Stay The Course As Gold Continues Its Progressive March

June 11, 2012, at 1:25 pm
by Jim Sinclair

My Dear Friends,

In one corner we have the Exchange stabilization fund and gold banks, their brokers who are clearly in a panic to hold gold below $1600. In the other corner are many central banks elsewhere that fear the viability of their paper currency inventories. In the middle stands the speculators which are basically gambleholics who will always be in the middle of the battle getting pummeled.

Last evening was the worst nightmare of the Exchange Stabilization Fund and gold banks as gold moved up $17 in Asia, therein properly defining the situation in paper currency everywhere.

The EU had gapped up and gold had worked its way up.

The situation is so fragile for Goldman, the primary broker for the Exchange Stabilization Fund selling paper.

Gold went from plus $17 to minus $10 as it caught the notice of latent central bank physical buyers. Gold then gained $13 so far from the low.

The war is between US manipulative interests and central banks. The fiat paper system is broken to the point that depositors will not get back their funds without delay and potential discounting.

The banking system, thanks to OTC derivatives, is broken. Austerity politicians are going to be swept out of Euroland and elsewhere.

Stay the course. Gold’s targets are $1909 and $2111 on its progressive march.

The secret that the manipulators must keep quiet is that the physical market for gold is very thin on the sell side. Whatever is offered, be it 500 tons or more in manipulation from paper, has been and will continue to be taken.

As gold ticked up $17, the physical market was thin on offerings.

Bullion will top paper. The price target for gold is not below $1524 but rather over $2100.

Respectfully yours,
Jim

 

In The News Today

June 11, 2012, at 1:19 pm
by Jim Sinclair

Dear CIGAs,

Today Goldman’s commodity guru predicted gains between 20% and 40% for major commodities. He will certainly go to Bankster hell for that.

He will travel by bus and eat at Friendly’s for this prediction.

Jim



Jim Sinclair’s Commentary

You expected anything different from the representatives of the sellers of the insurance policy?

IFR – ESM loans unlikely to trigger Spain CDS Mon Jun 11, 2012 9:10pm IST
(From the International Financing Reviewwww.ifre.com)
By Christopher Whittall
LONDON, June 11 (IFR) – Credit default swaps on Spain are unlikely to trigger as a result of the 100 billion euro bail-out of the country’s banking system announced over the weekend, according to leading derivatives lawyers.
The European Stability Mechanism’s senior creditor status has led to questions over whether a subordination credit event will be triggered upon Spain receiving loans from the permanent bailout fund. In contrast to the IMF’s preferred creditor status, which is implicit rather than legally documented, the ESM’s treaty actually specifies its seniority to other creditors – a clause that some analysts reckon could trigger CDS…
More…





Jim Sinclair’s Commentary

How about China? The SWIFT system was ousted on these threats.

U.S. to exempt India, South Korea from sanctions over Iran: Congress aides WASHINGTON | Mon Jun 11, 2012 2:15pm EDT
(Reuters) – The United States will exempt India,South Korea and five other countries from financial sanctions because they have significantly cut purchases of Iranian oil, two congressional aides told Reuters on Monday.
One aide said Turkey, South Africa, Taiwan, Malaysia, and Sri Lanka would also be exempted from the sanctions.
The Obama administration is expected to announce the decision later on Monday. It means banks in the countries will be given a reprieve from the threat of being cut off from the U.S. financial system under new sanctions designed to pressure Iran over its nuclear program.
More…





Jim Sinclair’s Commentary

Human rights violations?

One New York Judge Is Holding Her Ground Against The Biggest Names In Government Michael Kelley | Jun. 8, 2012, 9:40 PM
On May 16 U.S. District Judge Katherine Forrest upheld her decision to block the controversial indefinite detention provisions in the National Defense Authorization Act (NDAA) of 2012, and the Obama Administration made a request for a more detailed explanation.
The defendants — Barack Obama, Leon Panetta, John McCain, John Boehner, Harry Reid, Nancy Pelosi, Mitch McConnell and Eric Cantor — argued that the order only stopped the government from indefinitely detaining the journalists and activists who brought the lawsuit.
But Judge Forrest has now clarified the injunction in a 8-page memorandum released Wednesday so as to "leave no doubt" that U.S. citizens cannot be indefinitely detained without due process.
(She did allow the section of the NDAA that authorizes the government to indefinitely detain “those who planned, authorized, committed, or aided in the actual 9/11 attacks.”)
The plaintiffs argued that the law was overly vague and that it violated the First (i.e. free speech/press) and Fifth (i.e. due process) Amendments.
More…





Jim Sinclair’s Commentary

The ISDA (International Swaps and Derivatives Association) remains the most powerful financial arbiter on the planet. Can you imagine a mess so great that an arbiter of the financial mess is the mess maker themselves who has to make it look good, or the entire system collapses?

This dream financial world will not continue too much longer. Soros gives it 3 months. I think he might be more correct at 3 weeks. That is why there was such panic to hold gold from appreciating last night and our early morning.

IFR – ESM loans unlikely to trigger Spain CDS Mon Jun 11, 2012 4:40pm BST
By Christopher Whittall
LONDON, June 11 (IFR) – Credit default swaps on Spain are unlikely to trigger as a result of the 100 billion euro bail-out of the country’s banking system announced over the weekend, according to leading derivatives lawyers.
The European Stability Mechanism’s senior creditor status has led to questions over whether a subordination credit event will be triggered upon Spain receiving loans from the permanent bailout fund. In contrast to the IMF’s preferred creditor status, which is implicit rather than legally documented, the ESM’s treaty actually specifies its seniority to other creditors – a clause that some analysts reckon could trigger CDS.
There have been subsequent reports that Spain’s emergency loans may be funneled through the temporary bailout fund, the EFSF, before the ESM becomes into force in July to avoid a potential credit event. Such measures may prove unnecessary, though, as derivatives lawyers have cast doubt on the possibility of ESM rescue money triggering CDS.
"I can’t see any basis on which this would constitute a subordination credit event as it doesn’t change the terms of the claims held by the other creditors," said Simon Firth, a partner in the derivatives practice at Linklaters.
"It’s actually impossible to have a restructuring credit event based subordination without something that affects the rights of existing bondholders. In the absence of some kind of agreement or change of law, then I don’t see anything that will [do that]," said Firth.
More…





Jim Sinclair’s Commentary

Monti, how about in 3 weeks? Merkel will sign on when push comes to shove.

Monti Says Joint Euro Bonds Needed ‘In a Not Very Long Time’ By Jeffrey Donovan and Chiara Vasarri – Jun 7, 2012 9:12 AM GMT-0300
The 17 members of Europe’s single currency should start jointly selling debt and find ways for the region’s banks to boost capital without burdening their national governments, Italian Prime Minister Mario Monti said.
Speaking by video link to a conference in Palermo, Monti said that euro bonds should be adopted in “a not very long time.”
The debate over debt sharing has exposed differences among the leaders of Europe’s biggest countries as they try to devise a common strategy to reduce borrowing costs. Chancellor Angela Merkel said on June 3 that “under no circumstances” would she agree to have Germany back euro bonds, while French President Francois Hollande and Monti have embraced the possibility of common debt.
It’s important that the proposal “remain on the table” and that it doesn’t become “an instrument of division between countries that must find a consensus rapidly and demonstrate their cohesion,” Monti said.
Monti is seeking to help broker a common strategy by hosting a meeting in Rome with Merkel, Hollande and Spanish Prime Minister Mariano Rajoy on June 22.
The euro area needs a deeper fiscal and financial union that would include regional oversight of lenders and collective bank deposit guarantees, the Italian premier also said.
“ We need to quickly act to put an end to the vicious circle between the vulnerability of the banking sector and the sovereign debt crisis,” he said.
More…

 

 

One on One with Paul Craig Roberts

June 11, 2012, at 1:11 pm
by Greg Hunter

By Greg Hunter’s USAWatchdog.com

Dear CIGAs,
There has been plenty of calamitous news surrounding the European debt crisis.  Greece is insolvent.  Spain just got a big bank bailout, and Ireland wants a new bailout deal.  No matter how bad it looks in the EU, Paul Craig Roberts says the problems in Europe are “nowhere near as big as the ones here.”  The U.S. is printing massive amounts of money to paper over the mess, but it won’t work.  Roberts says a collapse of the U.S. dollar could happen at any moment.   It could be triggered by any number of things such as war or a derivatives meltdown.  When a former Assistant Treasury Secretary (under the Reagan Administration) and a PhD in economics sounds the alarm bell, people should take cover.  Dr. Roberts says, “The cliff dive we are experiencing in housing isn’t over,” and precious metals prices are “being suppressed.”  Roberts says, “Gold prices should be rising.  Why? Because the debt is rising.”   What is the reason why Dr. Roberts thinks the suppression game has gotten so intense?  Dr.  Roberts says, “The fact that they are driving the price down suggests to me the situation is getting more desperate.”  Greg Hunter interviews Paul Craig Roberts one on one about these subjects and more.

More…

 

Jim’s Mailbox

June 11, 2012, at 1:11 pm
by Jim Sinclair

Jim,

There is a historic experiment underway at the US Federal Reserve, and the US economy is the test subject. In response to the severe recession in 2008, Federal Reserve Chairman Bernanke initiated an unprecedented liquidity operation that continues today. As a result, during the last four years, the monetary base has expanded by more than 200 percent.


Chairman Bernanke has spent most of his career in academia, during which he studied the Great Depression of the 1930s and 1940s. As a result, he is terrified of deflation and he would prefer any other type of economic environment. He has stated in no uncertain terms that his objective during the last few years has been to inflate risk assets such as stocks in an attempt to spur a “virtuous circle” of economic growth. In one sense, the program is been a success, as the US stock market has moved sharply higher in response to the monetary stimulus programs.

The problem is that there is no meaningful statistical correlation between stock market gains and economic growth. Therefore, the market gains fueled by these programs tend to be transitory and vulnerable to the types of violent corrections that we have experienced since 2010. Even worse, the liquidity operations are creating massive structural imbalances and there is no known method to eliminate those imbalances without causing extreme economic disruptions. Consider the inflationary consequences of current monetary policy. The following graph from a recent commentary at the Hussman Funds website displays the relationship between the 3-month Treasury bill yield and liquidity preference.

“Currently, the U.S. monetary base amounts to 17 cents per dollar of GDP – a level that is consistent with contained inflation only if short-term (3-month Treasury) yields are held below about 10 basis points. Think of it this way. The willingness of people to hold a given amount of base money, per dollar of nominal GDP, is intimately tied to the rate of return that they could get on an interest-bearing security. Higher interest rates reduce the demand for zero-interest cash. So if there is upward pressure on interest rates, and the Fed leaves the money supply alone, how do you reach equilibrium? Simple – nominal GDP becomes the adjustment variable. If there’s not enough real GDP growth to absorb the excess base money, prices rise to do the job.
Likewise, expanding the amount of base money per dollar of nominal GDP puts downward pressure on Treasury bill yields and short-term interest rates, but really only if there are no inflationary pressures in the system. Clearly, if inflationary pressures are present (suggesting that the monetary base is already too large), an expansion in the monetary base won’t produce lower interest rates. Rather, it will accelerate those inflationary pressures as nominal GDP is forced to keep up with the monetary base – even if real GDP isn’t growing at all. All hyperinflations are built on this dynamic.”
Of course, Chairman Bernanke is confident that the Federal Reserve will be able to eliminate this massive monetary imbalance in a way that will prevent a debilitating surge in price inflation. The trillion dollar question is how? No such rebalancing operation on this unprecedented scale has ever been successfully undertaken in the history of the modern central banking system. Additionally, as an academic who has spent a lifetime focusing on economic theory, Bernanke has a tendency to expect markets to behave in well-defined manners and his exit strategy will undoubtedly be based upon that fundamental premise. Unfortunately, when market forces ultimately move to restore balance to the system, they will likely do so with an unforeseen speed and ferocity, leaving the Federal Reserve well behind the proverbial curve. At some point, several years from now, balance will be restored, setting the stage for the next structural expansion, but getting there will invariably involve significant economic turbulence and hardship.

Best Regards,
Erik McCurdy
Senior Market Technician

Prometheus Market Insight 1122 E Pike St #1194
Seattle, WA 98122
425.457.3559
www.prometheusmi.com





Hello Jim,

I was just wondering how gold would react if this was implemented and on the other news that The Basel Committee for Bank Supervision (or BCBS) is considering making gold a Tier 1 asset for commercial banks with 100% weighting rather than a Tier 3 asset with just a 50% risk weighting as it does today.
We live in interesting times.
Thank You,
CIGA Robert

Dear Robert,

That puts a very high floor under gold. That is one of the reasons the manipulators could not keep gold down today.

This will happen because the banks need the tier one asset category on anything, and fast. They would be happy if bubble gum was deemed a Tier 1 asset.

Jim

Spain’s bank rescue won’t solve all Europe’s problems CIGA Eric
The message of the market, particularly the action in the US bond market, told us this much early into the trading session.  QE to infinity accompanied by stagflation and localized economic contractions maintains social order longer than an interconnected and highly-correlated, worldwide depression.
Headline: Spain’s bank rescue won’t solve all Europe’s problems
WASHINGTON – A $125 billion plan to rescue Spain’s banks won’t solve Europe’s debt crisis or ease the pain of double-digit unemployment across the continent. Initially, the rescue plan boosted financial markets around the world. But the euphoria quickly faded. Europe still has plenty of troubles to address in the three other countries that have already received financial help: Greece, Portugal and Ireland. In Greece, voters could elect a government next week that will refuse to live up to the terms of the country’s $170 billion rescue package. Portugal is combating a toxic combination of high debt and 15% unemployment. Ireland is cleaning up a banking mess a lot like Spain’s. And in Italy, the eurozone’s third-largest economy, government debt is piling up as the economy stagnates. "We still have some pretty fundamental problems to solve," says Nicolas Veron, senior fellow at the Bruegel think tank in Brusssels. "We need more radical solutions than this one."
Source: usatoday.com
More…

 

Jim’s Mailbox

June 11, 2012, at 6:38 am
by Jim Sinclair

Dear Jim,

It looks like it’s too late for the people we warned here so many times.
I have used Google translator below.
Regards,
CIGA Luis

Network Bank stopped payments, customers furious
Stop the transaction until July for the crisis of the institution.
The website of the Bank Network.
Network Investment Bank has suspended payments, causing great inconvenience to customers. STOP FOR A MONTH. The institute, in receivership since last November, announced that on May 31, the commissioners, "with the approval of the Monitoring Committee and with the approval of the Bank of Italy, have decided to suspend the payment of liabilities of any kind ‘for a month. The stop, communicated through the website of the bank, does not include client financial instruments. It was emphasized that "the measure was needed to tackle the difficult situation of the bank. angry depositors. To the rescue – in the few lines we read online – have stepped forward and the group Sim Consultinvest Savings Bank of Ravenna, but in the meantime, depositors are furious . For all spoke Massimo, police in Milan with his wife and two daughters in Messina: "Nobody told me anything and today (June 4), when I went to pay the mechanic, the ATM was not working. Even the credit can do. ‘ "MI HAVE REMOVED THE MONEY." "Actually," he added, "I have taken my money. In the book I have only 20 euros in cash and the escrow account where the salary is credited to me, how do I make ends meet? ". And to think that Bank Investment Network has as shareholders the names of the first floor of the financial world: Aviva Banco Popular De Agostini and Sopaf. "GUESTS OF PERSONS FINANCIALLY ADVANCED." The customers of Bank Network, financial sources have noted, is composed largely of the "financially sophisticated individuals" able to understand the situation and wait for the definition plan of action by the group and Sim Consultinvest Savings Bank announced the release of Ravenna as special commissioners
Link to original article…

 

European Collapse Hedge Return: +25% In One Day; 48,586,180,011% Annualized

On Friday afternoon Zero Hedge brought the world's attention to a press release from a little-known company, that virtually nobody caught, one issued by Canadian company called Fortress Paper, which announced that "its wholly-owned subsidiary, Landqart AG, a leading manufacturer of banknote and security papers, has had a material banknote order reinstated. This order was unexpectedly suspended in the fourth quarter of 2011 which negatively impacted the financial results of Landqart's operations in the first half of 2012." Our simple conclusion was that "if the chart of De La Rue is any indication of how banknote printers respond to potential European disintegration, it just may be that the best hedge to a VIX soaring to 80, aka "disorderly Grexit" as explained earlier by Citi, just may be TSX:FTP." Below is the chart of TSX:FTP since our 1pm on Friday. The stock is up 25% since our post, and roughly 48,586,180,011% annualized based on today's action alone. Not a bad hedge to a "disorderly Grexit."

 

ISDA Says No CDS Trigger On Subordination

And just as ISDA was starting to become somewhat credible again, we get this from Bloomberg:

• Spanish CDS Trigger Unlikely on Subordination, Says ISDA *Dow Jones

So..... Subordination? Thank you ISDA for confirming that the true reason of today's sell off has now been enacted.

The Spanish Bailout In Context

In the context of the last 20 years of banking crises, the #Spailout would rank in the middle on the basis of cost relative to GDP. Despite all the talk of its size relative to some self-diagnosed capital needs, we wonder if EUR100bn is enough, and as JPMorgan's Michael Cembalest notes: given conditions in Spain, it might need to be higher. Other reservations include the implied subordination of government bondholders, since the EU presumably sees itself as a preferred lender to the Spanish government - which ha snow been pretty much confirmed by ISDA. Spain’s private sector is still in tough shape, so Spain may still have to opt for a sovereign rescue package in excess of EUR300 billion this year or next. In any case, this latest step does not otherwise change the cautious view the JPM CIO has on Spain given low growth, inter-regional capital flight and rising debt burdens across the Periphery.

The Solution To Too Much Debt Is Not More Debt!

Admin at Jim Rogers Blog - 2 hours ago

The solution to too much debt is not more debt! This is most insane thing I’ve ever heard. It’s going to make the collapse, when it comes even worse – be careful. No, don’t be careful. Be worried. - *in CNBC* *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.*

 

 

US Treasuries Bubble Will Burst

Admin at Marc Faber Blog - 2 hours ago

If you me asked about the Nasdaq in December 1999, I would have said this is the biggest bubble ever. And yet the Nasdaq continued to go up 30 percent until March 21 2000, and then what happened and how have these people faired since they invested in the Nasdaq in the final months of 1999 and early months of 2000? It's been a disaster. And I think the government bonds bubble will also burst, but I don't know if it's tomorrow or in three months. I suspect actually maybe sooner than later, because the consensus is now buy US government bonds. - *in Business Insider * * * *Related: iSh... more » 

American Dream Now Fantasized In Mandarin

For years some of us have been preaching that the so-called American Dream, if it once existed, was then appearing as nothing more than a myth. Ronald Reagan, touted as the great communicator, articulated this myth quite well making most everyone feel hopeful and proud, while at the same time spreading the most perverse moral disease that can confront any modern day society: the cult of inequality – an inevitable result from the infamous trickle-down economics and the homage to greed. And, for three decades, that’s what we have been living in the United States: a morbid growth in inequality either sponsored or condoned by the leadership in the White House, all following in Reagan’s footsteps: the two Bushes, father and son; Bill Clinton; and now, our fizzle-savior, Barack Obama. The truth is that Americans have been fed by both parties the Great American Lie, while at the same time being humored with the placebo of the American Dream.

Spirit Level... Or Li(e)bor?

Wait, this can't... Europe is imploding, the world economy is crashing, and the Spanish banking sector has failed, and the BBA is telling us that in over 3 months Libor has moved by at most... 3 bps, has actually been unchanged for weeks and weeks on end, and has been used by construction workers in the place of a spirit level?

Market Responds To Latest AAPL Product Cadence*

While much was made of WWDC with wall-to-wall media carpeting of the event, it seems the sad reality of a new laptop with more memory and screen that needs it own Lasik Surgery procedure to read it is just not enough to support the AAPL share price. The exuberance over a cross above the 50DMA does not seem as celebrated as we cross back below it.

Eurosis For Dummies - A Timely Reminder

Where does the money for the bailouts come from? All the governments in Europe including Greece, Italy, and Spain.
And who is allowed to receive money from it? All the governments in Europe including Greece, Italy, and Spain.
How can that possibly work? It can't, but Europeans like bad ideas that sound nice!

RANsquawk US Market Wrap - 11th June 2012

Submitted by RANSquawk Video on 06/11/2012 - 15:21 RANSquawk



 

We The Sheeplez... is intended to reflect excellence in effort and content. Donations will help maintain this goal and defray the operational costs. Paypal, a leading provider of secure online money transfers, will handle the donations. Thank you for your contribution.

I'm PayPal Verified