Posts Categorized: Bill Holter

Posted by & filed under Bill Holter.

Dear CIGAs,

The world is awash with "promises".  Nearly everything we think of as having "value" is because of a promise behind it.  A few examples;  your bank accounts, retirement funds, bonds and even the dollar bills in your pocket.  Your bank account for example, once you deposit the money it is no longer yours.  You can argue this if you wish but we now know this is true for sure after recent "bail in" legislations passed throughout the west.  When you deposit funds into a bank, it then becomes "their money" held for you …they "owe" it to you.  Do not take this lightly, lawmakers around the world have made this the new reality.  A little known fact, in 1845 Britain passed banking law that made depositors (unsecured creditors), this is still precedent to this day.  When you deposit money you "accept a liability" from your bank and are classified as an unsecured creditor.  In other words, "get in line with everyone else"!

Same thing with many retirement accounts.  Think about Social Security.  When you get your annual statement form, it comes with an asterisk.  This is to inform you they "might need to reduce benefits".  With any retirement account you are relying on the custodian to make payments to you upon retirement.  Think about state and municipal retirement accounts promising the good life, they are nearly ALL underfunded.  Meaning there is not enough money in there to make (promised) future payments unless some sort of magically higher returns are realized.  These are underfunded by the TRILLIONS of dollars!

Bonds are an obvious asset class where a "promise" is relied on.  Dollars on the other hand seem the most misunderstood by the public while being the biggest leap of faith in all asset classes.  Dollars rely on the "full faith and credit" of the U.S. government (a bankrupt entity) yet the populace sleeps through the night secure knowing they own dollars.  ALL non backed, fiat currencies in the past have failed.  The dollar is the widest spread and widely owned fiat the world has ever known, its failure will be spectacular upon arrival!

I wanted to point out the above "promises" as a basis to speak about trust or confidence.  The financial world turns on the axis of "trust".  This trust was nearly broken in 2008 and is the reason the Federal Reserve needed to secretly lend $16 trillion all over the world.  If the Fed had not come up with these funds, failures would have spread and trust would have been broken amongst the banks/other financial institutions and even between the central banks themselves!  The Fed’s largesse worked and trust was maintained.

Now, I believe we are set for another "test" of trust.  We have gone five+ years with QE this and QE that, the reality being outright monetization.  In fact, central banks today are buying more sovereign bonds than are even being issued.  The public and even the professional funds have backed away from the debt markets, you can’t blame them because the interest received does not even cover inflation not to mention a risk premium.  Globally the pace of trade and business activity is slowing or even declining which will bring to a head the difficulties in meeting debt service and other "promises".

I ask, what will happen when inevitably "trust" begins to wane?  Or even fully break?  It is at this point the system goes into "The Great Call".  Margin call?  Of course, because nearly everything financial has leverage behind it but there is more to it than this.  The "call" I am speaking of is for contracts of all sorts to "perform".  In particular I am thinking "derivatives" contracts will be called on to perform their contractual duties.

All in all, there are over $1 quadrillion worth of derivatives outstanding.  The problem with this is the "tail" is bigger than the dog. In other words, the amount of derivatives outstanding dwarfs the total amount of money outstanding and thus the ability to "pay" and make good on the contracts.  The other side of this coin are contracts promising to deliver something.  Here I am thinking both gold and silver.  There are far more (100-1 or more) obligations outstanding than there are ounces or kilos available to deliver.  This is a default just waiting to happen.                                                              

If you listen to the Harry Dents of the world, the dollar will be the safe haven and where all fear capital will go.  In a world based on nothing but trust and promises, will fear capital really pile INTO a currency based ONLY on trust and promises …when "trust" is exactly what is come into question.  Actually, it can be said the dollar was originally set up in 1971 on a "never pay" model.  The dollar (and bonds) only promise to pay "more dollars" and nothing else.  This game worked for many years, now it looks like the Saudis after doing many deals with both Russia and China may be set to transact in currency other than dollars.  Are they displaying confidence? 

The Chinese are now net sellers of U.S. Treasuries.  Ask yourself this question, if China could sell all of their Treasuries and turn it all into gold, silver, oil, copper and other real tangible assets (without destroying the Treasury market or making gold and silver go no offer), would they?  I say yes, they absolutely would love to be out from under their Treasury position.  Apologetic others might say China is comfortable, we will soon see. 

Because confidence is the only thing at this point holding the game together …and its fickle nature, it is important for you to think this through.  What will be standing when confidence breaks?  Can banks globally survive "runs" when depositors come calling?  Can commodity exchanges deliver all they promise?  Can borrowers "borrow more" if they cannot redeem past issues with new debt?  This is where we are headed both systemically and globally!

Before finishing I want to tie two connected thoughts together.  First, the great Paul Craig Roberts said last week he feared precious metals could be suppressed forever.  I received MANY fearful e-mails regarding this thought process.  Mr. Roberts would be entirely correct if it were not for one small detail, REAL gold and REAL silver must be available to deliver.  Otherwise the game comes to an end and the fraud is exposed.  He is entirely correct, "price" can be jammed or rammed with enough "margin" posted.  Dan Norcini once upon a time had it correct when he said, nothing will unnerve the shorts more than the longs standing for delivery …and making a call for the product.  I would like to remind you, COMEX currently has only 11.7 tons of gold for delivery.  This is roughly $400 million.  If I were short, this paltry sum would not add to my confidence.

Another thought going hand in hand with this is where we are now versus 2008.  Back then we were within overnight hours of the entire system coming down, this is fact.  What has changed since then?  "Nothing", but in reality quite a bit.  Nothing has changed from the standpoint of "tools used".  We have not altered or changed anything that "got us to the brink"… only done more of it!  We have far more debt and more derivatives outstanding now.  In fact, central banks and sovereign nations have even sacrificed their balance sheets to prolong the game.  It has worked …so far.  The only problem is the entire arsenal of the central banks have already been tried and failed to provide the real economy with any stimulus.  The result has been capital pushed into financial markets and blowing the bubble(s) far larger than they were.  Now, we have far larger markets with far more leverage than 2008.  These will need to be met with central banks and sovereign treasuries with weaker balance sheets and almost no ability to borrow in an effort to reflate.  It is a recipe for disaster. 

We already know the sovereign debt markets are very thin on the bid side as liquidity has dried up.  We also know equity markets are displaying horrible internal breadth.  China is actually nearing a 1929 scenario and will be there shortly if they cannot steady.  Confidence is a fickle girl, if it breaks, then we go back to the 2008 scenario and we’ll find out just how powerful the central banks really are.  I believe the coming "Great Call" cannot nor will be met and only then will we see what is left standing.  It is imperative here and now to position yourself in assets that do stand on their own, everything else will be a broken promise!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome! bholter@hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

Let’s look at two different topics where we are seeing contradictory "evidence".  First up is what’s happening in the gold and silver markets.  Never before have I seen sentiment as poor as it is today.  Nor have I seen so many negative articles about gold in the various mainstream publications.  It has gotten so bad, gold has even been compared to "pet rocks"!  While we have seen food fights before, the name calling as of late has become deafening led recently by Martin Armstrong and Cliff Droke.  I wonder how or what their response is to the physical side of the argument?

As you know, there have been "air pockets" in the price of gold over the last three years.  Nearly always, these takedowns occur at night and in particular Sunday nights.  The last one a couple of weeks back, saw $2.7 billion worth of gold sold over a two minute span.  I have asked the question many times, "who" controls this much gold and if we could identify someone or some entity, "who" would ever sell in a manner to destroy pricing if a profit motive truly exists?  Can anyone conjure up an answer to this while including the phrase "profit motive"?  I dare any of the gold bashers to answer these two very simple questions!  Front running just a bit, any real answer I would imagine must have "desired lower gold price" as part of the explanation.

A very real problem or flaw in logic exists in the current gold and silver markets.  If there is in fact so much selling (panic selling), how is it possible the U.S. Mint had to stop selling Silver Eagles nearly a month ago?  It can only be for one of two reasons.  Either they had enough silver but could not produce coins fast enough to satisfy demand, or, they could not source enough silver to make the coins.  But this does not make any sense.  How could there be "too much demand" if everyone is selling?  Also, how could there not be enough silver available if everyone is selling and has sold?  Where did all of this "sold" silver go to?  Again, I dare anyone to come up with a logical answer to this.

We are also seeing the same thing in gold.  It is trading in backwardation ($7 plus) in London and with substantial premiums in India and throughout Asia.  If the masses are dumping gold then supply should be plentiful, how can physical tightness exist or premiums over the paper price exist if recently sold gold is falling out of dump trucks on their way to refineries?  Any logical answers for this?  The gold bashers say "see, the price is down, there is your proof".  Do Armstrong and crew deny that the only thing necessary to sell a COMEX gold or silver contract short is the ability to post margin?  Do they deny that "money" (margin) can be and is created for free ?  And then used to "water down" the futures in the same manner as a company over issues stock or a country over issues money supply?

There is a very real distinction between paper gold and physical gold, this will soon become apparent.  The difference is physical in your own control is no one else’s liability.  Paper gold on the other hand is the liability of the issuer of the contract.  Currently, COMEX has a whopping 11.7 tons left of deliverable gold left.  JP Morgan claims to have less than four tons, these are the lowest numbers I can ever remember.  To put it in perspective, 11.7 tons of gold is worth less than $400 million dollars.  The COMEX can now be broken and exposed with petty cash!  As sure as the Sun will rise tomorrow, there will eventually be a "call" on real gold.  Not only on COMEX gold but ALL paper gold …any call will not be met because the gold does not exist to meet the call.  There are now more than 100 paper ounces of gold sold for every one ounce of real gold that exists to deliver.  If there were 100 fake shares of IBM trading and watering down every one real share in existence, the price of IBM stock would be trading in the low single digits!  The fake shares would alter perception but not the reality of what the company is worth as an ongoing concern.

Another area to touch on is the "threat" of the Fed raising interest rates.  I view a rate hike as ONLY a threat at this point and will get into that shortly.  Looking back, the Fed has floated the idea of rate normalization ever since early 2010.  It was always six months out …and continually extended.  But this time they really mean it?  The consensus is now for a rate hike in September.  I can only say one thing to Janet Yellen and the gang, I DARE YOU!  In my opinion, if the Fed were to raise rates we might only have a functioning financial system for about 48 hours, I cannot see more than a week or two at the most.

Why is this you ask?  Let’s count the ways … First, global trade is already imploding.  China is entering a margin call scenario on many fronts.  An already strong dollar is pressuring an over indebted world that owes in dollars.  Internally, the U.S. is missing on many cylinders, retail sales and housing turnover already weak will become disastrous.  Reported economic numbers are barely treading water even with bogus assumptions and accounting.  Tightening credit will also have a negative effect on the banking system with razor thin margins and even more so in the derivatives complex.  Higher rates on their own will create margin calls, not to mention investors scrambling for the door in fear of even more rate hikes.  Panic begets panic in other words.

The way I see it, there is a very real probability the Fed not only does not raise rates in September, a very real chance exists for QE4 to be announced and implemented in a panic.  It should be added that the possibility of forced U.S. Treasury sales by China is a distinct possibility.  They may be forced to do this to shore up their panicky markets.  Who will be the buyer?  Yes of course, the Fed and ONLY the Fed!  It is my belief the Fed is about to be tested beyond breaking not only as lender of last resort but also "buyer of only resort" when it comes to the Treasury market.  Liquidity is already quite tight world wide, can the Fed really exacerbate the situation by raising rates?  Is any economy anywhere in the world strong enough to bare higher rates?  Any financial system solid enough?  I DARE THEM to raise rates …I bet they will instead be forced to do the opposite and pump unprecedented new liquidity!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

While taking a short vacation last week, this article was intended to be my first one upon returning.  That plan was squashed a week ago with the brutal "interventions" upon gold and silver during the illiquid overnight hours early Sunday morning.  Let me add to what I wrote last Friday by saying the phrase "TIME AND SALES"!  For anyone who does not know what this means, any trade on any market anywhere in the world has a "paper trail".  It is called a "time and sales report".  Very simply, it reports who traded what, in what amounts and to whom.  Once the broker is identified, then regulators can query as to who the customer was for whatever trade in question.  If they want to know "whodunit", it’s quite simple.

This is not rocket science.  It is not hocus pocus or even anything "special".  Time and sales have been around since the dawn of trading.  Even prior to computers, handwritten records were taken to record who traded what, when and in what quantities.  Should the SEC, NYSE, CFTC or anyone else want to know who is doing what, it takes five seconds or less to find out.. (This includes the Chinese who have outlawed selling under the penalty of firing squad!!!  So who is doing all the selling?) In my opinion, the regulators should be strung up on lampposts for their lack of doing the jobs they are being paid public tax money to do.  They have turned a blind eye, presumably because they are told or believe it is for "the greater good"?  …the greater good… sounds like something out of Russia or China back in the day when I was a youngster in the 1960’s – or even something in the history books we read as kids in school regarding Nazi Germany.

Do you remember this time period?  I still remember this time frame very well and pine for it every day.  Back in those days we couldn’t wait to get home from school so we could get to play baseball, football, basketball or even hike it to the nearest pond in winter time to play some pickup hockey.  Back in those days our parents knew where we were by where our bicycle was.

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There were no cell phones and if we needed to make a call from a public place, we would pull the dime out of our pocket our parents always insisted we have.

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We could sell (or even buy) lemonade without a health department license and had no fear of arrest – we even gave the police free samples.  We walked a half mile or even a full mile to get to school (but not uphill both ways nor always in the snow).  We did this with friends or if we were late we did it alone.  Back then this was the norm.  Today, parents are regularly being arrested for allowing a child to go two blocks away on their own… not to mention the nine-year-olds for selling lemonade!!!
  After playing, we’d all head home for dinner and get to watch some TV.  Remember?  " TV" where no cussing was allowed.  Most shows had a "theme" or an underlying lesson that taught kids "good always triumphed over evil".  We watched Batman, Superman and others.  Western’s were in vogue and there was always a lesson to be learned from watching The Rifleman or Gunsmoke.  I have said several times over the years when writing on this subject, "Leave it to Beaver cannot even be found on syndicated reruns anymore".  My point is, the "wholesome" world we grew up in is so far gone, current history books don’t even mention it as a footnote!

Think about where we are today.  Where handshakes used to suffice, contracts are now drawn up to be purposely broken.  More than half of our population "takes" while less than half the population supports this spending habit.  Worse, it is the "supporters" who are vilified today because they don’t "give enough."  We used to have free speech as outlined in The Constitution, now there is only free speech for the "special" groups.  Anyone who speaks against any of these very special groups is branded a racist, sexist, homophobe, or religious persecutor (except of course, unless you’re speaking against Christians – that’s OK… even seemingly encouraged).  Or worst of all, you could be labeled a "CONSERVATIVE!"

Today it is OK to burn the American flag, outlaw the quaint historical  Confederate flag …while flying the flag of any other nation (here in Texas the favorite to fly is that of Mexico) on our own sovereign soil.  I noticed yesterday while in a very long  U.S. Customs line upon returning home, how much longer, formal and probably difficult it was rather than just swimming across the river!  Many states no longer require a voter registration card to vote or even a driver’s license, so the motto "vote early and often" applies.  Citizens who pay for "old" health insurance now get "charged" extra on their taxes, while those who can’t afford insurance get it for free… along with cellphones, housing, food, stipends for each child etc. …and anyone who speaks out about it is branded a "crazy."  Please let me remind you, this country was originally formed because of oppression and the practice of "taxation without representation."  Have we pretty much gone full circle?

You could not have told me even 20 years ago we would be where we are today.  We have a system where the president makes up laws as he goes along, the Supreme Court rubber stamps his illusions and Congress has been relegated to irrelevance.  Speaking of Congress, didn’t "We the People" just throw the bums out?  Didn’t the Republicans run on a ticket that said they would overturn all sorts of ridiculous (and if you ask me) tyrannical laws?  Have they overturned anything?  No, they just passed the fast track trade bill which will gut our economy even further …while the Democrats voted against it …?  Forget about the giant sucking sound Ross Perot spoke of, we will soon hear the wheezing and gurgling last breaths of a nation, in my sad opinion.  In the interest of not losing you as a reader, I could go on and on about subjects like guns, GMO’s, baby parts for sale or whatever but I think you get the point and I’ll stop here.

From an economic and financial standpoint, it is funny that while away I read "The Scarlet Woman of Wall Street."  This was the story of Daniel Drew, Vanderbilt, Fisk, Gould and Erie railroad during the mid to late 1800’s.  There were no financial laws back then that prevented anything with the exception of bribery which was impossible to prove unless the giver and receivers were both stupid beyond their years.  Then all sorts of laws were written and the playing field was somewhat leveled (as much as it could have been).  Now, there are so many laws on the books, it is impossible not to break one of them.  The thing is, financial institutions do not care.  Since no one goes to jail (except for a couple of hedge fund managers), it is more profitable to illegally and blatantly swipe $10 billion because you know your fine will only be $100 million.  If you think about it, management in today’s world could probably be held accountable in today’s civil legal system for NOT BREAKING THE LAW and leaving money on the table.  Why play fair when everything is rigged, while you can steal and pay only 1% or less of what you made?  It is almost management’s "fiduciary duty" to lie, cheat and steal in order to not fall behind!

To wrap this piece up I would like to say this, if you don’t believe or cannot see that all markets are rigged all of the time I’m sorry.  If I offended anyone for any reason, again I’m sorry.  If you believe today is "normal" in any way, I am sorry.  Actually, let me clarify this: I am not sorry, but I am sorry you don’t understand the point I am trying to get across and sorry you cannot see it.  Unfortunately, the American people have been slow boiled into believing our lives are normal and things are "just the way they are."  We have been lulled into believing we are an "exceptional" people and "deserve" the finer things in life.  What we have forgotten is that hard work, hard money, and innovation is what made this country great to begin with.  Many today don’t remember or never knew this very basic tenet…but ignorance does not change the fact.  Truth and justice (and for the most part "business") was what America was once all about.  Please do not tell me I am na├»ve.  I am not.  Please do not tell me this is not being done according to a plan.  It is.  There is zero percent probability the policies in place today are by mistake.  They are not by mistake and no one could be so stupid which leaves only one option …"purposeful" is the operative word.

The United States was the shining light of the world in so many ways.  We are no longer.  We were built as a Republic that followed The Constitution which was written mainly by God fearing Christians.  We have evolved into a perverted, apologetic, weak and slovenly society with little to no values regarding anything from our ethics, morals, constitutions, or anything else.  We believe we deserve the best and should work the least (if at all).  It’s the American WAY!!!  Unfortunately, what I write here is now considered by the majority as either anti-government or unpatriotic.  It is neither.  In fact, all I advocate is following The Constitution.  You know, that "thing" our politicians "swear to God to uphold" (did you catch that?  They swear to God!  Not to Walt Disney, Facebook or even the almighty Google!) while raising their right hand with their left hand on The Bible?  I am a true patriot in a world where burning the flag, shredding The Constitution and spitting on The Bible is considered sane and normal.  I am here to remind you it certainly is not!  I am not writing this to convert the perverts, only to let those who are still sane know that yes, you are still sane.  That said, in today’s ludicrous world, what I write here can be used as proof of my "insanity" and my lack of "patriotism."  You decide.

I guess I would sum it all up by twisting the words of Superman, "Truth, Justice and (is no longer) The American Way!

Standing watch (with tears in my eyes),

Bill Holter
Holter -Sinclair collaboration
Comments welcome!
bholter@Hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

After planning to take this week off for a little rest, market gyrations have changed the plan.  Initially next week I was going to pen a piece titled “Truth, Justice and no longer the American way”.  This will now wait a bit.

This past Sunday night and Monday’s action in gold needs to be discussed of what I believe is now a rapidly moving big picture.  $2.7 billion worth of gold futures were sold in just 2 minutes Sunday night.  As I have asked before, “who” could possibly “own” this much gold other than an official source?  The answer of course is nearly no one other than a very small handful of ETF’s.  In perspective, $2.7 billion worth of gold is roughly 3% of global production.  Said differently, it amounts to nearly 10 days worth of labor and production worldwide… sold in less than two minutes!

  Next, assuming there really is an entity that owns this much gold, “who” in their right mind would sell it in this fashion?  Who would sell so much and so rapidly concentrated in time as to knock the price down $50?  What trader would still have a job the following day if their own sale created a drop of four percent in the proceeds received?  Traders today fight over one thousandth of a percent, are we to believe a trader was willing to give up 4%?  Was this trader so “scared” that gold was going to drop Mondaythat he just “had to get out”?  No, it is obvious to even the most disingenuous, this was purely an “operation”, one meant to depress the price of gold at any cost.  In perspective, this trader by not spacing out the trade cost his “firm” $40 million if you only use the midpoint of the trade.  Will this be reflected in his year end bonus (sarcasm)?  As of today, finally, the hunt is on as to “whodunit” http://www.zerohedge.com/news/2015-07-23/hunt-mystery-gold-bear-raid-leader-begins ???

  In my opinion they may need to look to only two sources though only one is necessary.  In every trade there are two sides, the buyer and the seller.  Have you ever wondered “who” the buyer is in the middle of the night to such large sales?  What if it is principally only two houses who trade back and forth with each other and then flatten out over the course of the next few days?  In essence, if this is the case there is not really any risk because they would always be “flat” between each other.  I don’t know if we will ever find out “whodunit”.  This is certainly a possible scenario and one in a world where the rule of law has been revoked …certainly feasible.

  Switching over to silver, the low prices have again created havoc in the physical market.  Prior to Sunday, the U.S. mint had already suspended sales of Silver Eagles.  This was done for one of only two possible reasons.  1. demand was so great they could not keep up with it or 2. they could not source physical silver to mint the coins.  This is exactly akin to Venezuela’s toilet paper shortage.  They have mandated a retail price below what it can be produced for and thus …manufacturers have stopped making it because they cannot earn a profit.  Simple!Another analogy would be a butcher who advertised $1.99 filet mignon.  Even if he had any to begin with, it would not last more than a few moments and you would be stuck slapping some $3.99 a pound hamburgers on your grill.

  As of now, coin dealers across the U.S. are on back order for nearly all silver products.  The premiums as in other similar previous instances have risen and product has been swept off the shelves.  What is the “real price” of silver you ask?  It is whatever you must pay to receive real metal.  As it stands now, COMEX paper prices and real physical prices are about 15-20% apart from each other.  In my opinion, should COMEX press prices further down, they risk exposing themselves as a fraud.  Already in July, some 3 million ounces have jumped queue and been demanded for immediate delivery.  In other words, COMEX is risking creating a “run” on physical metal which is 100% contrary to what low prices have been used for.  Low prices are the main tool used of “sentiment discouragement”, it very well may turn out that these low prices create a stampede into their laughably small inventory!

  From a broader perspective, what I believe we are seeing is simply one “skirmish” (but at the very core) in a global financial war between the West and the East.  We now know several other pieces to the puzzle.  China, the leader of the East is clearly economically slowing down as evidenced by many recent statistics, the container trade numbers being most recent;

Their stock market is imploding and capital flight is in the hundreds of billions.  Couple this with China dumping U.S. Treasury securities via their “Belgium accounts” and we have a better picture of the “financial war” being waged.

  As a theory, most believe the 600 tons of gold announced by China last week was the reason for the Sunday/Monday drop.  This I believe is correct but for 180 degree wrong reasons.  Many were shocked and disappointed at the number of only 600 tons.  It truly is laughable as it represents about 3 months worth of gold China currently imports and has been for over 5 years.  I believe they made this announcement for two reasons.  First, they needed to show more gold in order to be considered by the IMF for inclusion into the SDR this fall.  I also believe they wanted to show a lower number so as not to spook gold higher as they are clearly a buyer each month.  If you are a buyer, why press the price higher as long as you are receiving delivery?

  Going a step further and tying this all together we can see several things happening.  China is now witnessing an unprecedented capital outflow while the U.S. dollar has gotten stronger.  A strong U.S. dollar is textbook warfare against Russia and aimed at tightening the screws further both financially and economically. We have heard from Sergei Glayzev on several occasions, Russia/Mr. Putin plan on dropping a financial and moral “truth bomb” on the United States.  They will only be pushed so far, I believe some sort of data dump can be expected at any moment.

  If you look at this from the standpoint of “war”, these are all chess moves between those issuing a fake currency and those wanting to do real trade with real settlement.  Did the U.S. just “punish” China for being a gold buyer and making an announcement (even though miniscule)?  I think this can be looked at as the Western banks are short paper gold derivatives and long dollars whereas the East is long real metal and desirous of leaving the Western banking system behind.  There is no other reason China and Russia would have set up trade banks, clearing systems, currency hubs etc. all over the world if they did not expect to use them.  This is a war between the West wanting to prolong their own current fiat system and the East wanting to move away to one that is equitable to all involved.

  We are already in WW III.  It is because of and being waged in financial assets.  It is clear to me the U.S. is in panic mode and trying to break the long term bull trend in gold.  If the trend cannot be broken, the dollar will be zeroed out.  Unfortunately, both sides know this full well.  The military warnings of late from both Russia and China have become much louder and the actions and movements by the U.S. (staging in Turkey for Syrian raids for example) much more dangerous.  As I see it, the U.S. “needs” war to cover many dirty financial tracks.  China/Russia on the other hand may try to prevent war by releasing “the truth” and thus crippling the U.S. financially and thus the ability to wage aggression.  The problem as I see it is the world is too far along technologically and the days of having to pay and fund an army long term is behind us.  Now, “kicking the table over” is a simple as pushing a button.  Unfortunately, this may be the only remaining choice for the U.S. in the financial collapse I see coming.

  Let me finish with a couple of questions.  Who do you believe is more levered, the East or the West?  Yes, China is levered and unquestionably going to suffer short term during the unwind.  Xi Jinping said this himself.  Who has a financial system layered with trillions of dollars in derivatives?  Which direction has physical gold been flowing for at least a decade?  Finally, what is the “real” price of gold or silver?  Is it what the paper exchanges say?  Or is it what it actually costs to purchase …in size?  I believe we will find out all of these answers and many more over the next few months.  The entire world will be shocked to its core when nearly everything we have come to believe in turns out to have been a Hollywood production of “Wag the Dog”!  I pray there will be “options” available to the West, though deep down I know this is not the case.

Regards,  Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

So Mr. Tsipras has sold out his countrymen.  He called for a referendum fully expecting a “yes” only to receive a resounding no vote.  No matter though, what was already “planned” has already gone forward to kick the can down the road.  As overwhelming as the referendum was and as in your face the following proposed agreement is, outright rioting, violence and even civil war has a high probability of resulting.  A “convenient coup” (remember Ukraine?) could even be in the works?

Looking at Greece from a grand standpoint, what’s the deal?  First, Greece is really not much worse off than Portugal, Spain (the West’s newest police state), Italy or even France.  Truth be told, Greece has less debt per capita than us “rich” Americans.  No doubt Greece is symptomatic of the West’s position of too much debt …not enough GDP but this is not really what I’d like to talk about today.

Greece initially was bailed out in 2010 and again in 2012, two can kicks if you will.  The current episode has been going on for well over six months, it is not a surprise to anyone by any means.  My point is this, we have seen lines outside of ATM’s for over two weeks but the situation has been known about and well publicized for quite some time.  Other than pensioners who are trying to retrieve their latest monthly or bi weekly payment, who else should be standing in these lines?

Certainly money has bled from their banking system over the last year, a number around 100 billion euros …but there is still over 100 billion euros left?  Who would have left any cash in Greek banks as wide spread and “early” as the bad news on the banks has been?  Were the Greek people sleeping?  Did they have the American “can’t happen here” syndrome?  Who would have been stupid enough to leave capital in the bankrupt banking system of a bankrupt nation?  Mindboggling isn’t it?

Let’s switch gears and now look in the mirror.  Have we not had enough information here in the U.S. to understand we face the same fate …only much bigger and far worse from a leverage standpoint?  Yes I know, mainstream media works overtime to keep the cattle penned in their “everything is fine” corral, but isn’t it obvious to anyone who bothers to wipe the fog from the window?

Think about it, the financial world almost ended in 2008.  Nothing was fixed, nothing even changed.  In fact, the only change has been the degree to which unsound monetary, fiscal and banking practices have been since then.  It is as if we hit a brick wall in 2008 yet pressed the accelerator harder ever since!

This article is not about groundbreaking thought, it is meant to ask “why”.  Why is there no panic or fear?  Why if the real global economy is slowing and shrinking do we not see any financial reaction?  Why if the financial markets are far more levered than they were in 2008 have the wheels remained in place and few questions are asked?

I think the answer to this is pretty simple and can be summed up with the old saying “nothing matters until it does”.  Over the last two or three months I have fielded so many questions like “why can’t this go on forever with the central banks just papering everything over”?  I believe your answer lies in this question!  “Papering” being the key word.  There is such a thing as “reality” or “truth”.  Yes this can be hidden for a time but always, water will seek it’s own level.

Let’s take a look at Greece again, a “deal” has been struck and the fear in the “reality community” is the can got kicked again and it will go on forever.  First, has a deal really been struck?  If so, what is it exactly?  Think about what has come out this week.  Their banks are still closed (and will most likely be bailed in), “safe” deposit boxes cannot be accessed, talk of a 30 year extension in debt has been tossed around and the IMF now says they may not be able to participate in any bailout because they cannot give aid to an insolvent entity.  Is anything fixed?  Has anything been done to make Greece an ongoing concern?  What sort of deal can be made that even looks doable?  The answer to the above of course is nothing can be done and no deal is really doable because Greece is broke and simply cannot pay.  You see, any deal that is done must at least appear feasible, there is no such thing!

Markets so far have been kept fairly well under control.  This has been done via the use of derivatives but these are what caused many of the problems in the first place.  How do you think Greece, a financial deadbeat, was allowed into the Eurozone to begin with?  Derivatives!  Derivatives were used to hide much of their debt.  (Now Goldman Sachs may be sued for their aid in the fraudulent entry of Greece via bogus derivatives).  Though it was hidden, did the debt go away?  No, the debt and the service on same has jumped up and brought forth the reality of bankruptcy.

To finish, you can call dog crap whatever you would like.  Call it a rose, call it beautiful, call it whatever.  No matter the name, it is unpleasant to look at, smell or especially step in.  Greece is simply the first one to be realized, all the others up to and including the U.S. are in the same insolvent boat.  If you are sitting tight and believe “it can’t happen here”, you are making the same mistake the many Greeks who are standing in line made.  It can and will happen here, it mathematically has to as there is no other alternative.  Anyone with enough sense to step around a pile of dog pooh should have enough sense to get out of the system NOW to the best of their ability.  Ask any Greek if this is good advice!  They are no different from any other Western nation except they cannot print what they need to pay.

The final question then is this, does printing actually create “value”?  Can printing turn anything insolvent in to solvent?  The only thing printing (or borrowing more) can do is allow for current payment …which only makes future payments larger.  This is the state of the entire West and being previewed by Greece, only digging the 2008 hole deeper and deeper!  Greece is merely a symptom of bad policy, they are also the poster boy the world will see as not having any real solution.  If there is no real solution to Greece, how can there be a solution to any other bankrupt nation from that very same flawed policy?

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

In the last article "An indication of PPT failure", many readers wrote in and either asked what the various acronyms were or admonished me for using so many without explaining them.  I will try in the future to assume the reader does not know what we’re talking about and at least spell out any acronym used.  As for the last article;  "PPT" = plunge protection team,  "ROW" = rest of world

Today, let’s look at China and their recent efforts at preventing their equity markets from collapsing.  First, it should be understood they are "too late".  I can say this because their PE (price to earnings) ratio even after the collapse of

25%-40% (with some stocks not even trading Friday), the Shanghai Exchange still trades at over 60 times earnings.  In other words, at today’s rate of earnings it will take 60 years worth of earnings to equal what investors are willing to pay now.  They have allowed and even fostered a bubble of epic proportions to form, no amount of effort can stop this bubble from collapsing.

This past week, China took the crazy steps of making it "illegal" for institutional accounts to sell …for the next six months!  How will pension plans make promised payments?  Will they send out IOU’s until it’s "legal" to sell again?  There were also reports of brokers refusing to accept sell orders at all.  Let’s say this, the harder China works at closing the exit doors and not allow sales will only work to put more pressure on the world’s other equity markets.   This was one of the points I was trying to make when I wrote about the crisis "crossing borders" last week.

Think of it this way, what would you personally do if you were locked into the market here in the U.S.?  What if our markets were closed, yet the Canadian or other European bourses were open?  Would you consider selling something short elsewhere as a hedge because you are trapped long in the U.S.?  Even if it is not the same company exactly, would you sell let’s say Fiat or Mercedes short as a hedge against being long shares of Ford Motor?  Or forget even being industry specific, would you at least try to sell another bourse short and do it in dollars?

Do you see my point?  China closing her markets will put pressure on other markets because being trapped can make for some "desperate people" …and you know what they say desperate people do!  

Another reason the Chinese market will not recover is that speculation has run rampant and a cleansing is coming.  Forget about opening four million retail accounts per day or hairdressers quitting their jobs to "day trade", the amount of margin built up and being used is staggering.    

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If you look at the margin debt on the Shanghai Exchange, you will see it was a very similar percentage to that of the U.S. and double that of Japan just three years ago.  Since then, margin debt rose NINEFOLD to 18%!  Just in the last month during their crash, this number has dropped nearly 4 percentage points but is still as unsustainable as is a PE ratio of 60 times earnings.  The huge margin debt suggests that selling will "FORCE" more selling because of margin calls.  China’s equity market is a wildfire already burning!

Skipping backwards as mentioned above, selling pressure from China is going to bleed over and into foreign markets.  This is how the advent of plunge protection teams will fail as "borders" will be crossed.  Today’s world is one where everything financial is truly global.  We see this and know this simply by looking at balance sheets and counterparties.  We will see this and also feel it shortly as sovereign PPTs become pressured from outside bourses.  This is no different than in trade where one nation devalues its currency to steal market share in a "beggar thy neighbor" fashion.  By the way, our "glitch" of last week in my opinion was the first surge of selling across borders, with MUCH MORE to come.

A recent article was penned comparing China to a "Field of Dreams" where

ghost cities were built in a huge miscalculation.  It was said they built these cities with the expectation of rural farmers moving in and buying up all of the overcapacity.  I highly disagree with this thought process.  For well over three years it has been my belief the Chinese knew exactly what they were doing by building roads to empty cities that had their own runways and airports, sewage, drainage and complete utility systems at the "ready". 

Why would they have done this?  It is such a waste of capital right?  Well yes, if it was "real capital" this would be correct.  It is my belief the Chinese already knew "how" this was all going to end.  They knew the financial system was a Ponzi scheme that could ONLY CONTINUE with new and more debt being added.  They also knew the credit system will ultimately collapse in a heap upon itself.  No, this is no Field of Dreams, "if we build it they will come", on the contrary … their thought process is "If we build it we will have it"!  They also have accumulated the world’s largest hoard of gold with this thought process.

Look at what China has done?  They have overcapacity everywhere.  They have unused plant, equipment, machining capability, housing and infrastructure …but guess what?  IT IS ALL NEW!!!  Now let’s make a comparison to the U.S., the only thing we have that’s new are a bunch of McMansions built all over the place.  We have little capacity to produce anything.  Our roads, bridges and mass transit systems are all old and in many cases in disrepair.  Our "grid" is a century old and at risk of being taken down by an EMP. 

Moving along to the "end game", if a financial collapse is coming and credit everywhere is defaulting, then what exactly is left?  Financial assets of all sorts will be rendered valueless, but physical "structures" will still remain.  They may (will) change ownership via default but they will still remain and be "usable".  China has played the game and used credit to build real things for the future.  We invented the game and used credit to "eat" for the here and now.  The global "game of credit" will mathematically end, and it will end badly.  The U.S. will be beaten badly in the very game we created!

China has known for many years where and how this would end. It is one of the reasons they have accumulated the largest hoard of gold in the world and are also the largest gold producer.  The credit bubble will pop and yes China will be hurt but they will be left with new infrastructure and more gold than anyone else in the world.  A pretty good position to be in if we all have to start over!

Standing Watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

Forget about Greece, they didn’t matter yesterday as the NYSE shut down for nearly four hours.  Greece does matter and

certainly will matter in the weeks to come.  Before getting to yesterday’s very peculiar "glitch", I do want to mention something quite humorous about Greece.  Ambrose Evans-Pritchard wrote yesterday the referendum actually backfired!  When Tsipras called for the referendum, he apparently expected a "yes" vote (and so did the banksters running the show!).  The "plan" was after the yes vote, Tsipras would hang his head and agree to more austerity and thus kick the can one more time.

The "cradle of democracy" threw an absolute monkey wrench in these plans!  How can Tsipras now do any deal with the Troika without being lynched in the public square?  One can only hope the Greeks stand up for themselves and not allow anyone to sell them out.  As I wrote Tuesday, I believe their best bet is to follow in an Icelandic model and default, start issuing the drachma at a fair exchange rate and exit the Eurozone.  In this manner they start over and have some very interesting trade opportunities from their east.  We will se what they choose and exactly how bad the fallout is shortly!

So what exactly happened yesterday with the New York Stock Exchange?  It was certainly a peculiar day because "glitches" turned up everywhere!  First it was United Airlines having to ground all of their flights, then both The Wall Street Journal and Zerohedge websites went down.  I also heard of many New York subway cars being halted.  Then of course the NYSE was halted for four hours.  Was all of this "coincidence"?  Or was just "glitchy"?  Let’s call this scenario number one of what I believe are three possibilities.

Then we have scenario number two, yesterday was the result of Eastern cyber attacks.  The theory goes like this, China is angry because "we topped" and rolled their markets over in a crash like fashion.  Maybe yesterday was a test to see what they could actually do?  You may pooh pooh this if you will but it only took 15 minutes for the talking heads on CNBC to deny any scenario except the "glitch".  It wasn’t China, it wasn’t a hack, it was not terrorism we were carefully told.  I personally have believed in the theory Mr. Putin would release some sort of "truth bomb" calling BS on various false flags, fraudulent dealings and the Western Ponzi scheme in general.  I still believe this will come as the U.S. looks surely to square off with Russia/China/(even ROW) at some point in the not to distant future.  I believe there is some merit to this scenario but let’s leave it at that for the moment and then revisit at the end.

Scenario number three seems to me to be the meatiest.  I spoke to Jim Sinclair while the market was in closure to see what his take was.  He immediately said to me; "it’s like if in a casino and everyone starts winning, mysteriously either the lights go out of someone pulls a fire alarm …no more gambling!  I think the PPT knew they were going to be overwhelmed, if this were the case and I was the chairman of the NYSE, I would run upstairs and pull the plug out of the wall.  …Problem solved …for now!".

Let’s look at this a little closer.  There are without any doubt "plunge protection teams" all over the world.  In the U.S., it is by an executive order signed in 1988 by Ronald Reagan.  The Bank of Japan has openly said they buy everything including equities.  China, who has been having very serious (25%-42% drops in just 16 trading days) market problems.  In fact, it could be said China has already crashed.  They are making it illegal for institutions to sell, the PBOC has actively been in their markets and everything they have tried has not worked until today.  Then we have Europe and Mr. "we’ll do anything necessary" Draghi.  Strangely, even though he is a politician, this is something out of his mouth I believe.

That said, I have a question.  Is it possible that we are seeing a global PPT failure?  You see, the "fires" are no longer compartmentalized, they have jumped borders!  It is this "crossing of borders" I believe which is causing problems.  For example, if we look at currencies, what happens if both the ECB and the Fed are trying to support their own currencies, aren’t they actually trading against each other?  Another thing to ponder is this, if one market closes (yesterday it was China), will this bring "trapped sellers" into the next market that opens and thus on the shoulders of their plunge protection team?

My personal take on these three differing scenarios is the truth lies as a combination of two and three, I guess I’m just too cynical to fall for the "glitch excuse".  Whether you want to believe it or not, we (the U.S.) are at war with the East and desperately hanging on to the dollar remaining as king.  This has been going on for years, only now it is becoming obvious.  Would one country try to electronically harm another country financially?  Is the Pope Catholic?  I do believe there is something to yesterday being either a trial run or a test, maybe even a "shot across the bow".  I also believe the plug was pulled on purpose.  Maybe it had to be or was forced, I do not know.  I do believe we are watching as the various PPT’s fail to hold the lines.  I’m pretty sure we will find the answers out and shortly.  The real answers may not be pleasant!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome bholter@hotmail.com

Posted by & filed under Bill Holter.

Dear CIGAs,

The Greeks voted "no" and should be applauded for their valor! Knowingly or not, their no vote has added extra cards to their hand. They now have more options than they would have had with a yes vote. In fact, Greece still has the only option they would have had with a yes vote (cut a deal for "more aid" and austerity), plus many other which pressure the lenders. I must say, a "vote" coming from the cradle of democracy CONTRARY to what the banksters wanted is a breath of fresh air!

Now what? Greece basically can go down three very different roads. They can use their "new freedom" to either negotiate new aid and restructuring, they can stay in the Eurozone while not paying on their debt and using a new drachma or, …they can go full Iceland! Please understand this, no matter what they choose, their banking system is inedible toast and they cannot pay their debt service let alone the principal. The bottom line is "someone" will have to eat the losses. Whether it be the ECB itself, European banks or whomever, the debt will not be paid and someone, somewhere will have to "lose". Keep in mind this is happening while liquidity is already quite tight.

It is possible we could see some sort of deal where "the world is saved" and a violent short covering rally in everything ensues. Should this occur, do not be fooled because nothing can nor will be fixed. Can they buy a month or three months time with Greece? Probably but as liquidity is drying up, accidents are more likely to happen. Countering this thought process, Greece does also have an "out" should they decide to turn toward any help offered by Russia and China. If this is the choice, I believe it’s a very good bet that rioting and even a coup may be "helped" from the shadows. I won’t elaborate on this but should it appear Greece is moving away from the West, unrest of all sorts will surely be "stirred" up!

Of their options available, I personally believe they should go "whole hog Iceland". What is best for Greece for the future would be to put a moratorium on payments and outright default. They would then be forced to issue a new drachma to conduct commerce with. I also believe they should leave the Eurozone and focus trade toward the East where their new drachma would be more likely to be accepted. Greece would be forced to "start over" from ground zero, not a happy prospect but one where at least a foundation exists. The "old" world order will not stand in the long run, it may fall apart piece by piece or all at once.

The piece by piece scenario would include Portugal, then Spain, and then Italy (with France mixed in there) wanting to go down the same Greek road. We very well may see national referendums becoming the new fad. All of these countries will want some sort of relief from their debt as the numbers are clearly unsustainable. Talk of the situation being contained is laughable. So laughable, the whole system could go from "normal" to "over" in 48 hours in my opinion.

Look around the world, China is now down 25+% in just over three weeks. Europe, it’s currency and even the Union itself is in question …and the Federal Reserve needs to do something in the credibility department. What I am saying is this, can the Fed really tighten ANYTHING in the current environment? As I mentioned previously, liquidity is rapidly going away …in an over indebted system this is the most potent of poison! As I see it, a massive dose of new QE will have to be administered just to keep the doors open. Watch for this!

Meanwhile, "we" look like idiots to those we have tried to help. While the credit market is on the cusp of breakdown and full seizure, gold and silver prices got smashed again today. Funny thing though, even though there has been so much "selling", the U.S. Mint has apparently suspended sales of Silver Eagles! I will ask the question again as I have before, if there is so much "selling" of silver, why can’t the Mint source it to sell? It is their mandate! It is the law (which matters not anymore)!

Are we moving into a zone where COMEX prices will get hit further …while the mint sells nothing until August (if we even make it to August) …and then we see some sort of credit/financial/international event where force majeure is declared? For whatever reason the Mint can conjure …can’t source metal …can’t keep up with demand …or whatever, a suspension of sales does not jibe with massive panic selling of "metal". Unless of course they say "we are suspending sales because there is no demand". I am sure a statement like this could be spun as Gospel truth!

Folks, we stand on the verge of the global credit markets coming to a grinding halt. In our current world, NOTHING that we consider "normal" will transact or transpire without credit. Our lives will change literally overnight without credit. We are about to live through a massive wildfire of credit values burning to the ground, gold and silver will still be standing when the smoke clears. It is completely laughable to see gold and silver forced down when the fear of credit collapse is rising. Mother Nature doesn’t work this way, central banks wish she did! I hope you have the will to "see through it", the coordinated efforts to support paper markets and suppress gold and silver have been truly impressive. The currency of the biggest, most indebted and "brokest" issuer in the world is attracting safe haven bids. I assure you, once control is lost and we go into all out panic, even those pulling the levers will be moving against their own central banks!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome! bholter@hotmail.com