Gold Only Functional Hedge Against Downgrade Of Treasuries

July 26, 2011, at 12:18 pm
by Jim Sinclair in the category General Editorial |  Print This Post |  Email This Post

 

Dear Extended Family,

There is no functional hedge against the downgrade of US Treasuries that is sure to come with or without a default except gold.
The cat is out of the bag. The political opposition can back the present administration into a corner on the most important issue, debt.
If that is the case with debt, then what else could they do it with?
To assume there will be a default is extreme, however within a week we will know. There are those in the political opposition that might go to any length to cripple the present administration.
The only conclusion that I can come to is that you should NOT take your gold hedges off. At $1764 a runaway gold bull market becomes an exponential run away gold bull market.
After $1754 Alf and Armstrong become the predictors of note for Gold at $3000 to $12,500.
Respectfully,
Jim

Stark Reality: Dem Firebrand Admits Debt Ceiling Deadline a Charade

Jim’s Mailbox

July 26, 2011, at 12:14 pm
by Daniel Duval in the category Jim's Mailbox |  Print This Post |  Email This Post

 

No Real Estate Rebound Until 2034 

CIGA Eric

While the housing market will see periods and ebb and flow, it won’t rebound until 2034. By then, the Fed paper will be a distant memory of analysis that underestimated supply and credit damage.
Months Months Supply of New One-Family Houses for Sale And Change YOY
Jim Sinclair’s Commentary
This prediction is much too bullish.
Headline: No US home building rebound until 2014 – Fed paper
(Reuters) – U.S. home building likely won’t return to normal levels until 2014, and then only if housing prices rebound and foreclosures drop sharply, research from the San Francisco Federal Reserve Bank showed.
Continued weakness in the housing market is dragging on the U.S. economy, which is losing ground under the weight of 9.2 percent unemployment and declining consumer confidence.
A report on Friday is expected to show the U.S. economy expanded at a 1.8 percent clip in the April-to-June period, below the first quarter’s tepid 1.9 percent rate.
Research released Monday by William Hedberg, a San Francisco Fed research associate, and John Krainer, a senior economist there, indicate the drag from housing is likely to continue for years.
"Our analysis suggests that even an unusually strong period of real house price appreciation would not, on its own, lift starts to long-run average levels," the researchers wrote in the regional Fed bank’s latest Economic Letter. "A significant easing of the drag on housing stemming from the inventory of foreclosed homes is also needed."
Foreclosures would need to drop by 50,000 homes per quarter starting in 2012, the researchers found, and home prices would need to stop falling by 2013 and then begin to rise, for housing starts to return to pre-2004 levels by 2014.
Source: reuters.com
More…

Charting David Rosenberg's Thesis: "No Gold Bubble Until $3,000"

Today's "Breakfast with Dave" from David Rosenberg is a veritable chartapalooza, the inspiration for which appears to have been the "reversion to the mean" theme presented in yesterday's IMF chartpack, presented here. There is, however, one section that is unique: that dealing with gold, and more specifically, why in Rosenberg's opinion gold is still quite cheap and why it is trading at about 50% of what the Gluskin Sheff strategist would consider bubble value. As Rosie says: "we have liked gold for a long time and we remain very constructive. It is more than just a hedge against recurring bouts of global financial volatility. The growth rate of gold production is roughly stagnant while the growth rate of fiat currency in most parts of the world continues to accelerate. It's all about relative supply curves - the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple." Indeed it is: when one strips out all the fancy talk, mumbo jumbo, and syllogistic gibberish out of modern economic theories, be they neoclassical Keynesianism (or, god forbid, just classical), chartalism (sorry, infinite debt-money issuance won't work: in two years we will all see why), or any other attempts to reduce a broken imbalance in supply and demand propped up by the "invisible hand", it is all about supply and demand. Sure enough, one thing we have an infinite supply of is fiat money, and the resulting debt necessary to "back it up." As for demand, well that's another matter. With gold: it is just a little inverted.





This is just the first Domino to fall...

Jefferson County Retains Klee Tuchin For Upcoming Chapter 9 Legal Advice

As anyone who follows the restructuring process (and religiously reads debtwire) will tell you, the first sign of smoke is when a creditor retain legal bankruptcy counsel, promptly followed by financial, which in turn, or at least 95% of the time, leads to a dropping off of bankruptcy docs at the local bankruptcy court, or Southern New York. And where there's smoke, there's Alabama fire. According to blog al.com, the Jefferson County Commission has just retained the services (at $975/hour) of Ken Klee, of LA-based Klee Tuchin, best known for advising Orange County on its Chapter 9 filing back in 1994. And with this the probability that Jefferson County will conclude that the time to file its own Chapter 9 in two days, is virtually a certainty (and sorry, no bankruptcy lawyer will advise his clients not to file for bankruptcy. Hourly retainer, remember?). And with the US debt situation still unlikely to be resolved within 48 hours, the last thing the market needs is to worry not only what known on effects this mega-municipal bankruptcy case will end up generating, but who else will file after. That said, we are confident the market will surge even more as it digests these news. Why? Two words: Bernanke Put.

Yet Another Direct Bidder Avalanche Pushes $35 Billion 2 Year Auction Through The Finish Line

Submitted by Tyler Durden on 07/26/2011 - 13:13 Agency Paper Bond High Yield
Just like in previous auctions post the end of QE2, so today's just concluded $35 billion 2 Year auction closed off with Direct Bidders once again surging to take down nearly as much as the Indirects. Foreign institutions (Indirects) were responsible for 27.67% of the total allocation, while Directs rose from 13.53% to 20.03%: Chinese proxies, Fed, who knows. It wasn't dealers, who supposedly took down just over half or 52.30% of the auction. Otherwise, the bond priced at a 0.417% high yield, modestly higher than June's 0.395% same with the Bid To Cover, which came at 3.14, just higher than the 3.08 previously. With the When Issued trading at 0.42% there were no major surprises into the pricing. Overall, nothing notable except for the increasing role that Direct Bidders continue to play in each and every issuance now that the Fed is briefly not monetizing treasury debt. We expect more of the same in the remaining 5 and 7 auctions in the balance of the week.And an amsuing comment from TD's Richard Gilhooly: "Given the bid in the Treasury market today as spreads widen in Agency paper and mortgages, belatedly in swap spreads, it would suggest that we are seeing an ironic flight to quality into the asset class that is at risk of downgrade." Yeah, who cares though.

Economic Rape of Europe Nearly Complete, Part II

In Part I, I explained and (for many) introduced readers to two of the major scam-vehicles which the Wall Street Oligarchs (and a few European brethren) unleashed upon the world – and in particular the nations of Europe. Interest rate swaps and credit default swaps (both forms of “derivatives”) have been used to inflict trillions of dollars in losses on their victims, with no end to this massive tally in sight.

As I watched Wall Street terrorists decimate the debt-markets (and thus the economies) of European nations one-by-one, I had assumed that such an unprecedented economic “attack” against these nations had been a goal unto itself. I was mistaken. Instead, what has recently become apparent is that such terrorist attacks on Europe were merely the means to an even greater end: to completely plunder all the wealth of these nations.

In furtherance of this objective, the banking crime syndicate (and the ultra-wealthy bond parasites whom they represent) have formulated a three-pronged scheme to drain every last drop of wealth from these economies (and nations):

1) Using these fraudulent bond debts to attach a legal claim on the large, national gold-hoards which these nations claim to still possess

2) Attaching “loss guarantees” to the bad-debts of the Euro debt-sinners

3) Ramming through a full economic integration of all these Euro-zone nations

I will address these economic “crimes against humanity” in order.

The same Western central banks (and bankers) who literally dumped thousands of tons of gold onto the global market over a two-decade period – claiming that they had no use for this “barbarous relic” – are now all singing a different tune. They have completely ceased their own gold sales, for one of two reasons: they have now decided to hoard all of their remaining gold, or their vaults are empty, and they simply have no more gold to “sell”.

Either interpretation of events is plausible. However, depending on which premise is correct, the decision by Western banking authorities to designate the national gold hoards of these nations as “collateral” for their (fraudulent) bond debts has two entirely different (and separate) motivations. If the gold still exists, then naming gold as collateral for debts which could never be repaid (and where default is imminent) is nothing less than the theft of these nations’ gold reserves.

Conversely, it is also highly plausible that there are no (remaining) hoards of gold hidden in bankster vaults (at least none which belongs to these governments). Why is there reason to suspect that the claims that these nations possess large gold reserves are more fantasy than fact? Because when Western banksters were dumping their thousands of tons of gold onto the market to crush the “life” out of that market, their primary method of “delivering” this gold onto the market was not outright “sales” of gold, but rather “leases”.

Here I must defer to the years of time and effort which the vigilant gang at GATA (the “Gold Anti-Trust Action” Committee) have devoted to monitoring the activities of these bankers. It has long been their suspicion that the “gold reserves” listed by many/most/all Western nations are complete fiction – as they do not account for the countless tons of “leased gold” which will never (and could never) be returned to these bank vaults. In other words, most of the “gold” held in these European vaults are not gold bars physically present in these vaults, but rather merely stacks of gold “IOU’s”. Read more: Economic Rape of Europe Nearly Complete, Part II

 

 

 

 

 

 

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