Here We Go: Moody's Downgrade Is Out - Morgan Stanley Cut Only 2 Notches, To Face $6.8 Billion In Collateral Calls

Here we come:

• MOODY'S CUTS 4 FIRMS BY 1 NOTCH
• MOODY'S CUTS 10 FIRMS' RATINGS BY 2 NOTCHES
• MOODY'S CUTS 1 FIRM BY 3 NOTCHES
• MORGAN STANLEY L-T SR DEBT CUT TO Baa1 FROM A2 BY MOODY'S
• MOODY'S CUTS MORGAN STANLEY 2 LEVELS, HAD SEEN UP TO 3
• MORGAN STANLEY OUTLOOK NEGATIVE BY MOODY'S
• MORGAN STANLEY S-T RATING CUT TO P-2 FROM P-1 BY MOODY'S
• BANK OF AMERICA L-T SR DEBT CUT TO Baa2 BY MOODY'S;OUTLOOK NEG

So the reason for the delay were last minute negotiations, most certainly involving extensive monetary explanations, by Morgan Stanley's Gorman (potentially with Moody's investor Warren Buffett on the call) to get only a two notch downgrade. And Wall Street wins again.

Germany Court delays ESM/Moody;s downgrades 16 banks/Morgan Stanley hurt the worst/China has lousy PMI numbers/USA also bad PMI

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 37 minutes ago

Good evening Ladies and Gentlemen: Gold closed down today by a huge $54.30, finishing the comex session at $1564.30  Silver also followed her stronger and wiser cousin by falling $1.55 to $26.83. There is no question that the world turmoil is certainly having its effect on our paper precious metals.  With all bourses in the red, many are reading the tea leaves and have figured out that the

Moody's Hammer To Fall At 4 PM

From Bloomberg citing CNBC, which apparently is where Moody's leaked all its data

• MOODY’S TO UNVEIL BANK DOWNGRADE AT 4PM: CNBC
• CNBC SAYS B OF A L-T DEBT RATING TO BE CUT BY 1 NOTCH BY MOODYS
• CNBC SAYS CITI, JPM AND GS L-T DEBT RATING WILL BE CUT 2 NOTCH

So... this leaves Morgan Stanley with the dreaded 3 notch cut which automatically springs up to $9.6 billion margin calls and memories of AIG? Assume crash positions.

The Deer Is Back As Markets Go 'Reality-On'

Today wasn't the worst plunge in the stock market so far this year... It was the second-worst by a whisper. And just like that we are one third of the way down to Goldman's target. But everything is priced in? It seems that between the realization that global growth may actually be slowing (between China PMI and this morning's Philly Fed) and the recognition that there is no-QE-without-a-crash, markets began to lose steam early on this morning (led by energy names crushed by the biggest two-day drop in oil in over 9 months). Then Goldman's timely note to short the market if you want Bernanke to act (and the rumors of pending global bank downgrades) sent us over the edge as the S&P lost its upchannel and plunged (down over 40pts from its highs of Tuesday). The Dow is following a very worrisome pattern (echoing last year far too well) as it lost the second most points in the year. Gold (and the rest of the commodity complex - led by WTI -7% this week) fell notably as the USD surged to up almost 1% on the week. Gold's and USD's moves suggested further pain for the S&P as Treasuries stabilized at notably better levels and did not plunge on the day (though much of this is equities playing catch up to a longer-term dislocation). VIX jumped over 3 vols back over 20% (as perhaps the jump in implied correlation we highlighted was on to something). AUD (as we suggested) was crushed as risk-on trades drive carry-off and the China trade dumped it by the most in a day since November (almost back to parity). Heavy volume and a big pick up in average trade size suggest this has more to run as broke back under the 50DMA and back inside the down-channel for the S&P.

Taibbi Is Back With The Scam Wall Street Learned From the Mafia

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo. But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

And Today's Market Ramp Comes Courtesy Of...

... The Eurogroup, which according to various newswires has informally decided to use the EFSF for Spanish financial sector bailout, likely to be transferred to the ESM later according to sources.
It seems that now they are not even trying. Like yesterday when the market idiotically ramped when Merkel said that the ESM and EFSF can do... what they are designed to do, namely buy bonds, so today, we "discover" that because the ESM is actually non-existent, and will be delayed as reported earlier due to German bickering, Europe will be stuck with the far smaller EFSF, which by the way has about €200 billion in dry powder left.

Goldman's Stolper Sets New Client Corzining Record

There are simply no words to describe this.

Germany falters as eurozone slowdown deepens

by Louise Armitstead, The Telegraph:
As a whole, Germany’s private sector shrank for the second month in a row in June, falling to its lowest point since the height of the financial crisis in 2009, data out on Thursday showed.
Economists fear the eurozone debt crisis may finally have taken its toll on Germany, despite it recording growth of 0.5pc in the first quarter.
Markit Economics’ combined manufacturing and services Purchasing Mangers Index (PMI) fell to 48.5 in June from 49.3 in May, dropping further below the 50 level which divides expansion from contraction.
Manufacturing was the biggest pull; its PMI reading fell to 44.7 in June from 45.2 in May – the fastest contraction since June 2009.
Manufacturers indicated a steep and accelerated downturn in new export business during June, with the pace of reduction the fastest since April 2009.
Read More @ Telegraph.co.uk

Moody's set for bank ratings cuts Thurs

Eric De Groot at Eric De Groot - 13 minutes ago

Big bank downgrade imminent headline might has well have been worded transition from day to night imminent. Yawn. This BIG BANK downgrade and broad market short call is simply coincidence, right? Headline: UPDATE 2-Moody's set for bank ratings cuts Thurs -sources * Global banks have been under review since February * Downgrades likely priced into stocks * Ratings cuts could... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

Spain pays new record for medium-term debt

Eric De Groot at Eric De Groot - 36 minutes ago

While all 'media' eyes remain focused on Spain's funding troubles, they continue to miss the financial vultures organizing and circling above Italy. Savvy traders recognize that force measured by volume and price is the key to direction. Shrinking volume at support and resistance zones (i.e. key reversals and upside breakouts) suggests waning upside force. In other words, the financial... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

How Wall Street Financial Companies Stole Billions From Main Street

Gold Bulls React to FOMC Statement after Overnight Reflections

Trader Dan at Trader Dan's Market Views - 1 hour ago

What a difference one day can apparently make in the minds of traders! Yesterday, following an initial sharp downside knee jerk reaction to the lack of an imminent QE3, Gold (and Silver) both rebounded well off their lows as traders became convinced that the Fed had surely left the door open to a round of QE should there be one more month of disappointing payrolls numbers. That sentiment sure proved fleeting, not only in the precious metals markets, but across the entire spectrum of commodities, as well as the bond markets. Die-hard equity bulls, who were consoling themselves that... more » 

Austerians Versus Keynesians

The battle between the 'Austerians' and the 'Keynesians' remains front-and-center in Europe (and elsewhere for that matter). As Sean Corrigan noted recently Frau Merkel is sticking to the only strategy that she can - of insisting that future aid is tied to the construction of budgetary oversight, reduced national sovereignty, and the implementation of labor market reforms - paying lip-service to her nation's unwillingness to pay for what they view as their counterparts' indolence or improvidence. How long this can last is an open guess. Stratfor's Kristen Cooper provides a succinct clip of the state of European Austerity (seeing little progress in reality and in fact a pull-back by Italy and France at the realization that their electorate won't be happy!!). Perhaps, as Corrigan notes, the real lesson is to be had from the Baltics, where 'drastic devaluation' has accompanied genuine 'austerity' - and as a result of this bitter medicine, they are now growing private GDP. As Corrigan sums up, [Austerity as it is being implemented in Europe] is aimed not so much at reinvigorating individual endeavour as at minimizing the reduction in the reach and importance of the state (satisfying neither the Keynesians nor the Austrians) and that is what is self-defeating about such measures.

What Oliver Wyman Really Said About Spain's Banks

The 'real' results from Oliver Wyman's stress tests are out, via Bloomberg, and there are some skeptical conclusions at best. The expected loss for Spanish banks under the adverse stress test scenario is €253-274 billion (and EUR 173-194 billion under the base-case). The announced capital deficit under the stress scenario of €51-62 billion assumes some rather interesting items: The expected loss is offset by €98 billion of exiting provisions (which will have to be offset by something and if deposit outflows continue, instead of reverse, then this merely accelerates the under-capitalization); and New profit generation of €64-68 billion seems remarkable for a banking system which is inextricably tied to its sovereign and entirely bust itself
It seems clear that adjusting these for any sense of reality means the real loss (or capital deficit) will be well north of the EUR 100 billion assigned to the country. We only wonder if Oliver Wyman was paid, as they should be, in stock of Spanish bank STD, vesting over the next 3 years.

Can the President Rewrite Federal Law?

by Andrew P. Napolitano, Lew Rockwell.com:
Here we go again. Is the Constitution merely a guideline to be consulted by those it purports to regulate, or is it really the supreme law of the land? If it is just a guideline, then it is meaningless, as it only will be followed by those in government when it is not an obstacle to their purposes. If it is the supreme law of the land, what do we do when one branch of government seizes power from another and the branch that had its power stolen does nothing about it?
Late last week, President Obama, fresh from a series of revelations that he kills whomever he pleases in foreign lands, that the U.S. military is actually fighting undeclared wars in Somalia and Yemen, and that the CIA is using cyber warfare – computers – to destabilize innocents in Iran, announced that he has rewritten a small portion of federal immigration law so as to accommodate the needs of young immigrants who came to the U.S. as children and remained here. By establishing new rules governing deportation, rules that Congress declined to enact, the president has usurped the power to write federal law from Congress and commandeered it for himself.
Read More @ LewRockwell.com

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In The News Today

June 21, 2012, at 9:33 am
by Jim Sinclair

It is clear that China intends to be the world center for buying and selling gold…The plus in all this for Americans is that the price of gold will be out of the grip and manipulations of the Federal Reserve and the Comex. – Richard Russell, 20 June 2012






Jim Sinclair’s Commentary

The largest investors seems to appreciate the future of gold.

Russia Buys 0.5 Million Ounces and Bank of Korea “Needs To Buy More” Gold
Today’s AM fix was USD 1,600.00, EUR 1,261.43, and GBP 1,017.17 per ounce. 
Yesterday’s AM fix was USD 1,618.75, EUR 1,274.81, and GBP 1,029.41 per ounce.
In volatile up and down trade, gold dropped for its 3rd day after Bernanke and the Fed failed to announce the latest round of QE. The Fed did expand "Operation Twist" by $267 billion and will continue it to the end of 2012, instead of expiring in June which was gold bullish.
The Russian central bank has again increased its gold reserves by 500,000 ounces.


IMF Russia Gold in Million Fine Troy Ounces (Monthly Chart)
Today, Alexei Kudrin, Russia’s former finance minister said that a full-blown economic and financial crisis in the euro zone is inevitable and will develop within a year.
Russia may be planning to give the ruble some form of gold backing in order to protect the ruble from devaluations and protect Russia from an international monetary crisis.
 

More…

 

Jim’s Mailbox

June 21, 2012, at 9:19 am
by Jim Sinclair

My Dear Friends,

When regulations exist that seem to be only on paper and not enforced in practice one of the solutions is civil litigation. Today the manipulation is so blatant that in many cases they are not dotting their Is or cross their Ts. To utilize such a route you need the best counsel, money to pay them, the will to fight and the knowledge of how. What stockholders can do is politely, but continually ask the specialists, the exchanges and the regulatory commissions to review whatever you consider a manipulative transaction or transactions. Enquiring is not one touch and run. It is to continuing your communication in a gentlemanly tone until answered or at least acknowledged. You should continue as long as required. The management of your company has an obligation to investigate any such pattern of transaction to determine the intent and if continuous, the identity of the source. Silence by the investors and the company is inviting martyrdom. That is not what you hired your management for.

Respectfully,
Jim

Dear Jim,
The Financial Media uses the word "unexpected" a lot. It’s as if they think that the drumbeat of bad economic news won’t seem as "bad" if they preface housing prices, unemployment, GDP or whatever the fiasco du jour is with "unexpected." As if anyone believes they "expected" good news from the ongoing economic train wreck we witness daily.
Here is something they NEVER preface with "expected," although they should. The so-routine-as-to-be-boring paper raids on the COMEX to drive bullion spot prices down around key events (like the monthly FOMC meeting, for one example, COMEX expiry dates for another). Anyone who cares to can mark their calendar months in advance with [raid - FOMC, or raid - CRIMEX expiry] and be correct ad-nauseum.
Today’s paper ‘smackdown’ was thus quite predictable AND "expected" (attached is a perfect example), and the game to convince the retail investors (a.k.a. the dumb money, and/or muppets) that physical bullion is bad and that today’s Fool’s Gold (paper fiat) is good continues as regularly scheduled.
Yawn…
Look at the price of Gold Bullion and how it behaved in the Weimar period. Essentially flat during deflationary collapse, then parabolic during inflationary collapse. Do you suppose the Central Bankers and their proxies then, as they do now, suppressed the price action to delay/stall for a bit more ‘time’ for the magic unicorn to somehow save them (or, as the cynic in me suggests, to position themselves to front-run what they certainly ‘knew’ was coming and Devil-take-the-hindmost (read: the dumb money)?
Regards,
CIGA Richard S.






Dear Jim,

As usual, The Central Bank of the Russian Federation updated their website yesterday. It showed that they had added another 500,000 ounces of gold to their reported reserves in May…which now sit at 29.3 million troy ounces of fine gold. The excellent chart below is courtesy of Nick Laird, for which I thank him on our behalf.
CIGA Edward P.

 

In The News Today

June 20, 2012, at 8:15 pm
by Jim Sinclair

Jim Sinclair’s Commentary

More really bad news for the US dollar. The biggest mistake ever made was using the SWIFT system as an economic weapon.

This is the formation of a BRIC Swift system and ad hoc united central bank mechanism.

China’s Central Bank Willing To Share $3 Trillion
Brazil, Russia, India and China, the BRIC countries, are back to talking about creating a unified financial system where they can avoid euro and dollar volatility.  This time, a pooling of Central Bank dollars from the countries in case liquidity dried up as the world tracks the West’s crisis momentum.
Regardless of the amount of difficulty involved, the big four emerging markets plus South Africa said earlier this week they were considering setting up a foreign-exchange reserve pool and a currency-swap arrangement in an effort to avoid any credit crisis stemming from the advanced economies.
China President Hu Jintao and other leaders met in Los Cabos, Mexico for the G20 Summit. There, according to the Chinese Foreign Ministry, the leaders discussed the currency swap and foreign-exchange reserve pool ideas with their Russian, Indian and Brazilian peers.  Hu asked the finance ministers and central bank chiefs to implement these ideas, according to a story in China Daily on Wednesday morning.
Swap arrangements give central banks the ability to lend each other money in order to keep markets liquid. The pooling of foreign-exchange reserves are contingency measures aimed at containing crises such as the one roiling the eurozone, analysts told the paper.
If, for example, oil prices collapsed to 2008 levels of around $40 a barrel from the roughly $85 today, and if oil dependent Russia was in need for a few million dollars after rummaging through its own sizeable cash account at their Central Bank, they could, in theory, borrow from China’s $3 trillion international reserves. That would give the market some confidence that Russia is not forced to wipe out its reserves, sending Russian debt costs higher as investors wonder whether a country’s “rainy day” fund is enough to handle its obligations to bond holders.
More…





Jim Sinclair’s Commentary

The US dollar has no fundamentals to carry it up on its own legs. The mirror image of the euro is no long term guarantee of US dollar strength.

Utilization demand for the dollar in international settlement is sundering, and with it the dollar must follow.

Renminbi begins to go global By Robert Cookson in Hong Kong
May 23, 2012 12:19 am
Not so long ago, international use of the renminbi was limited to cash transactions along China’s borders. Mongolian, Pakistani and Laotian traders accepted wrinkled, Mao-emblazoned notes from Chinese visitors but that was about as far as it went.
No longer: over the past three years, the renminbi has started to go global. British hedge funds buy and sell the currency at the push of a button, while corporations such as McDonald’s, the fast-food chain, and Tesco, the UK supermarket group, raise funds in the small but fast-growing renminbi bond market.
Even George Osborne, UK chancellor, is getting excited. Last month he launched an initiative to help the City of London develop into a “western hub” for the renminbi as China’s foreign exchange controls are relaxed.
While the steps so far have been small and incremental, many people believe that the renminbi could ultimately challenge the US dollar as a global reserve currency. If this proves to be correct, its ascent will have big effects on trade, investment and politics across the world.
Pierre Gave of Gavekal, a Hong Kong-based research group, predicts the renminbi will become a major currency for trade between China and its Asian neighbours in the coming years, before spreading across the world.
More…





Jim Sinclair’s Commentary

This is what paper gold cannot and will not defeat.

China takes up India’s gold buying slack Frik Els | June 20, 2012
Consumers made the most of the dip in the price of bullion and mainland China’s gold purchases via Hong Kong hit a record 101.7 tonnes in April, up 62%, according to figures released by the Hong Kong government and reported by Reuters.
Quarterly data from the Hong Kong census and statistics office showed the Middle Kingdom also exported much more gold – 34.3 tonnes of the yellow metal found its way back to Hong Kong bringing the net imports to 67.4 tonnes.
China’s imports hit a record of 102.5 tonnes in November 2011 and for the whole of last year net imports were 380 tonnes,  up from the roughly 120 tonnes in 2010.
The Wall Street Journal explains why gold is such a popular investment in China:
“Inflation [in China] is high and there is a low chance to invest in property and little desire to participate in the stock market. But disposable income is rising and people want to protect their wealth,” said Helen Lau, a senior metals and mining analyst at securities firm UOB Kay Hian.
China’s renewed appetite for gold is in contrast to India, historically the number one global importer of the metal. The number one reason for the drop-off in demand is a rapidly weakening currency.
More…





Jim Sinclair’s Commentary

Remember whenever out taking a walk outdoors, do not look up.

You are really on candid camera.

Is that really just a fly? Swarms of cyborg insect drones are the future of military surveillance By Daily Mail Reporter
PUBLISHED: 11:16 EST, 19 June 2012 | UPDATED: 12:05 EST, 20 June 2012
The kinds of drones making the headlines daily are the heavily armed CIA and U.S. Army vehicles which routinely strike targets in Pakistan – killing terrorists and innocents alike.
But the real high-tech story of surveillance drones is going on at a much smaller level, as tiny remote controlled vehicles based on insects are already likely being deployed.
Over recent years a range of miniature drones, or micro air vehicles (MAVs), based on the same physics used by flying insects, have been presented to the public.
The fear kicked off in 2007 when reports of bizarre flying objects hovering above anti-war protests sparked accusations that the U.S. government was accused of secretly developing robotic insect spies.
More…





Jim Sinclair’s Commentary

Operation twist is a joke. At this time it is a sick joke. El-Erian says the same thing in other and kinder words.

EL-ERIAN: The Fed’s New Policy Is Causing ‘Distortions That Will Take Years To Resolve’ Matthew Boesler | Jun. 20, 2012, 2:58 PM
Mohamed El-Erian, CEO of PIMCO, the world’s biggest bond fund, just published his instant  reaction to the Fed’s policy announcement in the Financial Times.
On today’s FOMC announcement that Operation Twist will be extended through year end, El-Erian says that "all the Fed will do is buy some time," and that in the interim, "collateral damage will mount, making the next policy steps even more excruciating."
Here are El-Erian’s thoughts on the likely outcome of the FOMC decision today, and specifically how it affects his business at PIMCO:
What this continued Fed activism will do is to continue altering the functioning of markets, contaminate price discovery and distort capital allocation. Already, the viability of several segments – from money markets to insurance and from pension provision to suppliers of daily market liquidity, all of whom provide financial services to companies and individuals – has been undermined. The Fed has also conditioned many market participants to believe in a policy put for both equities and bonds. And other government agencies are relieved to have the policy spotlight remain away from their damaging inactivity.
More…





Jim Sinclair’s Commentary

In my opinion today’s inaction by the Fed guarantees a systemic Western world financial crisis this year that will make Société Générale 100 percent correct.

SocGen: Gold Could Surge Over 500% Matthew Boesler | Jun. 20, 2012, 10:16 AM
Societe Generale is "enthusiastic on gold" — so much so that in their latest cross-asset strategy report, they call "buy gold ahead of QE3" their number one strategy, saying it’s "the perfect asset to benefit" from additional loose monetary policy.
In the report, SocGen discusses the historical relationship between the price of gold and the U.S. monetary base. The SocGen team writes that "if gold catches up with the increase in the monetary base since 1920 (as it did in the early 80s), its price would rise to USD 8500/Oz," adding that just "to close the gap with the monetary base increase since July 2007, gold would have to rise to $1,900/oz, assuming full transmission from the monetary base increase to the gold price."
Here is the chart showing the relationship between the price of gold and the monetary base:

More…





  

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