http://www.ellismartinreport.com/node/181

Jim Sinclair: Well, you have to understand the critical nature of today, today the time we're talking our listeners and between ourselves. The return to quantitative easing is an event which impacts liquidity. Historically always and into the future the main motivator for the general equities markets, the Netflixs and the Googles, of the world is liquidity. The reason why we came of out the bear market in 2009 was quantitative easing. The reason we've been able to hold the general equity levels that are relatively high levels meaning circling around that 1,200 on the Dow is without any question liquidity. The grease of the wheels of the general equities market has always been not necessarily earnings per share. Not necessarily valuations historically. But, rather the presence of liquidity or lack of liquidity in the in the market at any given time. The advent of quantitative easing is good for gold. It is good for the general equities markets. It is negative for the dollar and positive for other than dollar items. However, QE is not a solution to anything. Quantitative easing or the increasing of liquidity or the actually creation of money out of thin air is the bubble making mechanism that you saw in real estate. It's a bubble making mechanism that you see in asset values. It puts money into the hands of people that have to make investment decisions and will make them generally along the lines of what their most familiar with and what they're most used to dealing in. Today we are standing on the threshold of a credit event that is the determination of how the Greek debt will be handled amongst the euro nations. The people who will define what that credit event is, is the International Swaps and Derivatives Association. The International Swaps and Derivatives Association will determine whether a credit event is a default, sovereign default or not. In the most practical sense we're in an election year. In the most practical sense and recognizing that five of the U.S. major banks hold 97% of the obligations on credit default swaps that is that they have guaranteed the buyer of this instrument against the default of an instrument primarily euro debt. So, the credit default swap is actually an insurance policy that brokerage firms issue. And, there is an organization which oversees that basically writes the master agreements. Came into existence in the early 1900/1992, I mean, early 1990s. It was the body that determined that Goldman and Deutsche Bank and all those should be paid out on the shorted backed issues. It's the body that will determine whether or not a sovereign nation has defaulted. So, as we kick the can forward we'll have to for practical reasons, 97% of this insurance policy granted by five the U.S. largest banks, this credit event about to happen the 30% or approximately, it's got a 3 in front of it, where the euro will, where it will be determined that Greece's debt will payout is either going to be determined to be a credit default or not a credit default. Excuse me. Yes, a credit default or not a credit default by the International Swaps and Derivatives Association. The International Swaps and Derivatives Association is primarily made up of representatives of the banks that deal in these items. And, logic would say that their determination would be that no matter what happens to the Greek debt it's not a default because if they decided otherwise they'd have to payout. What I'm doing for you is giving out a case of why more liquidity not less liquidity is forthcoming, why we've already set up and why the Fed last week already announced the return to QE. While even before that in late December the Fed provided over $500 billion dollars worth of swaps to the ECB who in turn lent that money to their member banks who in turn used that money to buy euro debt, which is global quantitative easing. The bottom line is what's taking place is good for equities as it is good for gold investments as it is not that good for the dollar. It's very complex. We've made this world so complex that simplicity no longer exists in casinos everywhere. Bottom line of this analysis, both equity markets and equities of gold and gold itself should rise. Bottom line of this analysis 80 to 82 is the top on the dollar for fundamental reasons. The real importance of this analysis is that you cannot kick this can of credit default swaps much further down the road because there is a point, the point is zero. How in the world would the International Swaps and Derivatives Association say that Greece was not in default if they paid back 10% of what they owed? We're nothing of what they owe. And, five major banks holding these had to insure the debt. And, in going to insure the debt compared to the capital of the banks they don't have it. It's another paper game we've created to enrich the banking industry and to put the entire world into potential jeopardy.

TEMR: So, if we like the two previous bubbles we're really going to love this one . . .

Jim Sinclair: You're going to love this. You're going to enjoy it to no end.

TEMR: For at least a year or two maybe.

Jim Sinclair: Absolutely.

TEMR: And, then watch out.

Jim Sinclair: Yeah.