Santa Out In Front

217
Tue, Jan 31, 2012 - 9:01am

There has been a great discussion in the previous thread regarding the dire warning and interview that Santa gave to Ellis Martin yesterday. With apologies to those actively participating in it, I felt that it must be moved to its own thread.

Lots of folks come here simply to read the main page. As we all know, that's a big mistake. The true value of this site is in the wise and learned comments that are shared with each thread. The discussion regarding Santa is a perfect example. If you missed it, here is what all the hubbub is about.

First, on his site, Santa posted this last evening:

January 30, 2012, at 7:37 pm
by Jim Sinclai
r
My Dear Friends,
I was interviewed today concerning the most powerful body in the financial world that now holds in its hands the near future of all markets, from currencies to commodities, based on a single edict to be given.
The interview is being processed and should be posted here later this evening.
This organization supersedes all governments and central banks today in terms of the financial power they edict. This organization can have a greater impact on your pocketbook than the FASB did when they killed "true value" accounting.
This body is made up of the key players of the five largest banks in the USA and other countries. This body by their actions this week will guarantee QE to infinity.
This is relevant to all your assets, yes all. If you have the time listen to it please. If you don’t have the time listen to it please. If you don’t listen to it do not blame me when all hell breaks loose six months from now.
Not one word about this body was on the airwaves today, yet this group by a simple decision rules the financial plant. They will be making this edict in just a few days. They have to do it again this year. It is then that you know what will hit the fan.
I feel this is it for jsmineset.com tonight. I do not want to write another word and detract from the revelations you will hear.
Your financial future, even if you have never heard of them, is in this organization’s hands. Check in later for the interview. If you don’t check in your finances might just check out.
Please remember you have been informed of this impending edict as a service to the community.
Respectfully,
Jim

As you might imagine, this got everybody's attention. We all sat around for an hour or two, waiting for the interview and then it was finally posted to the Ellis Martin YouTube channel. I will second Santa's sentiment...please take the time to listen to this today:

Breaking News Ellis Martin Report with Jim Sinclair

As we were debating what this all meant, I offered what I still think is a reasonably good explanation:

If I understand this right, here is what Santa is saying:

  • In 2008, AIG had sold CDS on CDOs. CDOs defaulted and AIG had to pay. AIG went broke. The counterparties to the CDS were GS, JPM et al and had to be made whole on their losses that they thought were insured by AIG.
  • US Govt funnels TARP cash thru AIG to GS, JPM et al to cover losses
  • IN 2012, Greece is about to default, just like the CDOs of 2008.
  • ISDA (run by Big 5 banks) declares that 70% haircut on Greek bonds is not a default.
  • Therefore, Big 5 do not have to pay off on CDOs bought by Greek bondholders. Big 5 off the hook.
  • Greek bondholders who thought they had principal insurance are now screwed and left holding the bag.
  • Greek bondholders (big Euro banks, big Euro govts, big hedge funds) will now be insolvent.
  • Greek bondholders will need massive capital injection.
  • Short term euro negative/dollar positive.
  • Regardless, lots and lots of money printing to save Greek bondholders.

Also, a significant part of Santa's warning is the timing. He seems to be saying that a decision regarding whether or not this is a "default" will be announced this week. Clearly, a market coming to terms with a massive, new money printing scheme to cover the bondholders will be a market that assigns the precious metals a much higher value in the weeks ahead. We will have to watch this very closely.

OK, have at it. Listen to the interview and discuss the implications in the comments. Learn from each other. Help each other. Prepare accordingly. TF

p.s. I believe that gold is popping this morning based upon this news:

https://www.zerohedge.com/news/venezuela-completes-repatriation-160-tons-gold

Apparently, some are surprised that El Commandante was able to pull this off. At any rate, 160 tonnes in Venezuela means that as much as 16,000 tonnes has been removed from the LBMA/Comex paper regime. Ponder that one for a while.

About the Author

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  217 Comments

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diegeiro
Feb 1, 2012 - 10:08pm

It's complex crap...but it's real

15:24 "Its too too much to think that you will call into service the default swaps which can't and are not financed to service. You would have to go through another bank rescue. Eventually it's going to have to happen, because eventually, this kicking the can down the road is not going to witness a major economic recovery in Europe that finances the governments ability to meet their deficit responsibilities.....

16:00 "...It's complex crap...but it's real"

"We are standing on the threshold of a credit event."

Sinclair

My thanks to Santa, Mr. Ferguson and his faithful readers, and also to Zero Hedge, without whom I would not have an understanding of this crazy mixed up world in which we are living, although I may be a day late in the conversation...

Eric Original
Feb 1, 2012 - 7:51pm
¤
Feb 1, 2012 - 7:17pm

No comment box / Hats off to the Mods

For some reason I see no "comment box" in the new thread.

Probably swamped from all the newbs/lurkers signing up or putting their guesses in. I'm sure the Mod(s) are working their butt off and there's a reason for it.

Glad to see lots of new names out there.

I see Mod Washington alluded to how busy it's been behind the scene's.

Thanks MW

AlijoStratajema
Feb 1, 2012 - 6:46pm

Fed Alert

Unless announces some news then gold won't have time to listen...

StratajemaAlijo
Feb 1, 2012 - 6:32pm

Re: Fed Alert

When the Bernank speaks, gold listens and usually rises!!!

Alijo
Feb 1, 2012 - 6:23pm

Fed Alert

Federal Reserve chairman Ben Bernanke testifies before the House Budget Committee about the state of the economy. Tomorrow 10 am EST...

Peaches Marie
Feb 1, 2012 - 12:42pm

Red Alert: Credit Default Swaps Explained

One read and there is no question (who, what, where, or why). She has a way with words. Anne Barnhardt "simplifies" Santa's CDS scenario. https://barnhardt.biz/

News out of Brussels last night was that a package is being put together that would haircut Greek bonds by 70%, thus only paying back 30 cents on the dollar to anyone holding Greek paper. This will set a precedent that will eventually be played out all over Europe.

Full AP story HERE.

This is extremely bad, and will spell the end of the big U.S. banks and the financial system in total. But EVERYONE needs to understand credit default swaps (CDS) first. CDS are insurance policies that investors have traded – very similar to OPTIONS for my old clients and cattle people out there. Buying a CDS is essentially like buying a put. The buyer pays a premium, or fee, to the writer, or seller of the CDS that says that the seller will guarantee and make whole the buyer’s position in a specific bond IF the entity behind the bond (such as Greece) defaults. In exchange for paying the premium and being made whole after a default, the buyer of the CDS surrenders the bond position to the seller of the CDS, and the seller gets to keep both the premium paid plus gets to keep any salvage value of the defaulted bond.

So the CDS buyer pays a premium or fee, and the seller guarantees against a default but gets to take ownership of the bonds and keep any salvage value if a default does happen.

Here is what I STRONGLY suspect is going to happen with this 70% haircut plan. The bondholders are going to take the full brunt of the 70% haircut, BUT the body that actually dictates whether or not a default has happened – the International Swaps and Derivatives Association (ISDA) – will declare that this credit event is NOT a default, and thus all of the banks and entities that THOUGHT that their European debt positions were hedged with CDS will find out that they have no protection at all. And then the excrement hits the fan. Big time.

The argument that the ISDA will make is that a 70% haircut isn’t a default. This is, of course, abject horse manure. Try paying only 30% of your mortgage and see how quickly the word “default” is used. They are using the 70% figure because a 30% payout is just enough to make the legalistic argument that a FULL default hasn’t occurred - which makes NO SENSE because salvage value is one of the core concepts in CDS contracts. The SELLER GET THE RIGHTS TO THE SALVAGE VALUE, which by definition implies that the default need not be 100% in order to execute the CDS. ARRGGHH!!!!

The obvious question is, WHO IS IT THAT HAS WRITTEN ALL OF THESE CREDIT DEFAULT SWAPS, because they are going to make off like bandits. They are going to have received all of the premium, the default event will have happened, and they won’t have to pay out. Like the old Dire Straits song says, “Money for nothin’ and chicks for free.” Fish in a barrel. Lambs to the slaughter. Candy from a baby.

I will venture a guess as to who two of the largest writers of Eurotrash CDS might be. How about . . . oh, I dunno, Goldman Sachs and J.P. Morgan? Guys, what MF Global was doing with customer funds – “hypothecating” and leveraging the customer money into European bond positions “hedged” with credit default swaps – THEY’RE ALL DOING IT. All of the brokerage houses. All of the investment firms. All of the retirement account custodians. ALL OF THE BANKS. I can almost promise you that Goldman Sachs and J.P. Morgan have been sitting on a net short position in Europe, quietly betting against European paper, all the while pimping and selling long European positions (It will be fine! The bailouts will come!) AND happily selling TRILLIONS of dollars worth of CDS to their customers to “guarantee” the customers’ long-Europe positions against default, knowing full well that Europe WOULD collapse. (Duh. Anyone who can do 2nd grade math knows that.) When the collapse happened they knew from the beginning they WOULD NEVER HAVE TO PAY OUT ON THE CREDIT DEFAULT SWAPS THAT THEY WROTE because the ISDA was populated BY THEIR OWN PEOPLE, and the ISDA would therefore never declare a default. They would therefore pocket the premium received, but most importantly would then swoop in and BUY UP ALL OF THE BANKS AND BROKERAGES DESTROYED BY THEIR UNHEDGED NET LONG-EUROPE POSITIONS.

Think about it. Why would a Goldman or a J.P. Morgan write trillions of dollars of CDS on Europe in the first place? CDS aren’t like regular options. CDS are binary in their outcome. Either there is no default, or there is, and the payout required would be massive. There is no middle ground. There is no “moderate” payout on a CDS. It is either all-or-nothing. Why would Goldman and J.P. Morgan write these CDS contracts knowing full well that Europe was mathematically impossible to save and thus guaranteed to default, and that the inevitable European default would then lead to demands for payout that were – again – mathematically impossible? We are talking tens if not hundreds of trillions of dollars. We are talking multiples of the size of the entire economy of the U.S. - and that is just the exposure of ONE BANK (i.e. JPM @ $78TTT). There is no possible way to payout on that. It seems to me that these CDS writers knew from the start that they would never have to payout. They knew that their people in the ISDA would never declare a default, but would always leave some trifling payout to “legally” skirt default. If it ever got to the point that there was a full default, World War 3 would be the result and thus the entire point would be moot. The bankster oligarchs would at that point be moving fully to declare a new totalitarian world government and abolish and seize all private property. Game over.

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Smiddywesson
Feb 1, 2012 - 8:18am

@retireyoung

No Evil Empire? LOL that's a good one.

If there's no Evil Empire, then why did we bail them out?

We all knew the bail outs wouldn't work, so how did they get two political parties that never agree on anything to throw away 16 trillion dollars, much of which went to overseas banks?

Which is more believable, that hundreds of people were all crazy at the same time or they were themselves evil and were working for the EE? Don't forget that Dick Durban quote: "The banks, they run this place."

Nature abhors a vacuum, and in this case, the vacuum is between the ears of the average citizen when it comes to money. Into that vacuum came central banking, to establish a new equalibrium with them in control and us, in our innocence and ignorance, willingly in chains. It's that simple. Give the money changers some slack, and they will tie you up in it.

I paid to bail out the EE. If there's no EE, I want my money back.

Senseosensei
Feb 1, 2012 - 2:48am

I find it frightening

when seemingly intelligent people stick their heads in the sand, with no knowledge of history, and apparently no sense of the decay of society surrounding them.

It is telling me we have a long way to go still before masses wake up to reality.

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