Post # 1,000...or in other words...approximately 10,000 explanations, of what is happening to world markets... and why...

Gene Arensberg: Silver's parabolic corrections

 

In The News Today

May 24, 2011, at 3:58 am
by Jim Sinclair

Jim Sinclair’s Commentary

Yra tells it exactly as it is.
My former floor trading partner and dear friend lays out the lay of the dollar.
Notes From Underground: The only TRU-MAN about the DOLLAR is ex-CEA head Christina Romer By Yra
In an effort to stay abreast of news and markets while in
Continue reading In The News Today

Jim’s Mailbox

May 24, 2011, at 7:41 am
by Jim Sinclair

Good Morning Mr Sinclair,

I hope your travels are going well.
“Reprofiling is just a nice word invented by the politicians when they mean restructuring,” said Nicola Marinelli, a money manager at Glendevon King Asset Management in London, which oversees more than $150 million."
Best wishes,
CIGA Viktor

Dear Viktor,
Only QE can stop the Greek default!
Regards,
Jim



Jim.
I understand. Tanzania is a way to play China’s rise without being in China, or under the home grown, authoritarian free enterprise magnifying glass.

Big Tatanka

Dear BT,
Now you have it 100% correct.
Regards,
Little Tatanka (Jim)




Greece Reports: “Circular Reasoning Works Because Circular Reasoning Works” – Or – Here Comes That Default!!!

Posted by: Reggie Middleton

Post date: 05/24/2011 - 13:40

Greece says it will not default because it has made a perfectly circular argument against default, and we all know that Circular Reasoning Works Because Circular Reasoning Works Because... Greece is Guaranteed to Default. It's shouldn't even be up for debate since it is simple math: 2+2=4, not 3. I've laid it all out for you below, complete with the requisite advanced mathematical formulae (2+2...)

Guest Post: AIG – Still More Questions And Fallacies Than Answers

Submitted by Tyler Durden on 05/24/2011 16:08 -0400

So, as the government is about to unload some of its AIG shares on the market, we will hear about it all day long. It is impossible to listen to a report on AIG without someone mentioning how credit derivatives were directly responsible for the collapse of AIG which is proof that credit derivatives are bad. It also seems that everyone is convinced that it wasn’t the fault of the banks and that the bailout was justified. The reality is that AIG lost money on customized regulatory capital arbitrage pass through trades where they underestimated the risk but also gamed the system. The banks themselves were sloppy on the credit terms that they engaged AIG on, creating the margin call death spiral. Finally, it has never been made clear that AIG had to get dragged into the problem, and that AIG FP could have been ring fenced and not impacted the parent companies. 

IB Blasts Preemptive Margin Hike Warning

Submitted by Tyler Durden on 05/24/2011 15:25 -0400

The brokers are getting pissy again - it must be that time of the month again....when vol is about to surge. In a blast to all exchange members, Interactive Brokers has just warned of imminent margin hikes due to "the recent spike in volatility of various commodity products." Of course, expecting vol (just like inflation), one can argue, is more important than even experiencing it. And it promptly becomes a self-fulfilling prophecy. In other words, should other brokers and/or exchanges follow suit with this preemptive margin hike warning, it may be time to step to the sidelines. Then again, in centrally planned, manipulated stock (and now all other) markets, this is easily the best decision regardless... 

Kansas, Dallas Feds Request 25 bps Discount Rate Hike, As 10 Other Fed Prefer Status Quo

Submitted by Tyler Durden on 05/24/2011 15:13 -0400

According to the just released minutes from the April 4 and 25 discount rate meetings, two Feds: the Dallas and Kansas City Feds, continued to request an increase in the discount rate by 25 bps from the current 0.75 bps. As a reminder the discount rate was first (and last) hiked back in February 2010, when the Fed, wrongly tried to telegraph the all clear on the economy, which was then hoped to have entered a virtuous cycle, only for everyone to realize it had only entered the conclusive phase of QE1. Since then it has held constant at 0.75 bps, even as it continues to be purely a formality, with just a few million dollars borrowed at the discount window by various banks who wish to avoid the Discount Window stigmata. Therefore, instead of actually determining interest on existing last ditch overnight liquidity requirements, any move in the Discount Rate would instead simply put more confusion on the path the Fed has set off on with regard to tightening/loosening. In other words, despite all the posturing by ever more Fed presidents, just two Feds are willing to put even one metaphoric cent where their mouth is. 

JP Morgan Cuts Q2 GDP Forecast

Submitted by Tyler Durden on 05/24/2011 14:27 -0400

Once again Zero Hedge is just a week or so ahead of the "experts." A week ago, in a post titled "April Vehicle Assembly Rate Collapses, May Industrial Production Estimates To Be Cut" we concluded "Expect to see drastic downward cuts to May Industrial Production and next, to Q2 GDP." Enter JPMorgan's Michael Feroli with "Motor vehicle sector to drag on Q2 growth." Full text: "We are revising down our outlook for the annual growth rate of real GDP in Q2 from 3.0% to 2.5%. The main factor behind our revision is weaker output of the motor vehicle sector. Based on industry data we project that real output in this sector will decline at around a 20% annual rate, which would subtract 0.5%-point from GDP growth. From an expenditure category perspective, we see most of this weaker output making itself felt in a softer pace of inventory accumulation (with some offset though weaker imports). A portion of this shortfall reflects supply chain disruptions associated with the Tohoku earthquake. Anticipating a fading of those disruptions, auto production schedules look for a rebound in output in the third quarter, which, along with somewhat lower gasoline prices, supports the case for an acceleration in growth next quarter to 3%. The change to our second quarter growth forecast is modest enough not to have a significant impact on our projections for labor markets or inflation. We continue to anticipate a first Fed rate hike in 13Q1." Next up: Goldman revising their Q2-4 GDP "hockeystick" to be more reminiscent of a "baseball bat."

$35 Billion In 2 Year Treasurys Price As Primary Dealers Take Down Half, More Retirement Funds Squeezed To Make Room Under Ceiling

The fact that the US is at the debt ceiling, and every incremental dollar of debt issued has to be met with a comparable underfunding in retirement funds is not bothering the SecTres (at least until August 2 at which point all mechanisms to delay the ceiling breach expire). Which is why today's auction of 2 Year paper passed with barely a glitch: $35 billion (CUSIP QZ6) priced at 0.56% (89.7% allotted at high), the lowest yield since December 2010. The Bid To Cover was a sizable jump to recent auctions, coming at 3.46, nearly half a turn higher than last auction's 3.06, and higher than the LTM average of 3.38. Not surprisingly, at 31.29% Indirect interest was the lowest since January, as foreign central banks and investors are dealing with tightening concerns of their own, meaning the bulk of the auction went to Primary Dealers (half) and the balance to Direct Dealers, who took down a 2011 high of 19.15%. The direct bidder hit rate was a surprisingly solid 32.22%. Nonetheless, with the WI trading almost on top of the auction High Yield, there were no surprise in the short-end of the bond market, where investors once again are forced to look ever further right for any yield, as short-term rates have plunged to lows last seen just when the equity market was about to flip over (not to mention the quirks currently in the money market funds which has snagged the shadow economy rather bad since the FDIC fee assessment was imposed). 

China Oil Demand Projected To Hit 11 MM/bpd By 2015, Up 25% From Now; Will Reach Consumption Parity With US By 2030

Submitted by Tyler Durden on 05/24/2011 13:02 -0400

With the topic of oil once again dominating the air waves courtesy of Goldman's most recent flip flop on Brent, we look at one of those thing that few if any have actually done much analysis on over the past decade, namely supply and demand. As it is no secret that the primary driver in price formation of virtually all commodities has been excess liquidity, the actual fundamentals have been drowned for a long time. Yet they still remain. Of all "demand fundamentals", the biggest one is and will be China. Should the world indeed proceed to tighten across the globe, the question of Chinese demand will increasingly become one of substantial importance. Here is how Platts sees Chinese oil demand in the next several years: "China's demand for oil will grow 4-5% a year to hit 530 million-560 million mt (10.6 million b/d-11.3 million b/d) in 2015, with transport fuel and chemical feedstocks driving the increase, a senior Chinese researcher said Wednesday." Platts estimates that China's current oil consumption is about 450 million mts, a 12.2% increase over the past year. And following 2015, "Growth will then slow to 2%-3% a year, to reach 590 million-650 million mt by 2020, said Liu Xiao Li of the Energy Research Institute, part of China's economic planning agency, the National Development and Reform Commission. With oil production in 2020 expected to be 200 million-230 million mt, that would imply an import dependence of around 65%, she added." One can thus see why China is ever so cautious proceeding to procure E&P exposure and infrastructure projects around the world: the country realizes that without a friendly foreign "import" base, there is no way it can grow into its energy demand. Lastly, for those who collect parity facts, "in a presentation at the International Air Transport Association's Aviation Fuel Forum, Standard Chartered Bank said China would overtake Europe as the world's second largest consumer of oil before 2020, with around 13 million-14 million b/d of demand. The bank's data indicates China would catch up with the US sometime after 2030. Standard Chartered's data has China's oil demand approaching 17 million b/d around that year and still rising, with US oil demand around 18 million b/d and falling." Luckily by then we should have far more evidence whether the Peak Oil theory is indeed true, in which case the world will have far greater problems in the next 19 years than anything seen to date.

Reality Check With Rosenberg

Submitted by Tyler Durden on 05/24/2011 12:16 -0400

The S&P 500 is no higher now than it was on February 7. Yet, so many pundits still believe we are in a flaming bull market.

QE2 failed to provide for a sustained acceleration in the pace of economic activity.

The housing inventory background is horrible

Over half of the NYSE is now trading below its 50-day moving average (thanks to Richard Russell).

M3 has fallen at a 1.5% annual rate since QE2 started (thanks to CLSA's Russell Napier); in other words, credit is still not being created.

The Nasdaq is the first of the major averages to have broken below both the 100-day and 50-day moving averages. The Dow and S&P 500 have so far just pierced the former, but we all know the Nasdaq is a leading indicator. As an aside, in the last 12 months the Dow has broken below its 50-day moving average three times and from that point to the interim bottom, we saw the Dow plummet 4.5%.

...And much more