Quoting Jim Sinclair: “Gold stocks are the utilities of the future.”
Dear CIGAs,
Few would dispute that the twelve year (and still counting) bull market in gold has been the opportunity of this investment lifetime. Even fewer have participated. From its 20 year bear market low in August of 1999, bullion has appreciated more than seven fold. That works out to a $US compound return of 18.0% compared to 0.7% for the S&P 500. There is a paltry $2 trillion of investment gold, approximately 1% of global financial assets. It is not main stream. It is not widely held. The rationale for investing is antithetical to mainstream thinking. The opportunity has been missed by almost every conceivable category of investor including pension funds, endowments, mutual funds, and central banks, all of whom could be safely described as underweight the metal, overweight dicey financial assets. Despite the headlines, gold remains under owned.
To regard the lengthy bull market in gold as an isolated fact would be simplistic and superficial. The media and most of the financial community are captivated by daily price action, but see nothing more. To most, it is a speculation, probably an overcrowded trade, and maybe a bubble. It is seen in the narrowest of terms, as an odd curiosity that will at some point just go away.
Gold’s advance is but one aspect of a much bigger picture. The collapse of the dot com and housing bubbles, the 2008 credit collapse, the eleven year bear market in stocks, sovereign debt woes in Europe, zero interest rates, intractable sovereign fiscal deficits, and, yes, the steady rise of gold in all currencies are rooted in the breakdown of confidence in paper currencies linked only to political agendas.
Since the demotion of gold to non-monetary status by the Nixon administration in 1970, fiat money and credit based upon it have been a fundamental source of global wealth generation. What is the value in real terms of the $200 trillion of wealth denominated in currency if nobody wants the paper?
In golf parlance, a “mulligan” is a second chance to make good on a bad tee shot. Mulligans are routinely granted and gratefully accepted by every golfer at the beginning of a friendly match, after a bad first shot. In the world of investing, second chances, or “do overs” are not routine. Sideline huggers who have missed the bull market of a lifetime must “pay up” if they wish to participate in a long-established trend. Late to the party entry points are inherently more risky, as the sharp correction in bullion during the last week of August in bullion illustrates.
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Europe's Response To Geithner's Advice: "I'd Like To Hear How The United States Will Reduce Its Deficits ... And Its Debts"
Two years after being laughed out by a bunch of Chinese students, Tim Geithner realized that his hypocrisy may pass muster in the Beltway, but the crowd is tougher across the Atlantic. As Reuters reports, the much anticipated meeting between Geithner and the euro FinMins in Wroclaw, Poland, lasted all of thirty minutes and if nothing else managed to unite the Europeans... in their ridicule and derision of the man that has become a global muppet caricature. The litany of quotes needs no explanation: "I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone that they tell us what we should do and when we make a suggestion ... that they say no straight away," Maria Fekter, [Austria's Finance Minister] told reporters afterwards, recalling a difference of opinion between Geithner and German Finance Minister Wolfgang Schaeuble on how to reinvigorate the euro zone and tax financial deals." And the kicker came from Belgian Finance Minister Didier Reynders, who responded 'tartly' that "We can always discuss with our American colleagues. I'd like to hear how the United States will reduce its deficits ... and its debts." Alas, as Tim has found the hard way, being one of the biggest offendors when it comes to collapsed economies does take away from his credibility. So if we may suggest, Timmy should i) focus on fixing the US economy, and since he has repeatedly failed at that ii) to immediately resign.
September 16, 2011, at 11:40 am
by Jim Sinclair in the category In The News |
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by Jim Sinclair in the category In The News |
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Jim Sinclair’s Commentary
China to ‘liquidate’ US Treasuries, not dollars
By Ambrose Evans-Pritchard
The debt markets have been warned.
A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.
"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.
"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."
"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.
To my knowledge, this is the first time that a top adviser to China’s central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.
We don’t know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank’s FX arm. The figure is thought to be over $2.2 trillion.
The Chinese are clearly vexed with Washington, viewing the Fed’s QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.
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Dear Eric,
Cautious consumers pull back on retail spending
CIGA Eric
I find no disagreement with the headline below. The downward acceleration of gold adjusted retail sales suggests trying times ahead not only for the US households but also economy. Consumption, representing over 70% of GDP, is a key driver of US economic growth. The pressure to do something domestically is mounting.
Headline: Cautious consumers pull back on retail spending
WASHINGTON (AP) — U.S. consumers grew more cautious last month amid wild stock market swings, zero job growth and heightened concerns that the economy has weakened.
Retail sales were flat in August. At the same time, wholesale inflation leveled off. The latest data could give the Federal Reserve more impetus to adopt additional stimulus next week.
"The combination of those two reports sets the stage for, and warrants, additional action by the Fed," said Michelle Meyer, an economist at Bank of America Merrill Lynch.
Wall Street looked past the weak retail sales data. Growing optimism that European leaders would be able to contain their debt crisis drove stocks higher. The Dow Jones industrial average closed up 140 points for the day.
In August, consumers spent less on autos, clothing and furniture, the Commerce Department said Wednesday.
Source: finance.yahoo.com
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Jim Sinclair’s Commentary
The following chart is from CIGA Luis.
Dear CIGAs,
After Secretary Geithner told the CNBC audience that he was going to Poland as an observer of the ECOFIN meeting on Friday, it seems he changed his mind. U.S. policymakers have woken up to the fact that the European credit crisis is the real deal and risks sending the entire global financial system into a period vicious cycle of asset liquidation. The Obama administration has come to realize that a severe credit crisis can certainly undermine the JOBS PROGRAM AND ANY OTHER STIMULUS PROGRAMS IN THE WORKS. If the world frets of a U.S. renewed recession, then imagine the global trepidation of a simultaneous credit crunch in Europe. A EUROPEAN MELTDOWN WOULD BRING THE U.S. TO INCREASED UNEMPLOYMENT AND A CERTAIN DEFEAT FOR THE OBAMA ADMINISTRATION.
The summer vacation in Europe is over and it is time to SOUND THE TRUMPETS calling for renewed vigour from the world’s financial authorities for massive amounts of liquidity. Swap lines were the jolt from the defibrillator of economic therapy as the ECB and others try to halt the arrest of the European banking system. Of special interest is that the FED, SNB, BOE and the BOJ were the central banks named as the providers of DOLLAR SWAPS for Europe–the Canadians were missing from the list of usual suspects. Again, it seems that the G-7–with White House prodding–wants it to appear that policy makers are attempting to get ahead of a potential financial calamity in the European banking system. The DOLLAR SWAPS will also buy the ECB some time and room for manoeuvre as it relieves some of the pressure on ECB bond purchases.
It was noted that there has been very little use of the present seven-day swap facilities but the authorities seem to be more worried about end-of-year funding problems and thus moved to provide a 90-DAY FACILITY. It was noted in a WSJ article that the swap lines have been underutilized as European banks were using private deals to borrow DOLLARS by pledging DOLLAR ASSETS to U.S. banks. If there was plenty of DOLLARS available, then today’s announcement was an example of Hank Paulson pulling the “bazooka” and letting the markets know that the global policymakers are serious about Europe. Any liquidity addition of a SYMBOLIC NATURE in a zero-rate environment should boost all asset prices, and, once the FOG OF WAR clears, WIND UP PUTTING A NEW BID TO GOLD.
Imagine that it is possible for both GOLD and STOCKS TO RALLY. Time to examine the GOLD/CURRENCY charts as the fear of deflation causes all the world’s central banks to throw monetary caution to wind created by helicopter rotors. The SWISS NATIONAL BANK HAS ESTABLISHED A NEW LEVEL OF INTERVENTION FOR THE ENTIRE FINANCIAL SYSTEM. EUROPE entered the arena today, which makes me wonder what the quid pro quo will be for Japan’s cooperation: Will the BOJ get the nod of approval for a new effort to drive the YEN lower? With a G-20 meeting next week in Washington the markets will be on heightened alert.
Quick Hitter: An article in today’s London Telegraph by Ambrose Evans-Pritchard is a must read (“China to ‘liquidate’ US Treasuries, not dollars”). The bottom line is that China will demand securities as they begin to sell BONDS. Will the U.S. authorities allow the Chinese SWFs to purchase U.S. corporate assets as they sell off their treasury holdings? This has been an issue of NOTES for a long time and we look for it to surface again as the BOND market reaches ridiculous levels.
More…
QE, a stealth default, on US debt!
China to ‘liquidate’ US Treasuries, not dollars
By Ambrose Evans-Pritchard
The debt markets have been warned.
A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.
"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.
"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."
"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.
To my knowledge, this is the first time that a top adviser to China’s central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.
We don’t know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank’s FX arm. The figure is thought to be over $2.2 trillion.
The Chinese are clearly vexed with Washington, viewing the Fed’s QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.
More…
September 16, 2011, at 11:33 am
by Jim Sinclair in the category Jim's Mailbox | Print This Post | Email This Post
by Jim Sinclair in the category Jim's Mailbox |
Print This Post | Email This PostDear Eric,
This will lead to more guarantees of QE to infinity.
Cautious consumers pull back on retail spending
CIGA Eric
I find no disagreement with the headline below. The downward acceleration of gold adjusted retail sales suggests trying times ahead not only for the US households but also economy. Consumption, representing over 70% of GDP, is a key driver of US economic growth. The pressure to do something domestically is mounting.
Headline: Cautious consumers pull back on retail spending
WASHINGTON (AP) — U.S. consumers grew more cautious last month amid wild stock market swings, zero job growth and heightened concerns that the economy has weakened.
Retail sales were flat in August. At the same time, wholesale inflation leveled off. The latest data could give the Federal Reserve more impetus to adopt additional stimulus next week.
"The combination of those two reports sets the stage for, and warrants, additional action by the Fed," said Michelle Meyer, an economist at Bank of America Merrill Lynch.
Wall Street looked past the weak retail sales data. Growing optimism that European leaders would be able to contain their debt crisis drove stocks higher. The Dow Jones industrial average closed up 140 points for the day.
In August, consumers spent less on autos, clothing and furniture, the Commerce Department said Wednesday.
Source: finance.yahoo.com
More…
Jim Sinclair’s Commentary
The following chart is from CIGA Luis.
September 16, 2011, at 12:50 am
by Yra Harris in the category General Editorial | Print This Post | Email This Post
by Yra Harris in the category General Editorial |
Print This Post | Email This PostDear CIGAs,
After Secretary Geithner told the CNBC audience that he was going to Poland as an observer of the ECOFIN meeting on Friday, it seems he changed his mind. U.S. policymakers have woken up to the fact that the European credit crisis is the real deal and risks sending the entire global financial system into a period vicious cycle of asset liquidation. The Obama administration has come to realize that a severe credit crisis can certainly undermine the JOBS PROGRAM AND ANY OTHER STIMULUS PROGRAMS IN THE WORKS. If the world frets of a U.S. renewed recession, then imagine the global trepidation of a simultaneous credit crunch in Europe. A EUROPEAN MELTDOWN WOULD BRING THE U.S. TO INCREASED UNEMPLOYMENT AND A CERTAIN DEFEAT FOR THE OBAMA ADMINISTRATION.
The summer vacation in Europe is over and it is time to SOUND THE TRUMPETS calling for renewed vigour from the world’s financial authorities for massive amounts of liquidity. Swap lines were the jolt from the defibrillator of economic therapy as the ECB and others try to halt the arrest of the European banking system. Of special interest is that the FED, SNB, BOE and the BOJ were the central banks named as the providers of DOLLAR SWAPS for Europe–the Canadians were missing from the list of usual suspects. Again, it seems that the G-7–with White House prodding–wants it to appear that policy makers are attempting to get ahead of a potential financial calamity in the European banking system. The DOLLAR SWAPS will also buy the ECB some time and room for manoeuvre as it relieves some of the pressure on ECB bond purchases.
It was noted that there has been very little use of the present seven-day swap facilities but the authorities seem to be more worried about end-of-year funding problems and thus moved to provide a 90-DAY FACILITY. It was noted in a WSJ article that the swap lines have been underutilized as European banks were using private deals to borrow DOLLARS by pledging DOLLAR ASSETS to U.S. banks. If there was plenty of DOLLARS available, then today’s announcement was an example of Hank Paulson pulling the “bazooka” and letting the markets know that the global policymakers are serious about Europe. Any liquidity addition of a SYMBOLIC NATURE in a zero-rate environment should boost all asset prices, and, once the FOG OF WAR clears, WIND UP PUTTING A NEW BID TO GOLD.
Imagine that it is possible for both GOLD and STOCKS TO RALLY. Time to examine the GOLD/CURRENCY charts as the fear of deflation causes all the world’s central banks to throw monetary caution to wind created by helicopter rotors. The SWISS NATIONAL BANK HAS ESTABLISHED A NEW LEVEL OF INTERVENTION FOR THE ENTIRE FINANCIAL SYSTEM. EUROPE entered the arena today, which makes me wonder what the quid pro quo will be for Japan’s cooperation: Will the BOJ get the nod of approval for a new effort to drive the YEN lower? With a G-20 meeting next week in Washington the markets will be on heightened alert.
Quick Hitter: An article in today’s London Telegraph by Ambrose Evans-Pritchard is a must read (“China to ‘liquidate’ US Treasuries, not dollars”). The bottom line is that China will demand securities as they begin to sell BONDS. Will the U.S. authorities allow the Chinese SWFs to purchase U.S. corporate assets as they sell off their treasury holdings? This has been an issue of NOTES for a long time and we look for it to surface again as the BOND market reaches ridiculous levels.
More…
Friday, September 16, 2011 – by Staff Report
China risks hard landing as global woes spread ... China's carefully-managed soft landing is turning harder by the day, threatening to deflate the torrid credit bubble of the past three years. Beijing is alarmed by inflation above 6pc and price-to-income ratios for property in the rich coastal cities ... "There is a large potential risk," said Zhu Min, the deputy managing director of the International Monetary Fund and a former Chinese official. Mr Zhu said China had doubled the loan ratio from below 100pc of GDP before the Lehman crisis to roughly 200pc today. The danger is that this excess could start to unwind just as the West goes into a sharp downturn, and possibly a double-dip recession. China and emerging Asia are fundamentally in weaker shape this time, having used up their "fiscal cushions", leaving them with little leeway to cope with a fresh global shock. – UK Telegraph
Dominant Social Theme: Europe has a lot of troubles. But, hey, China's always delivered before. Perhaps it can still fix the world once it fixes itself.
Free-Market Analysis: Good on you, Ambrose Evans-Pritchard. There is really no other story that matters, is there? If China goes down, the economic system of the past 60 years may be finished. Collapsed. Kaput. That's because every other major economy in the world is troubled to a degree. China has been pulling the whole boatload. But what if China's magnificent industrial engine begins to sputter and lose traction?
If America is in a recovery, as the Obama administration claims, it's a funny one. We tend to think the American economy more or less resembles a depression. Europe's, too.
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Friday, September 16, 2011 – by Staff Report
FDA Set to Ban Your Supplements ... The FDA has issued a proposed mandate that represents the greatest threat to dietary supplements since 1994. Back in the early 1990s, consumers were so alarmed by FDA bullying that they staged a massive revolt. The result was that Congress passed a law prohibiting the FDA from banning popular nutrients (as the agency had threatened to do). There was, however, a loophole in the 1994 law. The FDA was given authority to regulate ingredients introduced after October 15, 1994. It has been 17 years, but the FDA just issued draconian proposals as to how it intends to regulate what it now calls "new dietary ingredients." If implemented, some of the most effective nutrients you are taking will be removed from the market. This includes many fish oil formulas and natural plant extracts. – NY Daily News
Dominant Social Theme: Raw milk and fish oil can kill you. It is much better to eat "heart healthy" potato chips.
Free-Market Analysis: Dr. Joseph Mercola is out with a "red alert" posted on his website reporting on new regulations from the Food and Drug Administration that may reduce or eliminate people's access to such food additives as fish oil.
Dr. Mercola is a leading authority on non-pharmaceutical nutrition and he has even posted a letter on his website that people can copy, personalize and email to their congressional representatives on Capitol Hill regarding these new regs. The letter makes the point that Congress actually passed a law (DSHEA) back in 1994 to try to prevent the FDA from doing exactly what its bureaucrats intend to do now.
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Friday, September 16, 2011 – by Staff Report
Central Banks Rescue the World … Global central banks act to help eurozone lenders ... Central banks around the world have joined in a co-ordinated action to make more dollars available to eurozone banks, to ease the funding pressures which have built up in recent weeks. Today's move to boost bank funding has echoes of the co-ordinated action taken by central banks in September 2008 after the Lehman collapse. – Agency Reports
Green Jobs Are the Hope of the Future? … Green industry to create thousands of roles ... The green energy industry is regularly touted by the Government as being a huge job creator of the future. Louisa Peacock asks where the future work will come from. How can Britain compete with the likes of Germany and China to develop a renewable energy industry? – UK Telegraph
US Seeks Worldwide Justice … Salisbury man banned from hunting worldwide ... A Salisbury resident has been banned from hunting anywhere in the world for two years as part of an agreement with federal authorities in Kentucky on charges that he illegally hunted in and took wildlife from that state. Rodney L. Poteat agreed to the ban in U.S. District Court in Kentucky last week, according to a Department of Justice press release. Reached at his Perryman Drive home Wednesday evening, Poteat declined to comment. – Salisbury Post
Libya Turns Islamic? … Islamists' Growing Sway Raises Questions for Libya ... Most Libyans practice a moderate Islam in which individual liberties are respected ... In the emerging post-Qaddafi Libya, the most influential politician may well be Ali Sallabi, who has no formal title but commands broad respect as an Islamic scholar and populist orator who was instrumental in leading the mass uprising. – NY Times
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