Jim is back, fired up and full of information. We cover the below topics for an hour and a half session.
Has the Financial & Trade War Turned into a Hot War?
Jim says, definitely yes. Tianjin, China is the most strategic business, tech, info and database center in the nation. The explosion was certainly the result of an attack, among other connections between currency devaluation events and violent explosions (see Bangkok). One item of intrigue is that the devaluation of currency means USD lifted higher, and much like a balloon pops if it rises too much (from pressure differential). The devaluation trend will catch fire, and accelerate the USDollar death spiral. RMB devaluation started a trend, sure to result in Competing Currency War. USGovt and USFed masters do not want USD to be given an accelerant booster rocket.
What is the Interpretation of the Stock Market Nose Dives?
It begins with the USEconomy stuck in deep recession for six years (now depression). In fact, calling a depression a recovery is the ultimate in Third World propaganda. Yellen is the American version of Mugabe from Zimbabwe (unclear why took Fed post). The Wiley Coyote moment is here. Fed rate hike talk might be more like “HIKE OR DIE” moment or “DIE EVEN IF HIKE.” It is game over for sovereign debt foundation for USDollar. The initial damage from bond fracture realization is with equities (stocks). Could be USFed & Wall St have arranged 1000-pt down opens so as to create USTBond demand during the Chinese dumping exercise (act of financial war)? And the irony: US Langley attacked Chinese stocks, but China dumps USTBonds to shore up financial market. Stocks are the first major casualty, but energy sector losses are with corporate bonds. A 50% correction is appropriate for the USEconomy in depression and PE ratios double the norm. US Stocks no longer a forward indicator of economic performance. ZIRP has had no effect on USEconomy or housing market in kickstart (CAPEX in EmgMkt)
Is It Crunch Time with US Treasuries & China Dumping $100BN per Week?
We are now in QE to Infinity Squared mode. At this rate, China would dump all its holdings in ten weeks. Gulf Emirates have $2.2 trillion in toilet paper assets (mostly in USTreasurys), add in another couple loose $trillion out there and the numbers are big. Games like BLICS doubling the New York QE volume will no longer work. QE has ruined the integrity of USTreasury Bonds. USFed must cover the global dumping of USTBonds (confidence to go next). QE to Infinity Squared precedes rejection of USTBills in trade. RMB to be demanded/required/norm in trade settlement with Eastern export nations.
What The Heck is Happening with the Silver Market Disconnect?
Default will occur in silver market first, not gold. Physical supplies are the tightest we’ve ever seen. The supply side has not caught up since the US Mint suspension of sales in early July, in fact, it has gotten worse. Premiums and delays have increased on all silver products. Acute shortages have gone worse, with the official mints announcing suspended sales. Jim says gold fights the political battles, but silver will take away the majority of the spoils (2x VS 3x). JPMorgan is on list of Authorized Purchasers to steal supply, just like GLD/SLV funds. The third largest US wholesaler & distributor with 21 warehouses has been cleaned out of ALL silver. Live product dealers are all sold out, coin dealer shows are empty of silver coins and Johnson Matthey & Engelhard went No Offer on 100-oz bars. German gold demand is twice that of the US, and Eastern gold demand is twice the West. Shanghai gold demand is over 73 tons per week (steadily over 50 tons/wk). India gold demand is up 61% in April & May 2015 (versus same months 2014).
How Bad Are the Energy Sector Losses?
One hundred times worse than the common person can possibly imagine. The foundation of USDollar has had oil sector basis for 40+ years. The USTreasury Bond structural damage has been evident for several months and a dismantled Petro-Dollar factor is at work in a powerful manner. Fracking shale weak fringe is being destroyed at the margin, the first line of damage. The shale, drillers, producers, and platforms are facing ruin in bonds, stocks. Private Equity firms are facing staggering losses. Fitch just made the bankruptcy call in energy sector, and at 2x to 3x the norm. In 1H2015, companies in energy, metals, mining sectors accounted for 57% of defaults. An armada of junk-rated offshore drillers are headed into bankruptcy, led by Hercules. Recognized names are going bankrupt, with big collateral damage in the coal niche. There is enormous damage also in the financial sector (banks, private equity, venture cap, big investors). Due to counter-party risk financiers are on the hook. The big banks hold $trillions in energy derivatives, to bring death of Wall St banks finally. Many energy firms removed hedges recently to take profits now, and die soon. Recent losses in the energy sector amount to $1.3 trillion in valuation. Pension funds have suffered massive losses, like CALPERS, who is seemingly involved in every bust. There is a liquidity death spiral in private equity, as some double down only to delay death until later. Major PE firms structured deals to give themselves preferential treatment during restructuring. In coming months, all the oil hedges expire, which will unleash the full brunt of damage.