Thursday, July 7, 2011

Ambrose Evans-Pritchard Is Back, Guns Blazing

AEP is back, and he is angry...

The Die Is Cast

July 7, 2011, at 6:53 pm
by Jim Sinclair in the category General Editorial |

My Dear Friends,

Have you thought about all the dramatics now taking center stage in the media? What compromise will be adopted that will allow for the US to avoid default by raising the debt ceiling?
Raising the debt ceiling is the problem and not by at means a solution. The race between dropping revenues and increasing costs will not be settled by politicians that do not even understand the problem.
The resignations of key economic personalities in the present Administration is systematic of the solid nature of the downward spiral that has gripped Western finances since the failure of OTC derivatives turned a normal recession into a long term depression.
There is no event that will turn the tide of the ramifications for poor economic management. Nothing can stop Gold, Silver, the Swiss and the Cando now.
The present drama of tax increases and spending cuts, like the release of oil, means nothing whatsoever even in the medium term.
The damage is done as the damage is cumulative. Day to day events are irrelevant. Day to day market activity is interesting but meaningless.
The die is cast. All we can hope is that gold is not headed to $12,500.
Regards,
Jim

Discrepancies found in Fed and Treasury gold statements

Central banks pull most gold in a decade from BIS

Judy Shelton, Lew Lehrman argue for bringing gold back

Kitco moves into creditor protection

Retirement Fund Plunder Update: $206 Billion So Far, $62 Billion Left

As of today, since the debt ceiling breach on May 16, the Treasury has plundered about $206 billion from the two primary retirement accounts: the G-Fund and the Civil Service Retirement and Disability Fund, according to calculations performed by Stone McCarthy. The full breakdown for sticklers is provided below, however what is more important is that with just 4 weeks left until the D-Day, there is about $62 billion in available debt ceiling stretching options. In other words, Tim Geithner has burned through 75% of his dry powder just 50 days into the debt ceiling breach. What happens in the next few days - Stone McCarthy gives the full breakdown "Based on our projections for marketable borrowing and trust fund flows, we think Treasury would need to use about $37 billion of that $62 billion in July, and would exhaust the rest with the settlement of auctions on August 1. If things go down to the wire, Geithner could create a little more room by declaring that the Debt Issuance Suspension Period will last longer than the original May 16-August 2 timeframe, which would be reasonable if Congress hasn't acted by August 1 or August 2." Said otherwise, with the market still completely ignoring the debt ceiling situation, if nothing has changed by the last week of July, it will once again, very much retroactively, panic.

Risk-ES Divergence Back To Silly Levels

Submitted by Tyler Durden on 07/07/2011 20:08 -0400

One glance at the RISK-ES basket confirms what everyone knows: regressed for a July 5 start, while the broader Risk basket has been moving roughly in line with ES, today we saw a major decoupling, which, if nothing else, indicates that stocks are once again on their own in the stratosphere, while all other risk signals indicate a far more subdued value. As a result, the spread has once again hit the notable 10 ES point equivalent divergence which more often than not ends up being compressed... eventually. Alas, since the Chairsatan can stay irrational far, far longer than any printer can print without running out of ink, at this point who the hell knows what is happening. But since this is bizarro world, it is probably a good thing that this, the 9th consecutive week of domestic equity fund outflows, saw "just" $3 billion pulled from massively margined mutual funds. This is a welcome drop from the $4.3 billion pulled last week. At this rate we may hit an inflow eventually, at which point the lunatic in charge of the asylum will once again crash it all.

As DSK's Star Is Rising, Is Lagarde's About To Set? French Court To Decide Whether To Open Against Brand New IMF Head

The IMF soap opera just entered the twilight zone. Following the release of facts about DSK's accuser just two days after the swearing in of his replacement, Christine Lagarde, that could discredit her story and absolve the former IMF head of all wrongdoing, the current one may be about to experience amajor legal humiliation of her own. According to Reuters, a French court will decide on Friday whether to launch a legal inquiry into the role of IMF chief Christine Lagarde in a 2008 arbitration payout, a move that could cloud her debut at the international lender. To be sure this is the second time in the past two months that Lagarde's legal troubles have followed her: back in May we noted that the very same legal troubles could potentially delay her ascent to the head of the IMF. However, the French tribunal did not move fast enough, and thus Lagarde was elected without that major legal blemish being removed from her record. Thus it would be supremely ironic if tomorrow the Court Justice of the Republic were to pronounce that there just may be a case against Lagarde for abuse of authority. Coupled with DSK's probable imminent absolution of wrongdoing, in keeping with the Onionesque nature of reality, it would not surprise us if a year from now the IMF will have done a big switcheroo, and undone the whole thing, whereby DSK is back as head of the IMF.

Guest Post: Cheating - Competition’s Great Equalizer?

Cheating has achieved art form, particularly in business, politics and sports; and the public has come to accept this cheating behavior shrugging their shoulders. “They all do it” has become the rationalization to accept not just the fame and celebrity of major personalities (sports heroes), but also the detrimental acts so often perpetrated by those who yield power over us: business moguls and politicians. “They all do it” rationale has brought us all to the level of co-conspirators since this is a game we all must play; there’s no room for spectators since the outcome of those acts affect not just our well-being, but the dignity, or lack of it, in which we view ourselves. If cheating is so endemic in our capitalist way of life, why do we act so surprised when it affects other areas of our society, such as religion, the judicial system, and now education? Aren’t some areas sacrosanct, immune to major scandals? Definitely not! Capitalism without appropriate rules and controls also implies competition without rules or controls. And in this environment of the survival of the fittest, fittest being people who possess the wealth and power, those who disagree with the politics and policies of the rules-imposers feel that they, too, need a great equalizer.