Dear CIGAs,
To answer questions from Cape Town, RSA today:
1. I have said for a considerable period of time that gold will trade at or above $1650 by January 14th 2011. I started saying this so far back it looked nuts.
That statement means exactly what is says. It is not hedged in any way.
2. Martin Armstrong is a market timer. Specifically, he times "SENTIMENT." Sentiment makes markets happen so his highs and lows need not be on the day (many are). They will be close.
Gold requires a lack of confidence in other alternatives such as the US dollar. Gold can be roughly attached to Armstrong’s changes in sentiment. Long term gold is attached in the inverse to Armstrong’s trends, especially under today’s unique and unprecedented circumstances.
3. Alf Field’s prediction of prices have been outstanding. Gold can do what he has outlined. My commitment to you is $1650.
Are we clear now?
Jim Sinclair’s Commentary
They are going to clean up as usual. The first low was on April 19th and the take off is in June. $1650 will be reached on or before January 14th, 2011. In all likelihood, the number will probably be much higher. The inside always knows. What more do you need to know?
Hedge Funds Making Big Bets on Gold
By Joseph Checkler
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Hedge fund firms Paulson & Co. and Lone Pine Capital made big bets on gold during the first quarter, becoming the No. 1 and No. 2 shareholders, respectively, in the SPDR Gold Trust (GLD) exchange-traded fund, according to regulatory filings.
Paulson & Co. – run by John Paulson, who had already been beefing up his exposure to gold companies – bought 31.5 million shares of the ETF during the first quarter, according to its mandatory end-of-first-quarter holdings report with the Securities and Exchange Commission. That stake would be worth more than $2.8 billion if Paulson still holds all those shares at present.
Stephen Mandel’s Lone Pine bought 26.5 million shares of the ETF, which would be worth $2.4 billion if it still holds those shares. Lone Pine didn’t immediately return a message seeking comment.
Many hedge fund managers have been increasing their gold investments lately. More than 28% of the SPDR Gold Trust ETF’s outstanding stock was owned by hedge funds as of the end of the first quarter, according to Factset Research Systems.
The increased bets on gold come as the price of the yellow metal have remained high, above $900 an ounce. Funds also see hard assets as insurance against further turmoil in the financial system, including a decline in the value of paper currency.
Most active investing in gold has been by Paulson.
In March, Paulson paid $1.3 billion to buy Anglo American PLC’s (AAUK) remaining stake in South African miner AngloGold Ashanti Ltd. (AU). Paulson also recently introduced to investors a new share class pegged on the price of gold.
Jim Sinclair’s Commentary
10% of credit card debt gone bad is outrageous, most certainly if the 2nd leg of the collapse in SENTIMENT is starting TODAY!
American Express to cut 4,000 jobs
Mon May 18 22:38:11 UTC 2009
By Jonathan Stempel
NEW YORK (Reuters) – American Express Co, the credit card and travel services company, on Monday said it plans to eliminate 4,000 jobs, or 6 percent of its workforce, as the weakened economy causes higher customer defaults.
The cuts are part of the New York-based company’s plan to save $800 million over the rest of 2009. They are in addition to 7,000 job cuts and an expected $1.8 billion of savings from a restructuring it announced in October.
Like many rivals, American Express has been hurt by rising delinquencies among cardholders, with the U.S. unemployment rate having risen to its highest level since 1983.
On Friday, American Express said its net charge-off rate, or debt it does not expect to be repaid, rose to 10.1 percent in April from 8.8 percent in March.
"We continue to be very cautious about the economic outlook," Chief Executive Kenneth Chenault said in a statement. He said the cost savings "will be reinvested in the business to make sure we can take competitive advantage of opportunities as the economy begins to rebound."
Jim Sinclair’s Commentary
This is a grotesque result of Wall Street’s take over deal of Washington Inc. and total lack of any consideration for the victims of their deeds.
There are scared families out there right now. There are tears out there in fear of how the family will survive the loss of work by the wage earners.
Marriages have difficulty surviving hard downtimes in economics.
There are fixed income people out there hoping to die soon because they cannot afford to live much longer.
But up in Greenwich CT, they are high fiving over the screwing they have given the world.
Where is your rage?
Geithner’s gift to Wall Street
As the first TALF-backed deals for Ford, Honda and Harley’s debt hit the market, professional investors see an opportunity to make a killing.
By William D. Cohan, contributor
Last Updated: May 18, 2009: 10:39 AM ET
NEW YORK (Fortune) — Imagine if you were not really in the market for a house but the government came along and said that it would finance 94% of a home’s purchase price with a mortgage rate of less than 3%. Still not interested? Wait, Uncle Sam has some additional sweeteners: if you do the deal and buy the house for only 6% down, you also get the equivalent of rental income every month to the tune of at least an annualized yield of 10% of the purchase price.
But wait there’s still more: if, say, after two years, you decide you don’t want the house any longer, you can just walk away from it. No need to pay the balance of the mortgage (it won’t affect your credit rating), and you can keep the rental income received to date.
That’s essentially the deal that Treasury Secretary Timothy Geithner has offered qualified professional investors who participate in the so-called TALF (Term Asset-Backed Securities Loan Facility). Two months into the program as the first TALF- backed deals hit the market, you can see why the likes of hedge fund Fortress Investment Group are drooling over it. "I’m a big believer in the impact that TALF can and should have," Fortress CEO Wes Edens said on a May 6 investor call, adding that he expects that Fortress will be "a big participant" in the TALF program "three to six months from now."
The first few TALF deals — one for Ford Credit (the financing arm of the automaker), another for American Honda Receivables Corp., a third for the student loan company Sallie Mae and a fourth for motorcycle icon Harley Davidson — shed some light on our tax dollars at work.
"I’ve had accounts that dropped everything they were doing to take a look at this TALF financing," one Wall Street trader explained. "It was like nothing they had ever seen. It beats any financing that the private sector could ever come up with. I almost want to say it is irresponsible." For instance, Prudential Financial, Inc. (PRU, Fortune 500), the large insurer and investment manager, borrowed $786 million from the TALF as of March 31 and put up only $50 million to do so, some 6.4% of the deals.
Jim Sinclair’s Commentary
You think it might be a better idea to consider a guarantee for China than planting foolish media articles telling them to stuff it?
There is a better chance that the dollar is going to get stuffed, and magically China and Brazil will reveal it has only a few of those things left.
Where is the international police force for illicitly manufactured financial statistics?
They might be too busy busting the West to attend others.
Brazil and China eye plan to axe dollar
By Jonathan Wheatley in São Paulo
Published: May 18 2009 18:24 | Last updated: May 18 2009 23:31
Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president.
The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency.
Mr Lula da Silva, who is visiting Beijing this week, and Hu Jintao, China’s president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month.
An official at Brazil’s central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil.
“Currency swaps are not necessarily trade related,” the official said. “The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi.”
Henrique Meirelles and Zhou Xiaochuan, governors of the two countries’ central banks, were expected to meet soon to discuss the matter, the official said.
Jim Sinclair’s Commentary
Did you notice that Martin Armstrong suggests today is the high for green shoots? If you didn’t then go back to the "click to" chart below and get out your magnifying glasses.
Whatever happened to the promise of Fiscal Stimulation?
The answer is easy, Wall Street stole it and only Wall Street benefits from it.
"The Worst Is Yet to Come": If You’re Not Petrified, You’re Not Paying Attention
Posted May 15, 2009 09:31am EDT
by Aaron Task
The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.
"We’re in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn’t petrified, he or she is a damn fool."
Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."
This outlook is based on the following main points:
* With the unemployment rate rising into double digits – and that’s not counting the millions of "underemployed" Americans – consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.
More…
Jim Sinclair’s Commentary
This pretty much says it all.
Jim Sinclair’s Commentary
It starts as an investment, but becomes insurance. The policy pays off. Trading your insurance policy is not advisable.
Jim Sinclair’s Commentary
This is today’s market, all of it from bonds to Gold and equities.
The mood of the homebuilder’s sentiments versus expectations is just ebullient.
Of course it is because the equity market rallied.
Of course the equity market rallied but it cost north of USD $10 trillion to accomplish it.
The Libor rate looks like it fell through a black hole in the floor.
Of Course it does because it cost north of $10 trillion to produce that.
Now that a Sentiment Index is reported ebullient (versus expectations of course) who needs gold?
Mr. Armstrong, you are the master of timing, what is your opinion on economic sentiment?
Click here to view today’s piece from Martin Armstrong
Here is a question of manners:
Many of you call me with blocked numbers on my caller ID. You are entering my privacy but I cannot see who you are. Isn’t there something a tad wrong with that?
I let those calls go into the machine for return at a later time if the caller is known to me.
China and Treasuries today:
Here is an answer to today’s many inquiries.
The Wall Street party-line has always been that since the US has stuffed China with US Treasuries, China has no choice but to shut up, suck it up and choke on them. Hey, what is a trillion today anyway?
That viewpoint is extremely short sighted. Central banks have many alternative methods to offload dollar items than looking for buyers in the Forex or US Treasury world markets. This is most certainly true for those that finance international business of their quasi government private sector
Let us not forget buying gold as one way to pay in dollars that results in diversification of reserve assets.
Treasury instruments are fungible as collateral items into whatever currency is required in trade.
When I have discussed transactions with Chinese nationals in China a meeting with a personality of or at the China Trade Bank is standard fare.
Jim Sinclair’s Commentary
The Funds will of course be diverted. About that there is no question. It is an ages old tradition.
The management retirement program is the most probable recipient of the diversion judging on past performance of the similar.
Pakistan Is Rapidly Adding Nuclear Arms, U.S. Says
By THOM SHANKER and DAVID E. SANGER
Published: May 17, 2009
WASHINGTON — Members of Congress have been told in confidential briefings that Pakistan is rapidly adding to its nuclear arsenal even while racked by insurgency, raising questions on Capitol Hill about whether billions of dollars in proposed military aid might be diverted to Pakistan’s nuclear program.
Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, confirmed the assessment of the expanded arsenal in a one-word answer to a question on Thursday in the midst of lengthy Senate testimony. Sitting beside Defense Secretary Robert M. Gates, he was asked whether he had seen evidence of an increase in the size of the Pakistani nuclear arsenal.
“Yes,” he said quickly, adding nothing, clearly cognizant of Pakistan’s sensitivity to any discussion about the country’s nuclear strategy or security.
Inside the Obama administration, some officials say, Pakistan’s drive to spend heavily on new nuclear arms has been a source of growing concern, because the country is producing more nuclear material at a time when Washington is increasingly focused on trying to assure the security of an arsenal of 80 to 100 weapons so that they will never fall into the hands of Islamic insurgents.
The administration’s effort is complicated by the fact that Pakistan is producing an unknown amount of new bomb-grade uranium and, once a series of new reactors is completed, bomb-grade plutonium for a new generation of weapons. President Obama has called for passage of a treaty that would stop all nations from producing more fissile material — the hardest part of making a nuclear weapon — but so far has said nothing in public about Pakistan’s activities.
Jim Sinclair’s Commentary
The most important points to consider are:
1. How do you guarantee US Treasuries with US dollars? Is it at an agreed relationship to the Yuan? Does that not sound somewhat like the old takeover deals where value was set and more shares issued if the value of the acquiring company declined below certain levels over time? The other method would be gold equal to face value and the final method would be the surrender of Treasuries for gold at a set value.
2. The Ruble as a reserve currency seems somewhat strange. In fact, why would any nation want that burden? If the Ruble was to be in some form tied to a basket of commodities such as oil and gold there might be a strategy.
3. The apparent estrangement taking place between the US Administration and Israel.
China’s Stockpiles Are New Sovereign Wealth Strategy, RBC Says
By Kevin Hamlin
May 18 (Bloomberg) — China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.
“It’s part of an overall desire to decrease its exposure to dollar assets,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong, in an interview today. China fears the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause “higher inflation and a weaker dollar,” he said.
Premier Wen Jiabao has said he is “worried” about the safety of the nation’s $767.9 billion in holdings of U.S. Treasuries and called on the U.S. “to guarantee the safety of China’s assets.” Central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.
“Increased spending on commodities represents a reallocation of China’s sovereign wealth away from the accumulation of financial assets,” Jackson said in a May 15 research note.
China, the world’s biggest consumer of iron ore, boosted imports of the material to a record 57 million metric tons in April. China’s purchases of copper and copper products reached a record 399,833 metric tons last month, compared with 374,957 tons in March.
