Posts Categorized: Bill Holter

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

Posted by & filed under Bill Holter.

Dear CIGAs,

Bill Holter is back to discuss the impending ‘Global Margin Call’… and when it might begin. We recorded this call on Friday, July 3rd, so we weren’t privy to the outcome of the Greek referendum at the time of this call. So Sunday’s news that the PEOPLE of Greece have said a resounding NO to IMF Bankster servitude and endless austerity is most welcome news indeed. Although, from a global economic collapse perspective, from a derivatives bubble and credit default swaps and TBTF criminal international banks perspective, today’s vote may well ensure that a ‘Global Margin Call’ could commence at any moment.

Thanks for joining us – and stay tuned to SGT Report all week for much more on the events in Greece and the repercussions these events may have on all of us.

Posted by & filed under Bill Holter.

Dear CIGAs,

Often times I like to write about an event or someone else’s article because of the importance to the overall picture.  Today I will do something a little different.  Below is an e-mail I received last Thursday from a friend.  I have the utmost respect for his thought process and his knowledge.  The writer is "plugged in" if you will, he has very high and powerful contacts in both China and London while he operates out of North America.  The following is chilling to say the least because it comes from someone who "knows", it is not a speculation on his part because he is seeing it real time!  I will add my comments afterward.

"I have been pounding the drum for some time about shrinking liquidity and what the impact will be. Well, I can tell you that we are almost there and a real crisis is developing far faster than what I envisioned that is impacting the 75 Trillion Shadow Banking sector which is on the verge of implosion. Focus on Europe as the real crunch will spread like a wildfire from there seizing up all credit markets.

We will ignore China and the BRIC for the time being as to impact and focus on the European Ponzi that the bankers have brought to the table.

The specific area we should keep an eye on is the U.S./bund 10yr yield spread, currently quoted at 155bp. This spread will start taking its lead from the euro, so when that starts to lose favor keep sharp eye out for the next shoe to drop.

Asian shares were very volatile today,  Shanghai in particular, trading with a 10% variation (daily low to high) today as PBOC were active again. In Europe we did see small gains intraday in DAX and CAC but neither could hold on and actually closed well into negative territory both down over 1%. UK FTSE never got into the green all day and closed -1.5%. Even seasoned Traders are scared now about intra day swings and being caught in a downdraft at closing. Banks are tightening the leash on trading lines to reduce exposure which is sure to castrate liquidity of bonds.

Credit markets are almost closed, I am being told! I REPEAT again the CREDIT markets are almost closed! Trades are happening by appointment and to even move 1MM EM bonds (at an opening price) is almost impossible. It is not uncommon to hear an indication only to trade and a 2% trade away from from opening, assuming you are able to trade, and desire to trade is no guarantee of a sale. NO ONE  is standing up to market prices and to liquidate even a small portfolio can take weeks. It is important that you cannot any longer trade the basis as value is dropping and there no point to  partially selling specific bonds unless you can clear a given position! Because once there is a traded price ALL holders of same or similar will have to remark the book. That is unless you are a bank where the Balance Sheet is not a Mark-to-Market approach on a daily basis for the book being held. Think holding government debt at par for the likes of Italy or Spain knowing they can never clear the debt, and knowing that no one will buy at market. So what is the true value of a large portfolio? Do you hang on getting interest while it is still being paid or do you attempt to go to cash? And if you do who is going to step into your shoes ? Especially since the banks are all trying to save cash and want no exposure of any kind. We maybe approaching the point where central banks are losing credibility and their ability to contain the fallout, when governments are so badly in debt they are powerless and rudderless in a sea of chaos.

We are coming very close to complete chaos that will make 2008 look like a walk in the park! We will be fortunate if we make fall without a real financial disaster!

——————————————————————————————-

Following up from yesterday let’s ponder the upcoming  Crisis that we are facing that specifically involves bonds, which are the bedrock of the financial system and what the fallout maybe.

Every asset class in the world trades based on the pricing of bonds. So the fact that bonds are in a bubble (perhaps the biggest bubble in financial history), means that EVERY asset class is in a bubble. Everything from real estate to stocks to the buying of cars. Ever wonder why car loans in America exceed the value of the cars in question.

Depending on who you speak with globally there are $75-$100 trillion in bonds in existence today.

A little over a third of this is in the US. About half comes from developed nations outside of the US. And finally, emerging markets make up the remaining 14%.

So whatever the real trillion it is, the size of the bond bubble alone should be enough to give pause. Even to the most aggressive or optimistic folks.

However, when you consider that these bonds are pledged as collateral for other securities (usually over-the-counter derivatives) the full impact of the bond bubble explodes higher to something like $500TRILLION. This affects both banks and the shadow banking industry. No wonder the Bank of England is perplexed as to the shrinking liquidity, it is a problem to which they have no solution.

To put this into perspective, the Credit Default Swap  (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion).

And this was at a time when there was QE and other means to throw at the problem which are now spent. So what will be used this round?

This is why the shrinking liquidity in bond sales is even to give real pause and wonder what will come to be as confidence in government wanes, and the shrinking liquidity affects all markets at the same time in different degrees but with a universal discount of value and liquidity, egged on by collapsing derivative trades."

  So there you have it.  This is something I have been saying for quite some time, we are living in the greatest credit bubble of all time…and it is bursting.  It is bursting because liquidity is drying up.  The point made regarding the inability to offload bonds speaks to just how small the "exit door" really is in the most crowded trade in all of history!  I hope you did not miss what was said about "marking to market".  The sale of a measly $1 million worth of bonds at any discount affects the pricing of BILLIONS which then acts as a further liquidity restriction on bank balance sheets.

To this point we have not seen much weakness in U.S. markets BUT we are witnessing the "volume" dry up drastically.  This lack of volume also speaks to the size of the exit door.  Without volume, how does one sell if they want to?  Better yet, without sufficient volume, how does one sell if they HAVE TO or are FORCED TO?  In Asia, China’s stock market has collapsed over 20% in just three weeks.  They are living a real life margin call!  What is most humorous to me is China has now instituted rules where stock market margin calls can be met by posting real estate as collateral!  Meeting margin with an already margined asset is the recipe for disaster!

  Please understand this, "policy" and central banks are doing whatever they can to keep investors away from the exit door because they know there isn’t one.  Central banks all over the world are "buyers" of nearly all things paper, do we really have "markets"?  Anywhere?  Let me finish with this, it is written in the Bible "and on the third day He rose again".  Here on Earth I believe we will soon find out after credit breaks, "and on the third day …nothing opened".  I truly believe this is possible.  I do not believe the Earth can spin more than twice after a true break in the credit markets before a COMPLETE SHUTDOWN will occur.  Nothing "paper" will be spared! 

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

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Dear CIGAs,

Not that almost any and all news today is enough to make you scratch your head, two pieces of news yesterday were bombshells!  I am talking about Greece’s stance of staying IN the Eurozone and the Zerohedge article regarding JPM "cornering" the global commodity markets.

Let’s first start with Greece, who could have seen this one coming?  They are taking the stance "Greece and ONLY Greece" can decide if they leave the EU.  Greece Threatens ‘Unprecedented’ Injunction Against EU To Block Grexit  I believe this is correct, there is no law allowing the EU to kick someone out.  The only way an exit can occur is if a nation decides to leave.  This is incredibly interesting because Greece can default and put a moratorium on payments yet remain as a Euronation.  I guess you might call it "squatter’s rights", they stay …but don’t pay.  Before going any further, I do understand Greece originally entered the EU "fraudulently" and with well cooked numbers.  As I understand it, "too bad so sad" it is water under the bridge, was not caught upon their entrance and cannot be used to negate their inclusion now.

What is extremely interesting is this, the Greek debt has already been largely offloaded onto the balance sheet of the ECB.  This was done to try to insulate private bank balance sheets from the risk of default and thus being underfunded.  But a fork in the road now exists, as I understand it, if Greece leaves then the debt goes back to the original banks who own the debt.  If Greece stays, the debt will stay on the ECB’s balance sheet.  Do you see the ramifications?  If Greece leaves, we have a banking failure through Europe … but if they stay then the ECB eats the losses.  Thinking this through, if Greece stays they will effectively force a mass printing by the ECB to cover up the losses.  This will effectively dilute the euro and certainly hamper the ECB’s ability to function as they desire.

Call me crazy but I don’t think this is by any mistake at all.  This is a financial chess match where Mr. Tsipras/Varoufakis and Vladimir Putin (socialists) are using great gamesmanship.  I believe it was decided Greece will stay, not pay ..and watch the ECB/Eurozone suffer with this.  Eventually Greece will leave but that will be AFTER the fire and AFTER the smoke clears.  I also believe a pipeline deal through Greece is a foregone conclusion and as this whole thing plays out, Europe will become "closer" to Russia, China, India and the BRICS  …which means what exactly?  They will be further away from the U.S.!!!  This is not rocket science, we are watching socialists who have legally hacked into one of the West’s "cars" … and have the ability to control it!  They can start it, stop it, make it go right, left or even just turn it off!  Maybe I am giving too much credit and this was just a coincidence, I highly doubt it!  To top this strategy off, I still believe we will be served a "truth bomb" by Mr. Putin which will effectively cut the dollar off at the knees!

The other head scratcher is the revelation JP Morgan has cornered the commodity markets http://www.zerohedge.com/news/2015-06-29/jpm-just-cornered-commodity-derivative-market-and-time-we-have-proof .   Before starting on this one, let me say there are many moving parts and unknowns (probably designed this way).  I have queried my mentor and spoken with Jim, I have spoken to several others whom I respect and value their opinions.  Though the takeaway was by no means unanimous, the following is my personal opinion.

To set the stage, it must be understood the U.S. is at WAR, a financial war where the survival the dollar is at stake.  We watched late last year and early this year where huge pressure was put on the price of oil.  This I believe was done to pressure Russia as energy is their biggest export.  Oddly enough, Russia and our "ally" Saudi Arabia just signed six deals last week.  We do not even know what these deals were but a good speculation is Saudi Arabia is moving toward Russia and away from the U.S..  Remember, the Saudis are the cornerstone underlying the petrodollar.  Gold and silver have also been pressured at every turn over the last four years and in particular the last 12 months. 

I assume JP Morgan and the Fed are one and the same.  There have been stories JPM has amassed 350 million or more ounces of silver.  We also know China/Russia/India have been huge buyers of gold.  We now know JPM has increased their derivatives by over $3 trillion in just one quarter.  It is obvious to me, they are the ones sitting on the paper prices of gold and silver.  This would make sense for the Fed to attack the metals and thus support the dollar.  In fact, standard procedure in any war is to strengthen your currency while weakening your opponents.  I believe the neocons know the bottom of our "gold barrel" is close at hand, they have decided to go all in on price suppression knowing full well "contracts were made to be broken" (defaulted on).

The flip side is this, silver is too cheap in relation to gold.  It is also "the stuff" which will have massive future demand for medicine, technology and green energy (think solar).  What if the price of silver were to equal gold or even surpass it in the future?  I ask this because I think not listening to Jamie Dimon may be a mistake.  He has clearly told us a panic is coming, he has told us to take our GOLD out of safety deposit boxes …and he is buying silver.  Could the plan be to mark up silver to unbelievable (today) levels that rival gold?  Is JP Morgan short or long gold or silver?  We don’t know for sure but would appear they have been all over the suppression business.  One last question, could a "confiscation" of gold be in the offing …but not silver?  Do you see the connection?

I know, a lot of speculation but remember this, there are FAR more uses for silver than gold.  Wouldn’t COMEX be forced to "force majeure" gold contracts in the event of a re-signing of the 1933 executive gold confiscation order?  If Morgan has wording in their OTC contracts similar, wouldn’t that close out their gold side …and leave them holding physical silver?  Please also remember, it was the big banks who made the huge money from $200 to $875 in the late 1970’s, NOT the goldbugs who were largely shaken out (sound familiar to current times?).  The banks as Jim has always said "trade both sides all the time".  I believe they have been in the process of extricating themselves from their dilemma for quite a while, physical silver may just be the key!

I know this is much in the way of speculation but thought has to start somewhere and I have not seen any theories with hard facts or answers.  Maybe this is off the mark, or, maybe close to the target in some fashion.  All I know is JP Morgan is not manned by crazy maniacal fools.  On the contrary, they may be greedy and evil amongst other poor traits but "stupid" is not one of them.  Don’t get me wrong, I am not saying the price of gold will go down.  No, I believe China will unveil a gold backed yuan later this year and the U.S. will be found not to have any gold … China will mark up gold.  But, there are more uses for silver and "we" (not really "us") happen to have MASSIVE TONNAGE? 

If you disagree with this, fine.  If you would like to fireball it, please have a theory ready to replace it because as I said up top, truly a head scratcher!

Standing watch,

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

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Dear CIGAs,

Now that we know Greece will default, where do things go from here?  Before getting to that very tough question (with no concrete answers), I would ask another stinging question.  "Was a Greek default really "already in the market"?  I have to chuckle just a little as Zerohedge did an article quoting many "talking heads" who as of last Friday were still doing their best Bruce Willis imitations and advising "come out to the coast, we’ll have a BLAST"!  How Could The "Greek Experts" Be So Wrong?  As I questioned last week, a Greek default and Eurozone exit was in no way already factored into the market …unless you believe today’s carnage is a result of Puerto Rico ‘fessing up to their bankruptcy!

Where exactly does this go from here?  First and foremost, Greece is on par with Lehman Bros. of 2008 or may even be worse!  For a sovereign government to go down, or I should say "be allowed" to go down is worse than Lehman.  Lehman Bros. was "forced down" and put out of business before anyone figured out what the actual ramifications were.  Now, everyone knows of the interconnected ramifications yet Greece was still "allowed" to default (yes I know, whether it is classified truly as a default remains to be seen?).  My point is this, if the central banks were truly omnipotent, then how could "a Greece" ever happen?  For those of you who believed it would be "papered over" as everything else up until now has …something has changed!

But what exactly has changed?  Greece, or Detroit, or Puerto Rico or wherever, are all small but they are REPRESENTATIVE of what is wrong with the entire system.  In fact, if you truly break the numbers down I believe you will find the U.S. is actually in a deeper hole than Greece.  Before you scream at me, please include all of the guarantees and future U.S. obligations, if you do this you will see Greece is actually a fiscal tightwad!

Beginning immediately it is important to understand any institution can seem healthy one day yet announce insolvency the following day.  This is NO JOKE and I am not grandstanding.  We just do not know who owns or is obligated to "what".  The financial markets and the individual players are so levered in various directions, volatility as we are now seeing can easily bankrupt the underfunded overnight.  I believe this has already happened over the last few years but clandestine funding has kept it hidden.  The recent volatility may have been too sharp, sudden or violent to keep the evil genie in the bottle, we will soon see.

I cannot stress how important it is now for you to be on guard for anything at any time.  A market closure, though likely over a weekend can occur during ANY WEEKDAY!  Do not allow yourself to be lulled to sleep by any rallies from here or stories of how "the storm has passed".  It is ONLY BEGINNING!  Greece is absolutely nothing compared to what is to come.  Even the Chinese market has entered bear market (-20%+) from just a month ago and the leverage in that market is huge with an unwinding due.  Ultimately however, this will end up taking out most all of the major money center banks worldwide.  To see London, Frankfurt, Washington D.C. and even Basel Switzerland buckle under the coming CDS/derivatives meltdown will not be a shock to me.  As this progresses, it may take weeks or months to unfold but be aware 48 hours is truly all that’s needed.

The only thing I can tell you with certainty is this; as the meltdown proceeds I can guarantee physical gold and silver will still be standing.  My thought is they will be standing "much taller" than they are today as they truly are "money" and global "monies" are going to come under scrutiny.  This is at the core question to be answered of it all …"what is money"?  The current belief is that "debt is money", it is not and never was.  Debt may have been perceived as money or even an asset …it has and always will be a liability!  THIS IS THE KEY LESSON MANKIND IS ABOUT TO LEARN!

Standing watch for you,

Bill Holter
Holter-Sinclair collaboration
bholter@hotmail.com

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Dear CIGAs,

This coming week could be very telling. China just ended a disastrous week and finished just whiskers away from entering bear market (-20%) territory  http://www.zerohedge.com/news/2015-06-27/chinas-370-billion-margin-call. Credit markets all over the world are weakening and yields are rising. Greece will not make their June 30 payment(s) and probably go through a referendum to decide whether or not to flip their creditors the bird in a meaningless vote. In fact, Greece will probably "go boom" this week. Their banks and stock markets may not open Monday morning http://www.zerohedge.com/news/2015-06-27/greek-stock-market-may-not-open-monday-greek-officials-warn. Two days later, some sort of plan will need to be concocted to classify their bankruptcy as not a "DEFAULT", otherwise a $3 trillion fuse to a $1.4 quadrillion bomb will be lit! These and more will be very important "mid-term exams", any failure will bleed over into derivatives and become "final and terminal exams" with zero chance of a passing grade!

We have all heard about the Greenspan, Bernanke and now the Yellen "put".

It has been believed (and for good reason), the Fed would step in and save the stock market should it begin to buckle. Magically, and time after time as the stock market would hit critical levels, panic buying would appear.  This has been written about many times by many authors. Would the Fed really buy stocks or even indices? I would ask, "why wouldn’t they, it is actually even legal" after the plunge protection team was created in 1988. This is not conspiracy theory, it is FACT! All one needs to do is look at the Bank of Japan, they openly buy stocks and even seem proud of it!  As for equities, please ask yourself these questions. How "sound" is a stock market that makes continual new highs on lesser and lesser volume? http://www.zerohedge.com/news/2015-06-27/bad-breadth-milestone-warning-stocks If you are a large holder, are you bigger than the available exit? What if everyone at once took Ms. Yellen up on her "put offer"?

Another area where Fed buying looks to be very important is in our credit markets. Unless they step up with some serious buying, and soon, our 10 year Treasury yield will take out 2.5% to the upside. U.S. Treasuries and their "value" are what act as collateral or foundation for everything the world "believes in". Before going further, I do want to mention another aspect of the ultra low rates we live with. When rates are 10%, a 100 basis point move is only 10%, when rates are 2%, a 100 basis move is 50%!  In other words, movements in interest rates when rates are low have a hugely magnified impact. When rates rise, collateral "shrinks" very rapidly from a low interest rate base which means margin calls are more rapid and bigger in amounts. Higher rates will make insolvencies that much more likely and will then occur "systemically".

This topic was suggested to me by Jim, as he put it, I believe this chapter will be described as "The Phantom of the Fed Put revealed." Please understand what is meant here. There is a "confidence" all over the world in not just the Fed but in ALL central banks. This is a misplaced confidence because the markets themselves are far larger than any single central bank or even ALL of them collectively. Yes, The Fed can push, pull, support and suppress …for a time. They cannot stop a broad tide from going out or prevent a tsunami from coming in over a long time frame. The current timeframe is six years, A LONG time for us Westerners, might as well be six days for those from the East. Does a Fed (central bank) put really exist? Or is it only the "belief" a put exists?

My point is this, the only thing holding markets together is confidence …and the only thing keeping confidence from being shattered is the belief central banks are and will provide a "free put" to all markets. Take the three examples I started with up top. If the Chinese market continues to implode, what will that say about the abilities of the PBOC? Or when Greece defaults and triggers others, what will that say about the ECB or IMF? Were Treasury yields to rise through 2.5% amongst the other turmoil, what will that say about the "safe haven" status of Treasuries and thus the dollar?  It will be a reflection of Fed impotence. The skeptics who say "they will do this forever" …can say what they say at their own peril!

Let me finish this with the BIG BAZOOKA. I am sure you remember Hank Paulson talking about $700 billion TARP as a bazooka? The reality is this amount will not even be a spitball this next time around. There are over $1.4 quadrillion worth of notional value derivatives outstanding. The apologists say "notional" value has no meaning, it is only the "margin" that counts. They are correct during "normal times". Normal times being defined as being "trusted enough" and being able to breathe. Seriously, if you can breathe today you can borrow money. What comes next is a change of thought and a massive phase of global distrust. When trust and confidence break, "margin call" will become a familiar term to nearly all.

This you MUST understand, when trust evaporates, credit will cease entirely. Without credit, the world will stop spinning. Everything finance and many things real will be gone. The financial house cannot stand with a worthless foundation and distribution of real products will cease as the supply chain breaks. Over $1.4 quadrillion in derivatives is a larger number than "everything is worth" …not to mention far larger than the money supplies to settle the trades or put up the margin. You see, "putting up the margin" will equate to 100% of all these contracts because in default …notional and real value are one and the same! Settlement is not an option! It is this $1.4 quadrillion margin call that hangs over the entire system each and every day. Margin calls are almost never issued into calm. They are almost always issued into panics and by definition ALWAYS at the wrong time! The only way to shed all margin is to get G.O.T.S.!

I have said all along and stand by my statement "when this thing gets lit, it will only take 48 hours to engulf everything". If this is truly the "beginning of the ending sequence", many markets will go no bid while a couple will go no offer! Meaning you will have what you and that’s all you will have… I leave you with this horrible thought for the weekend. How better might $100 be spent? A nice dinner with your spouse or on 200 lbs. of parboiled rice?

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

Posted by & filed under Bill Holter.

Dear CIGAs,

"Don’t push a bad position"! This is good advice in many varied quests. It is good advice in games like chess or poker. Good advice in sports, business, politics, geopolitics and certainly in militarily ventures. Today we will look at two separate issues where "bad positions" are being pushed to the wall!

First, we have an insane situation brewing in COMEX silver. The open interest finally exceeded 200,000 contracts (1 billion ounces). I believe the only other time this much open interest existed was back in 1980 or ’81. This makes no sense whatsoever, the price is again plumbing 4 year lows yet open interest has moved to record highs? The fact open interest has expanded while price has declined is proof positive the "initiation" of this expanded open interest has been by "shorts" but absorbed by "someone" on the other side of the trade. Total global production of silver is only 800 million ounces or thereabouts so COMEX shorts have contracted to deliver 25% more silver than will even be produced globally over the next 12 months. Silver available for COMEX delivery only totals 57 million ounces so they sit on a naked short time bomb of more than 950 million ounces!

If we look at the July silver contract, there are 55,000 contracts still open with only 4 days remaining before first notice day. This is 275 million ounces still open with only 57 million ounces available to deliver. This is truly fraudulent sales of metal because the metal does not exist to deliver. Yes I know, the apologists will say "this always happens and the shorts will decline into first notice day and evaporate throughout the delivery month". I agree, this "has" always happened in the past but something is changing now. In the past, total open interest always dropped going into FND, now it is not. Not only are all July contracts closed out being rolled into September, the total is rising rather than declining sharply.

I first wrote last August about the situation where huge open interest in the September contract dwarfed the available silver for delivery. My speculation then as it is now, I believe somehow the bulk of the open interest in the nearby month is of Chinese origin. I called it a "Kill Switch" then and still believe this to be the case. The shorts have had their way with silver but I believe "pushing a bad position". They are "making" price by contractually selling silver which does not exist. This travesty was recently called out by Keith Neumeyer, CEO of First Majestic Silver corp., http://www.mineweb.com/news/silver/silver-manipulation-first-majestic-question-cftc/. Bravo! and you are exactly correct.  Then of course we must wonder of JP Morgan reportedly accumulating millions of silver ounces, what of this?

To finish this section, there is NO market anywhere on the planet where the amounts of futures dwarf the physical product so overwhelmingly than in silver. Why is silver so important? Why has it been bludgeoned so badly and even priced below the cost of production? You must understand how small the silver market is. Total global production is less than $15 billion per year …"but", silver cannot be left alone because high silver prices do not jibe with low gold prices. …And gold MUST be kept down and out of the limelight because high gold prices do not fit with low interest rates …which are an absolute must in an effort of reflation. You see, in no way can interest rates be allowed to rise with the amount of global debt outstanding. Higher interest rates will crush the debt outstanding, the silver market is at the VERY BEGINNING of the "food chain" that keeps the lid on interest rates. I believe the Chinese hold this market in their back pocket paid for with "pocket change", they will use is it at their own discretion!

Another "bad position" is the stance the U.S. is taking with Russia (and the rest of the world for that matter). We have placed economic and financial sanctions on Russia in an effort to bankrupt them. It has been speculated the Saudis opened the oil spigots to lower energy and break Russia as was done in the 1980’s. So far there has been more stress in the U.S. fracking sector than damage done to Russia. This may have originally been the case, however, Russa and Saudi Arabia just signed six separate deals just last week. A case can be made, the sanctions meant to hurt Russia have hurt the German, French and other Euro economies just as much. The IMF has said they will fund Ukraine even after a default …but not Greece, they need some of that "austerity stuff" that no one wants. Greece has turned back and forth playing nice with Russia in an on again off again type romance.

The scary part is the military buildup of U.S. hardware in Eastern Europe. Mr. Putin has a "limit" to what he will tolerate just as anyone else. The danger to the U.S. is not just World War III, it may be the lengths Mr. Putin will go to avoid a war. I have speculated Russia (Mr. Putin) will drop a "truth bomb" in order to cripple the U.S. financially by breaking confidence in any and all things American. I believe Russia (via Snowden) has enough evidence of various false flags, fraudulent deals and U.S. scam tradings to "shame" the U.S. into retreat. When I say "shame", I am talking about the dollar being undermined by a break of confidence.

We have pushed and shoved our way around for years while "losing friends and not influencing people".  In trying to isolate Russia, we have succeeded in isolating ourselves as the rest of the world prepares avoiding the dollar.  Just look around, the U.S. has steadily lost allies in meeting after meeting.  We have been in a bad position for at least 15 years, our manufacturing base is gone. Yet we have pushed our position harder and harder? You see, we have had to "push" because what was once "earned" and deserved is no longer true, we now must demand our place at the table to sit at it …and mostly unwelcome.

Let me finish with this thought, just as the high school football star is always invited to the parties, the invitations become less and less if he becomes conceited or if his skills diminish.  In this analogy, the U.S. has not only become conceited but crossed the line well into arrogance. As for "skills"? These were shipped overseas just as Ross Perot said they would. Unfortunately, the U.S. has pushed itself from a bad position into one worse than anyone could imagine 20 years ago!

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