A Golden Tipping Point: University of Texas Takes Delivery Of $1 Billion In Physical Gold
Submitted by Tyler Durden on 04/16/2011 19:59Tipping points are funny: for years, decades, even centuries, the conditions for an event to occur may be ripe yet nothing happens. Then, in an instant, a shift occurs, whether its is due a change in conventional wisdom, due to an exogenous event or due to something completely inexplicable. That event, colloquially called a black swan in recent years, changes the prevalent perception of reality in a moment. This past week, we were seeing the effect of a tipping point in process, with gold prices rising to new all time highs day after day, and the price of silver literally moving in a parabolic fashion. What was missing was the cause. We now know what it is: per Bloomberg: "The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board." And so, the game theory of a nearly 100 year old system of monetary exchange has seen its first defector, but most certainly not last. With an entity as large as the University of Texas calling the bluff of the Comex, the Chairman, and fiat in general in roughly that order, virtually every other asset manager is now sure to follow, considering there is not nearly enough physical gold to satisfy all paper gold in existence by a factor of about 100x. The proverbial Nash equilibrium has just been broken.
One of our favorite economic commentators - Jim Grant of Grant's Interest Rate Observer - was on Consuelo Mack continuing his ongoing crusade against Ben Bernanke's lunacy, and the monetary central planning of the Federal Reserve, particularly focusing on the topic of pernicious inflation which for good reason has received much attention of the past year. Grant, who unlike Steve Liesman correctly observes that inflation is now rampant (those who need a reminder can do so at the only objective source for actual inflation tracking, MIT's Billion Price Index), is eating away at the standard of living of the bulk of the population, even as this same population can not benefit from anything beyond minimal rates on their saving deposits. "The Fed is unconscionably complacent about the consequences of what it is doing, and let us not blink at what it is doing: it has imposed the lowest money market interest rates anyone remembers, it has expanded its balance sheet into something grotesque all in the space of a couple of years. These are monetary events that have never before been seen, and indeed, never before imagined...The Fed's policies are certainly great for one class of society: the speculative classes.... We have socialized risk, we have privatized gains, much to the relief of Greenwich, CT where our zillionaires live, and the unconscionable and indefensible fallout of this is that savers get zero on their savings balances, and the speculative classes get to borrow in wholesale markets at zero and get to make their zillions all over again... The Chairman is whistling by the graveyard in this manner of 2% inflation rate being harmless." On Grant's expectations for inflation rates: "there will be a lot of suddenly - 4 or 5% let us say...So much of our speculative apparatus is powered on these zero percent interest rates... Think how hard it is to hold back a cash reserve in this economy... Your stupid neighbor who is watching this program is making a lot fo money in the stock market: how hard is it not to participate? You can't do it... But 4% inflation would mean that the party is over... Everything would fall out of bed... Gold and silver would right themselves, because they are money that would come into their own at the end of the cycle of disillusionment but for a time there would be terrific chaos in investment markets."
The Fed, in bailing out the world (a meme that has only now received popular acceptance following the release of formerly classified Fed documents, despite our claims precisely to that end from back in October 2009) has become the world's largest hedge fund and with a DV01 of over $1.5 billion by now, has taken on virtually unlimited interest rate risk (a topic discussed back in April 2010). As such controlling inflation expectations, or more specifically, Long-Term rates (the part on the curve that Quantitative Easing is powerless to control) is the most critical aspect of the viability of the monetary system. Stunningly, today we learn that to keep long rates low, the Fed may have resorted to nothing short of the same suicidal trade that destroyed AIG FP and brought the entire system to its knees. Namely, Ben Bernanke is now quite possibly the second coming of Joe Cassano, since in order to keep rates low, Bernanke is forced to a last resort action of selling billions upon billions of Treasury puts to "pin" rates low contrary to natural supply-demand mechanics. If so, the Fed is now basically AIG Financial Products, although instead of being synthetically long mortgages (and thus betting on a rate decline) and selling hundreds of billions in CDS to amplify its bet, Bernanke has done the same thing, only this time with Treasurys. Of course, Ben has the printing press on his side apologists will claim. Alas, that will have no impact whatsoever, if indeed the Fed has been reduced to finding ever fewer counterparties to a synthetic bet to keep long-term rates low, as very soon, with inflation ticking up, all hell may break loose in an identical replay of what happened to AIG once the Fed's put is called against it. Only this time there will be nobody to bail out the ultimate backstopper, resulting in the long overdue end of the current failed monetary system experiment.
Texas university endowment's gold investment will prompt others, Lassonde tells King World News
China Hikes RRR For Fourth Time In 2011: As Real Estate Bubble Pops, JPM Sees "Mass Affluent" Rushing Into Gold
Submitted by Tyler Durden on 04/17/2011 10:21 -0400Following leaked (and confirmed) news that in March Chinese inflation came at 5.4%, the PBoC has once again decided to intervene, enacting its fourth Reserve Requirement Ratio hike of 2011. From Bloomberg: "Reserve ratios will increase a half point from April 21, the People’s Bank of China said on its website today. The move, taking the requirement to 20.5 percent for the nation’s biggest lenders, came less than two weeks after the central bank boosted benchmark interest rates. “Tightening will continue until there are signs that inflation has been effectively brought under control,” Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said before today’s announcement. A surge in foreign-exchange reserves to $3 trillion last month and rebounding lending and money-supply growth have highlighted overheating risks in the fastest-growing major economy. Gross domestic product rose 9.7 percent in the first quarter from a year earlier and inflation accelerated to 5.4 percent, the most since July 2008, the statistics bureau said April 15. Inflation has exceeded the government’s 2011 target of 4 percent each month so far this year. The increase in reserve requirements was the fourth this year." Naturally, this also means that the plunge in real estate ASPs, confirmed everywhere, but most pronounced in the capital, is set to continue. This, according to JPM's Jing Ulrich, means that with real estate no longer an attractive asset bubble, the "mass affluent" Chinese will be forced to invest in gold and alternative property investments. From Dow Jones: This group "has seen its investment options sharply affected by restrictive housing measures" such as property taxes, increases in down-payment requirements, and raised interest rates, "since these households possess sufficient capital to purchase investment property, but do not have the same degree of access to investment vehicles such as private equity funds and retail property" as the super-rich, she says, adding that equities, gold and alternative property investments are therefore the key beneficiaries."
Posted: Apr 17 2011 By: Jim Sinclair Post Edited: April 17, 2011 at 10:00 am
Filed under: Jim's Mailbox
Posted: Apr 17 2011 By: Jim Sinclair Post Edited: April 17, 2011 at 10:00 am
Filed under: Jim's Mailbox
Jim,
This is sad but true… Born in the wisdom of your Formula!
CIGA Big Tatanka
This is sad but true… Born in the wisdom of your Formula!
CIGA Big Tatanka
Jim Grant On Inflation: "There Will Be A Lot Of It Suddenly" Because Our Interest Rate Structure Is "Beyond Strange"
Submitted by Tyler Durden on 04/16/2011 13:20 -0400One of our favorite economic commentators - Jim Grant of Grant's Interest Rate Observer - was on Consuelo Mack continuing his ongoing crusade against Ben Bernanke's lunacy, and the monetary central planning of the Federal Reserve, particularly focusing on the topic of pernicious inflation which for good reason has received much attention of the past year. Grant, who unlike Steve Liesman correctly observes that inflation is now rampant (those who need a reminder can do so at the only objective source for actual inflation tracking, MIT's Billion Price Index), is eating away at the standard of living of the bulk of the population, even as this same population can not benefit from anything beyond minimal rates on their saving deposits. "The Fed is unconscionably complacent about the consequences of what it is doing, and let us not blink at what it is doing: it has imposed the lowest money market interest rates anyone remembers, it has expanded its balance sheet into something grotesque all in the space of a couple of years. These are monetary events that have never before been seen, and indeed, never before imagined...The Fed's policies are certainly great for one class of society: the speculative classes.... We have socialized risk, we have privatized gains, much to the relief of Greenwich, CT where our zillionaires live, and the unconscionable and indefensible fallout of this is that savers get zero on their savings balances, and the speculative classes get to borrow in wholesale markets at zero and get to make their zillions all over again... The Chairman is whistling by the graveyard in this manner of 2% inflation rate being harmless." On Grant's expectations for inflation rates: "there will be a lot of suddenly - 4 or 5% let us say...So much of our speculative apparatus is powered on these zero percent interest rates... Think how hard it is to hold back a cash reserve in this economy... Your stupid neighbor who is watching this program is making a lot fo money in the stock market: how hard is it not to participate? You can't do it... But 4% inflation would mean that the party is over... Everything would fall out of bed... Gold and silver would right themselves, because they are money that would come into their own at the end of the cycle of disillusionment but for a time there would be terrific chaos in investment markets."
Doubling Down To (DXY) Zero: Has The Fed, In Its Stealthy Synthetic Bet To Keep Long-Term Yields Low, Become The Next AIG?
Submitted by Tyler Durden on 04/16/2011 16:41 -0400The Fed, in bailing out the world (a meme that has only now received popular acceptance following the release of formerly classified Fed documents, despite our claims precisely to that end from back in October 2009) has become the world's largest hedge fund and with a DV01 of over $1.5 billion by now, has taken on virtually unlimited interest rate risk (a topic discussed back in April 2010). As such controlling inflation expectations, or more specifically, Long-Term rates (the part on the curve that Quantitative Easing is powerless to control) is the most critical aspect of the viability of the monetary system. Stunningly, today we learn that to keep long rates low, the Fed may have resorted to nothing short of the same suicidal trade that destroyed AIG FP and brought the entire system to its knees. Namely, Ben Bernanke is now quite possibly the second coming of Joe Cassano, since in order to keep rates low, Bernanke is forced to a last resort action of selling billions upon billions of Treasury puts to "pin" rates low contrary to natural supply-demand mechanics. If so, the Fed is now basically AIG Financial Products, although instead of being synthetically long mortgages (and thus betting on a rate decline) and selling hundreds of billions in CDS to amplify its bet, Bernanke has done the same thing, only this time with Treasurys. Of course, Ben has the printing press on his side apologists will claim. Alas, that will have no impact whatsoever, if indeed the Fed has been reduced to finding ever fewer counterparties to a synthetic bet to keep long-term rates low, as very soon, with inflation ticking up, all hell may break loose in an identical replay of what happened to AIG once the Fed's put is called against it. Only this time there will be nobody to bail out the ultimate backstopper, resulting in the long overdue end of the current failed monetary system experiment.
David Kostin's Latest Weekly Chartology: The S&P Downgrade Preparations Begin
Submitted by Tyler Durden on 04/17/2011 12:16 -0400In his latest weekly kickstart, David Kostin says: "The core aspects of our positive outlook for US stocks remain in place. However, the distribution around our base case has widened since early December following a 9% rally in the S&P 500 and elevated risk to the US economic outlook from higher oil prices and inflation. Accordingly, we have shifted our recommended sector weights closer to benchmark and adjusted our thematic trade recommendations to gain more exposure to growth markets. We (1) maintain our S&P 500 year-end 2011 price target of 1500 (+14%); (2) lower our Financials weighting to Neutral from Overweight and reduce the size of our Health Care underweight; and (3) recommend buying stocks with high BRICs sales and close our Dividend Growth and Dual Beta trades. We believe these changes are consistent with portfolio risk reduction during periods of uncertainty." Considering that this came out before Hatzius' Friday night bomgb skewering Q1 GDP from 2.5% to 1.75%, we are confident Kostin will have no choice but to lower his interim S&P target, following promptly by his full year 1,500 on the S&P. After all preparations for QE3 are now in full force., only this time the brent will have $125 as a baseline instead of $70. We won't even mention gold.
On Friday, April 15, TEPCO released what is the most conclusive video of the devastation at Fukushima. After watching these three clips we fail to see how even the most optimistic of individuals see the situation as resolving with anything but entombment, which however judging by the urgency in Japan's actions will be the first even on the agenda...in 2015. In other Fukushima news, we learn that after declining for a few days, the seawater around the reactor has once again seen a surge in radioactivity (Kyodo), that fuel rods have melted through not one, not two, but all three active reactors at Fukushima, but not to panic: all is well as long as these are cooled down, by the same water that will eventually seep into the ocean of into the groundwater considering the cooling system is destroyed beyond repair (Japan Times), that TEPCO itself, following weeks of denials, will not only be nationalized but most likely bankrupted eventually as a push to complete the liberalization of Japan's power industry (Asahi), but this won't happen before TEPCO drags down the Nikkei: Reuters reports that as part of funding its reconstruction efforts, the virtually insolvent utility will be forced to liquidate up to its entire stake ($2.2 billion) in telecom giant KDDI, potentially setting off a selling waterfall across various asset classes. Elsewhere, now that Japan will have no choice but to contend with rolling blackouts indefinitely, the country's energy needs will be increasingly reliant on Russia's goodwill, which now is the white knight "energetic" protector of not only Europe, but Japan (Yomiuri). Lastly, also from Yomiuri is this brief summary of just how majorly impacted Q2 GDP will be (read inventory liquidations following supply chain disruptions) following the Japan earthquake.
Jim Sinclair’s Commentary
The predictable result of the present conditions, conditions which will not change, is US dollar weakness and Gold strength. That as a trend will continue into 2015.
Dollar faces extinction by Samuel Jaberg, swissinfo.ch
The United States greenback has become the biggest speculative bubble in history and will soon go the way of the dinosaurs, warns Swiss financial journalist Myret Zaki.
In her latest book, Zaki says that the euro’s future is much brighter and that attacks against the currency are just a smokescreen aimed at hiding the collapse of the American economy.
“The collapse of the American dollar… is inevitable. The world’s biggest economy is nothing but an illusion. To produce $14,000 billion of nation income, the United States has created over $50,000 billion of debt that costs it $4,000 billion in interest payments each year.”
There can be little doubt about Myret Zaki’s opinion of the American dollar and economy, which she considers technically bankrupt, an opinion she backs up in her new book, La fin du dollar (The end of the dollar).
Over the past few years, she has become one of Switzerland’s best known business journalists, with a book about the UBS debacle in the US and another about tax evasion.
More…
Must See: TEPCO Releases Video From Unmanned Helicopter Drones Above Fukushima As Robots Are Finally Used In Restoration Effort
Submitted by Tyler Durden on 04/17/2011 11:09On Friday, April 15, TEPCO released what is the most conclusive video of the devastation at Fukushima. After watching these three clips we fail to see how even the most optimistic of individuals see the situation as resolving with anything but entombment, which however judging by the urgency in Japan's actions will be the first even on the agenda...in 2015. In other Fukushima news, we learn that after declining for a few days, the seawater around the reactor has once again seen a surge in radioactivity (Kyodo), that fuel rods have melted through not one, not two, but all three active reactors at Fukushima, but not to panic: all is well as long as these are cooled down, by the same water that will eventually seep into the ocean of into the groundwater considering the cooling system is destroyed beyond repair (Japan Times), that TEPCO itself, following weeks of denials, will not only be nationalized but most likely bankrupted eventually as a push to complete the liberalization of Japan's power industry (Asahi), but this won't happen before TEPCO drags down the Nikkei: Reuters reports that as part of funding its reconstruction efforts, the virtually insolvent utility will be forced to liquidate up to its entire stake ($2.2 billion) in telecom giant KDDI, potentially setting off a selling waterfall across various asset classes. Elsewhere, now that Japan will have no choice but to contend with rolling blackouts indefinitely, the country's energy needs will be increasingly reliant on Russia's goodwill, which now is the white knight "energetic" protector of not only Europe, but Japan (Yomiuri). Lastly, also from Yomiuri is this brief summary of just how majorly impacted Q2 GDP will be (read inventory liquidations following supply chain disruptions) following the Japan earthquake.
Jim Sinclair’s Commentary
The predictable result of the present conditions, conditions which will not change, is US dollar weakness and Gold strength. That as a trend will continue into 2015.
Dollar faces extinction by Samuel Jaberg, swissinfo.ch
The United States greenback has become the biggest speculative bubble in history and will soon go the way of the dinosaurs, warns Swiss financial journalist Myret Zaki.
In her latest book, Zaki says that the euro’s future is much brighter and that attacks against the currency are just a smokescreen aimed at hiding the collapse of the American economy.
“The collapse of the American dollar… is inevitable. The world’s biggest economy is nothing but an illusion. To produce $14,000 billion of nation income, the United States has created over $50,000 billion of debt that costs it $4,000 billion in interest payments each year.”
There can be little doubt about Myret Zaki’s opinion of the American dollar and economy, which she considers technically bankrupt, an opinion she backs up in her new book, La fin du dollar (The end of the dollar).
Over the past few years, she has become one of Switzerland’s best known business journalists, with a book about the UBS debacle in the US and another about tax evasion.
More…
Let us now see the major stories of yesterday and early this morning.
The big stories of yesterday is the estimated contraction in second quarter GDP. Dave Kranzler, of the Golden Truth, gave a great commentary on this:FRIDAY, APRIL 15, 2011
More QE3 Serum
No time to do a big post today, but we are now seeing some Wall Street firms cut their Q2 GDP estimates PLUS a non-Wall Street firm with more credibility just cut its Q2 GDP forecast. I got this from zerohedge:
"But what about the great economic reports today and earlier this week that show manufacturing growth and lower than expected inflation?" you might ask. I promise you that nominal growth in these economic indexes are highly skewed by real inflation. And please note that today's CPI report, to begin with, is a highly manipulated Government prepared report and it's widely acknowledged, accepted and proven that the Govt-CPI is recklessly and tragically incorrect. And furthermore the only number that was better than expected was the "core," which excludes food and energy. ROFLMAO. How many of you spend at least 30-50% of your after-tax income on food and energy (gas, heating, a/c, electric)? Most Americans do.
So toss these b.s. economic reports out the window and start looking at what is really going on around you. The total level of Americans actually working as % of the population is in continuous decline - the Govt just changes the definition of what constitutes the "labor force." The number of Americans dependent on food stamps increases every month. Those "robust" auto sales for March? Check again and please note that they were a product of the auto manufacturers "stuffing" dealer inventories. Search zerohedge for that report if you need to see the proof for yourself. Dealer inventories are at record levels, but auto manufacturers book a sale once a vehicle is shipped to a dealer. Oh and the auto maker happily finances that sale with your money (at least GM and Chrysler use your money). And I don't even need to mention the fact that the housing market is absolutely falling off a cliff plus prices are tanking again.
Speaking of housing, Bank of America, one of the BIGGEST homebuyer financiers on the planet, is now saying that homeowners should not look at their home as an asset. What the hell? I'm not making this up, see for yourself: LINK That truly blows my mind. Don't forget that for the past decade, mortgage finance has been the largest part of BAC's revenues, income and bonus pools. ROFLMAO. This is an absolute tragic farce. The number ONE sales pitch used in a housing transaction is that "a house is a great investment!" Bankers all over the country got rich on this battle cry. Now we find out that it was one big lie? I'll give BAC CEO Brian Moynihan the "asshole criminal of the year" award for the one.
Please take time to read or reread "Atlas Shrugged." The movie opens tonight and I'm going to see it. The media that has reviewed it so far, is panning it. That does not surprise me. The Denver Post didn't even review it. The review I saw was posted on the online Denver Post. I'm sure the media, heavily controlled by the Corporate/Government Big Brothership, has been told to dampen its reception of the movie. Why? Because the subject matter as presented by Ayn Rand is exactly what is going down in our country right now. That plus a heavy does of George Orwell.
Before you go get your "Atlas Shrugged" tickets, please read this: Brazil, Russia, India and China, collectively known as "the BRICs," understand what Rand/Orwell understood and they understand what is happening right now in this country. And thus, THIS is why they are systematically and methodically getting the hell OUT of the U.S. dollar. Please read this for reference: Arrivedercie Dollaro!
Will U.S. economic output be affected by the supply disruptions to the Japanese auto manufacturers? The answer is unequivocally yes and the economic impact will be quite severe in April and for Q2 as a wholeHere's the LINK Goldman has also been busy lowering its outlook for Q2 and the full year. You can google to find reference to that, or zerohedge has been chronicalling it. Some people are of the view that the chief economist at Goldman gets "special" insight into what the Fed is thinking, and thus believe that Goldman is prepping the markets for the eventual capitulation on the QE2-extension aka QE3 call from Fed. Also recall that I have averred in my commentaries that the renewed money printing programs would be justified by the economic effects globally of Japan and Libya.
"But what about the great economic reports today and earlier this week that show manufacturing growth and lower than expected inflation?" you might ask. I promise you that nominal growth in these economic indexes are highly skewed by real inflation. And please note that today's CPI report, to begin with, is a highly manipulated Government prepared report and it's widely acknowledged, accepted and proven that the Govt-CPI is recklessly and tragically incorrect. And furthermore the only number that was better than expected was the "core," which excludes food and energy. ROFLMAO. How many of you spend at least 30-50% of your after-tax income on food and energy (gas, heating, a/c, electric)? Most Americans do.
So toss these b.s. economic reports out the window and start looking at what is really going on around you. The total level of Americans actually working as % of the population is in continuous decline - the Govt just changes the definition of what constitutes the "labor force." The number of Americans dependent on food stamps increases every month. Those "robust" auto sales for March? Check again and please note that they were a product of the auto manufacturers "stuffing" dealer inventories. Search zerohedge for that report if you need to see the proof for yourself. Dealer inventories are at record levels, but auto manufacturers book a sale once a vehicle is shipped to a dealer. Oh and the auto maker happily finances that sale with your money (at least GM and Chrysler use your money). And I don't even need to mention the fact that the housing market is absolutely falling off a cliff plus prices are tanking again.
Speaking of housing, Bank of America, one of the BIGGEST homebuyer financiers on the planet, is now saying that homeowners should not look at their home as an asset. What the hell? I'm not making this up, see for yourself: LINK That truly blows my mind. Don't forget that for the past decade, mortgage finance has been the largest part of BAC's revenues, income and bonus pools. ROFLMAO. This is an absolute tragic farce. The number ONE sales pitch used in a housing transaction is that "a house is a great investment!" Bankers all over the country got rich on this battle cry. Now we find out that it was one big lie? I'll give BAC CEO Brian Moynihan the "asshole criminal of the year" award for the one.
Please take time to read or reread "Atlas Shrugged." The movie opens tonight and I'm going to see it. The media that has reviewed it so far, is panning it. That does not surprise me. The Denver Post didn't even review it. The review I saw was posted on the online Denver Post. I'm sure the media, heavily controlled by the Corporate/Government Big Brothership, has been told to dampen its reception of the movie. Why? Because the subject matter as presented by Ayn Rand is exactly what is going down in our country right now. That plus a heavy does of George Orwell.
Before you go get your "Atlas Shrugged" tickets, please read this: Brazil, Russia, India and China, collectively known as "the BRICs," understand what Rand/Orwell understood and they understand what is happening right now in this country. And thus, THIS is why they are systematically and methodically getting the hell OUT of the U.S. dollar. Please read this for reference: Arrivedercie Dollaro!
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