Beginning Of The Ending Sequence

Posted June 27th, 2015 at 7:22 PM (CST) by Jim Sinclair & filed under Bill Holter.

Dear CIGAs,

This coming week could be very telling. China just ended a disastrous week and finished just whiskers away from entering bear market (-20%) territory  http://www.zerohedge.com/news/2015-06-27/chinas-370-billion-margin-call. Credit markets all over the world are weakening and yields are rising. Greece will not make their June 30 payment(s) and probably go through a referendum to decide whether or not to flip their creditors the bird in a meaningless vote. In fact, Greece will probably "go boom" this week. Their banks and stock markets may not open Monday morning http://www.zerohedge.com/news/2015-06-27/greek-stock-market-may-not-open-monday-greek-officials-warn. Two days later, some sort of plan will need to be concocted to classify their bankruptcy as not a "DEFAULT", otherwise a $3 trillion fuse to a $1.4 quadrillion bomb will be lit! These and more will be very important "mid-term exams", any failure will bleed over into derivatives and become "final and terminal exams" with zero chance of a passing grade!
We have all heard about the Greenspan, Bernanke and now the Yellen "put".
It has been believed (and for good reason), the Fed would step in and save the stock market should it begin to buckle. Magically, and time after time as the stock market would hit critical levels, panic buying would appear.  This has been written about many times by many authors. Would the Fed really buy stocks or even indices? I would ask, "why wouldn’t they, it is actually even legal" after the plunge protection team was created in 1988. This is not conspiracy theory, it is FACT! All one needs to do is look at the Bank of Japan, they openly buy stocks and even seem proud of it!  As for equities, please ask yourself these questions. How "sound" is a stock market that makes continual new highs on lesser and lesser volume? http://www.zerohedge.com/news/2015-06-27/bad-breadth-milestone-warning-stocks If you are a large holder, are you bigger than the available exit? What if everyone at once took Ms. Yellen up on her "put offer"?
Another area where Fed buying looks to be very important is in our credit markets. Unless they step up with some serious buying, and soon, our 10 year Treasury yield will take out 2.5% to the upside. U.S. Treasuries and their "value" are what act as collateral or foundation for everything the world "believes in". Before going further, I do want to mention another aspect of the ultra low rates we live with. When rates are 10%, a 100 basis point move is only 10%, when rates are 2%, a 100 basis move is 50%!  In other words, movements in interest rates when rates are low have a hugely magnified impact. When rates rise, collateral "shrinks" very rapidly from a low interest rate base which means margin calls are more rapid and bigger in amounts. Higher rates will make insolvencies that much more likely and will then occur "systemically".
This topic was suggested to me by Jim, as he put it, I believe this chapter will be described as "The Phantom of the Fed Put revealed." Please understand what is meant here. There is a "confidence" all over the world in not just the Fed but in ALL central banks. This is a misplaced confidence because the markets themselves are far larger than any single central bank or even ALL of them collectively. Yes, The Fed can push, pull, support and suppress …for a time. They cannot stop a broad tide from going out or prevent a tsunami from coming in over a long time frame. The current timeframe is six years, A LONG time for us Westerners, might as well be six days for those from the East. Does a Fed (central bank) put really exist? Or is it only the "belief" a put exists?
My point is this, the only thing holding markets together is confidence …and the only thing keeping confidence from being shattered is the belief central banks are and will provide a "free put" to all markets. Take the three examples I started with up top. If the Chinese market continues to implode, what will that say about the abilities of the PBOC? Or when Greece defaults and triggers others, what will that say about the ECB or IMF? Were Treasury yields to rise through 2.5% amongst the other turmoil, what will that say about the "safe haven" status of Treasuries and thus the dollar?  It will be a reflection of Fed impotence. The skeptics who say "they will do this forever" …can say what they say at their own peril!
Let me finish this with the BIG BAZOOKA. I am sure you remember Hank Paulson talking about $700 billion TARP as a bazooka? The reality is this amount will not even be a spitball this next time around. There are over $1.4 quadrillion worth of notional value derivatives outstanding. The apologists say "notional" value has no meaning, it is only the "margin" that counts. They are correct during "normal times". Normal times being defined as being "trusted enough" and being able to breathe. Seriously, if you can breathe today you can borrow money. What comes next is a change of thought and a massive phase of global distrust. When trust and confidence break, "margin call" will become a familiar term to nearly all.
This you MUST understand, when trust evaporates, credit will cease entirely. Without credit, the world will stop spinning. Everything finance and many things real will be gone. The financial house cannot stand with a worthless foundation and distribution of real products will cease as the supply chain breaks. Over $1.4 quadrillion in derivatives is a larger number than "everything is worth" …not to mention far larger than the money supplies to settle the trades or put up the margin. You see, "putting up the margin" will equate to 100% of all these contracts because in default …notional and real value are one and the same! Settlement is not an option! It is this $1.4 quadrillion margin call that hangs over the entire system each and every day. Margin calls are almost never issued into calm. They are almost always issued into panics and by definition ALWAYS at the wrong time! The only way to shed all margin is to get G.O.T.S.!

I have said all along and stand by my statement "when this thing gets lit, it will only take 48 hours to engulf everything". If this is truly the "beginning of the ending sequence", many markets will go no bid while a couple will go no offer! Meaning you will have what you and that’s all you will have… I leave you with this horrible thought for the weekend. How better might $100 be spent? A nice dinner with your spouse or on 200 lbs. of parboiled rice?

Regards, Bill Holter
Holter-Sinclair collaboration
Comments welcome! bholter@hotmail.com

Collapsing CDS Market Will Lead To Global Bond Market Margin Call

Submitted by credittrader on 06/28/2015 - 16:00 As we previously noted, liquidity is there when you don't need it, and it promptly disappears once it is in demand. Consider it "cocktease capitalism." If liquidity lasts longer than 4 hours, call the CFTC because you may be experiencing a spoof. Right now, the ultimate spoof is setting up as the credit default swap market collapses, and a global bond market margin call is just around the corner.

Ahead Of The Open: Deer In Headlight "Traders" Pray For The Plunge Protection Team To Arrive

Submitted by Tyler Durden on 06/28/2015 - 15:44 Reasoned market analysis will have to allow for stop losses getting off-side -- or panic-struck or trying to be prudent -- traders back to neutral, the potential consequences of the markets desks of every major central bank being on high alert and prepared to act (“plunge protection teams,” to use the vernacular of the financial crisis), as well as the frustrating reality of it being Sunday evening, which means markets will open ad seriatim and only slowly.

EURUSD Opens Down 150 Pips, Breaks To 1.09 Handle

Submitted by Tyler Durden on 06/28/2015 - 15:26 Contained-ish...

Goldman Explains Who Gets Stuck With The Bill When Greece Leaves The Party

Submitted by Tyler Durden on 06/28/2015 - 15:10 "More cynically, if a default of bank liabilities is inevitable, it may deem it better to ensure that domestic claimants on Greek banks switch into hard 'convertible' Euro banknotes (or offshore accounts), leaving the residual claimants (the ECB which has provided ELA funding) to take the loss.

The Test Of Central Bank Omnipotence May Be Upon Us

Submitted by Tyler Durden on 06/28/2015 - 14:30 Over the last few months the financial media has not only turned deaf ears to the drama, (out of boredom) they have also blindly discounted any contagion effects as “isolated” at best – relative periphery contagion at worst. In other words: Any and all problems can be contained, mitigated, or solved by none other than your friendly neighborhood Central Bank. After all, if you listen to the so-called “smart crowd” these bankers have powers even Zeus would envy. So why worry about a little turmoil at the foot of Olympus? In any hero-worship endeavor one thing must remain constant or it all falls apart. Those that worship can never witness any event regardless of how minor: that the gods are not all that they portend to be. In other words: Allow just one moment of truth to be witnessed showing frailty instead of omnipotence – and the whole ruse falls regardless of the size and strength of the monuments and temples built to honor. For they will be abandoned: sometimes slowly, at others - all at once.

Germany To Tourists: If You Go To Greece, Bring Plenty Of Cash

Submitted by Tyler Durden on 06/28/2015 - 13:50 With the ATMs running on empty and the banks set to be closed for a week, the German foreign office has some advice for anyone traveling to Greece...

The ECB Suddenly Has A Huge Headache On Its Hands

Submitted by Tyler Durden on 06/28/2015 - 13:25 As that €126 billion or so of total ECB/Eurosystem claims on Greek banks were "charged off" in case of a terminal Greek "event" then the entire ECB capital buffer would also be wiped out, leaving the ECB with negative equity. Translated: dear Eurosystem members: we need more cash.

Democracy Is Dangerous - It's Not For Greek Grandmas

Submitted by Tyler Durden on 06/28/2015 - 13:20 After perusing a thousand views and pieces, many on the inevitable topic of ‘Da Referendum’, there is this huge divide between what a simple vote can and should be, and how it is perceived and presented, and this has left us wondering what causes the divide. Case in point, Bloomberg has a piece called “Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair”. The implied connotation being that asking grandma about anything other than knitting patterns and souvlaki recipes is asking for trouble. What does she know? Politics should be decided by politicians. Well, and bankers of course.

"Artificial" Phantom Liquidity Will Disappear In "Adverse, Turbulent" Markets, BIS Warns

Submitted by Tyler Durden on 06/28/2015 - 12:45 "The growing size of the asset management industry may have increased the risk of liquidity illusion: market liquidity seems to be ample in normal times, but vanishes quickly during market stress. This liquidity may be artificial and less robust in the event of market turbulence." So what's the solution? Unfortunately there isn't one. Instead, fund managers are simply resorting to emergency liquidity lines with banks which is just another manifestation of using cheap cash to delay the Schumpeterian endgame scenario which, if ever allowed to play out, will finally purge capital markets, reset the system, and free the world from the nefarious clutches of central bankers gone mad with delusions of Keynesian grandeur.

Trouble in Greece and China?

from Outsider Club:
Both U.S. stocks and global bonds swung back into positive territory after a recent bearish hangover set the scene for a rocky start to the week. Though the case remains strong for an eventual correction in equities, not only in North America but in Asia as well, it appears the precious metals have more room to absorb hedging against this risk.
Spot gold opened at an 11-week low on Monday, so some slight recovery was expected this week. Although there were no dramatic moves in either direction, the metals were divided in Monday’s trading session, with gold and platinum posting slight gains while silver and palladium slid back near support levels at $16/oz and $750/oz, respectively.
Read More @ OutsiderClub.com

Keynes, The Great Depression And The Coming Great Default

by Gary North, Contra Corner:
Ideas have consequences, but not in a social vacuum. There are no social vacuums.
Ideas that are held by a minority of fringe academics or polemicists sometimes become the foundations of victorious social movements after existing social institutions are undermined by a social crisis.
There seems to be an inherent optimism in the thinking of most members of the human race. It is the source of men’s sacrifice in the present for the sake of the future. We think the future is going to get better, and therefore it is worth sacrificing present consumption for the sake of future consumption. This is the basis of thrift. This is the basis of expanded capital in our society.
Read More @ DavidStockmansContraCorner.com

America’s Water Crisis Is Way Bigger Than Just California

from DAHBOO777:

A FEMA Camp on Every Block and the Construction of Mass Burial Sites by Jade Helm Personnel

by Dave Hodges, The Common Sense Show:
Dear Dave,
My brother-in-law is an Army Reservist in Texas. His last drill was somewhere in Ohio where his unit was trained on operating brand new massive bulldozers. They were digging holes large enough to “bury tanks”. I suppose they were told that’s what the holes were being dug for but it must have struck him as odd or he wouldn’t have mentioned it to my sister. Is there some reason that the army buries tanks that I’m unaware of? If not, what else might these large holes be used for? Also, the location of the drill was changed at the very last minute from Southern California to Ohio.
I wouldn’t want my sister to know I e-mailed this information to you; however, It struck me as odd and goes right along with a lot of the accounts I’m reading in your articles. I appreciate very much what you do. May the Lord watch over you, Brother.
Sincerely,
C Hummel
Read More

Nuclear Warfare in the 21st Century

from corbettreport:



As NATO and Russia revive the old nuclear Cold War, the public is being prepared to accept the first-strike use of tactical nuclear weapons on targets in the Middle East and elsewhere. And as the world inches closer to a World War III scenario, we find the old MAD doctrine being revived in a new round of madness.

Bill Gates’s Idiocy (or Is It Psychopathy?)

by Eric Zuesse, Washington’s Blog:
Bill Gates was interviewed in the Thursday June 25th Financial Times, about global warming investments, and he said some remarkably stupid things, but explaining what he said requires a lot of intelligence; so, maybe what he said isn’t actually that stupid. Might he be an idiot savant? Perhaps there’s a deeper truth here.
After all, idiot savants should be respected in the areas where they have their gift, but not outside it. Occasionally, distinguishing between an idiot savant and a genius can be hard to do.
For example, at the beginning of the 20th Century, Henry Ford was considered to be a genius of industry and of technology, and he was sometimes America’s wealthiest person, but he was also a bigot, and no one can be stupider than that; so, he was just an idiot savant, after all.
Read More @ Washingtonsblog.com
image:beforeitsnews.com

Are the Iranian Nuclear Negotiations Breaking Down

by James Corbett, The International Forecaster:


 
As Alfred Adask pointed out in our weekly conversation on “Financial Survival” this week, the non-stop round-the-clock coverage of the Greek crisis in the news media the past few weeks has effectively obscured some other pressing issues from gaining much attention.
One of those issues is the possible meltdown of the framework agreement on the Iranian nuclear program that was reached in April and announced with much fanfare, ballyhoo and fear porn.
Wait, Iran has a nuclear program?
Well hopefully you knew about this already, but in case you didn’t: yes, the Iranians have a nuclear program. Any guesses where it came from? That’s right, the United States! Back in 1957 the US signed an atomic cooperation agreement with Iran as part of their “Atoms for Peace” program, which was an international psychological operation program to destroy the taboo against the use of nuclear weapons by familiarizing the world with nuclear technology. Ten years later Tehran opened its nuclear research center featuring a 5 Megawatt nuclear research reactor supplied by (you guessed it) Uncle Sam.
Read More @ The International Forecaster

/