Huge Stimulus Fast And An End To The Fed/Legislative Standoff

August 23, 2012, at 1:45 pm
by Jim Sinclair

Dear CIGAs,

Stay the course! 
The current pressure  on gold shares by hedgies is because Romney says, if elected, he will fire The Bernank and will not want to see QE 3.
Now what impact does that have to have on The Bernank? I would say he now really wants to see obama elected. That speaks very well for huge stimulus fast and an end of the standoff between the Federal Reserve and the US legislative.
The hedgies hate gold so they interpret Romney’s statement bearishly. In truth it is the opposite, bullish for gold.
The Bernank has been considered good for the dollar up to now as much as that is mistaken.

Regards,
Jim

Republicans Consider Returning To Gold Standard: Real Or Red Herring?

Stranger than fiction perhaps but the FT is reporting that the gold standard has returned to mainstream US politics for the first time in 30 years with a 'gold commission' set to become part of official Republican party policy. While this could simply be a reach for as many Ron Paul marginal voters as possible (with the view that the GOP would never really go for it); it appears drafts of the party platform from the forthcoming rain-soaked convention call for an audit of the Fed and a commission to look at restoring the link between the dollar and gold. The FT, citing a spokesperson, adds that "There is a growing recognition within the Republican party and in America more generally that we’re not going to be able to print our way to prosperity," but "We’re not going to go from a standing start to the gold standard," although it would provide a chance to educate politicians and the public about the merits of a return to gold. Interestingly, the Republican platform in 1980 referred to "restoration of a dependable monetary standard", while the 1984 platform said that "the gold standard may be a useful mechanism."

JPM's London Whale May Face Jail Time For Mismarking Billions In CDS

When first the speculation and subsequently the confirmation that in addition to suffering massive losses on its IG-9 position, JPM had engaged in massive, reckless and criminal CDS mismarking with the intent to defraud and to boost the appearance of profit for selfish reasons, we promptly concluded that "Jamie Dimon's "tempest in a teapot" just became a fully-formed, perfect storm which suddenly threatens his very position, and could potentially lead to billions more in losses for his firm." So far, the regulators which are currently on page two of "CDS for Absolutely Corrupt Criminal Morons", are only slowly catching up. And while the stench will eventually lead to Jamie, as what happened in the over the counter, unregulated CDS market has most certainly happened at the tens of trillions in other OTC products traded by JPM, most of which are IR swaps, tying it all back nicely to the Libor scandal of which JPM is also a part, the first person who will certainly experience some major pain as the JPM scapegoating plays out, is none other than the London Whale himself Bruno Iksil, who was loved by all at JPM when he was making money, and is now being hung out to dry, once the bank is in the prosecution's cross hairs.

Asia posts disappointing PMI followed by Europe/Poor Confidence numbers from Germany/

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 4 minutes ago

Good evening Ladies and Gentlemen: Gold closed up smartly again today to the tune of $32.20 finishing the comex session at $1669.60. Silver also had a good day closing at $30.45 up 90 cents. In the access market at 5 pm: gold:  $1670.50 silver: $30.58 Today started off with a bang with the poor PMI out of China for a three year low. It's readings are below 50 which means contraction of the

China Has Become One Big "Stuffed Channel"

Zero Hedge covered the topic of automotive channel stuffing long before it became a conversation piece, particularly as it pertains to Government Motors, a story which has recently taken precedence after being uncovered at such stalwarts of industry as German BMW and Mercedes, implying the German economic miracle may, too, have been largely fabricated. Another core topic over the years has been the artificial and inventory-stockpiling driven (in other words hollow) "growth" of China's economy, whose masking has been increasingly more difficult courtesy of such telltale signs of a slowdown as declining electricity consumption and off the charts concrete use. It was only logical that the themes would eventually collide and so they have: the New York Times published "China Besieged by Glut of Unsold Goods" in which, as the title implies, it is revealed that China is now nothing more than one big "stuffed channel."

Equities Plunge Most In A Month As Gold And Treasuries Extend Gains

Volume? Check. Spanish Spreads wider? Check. Maria B Saying "Wall-of-Worry"? Check. Sure enough, all the pieces were there for a sell-off today as the S&P saw its largest drop in a month as volumes have resurged in the last three days (of fading markets) and average trade size has gradually fallen from its peak (at the multi-year highs on Tuesday). Cross-asset-class correlations picked up notably and equities caught down to risk-assets (after yesterday's 'rally'). VIX rose once again - back above 16% - with the biggest 3-day rise in a month. Gold has rallied 1% per day for the last three days (something we haven't seen since OCT11) up near $1675. 10Y Treasury yields have now dropped 5 days in a row (something we haven't seen since APR12), down over 20bps from their highs/200DMA. Oil stumbled on the day, now down 0.3% on the week, even as Silver is up almost 9% on the week (and Gold 3.3%) - even as the USD is down 1.4% on the week (leaking lower still on the day after its gap overnight). Materials underperformed by the most today (which smells like QE-off) and was followed by Energy and Financials. Stocks underperformed (though HYG was modestly bid - we suspect on convergence trades) as stocks caught down to credit once again.

Donations will help maintain 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
 

The Most Important Chart In TheWorld

In a nutshell, charting this ratio demonstrates the 'real' return on stocks adjusted for inflation or currency debasement.  As we all know, the Zimbabwe stock market essentially went up to infinity during their hyperinflation but did anyone get rich from that?  Of course not, the shares were denominated in a currency that was on its way to worthlessness. The key thing with the Dow/Gold chart is that it perfectly mimics the various social moods and massive secular trends that exist in the economy over very long periods of time.  It is just as effective in periods of deflation as in inflation in telling you the true story. In both of the prior two periods (one deflationary and one inflationary) the DOW/GOLD ratio got down to about 1:1.  It has been our contention for many years that we will see that same ratio once again.  That would imply another roughly 75% drop in stocks to gold and Mike Krieger expects that this next leg is beginning now.

Euro Gold closing in on its All Time High

Trader Dan at Trader Dan's Market Views - 17 minutes ago

The following chart reveals the strength of gold when priced in terms of the Euro Currency. Notice that it has been steadily working higher and is within striking distance of an overhead resistance level coming in just shy of 1350. If can push through this level, it should be able to match or exceed its all time high. It has been in a consolidation pattern since late last year but with a definite higher bias as can be seen from the series of higher lows riding along the lower red support line. Notice that mini-trend higher has accelerated since April of this year. 

 

Follow-up To Yesterday

Dave in Denver at The Golden Truth - 29 minutes ago

*“Whether it be gold shares on their own, compared to gold, versus bonds or versus the stock market, gold shares are rising from the dead.” *- Aden Sisters, sourced from Peter Brimelow's Marketwatch column (link below). Gold is up about another $30 from when I published yesterday's post. I never assume that we'll get a move like that in 24 hours, but I know that we have days ahead of us in which gold will move $100 or more. Gold is up nearly $150 in just over the last 62 hours. Yesterday I posted a 3-yr weekly chart. I thought it might be interesting to look at an even "bigger... more » 

 

Gold Daily and Silver Weekly Charts - Hard into Resistance

SP 500 and NDX Futures Daily Charts - Profit-Taking Down to Support

Silver Tacks on the "30" Handle

Trader Dan at Trader Dan's Market Views - 3 hours ago

Short Covering from panicked speculators has led to a sharp rise in silver prices that is also drawing in new buyers who chase momentum. Note that hedge funds while remaining net longs, had also begun playing silver from the short side as the European sovereign debt crisis had most investors looking at the slowing economic growth environment as one in which to short both copper and silver. Yesterday's change of wording in the FOMC Statement sent shock waves through the shorts who ran like hell setting the stage for a signficant amount of technically related buying in today's sessio... more » 

 

Video: If You Really, Really, Really Want to Get Rich ...

Admin at Jim Rogers Blog - 4 hours ago

*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.*

What's Spooking US Financials?

Since just after the open on Tuesday, the major US financials have decided that they will not go Bove-like to the moon and in fact have fallen back quite notably. As European pain has re-emerged, of course, its Margin Stanley that is hurting the most (-5%) but the rest are down 2.5 to 3.5%. It seems once again that the major financials' stocks have got ahead of themselves (both relative to the market and their CDS).

On Economic Deceivers And Propagandists

The purpose of the list is to expose current partisan debate as corrupt and off-point. Economic policy makers across the political spectrum, including some commonly labeled “extreme” by more centrist politicians, are unwilling to acknowledge that fractionally reserved banking systems are the true source of the past generation’s credit build-up, the economic malaise it necessitated, the growing economic hardship it is creating, and the inescapability from deteriorating economic conditions through conventional policy means. The list challenges American policy makers to publicly identify and make illegal fractional-reserve banking, and further challenges them to lead the world in adopting sound money and credit practices that returns economic power to global economic actors following commercial rather than financial incentives.

Why In America It Pays To Be An Old, White, Widowed, Native-Born Female; Everyone Else Is Out Of Luck

As the 2012 presidential candidates prepare their closing arguments to America’s middle class, they are courting a group that has endured a lost decade for economic well-being. Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some—but by no means all—of its characteristic faith in the future. These stark assessments are based on findings from a new nationally representative Pew Research Center "Fewer, Poorer, Gloomier" study and we present the only two charts that matter now.

Santelli Exposes The Political Fed Behind The Curtain As Romney Makes Bernanke A Target

UPDATE: Added Romney's Bernanke-Busting Clip
With Romney's comments (that QE2 didn't work, that he doesn't back QE3, and that Bernanke should go) somewhat cornering the Fed-Head's decision-making, CNBC's Rick Santelli's comments this morning are even more prescient. The Chicago truth-sayer vociferously noted the increasingly politicized Federal Reserve actions, highlighting Schumer's recent 'demand' that Bernanke do his job. With Bullard this morning noting that muddle-through was not enough to justify the size of QE3 the market seems to be anticipating, it appears any actions by the Fed in the near-term can only be seen as political. The only way to justify any sizable NEW QE is then surely for the market to crash - and with Spain's no-bailout-soon, and Merkel back in the headlines, who knows what's possible. One thing is certain: under Romney the country will need a Fed Chairman. And if it is not Bernanke, despite Glenn Hubbard's promises yesterday, one very likely name will be Hubbard's close friend and co-author: Goldman's Bill Dudley, who now runs the NY Fed. One wonders which choice will be worse for the country (if not for gold longs) - the Chairsatan or Bill Dudley? Of course, look for Obama to retaliate and promise to para-drop dolla dolla billz if elected. Critically, the wizened ex-Gold trader Santelli notes the precious metal knows this and is acting as a barometer of anxiety in this stand-off.

Perfectly Irrational Market Slides On News Spain Actually Not On Verge Of Default

Within seconds of the non-news headline (via Bloomberg) hitting:
*EU SAYS IT'S NOT EXPECTING SPAIN AID REQUEST 'ANY TIME SOON'
The S&P 500 is crumbling, Oil is plunging, and EUR is selling off

5 Year TIPS Price At Record Low -1.286%

Think NIRP is only allowed in select European countries. Moments ago the US Treasury sold a whopping for the series $14 billion in TIPS. The yield? A record low -1.286%, courtesy of TIPS being the only US debt instrument allowed to price at a negative yield (but not for long: JPM's new head of the London CIO divison Matt Zames who is also head of the TBAC is working hard at getting negative yields legalized across the board). The first time the Treasury sold TIPS at a negative rate was back in 2010, when it priced $11 billion at -0.55%. The comment back then: "It signals people’s expectation of the Fed being able to create some inflation with the QE program,” said Alex Li, an interest-rate strategist in New York at Deutsche Bank AG, which as a primary dealer is required to bid at Treasury auctions. “With nominal rates so low, in order have high TIPS breakevens you’ve got to have negative real yields on the five-year." It didn't then. It won't now. Of course, if the CPI were actually adjusted to reflect reality, then TIPS would be the best investment imaginable. As it stands right now, it will likely keep losing money until such time as the CTRL and P keys are finally superglued in the on position.

Donations will help maintain 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