"No-Brainer Trade Of The Year" Plummets As Bondholders Duck Ahead Of Possible Greek Bankruptcy Tomorrow
Was it only two weeks ago
that the smartest investors in the room were calling 'buying Greek
bonds' as the no-brainer trade-of-the-year? Sad to say that for such
power-houses of intellectual prowess as Greylock (who if you remember
could not get enough media coverage during the PSI discussions) have
once again grabbed that falling knife with 3 hands and lost a finger,
thumb and perhaps even their toes. Longer-dated Greek bonds have dropped
to an all-time low price of 13.75 cents on the Euro (a magnificent 27%
drop in 2 weeks since the NYT ran the buy it now or you're a big loser article). These bonds are down over 43% since the PSI deal and have plunged
in price in the last few days as the reality of a potential bankruptcy
of absolutely cash-strapped Greece comes to bear tomorrow with the EUR430mm bond due.Must See: Greece Explained In One Picture
We were going to do a caption contest out
of this image, but unfortunately this is not funny. It is tragic. Many
people will lose all their money, savings, livelihood, and more
because of this...James Montier On "Complexity To Impress", Monkeys With Guns, And Why VaR Is Doomed
"One of my favourite comedians, Eddie Izzard, has a rebuttal that I find most compelling. He points out that “Guns don’t kill people; people kill people, but so do monkeys if you give them guns.” This is akin to my view of financial models. Give a monkey a value at risk (VaR) model or the capital asset pricing model (CAPM) and you’ve got a potential financial disaster on your hands." - James Montier, May 6
Iberia Implodes To 17 Year Lows As Stigma Trade +200%
Europe's story today was multi-month record deterioration in equity and credit markets.
The turning point appears to have been the market's recognition of
what LTRO really is and LTRO2 pretty much marked the top. While recent
weakness has been exaggerated by the JPMorgan debacle (contagion to
'cheaper' hedge indices in credit), the Greek reality and clear
contagion of a Euro / No-Euro decision any minute has Spanish, Italian,
and Portuguese equity and credit markets crashing lower (from already
Tilson-clutching lows). Spanish bond spreads are 160bps wider
since LTRO2 and Italy 87bps wider with today's +28bps in Spain taking it
to all-time record wides (pay less attention to yields now as
they will be flattered by the ripfest run to safety in bunds), Portugal
is back above 1100bps in 5Y CDS, but most critically - given LTRO's
unintended consequence of encumbering the weakest banks exponentially
to the domestic sovereign - the LTRO Stigma is up more than 200% from its lows when we first pointed out the reality.
Banks who took LTRO exposure are on average almost at record wides
(with many of them already at record wides). European equities are weak
broadly but remain above their credit-implied levels as investment grade and high-yield credit in Europe falls back to four-month lows (almost entirely eradicating the year's gains) while the narrower Euro Stoxx 50 equity index is down significantly YTD. short- and medium-term EUR-USD basis swaps are deteriorating rapidly once again as clearly funding is becoming a major issue in the Euro-zone.The New European Serfdom
If the establishment is to be believed — it’s in the interests of “long-term financial stability” that creditors who stupidly bought unrepayable debt don’t get a big haircut like they would in a free market. And it’s in the interests of “long-term financial stability” that bad companies who made bad decisions don’t go out of business like they would in a free market, but instead become suckling zombies attached to the taxpayer teat. And apparently it is also in the interests of “long-term financial stability” that a broken market and broken system doesn’t liquidate, so that people learn their lesson. Apparently our “long-term financial stability” depends on producing even greater moral hazard by handing more money out to the negligent. The only real question is whether or not it will just be the IMF and the EU institutions, or whether Bernanke at the Fed will get involved beyond the inevitable QE3 (please do it Bernanke! I have some crummy equities I want to offload to a greater fool!)
Gold Probing the $1550 Level
Trader Dan at Trader Dan's Market Views - 1 hour ago
Gold has continued to see further selling in today's session with traders
once again exiting "RISK" trades in favor of the "Growth Off" or RISK
AVERSION trades. Long commodity positions, along with long equities, are
getting liquidated with money flows heading towards US Treasuries in
general. This can be seen in the CCI, the Continuous Commodity Index, which
is moving lower while bonds move higher, taking interest rates down even
further as the yield on the Ten Year is now down below the 1.80% level.
Remember, there has not been a week yet during which this yield ENDED BELOW
that c... more »
This Is All Going To End Badly For The West
Admin at Jim Rogers Blog - 1 hour ago
"You cannot solve a problem of too much debt with yet more debt. And so
this is all going to end badly for the west." - *in a recent interview *
*Jim Rogers is an author, financial commentator and successful
international investor. He has been frequently featured in Time, The New
York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The
Financial Times and is a regular guest on Bloomberg and CNBC.*
S&P 500 Index: We Have Seen The High For The Year
Admin at Marc Faber Blog - 1 hour ago
I think maybe we have seen the high for the year unless you get a huge QE3.
That may not be forthcoming. -* in BI *
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Diffusion Index Readings And Seismic Activity In Gold And Silver
Eric De Groot at Eric De Groot - 1 hour ago
Ephrem, Correct. High diffusion index (DI) readings anticipated tradable bottoms, but these advances fizzled due to the distribution of paper control behind the scenes. The "earthquakes before the price eruption" signal analyzes the distribution of control by the various players - some players being more important than others. It generates an earthquake (signal) when conditions turn favorable... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
Meet The Latest Converted Gold Bug: The IMF
When wonkish blogs suggest gold ownership as a hedge for the political idiocy
of the world, it is mockingly shrugged off. When the BRICs add gold, it
is eschewed in a 'well, its diversification' argument. But when the
bankers' bankers' bank - The IMF - starts adding Gold to its reserves to
cover higher expected credit risk losses (read major devaluations of
fiat currency exposure), perhaps - just perhaps - the 'rationality put' we noted earlier is becoming a little more expensive in the minds of Lagarde and her colleagues. As Bloomberg News reports, “The Fund is facing increased credit risk in light of a surge in program lending in the context of the global crisis,” the IMF staff wrote in a report released today, adding "there is a need to increase the Fund’s reserves in order to help mitigate the elevated credit risks,” and as CommodityOnline added: "The International Monetary Fund (IMF) is planning to purchase more than $2 billion worth of gold on account of rising global risks. The IMF currently holds around 2800 tonnes of gold at various depositories".Cashin On "The Rationality Put"
Many
floor types think that there is a kind of “rationality put” in the
markets. It evolved in the post-Lehman chaos. The premise goes something
like this: world leaders were shocked and stunned by the scope and
size of the nearly instant damage from Lehman’s fall. That shock caused
them to rescue AIG, a far, far bigger project than Lehman. Since then,
central banks and governments have stepped in quickly as each new
crisis emerged. However, as UBS' Art Cashin notes somewhat ominously,
the Greek exit / Euro-breakdown risk has made it hard to exercise a “rationality put” if things turn irrational beyond your control.James Wesley Rawles: The Coming Collapse – Pepare NOW! But if the Power Grid Goes Down, All Bets Are Off
I spent a good bit of time this weekend reading up on the Greek political situation, and stole the ‘Achilles Heel’
phrase from this week’s Economist magazine. I thought that description
was perfect for the Greek vote, as the Euro has stumbled because of the
recent uncertainty in Greece. Greek leaders have been unable to form a
unified government, and there is a real possibility that the Greeks will
be heading back to the polls for another vote. As Chuck reported last
week, European leaders have approved the next round of bailout funds for
Greece, but with the continued leadership vacuum I have to think this
could be the final payment. If they have another election, the markets
will certainly see it as a referendum on whether the Greeks want to stay
in the euro. A vote for the same anti-austerity parties would certainly
put pressure on European leaders to re-think Greece’s membership in the
single currency.We have heard warnings over the ‘end of the euro’ almost since it began trading, and I never put much credence in those who felt the euro wouldn’t last. But I do think the euro will evolve with the markets, and a Greek departure is a real possibility.
Read More @ CaseyResearch.com
Bloomberg:
The People’s Bank of China said it will cut banks’ reserve requirement ratio by 50 basis points effective May 18.
China’s slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.
Read More @ Bloomberg
The People’s Bank of China said it will cut banks’ reserve requirement ratio by 50 basis points effective May 18.
China’s slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.
Read More @ Bloomberg
from The Economic Collapse Blog:
Why does the state of California seem to be so incredibly hopeless?
These days California can’t seem to do anything right, and if you live
in California things just got a whole lot worse. Governor Brown has
announced that the state budget deficit for this year is going to be
much larger than projected, that more government services are going to
be cut and that voters are going to vote on another round of tax
increases in November. Meanwhile, unemployment is sitting at 11 percent
and extended federal unemployment benefits for workers in the state are
ending. Because California is one of the worst places in the nation to
conduct business, there has been a steady flow of companies leaving the
state. Those companies have taken a whole lot of good jobs with them.
Due to the lack of jobs and a steady stream of impoverished immigrants
coming in from Mexico and other countries, poverty in the state has
exploded and crime is rapidly increasing. California may be the land of
“endless sunshine”, but for the California economy there are only dark
clouds on the horizon. The state is coming apart at the seams and there
is not much hope that things are going to turn around any time soon.
These days, California is very similar to Greece in many ways.
Just like Greece, California has had round after round of “austerity” and yet still cannot seem to balance the budget.
Read More @ TheEconomicCollapseBlog.com
Why does the state of California seem to be so incredibly hopeless?
These days California can’t seem to do anything right, and if you live
in California things just got a whole lot worse. Governor Brown has
announced that the state budget deficit for this year is going to be
much larger than projected, that more government services are going to
be cut and that voters are going to vote on another round of tax
increases in November. Meanwhile, unemployment is sitting at 11 percent
and extended federal unemployment benefits for workers in the state are
ending. Because California is one of the worst places in the nation to
conduct business, there has been a steady flow of companies leaving the
state. Those companies have taken a whole lot of good jobs with them.
Due to the lack of jobs and a steady stream of impoverished immigrants
coming in from Mexico and other countries, poverty in the state has
exploded and crime is rapidly increasing. California may be the land of
“endless sunshine”, but for the California economy there are only dark
clouds on the horizon. The state is coming apart at the seams and there
is not much hope that things are going to turn around any time soon.These days, California is very similar to Greece in many ways.
Just like Greece, California has had round after round of “austerity” and yet still cannot seem to balance the budget.
Read More @ TheEconomicCollapseBlog.com
Adventures in Capitalism:
I like investing in commodities because they’re very simple to
understand—it’s all about supply and demand. Naturally, I take a very
strong interest in the increasing demand for gold coming out of China.
You see, in the short run, the paper markets (leveraged traders) rule
the day. In the longer run, the physical market is all that matters. In
the past few months, we’ve seen some very important changes in the
physical market for gold—China is hungry.
Read More @ http://adventuresincapitalism.com
I like investing in commodities because they’re very simple to
understand—it’s all about supply and demand. Naturally, I take a very
strong interest in the increasing demand for gold coming out of China.
You see, in the short run, the paper markets (leveraged traders) rule
the day. In the longer run, the physical market is all that matters. In
the past few months, we’ve seen some very important changes in the
physical market for gold—China is hungry.Read More @ http://adventuresincapitalism.com
by Julian Phillips, www.GoldForecaster.com / www.SilverForecaster.com
In
the second of a two part series on the factors driving gold demand,
Julian Phillips looks at the investment segment of the market and the
effect of traders on prices.
Investment demand – emerging world
While western jewellery demand reacts very much to the state of the developed world’s economic states, emerging world demand for ‘jewelry’ sits on the border of decoration and investment. Thus, we prefer to look at it as investment demand.
Read More @ MineWeb.com
In
the second of a two part series on the factors driving gold demand,
Julian Phillips looks at the investment segment of the market and the
effect of traders on prices.Investment demand – emerging world
While western jewellery demand reacts very much to the state of the developed world’s economic states, emerging world demand for ‘jewelry’ sits on the border of decoration and investment. Thus, we prefer to look at it as investment demand.
Read More @ MineWeb.com
from Silver Vigilante:
The
element of Occupy Wall Street that supports the establishment left-wind
might find themselves today dumbfounded to explain how their
candidate of choice, Barack Obama, has allowed JPMorgan to accrue
derivatives positions which have proven hazardous to the global economy. But, nonetheless, this reality has come to pass.
Not much has changed since 2008, and this is no surprise to anybody paying attention. It has hitherto been reported, in fact, that the derivatives market – post 2008 – has only grown as the socialized-loss and privatized-profit model has been reaffirmed by a psychologically tortured and confused population.
Read More @ SilverVigilante.com
The
element of Occupy Wall Street that supports the establishment left-wind
might find themselves today dumbfounded to explain how their
candidate of choice, Barack Obama, has allowed JPMorgan to accrue
derivatives positions which have proven hazardous to the global economy. But, nonetheless, this reality has come to pass.Not much has changed since 2008, and this is no surprise to anybody paying attention. It has hitherto been reported, in fact, that the derivatives market – post 2008 – has only grown as the socialized-loss and privatized-profit model has been reaffirmed by a psychologically tortured and confused population.
Read More @ SilverVigilante.com
by Tibor Machan,The Daily Bell:
In his book Basic Rights (Princeton,
1970), Henry Shue argued that there is no valid distinction between
negative and positive rights; his argument has recently resurfaced among
so-called left-libertarians (otherwise also known as bleeding heart
libertarians), a neologism if there ever was one. (I am tempted to start
an association of no-nonsense libertarians to oppose them!)
Read More @ TheDailyBell.com
In his book Basic Rights (Princeton,
1970), Henry Shue argued that there is no valid distinction between
negative and positive rights; his argument has recently resurfaced among
so-called left-libertarians (otherwise also known as bleeding heart
libertarians), a neologism if there ever was one. (I am tempted to start
an association of no-nonsense libertarians to oppose them!)Read More @ TheDailyBell.com
from Silver Doctors:
Not only is The Morgue drowning in interest rate swap losses from its CIO unit, but the SEC has issued JP Morgan a Wells notice over Bear Stearns’ mortgage backed securities violations.
Why you might ask, is a Wells Notice over MBS fraud a monumental concern for JP Morgan when the SEC is likely to slap JPM’s wrist over the issue for a $50 million fine ?
Well, Wells notices happen to be discoverable in civil litigation. In JPM’s Mortgage-Backed Securities and Repurchase Litigation note on the 10-Q the bank filed on Thursday, JPM states: “There are currently pending and tolled investor and monoline claims involving approximately $120 billion of such securities.”
MBS analyst Teri Buhl writes: ‘The face value amount of securities tied to the monoline suits against JPM are significant because there was a recent ruling in a Countrywide RMBS suit that ruled if plaintiffs can prove there were miss-representations in the bonds then the entire amount of the bond has to be bought back…not just the amount that defaulted or caused a loss.‘
Read More @ SilverDoctors.com
Not only is The Morgue drowning in interest rate swap losses from its CIO unit, but the SEC has issued JP Morgan a Wells notice over Bear Stearns’ mortgage backed securities violations.Why you might ask, is a Wells Notice over MBS fraud a monumental concern for JP Morgan when the SEC is likely to slap JPM’s wrist over the issue for a $50 million fine ?
Well, Wells notices happen to be discoverable in civil litigation. In JPM’s Mortgage-Backed Securities and Repurchase Litigation note on the 10-Q the bank filed on Thursday, JPM states: “There are currently pending and tolled investor and monoline claims involving approximately $120 billion of such securities.”
MBS analyst Teri Buhl writes: ‘The face value amount of securities tied to the monoline suits against JPM are significant because there was a recent ruling in a Countrywide RMBS suit that ruled if plaintiffs can prove there were miss-representations in the bonds then the entire amount of the bond has to be bought back…not just the amount that defaulted or caused a loss.‘
Read More @ SilverDoctors.com
by Laurence M. Vance, Lew Rockwell.com:
In a recent article for the online journal Public Discourse,
conservative Jay Richards asks the question: “Should Libertarians Be
Conservatives?: The Tough Cases of Abortion and Marriage.”
Richards is Director and Senior Fellow of the Center on Wealth, Poverty, and Morality at the Discovery Institute, a Visiting Scholar at the Institute for Faith, Work, and Economics, and co-author, with James Robison, of the New York Times bestselling book Indivisible: Restoring Faith, Family, and Freedom Before It’s Too Late (FaithWords, 2012). Richards and I have many common interests: Christianity, theology, economics, politics. He sounds like my kind of guy – except that he’s not.
Richards is your typical “criticize the welfare state while you support the warfare state conservative.” I wasn’t sure at first, but after looking at his new book Indivisible, and especially his remarks in chapter five (“Bearing the Sword”) on pacifism, just war, the war on terror, the military, and defense spending, my suspicions were confirmed.
Read More @ LewRockwell.com
In a recent article for the online journal Public Discourse,
conservative Jay Richards asks the question: “Should Libertarians Be
Conservatives?: The Tough Cases of Abortion and Marriage.”Richards is Director and Senior Fellow of the Center on Wealth, Poverty, and Morality at the Discovery Institute, a Visiting Scholar at the Institute for Faith, Work, and Economics, and co-author, with James Robison, of the New York Times bestselling book Indivisible: Restoring Faith, Family, and Freedom Before It’s Too Late (FaithWords, 2012). Richards and I have many common interests: Christianity, theology, economics, politics. He sounds like my kind of guy – except that he’s not.
Richards is your typical “criticize the welfare state while you support the warfare state conservative.” I wasn’t sure at first, but after looking at his new book Indivisible, and especially his remarks in chapter five (“Bearing the Sword”) on pacifism, just war, the war on terror, the military, and defense spending, my suspicions were confirmed.
Read More @ LewRockwell.com
by Chris Sheridan, Financial Sense:
Every day the financial
markets get more chaotic—a fact that couldn’t be made any more clear
than with a recent revelation given by ex-physicist and author, Nick Dunbar, in describing a new level of complexity facing banks and derivatives. Ironically, Thurdsay night’s emergency conference call
by JP Morgan of a massive $2 billion unavoidable loss is perhaps a
confirmation of what banks are now starting to grapple with.
After attending a recent conference in Barcelona featuring some of the top thinkers in quantitative analysis, Dunbar says that the financial crisis has now left “quants grappling with a new landscape…that has turned the old world upside down.”
What is this new landscape he’s referring to? One in which derivatives have become so chaotic that they no longer obey the classical laws of physics. The derivatives world now, he says, is beginning to operate at a level of mathematical complexity associated with quantum physics—specifically, a field known as “Quantum Chromodynamics”.
Read More @ Financial Sense.com
Every day the financial
markets get more chaotic—a fact that couldn’t be made any more clear
than with a recent revelation given by ex-physicist and author, Nick Dunbar, in describing a new level of complexity facing banks and derivatives. Ironically, Thurdsay night’s emergency conference call
by JP Morgan of a massive $2 billion unavoidable loss is perhaps a
confirmation of what banks are now starting to grapple with.After attending a recent conference in Barcelona featuring some of the top thinkers in quantitative analysis, Dunbar says that the financial crisis has now left “quants grappling with a new landscape…that has turned the old world upside down.”
What is this new landscape he’s referring to? One in which derivatives have become so chaotic that they no longer obey the classical laws of physics. The derivatives world now, he says, is beginning to operate at a level of mathematical complexity associated with quantum physics—specifically, a field known as “Quantum Chromodynamics”.
Read More @ Financial Sense.com
“America’s national government has moved way beyond a political spoils system,” wrote Charles Goyette in his book The Dollar Meltdown.
“A spoils system leaves the host alive so that a politician’s
occasional ne’er-do-well brother-in-law can be put on the payroll.”In contrast, Goyette suggested, “America has become a piñata: Everybody gets a crack at it. Presidents and other elected officials pass the big stick around as a reward to those who help keep them in charge of the piñata party.”
Goyette’s book came out in 2009. Since then, we have learned that the party is even more debauched, nay demented, than he ever imagined. And you, dear reader, were not invited…
Read More @ DailyReckoning.com.au
by Graham Summers, Gains Pains & Capital:
As I’ve noted in previous articles, politics, not economics, rule
Europe. What I mean by this is that most major decisions in Europe are
determined by political agendas that ignore economic and financial
realities.
This is at the core of the “welfare state” mentality that permeates Europe as a whole. The EU in general is comprised of an aging population that is more concerned about receiving the pensions/ health benefits/ social payouts that were promised to them by the system than anything else.
As a result of this, EU voters, who determine EU elections, don’t take action until what has promised to them comes under threat.
For this reason, EU political leaders will maintain their agendas regardless of whether said agendas go against financial or economic realities (or common sense for that matter) until these agendas begin to have real negative consequences for their political careers.
Read More @ GainsPainsCapital.com
As I’ve noted in previous articles, politics, not economics, rule
Europe. What I mean by this is that most major decisions in Europe are
determined by political agendas that ignore economic and financial
realities.This is at the core of the “welfare state” mentality that permeates Europe as a whole. The EU in general is comprised of an aging population that is more concerned about receiving the pensions/ health benefits/ social payouts that were promised to them by the system than anything else.
As a result of this, EU voters, who determine EU elections, don’t take action until what has promised to them comes under threat.
For this reason, EU political leaders will maintain their agendas regardless of whether said agendas go against financial or economic realities (or common sense for that matter) until these agendas begin to have real negative consequences for their political careers.
Read More @ GainsPainsCapital.com
by Jeff Berwick, Whiskey and Gunpowder:
We hate being right.
After all, we have been predicting that people in the US and most of the western world will soon find themselves living in a Terminator-esque world where they will be tracked every moment of the day (US Government Builds World’s Biggest Domestic Spy Complex), 1 the US Government can jail indefinitely and even kill its own citizens (NDAA Bill Can Send Americans to Prison Indefinitely Without Trial), that the assets of westerners will be taken and consumed by their vampire overlords (France mulls 100% tax rate), they will be restricted in their ability to travel outside the country (Congress about to pass a bill that restricts travel and revokes passports with no trial) and it will be impossible to get your money outside of the country to protect it from confiscation (capital controls).
Read More at Whiskey and Gunpowder
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We hate being right.
After all, we have been predicting that people in the US and most of the western world will soon find themselves living in a Terminator-esque world where they will be tracked every moment of the day (US Government Builds World’s Biggest Domestic Spy Complex), 1 the US Government can jail indefinitely and even kill its own citizens (NDAA Bill Can Send Americans to Prison Indefinitely Without Trial), that the assets of westerners will be taken and consumed by their vampire overlords (France mulls 100% tax rate), they will be restricted in their ability to travel outside the country (Congress about to pass a bill that restricts travel and revokes passports with no trial) and it will be impossible to get your money outside of the country to protect it from confiscation (capital controls).
Read More at Whiskey and Gunpowder
by Joe Wolverton II, The New American:
Word out of Idaho is that the Ron Paul bloc in the Gem State’s GOP, perhaps encouraged by recent events at the Nevada and Maine state Republican conventions, plans to attempt a similar strategy.
Jim Sinclair’s Commentary
China Investment Corp. willing to invest more in Africa’s infrastructure Xinhua | May 11, 2012 16:24
By Agencies
China Investment Corp., the nation’s sovereign wealth fund, is willing to increase investment in Africa, especially in infrastructure, as the fund is seeking long-term returns in the rising economy, the company head has said.
"Africa’s economy is gathering speed, and the growth rate will probably exceed that of China in the future," CIC’s president Gao Xiqing told Xinhua during the ongoing World Economic Forum on Africa held in Addis Ababa, Ethiopia’s capital, from Wednesday to Friday.
Gao said the growing political stability and population in Africa have laid good foundation for the fast economic development of this continent. CIC could find many opportunities in Africa, he said, adding infrastructure would be a good option for long-term investment for economic returns.
"We are willing to cooperate with Africa in this area," he said.
For some small-scale projects, CIC is cooperating with China- Africa Development Fund to make investment in Africa.
He called on African nations to open up for foreign investment to boost their economy.
Africa is rising as a promising land for investors because of its continuous fast economic growth as the US and Europe is grappling for recovery from the fallout of the global financial crisis.
Gao also said CIC is still looking for opportunities in Europe, but maybe not the bond part. "We never bought too much to begin with," he said.
More…
Jim Sinclair’s Commentary
Austerity blow for Merkel in German state election
By Stephen Brown
DUESSELDORF, Germany | Sun May 13, 2012 10:13pm EDT
(Reuters) – Chancellor Angela Merkel’s conservatives suffered a crushing defeat on Sunday in an election in Germany’s most populous state, a result which could embolden the left opposition to step up attacks on her European austerity policies.
The election in North Rhine-Westphalia (NRW), a western German state with a bigger population than the Netherlands and an economy the size of Turkey, was held 18 months before a national vote in which Merkel will be fighting for a third term.
While she remains popular at home because of the strength of the economy and her steady handling of the euro zone debt crisis, the sheer scale of the defeat in NRW leaves her vulnerable at a time when a backlash against her insistence on fiscal discipline is building across Europe.
According to first projections, the centre-left Social Democrats (SPD) won 38.9 percent of the vote and will have enough to form a stable majority with the Greens.
Merkel’s Christian Democrats (CDU) saw their support plunge to just 26.3 percent, down from nearly 35 percent in 2010, and the worst result in the state since World War Two.
More…
Earthquakes Before The Price Eruption In Silver Coming
CIGA Eric
Silver will be the key to timing precious metals in the coming weeks. Silver diffusion index which surged to 75 suggests massive inflows (long buying and short covering) into price weakness by the invisible hand (see chart 1). This is extremely bullish.
Chart 1: Silver London P.M Fixed and the Silver Diffusion Index (DI)
The invisible hand while focused and busy may not be done. Similar to the gold market, earthquakes before the price eruption tend to precede major bottoms (see chart 2). The silver volcano while rumbling and venting gas has yet to record any significant seismic activity. It’s coming and only the perma-bears won’t feel them.
Chart 2: Silver London P.M Fixed and the Silver Long/Short Concentration Index (CI): 1 = Bullish Setup, -1 = Bearish Setup
More…
Hello Jim,
In regards to comments made by yourself that it’s more important than ever to be one’s own central bank, to be one’s own clearing house. When switching shares to the DRS that are held in trust companies in Canada, is that in relation to holding bullion outside the US? I understand completely that shares are not bullion, but is the idea the same? Gratitude, a deep sense of appreciation, and my support don’t seem to do it justice.
Thank you for all you do.
CIGA K
Dear CIGA K,
Jim Sinclair’s Commentary
Jim,
As I type this and look on the wall at my $100 Trillion Zimbabwe Dollar note, I’m struck again by how few people understand the difference between ‘nominal’ and ‘real.’ I will not use Webster’s definitions, because with the advent of Google, even fewer folks now posses a dictionary. Using my definitions then:
- Nominal: the ‘face’ value printed on a paper fiat note.
- Real: what you can really buy with that note, or these days, a whole lotta fiat notes.
While the buying power of fiat money has fallen by 96% under America’s greatest failure (the Fed), the buying power of Gold has increased ~700%. This equals the ‘invisible’ robbing of the Poor and Middle Class by the Fed. Let me give you an example of the difference between average wages in paper fiat over time, compared with equivalent ounces of Gold:
- Average wages in 1959 were $5,016 or 143oz of Gold
- Average wages in 1977 were $15,000 or 120oz of Gold
- Average wages in 1999 were $28,970 or 104oz of Gold
- Average wages in 2008 were $41,335 or 53oz of Gold
This is not exactly rocket science, yet most folks consider that they are ‘doing better’ because their nominal wages have increased over time, when in fact it takes increasing nominal amounts of debauched fiat to buy the same ounce of Gold (in effect making Gold more valuable over time in terms of buying power, as the Dollar slides into bongo-buck territory… my Zimbabwe note ref’d infra germane).
Hmmm… which would I rather have? A wheelbarrow stuffed with $100 bills that won’t buy me a loaf of bread, or 100 ounces of Gold? Gee, tough one. Too bad the Fed and our politicians (excepting Ron Paul) aren’t making any efforts to help me choose.
Meanwhile, I’m completely ignoring the very short-term white noise in the heavily manipulated bullion markets, and hanging tough until the ‘invisible hand’ has inflicted maximum pain and this temporary swoon turns around.
Word out of Idaho is that the Ron Paul bloc in the Gem State’s GOP, perhaps encouraged by recent events at the Nevada and Maine state Republican conventions, plans to attempt a similar strategy.
According to local media,
many supporters of Ron Paul in Idaho are “so disgusted” with their
man’s third place finish in the Idaho caucus that they are anxiously
engaged in righting that wrong.
How serious are the backers of the
libertarian-leaning Texas Congressman? “I’ll do the scorched earth if I
have to,” declared Ryan Davidson, third vice chairman of the Ada County
Republican Party and a grassroots Paul campaign organizer.
The plan as it’s been revealed is for the Paul camp
to use state party rules to their advantage and wrest control of the
GOP state convention in June through the accumulation of delegates in
the little-publicized precinct committee meetings to be held statewide
on May 15.
Read More @ TheNewAmerican.com
Jim Sinclair’s Commentary
Only prejudicial thinking can keep you from seeing this as fact.
China Investment Corp. willing to invest more in Africa’s infrastructure Xinhua | May 11, 2012 16:24
By Agencies
China Investment Corp., the nation’s sovereign wealth fund, is willing to increase investment in Africa, especially in infrastructure, as the fund is seeking long-term returns in the rising economy, the company head has said.
"Africa’s economy is gathering speed, and the growth rate will probably exceed that of China in the future," CIC’s president Gao Xiqing told Xinhua during the ongoing World Economic Forum on Africa held in Addis Ababa, Ethiopia’s capital, from Wednesday to Friday.
Gao said the growing political stability and population in Africa have laid good foundation for the fast economic development of this continent. CIC could find many opportunities in Africa, he said, adding infrastructure would be a good option for long-term investment for economic returns.
"We are willing to cooperate with Africa in this area," he said.
For some small-scale projects, CIC is cooperating with China- Africa Development Fund to make investment in Africa.
He called on African nations to open up for foreign investment to boost their economy.
Africa is rising as a promising land for investors because of its continuous fast economic growth as the US and Europe is grappling for recovery from the fallout of the global financial crisis.
Gao also said CIC is still looking for opportunities in Europe, but maybe not the bond part. "We never bought too much to begin with," he said.
More…
Jim Sinclair’s Commentary
The French and Greek elections are game changers favorable to gold but not yet understood.
Austerity is history.
Austerity blow for Merkel in German state election
By Stephen Brown
DUESSELDORF, Germany | Sun May 13, 2012 10:13pm EDT
(Reuters) – Chancellor Angela Merkel’s conservatives suffered a crushing defeat on Sunday in an election in Germany’s most populous state, a result which could embolden the left opposition to step up attacks on her European austerity policies.
The election in North Rhine-Westphalia (NRW), a western German state with a bigger population than the Netherlands and an economy the size of Turkey, was held 18 months before a national vote in which Merkel will be fighting for a third term.
While she remains popular at home because of the strength of the economy and her steady handling of the euro zone debt crisis, the sheer scale of the defeat in NRW leaves her vulnerable at a time when a backlash against her insistence on fiscal discipline is building across Europe.
According to first projections, the centre-left Social Democrats (SPD) won 38.9 percent of the vote and will have enough to form a stable majority with the Greens.
Merkel’s Christian Democrats (CDU) saw their support plunge to just 26.3 percent, down from nearly 35 percent in 2010, and the worst result in the state since World War Two.
More…
By Greg Hunter’s USAWatchdog.com
Dear CIGAs,
The surprise announcement by JP Morgan that it lost $2 billion in trading derivatives was portrayed in some mainstream media outlets as no big deal. The Associated Press reported Friday, “Bank stocks were hammered in Britain and the United States on Friday, partly because of fear that a surprise $2 billion trading loss by JPMorgan Chase would lead to tougher regulation of financial institutions. . . .”The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought,” CEO Jamie Dimon told reporters on Thursday. “There were many errors, sloppiness and bad judgment.” (Click here to read the complete AP story.)
I think the market thinks this $2 billion surprise loss is much more than fear of “tougher regulation,” or that it was just “sloppiness and bad judgment.” Remember MF Global and its bankruptcy on Halloween last year? It, too, was trading in risky derivatives, and it lost $6 billion that wiped out the firm along with $1.6 billion in segregated customer cash. In the aftermath, we still do not know where the customer money is, but we did find out MF Global was leveraged 40 to 1. It would be hard to believe other big banks were not leveraged in risky derivative trades the same way. This is why traders on CNBC were hitting the panic button last week. Joe Terranova said, “I will dump my Bank of America on this news.” Other traders on the show were equally scared. “I can almost guarantee it’s not just JPMorgan,’ added trader Guy Adami. ‘JPMorgan looks like it’s going to bring down the entire space,’ said Steve Grasso.” (Click here for the complete CNBC story.)
The only way JP Morgan could “bring down the entire space” is if the entire space was leveraged in ways similar to JP Morgan. Of course, no U.S. bank has more derivative exposure than JP Morgan. According to the Comptroller of the Currency, JP Morgan has a little more than $70 trillion in total derivative exposure. (4th quarter 2011 OCC report) The next 4 banks have a combined $150 trillion (approximate) in total derivative exposure. I am sure the banks will tell you that this is all hedged (bilaterally netted) to minimize any losses, but we all know how well that strategy worked with AIG, Lehman and MF Global.
More…
Dear CIGAs,
The surprise announcement by JP Morgan that it lost $2 billion in trading derivatives was portrayed in some mainstream media outlets as no big deal. The Associated Press reported Friday, “Bank stocks were hammered in Britain and the United States on Friday, partly because of fear that a surprise $2 billion trading loss by JPMorgan Chase would lead to tougher regulation of financial institutions. . . .”The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought,” CEO Jamie Dimon told reporters on Thursday. “There were many errors, sloppiness and bad judgment.” (Click here to read the complete AP story.)
I think the market thinks this $2 billion surprise loss is much more than fear of “tougher regulation,” or that it was just “sloppiness and bad judgment.” Remember MF Global and its bankruptcy on Halloween last year? It, too, was trading in risky derivatives, and it lost $6 billion that wiped out the firm along with $1.6 billion in segregated customer cash. In the aftermath, we still do not know where the customer money is, but we did find out MF Global was leveraged 40 to 1. It would be hard to believe other big banks were not leveraged in risky derivative trades the same way. This is why traders on CNBC were hitting the panic button last week. Joe Terranova said, “I will dump my Bank of America on this news.” Other traders on the show were equally scared. “I can almost guarantee it’s not just JPMorgan,’ added trader Guy Adami. ‘JPMorgan looks like it’s going to bring down the entire space,’ said Steve Grasso.” (Click here for the complete CNBC story.)
The only way JP Morgan could “bring down the entire space” is if the entire space was leveraged in ways similar to JP Morgan. Of course, no U.S. bank has more derivative exposure than JP Morgan. According to the Comptroller of the Currency, JP Morgan has a little more than $70 trillion in total derivative exposure. (4th quarter 2011 OCC report) The next 4 banks have a combined $150 trillion (approximate) in total derivative exposure. I am sure the banks will tell you that this is all hedged (bilaterally netted) to minimize any losses, but we all know how well that strategy worked with AIG, Lehman and MF Global.
More…
Earthquakes Before The Price Eruption In Silver Coming
CIGA Eric
Silver will be the key to timing precious metals in the coming weeks. Silver diffusion index which surged to 75 suggests massive inflows (long buying and short covering) into price weakness by the invisible hand (see chart 1). This is extremely bullish.
Chart 1: Silver London P.M Fixed and the Silver Diffusion Index (DI)
The invisible hand while focused and busy may not be done. Similar to the gold market, earthquakes before the price eruption tend to precede major bottoms (see chart 2). The silver volcano while rumbling and venting gas has yet to record any significant seismic activity. It’s coming and only the perma-bears won’t feel them.
Chart 2: Silver London P.M Fixed and the Silver Long/Short Concentration Index (CI): 1 = Bullish Setup, -1 = Bearish Setup
More…
Hello Jim,
In regards to comments made by yourself that it’s more important than ever to be one’s own central bank, to be one’s own clearing house. When switching shares to the DRS that are held in trust companies in Canada, is that in relation to holding bullion outside the US? I understand completely that shares are not bullion, but is the idea the same? Gratitude, a deep sense of appreciation, and my support don’t seem to do it justice.
Thank you for all you do.
CIGA K
Dear CIGA K,
If you hold bullion outside of your country then be prepared to go and live with your bullion.
Jim
Jim Sinclair’s Commentary
The following is a note from CIGA Richard that speaks to the buying
power of gold, and silliness that deflation today can be described as an
increase in buying power for the dollar.
Jim,
As I type this and look on the wall at my $100 Trillion Zimbabwe Dollar note, I’m struck again by how few people understand the difference between ‘nominal’ and ‘real.’ I will not use Webster’s definitions, because with the advent of Google, even fewer folks now posses a dictionary. Using my definitions then:
- Nominal: the ‘face’ value printed on a paper fiat note.
- Real: what you can really buy with that note, or these days, a whole lotta fiat notes.
While the buying power of fiat money has fallen by 96% under America’s greatest failure (the Fed), the buying power of Gold has increased ~700%. This equals the ‘invisible’ robbing of the Poor and Middle Class by the Fed. Let me give you an example of the difference between average wages in paper fiat over time, compared with equivalent ounces of Gold:
- Average wages in 1959 were $5,016 or 143oz of Gold
- Average wages in 1977 were $15,000 or 120oz of Gold
- Average wages in 1999 were $28,970 or 104oz of Gold
- Average wages in 2008 were $41,335 or 53oz of Gold
This is not exactly rocket science, yet most folks consider that they are ‘doing better’ because their nominal wages have increased over time, when in fact it takes increasing nominal amounts of debauched fiat to buy the same ounce of Gold (in effect making Gold more valuable over time in terms of buying power, as the Dollar slides into bongo-buck territory… my Zimbabwe note ref’d infra germane).
Hmmm… which would I rather have? A wheelbarrow stuffed with $100 bills that won’t buy me a loaf of bread, or 100 ounces of Gold? Gee, tough one. Too bad the Fed and our politicians (excepting Ron Paul) aren’t making any efforts to help me choose.
Meanwhile, I’m completely ignoring the very short-term white noise in the heavily manipulated bullion markets, and hanging tough until the ‘invisible hand’ has inflicted maximum pain and this temporary swoon turns around.
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