My Dear Friends,
For years we took major criticism for saying that QE to infinity was guaranteed. Recently we took major criticism for even saying QE itself was possible. Now we take criticism for saying QE to infinity is going to have a major impact economically in the entire Western financial world.
All the talking heads and writers are on a tear saying QE will do nothing, emphasizing deflationary scenarios both from within the community to financial TV. Those that take that position are raving morons.
The markets today are full of normal manipulation based on the MSM disinformation that QE to infinity is a hollow tool. It is dynamite and will have an impact of historical dimensions, but not necessarily the ones the morons expect.
Keep your gold investments. Gold is going to $3500 and beyond, about which there is no question. Stand tall. Don’t trade, and shut off the gold naysayers sensationalists we have battled from $248 to today.
This is nothing different from the disinformation of early 1979. The Philadelphia Fed president is an example of MSM disinformation.
Regards,
Jim
Jim Sinclair’s Commentary
Here is a review to offset the drivel pouring out of MSM declaring "QE to Infinity" as powerless and ineffectual.
Expectations of deflationary powers overpowering QE to infinity is rank madness pandered to by world class morons in, and outside our community
My Dear Extended Family,
The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from.
Let’s review what has transpired and begin to look at what will happen:
- OTC derivative manufacturers and distributors sold fraudulent paper to almost every entity as clients of the Western world financial system. Inherently the OTC derivatives manufacturers and distributors had part of the transaction on their books. No problem as long as the entire scam was a "Daisy Chain," a connected set of transactions that has the appearance of risk but when all netted out equals almost zero.
- Until Lehman was flushed, and flushed it was, most all OTC derivatives could have been netted to zero in a derivative resurrection bank. Losers would have rejoiced and winners would have declared war. However when Lehman was forced into bankruptcy it broke the "Daisy Chain" (a chain of near risk-less transactions when netted) of the OTC derivatives scam. At this point winners had won huge and loser had lost huge and there was no longer a means of repair to the quadrillion dollar scam. The problem has no practical solution other than transferring all losing paper to the balance sheet of the Federal Reserve where then it was anticipated no non-government "mark to market" audit would ever occur. It was the perfect hole to stick the junk into.
- The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.
- The Bank of international Settlements, seeing this outrageous number, changed their computer method of valuation to maturity assuming no failures and reduced the size of OTC derivatives of all kinds to a more acceptable but still huge number of $700 trillion notional value.
- In the first and second round of QE the Federal reserve purchased OTC derivatives including the variety called securitized mortgage debt to remove them from the balance sheets of the Western world financial system, thereby improving the Western world’s financial institutions balance sheet and preventing an international industry wide bankruptcy. That means the Federal Reserve has impaired its balance sheet in order to repair some of the balance sheet integrity of the Western world financial system. The amount they have purchased is significant, but not compared to total outstanding above more than one quadrillion dollars.
- The reason for QE to infinity, QE3, is the failure of business activity in the Western world to pick up with early huge monetary stimulation so as to repair the balance sheet of the Western financial world financial system. The unseen crisis is the hidden weakness of the Western world financial system thanks to FASB (The gatekeepers of world accounting) which allows financial institutions internationally to hide their losses by valuing their paper at whatever the bank wants it to be with no reference to seek a market value, primarily because there is none to seek.
- The crisis not seen by Fed observers is the true balance sheet condition of the loses on the trillions of dollar of worth-less paper fraudulent paper because numbers are given but no independent mark to market audit has been or is likely performed.
- As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.
- The end game problem is an extended recessionary business conditions going into 2015 to 2017 wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.
Now you know what brings about the end game.
In the future I will do small simple articles dealing with the impact on markets of a to be Bankrupt Central Bank, the US Federal Reserve. The end game could come sooner, but only if there was an independent "mark to market" audit of the Federal Reserve inventory of worthless paper which remains unlikely no matter who wins the election in November.
Those of you invested in gold and silver vehicles of all kinds (with the exception of ETFs and futures) rest well this weekend. $3500 will easily be a place gold trades. The Canadian dollar and blasphemy to the euro snobs, the Swiss franc, remain go to vehicles for cash positions. Yes cash because you to not have to pay to own them as you do with a sovereign paper with negative interest.
Your watchman,
Jim
My Dear Extended Family,
Twice today the manipulators hit gold at $1775 again. That adds up to 9 body blocks at that price.
The manipulation is so transparent it is sad. The manipulators own Washington and do not fear any regulator or regulation. They are free to rape and pillage.
This is 1979 all over again. If you think the big boys are going short or flat to $3500 and above you are crazy. Stop quoting gold and gold investments 26 times a day. Gold is going to and through $3500 without any doubt.
In other news, our European brothers must believe getting their name in the paper or on the wire services is some sort of heaven. Now they are all talking Spain to death. US experts (God protect me from experts) show their xenophobia common to the colonies by their well aired opinion that Europe is over and the euro has no chance of a surviving. What a surprise they are in for when the euro trades at $1.40.
It seems that Greece is an old hat. The bottom line is simple, whatever monies are required for euro members will be provided, and once the spigot is turned on, it will not be turned off.
All opinions to the contrary are simply wrong. Germany is going nowhere else. I imagine if you are European leadership and you die you keep debating your death as you are lowered into the hole and then beyond.
Regards,
Jim
Jim Sinclair’s Commentary
QE to infinity is going to have a history-making impact on Western world economics. It is called currency induced cost push inflation.
The total rank stupidity that goes out on air waves all day by the fools that still cannot understand what is taking place is almost at a spiritual level.
The end game comes in the form of currency induced cost push inflation and that is guaranteed by QE to infinity.
All the deflationary talk today is intellectual garbage.
U.S. stock indexes deflated by Fed talk
Wall Street overbought; has September correction arrived? By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stock indexes fell Tuesday, surrendering gains after a nonvoting Federal Reserve member, Charles Plosser, offered a negative take on the central bank’s latest round of monetary easing.
“We still need effective fiscal policy,” said Phil Orlando, equity-market strategist at Federated Investors, referencing the limitations of central-bank action on the U.S. economy.
After rising 61 points, the Dow Jones Industrial Average DJIA -0.75% declined 101.37 points, or 0.8%, at 13,457.55, with 25 of its 30 components losing ground, led by Caterpillar Inc. CAT -4.25% , off 4.3% after the equipment maker reduced its earnings outlook.
Bruce Bittles, chief investment strategist at R.W. Baird & Co., played down the decline, saying the market has had a big run and looking to “relieve the overbought condition.”
“Folks were looking for the market to correct in September, and that didn’t happen, and uncertainty about the [U.S.] election plays a role, too,” Bittles added.
Extending loses into a fourth session, the S&P 500 index SPX -1.05% fell 15.3 points, or 1.1%, to 1,441.59, ending at a two-week low. The losses extended to all 10 of the S&P’s major sectors, with technology and financials hardest hit.
More…
Jim Sinclair’s Commentary
One of the largest consumers of OTC derivatives and securitized debt has been the pension funds. They always have been the waste paper container for Wall Street.
They don’t have problems. They have a FLAMING CATASTROPHY.
States see pension crisis looming despite cuts Published September 23, 2012 The Wall Street Journal
Almost every state in the U.S. has made cuts to its public-employee pensions, seeking to dig out from the economic downturn, but so far the measures have fallen well short of bridging a nearly $1 trillion funding gap.
Since 2009, 45 states have rolled back pension benefits for teachers, police, firefighters and other public workers, including cuts by Michigan and California this month. Next week, Republican Ohio Gov. John Kasich is expected to sign legislation requiring, for example, that certain teachers work longer and pay more toward their pensions.
The state measures show how economic forces are reshaping traditional rivalries, convincing lawmakers and labor leaders that past public pension plans are unsustainable. In Ohio and elsewhere, politically potent unions have locked arms with state officials over the pension cuts.
But the new laws have trimmed just $100 billion out of the $900 billion gap between what the states and their workers put into their retirement plans and what the states owe in retirement benefits, according to estimates prepared for The Wall Street Journal by researchers at Boston College.
Unfunded liabilities in many states grew to troubling levels after investment losses in the 2008 financial crisis depleted pension assets. While most states have approved some form of pension cuts, many have opted to apply those changes only to workers who have yet to be hired.
That means most of the savings won’t be realized for decades, when the most expensive retirement benefits come off the books. Changes made to the retirement plans of newly hired workers are expected to reduce pension costs by 25% over the next 35 years, according to Boston College estimates.
For years, part of the attraction of public service jobs has been guaranteed pensions and other benefits. That remains largely intact for current workers. Only a handful of states have replaced some guaranteed pension benefits with 401(k)-style retirement accounts that are commonplace in U.S. corporations.
Experts say the differences between public and private retirement benefits will eventually narrow as cuts to new workers’ plans take hold.
Many states have avoided reducing benefits for current workers or retirees, saying the plans have legal protections. Courts in Minnesota and Colorado have ruled that cost-of-living raises can be reduced.
"There is a lot of gray area,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. More states could try to cut future benefits for current workers because the laws aren’t clear, she said.
More…
Jim Sinclair’s Commentary
Where are all the great men today? Where is an Eisenhower or Truman? Nowhere, and therefore nothing changes with gold going to and through $3500.
When he left his presidency, he left in a taxi cab for the railroad station. Where have our heroes gone?
You may never see this again.
Thought you’d enjoy this! It’s one you want your Children and Grandchildren to read.
Harry & Bess
Harry Truman was a different kind of President. He probably made as many, or more important decisions regarding our nation’s history as any of the other 42 Presidents preceding him. However, a measure of his greatness may rest on what he did after he left the White House.
The only asset he had when he died was the house he lived in, which was in Independence, Missouri. His wife had inherited the house from her mother and father and other than their years in the White House, they lived their entire lives there.
When he retired from office in 1952 his income was a US Army pension reported to have been $13,507.72 a year. Congress, noting that he was paying for his stamps and personally licking them, granted him an ‘allowance’ and, later, a retroactive pension of $25,000 per year.
After President Eisenhower was inaugurated, Harry and Bess drove home to Missouri by themselves. There was no Secret Service following them.
When offered corporate positions at large salaries, he declined, stating, "You don’t want me. You want the office of the President, and that doesn’t belong to me. It belongs to the American people and it’s not for sale."
Even later, on May 6, 1971, when Congress was preparing to award him the Medal of Honor on his 87th birthday, he refused to accept it, writing, "I don’t consider that I have done anything which should be the reason for any award, Congressional or otherwise."
As president he paid for all of his own travel expenses and food.
Modern politicians have found a new level of success in cashing in on the Presidency, resulting in untold wealth. Today, many in Congress also have found a way to become quite wealthy while enjoying the fruits of their offices. Political offices are now for sale (cf. Illinois ).
Good old Harry Truman was correct when he observed, "My choices in life were either to be a piano player in a whore house or a politician. And to tell the truth, there’s hardly any difference!
Jim Sinclair’s Commentary
Can you beat the US Federal Reserve in the market place?
Federal reserve buying of treasuries is non-economic buying. Non-economic buying puts the onus on the willingness of the Fed to go QE to infinity as now discussed amongst the establishment analysts. Therefore economic reasoning translated to an investment or speculative position can easily give a wrong signal for a market. A definition of non-economic buying is manipulation.
The question then is does the short on US treasuries have more courage and more funds than the Fed? The answer is at this time (defined as 2012 and 2013), probably not.
The following two forces will remain offsetting influences 2012 and 2013.
As Clinton sounds interest rate alarm, does Congress think it’s for real?
By Tom Curry, NBC News national affairs writer
Updated at 4:50pm ET With a lame-duck session of Congress set for the weeks after the Nov. 6 election, members of Congress face the task of taking steps to reduce the deficit before inevitable interest rate hikes push the nation into a debt crisis with profound, long-lasting consequences.
Former President Bill Clinton gave a reminder of the task ahead as he renewed his warning Sunday about a surge in interest rates and a potential debt crisis.
“If interest rates were the same today as they were when I was president, the payment on the debt, that is, what the taxpayers have to pay every year, the financial debt (payments) would go from $250 billion to $650 billion a year,” Clinton warned on CBS’s Face the Nation Sunday.
Congress and President Barack Obama, he said, “can’t let that happen” – so they must strike a deal on reducing deficits and debt.
While acknowledging that the U.S. economy right now is anemic, Clinton said, “When the economy starts to grow and people start borrowing money again, and banks start loaning money to small businesses and not just big ones, interest rates will go up, because there will be more competition for money.”
Clinton has been trying for months to warn of what he sees as a danger. Last May he said as soon as the economy begins to grow “interest rates will go through the roof, the cost of financing the deficit will be staggering, and the private sector will be screaming for affordable credit.”
More…
How A 12th Century Mathematician Just Doomed The Bernank's Wealth Effect
Leonardo Fibonacci (1170-1250) may have just stuck his 'golden-ratio-based' fork in the equity market's rally. As the following chart shows, the diminishing marginal utility of Quantitative Easing's wealth effect has followed a rather remarkable pattern... and today marks the next turning point.
The Declining Economic Freedom Of The United States
The United States, long considered the standard bearer for economic freedom among large industrial nations, has experienced a remarkable plunge in economic freedom during the past decade. From 1980 to 2000, the US was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore. The ranking of the US has fallen precipitously; from second in 2000 to eighth in 2005 and 19th in 2010. By 2009, the United States had fallen behind Switzerland, Canada, Australia, Chile, and Mauritius, countries that chose not to follow the path of massive growth in government financed by borrowing that is now the most prominent characteristic of US fiscal policy. By 2010, the United States had also fallen behind Finland and Denmark, two European welfare states. Moreover, it now trails Bahrain, the United Arab Emirates, Estonia, Taiwan, and Qatar. The Fraser Institute's massive volume on the Economic Freedom Of The World - based on the following five factors: Size of Government, Legal System & Property Rights, Sound Money, Freedom to Trade Internationally, and Regulation - covers 42 variables with the goal of quantifying the key ingredients of economic freedom.
There's A Customer (Sucker) Born Every Minute
Eric De Groot at Eric De Groot - 3 hours ago
P.T. Barnum often suggested that "there's a customer born every minute".
Over time, this was transposed into "there's a sucker born every minute".
Either way, people will believe almost anything if the 'show' is big
enough. Stop wasting Jim's time by suggesting that QE will do nothing.
While QE won't spark a new super cycle of capital investment and/or
meaningful job creation, it will...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]Several Exponential Charts
We'll let the charts do the talking this time.
For China Size, Not Quality, Matters As First Aircraft Carrier Launched
In what is likely the biggest sabre being rattled this week in the war-of-words that is occurring in the Pacific, China announced today
the launch of its first aircraft carrier. China bought the 300-meter
Soviet-built vessel in 1998 from Ukraine and had it refitted to become
an important step in "raising the overall fighting capacity" of its
naval forces. Rear Admiral Yang Yi noted that "it is natural that China
should have its own aircraft carrier," arguing that all major world
powers already own similar vessels. Of course, the coincidental timing
is no surprise as Reuters notes
"China will never tolerate any bilateral actions by Japan that harm
Chinese territorial sovereignty," Vice Foreign Minister Zhang Zhijun
told his Japanese counterpart on Tuesday as the two met in a bid to ease
tensions. "Japan must banish illusions, undertake searching
reflection and use concrete actions to amend its errors, returning to
the consensus and understandings reached between our two countries'
leaders."Quantifying The 6 Downside And 2 Upside Risks To Global Markets
While
much attention has been paid to what Draghi has 'talked' about doing,
what Bernanke 'is' doing, what EU Leaders 'are not' doing, and what US
politicians 'will not' do - the world's risk markets remain on edge.
Admittedly, for now, that edge seems biased to the 'we-believe' side of
the fence. However, as Deutsche Bank notes, in their wonderfully succinct chart comparing the impact and probability of potential upside and downside risks to global markets,
it is economic (or real!) data that should worry investors the most -
though we still fear the Kubler-Ross 'denial' stage that in which
Spain/Italy/Portugal/Greece remain mired.Paul Ryan: "Do You Want Barack Obama To Be Reelected? Then Don't Vote For Ron Paul"
But what if one wants Ron Paul to be elected? Can one vote for Ron Paul then?Qatar - Rich and Dangerous
The
first concern of the Emir of Qatar is the prosperity and security of
the tiny kingdom. To achieve that, he knows no limits. Stuck between
Iran and Saudi Arabia is Qatar with the third largest natural gas
deposit in the world. The gas gives the nearly quarter of a million
Qatari citizens the highest per capita income on the planet and
provides 70 percent of government revenue. How does an extremely
wealthy midget with two potentially dangerous neighbors keep them from
making an unwelcomed visit? Naturally, you have someone bigger and
tougher to protect you. Of course, nothing is free. The price has been
to allow the United States to have two military bases in a strategic
location. According to Wikileak diplomatic cables, the Qataris are
even paying sixty percent of the costs. Having tanks and bunker busting
bombs nearby will discourage military aggression, but it does nothing
to curb the social tumult that has been bubbling for decades in the
Middle Eastern societies. Eighty-four years ago, the Moslem
Brotherhood arose in Egypt because of the presence of foreign
domination by Great Britain and the discontent of millions of the
teaming masses yearning to be free. Eighty-four years later, the
teaming masses are still yearning. Five SAC Traders Implicated In Insider Trading Case
Two years ago nobody would dare touch Steve "Blue Eyes" Cohen's firm. Then we dared to ask some questions. Then the entire expert "information arbitrage" network pyramid got exposed (with a one year delay after ZH) and hedge funds returns aka "alpha" plunged. And now this. From Bloomberg:- FIVE SAC CAPITAL EMPLOYEES HAVE BEEN IMPLICATED IN INSIDER CASE
- SAC MANAGER SAID TO BE UNCHARGED FIGURE IN HEDGE FUND SCHEME
- SAC FUND MANAGER MICHAEL STEINBERG SAID TO BE TIED TO PROBE
- SAC CAPITAL'S STEINBERG SAID TO BE UNINDICTED CO-CONSPIRATOR
BTFD... Keep Stacking...
Gold Holds Post-QE Gains As S&P Drops Most In 2 Months
It seems European credit markets were on to something this morning. As European tensions spilled over so the US equity markets just could not hold on to the post QEternity gains and turned down rapidly shortly after Europe closed. The S&P 500 has retraced over 75% of its post-FOMC spike gains, Treasuries are well below the pre-FOMC yield levels and the USD has retraced all of its losses. The 1% drop in the S&P 500 is the largest in over two months. equities closed at their lows - something we have not seen in a while - with all the usual high-beta suspects (e.g. AAPL -2.5%) all getting crushed. VIX surged to 15.5% (up 1.25 vols) as volume surged across most equity indices. Only Healthcare and Staples remain green post-FOMC.
Spanish Protest Turns Violent
Sadly
the social unrest that we had predicted, when over 50% of the youth
are unemployed and the politicians are navel-watching, has erupted, as
angry protesters charge the local police, who in turn are arresting
rioters and using volleys of rubbers bullets to keep the crowd at bay.China, Japan And The Senkaku Islands: The Roots Of Conflict Go Back To 1274
The Japanese have a peculiarly virulent strain of right-wing militarism that continues to influence domestic politics. In this worldview, reverence for the Imperial household is mixed with an aggrieved sense that Japan's expansion in World War II was justified (though few would say this publicly). As a result, any official Japanese attempt to apologize for the horrendous destruction, murder, enslavement and torture inflicted by Japanese forces in World War II sparks outrage in one sector of the domestic political order. Deep within this mindset is the view that the only thing wrong with World War II was that Japan lost. Even more galling to those who suffered so mightily, Japan has refused to publicly acknowledge (though they claim they have) and compensate the "comfort women," young women who were forced into prostitution to serve Japan's armed forces in the Asian/Pacific theater of World War II. This official dance between apology and refusal satisfies no one, and the general sense outside Japan is that the Japanese acceptance of guilt is grudging public relations rather than sincere. Combine an obsession with "face" and a plethora of deep-seated resentments, and you get the tinder for territorial disputes. What appears to be lost on the Chinese is the consequence of their saber-rattling and bluster: they appear to have obliterated 20 years of careful diplomacy aimed at convincing their neighbors of China's peaceful intentions.
Quote Du Jour From Jean-Claude
Remember Jean-Claude Juncker? The guy who promised he would quit his unelected post in Europe's neo-vassal imperial council, and tend to his garden or something due to the endless acrimony between France and Germany, only to clarify later he lied? Well, here he is again- JUNCKER SAYS THOSE BETTING ON EURO BREAKUP 'SERIOUSLY MISTAKEN'
CDS Market Begins Trading Imaginary Credit With LIBOR-Style Fixings
We
have not been aggressive anti-CDS fanatics in the past - since the
ignorance of mainstream media types satisfies that need - as the reality
in the credit market is less extreme than many would love it to be.
However, the latest move by Markit and its self-aggrandizing
dealer owner/clients, to bring names into the high-yield credit index
that do not even have CDS trading on them, is simply remarkable.
While they will defend the move on the basis that it will force
dealers to provide single-name CDS liquidity in three of the high-yield
credit markets most-indebted companies (CIT, Charter Comms, and
Calpine), the fact is that they are using the
liquidity/fungibility of the index to enable risk to be unwound on what
is likely bloated balance sheets containing too much of this crap. By imagining (or fixing LIBOR-style)
where the CDS would trade, based on where the firms' bonds trade, we
worry that the hitherto somewhat liquid source of 'fast' macro-hedging
or positioning has become even more manipulable than before - and in the
event of a default (or stress/illiquidity event), we can only imagine
the law-suits. As the FT notes - all this does is provide more
'arbitrage' opportunities as opposed to real hedging; simply amazing that as with equities - it is now the synthetic indices that run the entire market.Total Donations over the last 3 1/2 years. approx $165.00 (Thank You). Donations will help defray the operational costs. Paypal, a leading provider of secure online money transfers, will handle the donations. Thank you for your contribution.
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