Something Big Is Coming... and It's Going to Be BAD

Posted by: Phoenix Capital...

Post date: 11/18/2011 - 15:28

We have been getting MAJOR warning signs of a collapse for months now. No less than the Bank of England, the IMF, and legendary asset management firm Franklin Templeton have warned that we are...

Friday Night Irony: According To The Fed, Just Over One More Year Of ZIRP Will Lead To 38.36% Annual Inflation

Everywhere you look these days, it seems that ZIRP, or the Fed's Zero Interest Rate Policy, is the panacea to all the world's problems. In fact, ask any tenured economy Ph.D. what inflation is and you will get a stare down, be told you are a moron, that banks need to print more, more, more and that we are really roiling in deflation, with some latent mumblings about buying their economics textbook for the inflationary price of $124.95. Everywhere, that is except the Fed itself. Because in an extremely ironic twist, it is none other than the San Francisco Fed, which operates the "Be Fed chairman for a day" simulation, where you try to keep both unemployment and inflation within the "price stabeeleetee" barriers, that reveals the reality of ZIRP. The laughter really begins when one recreates precisely what the Fed is doing: namely the policy of Zero Interest Rates, now well in its third year, that things take a turn for the surreal. We challenge any reader to play the Fed simulation game, and to do what Bernanke has done: namely lock the Fed Funds rate at the legal minimum: between 0.00% and 0.25%. In our personal experience, we were dismissed as Fed Chairman after annual inflation literally went off the charts and hit 38.36% following 4 years of ZIRP. And according to the Fed, inflation would now, 2.5 years into ZIRP, realistically be running at about 17%. Which incidentally is exactly where it is, at least for those who have not mutated sufficiently to be able to metabolize iPads and fly to and from work using their own pair of wings. Of course, every hyperinflation has a silver lining: US unemployment will be just 1.5%. Granted everyone will be making pitchforks and rope, but they would be employed.

Guest Post: The Reasons For China's Imminent Bust

The global dominant narrative about China is wrong, claims Gordon Chang. Don't expect it to be the 'pocketbook of last resort' that will rescue world markets from their current malaise. And don't expect its remarkable economic growth to continue. In fact, expect a "hard landing" for China - and soon. Gordon sees the first real signs of slowdown in China's economic growth looking at the year-over-year numbers for the past several months as the inevitable harbingers of a coming collapse in China due to excessive stimulus policies the government undertook starting in 2009. The bubbles and malinvestment created by this stimulus have not been addressed, and increasing weakness and transitions inside the political system are making it less likely they will be before market forces intervene.

These Are Not The ETFs You Are Looking For...But This IS A Margin Call

Presenting, with little comment but complete and utter bewilderment, the latest margin hike and ETF changes. Direxion ETFs just changed the 'fund' mandates from 2x to 3x on a number of their more popular products - which of course, given the extra vol, will mean significant margin hikes from any broker you trade with...curiouser and curiouser.

Disquietingly Calm End To Calamitous Week

The middle of the week appeared to be the storm before the quiet of today before the potential storm of next week with aggressive action by the ECB this morning seeming to calm fears (and raise hopes of more) as risk assets were generally calmer today. Amid dismally low volumes, ES ended the day very marginally lower (led by Tech and Energy), commodities were mixed, IG credit outperformed TSYs and HY credit, and FX vacillated back to unchanged in general capping another week of strengthening USD vs the Majors (except JPY). US equities shrugged off a broad risk-off shift early in the day (driven by Oil and TSYs mainly) as OPEX seemed the focus of controlling intraday vol with CONTEXT and ES closing the week in almost perfect agreement (leaving cash S&P -3.3% YTD vs Gold +21.3% YTD).

Squid Vs Merkel

As the hopes and prayers of every European central banker (and long-only manager) rest on age old battles; 'good vs evil', 'woman vs man', 'Germans vs the-rest-of-us', we found today's helpful note from The House Of Squid very amusing. Goldman, in their puppet-masterly way, suggest (in an ever so logical manner) that perhaps Mrs. Merkel should allow for the print-fest and provide their right-hand man Draghi with the ammo he needs to have that discussion.

"There are no easy choices and it would have been, no doubt, better if the ECB had never got in the position it is in now. But the current situation demands a careful weighing of the risk involved with any decision taken. The inflationary risk thereby seems to be getting an unduly high weight in the consideration of German policy makers."

Senator Coburn Presents "Subsidies Of The Rich And Famous"

As the super-committee seems more and more likely to hit a brick-wall, we present with no comment, Senator Tom Coburn of Oklahoma's 'helpful' prose.

Americans are generous and do not want to see their fellow citizens go without basic necessities. Likewise, we expect everyone to contribute and to demonstrate personal responsibility. Government policies intended to mainstream wealth redistribution are undermining these principles. The tragic irony is the wealth in these cases is trickling up rather than down the economic ladder. The cost of this largess will thus be shared by those struggling today and the next generation who will inherit $15 trillion of debt that threatens the future of the American Dream. These consequences are the results of shortsighted spending and tax policies like those outlined in this report that should be eliminated.

Guest Post: MF Global: Was It A Hit?

Imagine you are Ben Bernanke, or on the Board of Governors of the Federal Reserve. The time frame is July and August of 2011 and the price of gold is on a tear. Commodities inflation has been persistent and is breaking out everywhere. Your prediction that inflation “is contained” and is a “temporary phenomena” are beginning to look absurd. What do you do? Simple. Hint that QE3, the primary drive of inflation, is coming and then fail to deliver at the September FOMC meeting. That takes care of the price of gold and the gold stocks. Ah, but those pesky commodities speculators keep making money and trading against what you want the markets to do. So what is to be done there? Hey Jon Corzine, how about you tank the largest broker for the small commodities punters in the world, and we let them twist in the wind? That will serve them right. Teach them to bet against the government approved scenario.

Clearwire Down 28% As Firm Mulls 'Skipping' Interest Payment

CLWR faces $474mm in interest expense for the next 4 years so 'skipping' this interest payment shouldn't be a problem, right? $7.93bn in principal and interest and a $1.5bn market cap (well before today that is) - all is well in the HY wireless broadband market. Paging ISDA...

Ireland: "Germany Is Our New Master"

Not only is Germany at the epicentre of the Italian-Spanish-French save-us 'discussion', they have now managed to add Ireland to their 'Uber Alles'. Reuters is reporting the leak of confidential Irish budget information by German lawmakers and Irish parliamentarians are seething - viewing the leak as 'incredible' and 'unprecedented'. Given the new laws, Germany now has the right to be fully informed about bailout countries' progress before new tranches of funds are paid out. As the Irish Daily Mirror put it perfectly "Germany is ourt new master." It is evidently clear that sovereignty is indeed blurring at the edges - cue Nigel Farage.

David Rosenberg: "The New Normal Is Seeing A Year's Worth Of Volatility Bunched Into 6 ½ Hours!"

Dramamine market got you down? You are not alone. David Rosenberg explains: "Yesterday's trade was rather telling. The Nasdaq dropped 2% and not only did volume rise but the breadth was awful with losers beating winners by a 5-to-2 margin (9-to-2 on the NYSE). The fact that the Nasdaq sliced below support of 2,600 and dipped below its 50-day moving average for the first time in six weeks is a bit ominous to say the least; while the S&P 500 undercut its lows of the past four weeks (even though it has managed to hold above the 50-day m.a. of 1,205). But between the slide in equities, commodities, oil and gold, coupled with the rally in Treasuries, yesterday had a certain eerie 2008 feel to it. And did you see the huge 70 point rally in the Dow just in the last couple of minutes? The volatility is incredible. Look at the charts below — they look the same, but one is the Dow's closing level each day this year and the other is the minute to minute ticker on any random session (we chose October 7th out of the hat). The new normal is seeing a year's worth of volatility bunched into 6 ½ hours!"

In The News Today

November 18, 2011, at 7:56 pm
by Jim Sinclair in the category In The News |  Print This Post |  Email This Post

Jim Sinclair’s Commentary


Two so far this weekend.

Bank Closing Information
November 18, 2011
These links contain useful information for the customers and vendors of these closed banks.
Central Progressive Bank, Lacombe, LA
Polk County Bank, Johnston, IA
http://www.fdic.gov/





Deficit talks shift toward blame game – CNN.com
By the CNN Wire Staff
updated 2:03 PM EST, Thu November 17, 2011
Washington (CNN) — Six days before the deadline for a deal, House leaders on Thursday blamed each other’s party for the inability of a special congressional committee to reach agreement on tax and entitlement reforms as part of a possible deficit reduction agreement.
The comments at successive news conferences by House Speaker John Boehner, R-Ohio, and Democratic leader Rep. Nancy Pelosi of California escalated the rhetoric over possible failure by the committee created as part of the debt ceiling agreement earlier this year.
Boehner expressed frustration with Democrats, saying they have refused to sign off on any deal in various stages of deficit reduction talks going back to December.
“They’re well aware of what we’re willing to do, but you can lead a horse to water but you can’t make him drink,” Boehner said, adding: “The problem we’ve had all year is getting ‘yes.’ “
He called for decisive action now, saying “it’s time to rip the band-aid off and do what needs to be done.”
More…







Jim Sinclair’s Commentary

Another reason why gold will go into the $2000s.

U.S. national debt tops record $15 trln
The U.S. national debt has set a new landmark by passing the $15 trillion mark, the U.S. Treasury Department said late on Wednesday.
Treasury figures showed that the U.S. public debt reached $15.03 trillion as of November 15, 2011 compared with $14.9 trillion registered as of September this year.
The U.S. public debt has grown steadily since August 2 when Congress broke a three-month debt talks stalemate and agreed to raise the country’s official debt ceiling from $14.3 trillion to $15.194 trillion.
The critical $15 trillion mark was hit as a joint panel of Republican and Democratic congressmen charged with the task of agreeing on at least $1.2 trillion deficit reduction appeared deadlocked before their deadline next Wednesday.
More…





Jim Sinclair’s Commentary

The price of gold will rise into the $2000s as well.

China 2011 Gold Demand Likely Rise 29% To 750 Tons
Thu Nov 17 04:10:37 2011 EST
BEIJING, Nov 17, 2011 (Dow Jones Commodities News via Comtex) —
China’s gold demand will likely rise to 800 metric tons next year, World Gold Council Far East managing director Albert Chang said Thursday.
China is the largest gold consumer in the world after India, with demand at 579.5 tons last year, according to WGC data.
(END) Dow Jones Newswires
11-17-11 0217ET
Copyright (c) 2011 Dow Jones & Company, Inc.





Jim Sinclair’s Commentary

Gold is getting ready for the $2000s.

Alf Fields is absolutely correct concerning the next phase in the gold market. Mobius is totally correct that nothing whatsoever is fixed.

The next financial crisis will be hellish, and it’s on its way
By Addison Wiggin | Forbes – 22 hrs ago
“There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.”
We’re raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out.  We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.
Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world’s major banks are tangled up.
Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius’ guess of 10 times the world’s annual GDP. “Are the derivatives regulated?” asks Mobius. “No. Are you still getting growth in derivatives? Yes.”
In other words, something along the lines of securitized mortgages is lurking out there, ready to trigger another crisis as in 2007-08.
What could it be? We’ll offer up a good guess, one the market is discounting.
More…

For those who don't expect something for nothing.

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