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Dear CIGAs,
I made this wager when Gold was at $248, and all I got was a Forbes article because they were looking for some dumb bell then that liked gold in order to make fun of him/her. Click here to view the Forbes article… That’s a nice way to get a career article in Forbes.
Robertson is right, so we are right, as the rates he looks for come compliments of a currency event that delivers hyperinflation. He just has to be sure the other side or sides of his OTC derivative puts up margin on a daily basis or he could be 100% right and not get paid one penny.
Please don’t send 10,000 emails and faxes asking "if the interest rate goes up will that not make for a strong dollar and weak gold" because it has been answered almost every day for the past several years. No it will not because in the midst of lousy business a currency event creates hyperinflation thereby producing the rate of interest over the top.
Julian Robertson Bets the Farm on Inflation
June 04,
Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes’ billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the ‘Tiger Cubs.’ And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.
For those unfamiliar with Robertson, we’d highly recommend checking out the profile/biography we just wrote on him. In that piece, we have outlined exactly why you should follow him (and the Tiger Cubs for that matter too). As we detailed in his profile, Robertson has a unique investment methodology. He takes a macro approach, finds a smart idea, researches it exhaustively, and places a big bet. And, when he feels he is more than correct, he will ‘bet the farm.’ And, it looks like we have identified Robertson’s next play where he has and will continue to ‘bet the farm.’
Julian’s Big Bet
While this is not a new position for Robertson, his constant confidence behind the play has inspired us to look at it more closely. Today, we are going to highlight Julian Robertson’s steepener swap play. In layman’s terms, he is betting on inflation. Taken from eFinancialNews, "Steepeners are a type of interest rate swap, where one party agrees to pay the other a fixed rate in exchange for a floating rate, which is derived from the difference between long and short term rates. Many of these products also use high leverage, where the difference between the two rates is multiplied by up to 50 times to produce a higher return."
He thinks rates could hit 7% easily and could go as high as 18%. We agree with him on this play and we first published our very basic rationale behind shorting US Treasuries back in October of last year. The main point we’re focused on is the wager that inflation is in our future. If such an outcome came to fruition, yields on long-term Treasuries would rise. When the yields increase, bond prices will drop, thus benefiting the short position. While the vehicles noted in this article are all slightly different in construction and purpose, they all broadly wager on the same outcome: inflation. Julian’s talked about this play in numerous forms, and we actually first heard about his ‘curve steepener’ play in January 2008 in Forbes. That piece highlighted how Robertson was "long the price of two-year Treasuries and short the price of the ten-year Treasury – betting that the difference, or curve, in the yield between the two will increase." Such a play is negative on the US economy and Robertson executed it because he felt the Federal Reserve would continue to flood the economy with money. And, he has been right.
Jim Sinclair’s Commentary
Vanity Fair’s article calls it a Beach Bummer.
I am sure we all feel very sorry for the OTC derivative mavens that have been thrown onto hard times. Now they will have to both winter and summer in Greenwich CT.
BEACH BUMMER
The Hamptons Stress Test
As summer begins, what better way to measure Wall Street’s health than a real-estate tour of the Hamptons? For every mansion on the sales or rental market, there’s a story—sometimes involving Bernie Madoff—and brokers are shell-shocked. The author surveys the deals, no-deals, lawsuits, divorces, and teardowns that characterize this strange, dark season.
By MICHAEL SHNAYERSONJuly 2009
It was the deal of the season—the deal, that is, that epitomized this dark, down, fraud-ridden year—in the once extravagant, now somber Hamptons.
John Veronis, a founding partner of Veronis Suhler Stevenson, the media-based private-equity firm that bears his name, thought he had a buyer last summer for his 10,000-square-foot oceanfront home, on Meadow Lane in Southampton’s prized estate section. Just how much he and his wife, Lauren, had been motivated to sell by the spec house going up beside them is unclear, since the Veronises declined to speak to Vanity Fair.
Jim Sinclair’s Commentary
The new inflation alarm at the vigilant New York Federal Reserve Bank:
Jim Sinclair’s Commentary
Stand firm and stay the course.
Yellen speaks of substantial shocks to come. If you assume that the algorithms were triggered and went wild today based on the green shoot demand for the dollar early on, what do you think SUBSTANTIAL SHOCKS will do to the algorithms?
Stand firm and stay the course.
Yellen Says Fed Must Brace for ‘Substantial Shocks’
By Vivien Lou Chen and Scott Lanman
June 5 (Bloomberg) — Federal Reserve Bank of San Francisco President Janet Yellen said that policy makers need to be prepared for “substantial shocks” and that rising Treasury yields may be a “disconcerting” signal of inflation fears.
“Recent experience raises the possibility that the Great Moderation is behind us, so we must be prepared for substantial shocks,” Yellen said today during a panel discussion hosted by the Fed Board of Governors in Washington. “Great Moderation” is a term used to describe the comparative economic stability seen in the U.S. and other major industrial countries, except Japan, since the mid-1980s.
Yellen’s comments on yields go beyond remarks made two days ago by Fed Chairman Ben S. Bernanke, who said in congressional testimony that the increases may reflect rising optimism about the economy and concerns about large federal deficits. Policy makers next meet June 23-24 in Washington and may consider whether to increase their planned purchases of $1.45 trillion of housing-related debt and $300 billion of long-term Treasuries.
Responding to audience questions, Yellen said that if she “had to write down a number” for the ideal long-term inflation goal, it would be 2 percent. That number is the preference of most Fed policy makers, she said, adding she would like to see more formal evaluation and research on the issue. She said she previously favored a 1.5 percent inflation rate.
“It’s a subject in which I have an open mind,” Yellen said.
Treasuries Tumbled
Treasuries tumbled today, driving two-year yields to an eight-month high, as traders began speculating the U.S. central bank will raise interest rates later this year.
Jim Sinclair’s Commentary
This article focuses on the reality of ETF gold and silver with no bone to pick. That makes it required reading for all of us involved in the metals markets. Further, it is published by a Financial Times sponsored entity, which is another positive.
Will a ‘Silver Bullet’ Finally Kill the Metal Manipulators?
June 04,
In my previous commentary, “Silver market fundamentals DISTORTED by bullion-ETFs", I pointed out how (so-called) “bullion-ETFs" were (with rare exceptions) merely a tool of the manipulators – with two primary purposes.
First of all, bullion-ETFs soak-up billions of investor-dollars each year, which would otherwise be invested in real bullion, or in the shares of precious metals miners. Naturally, this has helped to depress the price of silver, andseverely depress the price of silver miners – since almost all of the diverted investor-dollars were diverted from the miners, and not bullion, itself. I also showed how these fraudulent investment vehicles have been used to artificially inflate the supposed inventory-levels of silver stockpiles.
Specifically, at a time when actual silver inventories are at their lowest level in centuries, the (supposed) amount of “bullion” these funds claim to hold hassinglehandedly resulted in “official” inventory levels tripling in just three years – after plunging by 90%.
Today’s market price is based upon these phony “inventories” despite the fact that the bullion-banks who claim to hold all this silver are neversubjected to audits, to determine that they are not only holding enough silver to cover their custodial agreements with the “bullion-ETFs" – but are alsoholding sufficient silver to cover the MUCH larger “short” positions of these Manipulators (see “Silver Manipulation the worst in history – Ted Butler”).
Unless and until there is such a full and complete audit, the only rational assumption for investors is this supposed “tripling”of inventories is totally illusory, which also means that the “bullion” that is claimed to be held by these bullion-ETFs is also illusory.
Jim Sinclair’s Commentary
The question is timing.
Yes, it is possible for equities to perform like that in currency event driven hyperinflation.
What a delightful event to see the illegal (not legal – for them we have respect) goons ground into their own dirt, filth and fowl existences.
What do you think such an event would mean to gold equities as they follow the gold price, and get no opposition?
Jim Rogers On CNBC- I Have No Shorts
June 5, 2009
For the majority of his career, Jim Rogers has had both long and short positions. As of this interview, this is one of the few times Jim Rogers does not have a short position. Among the reasons for Jim not having any shorts is a possible currency crisis and thus should avoid shorting the market. The last time Jim had no shorts was the market crash of 1987. Among other things Jim Rogers continues to be “wildly” bullish on China, “wildly” bullish on commodities. Specifically, Jim likes Silver over Gold, Natural Gas and Cotton.
“I’m afraid they’re printing so much money that stocks could go to 20,000 or 30,000″ -Jim Rogers
- May Jobs Loss Was About 538,000 Net of Biases versus 345,000 Official Decline
- Birth-Death Model Upside Bias Increased by 27%
- Annual Payroll Decline Deepened to 4.0% / SGS-Alternate Unemployment at 20.5%
From the following subscription service you should subscribe to:
Jim Sinclair’s Commentary
Extremely well said.
No country has ever abolished poverty by printing paper
by Egon von Greyerz
June 4, 2009
We have consistently warned investors that the USA and many other countries including the UK will have a hyperinflationary depression in coming years. In this Newsletter we discuss why hyperinflation will happen. We also look at why government debt will grow exponentially in the next few years and discuss who is going to repay the additional $30-50 trillion that the world is likely to print since this crisis started?
Hyperinflationary Scenario Confirmed
We are primarily discussing the USA in this Newsletter, but most of the discussion also applies to the UK and many more countries.
Our three most important indicators are now confirming that the hyperinflationary avalanche is set in motion. The three indicators are: US Dollar US, Treasury Bonds, and Gold. In our January 5, 2009 Newsletter we stated “the big surprise in the coming year will be long rates going up and bond markets falling rapidly”. We also said: “We expect the dollar fall to accelerate during 2009 against most currencies”. And finally we said back in January that gold is our favourite investment for 2009. So it should be no surprise to our readers that the US Treasury 30 year bond is falling rapidly (interest rates going up), that the US dollar has resumed its down trend and that gold is on its way to new highs.
The three indicators – US Dollar,T Bonds, and gold are all variations on a theme. The theme is clear, namely that the USA is on its way to bankruptcy and that the rest of the world is no longer prepared to finance pieces of paper that have no value and can only be repaid by printing more of the same worthless paper. As George Bernard Shaw said:
“YOU HAVE TO CHOOSE BETWEEN TRUSTING THE NATURAL STABILITY OF GOLD AND THE NATURAL STABILITY AND HONESTY OF THE MEMBERS OF THE GOVERNMENT. AND WITH DUE RESPECT FOR THESE GENTLEMEN, I ADVISE YOU AS LONG AS THE CAPITALIST SYSTEM LASTS, TO VOTE FOR GOLD”
We agree with Shaw – How can you trust a government that first creates the biggest financial bubble in history and then, as proof of their total idiocy, attempts to solve the problem by massively increasing the size of the bubble!
Jim Sinclair’s Commentary
Here is today’s bullish news on the dollar so you know it is a short squeeze in La La Land.
U.S. employers cut 345,000 jobs; jobless rate jumped to 9.4 percent
WASHINGTON – With companies in no mood to hire, the unemployment rate jumped to 9.4 percent in May, the highest in more than 25 years. But the pace of layoffs eased, with employers cutting 345,000 jobs, the fewest since September.
The much smaller-than-expected reduction in payroll jobs, reported by the Labor Department on Friday, adds to evidence that the recession is loosening its hold on the country. It marked the fourth straight month that the pace of layoffs slowed.
Still, the increase in the nation’s unemployment rate from 8.9 percent in April underscores the difficulties that America’s 14.5 million unemployed are having in finding new jobs. Economists had expected the rate to hit 9.2 percent last month.
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.4 percent in May, the highest on records dating to 1994.
Even with layoffs slowing, companies will be reluctant to hire until they feel certain that economic conditions are improving and that any recovery will last.
Jim Sinclair’s Commentary
Another prime example of why anyone who fears IMF gold sales are also terrified of things going bump in the night.
REFILE-UPDATE 1-China ready to buy up to $50 bn IMF bonds-Lipsky
Fri Jun 5, 2009 6:45am EDT
(Refiles to correct title of IMF’s Lipsky in first paragraph)
(Adds background, quotes)
ST PETERSBURG, Russia, June 5 (Reuters) – China will invest up to $50 billion in new International Monetary Fund bonds, the IMF’s first deputy managing director John Lipsky told Reuters financial television on Friday.
"The Chinese authorities have indicated that … (they) would be interested in investing up to $50 billion dollars in these bonds when they are ready and we hope that other countries will follow suit," Lipsky said on the sidelines of the St Petersburg Economic Forum.
Russia has already said it is interested in buying up to $10 billion of the bonds, which will form part of the extra $500 billion in capital the IMF is seeking to raise to help it support countries through the worst global economic slowdown since the great depression [ID:nL5330603].
China is the world’s biggest holder of gold and forex reserves, followed by Japan and Russia.
Lipsky said proposals for the bond issuance will soon be submitted to the IMF’s executive board, which should also receive the proposals for the issue of new Special Drawing Rights (SDRs) next month.
Jim Sinclair’s Commentary
Who out there is so naive as to think that these banks actually made all those billions trading in the first quarter?
That was the end of the mark to market rule followed by upward revaluation of the toxic asset portfolios booked as trading profits.
Destroyers and Paper Shufflers are all that is out there.
The street knows it, financial TV knows it, the dancing clown knows it and they all love it. You see how foul, amoral and soul-less these demons are.
They are so bad they are not even welcomed by King Ravana in Lanka.
Bank Profits From Accounting Rules Masking Looming Loan Losses
6-05-09
By Yalman Onaran
June 5 (Bloomberg) — Big banks in the U.S. say they’re on the mend. The five largest were profitable in the first quarter, rebounding from record losses for the industry in the fourth quarter. Share prices have jumped, with the KBW Bank Index doubling since March 6.
Treasury Secretary Timothy Geithner, after “stress testing” 19 banks on their ability to withstand a worsening economy, declared in early May that Americans can be confident in the banks’ stability and resilience. Wells Fargo & Co. and Morgan Stanley were among banks raising $43 billion in new capital since then through share sales.
“With our capital and assets, stressed as they have been, we can go back to focusing all our attention on managing our business and restoring value,” Citigroup Inc. Chief Executive Officer Vikram Pandit said after Geithner’s examinations were completed.
The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.
The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.
Jim Sinclair’s Commentary
And now a few words by the former Chairman uttered before the sins and greed of La La Land got to him!
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process… It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard."
–Alan Greenspan in a 1967 speech
Jim Sinclair’s Commentary
All of these initiatives and discussions have but one agenda, and that is the death of the US dollar.
Japan’s shadow finance minister wants single Asian currency
The man who hopes to be Japan’s next finance minister envisions an Asia united by a single currency, saying the dollar may no longer reign supreme in future.
The opposition’s "shadow finance minister" Masaharu Nakagawa also says he hopes to reshape the world’s number two economy into a kinder, gentler place if his Democratic Party of Japan (DPJ) wins elections this year.
"You can’t invigorate society only through… the law of the jungle where the strong become stronger," he told AFP. "The same player would always win if there were no handicaps in golf."
Japan’s conservative Prime Minister Taro Aso must call elections by September, when the DPJ hopes to topple his Liberal Democratic Party, which has been in power for almost all of the past half century.
In an interview with AFP, Nakagawa outlined some of the changes he would like to make if he becomes finance minister in Asia’s largest economy, which is now in the throes of its worst post-World War II recession.
Jim Sinclair’s Commentary
According to Fox News.
All pronouncements from upon high have high consequences:
Obama Overture to Hamas Suggests Inevitability of Terror Group’s Dominance Among Palestinians
In an apparent policy shift, President Obama on Thursday invited Hamas — a designated terror organization — to "play a role" in the future of the Palestinian people.
During his speech to the Muslim world in Cairo on Thursday, the U.S. president bluntly recognized the group, which has called for the destruction of Israel, in a two-sentence passage that was part of a broader discussion about the terms for peace between the Israelis and the Palestinians.
"Hamas does have support among some Palestinians, but they also have to recognize they have responsibilities. To play a role in fulfilling Palestinian aspirations, to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, recognize Israel’s right to exist," Obama said.
The president then called on Israel to end settlement construction and for both sides to embrace a two-state solution. He reiterated that the U.S. bond with Israel is "unbreakable."
Some observers said they were struck by the firm tone Obama took with both sides in addressing the generations-old conflict and particularly with his recognition of Hamas, which may signal to the group that it is seen as an inevitable part of the Palestinian future.
Jim Sinclair’s Commentary
It is high stakes poker that our leaders play.
It should be quite apparent now what "Israel makes a significant miscalculation," means.
Obama shifts tone toward Islamic parties
President Obama hinted Thursday that the United States would for the first time accept the results of Middle East elections won by Islamist parties.
In contrast to the Bush administration, which boycotted groups such as Hamas and Hezbollah even after they performed well in elections, Mr. Obama said, "America respects the right of all peaceful and law-abiding voices to be heard around the world, even if we disagree with them. And we will welcome all elected, peaceful governments — provided they govern with respect for all their people."
Those words carry particular significance because on June 7 Lebanon is expected to hold an election where Hezbollah, an Iran-backed group, could win a plurality of votes.
It was also a message to the Egyptian Muslim Brotherhood, whose members running as independents won 88 seats — 20 percent of the Egyptian national assembly — in 2005 despite widespread cheating on behalf of the government.
Several members of the group were in the audience at Cairo University as the president spoke. Egypt holds new parliamentary elections next year.
Jim Sinclair’s Commentary
First, China/Brazil and now China/Russia. The dollar rally is going to run into real problems.
The set up is perfect: The 2nd week of June coming up with a target for the big lift off in the 3rd.
$1650 is a minimum for this phase. Alf thinks an overrun could be double that.
Good luck to the Goons. Their window of opportunity, if the Goons have one, is in the next 2 weeks ONLY.
Russia, China should dump dollar in trade – Medvedev
Fri Jun 5, 2009 3:07pm IST
MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.
China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.
"I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.
Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.
Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.
