Posts Categorized: Jim’s Mailbox

Posted by & filed under Jim's Mailbox.

Yes Wolfgang correct, the Fed will be the buyer of last and only resort.

Bill

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Bill,

Sometimes Central Bank actions defy reasoning. In this case it’s raising interest rates in the face of an economic environment that’s on life support.

Lowering rates to ramp up bond prices has been the tempting feature of Fed policy for the past decade. This game has now run its course and the market knows this. Now they will raise rates in an attempt to draw buyers. A closer look at the underlying situation reveals their rationale.

We are all aware of the continual unloading of U.S. Treasuries by Central Banks throughout the world, especially China and Russia . This movement is gaining traction and will not end soon.

Someone has to pick up the slack. It certainly won’t be any funds or trading houses, as the run in yields toward zero has achieved its objective and the only real direction now is backtracking towards “normalization.”

Therefore, it’s up to the Fed to support its own paper. The way they do this is to raise rates and make US paper more competitive with foreign paper, as well as tempt the funds to move away from rich dividend equities and back into government paper. But at a cost….equity market turbulence.

“That said, a 3% Fed Funds rate would also lead to steep selloff in risk assets as the dividend yield on the S&P, currently at about 2%, would be about 1% below the risk free rate, leading to a wholesale “great rotation” out of stocks.”

Sure, the economy (the public) will draw the short straw with these actions, as they will promote a deeper slide into our recessionary environment. Higher rates will stifle growth. Quite simple.

“We could certainly debate why this expansion is already longer than normal, but strong growth is clearly not the reason. In fact, quite the opposite – a lackluster economic backdrop for years, leading to massive central bank support,has likely kept the cycle going more than anything else.”

There is, however, another option. And that may come to be their only option very soon. Printing fiat currency.

Print to repurchase debt and flood the landscape with green. Green paper that is!

When push comes to shove has the Fed ever really cared about the public? It’s always about corporate “care packages” at any cost. Always was, always will be.

CIGA Wolfgang Rech

Morgan Stanley: “Only One Thing Will Allow Central Banks To Keep The Party Going
March 19, 2017

Last week, we presented readers with the latest note from SocGen strategist. Albert Edwards, who explained why after so many years of false rate hike starts, the market not only responded to last week’s hike in a dovish manner – interpreting last Wednesday’s 0.25% hike as a 0.25% rate cut- but as Goldman Sachs showed previously, the dovish reaction was one of the strongest ones since the financial crisis, in other words: “the market no longer believes the Fed.” This is what Edwards said, citing his FX colleague Kit Juckes:

[T]he Fed’s reluctance to send an aggressive tightening signal, instead preferring to again shuffle upwards its dots just slightly, has disappointed markets. But to be fair, the problem isn’t really with the famous dots. It’s with the market, which just doesn’t believe the Fed will tighten as fast as they say they plan to (see left-hand chart below). If the market took the FOMC at their word and discounted a 3% Fed Funds rate at the end of 2019 and beyond, then we’d probably have a 3% nominal 10-year Treasury yield by now.”

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That said, a 3% Fed Funds rate would also lead to steep selloff in risk assets as the dividend yield on the S&P, currently at about 2%, would be about 1% below the risk free rate, leading to a wholesale “great rotation” out of stocks.

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Jim Sinclair’s Commentary

Trump outlines Merkel’s multiple differences. Compliments of CIGA Gijsbert.

No Oval Office Handshake, No Warm Words About Her Country, A Lecture On Immigration And A Wiretapping Joke: Trump’s VERY Chilly Summit With Germany’s Merkel
March 17, 2017

President Donald Trump had his chilliest summit yet with a foreign leader as he met with German Chancellor Angela Merkel today for the first time.

Talks began with a warm welcome outside the West Wing but turned cold as Trump blew off an attempted handshake in the Oval Office and disagreed publicly with Merkel on almost every major international issue.

Trump opened up a joint news conference that his daughter Ivanka attended with a slap at Merkel over her open-door refugee policy. Declaring that ‘immigration is a privilege, not a right,’ Trump said the safety of the countries’ citizens ‘must always come first without question.’

He also pushed for her country to live up to its NATO commitment, stressing the ‘need for our NATO allies to pay their fair share for the cost of defense.’

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Posted by & filed under Jim's Mailbox.

Wolfgang, Zerohedge assumes this is a hack. What if it is not? Can you imagine if they said this about our past president? They would have been immediately audited, the FDA would shut them down for o-coli violations and branded as racists …not to mention forced to participate in the mandatory national health care fraud which they received a special exemption for!

For chuckles, the following is from their comment section: “I heard they’re dropping ‘Donald’ off their corporate logo and opted for “McDodo”…on their way to extinction …”

Bill/ Jim,

Regardless of one’s political leanings, a modicum of respect should be afforded to the highest office in the U.S.

This is simply “McShameful.” Shame on McDonalds.

If this is how McDonalds treats the President of the U.S. just imagine how they treat would treat you!

Makes me wonder if the food they serve me isn’t being mishandled due to my race, color, creed, or political views.

I’ve lost trust in McDonalds.

CIGA Wolfgang Rech

McDonalds Tweets Trump: “You Are A Disgusting Excuse Of A President, Also You Have Tiny Hands”
March 16, 2017

Update: It appears McDonalds needed Twitter to tell Robert Gibbs and the company’s Corporate relations team that their account had been “compromised.”

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And so, as MCD has washed its hands of the rogue tweet and blamed “compromising” actors, the company has generated substantial media buzz… the only question is whether the buzz will lead to more or less sales.

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One day after Twitter stock tumbled after a pervasive hack showed just how vulnerable the underperforming social network (where 15% of total users appear to be bots) remains, moments ago McDonalds tweeted to president Trump, in what appears to be the latest hack of a prominent account, that “You are actually a disgusting excuse of a President and we would love to have @BarackObama back, also you have tiny hands.”

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Posted by & filed under Jim's Mailbox.

Wolfgang, I think the true question… is “real world money” even real?

Bill

Jim/Bill,

I’m hearing that “Farmville” money will be the next hot currency to hide your wealth in, once Bitcoin has been played out.

Formerly, just an online game where you send in real cash to buy virtual cash to be spent in a game that offers nothing more than amusement. Send in a few hundred dollars and you too can buy a virtual cow, goat, fertilizer or your virtual farm. (PT Barnum was certainly correct).

(Also known as FarmVille Cash, FarmVille Dollars, FarmVille Bucks, Farm Cash) is currency used to purchase in game items and skip tasks. It can be purchased with real-world money, and will also be slowly given to a player over time when reaching higher levels.

FarmVille Cash can be earned by spending real-world money, either by using a PayPal account or a credit card.

FarmVille

FarmVille is a farming simulation social network game developed by Zynga in 2009. It is similar to Happy Farm, Farm Town, and video games such as the Story of Seasons series. Its gameplay involves various aspects of farm management such as plowing land, planting, growing, and harvesting crops, harvesting trees and raising livestock.

Gotta hand it to those Millennials…they’ve got a solid grasp of reality!

CIGA Wolfgang Rech

Bitcoin Soars Above $1300 For First Time Ahead Of SEC Decision

March 10, 2017

With the SEC decision to approve a Bitcoin ETF looming, the payrolls data-inspired weakness in the USD appears to have sparked a sudden panic bid in Bitcoin, spiking the virtual currency to $1305 – new record highs.

Hard to say if someone ‘knows’ something about the SEC decision or this is a kneejerk to the dollar drop…

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Additionally, as Bloomberg points ut, BitMEX, a bitcoin platform, is offering members the ability to place bets using the digital currency on whether the Winklevoss Bitcoin Trust (COIN) will be approved by the SEC. Based on the betting, the ETF has a 45% chance of approval. Odds started at about 33% a month ago and jumped to 70% last week before fading. The lawyer who worked on the initial application said it’s unlikely to get approved, while some analysts call it a “coin toss.”

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From our very astute friend Robert. I asked permission to post the first paragraph and he was gracious enough to elaborate for us with an additional reply. Please read this carefully as he is plugged in and spot on, this is a giant liquidity/credit problem. China will not save the financial system, in fact, they may be at the very core.

Bill

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Did you see the Chinese Trade data and that Imports outpaced Exports giving them a deficit of around $9.1bn for the first time in over three years?

Perhaps they will be back in a surplus in the next period, however it could be a sign of declining demand globally as their export markets continue to weaken.

Which if so, tells us the western economies are still contracting regardless of what is being said, and China will face it’s own troubles.

Some parties will say perhaps it is a New Year issue but that is not the real story.

China does have a liquidity problem it’s hiding, that has not yet come into public view. Although, with cities for millions sitting empty and deteriorating causing a real drag on capital velocity (imagine a city of 3 million sitting empty and the lack of capital movement/ velocity by non productive real estate) ( they have a number) and soft declining exports while inventories build, all quietly financed with leveraged capital, it should not come as a surprise.

The big shock will come when rates in the US go up on the 15th and debt ceiling is breached, along with the continued decline in retail store volumes and increasing store closings. Where do people think the replacement sales are coming from? People forget loans are libor sensitive even to Chinese borrowers and their financiers, especially the commodity houses.

Consequently it will be their liquidity problem that will shock.

Cheers

Robert

China Posts First Trade Deficit in Three Years
March 8, 2017

(Beijing) — China recorded its first trade deficit in three years last month as imports surged on soaring commodity prices while exports declined, likely adding uncertainty to the country’s growth prospects.

The surprisingly robust rebound in imports may prove short-lived, while the disappointing performance of exports suggested that foreign demand remained slack, with rising anti-globalization led by U.S. President Donald Trump casting a pall on the outlook of Chinese overseas shipments, analysts said.

Imports soared 38.1% from a year ago to $129.2 billion in February, according to figures from the General Administration of Customs, beating the median projection of a gain of 18.8% in a poll of economists by Caixin.

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Jim,

You have to read this! How much more proof is needed? And as Binney said FISA is just for cosmetic reasons, it is a dictatorship.

CIGA Gijsbert

Former NSA Whistleblower: “Trump Is Absolutely Right, Everything Was Being Monitored”
March 8, 2017

Legendary NSA whistleblower William Binney (and creator of NSA’s global surveillance system) confirmed to Fox News, that President Trump is “absolutely right” to claim he was wiretapped and monitored… he was.

As we noted previously, Binney is the NSA executive who created the agency’s mass surveillance program for digital information, who served as the senior technical director within the agency, who managed six thousand NSA employees, the 36-year NSA veteran widely regarded as a “legend” within the agency and the NSA’s best-ever analyst and code-breaker, who mapped out the Soviet command-and-control structure before anyone else knew how, and so predicted Soviet invasions before they happened (“in the 1970s, he decrypted the Soviet Union’s command system, which provided the US and its allies with real-time surveillance of all Soviet troop movements and Russian atomic weapons”). Binney is the real McCoy.

Binney resigned from NSA shortly after the U.S. approach to intelligence changed following the attacks of Sept. 11, 2001. He “became a whistleblower after discovering that elements of a data-monitoring program he had helped develop — nicknamed ThinThread — were being used to spy on Americans,” PBS reported.

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Posted by & filed under Jim's Mailbox.

Dear CIGAs,

There are several important figures or events happening that could have some dramatic impact on the markets especially since the markets have just risen on hope (not delivery) and on S&P futures buying by the Fed. Real income of the consumers has gone down for many years now and real inflation is not 1-2% but more likely 8%. Just look at the empty stores on Madison Avenue in NYC and the malls all over the US. Agreed some has to do with the increasing on-line sales and the real estate agents who only know to ask more money because they are morons and don’t have any sense of reality how the real world works. Though underlying there is an increasing weakness emerging in my point of view.

Anyway the important figures/events on March 15 are:

Fed decision, rate hike 0, 0.25% or 0.50%.

Debt Ceiling reached and if not increased The Treasury will run out of money by June 2017.

CPI figures for February (2.2%).

Elections in the Netherlands most likely showing a pull to the right. Followed by elections in France, Italy and Germany.

Main question is what is the upside or downside risk at this point. I think if the Fed increases interest rates it will really implode our fake or make believe economy and if they don’t increase interest rates the dollar will take a huge hit because it means that the Fed expresses the fact that the economy is far too weak.

Anyway my view is that there are no good decisions. When is Wall Street finally going to close the gap with main street which hasn’t really recovered as described.

I think people will get enough of paper (debt, shares and currencies), all fake promises, and want to have unencumbered no non nonsense (so not art or $100m apartments, or classic cars) tangible assets like physical precious metals and agricultural land.

Time will tell but the stand off in society is telling us something.

Best and have a great weekend.

Gijs

Posted by & filed under Jim's Mailbox.

Dear Bruce,

Thanks for your excellent note.

I have been doing this as JSM for 14 years.

If Hillary was in office, I would be in a political re-education camp.

Is Trump really safe?

Is he really the Second Coming?

Let’s be sure first.

I gave you in JSM $1058 as the low in gold.

Gold may go to $50,000.

That is the entire story. All else is noise.

Ry,

Jim

Jim,

I’m an earnest 69-year-old investor in precious metals (physical and equities), and have followed you since the late-90s; at first, through media references and interviews, then near-daily via your website. There’s no single human being I trust more for honest insights about investing in gold and silver.

Over the past year, however, I’ve noticed a more ideological bent to your postings…a shift I attribute to the Presidential campaign and your recent partnering with Bill Holter. And while you’re no less entitled to personal opinions than any other citizen, that’s not why I’ve faithfully sought your counsel for almost two decades.

Please let “the old Jim” loose in future postings, and stick to insights about AU and AG.

God bless,

Bruce

Wolfgang,

This is exactly what Jim wrote about years ago when he termed the phrase “MOPE”. Wait until Project Veritas releases hundred’s of hours of backroom (allegedly CNN) video tomorrow. I’ll bet these videos will be truth bombs of previously unimaginable force!

Bill

Jim/Bill,

The ramifications of this admission are far reaching. Far beyond the simple Trump agenda.

Think about stocks, precious metals, spin on economic data, global politics, wars, etc.

People are continually being led to slaughter and don’t even know it. Finally we are approaching an era of enlightenment. Open your eyes folks. The Press is going the way of Sunday comics; taken for its humor and soon to disappear from households.

Anyone who is naïve enough to be believe the Press are an objective source of information deserves to get hoodwinked.

CIGA Wolfgang Rech

MSNBC Anchor: “Our Job” Is To “Control Exactly What People Think”
February 22, 2017

During a lively discussion centered on fears that President Trump is “trying to undermine the media,” MSNBC’s Mika Brzezinski let slip the awesome unspoken truth that the media’s “job” is to “actually control exactly what people think.”

SCARBOROUGH: “Exactly. That is exactly what I hear. What Yamiche said is what I hear from all the Trump supporters that I talk to who were Trump voters and are still Trump supporters. They go, ‘Yeah you guys are going crazy. He’s doing — what are you so surprised about? He is doing exactly what he said he is going to do.'”

BRZEZINSKI: “Well, I think that the dangerous, you know, edges here are that he is trying to undermine the media and trying to make up his own facts. And it could be that while unemployment and the economy worsens, he could have undermined the messaging so much that he can actually control exactly what people think. And that, that is our job.”

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Jim/Bill,

Although this article addresses Germany’s gold repatriation, it also reinforces what you’ve been saying for years now…GOTS. Securities you’ve purchased, if not registered in your name, are not really yours. Cash in the bank…same deal. Not yours.

CIGA Wolfgang Rech

World’s 2nd Largest Stockpile of Gold Leaves the United States
February 21, 2017

No one ever thinks about counterparty risk until it becomes a problem… and by then it’s too late.

But counterparty risk becomes a BIG deal, and QUICKLY, when the system stops functioning normally…

From Simon Black, Sovereign Man:

About 20 years ago when I was still a cadet at West Point, my economics professor organized a class trip to the Federal Reserve Bank of New York.

The part of the trip that I remember most was touring the Fed’s high security vault, 80 feet below street level beneath the bank’s main office building downtown.

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Jim/Bill,

Remember Draghi (Goldmans vice chair) the Clintons and Greece manipulated the entry of Greece into the EMU, for $1bn+ fee, under false pretenses for which European taxpayers are now paying!

CIGA Gijsbert

Mr Draghi, what are you afraid of? Release #TheGreekFiles!
February 20, 2017

What is this campaign?

Deep in a vault in the headquarters of the European Central Bank (ECB) lie #TheGreekFiles, a legal opinion about the ECB’s actions towards Greece in 2015 that could send shockwaves across Europe.

As a European taxpayer, you paid for these documents. But the ECB’s boss, ex-Goldman Sachs head Mario Draghi, says you can’t see them.

So former Greek Finance Minister Yanis Varoufakis and MEP Fabio de Masi, together with a broad alliance of politicians and academics (below), have announced they will file a mass freedom of information request to the ECB to uncover #TheGreekFiles once and for all.

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