In The News Today - www.jsmineset.com
Posted October 11th, 2014 at 10:39 PM (CST) by Jim Sinclair
Russia dumping dollars to use to protect currency and falling oil prices
As the United States expands its proxy war against Russia and the BRICS nations through a newly discovered secret deal with Saudi Arabia to force down global oil prices, Russia is firing back to this monetary attack against their currency and economy. On Oct. 10, a new report on Russian currency outflows shows that during the third quarter ending in September, the Eurasian state paid off a near record $53 billion in foreign debt, and sold off dollars to use as capital to stabilize their declining currency, and to protect their primary resource industry from the deflation America has caused through the dumping of excess oil into the market supply.
Some of this money was used earlier this week to support the declining Ruble as President Putin authorized the transfer of over $2 billion to be used directly to support the Russian currency. Additionally, the Russian central bank has already authorized funds to be set aside to supplement Russian corporations and oil industries should the need arise for liquidity and capital.
Despite the reassuring narrative from The West that Russia faces "costs" and is increasingly "isolated" due to sanctions for its actions in Ukraine, the most recent data suggests reality is quite different. First, capital outflows slowed dramatically in Q3 (from $23.7 billion in Q2 to $13 billion in Q3) with September seeing capital inflows for the first time since Sept 2013. Second, Russia's current account surplus was significantly stronger than expected ($11.4 billion vs $8.8 billion expected) driven by increased trade. Third, and perhaps most crucially, Russia paid down a massive $52.8 billion in foreign debt as Putin "de-dollarizes" at near record pace, reducing external debt to the lowest since 2012. - Zerohedge
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Jim Sinclair's Commentary
This did not take long.
Iraq asks for US ground troops as Isil threaten Baghdad Islamic State jihadists move within eight miles of the Iraqi capital, sparking calls for America to return to the country
By Alastair Beach
6:18PM BST 11 Oct 2014
Iraqi officials have issued a desperate plea for America to bring US ground troops back to the embattled country, as heavily armed Islamic State militants came within striking distance of Baghdad.
Amid reports that Isil forces have advanced as far as Abu Ghraib, a town that is effectively a suburb of Baghdad, a senior governor claimed up to 10,000 fighters from the movement were now poised to assault the capital.
The warning came from Sabah al-Karhout, president of the provisional council of Anbar Province, the vast desert province to the west of Baghdad that has now largely fallen under jihadist control.
The province's two main cities, Fallujah and Ramadi, were once known as "the graveyard of the Americans", and the idea of returning there will not be welcomed by the Pentagon.
But were the province to be controlled by Isil, it would give their forces a springboard from which to mount an all-out assault on Baghdad, where a team of around 1,500 US troops is already acting as mentors to the beleaguered Iraqi army.
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In The News Today - www.jsmineset.com
Posted October 10th, 2014 at 9:45 AM (CST) by Jim Sinclair
Russia, UAE considering payments in national currencies
16:22 October 10, 2014 Interfax
Russia and the United Arab Emirates (UAE) are considering making payments in their national currencies, Industry and Trade Minister Denis Manturov and UAE's Minister of Foreign Affairs Sheikh Abdullah bin Zayed Al Nahyan told journalists after a meeting. "This question was raised today for practically the first time ever, so it requires further review by specialists of both countries. But it has been added to the agenda and is being analyzed," Manturov said. Nahyan said the question of payments in national currencies was complex since the UAE's currency, the dirham, is very closely connected with the dollar. "This creates added difficulties, but there are ways these difficulties can be overcome. From a political standpoint, the UAE is set on full cooperation with Russia. If there is the political will, then the technical difficulties can be overcome," he said.
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Dallas Hospital Worker Tests Positive For Ebola In First Person-To-Person Transmission On US Soil - www.zerohedge.com
Submitted by Tyler Durden on 10/12/2014 08:57 -0400
And then there was #2. A few hours ago, Texas Health Presbyterian Hospital, announced that a health care worker who cared for dying Ebola patient Thomas Eric Duncan, has tested positive for the virus after a preliminary test, officials said early Sunday. If confirmed, it would be the first known person-to-person transmission of the disease in the United States. The name of the patients is currently unknown, what is known however, is that the worker was wearing full protective gear when treating Duncan, suggesting - yet again - that there is a transmission mechanism which is not accounted for under conventional protocol.
Continue reading on Zero Hedge.com.
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Asian De-Dollarization Explodes: South Korean Renminbi Deposits Surge 55-Fold In A Year - www.zerohedge.com
Submitted by Tyler Durden on 10/09/2014 19:50 -0400
Submitted by Simon Black via Sovereign Man blog,
The Bank of Korea - South Korea's central bank - released data that says South Korean domestic deposits have reached 16.19 billion Chinese renminbi in July this year, which is a 55-fold increase from the same period last year when renminbi deposits accounted for only 290 million.
The signs are clearly all there. Everyone realizes that the present system is on its way out and are taking appropriate measures. The Russians, the Germans, the French, the Brits, the Canadians, the Koreans...
Continue reading on Zero Hedge.com.
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Why Oil Is Plunging: The Other Part Of The "Secret Deal" Between The US And Saudi Arabia - www.zerohedge.com
Submitted by Tyler Durden on 10/11/2014 18:19 -0400
Two weeks ago, we revealed one part of the "Secret Deal" between the US and Saudi Arabia: namely what the US 'brought to the table' as part of its grand alliance strategy in the middle east, which proudly revealed Saudi Arabia to be "aligned" with the US against ISIS, when in reality John Kerry was merely doing Saudi Arabia's will when the WSJ reported that "the process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority."
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What was not clear is what was the other part: what did the Saudis bring to the table, or said otherwise, how exactly it was that Saudi Arabia would compensate the US for bombing the Assad infrastructure until the hated Syrian leader was toppled, creating a power vacuum in his wake that would allow Syria, Qatar, Jordan and/or Turkey to divide the spoils of war as they saw fit.
A glimpse of the answer was provided earlier in the article "The Oil Weapon: A New Way To Wage War", because at the end of the day it is always about oil, and leverage.
The full answer comes courtesy of Anadolu Agency, which explains not only the big picture involving Saudi Arabia and its biggest asset, oil, but also the latest fracturing of OPEC at the behest of Saudi Arabia...
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| Zero Hedge |
... which however is merely using "the oil weapon" to target the old slash new Cold War foe #1: Vladimir Putin.
To wit:
Saudi Arabia to pressure Russia, Iran with price of oil
Saudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.
Saudi Arabia plans to sell oil cheap for political reasons, one analyst says.
To pressure Iran to limit its nuclear program, and to change Russia's position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy.
With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf States will be less affected by the price drop, he added.
The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won't be able to affect Saudi Arabia's decision, Abanmy maintained.
The organization's decisions are only recommendations and are not binding for the member oil producing countries, he explained.
Today's Brent closing price: $90. Russia's oil price budget for the period 2015-2017?$100. Which means much more "forced Brent liquidation" is in the cards in the coming weeks as America's suddenly once again very strategic ally, Saudi Arabia, does everything in its power to break Putin.
Continue reading on Zero Hedge.com.
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Why NED Davis is Dead Wrong About $660 Gold - www.goldstockbull.com
October 6, 2014
John LaForge, commodities strategist at Ned Davis Research says gold is going to $660 an ounce.
In an appearance on CNBC on Thursday, LaForge said that the end of the current "super cycle" for gold could push the precious metal down to $660 an ounce, or about 40% lower than where it is currently trading.
LaForge said that in the 1980s, the price of gold fell about 65% from peak-to-trough as the precious metal endured a 20-year bear market. And after hitting $1900 an ounce in 2011, gold should see a similar peak-to-trough decline in the current cycle.
"We know that commodities run in super cycles, and they eventually die. And gold looks like it's dying," LaForge said.
"So $660 is certainly in the cards."
Of course, Mr. LaForge is just looking to get attention for NED Research by making such wild forecasts. His motives are murky and his prediction is flawed for a number of reasons.
While I agree that understanding cycles is key to price forecasting and successful investing, I am not sure that John understands the current gold super cycle or has taken into consideration the distortions caused by central bank stimulus and market intervention. Everything is indeed cycles and waves, including our natural environment, political system, etc. But understanding these cycles is the challenging part.
Mr. LaForge and NED Research are assuming that gold has finished its super cycle and already peaked. The correction over the past few years has certainly been brutal, but let's see if you agree with his thesis that the gold market has peaked and is heading for $660.
In the following points, I will argue the reasons why the gold market has not yet peaked. Instead, we are in a counter-trend correction within the long-term bull market.
1) Gold Gained Over 2,000% During the 1970's - The current gold bull market has advanced only around 500-600% during the current bull market ($300 to $1900 gold). Bull market cycles in general tend to generate gains well in excess of 500% before they are over, as shown in the chart below. This suggests that gold has not yet completed its bull market cycle. We are more likely in a severe correction within a long-term bull market than at the end of the bull market.
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2) Gold Has Not Come Close to the Inflation-Adjusted High from 1980 - That would put gold around $2,400 according to official inflation statistics or $8,890 according to the inflation statistics used by John Williams of ShadowStats.com. Either way, one would expect the current cycle to climb somewhere well above $2,400 before claiming that a top has occurred. Certainly, all of the conditions that caused the 1980 spike are much more severe today.
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3) Paul Volcker Doubled the Fed Funds Target Rate from 10% to 20% in 1980 - He did this in order to slow inflation and hold the monetary system together. The prime rate climbed to 21.5% during this time! This move crushed the gold market and led to the sharp decline that followed. Contrast this to today when the FED has kept interest rates near zero for years and has only talked of making incremental increases in meetings and notes. Even the hint of raising rates today sends the stock market into a tailspin. Raising rates too high, too fast would also make the Federal debt unmanageable. So, while the gold market might be pricing in a rate hike in the near future, things are different from 1980 and not nearly as conducive to such drastic policy changes. Absent such a rate hike, should we really expect a repeat of the 1980 plunge in the gold price?
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4) Gold Bull Markets End with a Bang, Not a Whimper - The gold price rocketed 120% higher in 1979 with what analysts call a blow-off top. By contrast, the best year of the current bull market was a 32% gain in 2007. This is not indicative of a top in the gold market.
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5) Dow to Gold Ratio Drops Toward Parity at End of Gold Bull Cycle - The ratio of the DJIA to the gold price typically reverts toward parity at the peak of the gold market. This is the point where gold becomes overvalued versus stocks and one ounce of gold can buy one unit of the DJIA. It dropped to 1.9 at the end of the gold bull market in 1932 and dropped to 1.3 at the end of the gold bull market in 1980. This Dow-to-Gold ratio has been trending towards higher peaks and lower troughs historically. So, one might expect it to finally drop to 1 or lower during the current bull market. At such a point, talk of the end of the gold bull market and a sharp plunge of 65% might be warranted. But this ratio has thus far only dropped to 6.3, suggesting that gold has quite a bit of appreciating to do versus stocks before it is overvalued or at the end of its bull cycle.
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6) Participation in the Gold Market Remains Very Low - Bull markets tend to end with mania, where everyone and their brother is scrambling to buy gold at any price. Even in 2011 when gold was trading above $1,900, participation remained very low (estimated at under 2% of the population). People were still lining up to sell their gold and cash in, not buy as much as possible.
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These items above are not signs of a top in a bull market. They suggest that we are in the midst of a major correction within a larger bull market cycle, not a new bear market in gold that will take the price back to $660. If anything, we should be witnessing signs of a hyper-cycle that takes the gold price and all of the indicators above well past prior bull markets. We are experiencing record levels of debt, unprecedented bailouts, QE and monetary stimulus, artificially low interest rates for years on end, unfunded liabilities in the trillions, derivatives in the hundreds of trillions and a de-dollarization environment that threatens the dollar as world reserves for the first time in decades.
Yet, gold is trading near the all-in cost of production for many miners. There is little to no profit margin, as gold is selling on the COMEX around the same price that it takes mining companies to dig it out of the ground. What other markets display this type disconnect? Can you buy a loaf of bread below the cost for the baker to make it? Can you buy oil below the cost to drill and refine it? Can you buy a home below the cost to build it or a car below the cost to manufacture it?
I will readily admit that the correction in the gold market has lasted longer than I had anticipated and brought prices lower than most gold analysts predicted. Even the anti-gold banks such as Citibank had a price target for gold of $1,655 in 2014.
Can the price of gold go lower? Yes. The price is set on paper markets, using leverage and borrowed money, with participants that have bottomless pockets and multiple ways to manipulate the price and profit from less sophisticated investors. Market manipulation has been exposed and confirmed in so many financial markets that it should not be all that hard to imagine that it occurs in the gold market as well.
Given this understanding, the price can disconnect from reality and do anything in the short term. But I am not a day trader and I am not too concerned about the short term. Prices cannot persist at or below the cost of production for long. Companies close their mines, supplies drop and prices bounce back. New markets are opening that diversify price discovery and reduce the ability of big banks to manipulate prices. Opportunistic investors sense value and step in to buy at oversold levels. Free market pricing has a way of re-asserting itself, in one form or another.
Furthermore, the nature of our fractional reserve, debt-based fiat monetary system dictates that banks and their government puppets will continue to print money in order to keep their system afloat, enrich their inner circles and keep their power intact. What is not so certain is that they will continue to find eager buyers of their debt in the international markets, that China will continue to hold large amounts of dollar-denominated assets or that oil-producing nations such as Saudi Arabia will continue to demand dollars for their oil in international markets.
While nobody can predict what gold prices will do, we can be fairly certain that NED Research is tossing around outlandish price forecasts in order to get attention and drum up business. It is working in the short-term I suppose, since here I am writing about them. But one has to question the credibility of a research firm, which believes that the gold price will fall 40% or 50% below the cost of production. My money says we are at or near the bottom, but only time will tell.
Jason Hamlin
www.goldstockbull.com
