Osama Bin Laden Killed: Implications First Take 

Submitted by Tyler Durden on 05/01/2011 23:48 -0400

It is difficult to understand what this means at this moment, but it permits the Obama administration to claim victory, at least partially, over al Qaeda. It also opens the door for the beginning of a withdrawal from Afghanistan, regardless of the practical impact of bin Laden’s death. The mission in Afghanistan was to defeat al Qaeda, and with his death, a plausible claim can be made that the mission is complete. Again speculatively, it will be interesting to see how this affects U.S. strategy there. Equally possible is that this will trigger action by al Qaeda in bin Laden’s name. We do not know how viable al Qaeda is or how deeply compromised it was. It is clear that bin Laden’s cover had been sufficiently penetrated to kill him. If bin Laden’s cover was penetrated, then the question becomes how much of the rest of the organization’s cover was penetrated. It is unlikely, however, that al Qaeda is so compromised that it cannot take further action.

 

Think Or Swim Hikes Silver Margin To Double That Of CME 

Submitted by Tyler Durden on 05/01/2011 23:29 -0400

On Friday we reported that MF Global hiked silver margins to roughly $25k per contract (following the CME's own two consecutive margin hikes of 9% and 10%).On Sunday night, not letting any public hysteria go to waste, Think or Swim follows suit and hikes the /SI margin to $30,037.50 and $6,007.50 for the /YI. At this point there is an outright scramble to get anyone with margin out of precious metals positions, which of course in the long run will merely reinforce the holding hands.

 

More On The Silver Dive: "Massive Sell Orders" Coupled With Bolivian Nationalization Halt Combine For Perfect Weak Hand Shakeout Storm 

Submitted by Tyler Durden on 05/01/2011 21:37 -0400

Two key factors that appear to be contributing to the rapid move in overnight silver (and subsequent jump to pare half its losses) is i) the fact that Bolivia, despite being in a cash crunch has for the time being yielded to miner demands and has put its nationalization plans (as discussed previously here) on hold, and ii) there has been a dramatic bout of selling coming out of nowhere, despite the PM complex having opened very well bid earlier on, in what appears a coordinate effort to nuke silver exclusively. 

Silver Plunges On China Slowdown Concerns, Dollar Short Covering 

Submitted by Tyler Durden on 05/01/2011 19:21 -0400

In early trading, silver is down nearly 20% from Friday highs, and just under 15% from its Friday closing fixing, hitting just over $42 in a slide of $6 commencing just after 18:25 pm. The reason for the collapse is not immediately clear, although concerns of a Chinese slowdown and overtightening are rumored to have been among the culrpits. The circumstantial evidence is in the OZ pairs, with the AUDUSD which has long been a high beta proxy for China plunging in early trading as well. Oddly enough, gold has been spared most of the carnage in silver, and was down about 1% in early trading. Overall, this appears to be nothing more than a short covering episode in the USd provoked by nothing factual. We will keep an ear open for any incremental data to determine if there is any actual reason for the plunge, such as for example that the BOJ has suddenly decided not to pick up the baton in trillions of monetizations over the next few months, instead of just another bout of technical selling.

 

What Keeps Wall Street Up At Night (Quarterly Edition) 

Submitted by Tyler Durden on 05/01/2011 17:16 -0400

Two quarters ago it was the muni implosion, last quarter it was sovereigns blowing up (again). Now, it's oil, and the stench of out of control inflation sending precious metals to daily all time record highs, that is keeping Wall Street up at night (yet doing nothing than seemingly providing one after another "buy the dip" opportunity). Every quarter the prevailing investing and spec opinion focuses on one key bogeyman in the wall of worry and refuses to let go, even as, or particularly because of, the Fed, in conjunction with the HFT-controlled market, sells vol to the point where everyone pretends risk is under control. Of course, it isn't, and neither the muni crisis has gone away, nor the threat of sovereign insolvency, nor pervasive inflationary threats (just buy gas in Europe). However, the fact that the Fed systematically takes on one conventional wisdom risk factor after another, and sells into every vol rally, almost certainly via curve exposure, but arguably via equity volatility indices as well (see thought by Artemis Capital on the subject), masks the symptom of an underlying systemic collapse until the market focuses on the next hotspot, which the Fed may or may not be able to resolve. And since we have finally moved on the biggest Fed artifact of all: inflation (and rampant one at that), the Fed's ability to extend and pretend the inevitable correction that needs to happen to push oil down to sub-$100 may be now coming to an end.

In The News Today

Posted: May 01 2011     By: Jim Sinclair      Post Edited: May 1, 2011 at 6:05 pm
Filed under: In The News

Iran Commander Warns Saudi Arabia Of Unrest 05/ 1/11 09:37 AM ET
TEHRAN, Iran — One of Iran’s top military commanders warned Saudi Arabia on Sunday that its decision to send forces to Bahrain to quell protests by Shiite Muslims would spark unrest at home, a semiofficial Iranian news agency reported.
Gen. Hasan Firouzabadi, head of Iran’s joint chiefs of staff, didn’t offer any evidence to back up his claim. But his comments reflected growing tension between Shiite-majority Iran and Sunni-dominated countries in the Gulf like Saudi Arabia.
Iran has repeatedly denounced Gulf leaders for dispatching a Saudi-led military force in March to prop up Bahrain’s Sunni monarchy and try to quell the protests by Shiites, who comprise 70 percent of the population but are excluded from key government and security posts.
"Unfair and unIslamic moves will hurt the honor of Muslims in Saudi Arabia, and it will threaten the security of Saudi Arabia," Firouzabadi was quoted as saying by the Mehr news agency.
Firouzabadi, who is known for his anti-Saudi rhetoric, also lashed out at the United States, claiming Washington was behind Riyadh’s move into Bahrain so that it could preserve an American naval base there.
More…




Jim Sinclair’s Commentary

Self reliance in all aspects of life is the bridge to a comfortable tomorrow. You are already self reliant as your own central bank.
Self reliance is required as few pension funds will pay anyone any pension

10 States Where Pensions Are Running Out of Money by 24/7 Wall St.
Friday, April 29, 2011
Corporate pensions, municipal pensions, state pensions — each category has funds that have run out of money and certainly many are running low. The fate of the UAW pensions was a critical part of the US bailout of the auto industry. Eventually, the unions received equity in Chrysler and GM, among other things. They are not the only large American companies with underfunded pensions; they are just the most recent and visible examples.
Austerity has taken its toll across the country. The need to cut expenses has become acute in the public sector. Federal, state, and municipal revenues are down because of the recession and the related effect on real estate prices and personal and business incomes. The costs of services that each level of government provides have not fallen as quickly. Some cities and counties have become insolvent and are in the hands of state-appointed emergency managers. The states worst off financially are in such trouble that Congress has started discussions about whether a state bankruptcy would be legal.
As the financial obligations and access to capital for states and cities is debated, one remedy has already been taken almost universally — cost cuts. One of the areas governments have either tried to cut, or have been forced to, are the funds put toward pensions and health benefits for public sector employees.
The Pew foundation recently released its "The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs" document. It says that states have a cumulative retiree and health care shortfall of $1.26 trillion. Many states have also not made ongoing contributions at the rate that experts suggest to get their funds in line with the obligations of those funds. Pew writes, "States’ own actuaries recommended that they contribute nearly $115 billion to build up enough assets to fully fund their promises over the long-term, but they contributed only $73 billion — or 64 percent of the total annual bill."
More…




Jim Sinclair’s Commentary

OTC derivatives have been and will continue to be the death of the USA.

Treasury Blocks Regulation Of Market That Sparked $5.4 Trillion Fed Bailout First Posted: 04/29/11 06:34 PM ET Updated: 04/29/11 10:51 PM ET
The Treasury Department plans to exempt foreign exchange derivatives from new Wall Street reform regulations, a Treasury official said Friday, dismissing concerns that the market prompted $5.4 trillion of emergency support from the Federal Reserve in late 2008.
Assistant Secretary for Financial Markets Mary Miller told reporters on Friday that the foreign exchange market already functions effectively and would not benefit from new rules. Subjecting the market to new rules, she claimed, would introduce a new and unnecessary process into a very well-functioning market.
But a 2009 study by Naohiko Baba and Frank Packer of the Bank for International Settlements concluded that there were major "dislocations in the foreign exchange market in the aftermath of the Lehman Brothers bankruptcy — problems that were only resolved after the Fed pumped money into foreign central banks in order to ensure that global banks had access to dollars.
After the bankruptcy of Lehman Brothers, the turmoil in many markets became much more pronounced, wrote Baba and Packer. In FX and money markets, what had principally been a dollar liquidity problem for European financial institutions deepened into a phenomenon of global dollar shortage.
Last years Wall Street reform bill required derivatives to be centrally cleared, a safety measure which helps ensure that the overall market does not falter if a bank or hedge fund cannot make good on its trade. But the law gave the Treasury Secretary Timothy Geithner the authority to exempt foreign exchange derivatives if they did not pose a threat to the financial system. The market Treasury hope to shield from regulation totals roughly $30 trillion, according to the Treasury, and is the dominant means for trading currency in global financial markets. Treasury is not exempting a broader class of more complex currency derivatives from the new rules– only the market for FX "swaps and forwards" would be effected.
More…