Posted: Apr 20 2011 By: Dan Norcini Post Edited: April 20, 2011 at 11:43 am
Filed under: Trader Dan Norcini
For all who have been awaiting the release of a video of China's Chengdu J-20 stealth fighter jet, which made its first flight on January 11 of this year, Youku has you covered. In a recently released clip, we can see the J-20 performing high speed taxiing tests at Huang Tian Ba airport, Chengdu. A quick summary of the characteristics of the J-20 can be found here. Of note is the rather loud exhaust noise coming from the "stealth" fighter. One would expect this to be modestly muffled in the final version...
And now for the latest does of reality from China, which will no doubt be reported by precisely zero of the mainstream media outlets. According to Stratfor, there has been a trucker strike in the Waigaoqiao zone in Shanghai on the morning of April 20. As the attached video reports: "The protests the morning of April 20 were in one of Shanghai’s busiest container ports and they were the result of rising fuel prices and low wages. In 2008, we saw similar strikes over fuel prices as taxi drivers took to the streets across China, highlighting how inflation can easily translate into social issues. These protests come a week after residents gathered in the Sonjiang district in Shanghai on April 13 in protest of cheng guan officials, also known as urban management officials, were said to have beaten a pedestrian in a traffic dispute and Shanghai is also the area where we saw the largest gathering during the Jasmine Movement on February 27." So how much longer will China be able to pretend that its USD-pegged monetary policy, not to mention the Fed's inflation exporting efforts is contained? And how long until China's inability to contain its inflation results in a Tiananmen-lite (or not so lite) redux?
Over the weekend, University of Texas made headlines after disclosing it was the first major institution to take delivery of $1 billion in gold, although still keeping it in the Comex system. Today, the CEO of the management company Bruce Zimmerman was on Strategy Session providing the rationale for his action to David Faber. First some prehistory: "We began buying gold in September of '09 at about $950 an ounce. Our average price is at about $1,150. We've invested around $750 million in gold over that twelve months and it now has a value around $1 billion." On what Texas thinks of gold (no surprise here): "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus. I noted a couple of days ago, i think there was a story out about Bernanke mentioning that while they may not increase quantitative easing, they may not necessarily reduce their exposure either. So i think that may be a signal that will continue to have a good deal of monetary stimulus. We read every day what's going on in DC and across the states. We'll see what fiscal policies look like. It remains a concern for us." As to the specific reason for demanding delivery: "We had gotten to a size and our thought was that we probably will have our position for a longer as opposed to shorter term, although we could sell at any time. But rather than continuously roll the futures contracts, it became easier and more economical for us to take possession of the bullion." So how long before many if not all other public fund managers decide the same logic should apply to them as well?
Filed under: Trader Dan Norcini
Dear CIGAs,
There is only one way to describe what is occurring to the US Dollar; its future as the global reserve currency is in serious danger of disappearing forever. Under the "leadership" of the US Federal Reserve, and thanks also to the reckless and incredibly short-sighted spending occuring at the Federal level, the Dollar has run out of friends.
It’s decline this morning has opened the door for gold to push past $1500 and silver into what looks to me like the beginning of a "MELT UP" mode. It has also send further speculative money flows into the commodity sector with the result that the CCI, the Continuous Commodity Index, is within a whisker of matching its all time high.
What many of us have feared could happen but were hoping to see avoided, is becoming increasingly likely the further the Dollar descends into this abyss. As a citizen of my nation who cares deeply for its future for the sake of my own children, I am both disgusted and grieved at what those who were charged with preserving the integrity of its currency have done to our birthright.
A pox on these scurrilous men who have sold out our nation for political expediency. Their only loyalty is to their own pocketbooks and their crony pals who could give a rat’s ass what happens to the nation as long as they can profit from it all. This plague of locusts is stripping us bare.
Click charts to enlarge in PDF format with commentary from Trader Dan Norcini
For further market analysis and commentary, please see Trader Dan’s website at www.traderdan.net
![clip_image001[4]](http://jsmineset.com/wp-content/uploads/2011/04/clip_image00141.jpg "clip_image001[4]")
Posted: Apr 20 2011 By: Jim Sinclair Post Edited: April 20, 2011 at 2:43 pm
Filed under: General Editorial
Dear CIGAs,
The following interview is courtesy of Ron Hera of the Hera Research Newsletter.
Click here to view the full interview…
Interview: Jim Sinclair on Gold and the World Financial System By Ron Hera
April 15, 2011
©2011 Hera Research, LLC
The Hera Research Newsletter (HRN) is pleased to present an in-depth interview with Jim Sinclair, Chairman and CEO of Tanzanian Royalty Exploration and founder of Jim Sinclair’s MineSet, which hosts his gold commentary as a free service to the gold investment community.
Jim Sinclair is primarily a precious metals specialist and a commodities and foreign currency trader. He founded the Sinclair Group of Companies in 1977, which offered full brokerage services in stocks, bonds, and other investment vehicles. The companies, which operated branches in New York, Kansas City, Toronto, Chicago, London and Geneva, were sold in 1983.
From 1981 to 1984, Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker.
He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation (a commodity clearing firm) and Global Arbitrage (a derivative dealer in metals and currencies).
In April 2002, shareholders of Tanzanian Royalty Exploration (formerly Tan Range Exploration) approved the acquisition of a Sinclair managed private company, Tanzania American International, and its exploration assets in Tanzania. Subsequently, Mr. Sinclair became Chairman of Tanzanian Royalty and now leads its efforts to become a gold royalty and development company.
He has authored three books and numerous magazine articles dealing with a variety of investment subjects, including precious metals, trading strategies and geopolitical events and their relationship to world economics and the markets. He is a frequent and popular commentator on financial and market related issues in various news publications and has been profiled in the New York Times.
In January 2003 Mr. Sinclair launched, Jim Sinclair’s MineSet, which now hosts his gold commentary and is intended as a free service to the gold community.
Hera Research Newsletter (HRN): Thank you for speaking with us today. You are one of very few people who have tried to warn investors about OTC derivatives. Why are OTC derivatives a problem in your opinion?
Jim Sinclair: Over the counter (OTC) derivatives are the reason we are going through what we are going through now. An OTC derivative is a kind of wager on what something will do. Up until 2009, most of these wagers had very little, if any, money behind them and, if the direction you bet on didn’t come to fruition, the amount of leverage resulted in extraordinary losses. There was a major rollover in derivatives tied to real estate in 2008, as well as in other types, such as those tied to sub-prime auto loans.
HRN: Did OTC derivatives destabilize the financial system in 2008?
Jim Sinclair: Absolutely.
HRN: Don’t financial institutions use risk cancellation models to hedge risks using OTC derivatives?
Jim Sinclair: Before the failure of Lehman Brothers, OTC derivatives losses would have almost netted out to zero. You can consider derivatives like a string in a circle with various knots representing all the derivatives transactions. When Lehman went broke, the string broke. When Lehman couldn’t meet its obligations on derivatives, they could no longer be netted out to zero. That’s why the banks went down, and that’s why you had the government bailouts and quantitative easing (QE).
HRN: OTC derivatives are the real reason for the bank bailouts?
Jim Sinclair: That is a fact which can in no way be argued away.
HRN: Hasn’t the problem been cleaned up by the Dodd–Frank Wall Street Reform and Consumer Protection Act?
Jim Sinclair: The pile of OTC derivatives is over $1 quadrillion. After 2008, the International Monetary Fund (IMF) adopted a new method of valuing them called value to maturity. Value to maturity assumes all of them will function, which is a cartoon. The derivatives pile hasn’t contracted. Basically, it has expanded, but value to maturity reduced the notional value from over $1 quadrillion to under $700 trillion. The amount outstanding is the same as it was in the first place.
The flavor of the present moment is credit default swaps against the solvency, or lack thereof, of sovereign nations. New derivatives have some margin behind them, but they only work if they are not called upon. If a nation’s debt was in fact to default, it would happen very quickly without a great deal of run up before. Most people would expect a rescue to be coming. Let’s say a rescue didn’t come, those credit default swaps would simply not be able to function and down again would come the banking system.
HRN: Are you saying that the financial system is less stable today than it was in 2008?
Jim Sinclair: It appears more stable but that’s only an appearance. The entire equity rally took place almost to the day from when the Financial Accounting Standards Board (FASB) relaxed the mark to market rule. It allowed financial institutions to make up whatever value they wanted for their worthless pieces of paper. If they used the real values, the banks would have come down.
HRN: Wasn’t the FASB change a temporary measure to halt the decline in mortgage-backed securities?
Jim Sinclair: It wasn’t just mortgage-backed securities. It was all the paper on bank balance sheets. The balance sheets of banks appear to be in good shape but they’re not. In fact, they will need a lot more funds.
HRN: Then the financial system is still vulnerable?
Jim Sinclair: They’ve kicked the can down the road. The purpose of QE, in other words the printing of money, is to maintain some degree of integrity in the financial system. Bear in mind that the grease for the wheels of equity markets is liquidity, meaning that if you create a lot of money, it goes into the hands of banking institutions and international investment houses. So, the equity out of thin air market has been sustained by QE.
HRN: What can the government do to prevent another crisis?
Jim Sinclair: You can assume that what’s been done already will be done again. There are no other tools in a practical sense. The idea that there won’t be a continuation of QE is nonsense.
HRN: Can the government bail out the banks again?
Jim Sinclair: The central banks will buy the government debt. That’s called quantitative easing.
HRN: Doesn’t QE undermine the dollar?
Jim Sinclair: The dollar is an exercise in psychology. It’s a piece of paper with a promise to pay but there’s nothing in which it can be paid. It’s legal settlement for debt but there’s nothing that it’s convertible into. To maintain confidence, it’s necessary to maintain the stature of a currency. In an arithmetic sense, if you go into a market to sell a supply of apples, and if you’re the only seller, you can get a nice price. If more sellers, meaning more apples, come into the market, there goes the price of apples. QE creates more dollars, which increases the supply.
HRN: If the dollar is loosing value because of QE, what about the Euro?
Jim Sinclair: If you look at the dollar or the Euro or the Yen, or even the Swiss franc, it’s a race to the bottom amongst all currencies. All countries everywhere are creating more paper every day. It’s a relative valuation, rather than a valuation based on an objective reference. What happens in the European Union immediately affects the dollar.
HRN: You mean the sovereign debt crisis?
Jim Sinclair: There’s too much focus on the Euro countries. There’s no difference between the economic union of Europe and the union of the states in the United States. The states of Europe have been revealed to be insolvent. How about the states of the United States? Out of New York, Illinois, California, etc., how many are solvent? The focus of the media has been on the Euro. The U.S. should stand in front of a mirror. The states of the economic union of America are in no better shape.
HRN: The news media is ignoring the U.S. sovereign debt crisis?
Jim Sinclair: In George Orwell’s Nineteen Eighty-Four, there were loud speakers constantly teaching the people what Big Brother wanted. The loudspeakers today are financial television. How much attention has financial TV put on the insolvency of U.S. states? It’s been mentioned, but not like the solvency problems of Portugal, Greece, Spain and Ireland, which have gotten hours, days, weeks and months of constant coverage. The solvency of New York, Illinois and California has been brought up but fleetingly at best.
HRN: So, the solvency problems of U.S. states are like an elephant in the room that no one is talking about?
Jim Sinclair: How can you say that the Euro is a disaster based on the financial condition of the states of the economic union of Europe, when the states of the economic union of the United States are in equally bad shape and in some cases worse? There’s no difference. If you want to analyze the Euro based on the weakness of its member states, how can the dollar be strong when the states of the United States are as weak or weaker?
HRN: So, the Euro could rise against the U.S. dollar, despite the European sovereign debt crisis?
Jim Sinclair: Sure it can. The question is, can the dollar go lower? The Euro could go to $1.50 or higher.
HRN: But the U.S. dollar is the world reserve currency. Doesn’t that guarantee its value?
Jim Sinclair: Only by default. It remains so because central banks own dollars. If central banks could exchange them for gold or other currencies without a major dislocation, they would.
More…
Posted: Apr 20 2011 By: Jim Sinclair Post Edited: April 20, 2011 at 2:42 pm
Filed under: Jim's Mailbox
Dear Jim,
As gold and silver continue bull runs, do you have any concern the Comex may invoke extraordinary measures prohibiting any new long positions? This was done to force liquidation of the Hunt Brothers silver positions.
There is a lot of speculation some bullion banks are trapped in heavy short positions. Because you were personally involved in resolving the Hunt Brothers/Comex issues, we CIGAs would greatly appreciate your views on this subject.
CIGA Doug
Dear Doug,
That was a unilateral novation of a contract which is illegal under contract law. They got away with it in the 80s but would probably not get away with it now. Really that means nothing to the long that never sees his silver or gold.
Litigation would break the exchange as a subsidiary of a major corporation, in time resulting in the longs and shorts establishing losses and gains on paper in court at the close of the day, a meaningless exercise that would screw the longs and the shorts in bankruptcy. This would cause a run on gold and silver paper delivery ETFs. It would also shift big money into gold and silver shares.
If you really want gold and you hold futures, you had better take delivery soon.
Regards,
Jim
Jim Sinclair’s Commentary
Self reliance suggests having functioning and fueled generator sets as a requirement because currency induced cost push inflation now prevalent in the Western world creates such interruptions in distribution of necessaries.
Greece facing electricity strikes over austerity
CIGA Eric
The world continues to deal with the ongoing debt crisis. The currency devaluation and austerity programs can lead to disruptions in services once considered birth rights by many.
Greece’s powerful electricity workers’ union says it is considering rolling strikes in May to protest plans to sell off a key stake in the state-run Public Power Corporation as part of a major privatization drive in the crisis-hit country.
The General Federation of PPC Personnel said in a statement posted on its website Wednesday that it is considering successive 48-hour strikes "aimed at changing the wrong decision taken by the government."
The union did not say when it will announce a decision, but has scheduled a news conference for next week.
The Socialist government plans to reduce its stake in PPC from 51 to 34 percent, under a euro50 billion ($71.5 billion) 2011-2015 privatization program.
In response, unions have already called a general strike for May 11.
Source: finance.yahoo.com
More…
Currency-Induced Inflation Driving Asset Prices
CIGA Eric
Currency-induced push inflation has been the dominant driver of price since 2008. Nothing really changes. The vast majority (99%) of the public lives in the economic paradigm of the previous expansion or the world they have come to understand. By the time they realize their standard of livings (i.e. lives) have changed and cannot be easily restored, disinformation, MOPE, and reality-scripted headlines will have hindered actions necessary to preserve wealth.
West Texas Intermediate Crude Oil (OIL) AND Oil to Gold Ratio (OILGLDR):
Headline: Oil up above $109 on signs of strong US demand
Oil prices rose above $109 a barrel Wednesday after a report showed U.S. gasoline supplies fell for a second week, suggesting higher fuel costs haven’t yet curbed demand.
A weaker dollar — which makes oil cheaper for investors holding other currencies — and rising equity markets in Asia and Europe also helped boost oil markets.
Source: finance.yahoo.com
More…
It’s Official: China Will Be Dumping US Dollars
There is only one way to describe what is occurring to the US Dollar; its future as the global reserve currency is in serious danger of disappearing forever. Under the "leadership" of the US Federal Reserve, and thanks also to the reckless and incredibly short-sighted spending occuring at the Federal level, the Dollar has run out of friends.
It’s decline this morning has opened the door for gold to push past $1500 and silver into what looks to me like the beginning of a "MELT UP" mode. It has also send further speculative money flows into the commodity sector with the result that the CCI, the Continuous Commodity Index, is within a whisker of matching its all time high.
What many of us have feared could happen but were hoping to see avoided, is becoming increasingly likely the further the Dollar descends into this abyss. As a citizen of my nation who cares deeply for its future for the sake of my own children, I am both disgusted and grieved at what those who were charged with preserving the integrity of its currency have done to our birthright.
A pox on these scurrilous men who have sold out our nation for political expediency. Their only loyalty is to their own pocketbooks and their crony pals who could give a rat’s ass what happens to the nation as long as they can profit from it all. This plague of locusts is stripping us bare.
Click charts to enlarge in PDF format with commentary from Trader Dan Norcini
For further market analysis and commentary, please see Trader Dan’s website at www.traderdan.net
Posted: Apr 20 2011 By: Jim Sinclair Post Edited: April 20, 2011 at 2:43 pm
Filed under: General Editorial
Dear CIGAs,
The following interview is courtesy of Ron Hera of the Hera Research Newsletter.
Click here to view the full interview…
Interview: Jim Sinclair on Gold and the World Financial System By Ron Hera
April 15, 2011
©2011 Hera Research, LLC
The Hera Research Newsletter (HRN) is pleased to present an in-depth interview with Jim Sinclair, Chairman and CEO of Tanzanian Royalty Exploration and founder of Jim Sinclair’s MineSet, which hosts his gold commentary as a free service to the gold investment community.
Jim Sinclair is primarily a precious metals specialist and a commodities and foreign currency trader. He founded the Sinclair Group of Companies in 1977, which offered full brokerage services in stocks, bonds, and other investment vehicles. The companies, which operated branches in New York, Kansas City, Toronto, Chicago, London and Geneva, were sold in 1983.
From 1981 to 1984, Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker.
He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation (a commodity clearing firm) and Global Arbitrage (a derivative dealer in metals and currencies).
In April 2002, shareholders of Tanzanian Royalty Exploration (formerly Tan Range Exploration) approved the acquisition of a Sinclair managed private company, Tanzania American International, and its exploration assets in Tanzania. Subsequently, Mr. Sinclair became Chairman of Tanzanian Royalty and now leads its efforts to become a gold royalty and development company.
He has authored three books and numerous magazine articles dealing with a variety of investment subjects, including precious metals, trading strategies and geopolitical events and their relationship to world economics and the markets. He is a frequent and popular commentator on financial and market related issues in various news publications and has been profiled in the New York Times.
In January 2003 Mr. Sinclair launched, Jim Sinclair’s MineSet, which now hosts his gold commentary and is intended as a free service to the gold community.
Hera Research Newsletter (HRN): Thank you for speaking with us today. You are one of very few people who have tried to warn investors about OTC derivatives. Why are OTC derivatives a problem in your opinion?
Jim Sinclair: Over the counter (OTC) derivatives are the reason we are going through what we are going through now. An OTC derivative is a kind of wager on what something will do. Up until 2009, most of these wagers had very little, if any, money behind them and, if the direction you bet on didn’t come to fruition, the amount of leverage resulted in extraordinary losses. There was a major rollover in derivatives tied to real estate in 2008, as well as in other types, such as those tied to sub-prime auto loans.
HRN: Did OTC derivatives destabilize the financial system in 2008?
Jim Sinclair: Absolutely.
HRN: Don’t financial institutions use risk cancellation models to hedge risks using OTC derivatives?
Jim Sinclair: Before the failure of Lehman Brothers, OTC derivatives losses would have almost netted out to zero. You can consider derivatives like a string in a circle with various knots representing all the derivatives transactions. When Lehman went broke, the string broke. When Lehman couldn’t meet its obligations on derivatives, they could no longer be netted out to zero. That’s why the banks went down, and that’s why you had the government bailouts and quantitative easing (QE).
HRN: OTC derivatives are the real reason for the bank bailouts?
Jim Sinclair: That is a fact which can in no way be argued away.
HRN: Hasn’t the problem been cleaned up by the Dodd–Frank Wall Street Reform and Consumer Protection Act?
Jim Sinclair: The pile of OTC derivatives is over $1 quadrillion. After 2008, the International Monetary Fund (IMF) adopted a new method of valuing them called value to maturity. Value to maturity assumes all of them will function, which is a cartoon. The derivatives pile hasn’t contracted. Basically, it has expanded, but value to maturity reduced the notional value from over $1 quadrillion to under $700 trillion. The amount outstanding is the same as it was in the first place.
The flavor of the present moment is credit default swaps against the solvency, or lack thereof, of sovereign nations. New derivatives have some margin behind them, but they only work if they are not called upon. If a nation’s debt was in fact to default, it would happen very quickly without a great deal of run up before. Most people would expect a rescue to be coming. Let’s say a rescue didn’t come, those credit default swaps would simply not be able to function and down again would come the banking system.
HRN: Are you saying that the financial system is less stable today than it was in 2008?
Jim Sinclair: It appears more stable but that’s only an appearance. The entire equity rally took place almost to the day from when the Financial Accounting Standards Board (FASB) relaxed the mark to market rule. It allowed financial institutions to make up whatever value they wanted for their worthless pieces of paper. If they used the real values, the banks would have come down.
HRN: Wasn’t the FASB change a temporary measure to halt the decline in mortgage-backed securities?
Jim Sinclair: It wasn’t just mortgage-backed securities. It was all the paper on bank balance sheets. The balance sheets of banks appear to be in good shape but they’re not. In fact, they will need a lot more funds.
HRN: Then the financial system is still vulnerable?
Jim Sinclair: They’ve kicked the can down the road. The purpose of QE, in other words the printing of money, is to maintain some degree of integrity in the financial system. Bear in mind that the grease for the wheels of equity markets is liquidity, meaning that if you create a lot of money, it goes into the hands of banking institutions and international investment houses. So, the equity out of thin air market has been sustained by QE.
HRN: What can the government do to prevent another crisis?
Jim Sinclair: You can assume that what’s been done already will be done again. There are no other tools in a practical sense. The idea that there won’t be a continuation of QE is nonsense.
HRN: Can the government bail out the banks again?
Jim Sinclair: The central banks will buy the government debt. That’s called quantitative easing.
HRN: Doesn’t QE undermine the dollar?
Jim Sinclair: The dollar is an exercise in psychology. It’s a piece of paper with a promise to pay but there’s nothing in which it can be paid. It’s legal settlement for debt but there’s nothing that it’s convertible into. To maintain confidence, it’s necessary to maintain the stature of a currency. In an arithmetic sense, if you go into a market to sell a supply of apples, and if you’re the only seller, you can get a nice price. If more sellers, meaning more apples, come into the market, there goes the price of apples. QE creates more dollars, which increases the supply.
HRN: If the dollar is loosing value because of QE, what about the Euro?
Jim Sinclair: If you look at the dollar or the Euro or the Yen, or even the Swiss franc, it’s a race to the bottom amongst all currencies. All countries everywhere are creating more paper every day. It’s a relative valuation, rather than a valuation based on an objective reference. What happens in the European Union immediately affects the dollar.
HRN: You mean the sovereign debt crisis?
Jim Sinclair: There’s too much focus on the Euro countries. There’s no difference between the economic union of Europe and the union of the states in the United States. The states of Europe have been revealed to be insolvent. How about the states of the United States? Out of New York, Illinois, California, etc., how many are solvent? The focus of the media has been on the Euro. The U.S. should stand in front of a mirror. The states of the economic union of America are in no better shape.
HRN: The news media is ignoring the U.S. sovereign debt crisis?
Jim Sinclair: In George Orwell’s Nineteen Eighty-Four, there were loud speakers constantly teaching the people what Big Brother wanted. The loudspeakers today are financial television. How much attention has financial TV put on the insolvency of U.S. states? It’s been mentioned, but not like the solvency problems of Portugal, Greece, Spain and Ireland, which have gotten hours, days, weeks and months of constant coverage. The solvency of New York, Illinois and California has been brought up but fleetingly at best.
HRN: So, the solvency problems of U.S. states are like an elephant in the room that no one is talking about?
Jim Sinclair: How can you say that the Euro is a disaster based on the financial condition of the states of the economic union of Europe, when the states of the economic union of the United States are in equally bad shape and in some cases worse? There’s no difference. If you want to analyze the Euro based on the weakness of its member states, how can the dollar be strong when the states of the United States are as weak or weaker?
HRN: So, the Euro could rise against the U.S. dollar, despite the European sovereign debt crisis?
Jim Sinclair: Sure it can. The question is, can the dollar go lower? The Euro could go to $1.50 or higher.
HRN: But the U.S. dollar is the world reserve currency. Doesn’t that guarantee its value?
Jim Sinclair: Only by default. It remains so because central banks own dollars. If central banks could exchange them for gold or other currencies without a major dislocation, they would.
More…
Posted: Apr 20 2011 By: Jim Sinclair Post Edited: April 20, 2011 at 2:42 pm
Filed under: Jim's Mailbox
Dear Jim,
As gold and silver continue bull runs, do you have any concern the Comex may invoke extraordinary measures prohibiting any new long positions? This was done to force liquidation of the Hunt Brothers silver positions.
There is a lot of speculation some bullion banks are trapped in heavy short positions. Because you were personally involved in resolving the Hunt Brothers/Comex issues, we CIGAs would greatly appreciate your views on this subject.
CIGA Doug
Dear Doug,
That was a unilateral novation of a contract which is illegal under contract law. They got away with it in the 80s but would probably not get away with it now. Really that means nothing to the long that never sees his silver or gold.
Litigation would break the exchange as a subsidiary of a major corporation, in time resulting in the longs and shorts establishing losses and gains on paper in court at the close of the day, a meaningless exercise that would screw the longs and the shorts in bankruptcy. This would cause a run on gold and silver paper delivery ETFs. It would also shift big money into gold and silver shares.
If you really want gold and you hold futures, you had better take delivery soon.
Regards,
Jim
Jim Sinclair’s Commentary
Self reliance suggests having functioning and fueled generator sets as a requirement because currency induced cost push inflation now prevalent in the Western world creates such interruptions in distribution of necessaries.
Greece facing electricity strikes over austerity
CIGA Eric
The world continues to deal with the ongoing debt crisis. The currency devaluation and austerity programs can lead to disruptions in services once considered birth rights by many.
Greece’s powerful electricity workers’ union says it is considering rolling strikes in May to protest plans to sell off a key stake in the state-run Public Power Corporation as part of a major privatization drive in the crisis-hit country.
The General Federation of PPC Personnel said in a statement posted on its website Wednesday that it is considering successive 48-hour strikes "aimed at changing the wrong decision taken by the government."
The union did not say when it will announce a decision, but has scheduled a news conference for next week.
The Socialist government plans to reduce its stake in PPC from 51 to 34 percent, under a euro50 billion ($71.5 billion) 2011-2015 privatization program.
In response, unions have already called a general strike for May 11.
Source: finance.yahoo.com
More…
Currency-Induced Inflation Driving Asset Prices
CIGA Eric
Currency-induced push inflation has been the dominant driver of price since 2008. Nothing really changes. The vast majority (99%) of the public lives in the economic paradigm of the previous expansion or the world they have come to understand. By the time they realize their standard of livings (i.e. lives) have changed and cannot be easily restored, disinformation, MOPE, and reality-scripted headlines will have hindered actions necessary to preserve wealth.
West Texas Intermediate Crude Oil (OIL) AND Oil to Gold Ratio (OILGLDR):
Headline: Oil up above $109 on signs of strong US demand
Oil prices rose above $109 a barrel Wednesday after a report showed U.S. gasoline supplies fell for a second week, suggesting higher fuel costs haven’t yet curbed demand.
A weaker dollar — which makes oil cheaper for investors holding other currencies — and rising equity markets in Asia and Europe also helped boost oil markets.
Source: finance.yahoo.com
More…
It’s Official: China Will Be Dumping US Dollars
Video Of Chinese J-20 Stealth Fighter Leaked
Submitted by Tyler Durden on 04/20/2011 14:07 -0400For all who have been awaiting the release of a video of China's Chengdu J-20 stealth fighter jet, which made its first flight on January 11 of this year, Youku has you covered. In a recently released clip, we can see the J-20 performing high speed taxiing tests at Huang Tian Ba airport, Chengdu. A quick summary of the characteristics of the J-20 can be found here. Of note is the rather loud exhaust noise coming from the "stealth" fighter. One would expect this to be modestly muffled in the final version...
China's Jasmine Revolution Is Back: Trucker Strike Hits Shanghai In Protest Over Surging Fuel Costs And Low Wages
Submitted by Tyler Durden on 04/20/2011 13:48 -0400And now for the latest does of reality from China, which will no doubt be reported by precisely zero of the mainstream media outlets. According to Stratfor, there has been a trucker strike in the Waigaoqiao zone in Shanghai on the morning of April 20. As the attached video reports: "The protests the morning of April 20 were in one of Shanghai’s busiest container ports and they were the result of rising fuel prices and low wages. In 2008, we saw similar strikes over fuel prices as taxi drivers took to the streets across China, highlighting how inflation can easily translate into social issues. These protests come a week after residents gathered in the Sonjiang district in Shanghai on April 13 in protest of cheng guan officials, also known as urban management officials, were said to have beaten a pedestrian in a traffic dispute and Shanghai is also the area where we saw the largest gathering during the Jasmine Movement on February 27." So how much longer will China be able to pretend that its USD-pegged monetary policy, not to mention the Fed's inflation exporting efforts is contained? And how long until China's inability to contain its inflation results in a Tiananmen-lite (or not so lite) redux?
University Of Texas Fund CEO Shares His Views On Gold, Explains Why He Took Delivery Of $1 Billion In The Precious Metal
Submitted by Tyler Durden on 04/20/2011 15:11 -0400Over the weekend, University of Texas made headlines after disclosing it was the first major institution to take delivery of $1 billion in gold, although still keeping it in the Comex system. Today, the CEO of the management company Bruce Zimmerman was on Strategy Session providing the rationale for his action to David Faber. First some prehistory: "We began buying gold in September of '09 at about $950 an ounce. Our average price is at about $1,150. We've invested around $750 million in gold over that twelve months and it now has a value around $1 billion." On what Texas thinks of gold (no surprise here): "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus. I noted a couple of days ago, i think there was a story out about Bernanke mentioning that while they may not increase quantitative easing, they may not necessarily reduce their exposure either. So i think that may be a signal that will continue to have a good deal of monetary stimulus. We read every day what's going on in DC and across the states. We'll see what fiscal policies look like. It remains a concern for us." As to the specific reason for demanding delivery: "We had gotten to a size and our thought was that we probably will have our position for a longer as opposed to shorter term, although we could sell at any time. But rather than continuously roll the futures contracts, it became easier and more economical for us to take possession of the bullion." So how long before many if not all other public fund managers decide the same logic should apply to them as well?
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