In The News Today

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Jim Sinclair’s Commentary

The financial firm or their clients?

The Oil Industry’s $26 Billion Life Raft
Thu, Apr 9, 2015, 2:36 PM EDT

For U.S. shale drillers, the crash in oil prices came with a $26 billion safety net. That’s how much they stand to get paid on insurance they bought to protect themselves against a bear market — as long as prices stay low.

The flipside is that those who sold the price hedges now have to make good. At the top of the list are the same Wall Street banks that financed the biggest energy boom in U.S. history, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.

While it’s standard practice for them to sell some of that risk to third parties, it’s nearly impossible to identify who exactly is on the hook because there are no rules requiring disclosure of all transactions. The buyers come from groups like hedge funds, airlines, refiners and utilities.

“The folks who were willing to sell it were left holding the bag when prices moved,” said John Kilduff, partner at Again Capital LLC, an energy hedge fund in New York.

The swift decline in U.S. oil prices — $107.26 on June 20, $46.39 seven months later — caught market participants by surprise. Harold Hamm, the billionaire founder of Continental Resources Inc., cashed out his company’s protection in October, betting on a rebound. Instead, crude kept falling.

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Jim Sinclair’s Commentary

Come on Janet, jack those interest rates up to slow down the runaway US economic recovery.

Recession 2.0: Abysmal Wholesale Sales Join Factory Orders In Confirming US Economic Contraction
Tyler Durden on 04/09/2015 10:37 -0400

Despite another data series revision by the Department of Commerce, there was no way to put lipstick on the pig of America’s wholesale trade data, and as reported moments ago, the all important merchant sales for February dropped for 3rd month in a row in February, the longest stretch since the last recession. After January’s downward revised plunge of 3.6% MoM (against -0.5% expectations), which was the biggest single monthly drop since March 2009, the decline continued in February at a -0.2% pace, wiping the floor with expectations of a 0.3% rebound.

Worst of all the annual pace of decline has now stretched over both January and February, confirming that 2015 is now officially a year of contraction for the US economy. As a reminder, every time this series suffers an annual decline, there is a recession.

Worse, not expecting the drop in demand, wholesales built up inventories once more, with wholesale inventories rising by 0.3%, above the 0.2% expected, and as a result the Inventory to Sales ratio has hit a new post-Lehman high of 1.29.

The above should not come as a surprise: a parallel and just as important data series, the US factory orders, also confirmed a week ago that the US is now in a recession, when Factory Orders tumbled by 4.3% Y/Y, their worst annual decline since, you got it, Lehman.

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Jim Sinclair’s Commentary

Making friends into enemies.

Norman Bailey: Israel’s historic shift in economic relations to Asia
Author: Norman A. Bailey April 7, 2015

Israel is in the midst of an historical shift of international economic relations emphasis from Europe and the U.S. to south and east Asia, including China, Japan, South Korea, Taiwan, Vietnam, Singapore and India. All indices of Israeli international trade and investment are pointing in the same direction.  The question now is how does Israel transform its economic success in Asia to political, diplomatic and perhaps eventually military support.  Along with this development is another equally significant one, namely the formation of an informal alliance of Sunni states, including Egypt, Jordan, Saudi Arabia and the Gulf states (except Qatar) in countering Iran and extremist Islamic terrorist organizations.

Israel is actively collaborating with those countries in security, defense and intelligence activities, as well as such economic projects as gas supply to Jordan and the Red to Dead Sea water project in that country. Stay tuned for major economic/scientific/technological collaboration with Egypt in the works.

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Jim Sinclair’s Commentary

Next month may not be easy for Greece.

Merkel Powerbase at Risk as Tsipras Courts Putin

Tsipras’ decision to go to Moscow, amid his huge bailout battle with Europe should come as no surprise to historians. Most of the current Greek minority population in Russia comprises descendants of Medieval Greek refugees, from the Byzantine Empire, the Ottoman Balkans, and Pontic Greeks from the Empire of Trebizond and Eastern Anatolia.

Despite Tsipras being atheist, he is keen to play-up the Orthodox Christian bond between Greece and Russia, which will play well to the significant population of Greek descendants who make up large communities in Moscow and St Petersburg. He even laid a wreath at the Tomb of the Unknown Soldier.

Having paid off its latest loan ($490m) to the International Monetary Fund on April 9, all eyes are on the next payment Greece will have to make every week in April and the further $7.75 billion it will have to find in May and June, while struggling to pay its own government staff and state pensions.

Greece Exit or Russian Sanctions?

By going to Moscow, Tsipras is playing a grand game. Germany’s Angela Merkel is on record as having said a Greek Exit from the Euro would mean the end of the European dream. Many analysts believe a Grexit would consign the Euro to a less valuable currency, with countries able to pick and choose when and how they adopt it. It would devalue the brand.

Meanwhile, with the European Union due to vote on whether to continue — or even increase — sanctions against Russia in June, Tspiras has one other trump card up his sleeve. The vote requires all 28 states to agree, and Tsipras has threatened to derail the sanction vote, which would prove hugely damaging to the EU, as a body of states.

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Jim Sinclair’s Commentary

If anyone knows, he certainly does.

J.P. Morgan’s Dimon warns next crisis will bring even more volatility

LONDON (MarketWatch) — You ain’t seen nothing yet, when it comes to market wreckage from a financial crisis, according to J.P. Morgan boss Jamie Dimon.

In his annual letter to shareholders, the bank’s chief executive warned “there will be another crisis” — and the market reaction could be even more volatile, because regulations are now tougher.

He argued the crackdown on the financial sector, added to more-stringent requirements for capital and liquidity, will hamper banks’ capacity to act as a buffer against shocks in financial markets. Banks could become reluctant to extend credit, for example, and less likely to take on stock issuance through rights offering, which would essentially create a shortage of securities.

Such factors “make it more likely that a crisis will cause more volatile market movements, with a rapid decline in valuations even in what are very liquid markets,” Dimon said in the letter. “Recent activity in the Treasury markets and the currency markets is a warning shot across the bow.”

The J.P. Morgan JPM, -0.25%  CEO pointed to the 40 basis-point move in Treasury securities on Oct. 15 as one of those warning shots. The move — though “unprecedented” and “an event that is supposed to happen only once in every 3 billion years or so” — was still relatively easily absorbed in the market and no one was significantly hurt by it, he noted.

“But this happened in what we still would consider a fairly benign environment. If it were to happen in a stressed environment, it could have far worse consequences,” Dimon said.

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