Angry Student Protesters Storm Tory HQ In London

Wonder why the EURUSD just dropped by over 120 pips in an hour? This may have something to do with it:

China Leads Backlash Against US Stimulus as Risk of Currency War, Protectionism Grows


California borrows $40 million a day to pay unemployment benefits.


Bob Chapman:  Creation of Debt as the Basis of Growth


An Economic Certainty:  Gold to Rise as Fiat Currencies Fall


Gold's Hot Streak Has a Silver Lining

CME Group Announces Money and Margin Requirement Increases

Posted: Nov 09 2010     By: Dan Norcini      Post Edited: November 9, 2010 at 7:37 pm
Filed under: Trader Dan Norcini
Dear Friends,
CME Group today announced a hike in the amount of money or margin needed to control a full-sized (5,000 ounces) silver contract. Margin for silver jumped to $6,500 from $5,000 or 30%.
Several things to know about this:
First, it is quite common to see this occur in markets that are undergoing sharp upmoves in price. The increasing price range can easily wipe out the entire margin amount in a single day with ease and this is designed to protect the integrity of the clearing houses and the brokerage firms. Customers who lose big cannot oftentimes meet margin calls and end up sticking the brokerage firm with losses. The idea is that the firms protect themselves by having more money at the clearing houses sufficient to cover potential losses.
Second – members of the exchange generally tend to be on the short side of a market moving higher and once they get trapped, they begin to squeak, and quite loudly at that. Squeaky wheels get the grease and since the exchange membership brings with it voting rights, they generally get what they want.
Thirdly – Small specs whose accounts are generally underfunded to begin with and who chase the markets higher based on the hype end up buying at relatively high levels. Once the margins get raised, these weak hands get forced out since they generally cannot meet margin calls and their exodus precipitates a wave of selling. That engenders more paper losses which then engenders more margin calls and the snowball effect occurs.
Fourthly – strong hands on the long side will look to add on during such price retracements when it appears that the bulk of the weak-handed latecomers have been flushed out. Stronger hands on the short side who have been experiencing severe bleeding of their trading accounts will welcome the opportunity to finally cover some of their existing shorts in an attempt to minimize the amount of damage that they have incurred. Getting out with a small loss after sitting through a huge one is a psychological victory for trapped shorts.
Fifthly – to believe that the bull market in the metals is now over and that gold in particular has topped, is to also believe that the US Dollar is about to somehow mysteriously repair itself in spite of the conditions that have been contributing to its recent decline. Gold is acting as a currency and will remain one. It is no longer trading as a commodity. Severe stress in the global monetary system assures that it will be well supported.
Sixthly – the breakdown in the long bond is signaling that the market is fearful of inflation ahead. Gold and silver are your protection against such conditions.
Summary – trading gold and/or silver is a vastly different thing than investing in either or both. Traders can get whacked if they do not respect what leverage can do to them and their trading accounts. You are playing with the big boys now and need to learn to be careful and avoid becoming complacent or overconfident about your existing positions. Failure to do so means immense pain. If you must trade, then use very short term time frames such as 5 or 15 minute charts to move in or out.
Investors who buy the metals as a hedge against the Dollar can be much more long term focused and tune out the short term gyrations of the markets. This is what we have been warning about when we said to expect increased volatility. It works both ways going up and going down.

In The News Today

Posted: Nov 09 2010     By: Jim Sinclair      Post Edited: November 9, 2010 at 7:48 pm
Filed under: In The News
Thought For This Evening
I have never heard so much noise by so many vocal people who have no idea what they are talking about.
This phenomena at this time is extremely dangerous. That noise is both inside and outside of our community.
QE is not a choice. It is the only tool the Fed has left. Austerity at this time would prove to be more dangerous than QE.
The new good guys and gals elected those with the tendency to select austerity as a solution are as dangerous as the other side.
This situation has all the earmarks of a short fuse that has been set in motion by mistake, and few realize it. For years I have been telling you that there is NO PRACTICAL SOLUTION to the total of all the mistakes that have been made since Roosevelt, in a depression, started it all.


Thought For The Day
The ultimate proof of a bull market is the increase of margin rates.
They are a professional tool to cover shorts and dictated by the board of directors of the exchange, which means floor traders.


Jim Sinclair’s Commentary
Quantitative easing is the monetization of debt. It can take many forms from guaranteeing other obligations to outright purchase of Treasury instruments.
The one trillion dollar Euro Rescue Program is without any doubt as big a QE program as Bernanke proposes. When will the fools that call themselves experts learn anything? When will our community truly understand what is happening now?
The following is a definition of merit from Wikipedia.

Monetizing debt
In many countries the government has assigned exclusive power to issue or print its national currency to independently operated central banks. For example, in the USA the independently owned and operated Federal Reserve banks do this.[1] Such governments thereby disavow the overly convenient ’slippery slope’ option of paying their bills by printing new currency. They must instead pay with currency already in circulation, or elsefinance deficits by issuing new bonds, and selling them to the public or to their central bank so as to acquire the necessary money. For the bonds to end up in the central bank it must conduct an open market purchase. This action increases the monetary base through the money creation process. This process of financing government spending is called monetizing the debt.[2] Monetizing debt is thus a two step process where the government issues debt to finance its spending and the central bank purchases the debt from the public. The public is left with an increased supply of base money.
More…




Jim Sinclair’s Commentary
There are times when everything around you is so totally FUBAR that one has to have a change of pace.
The world has finally lost whatever remained of its mind.
The geniuses on Financial TV have solutions infinitely more dangerous in present time than QE over time.



Jim Sinclair’s Commentary
What makes anybody think that the solution to Ireland will be any different from the Greek solution?
Should Ireland appeal because of the attack of the OTC derivative, credit default swaps, to the trillion dollar euro rescue fund then a single currency will be buying its own debt.
That is defined as QE in Euroland

Jim Sinclair`s Commentary
The US Treasury must raise money by selling bonds.
The Chinese took two shots at the US Treasury market today. That was their first wrong play. That tactic raises, not lowers the need for QE, the Fed buying of Treasury paper.
QE to infinity is the only the US Fed policy available now and will be the policy of the entire Western World before this chapter closes.

California’s unemployment fund has deficit of $10.3 billion By Dale Kasler | The Sacramento Bee
California businesses already pay some of the highest unemployment taxes in the country – and the tab is likely to increase.
The recession and the Legislature’s decision years ago to raise benefits have drained the state unemployment insurance fund, which now has a estimated $10.3 billion deficit.
The nonpartisan Legislative Analyst’s Office, in a recent report titled "California’s Other Budget Deficit," said the state will probably need to raise unemployment taxes on employers as well as reduce benefits to bring the fund back in balance.
Raising the tax would require a two-thirds vote in both houses of the Legislature and might be politically impossible. Gov.-elect Jerry Brown has promised not to raise taxes without voter approval.
But pressure is growing on Sacramento to fix the system soon – whether it wants to or not. California has borrowed about $8.5 billion from the federal government to keep benefits flowing, and the repayment obligations are coming due.
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