My Dear Extended Family,
Please keep focused on the fact that the gold market of the 70s was simply a dress rehearsal. What is taking place right now is the real thing.
The supposed "Curse of 13" is behind you in the break from $1900 to close to $1500.
The reaction was stopped because the need and use for QE to infinity is real and present in time. There is no other tool in the lender of last resort to the entire Western World’s toolbox other than QE which can be applied to create the degree of liquidity required to prevent a global implosion. No other tool can create infinite liquidity in a flash. There is no speculating on what might happen in the future. It has happened now.
Few are looking at dollar utilization falling in international contracting and settlement. That is a key element of 2012. The US dollar has enjoyed demand from settlement and contracting which it is now losing daily. Gold is gaining utilization as a competitive currency.
Enormous utilization was the blessing the dollar had when it was the reserve currency of choice. Utilization and settlement is falling fast as the dollar now is the reserve currency by default.
Very few have ever tried to quantify this serendipitous demand for the dollar. Allow me to assure you dollar utilization for these purposes is huge and extremely important to dollar valuation.
2012 is the year the dollar falls as a result of a significant drop in dollar contract and settlement utilization. Imagine the demand for gold as the dollar closes below the antiquated measure of .7200 on the redundant USDX. When this occurs you will be looking back at $2111 from higher levels.
Please keep in mind that this is not a dress rehearsal but rather the real thing. There is no practical means to handle the problems at hand. We are at the dead end of the road the can has been kicked down.
Volatility in gold is going to go wild so just keep your head down and hold your insurance close to your chest. The cheapest thing gold is the gold share with the most ounces versus its price.
Silver is a game, but one hell of a game. Another try by silver at $50 looks imminent.
Regards,
Jim
Dear CIGAs,
With silver breaking above the $37 level and gold trading $20 higher, today King World News interviewed legendary Jim Sinclair’s chartist Dan Norcini. Norcini told KWN what we are seeing today is a major breakout in the silver market and panic from the shorts: “Today we are seeing a strong move higher in silver and in gold, but particularly the silver market, which is up over 4%. Once silver took out $35.50 in a strong push, they ran a huge number of stops to the upside. There were a lot of shorts covering, Eric, there was literally a panic among the silver shorts.”
Dan Norcini continues:
“There were three previous attempts at this level that were held back by the shorts and when this upside resistance level was breached, the shorts had no choice but to run for cover. To compound their problem you had more fresh money pouring into silver, which simply added stress to the already panicked shorts.
We mentioned over the weekend in the KWN Weekly Metals Wrap that once silver cleared $35.50, there wasn’t a lot of overhead resistance in that market until roughly the $40 area….
Click here to read the full interview on www.KingWorldNews.com
ISDA Determinations Committee Accepts Question Related to a Potential Hellenic Republic Credit Event
Dear CIGAs,
The implications if this event comes to pass are huge!
ISDA Determinations Committee Accepts Question Related to a Potential Hellenic Republic Credit Event
LONDON, February 28, 2012 – The International Swaps
and Derivatives Association, Inc. (ISDA), as secretary to the
Determinations Committees (the DCs), today announced that a question
relating to a potential credit event with respect to the Hellenic
Republic has been submitted to, and subsequently accepted for
consideration by, the EMEA Determinations Committee.In accordance with the Determinations Committee Rules, a meeting will be held at 11AM GMT on Thursday, March 1 to determine whether a credit event has occurred.
Further information regarding the question is available at www.isda.org/credit.
About ISDA
Since 1985, ISDA has worked to make the global over-the-counter (OTC) derivatives markets safer and more efficient. Today, ISDA is one of the world’s largest global financial trade associations, with over 815 member institutions from 58 countries on six continents. These members include a broad range of OTC derivatives market participants: global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, clearinghouses and other service providers. Information about ISDA and its activities is available on the Association’s web site: www.isda.org.
ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc.
Link to the full news release…
Jim Sinclair’s Commentary
Compliments of CIGA Yahn:
Isn’t it ironic? The food stamp program, part of the Department of Agriculture, is pleased to be distributing the greatest amount of food stamps ever.
Meanwhile, the Park Service, also part of the Department of Agriculture, asks us to "please do not feed the animals" because the animals may grow dependent and not learn to take care of themselves.
Does Washington ever get their priorities straight?
Hi Jim,
Berkshire’s profit declined 30% in the fourth quarter on derivative bets, but Buffett isn’t “bothered by the short-term volatility.”
I thought he once called derivatives “financial weapons of mass destruction”!!
Best regards,
CIGA Black Swan
Berkshire Profit Declines 30% on Derivatives By Andrew Frye and Noah Buhayar – Feb 25, 2012
Berkshire Hathaway Inc. (BRK/A) said fourth- quarter profit fell 30 percent on smaller gains from Warren Buffett’s portfolio of derivatives.
Net income declined to $3.05 billion, or $1,846 a share, from $4.38 billion, or $2,656, a year earlier, Omaha, Nebraska- based Berkshire said today in its annual report.
Buffett, Berkshire’s chairman and chief executive officer, is investing in stocks and acquisitions as operating units generate cash. Derivatives bets, made in prior years on long- term gains in stocks and the solvency of borrowers, produced more than $2 billion of profit in the fourth quarter of 2010.
“These are contracts that don’t expire for another 10 or 15 years and might fluctuate a lot every quarter,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. Buffett is “not really bothered by the volatility short term,” said Kass, in an interview before results were released.
More…
Jim Sinclair’s Commentary
The liquidity required is QE to infinity squared.
Jim Sinclair’s Commentary
How about these rules? Thou shalt NOT speculate using money that does not belong to you.
In fact thou shalt only clear to earn your living. End of story.
Factbox: Rules for the post-MF Global futures industry 2:18 p.m. CST, February 28, 2012
(Reuters) – Four months after U.S. futures broker MF Global collapsed, roughly $1.6 billion in customer money is still missing, trading volumes are down, and the futures industry is looking for ways to restore confidence.
The U.S. Commodity Futures Trading Commission is due to hold a roundtable in Washington DC on Wednesday and Thursday to discuss how to better protect customer funds. Here are some of the more notable regulatory fixes currently under discussion:
* Make MF Global customers whole: Arguing that the industry will stay flat on its back unless all MF Global customers get every cent of their money back, two new members of the National Futures Association board proposed a novel solution: assess a fee on NFA members, and use the proceeds to secure a loan to cover the shortfall. The NFA is a quasi-regulatory agency funded by the industry and responsible for registering all futures brokers and overseeing some of them. The proposal, first floated in the weeks after MF Global’s October 31 bankruptcy, drew immediate criticism from insiders who said it would create "moral hazard." But the two board members stuck with it, and this month formally asked the NFA board to study the possibility. NFA’s president and chairman both declined to discuss the proposal with Reuters, and it’s unclear whether it will gain traction.
* Neutralize the "Corzine defense": Jon Corzine, the former Goldman Sachs banker who ran MF Global as its CEO until shortly after the bankruptcy, told lawmakers that he was unaware of any large transfers of customer money that could have resulted in the giant shortfall of funds. The NFA is considering a rule that would force the top executives of futures brokerages to sign off on or otherwise take "personal responsibility" for transfers of excess customer funds over a certain set amount, according to NFA’s Dan Driscoll.
More…
Jim Sinclair’s Commentary
Now here is a subprime loan if there ever was one.
US credit-card debt nearing toxic levels By GREGORY BRESIGER
Last Updated: 11:38 AM, February 26, 2012
Posted: 12:55 AM, February 26, 2012
More American households are falling back into the debt hole — this time without the safety net of home values to help bail them out.
Last year, total US consumer debt reached the highest point in a decade, according to a credit-card industry observer.
“Now more than ever, families need to work at saving and paying off any outstanding debts,” says Howard Dvorkin, a CPA and founder of ConsolidatedCredit.org, a credit counseling service.
He says that, after a few months of reducing credit-card debt levels, Americans are starting to return to their reliance on debt.
“People made some progress in reducing card debt earlier in the year, but in the last few months, as the stock market started to rise, they started to return to their old ways of charging things,” Dvorkin says.
In December, the total consumer debt, which is the combination of non-revolving and revolving debt, rose by some 9.3 percent to $2.498 trillion, according to the latest Federal Reserve Board numbers.
More…
Jim Sinclair’s Commentary
Signs of the falling dollar utilization for trade and settlement. This will impact the value of the US dollar in 2012.
Establishment of a Bilateral Local Currency Swap Agreement between the People’s Bank of China and the Central Bank of the Republic of Turkey 2012-02-21 17:29:44
On February 21, 2012, authorized by the State Council, the People’s Bank of China signed with the Central Bank of the Republic of Turkey a bilateral local currency swap agreement in Ankara, for the purpose of promoting bilateral financial cooperation, facilitating bilateral trade and investment, and maintaining regional financial stability. The amount of the agreement is 10 billion yuan or 3 billion Turkish lira. The effective period of the arrangement will be 3 years, and could be extended by agreement between the two parties.
More…
Greece/German Unemployment/Iran/Silver and Gold rise/California
Good evening Ladies and Gentlemen: Gold skyrocketed northbound to the tune of $13.40 as it finished the comex session at $1787.00. Silver also had a stellar day, finishing the day at $37.14 up $1.64. This is the first time in quite a while that gold and silver rose big time a day before first day notice. The bankers try and influence our longs not to take delivery so they generally raid.
2012 - The Year Of Living Dangerously
...European banks are three times larger than the European sovereigns, the ECB is not the Federal Reserve Bank of the United States, the leading economy in Europe, Germany, is 22% of the economy of America, that there are ever and always consequences for providing free money, that Europe is in a recession and it will be much deeper than thought by many in my view, that the demanded austerity measures are unquestionably worsening the recession and increasing unemployment, that nations become much more self-centered when their economies are contracting and that the more protracted all of this is; the more pronounced Newton’s reaction will be when the pendulum reverses course.Another Unintended Consequence: $80 Billion 'Gas Price' Tax On Consumption
Although
U.S. demand for crude oil has fallen by 1.5 million barrels per day
since 2007, anyone spending more than a few minutes on the road,
watching TV, or surfing the internet will be more than unpleasantly
aware of the rapid rise in gas prices recently. As we noted earlier,
following January's record high average gas price, February just
surpassed its own record and TrimTabs quantifies the impact of this
implicit tax on consumption, noting three key factors
that will remain supportive of high oil prices: Central Bank liquidity
provision (ZIRP), political tensions, and implicit USD devaluation.
Critically, around 70% of the benefits of the payroll tax extension has already been removed thanks to 60-80c rise in gas prices nationwide
whose growth has far outstripped wage and salary growth in recent
years. As Madeline Schnapp points out, while the latest round of oil
speculation is likely to end with a pop, the erosion of purchasing power from high energy prices is here to stay. Bottom Line: Rapidly Rising Fuel Prices Put Sluggish Economic Growth at Risk.Michigan, Arizona GOP Primary: Poll Coverage And Webcast
The seemingly endless GOP primary goes through the states of Michigan and Arizona tonight, where Romney and Santorum are the key competitors, while Gingrich and Paul focus elsewhere. BBC reports: "Both men have been campaigning intensively over the past few days. Pre-primary polls gave Mr Romney a marginal lead in Michigan, and a stronger advantage in Arizona. Analysts say a victory in his home state of Michigan is key for Mr Romney. He has long been seen as the front-runner and favourite for the nomination - and currently leads the race for delegates - but has struggled to win over a strong majority of conservative Republican voters. Most polls will close in Michigan at 20:00 EST (01:00 GMT), where 30 delegates are at stake. Delegates will be awarded to candidates in each congressional district, with two at-large delegates also awarded. In Arizona, where polls will close at 19:00 local time (02:00 GMT), 29 delegates will be awarded to the winner of the state's primary."Guest Post: Is Housing An Attractive Investment?
In a previous report, Headwinds for Housing, I examined structural reasons why the much-anticipated recovery in housing valuations and sales has failed to materialize. In Searching for the Bottom in Home Prices,
I addressed the Washington and Federal Reserve policies that have
attempted to boost the housing market. In this third series, let’s
explore this question: is housing now an attractive investment? At
least some people think so, as investors are accounting for around 25%
of recent home sales. Superficially, housing looks potentially
attractive as an investment. Mortgage rates are at historic lows,
prices have declined about one-third from the bubble top (and even more
in some markets), and alternative investments, such as Treasury bonds,
are paying such low returns that when inflation is factored in,
they're essentially negative. On the “not so fast” side of the ledger,
there is a bulge of distressed inventory still working its way through
the “hose” of the marketplace, as owners are withholding foreclosed and
underwater homes from the market in hopes of higher prices ahead. The
uncertainties of the MERS/robosigning Foreclosuregate mortgage issues
offer a very real impediment to the market discovering price and risk.
And massive Federal intervention to prop up demand with cheap mortgages
and low down payments has introduced another uncertainty: What happens to prices if this unprecedented intervention ever declines? Last, the obvious correlation between housing and the economy remains an open question: Is
the economy recovering robustly enough to boost demand for housing, or
is it still wallowing in a low-growth environment that isn’t
particularly positive for housing?Goldman Reports Receipt Of Another SEC Wells Notice On February 24
Looks like the SEC is not done with Goldman Sachs, already the subject of the largest civil fine levied by the SEC on a Wall Street firm, aside for that whole Robosettlement farce of course - which still is not available to the general public, and is back for more wristslaps. Per Reuters: "The U.S. Securities and Exchange Commission notified Goldman Sachs Group Inc that it may file a civil case against the bank related to a $1.3 billion offering of subprime mortgage securities, Goldman said in a regulatory filing on Tuesday. Goldman received the "Wells notice" on Feb. 24 related to the bond deal, which was underwritten by Goldman in 2006, according to the 10-K filing. A Wells notice indicates that SEC staff plans to recommend that the Commission take legal action, and gives a recipient a chance to mount a defense. The bank said it will be making a submission to SEC staff "and intends to engage in a dialogue" with them to address their concerns." Our only question is how will Goldman pin this one entirely on Fabrice Tourre who may or may not be still in the employ of the 200 West headquartered firm.Silver Explodes As DJIA Closes Above 13,000
After
22 crosses yesterday, and 12 more today, the Dow managed to close
above 13000. Transports were lower but less so on Oil's modest
retracement (though the Brent-WTI spread remained around $15). While stocks closed modestly higher, volatility and correlation markets remained considerably higher than would be expected and along with quite considerable relative weakness in HYG (the high yield bond ETF) into the close as well as a clear up-in-quality rotation was evident as investment grade credit outperformed notably
(not exactly a high-beta risk-on shift). Apple's meteoric rise helped
drag Tech to first place overall today and also YTD followed closely
(YTD) by financials both up around 14%. The last week or so of slow
bleed higher in stocks has notably not been led by a short-squeeze in
general - based on our index of most shorted names - but as is becoming
more and more clear, divergences (and canaries) are appearing all over
the place but we suspect can be traced back to Apple in many cases for
its over-weighting impact. Treasuries slid lower (higher in yield)
after Europe's close but remain better on the week and modestly flatter
across the curve. Aside from a hiccup around the macro data this
morning, EUR pushed higher all day against the USD shifting into the
green by the US close as JPY stabilized. The USD weakness helped Copper
and Gold leak higher but Silver was the massive winner, now up an impressive 4.3% since Friday and 30% YTD
as WTI lost $107 and is now down over 3% on the week. The IG rotation
coupled with vol decompression makes some (nervous) sense heading into
the LTRO results but it seems the new safe-haven trade is Apple (whose
option prices are now the most complacent since early 2009). US Weighing Usage Of Strategic Petroleum Reserve
Last week we joked that for every downtick in the Obama popularity rating (due to record February gas prices) we would see at least 1 million barrels released from the Strategic Petroleum Reserve. Sure enough, humor promptly becomes reality in United Banana States of Amerika:- CHU SAYS U.S. WEIGHS USING STRATEGIC PETROLEUM RESERVE
- CHU SAYS U.S. IS `VERY CONCERNED' ABOUT EVENTS IN IRAN
Average February Gas Price At All Time High; Follows Record January Gasoline Costs
Since everyone is buying everything that is not nailed down, preferably with both hands, on massive margin if possible, and since the global reflation trade is on full bore following trillions in cheap money dumped by central banks to prevent another re-recession within the broader Depressionary downtrend (offset for the time being only courtesy of $7 trillion in consolidated central bank funny money), it only makes sense that following record January gasoline prices, that February would see an all time high in gas as well (a detailed breakdown can be found at the AAA's website). But fear not: as the laws of supply and demand have also been usurped by the Fed, as has common sense and basic economics, both these data points indicate that Q1 GDP will also come at an all time high, because the entire economy is now purely a reflection of Apple, which as noted previously is almost bigger than the entire retail sector by market cap, and today hit an all time high as well. In fact, we are now seeing a record in new all time highs across the spectrum (if not volume - shhhh about volume), it means that even as IBM just laid off another 1,000 North American employees, that the economy has never been better either.
ISDA To Hold First Greek Default Determination Hearing On March 1
For a while there it seemed that together with the LTRO and the Bernanke testimony, tomorrow's event trifecta would be joined by ISDA, which it had previously been rumored would make a decision on whether a credit event (read CDS trigger) had occurred in the context of Greece, and specifically following the ECB's stripping of its own bonds under some arcane exchange offer that only the ECB was privy to (this is not a determination whether a credit event has taken place related to the PSI - that will take place in late March). According to a just released PR, this won't happen, and instead ISDA will hold the meeting at 11 GMT on Thursday, March 1, the day after the LTRO, and announce everything was voluntary and by the books, just to avoid overloading the algos with bullish news at the same time (recall that the LTRO announcement will take place at 11:15 CET). In this way, the upside love will be spread over two days, which should hopefully result in another 30 ES point, as the headline scanning aglos no longer care what the headlines actually say, as long as there are headlines. Remember: when dealing with a bipolar Atari 2600 - quantity trumps quality any time, especially when coming off the biggest short-term central bank liquidity infusion in markets in history.New York Fed Buys Building Housing Plunge Protection Team
Since nobody else has any interest in downtown NY real estate, Goldman's Bill Dudley, currently incidentally in charge of the New York Fed, has decided to step up. "The Federal Reserve Bank of New York (New York Fed) today announced that it has acquired the building at 33 Maiden Lane for $207.5 million from Merit US Real Estate Fund III, L.P. and established a new, wholly owned limited liability company called Maiden & Nassau LLC to serve as owner of the building. The acquisition provides a cost-effective, long-term alternative to the current practice of leasing space in this and other buildings and allows for greater control over maintenance, operation and security of the building." As a reminder, the 9th floor of 33 Liberty is where the ever elusive, but always present Plunge Protection Team, pardon the "markets group" at the Federal Reserve is housed (more here). And although in recent days it is no secret that the bulk of Fed open market stock order are routed via that one certain HFT powerhouse out of Chicago, it is always a good idea to keep all the market manipulating facilities under one roof. And so, the Fed now will have full domain over everything that transpires under its own roof. And since the building likely has an extended basement, it provides Dudley, and his muppet Ben Bernanke with a convenient location where to store the soon to be confiscated 107 tons of Greek gold.Pension Reform Unintended Consequence: The Pentagon Is Broke
New standards that were set in place in 2006 as part of the Pensions Protection Act that change rules on pension fund liability calculations looks set to push The Pentagon to budget DefCon 1 as they note the costs are "way more than a book-keeping question". As Defense News reports, the rule, which takes effect this week, requires the US government to reimburse its contractors to a far greater degree for their employee pension costs. The unbudgeted line-item is estimated at billions of dollars but perhaps what is most concerning is DoD Comptroller Hale's comment that the cost to The Pentagon will depend on how the companies' pension funds fare in the stock market. If investments do well, costs will be lower, but if investments do poorly, pension funds become further underfunded and this will mean more costs to the Pentagon. Yet more vested interest in the economy stock market's levitation but given the 2006 law change, we tend to agree with the Center for Strategic and International Studies who note: "How can this have snuck up on us and caught us unaware? I didn't hear any alarm bells!" How indeed? Maybe Dow 13k is even more important than we know?"It Ain't Over Till It's Over": Empirical Observations On Who The Next Occupant Of The White House May Be And Why
It is appropriate that as a post-mortem to tonight's GOP primary, which according to initial reports has Romney as winning both Michigan and Arizona, we have ConvergEx' Nick Colas providing an extensive summary of the factors in favor and against both the presidential incumbent, and the challenger, and in doing so handicap the possibility of election victory for either Obama or the Republican candidate, whoever he may end up being. As Colas says, 'it ain't over till it's over' - "As the battle for the 2012 Presidential election begins to pick up speed, we read a flood of reports that President Obama is a lock for reelection. And just as many that he is destined to be a one-termer. Those who believe that the winner of the 2012 election will be Republican claim that the keys to Obama’s downfall will be unemployment, skyrocketing oil prices, and increased federal spending. However, according to historical data and some political science theory, it looks like Obama has a pretty good chance of staying in the White House.... The GOP isn’t out of the race yet, but it’s up against some strong historical opposition." And while we would agree that all else equal Obama likely is a shoo-in, never before will there have been a full blown debt ceiling crisis in a repeat of August 2011 in the weeks and months leading into the election - that factor alone, in our humble opinion, could end up being the swing variable that pulls the otherwise ironclad victory away from Obama's clutch, and explains why the GOP caved so quickly on the payroll tax extension which will add $100 billion in debt, and force a debt ceiling breach ahead of November, as was first predicted on Zero Hedge. That, of course, and runaway oil: should crude continue its relentless surge, which it will if QE3 occurs, or an invasion or Iran becomes reality, Obama can kiss another 4 years goodbye.Another Unintended Consequence: $80 Billion 'Gas Price' Tax On Consumption
Although
U.S. demand for crude oil has fallen by 1.5 million barrels per day
since 2007, anyone spending more than a few minutes on the road,
watching TV, or surfing the internet will be more than unpleasantly
aware of the rapid rise in gas prices recently. As we noted earlier,
following January's record high average gas price, February just
surpassed its own record and TrimTabs quantifies the impact of this
implicit tax on consumption, noting three key factors
that will remain supportive of high oil prices: Central Bank liquidity
provision (ZIRP), political tensions, and implicit USD devaluation.
Critically, around 70% of the benefits of the payroll tax extension has already been removed thanks to 60-80c rise in gas prices nationwide
whose growth has far outstripped wage and salary growth in recent
years. As Madeline Schnapp points out, while the latest round of oil
speculation is likely to end with a pop, the erosion of purchasing power from high energy prices is here to stay. Bottom Line: Rapidly Rising Fuel Prices Put Sluggish Economic Growth at Risk.Please consider making a small donation, to help cover some of the labor and costs to run this blog.
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