“When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see money flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.”
–Ayn Rand, Atlas Shrugged (1957)
Dear CIGAs,
Here is an interesting question concerning the mark to market requirement for financial organization’s valuation of their so called assets.
"If you remove the requirement for mark to market of financial assets, can you calculate asset valuation selectively such as only up valuation but not down valuation?"
Does extreme times require extreme lies? Do the ends really allow any means? Does the accomplishment of fake valuation really make the damage that will be done over coming decades worthwhile? You could not count on any balance sheet as truthfully communicating worth. No, the ends here do NOT justify the means.
Jim Sinclair’s Commentary
The following is a video of the Bernanke-Sanders exchange courtesy of CIGA Anthony.
Jim Sinclair’s Commentary
I believe I covered this in my answer to Greg Hunters question yesterday, however this article does cover his point in much more detail.
Number One Reason to Own Gold
By Patrick A. Heller, Market Update
March 10, 2009
What do the following industry-leading companies have in common?
Alcoa, AIG, AMBAC, American Express, AMR (American Airlines), Bank of America, Bear Stearns, CBS, Citigroup, Countrywide Credit, Delphi, Dow Chemical, Eastman Kodak, Fannie Mae, Ford, Freddie Mac, Gannett, General Electric, General Motors, Goodyear Tire, Harley-Davidson, The Hartford, International Paper, JDS Uniphase, Lear, Lehman Brothers, Liz Claiborne, Macy’s, MBIA, Merrill Lynch, MetLife, MGIC, MGM, Motorola, JC Penney, Prudential, Saks, Sears, SprintNextel, Tenet Healthcare, UAL (United Airlines), United States Steel, Wachovia Bank, Washington Mutual, Whirlpool, and Xerox.
The answer: Since the middle of 2007, all of these companies have seen their stock values decline by more than 80 percent.
At the close of markets on June 29, 2007, gold was at $648. Its price now is more than 40 percent higher than it was then. Gold has outperformed the stocks in these companies by at least seven-fold in the past 20 months.
This example is a perfect demonstration of the number one reason to own gold. The best purpose for owning gold is for insurance against calamities that may affect the values of paper assets. The concept of owning insurance is not to make a profit by collecting on it (no one wants to be in a car accident, have their house burn down, lose valuable possessions to burglars, and so forth), but to have some protection just in case bad things come to pass. Gold serves to preserve and protect wealth.
Gold provides a stable form of money to facilitate commerce. An ounce of gold may temporarily hold a particular exchange rate versus dollars, pounds, euros, pesos, yen, francs, etc., but the value of these fiat currencies can and do change, usually downward. So far in history, there has never been a paper currency that has not eventually failed. In contrast, an ounce of gold from six thousand years ago is still worth an ounce of gold today.
Physical gold in your immediate possession is an asset that is not anyone else’s liability, so it has no counterparty risk. While the value of gold can fluctuate as measured in paper currencies, it has never suffered as much as these stocks of the companies listed above.
Jim Sinclair’s Commentary
Today in Pakistan.
Pakistan: has it reached the edge of the precipice?
Posted by: Myra MacDonald
March 10th, 2009
Maybe this always happens at times of national upheaval. But there is a surprising disconnect between the immediacy of the crisis facing Pakistan as expressed by Pakistani bloggers and the more slow-moving debate taking place in the outside world over the right strategy to adopt towards both Pakistan and Afghanistan.
Reading Pakistani blogs since confrontation between the country’s two main political parties explodedand comparing them to international commentaries is a bit like watching men shout that their house is on fire, and then panning over to the fire station where the folks in charge are debating which type of water hose works best.
With lawyers and supporters of opposition leader Nawaz Sharif vowing to blockade parliament later this week over the refusal of President Asif Ali Zardari to reinstate fired judges, the country is steeling itself for violent street protests, which in turn could provide easy targets for suicide bombers seeking to add to the mayhem. Sharif has talked about “a prelude to a revolution”, prompting the government to threaten him with charges of sedition.
Writing in Pak Tea House, a blogger who had insisted right up until February that Pakistan would turn out all right said this had been based on the assumption political parties would pull back from outright confrontation in the interests of the country. “I was wrong. And so faced with altered facts, I have changed my opinion. Pakistan is unraveling.”
Jim Sinclair’s Commentary
Today there was a release of what was termed an internal memo at Citi saying things are going very well this quarter.
This internal memo is nothing more than a plausible denial PR campaign.
US Already Preparing Next Citigroup Bailout (C)
Joe Weisenthal|Mar. 10, 2009, 5:43 AM
Three bailouts later, and Citigroup (C) is still a $1 stock. Hence the government is already engaged in "contingency planning", says WSJ, on the off-off chance that thinks take a turn for the worse.
What would that turn for the worse be? An actual bank run. Already Citi’s CDS are trading at blowout spreads, an ominous sign given how much intervention there’s already been, but bank executives swear there have been no hints of a run. Really.
Again, it’s all contingency planning, and whoever leaked this story to the Journal says they don’t expect to have to go through with it.
Jim Sinclair’s Commentary
People selling their insurance might just be a tad early.
Too big to fail? 5 biggest banks are ‘dead men walking’
By Greg Gordon and Kevin G. Hall, McClatchy Newspapers Greg Gordon And Kevin G. Hall, Mcclatchy Newspapers – Mon Mar 9, 5:19 pm ET
WASHINGTON — America’s five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.
Citibank, Bank of America , HSBC Bank USA , Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31 . Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.
The disclosures underscore the challenges that the banks face as they struggle to navigate through a deepening recession in which all types of loan defaults are soaring.
The banks’ potentially huge losses, which could be contained if the economy quickly recovers, also shed new light on the hurdles that President Barack Obama’s economic team must overcome to save institutions it deems too big to fail.
Jim Sinclair’s Commentary
Maybe this internal memo missed the media’s attention.
Regulatory reports show 5 biggest banks face huge losses
By Greg Gordon and Kevin G. Hall | McClatchy Newspapers
WASHINGTON — Five of America’s largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.
Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.
The disclosures underscore the challenges that the banks face as they struggle to navigate through a deepening recession in which all types of loan defaults are soaring.
The banks’ potentially huge losses, which could be contained if the economy quickly recovers, also shed new light on the hurdles that President Barack Obama’s economic team must overcome to save institutions it deems too big to fail.
While the potential loss totals include risks reported by Wachovia Bank, which Wells Fargo agreed to acquire in October, they don’t reflect another Pandora’s Box: the impact of Bank of America’s Jan. 1 acquisition of tottering investment bank Merrill Lynch, a major derivatives dealer.
