial Folly."

The Federal Reserve may soon end quantitative easing (QE) to "take away the punch bowl before the party gets going" and head off inflation before reaching its employment target.

"The trouble is that this is no ordinary recession, and a lot people have not had any punch yet, let alone too much," he explains.

Despite legitimate concerns about QE distorting asset prices, bubbles are not the main threat, Rogoff maintains. "And it would be a catastrophe if the recovery were derailed by excessive devotion to anti-inflation shibboleths, much as some central banks were excessively devoted to the gold standard during the 1920s and 1930s."

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No Bank Deposits Will Be Spared from Confiscation
By Matthias Chang
Global Research, April 24, 2013

I challenge anyone to prove me wrong that confiscation of bank deposits is legalized daylight robbery

Bank depositors in the UK and USA may think that their bank deposits would not be confiscated as they are insured and no government would dare embark on such a drastic action to bail out insolvent banks.

Before I explain why confiscation of bank deposits in the UK and US is a certainty and absolutely legal, I need all readers of this article to do the following:

Ask your local police, sheriffs, lawyers, judges the following questions:

1) If I place my money with a lawyer as a stake-holder and he uses the money without my consent, has the lawyer committed a crime?

2) If I store a bushel of wheat or cotton in a warehouse and the owner of the warehouse sold my wheat/cotton without my consent or authority, has the warehouse owner committed a crime?

3) If I place monies with my broker (stock or commodity) and the broker uses my monies for other purposes and or contrary to my instructions, has the broker committed a crime?

I am confident that the answer to the above questions is a Yes!

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Jim Sinclair’s Commentary

Syria is more serious than Snowden.

Fugitive Edward Snowden sets superpowers on collision course as Moscow and Beijing lock horns with White House
25 June 2013

Russia and China are flexing their muscles with Washington as diplomatic relations between the world’s greatest economic and political forces plunges to new depths as the US continues it hunt for elusive whistleblower Edward Snowden.

In Moscow, foreign minister Sergey Lavrov has slammed US demands to extradite NSA whistleblower Edward Snowden, who is believed to have stopped in Moscow while trying to evade American justice.

Lavrov said Snowden has not crossed the Russian border and insisted that Russia has nothing to do with him, his relations with US justice, or his travel plans.

He angrily criticised American demands for Snowden’s extradition and warnings of negative consequences if Moscow fails to comply.

Mr Lavrov said that accusing Russia of "violation of US laws and even some sort of conspiracy" with regard to Snowden is "absolutely ungrounded and unacceptable".

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Jim Sinclair’s Commentary

A good comment on discretion among ETFs.

Making a stealth leveraged bet on gold
6/25/2013 1:17:00 PM

Meanwhile, you know that I don’t trust the gold ETFs and other precious metal "paper" trading vehicles (see Game Plan for a Completed Corrupted Market). But I do think the GDX Gold Miner ETF is valid since it’s promising stock shares in publicly traded companies and not promising physical gold and silver which might or might not actually be owned and in the vaults. In the last couple years, I’ve often advised against owning gold miner stocks because they are often high-beta versions of gold itself, meaning when gold drops 30% like it has, gold miner stocks will drop maybe twice that much, 60% or more.

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Jim Sinclair’s Commentary

Civil, not criminal.

U.S. Civil Charges Against Corzine Are Seen as Near
By BEN PROTESS

Federal regulators are poised to sue Jon S. Corzine over the collapse of MF Global and the brokerage firm’s misuse of customer money during its final days, a blowup that rattled Wall Street and cast a spotlight on Mr. Corzine, the former New Jersey governor who ran the firm until its bankruptcy in 2011.

The Commodity Futures Trading Commission, the federal agency that regulated MF Global, plans to approve the lawsuit as soon as this week, according to law enforcement officials with knowledge of the case. In a rare move against a Wall Street executive, the agency has informed Mr. Corzine’s lawyers that it aims to file the civil case without offering him the opportunity to settle, setting up a legal battle that could drag on for years.

Without directly linking Mr. Corzine to the disappearance of more than $1 billion in customer money, the trading commission will probably blame the chief executive for failing to prevent the breach at a lower rung of the firm, the law enforcement officials said. If found liable, he could face millions of dollars in fines and possibly a ban from trading commodities, jeopardizing his future on Wall Street.

In a statement, a spokesman for Mr. Corzine denounced the trading commission for planning to file what he called an “unprecedented and meritless civil enforcement action.”

The aggressive action would stand in contrast to the government’s investigations so far into the 2008 financial crisis, many of which produced symbolic fines. In the case of Lehman Brothers, which imploded at the height of the crisis, no employee has ever been charged with civil or criminal wrongdoing.

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U.S. Banks Present Industry-Led Crisis Plan To Federal Reserve
June 24, 2013
By Mani

U.S. banks reportedly presented the Federal Reserve with a bail-in plan to pay for large bank’s restructuring in the event of a future crisis, The Wall Street Journal reports.

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According to a report filed by Dan Fitzpatrick, Shayndi Raice and Michael R. Crittenden for The Wall Street Journal, the plan was presented to the U.S. Federal Reserve in an attempt to preempt tougher rules from the regulators.

The private meeting was reportedly attended by officials from Wells Fargo & Company (NYSE:WFC), Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C) and several other banks.

Bail-in Mechanism

The bail-in mechanism would be designed to place a greater burden on creditors, as opposed to the tax payers, in the event of a bank’s collapse.

Last week, a similar scenario occurred wherein the UK’s Co-operative bank unveiled a rescue package to plug the £1.5 billion hole in its balance sheet. The historic rescue deal to raise £1.5 billion will force the bank’s bondholders to take losses on the investment.

The proposal presented to Federal Reserve officials would involve the largest financial-services holding companies would be willing to hold a certain amount of debt and equity which would be used to prop up any failed bank subsidiary seized by regulators.

The U.S. regulators however, haven’t responded to the banks’ proposal and might stick to their own plan.

The U.S. regulators believe banks still could pose a threat to financial stability in a crisis. Their plan involves more aggressive measures including capping bank-size, breaking-up institutions or forcing banks to take on more long-term debt.

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Ben Bernanke’s Real Message for Gold Investors, Translated by John Williams
By The Gold Report, on June 24th, 2013 in Expert Interviews

The Gold Report: On Wednesday, the Federal Reserve hinted that it might begin tapering quantitative easing by the end of the year based on signs of an improving economy. Gold immediately dropped from $1,347 an ounce ($1,347/oz) to $1,277/oz, a 7% decline and the lowest price in more than two years. The Dow Jones Industrial Average and NASDAQ were also off more than 2%. You called this “jawboning” and said that due to stresses in the banking system the Fed would be obliged to continue bond buying. Why would the central bank threaten to cut off the flow if it didn’t plan to do it?

John Williams: All the hype over the Fed’s so-called tapering is absolute nonsense. Fed chairman Ben Bernanke said the Fed’s pulling back of quantitative easing was contingent on the economy recovering in line with the Fed’s relatively rosy projections. He also indicated, however, that if the economy worsened, he would expand quantitative easing. When you consider that the official Fed projections are grossly optimistic, the conclusion is that we will have more, not less, bond buying from the government.

“The reality is that the economy is weak and it’s going to get weaker.”

The jawboning was a multifaceted attempt to placate the Fed’s critics, while soothing the stock and bond market jitters at the same time. The comments, however, hammered equities and bonds, as well as gold. The negative impact on gold likely would have been viewed as a positive result by the Fed.

The banking system nearly collapsed in 2008. The federal government and Federal Reserve took extraordinary measures to keep the financial system from imploding. Those actions prevented an immediate systemic collapse, but they did very little to resolve the underlying problems. I contend that we’re still in recession, with the economy deepening into a renewed downturn. At the same time, the banking system solvency problems continue. Little has changed in the last five years.

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