In The News Today

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Jim Sinclair’s Commentary

Mr. Williams shares his take on statistics.

– Particularly Unreliable Economic Data
– 2013 Annual GDP Growth Slowed to 1.9% from 2.8% in 2012
– Growth Bloated by Continuing Excess-Inventory Build-Up

"No. 596: Fourth-Quarter 2013 GDP"


Jim Sinclair’s Commentary

This is very dangerous as in a global market where dominos are falling.

Emerging market currencies buckle after Fed cuts stimulus
Published 2014-01-30 18:02:56

LONDON: Emerging markets faced intense pressure on Thursday after the US Federal Reserve cut its stimulus further, with currencies in India, South Africa and Turkey failing to rally despite interest rate rises.

Asian shares fell heavily and European stocks also retreated, extending a global rout driven by worries about emerging markets.

Concerns were stoked when the US central bank further reduced its quantitative easing (QE) stimulus overnight.

Wall Street sank on Wednesday after the Fed said it would reduce its bond-buying programme by $10 billion to $65 billion per month, citing a pick-up in the US economy. That followed a similar announcement in December.

Investors took flight as the news stoked fears of capital flows from emerging markets that have benefited from the Fed’s cheap money policy, hitting nations with large current account deficits, as dealers look for safer investments back home.



Jim Sinclair’s Commentary

Every step backwards for the dollar, as small as it might be, is a forward step forward for the Yuan. The question is what is Nigeria going to sell its oil for?

Nigeria Central Bank to Move More Currency Reserves in Yuan
By Maria Levitov Jan 28, 2014 11:46 AM ET

Nigeria’s central bank plans to shift more of its $43 billion of reserves into yuan from dollars, the deputy governor said today, as the Chinese currency gains greater prominence in global trade.

The bank will increase the yuan’s share of reserves to as much as 7 percent from 2 percent now, Kingsley Moghalu said in an interview in London, without specifying a timeframe for the change. About 85 percent of Nigeria’s reserves are held in dollars, he said.

“It was clear to us that the future of international economics and trade will shift in large part to business with and by China,” Moghalu said. “Ultimately,the renminbi is likely to become a global convertible currency.”

Nigeria is joining countries including South Korea in adding the yuan to reserves as China opens up its capital market and promotes the use of the currency in international trade and financing. Africa’s biggest oil producer also removed import restrictions on the dollar to support the naira, Moghalu said. The local currency has fallen 1.2 percent this month versus the dollar, after slumping 2.6 percent last year.



UPDATE 1-Japan turns net importer of gold in Dec, 1st time since July 2010
Thu Jan 30, 2014 4:33am EST

TOKYO, Jan 30 (Reuters) – Japan imported more gold than it shipped overseas in December, the first time the country has been a net importer on a monthly basis since July 2010, customs data showed on Thursday.

Imports totaled 3,429 kilograms (kg) in December, while the country exported 1,544 kg, leaving it with net purchases of 1,885 kg, according to the customs data released by the Ministry of Finance.

It was only the tenth time that Japan has been a net monthly buyer of gold since the end of 2005, the last year the country was a net importer on an annual basis.

It is likely to be a one-off event and was probably related to a Tokyo Commodity Exchange futures contract delivery, said a trader at a bank.

It was unlikely the turn to net imports was because of increased buying before a sales tax increase that’s due at the end of March, the trader added.



Jim Sinclair’s Commentary

GEAB speaks.

Historians, who usually consider that the 19th century runs from 1815 (Waterloo) to 1914 (the First World War) would certainly define the 20th century by the period 1914-2014, ending with the year in which the old system dies whilst a new one emerges. In this New Year 2014 welcome, then, to the 21st century!

We have symbolised 2013 as “the first steps in a chaotic world after” (1).

A year which was in effect the new century’s zero year and at the end of which solutions were emerging from all sides. At the beginning of 2014 the spotlight is henceforth on the Eurozone, China, Russia and the BRICS where the tools to shape the “world afterwards” are being designed with incredible rapidity: the “world before” is handing over to “the world afterwards”.

Nevertheless, there is a permanent risk of an explosion from the overheated financial planet driven by the incredible US imbalances… unresolved or little resolved. And the current transition period, certainly hopeful, is highly dangerous nevertheless. One danger is the statistical “smog” (2) which will probably characterise the year: first, the US economic and financial indices have lost any sense of direction by dint of being manipulated in order to hide the catastrophic reality; and second, the emerging world’s tools of statistical transparency aren’t sufficiently reliable to properly throw light on the reality. A collapse of visibility ongoing for several years on the one hand, the beginning of an organised transparency which the world economy needs to plan strategies on the other, in 2014 we are on statistical understanding’s trough of the wave. And that won’t be without its consequences.

Layout of the full article:

This public announcement contains sections 1&2.


The current period is particularly difficult to analyse. Central bank liquidity injections have hardly any historical equivalent and act insidiously like morphine; the stock exchanges move inversely proportional to countries health; finance and derivatives are completely out of control; the West and the US in particular are trying to hide their disastrous situation through benchmark signals which no longer say anything (like the unemployment numbers)… We have already analysed this “statistical fog” in the GEAB N° 73: the old world’s compasses are broken.



Jim Sinclair’s Commentary

You have to love the spin on how Bad is really good.

Sharp Drop In December Pending Home Sales Index Bestows Upon Buyers A Limited-Window Opportunity


The number of U.S. homes in contract fell to the lowest point in 20 months last month. Unseasonably cold weather and low home inventory may have temporarily slowed housing growth nationwide.

For home buyers, the drop may present an opportunity. Homes had sold quickly through most of 2013 so the rapid, year-end slowdown may help give buyers leverage. Plus, mortgage rates have been dropping. Today’s rates are their lowest in more than 10 weeks.

The spring market looks ripe to rebound. The best deals of this year, then, may be the ones you find today.

Pending Home Sales Index : A "Future" Housing Indicator

The Pending Home Sales Index (PHSI) is a monthly report, published by the National Association of Realtors® (NAR). It measures homes under contract, and not yet closed.

The Pending Home Sales Index is unique among the "common" housing market metrics. Whereas most metrics report on how the housing market did perform, the Pending Home Sales Index reports on how the housing market will perform. The index is "forward-looking".


Jim Sinclair’s Commentary

This used to necessitate an immediate audit of all the responsibilities of the person.

JPMorgan Technology VP Dies in Fall From London Headquarters
By Ben Moshinsky and Ambereen Choudhury Jan 28, 2014 10:44 AM MT

A vice president in technology operations, Gabriel Magee, died after falling from JPMorgan Chase & Co. (JPM)’s London headquarters, the bank said today.

The 39-year-old fell from 25 Bank Street in the Canary Wharf area onto a ninth-floor roof, London’s Metropolitan Police said, having been called to the scene at 8:02 this morning.

Magee had worked for JPMorgan since 2004 in the corporate and investment bank’s technology support department, the New York-based lender said in a statement.

“We are deeply saddened to have lost a member of the JPMorgan family at 25 Bank Street today,” said Jennifer Zuccarelli, a spokeswoman for JPMorgan in London. “Our thoughts and sympathy are with his family and his friends.”

The 11-year-old skyscraper is 33 stories high, according to building-data provider Emporis. It was formerly the European headquarters of Lehman Brothers Holdings Inc., which filed for the largest bankruptcy in U.S. history in 2008. The police are not treating the death as suspicious and no arrests have been made.



Jim Sinclair’s Commentary

Employment numbers do not underwrite taper.

U.S. jobless claims climb 19,000 to 348,000
By Jeffry Bartash
Jan. 30, 2014, 8:30 a.m. EST

WASHINGTON (MarketWatch) – The number of people who applied for U.S. unemployment benefits rose by 19,000 to 348,000 in the seven days ended Jan. 25, marking the highest level in six weeks. Economists surveyed by MarketWatch had expected claims to climb to 330,000 on a seasonally adjusted basis. Yet the average of new claims over the past month, a more reliable gauge than the volatile weekly number, barely rose, up 750 to 333,000, the Labor Department said Thursday. Also, the government said continuing claims decreased by 16,000 to a seasonally adjusted 2.99 million in the week ended Jan 18. Continuing claims, reported with a one-week delay, reflect the number of people already receiving benefits. Initial claims from two weeks ago, meanwhile, were revised up to 329,000 from 326,000, based on more complete data.


Jim Sinclair’s Commentary

Not a basis for Taper.

Consumer Confidence in U.S. Fell Last Week to Two-Month Low
By Katherine Peralta January 30, 2014

Consumer confidence dropped last week to the lowest level in two months as more Americans said it was not a good time to shop.

The Bloomberg Consumer Comfort Index declined to minus 31.8 in the week ended Jan. 26 from minus 31 reading the prior period. The buying-climate gauge slumped to a three-month low.

Retreating stock prices are probably damping sentiment among upper-income groups, while higher gasoline costs at the pump hurt the nation’s lowest earners. Bigger gains in wages and employment could provide the needed boost to confidence that encourages households to sustain spending, which accounts for almost 70 percent of the economy.

“We’re seeing the public respond to volatility in equity markets and slightly higher gasoline prices,” said Joe Brusuelas, a senior economist for Bloomberg LP in New York. “Given the ongoing sluggish wage environment, it’s not a shock that consumer confidence has cooled.”

The economy expanded at a 3.2 percent pace in the fourth quarter as consumer spending climbed the most in three years, a report from the Commerce Department also showed today. The annualized gain in gross domestic product matched the median forecast in a Bloomberg survey and followed a 4.1 percent advance in the prior three months.


Gold and Silver at ‘Historic Undervaluation’: John Embry
Wednesday, January 29, 2014
Henry Bonner

John Embry is a Chief Investment Strategist at Sprott Asset Management LP and works alongside Rick Rule and Eric Sprott. Mr. Embry oversaw $5 billion in funds at RBC Global Investment Management before Sprott, and he is a well-known gold and silver bull and considered an influential thought leader on precious metals. I got on the phone with Mr. Embry to talk about gold and silver at the start of 2014…

Hello John, what’s on your mind when it comes to gold and silver right now?

Well, I am really fascinated with the gold and silver markets for a simple reason: I believe that the fundamentals that should be driving the price couldn’t be better. At the same time, because the price of both gold and silver have been driven down relentlessly – going on two and a half years now for gold – the degree of undervaluation against any method that I look at is approaching historic records.

As a result of this counter-intuitive price action that we’ve seen in both metals, the sentiment in the market is horrible. I don’t think I have actually ever seen people so negative and disinterested in the subject, which I think represents one of the greatest buying opportunities in history.

Do you agree with Eric Sprott on his outlook for gold in the next 12 months (that the price could double in that timeframe)?

Yes, definitely; we certainly see eye-to-eye on the precious metals thesis. And one of the reasons I am buoyed in this is that all of the preconditions for a significant bottom are in place; none more so than the sentiment. I love to see really negative sentiment and right now it’s about as negative as it gets. When you throw in what’s going on in the financial and economics world – what’s really going on, not what the mainstream is telling you – and you superimpose it on that historic undervaluation, I totally agree with Eric’s views on this thing.

We’re not talking small moves here. When this thing really gets going, we’re going to be talking multiples of the current prices. It will unfold over time but it could happen quickly too.

What timeframe are we talking? Do you see a catalyst ahead?

Well, one thing that I’ve been watching closely is Germany’s request to repatriate its gold. The Germans asked for their gold that was being held at the Fed to be returned a year ago. We’re told, remarkably, that they’ll only get the 300 tons back over 7 years. Quite frankly, if the gold were actually there, they could put it on a couple of cargo planes and get it back to Germany in a week.


Jim Sinclair’s Commentary

Not only is the commentary by the author correct, but you must consider the major changes in the metrics of how the GDP is figured is arrived at to know we are dealing with another phony economic statistic.

As an example, Research and Development that used to be considered an expense of a corporation now for GDP purposes is considered an asset of the corporation thereby expanding GDP by all Research and Development done by USA corporations and businesses. This is but one of the many changes made six months ago to the metrics of what makes up the GDP. Intellectual assets are also added to the GDP at assumed values.

Preliminary Q4 GDP Declines To 3.2% As Expected; Final 2013 GDP 1.9%, Down From 2.8% In 2012
Submitted by Tyler Durden on 01/30/2014 08:52 -0500

After the blistering final Q3 GDP print of 4.1% (to be revised far lower eventually), the preliminary Q4 GDP number had only one way to go, down – and sure enough it dropped to the expected 3.2% (well below Joe LaVorgna’s 4.0% forecast), capping 2013 GDPat 1.9%, down solidly from the 2.8% growth recorded in 2012. "Assume a recovery…"

The good news: the composition of the preliminary Q4 GDP number was better, with inventories only accounting for 0.42% of the final 3.22% print, compared to 1.67% previously. In fact, for the first time since Q1, Personal Consumption was responsible for more than half of GDP growth, generating 2.26% of the annualized growth compared to 1.36% in Q3.Still on a quarterly basis, Personal Consumption of 3.3% missed expectations of a 3.7% growth, up from 2.0% – did the consumption surge already roll over before the quarter ended? Why yes, if one looks at abysmal holiday retail sales numbers.

The key contributors to consumption growth were Services, and specifically a jump in spending on housing and utilities (from -0.31% to 0.14%), as well as Food Services and Accommodations which rose from 0.02% to 0.43% annualized. Which was to be expected as inventory is being absorbed by consumption. The question is how much longer can consumers keep this behavior up with collapsing purchasing power.

The bad news, and here all "CapEx is growing" fans please look away, Fixed Investment tumbled from 0.89% to just 0.14% annualized, as investment across the board dipped but mostly in non-residential structures (down -0.03% from 0.35%) and a collapse in residential fixed investment from 0.31% to -0.32%.

Finally, net trade contributed a whopping 1.33% in GDP, the most since the 2.39% increase in Q2 2009. How much longer can the US continue boosting its GDP on the back of the shale boom, and declining imports, remains to be seen. However, just like the inventory build up now has to be soaked up, so the net trade boost is about to become a drag on growth, precisely in time for the consumer to also pull back. In other words, enjoy the Q4 GDP surge – it won’t last into 2014.