And There's Your Perfectly Leaked Explanation: CME Hikes Gold Margins, Again, This Time By 27%

Two weeks after the CME hiked gold margins by 22%, and two days after the Shanghai Gold Exchange sent them higher by 26%, here comes the CME, as we expected, with another 26% gold margin hike (previously: "Should we expect 3 more SGE margin hikes in the next 2 weeks? Or will the CME rightfully accept the baton and do everything in its power to dent the parabolic rise in the alternative reserve currency? We are cautiously looking at what the CME will do today and will advise readers."). And now we know that this particular margin hike was leaked well in advance, and explains the entire $100 plunge in gold today.

 

Operation Twist Expectations (or LSAD) Returning With A Vengeance Explains Today's Moves In Stocks And Gold

Whether the Fed will upgrade QE2.5, or "ZIRP through mid-2013", to QE3, or Operation Twist, the form we have been predicting it would take since May, is still unknown: very few people know what Bernanke will say on Friday, minutes after the first revision to Q2 GDP reveals a sub-1% number. What is known is that while cross-asset correlation has soared over the past few days, the biggest driver of stocks over the past few days has been nothing but the 2s10s30s butterfly, which in turn is driven by On and Off rumblings of Bernanke doing the Twist. And here is the rub: when the Fed announces Twist it will be extending duration, it effectively means selling everything 10 Year and older (yes, QE3 could very well be LSAD or Large Scale Asset Dumping instead of LSAP). The goal of this action: make the 2s10s will go vertical and to pancake the 10s30s: a move that the butterfly is now indicating it is once again pricing in - today alone we have seen a massive 15 steepening in the butterfly: a nearly 20% move in the curve. It also explains why gold is being sold off today, because simplistic investors believe that without an actual balance sheet expansion, the Fed will not be diluting paper. Completely wrong: it will merely do so synthetically, from a duration basis. Furthermore, the market will very soon read through the Fed's intention which will be predicated entirely on asset rotation and not on incremental fiat capital. The final outcome will be QE4 where the Fed will have to match the synthetic duration extension with actual cash bond deliverables, namely monetizing bonds, a move which will be even more critical once the deficit spend starts soaring again in the next 3 months. And when it does, it will have to do so double time, to make up not only for previous synthetic exposure extension, but for future priced in moves. In other words, nothing has changed, and we fully expect stocks to soar if indeed Bernanke mentions "duration extension", together with yet another gold dump. The issue is that Op Twist in the proposed format would be physically limited by the amount of 10 Year+ bonds held in the Fed's SOMA. At last check it was not that many at all. So any surge in stocks will be albeit both painfully transitory.





Read and Learn...
 
The Heart Of Violent Markets

August 24, 2011, at 1:59 pm
by Jim Sinclair in the category General Editorial |  Print This Post |  Email This Post

Dear Extended Family,

What is at the heart of the violent markets? The answer is Skier Illustration number 3.

Will Bernanke do something in the coming week? It does not matter in reality as business conditions are headed to a double dip in which the double could be wild on the downside. The Fed will act because of the balance sheet condition of the US and Western world financial industry devoid of false OTC derivative values.

Liquidity will be provided and Skier Illustration number 3 will take place, taking the US dollar lower and Gold to higher highs either now or very soon. As far as margin rates are concerned, they will rise to cash on both gold and silver before either sees full valuation.

You have heard from me on this gold reaction. Now hear from the extremely accurate Alf fields:

“The good news is that once the anticipated correction has been completed, gold should commence intermediate Wave 3 of Major 3. This should be the longest and strongest up-wave of the entire Bull Market. Expect high volatility and very high prices during that up-wave.”

Now let’s here from Kenny Adams, Master Technician, on long term trends:

“So far we have the potential for a topping action that may generate a moderate to deep correction – but not a long extended correction – not a termination of a bull trend.”

Now lets hear from Dean of Gold, Harry Schultz:

“Don’t bother me now. Call me when gold trades at $2400.”

So stop worrying. At the worst this is a fast, deep correction before much, much higher prices for Gold.

Respectfully,

Jim

 

 

Where Are We?

August 24, 2011, at 12:19 pm
by Greg Hunter in the category USAWatchdog.com |  Print This Post |  Email This Post

By Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Yesterday, the Dow was up more than 300 points, and gold hit another all-time high before dropping nearly $100 an ounce.  You would think the stock market was back and the gold trade was over.  Wall Street is excited about recent bad economic news that just may force Fed Chief Ben Bernanke to start a third round of quantitative easing (QE3).  I hate to break it to Wall Street, but QE3 is already underway in the form of 2 years of guaranteed near 0% interest rates.
That’s the close up of the economy.  The wide shot reveals something much more profound and dangerous for anyone who does not know which direction the giant economic cruise ship is turning.  The problem the world faces today is crushing debt.  In America, it is at the local, state and federal level.  On top of that, there have been many promises made in the form of retirement and health care.  In Europe, the same thing, except there the problem is more immediate and dire.  The fate of the European Union hangs in the balance.
There has never been a time in history when debt problems globally have been this monstrous.  At the beginning of the year, I quoted 87 year old Harry Schultz.  He is now retired but is widely respected for his economic and market calls.  In his last newsletter, Schultz summed up the calamity we face by saying, “Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched & where the rot is by far the deepest.”  (Click here to read my original post from January 2011.) 
David Knox Barker, who wrote “Jubilee on Wall Street: An Optimistic Look at the Global Financial Crash,” echoes Schultz.  Enormous problems will usher in equally enormous changes.  Barker said this week, “The final plunge of this long wave winter season is now underway. The international political economy, which has lost its moorings in individual accountability, responsibility and purpose, is breaking up. Socialism in all its forms, including the global banking system that is dependent on the government dole, is collapsing from the weight of its internal contradictions. Socialism is going through an extinction event in the final years of this long wave, receiving its just reward from the crushing long wave forces that it has magnified around the globe.” (Click here to read the complete article by Mr. Barker.)

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Guest Post: Libya's Post Gadhaffi Future - Who Gets The Oil?

Muammar Gadhaffi’s 42 year-old regime is in its death rattle – maybe today, maybe tomorrow, his administration that has ruled Libya with a quixotic and brutal hand is about to pass, in Trotsky’s piquant phrase, “into the dustbin of history,” prompting the question “what next?” The glittering prize is Libya’s 1.6 million barrels per day output of high quality crude, which accounted for about 2 percent of global oil output drawn from Africa's largest oil reserves, whose exports have been stymied since the NATO-led campaign began six months ago. Projecting into the future, analysts believe that has reserves to sustain its previous level of production for 80 years. Who will eventually control this asset, with oil prices currently at roughly $84 a barrel, generating an income of more than $12.6 million per day? Italy’s ENI? France’s Total? Britain’s BP? U.S. companies? Or, will China add Libyan future production to its string of acquisitions, as it is already China’s eleventh largest source of imports? The crystal ball is murky indeed, but when the uprising against Gadhaffi began six months ago, according to the Chinese media, about 36,000 Chinese were in Libya working on 50 projects.

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