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Trade deficit shrinks as auto and oil imports drop
CIGA Eric
The U.S. trade deficit unexpectedly shrank in January, reflecting a big drop in imports of oil and foreign cars. American exports also fell, a potential blow to hopes that the economic recovery will be aided this year by U.S. sales abroad.
A country that habitually consumers more than it produces, the definition of structural deficits, will always see its trade deficit decline when the economy slows. If this was unexpected, then the strength of the economy going forward should be unexpectedly weaker.
The Obama administration is also hoping to get a boost in exports from a fall in the dollar’s value against the Chinese yuan. It has been lobbying China to allow the yuan to rise in value against the dollar, responding to complaints from American manufacturers that China is unfairly manipulating its currency by holding down the yuan’s value to gain trade advantages.
No worries, devaluation, not investment in new plant, equipment and innovation, will save us. Unfortunately, Americans, sold on the idea that the worse is over, thus, by extension a recovery is around the corner, will have to experience the harsh reality of scrapping along the bottom for many years. The imports to exports trend from 1991-1997 gives a similar, but smaller model of the scrapping yet to come.
Import to Export Ratio: ![clip_image001[1]](http://3.bp.blogspot.com/_m5i6pLhlNWU/S5kqipEFNaI/AAAAAAAABMI/pQ72kNqRSn4/s1600-h/IMPORTSEXPORTSR.JPG "clip_image001[1]")
And while we wait, import prices, similar to late 2007 to early 2008 have reached double digit growth rates in January. Last time this happened the stock market was in process of rolling over.
Import and Export Price Change YOY: ![clip_image002[1]](http://1.bp.blogspot.com/_m5i6pLhlNWU/S5krXWGUJxI/AAAAAAAABMQ/em04-LEggMc/s1600-h/Import+to+Export+Price+Chg.JPG "clip_image002[1]")
Source: finance.yahoo.com
Jim Sinclair’s Commentary
Here are my comments on the algorithm driven gold gun slingers and semantic fundamentalists:
It is becoming evident to anyone with a brain that the ravingly bullish end of year televised economic pep rally was pure propaganda.
Enter the proverbial question of deflation or inflation, which is semantics only. Hyperinflation is a currency event and not an economic event. Therefore it can occur under any condition that causes a flop in confidence.
That condition is building and building in the Western world as the lies become more evident everywhere.
The money managers and computer nerds have been selling gold for four days. It was evident on the first day as the dollar fell and gold failed to react much at all.
They will be back buying at higher prices. Gold is going to $1650 and higher.
Half of Kansas City’s schools to close by fall
CIGA Eric
The school board narrowly approved the plan Wednesday night to close 29 of the district’s 61 schools to try to stave off bankruptcy. The closures have angered many parents, students and teachers, but administrators say they had no choice because without them, the district would have been in the red by 2011.
The public, readers, inherently know that the future greatness of our country will be defined by our children and their children’s children. Numerous cities, not limited to Kansas City, are making tough choices, such as wholesale school closings to ensure their financial survival. Yet, as many world leaders have rushed to support the OTC derivative winners, while the masses retreat into survival mode, what message are we sending to the future generations? For me, this stuff is largely business, but this never implies that I am not embarrassed as citizen about the choices being made.
Source: news.yahoo.com
Trade deficit shrinks as auto and oil imports drop
CIGA Eric
The U.S. trade deficit unexpectedly shrank in January, reflecting a big drop in imports of oil and foreign cars. American exports also fell, a potential blow to hopes that the economic recovery will be aided this year by U.S. sales abroad.
A country that habitually consumers more than it produces, the definition of structural deficits, will always see its trade deficit decline when the economy slows. If this was unexpected, then the strength of the economy going forward should be unexpectedly weaker.
The Obama administration is also hoping to get a boost in exports from a fall in the dollar’s value against the Chinese yuan. It has been lobbying China to allow the yuan to rise in value against the dollar, responding to complaints from American manufacturers that China is unfairly manipulating its currency by holding down the yuan’s value to gain trade advantages.
No worries, devaluation, not investment in new plant, equipment and innovation, will save us. Unfortunately, Americans, sold on the idea that the worse is over, thus, by extension a recovery is around the corner, will have to experience the harsh reality of scrapping along the bottom for many years. The imports to exports trend from 1991-1997 gives a similar, but smaller model of the scrapping yet to come.
Import to Export Ratio:
And while we wait, import prices, similar to late 2007 to early 2008 have reached double digit growth rates in January. Last time this happened the stock market was in process of rolling over.
Import and Export Price Change YOY:
Source: finance.yahoo.com
Jim Sinclair’s Commentary
Direct bidders is simply QE in Camouflage.
30-Year Treasury Auction Results
CIGA Eric
Wow! 29.6% of the accepted offers were taken down by direct bidders. For further discussion search auction results, or click. Direct bidders are starting to dominate the auctions across the yield curve.
30-Year Auction Results: 
Source: treasurydirect.gov
Derivative CDS mess
CIGA Eric
Let’s not play babe in the woods here. The problem not limited to Greece, Spain, or the EU. Derivatives have infected the balances sheets of corporations, nations, states, and municipalities across the globe.
The solution will be bailouts – either transparent or opaque. Little respect or consideration will be given to preservation of purchasing power of the currencies denominating those bailouts. This is why gold is rising, and when the public begins to catch on en mass, it will continue to rise much higher for years to come.
Forget Greece: Italy derivatives bomb also ticking
Financial markets are gripped by the role derivatives have played in Greece’s debt crisis, but Italy also has a derivatives time bomb, and hundreds of cities are in the 24 billion euro blast zone.
EU prepares in case Greek woes spread to Spain
If Greece’s debt crisis is giving the European Union a headache, it is minor compared to the pain it will suffer if a large member state such as Spain sinks into similar trouble.
NYSE Composite Average
CIGA Eric
Options expiration is coming next week. Trading leading up to and during expiration dates tend to push to the extremes. As a result, technical interpretations during these windows can be quite difficult. Retail money can get confused by the technicals caused by the confluence of expiration flows.
As the equity trees continue to reach endlessly higher into the sky, caution is still warranted. A few days ago I pointed out that the NYSE put/call ratio was 0.67. As of yesterday’s close, the number has dropped to 0.61. This means for every put traded, there were 1.64 calls traded. This low number, which can push below 0.5, reflects the equity trees pushing higher into the sky. This is a warning flag.
In addition, the energy of the tape since February has been anemic. An indicator called REV(E), cumulative measure of energy behind the tape, illustrates the divergence of price with the October and January highs. Today’s REV reading lags behind not only the January but also October high. This serial, double divergence with price and tape energy is troublesome. The single divergence foreshadowed the equity correction in January. Skepticism towards price must reign as long as these divergences exist.
NYSE Composite with Exchange Volume: 
Jim Sinclair’s Commentary
CIGA Bernie comments on the financial propaganda of yesterday:
Jim,
IN THE NEWS:
US budget deficit hits record high in February
WASHINGTON: The US government registered a record budget deficit in February, the 17th consecutive month of running in the red, the Treasury said on Wednesday.
IN THE GOOD NEWS:
The reading, however, was slightly better than the consensus analyst forecast of a deficit of 222 billion dollars.
CIGA Bernie
Dear Jim,
"Whether CDS swaps make much difference is questionable. The contracts are traded between banks or funds. They have little impact on the underlying debt, except to create mood music in the markets."
– AEP. Telegraph
He’s categorically wrong here, isn’t he? The CDS market allows the specs to make money shorting bonds and being long the CDS, there-in taking a country down at a profit, doesn’t it? I thought that is the main objection to the CDS market.
CIGA Keith
Dear Keith,
Wrong is the understatement of the age. Prepare to see a lot of propaganda out on the street on how CDS are kind and caring instruments.
Regards,
Jim
