Jim Sinclair’s Commentary
Here is a wise statement that those who feel they can trade for insurance should deeply consider:
“We don’t want to rely too much on celebrity spokespeople,” Mr. Chow said. “Celebrities come and go. Their popularity, notoriety, fame can be nebulous.
Gold, on the other hand, is solid — and eternal. “In hard times,” he said, “people cling to it.”
A Hong Kong Gold Merchant Seeks Fortune in China
By JOYCE HOR-CHUNG LAU
Published: July 31, 2009
HONG KONG — When Chow Sang Sang opened its third jewelry megastore in Hong Kong in April, it was not a quiet affair. The 464-square-meter space was packed with publicists, fashion models, art installations, drummers and a diamond necklace priced at 5.7 million Hong Kong dollars.
Vincent Chow, the grandson of the company’s founder and now its general manager, was at the 5,000-square-foot store to oversee the proceedings — and to take a hand at banging on the drums himself.
But although Mr. Chow, 62, is overseeing a rapid expansion in the family jewelry business, he is staying firmly focused on the commodity that made his family’s fortune.
“We started as goldsmiths,” Mr. Chow said in a recent interview. “Today, gold still makes up half of our sales.”
Chow Sang Sang was founded in 1934 in Guangzhou, China. In 1948 — when masses of refugees and companies fled political turmoil on the Mainland — Mr. Chow’s father and two uncles re-established the family business in Hong Kong, then a British colony.
In 1973, the jeweler went public on the Hong Kong exchange. Today, Chow Sang Sang has more than 190 stores in Hong Kong, Taiwan, Macao and China, and it had revenue of 9.88 billion dollars, or $1.27 billion, in 2008.
Jim Sinclair’s Commentary
The Fed knows how to take care of its own!
Wall Street profits from trades with Fed
By Henny Sender in New York
Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04
Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.
The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.
However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.
The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.
“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”
A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”
Jim Sinclair’s Commentary
Your funds are guaranteed by the FDIC. The only problem with that is FDIC is nearly broke and will have to be bailed out by the US Treasury.
The problem with the Treasury bailing them out is that dollars created out of thin air have never in history held their buying power. Therefore you get paid off in newly printed confetti money.
Jim Sinclair’s Commentary
Dr. Bob says "The collapse of Guaranty Bank would be biggest failure of ’09." Do you think the FDIC is ready for this?
Big Texas bank on verge of failure
Guaranty Bank, which counts Carl Icahn as one if its backers, is teetering on the edge of insolvency. But it may not be easy for regulators to find a buyer.
By Colin Barr, senior writer
Last Updated: July 31, 2009: 1:53 PM ET
NEW YORK (Fortune) — Guaranty Bank is hardly a household name. But the Austin, Texas-based thrift’s looming failure is shaping up as a big headache for bank supervisors — not to mention a black eye for Carl Icahn and others in the smart money set.
Guaranty (GFG) could be soon seized by the government in what would be the biggest bank failure in a year that has already had 64 of them. Last week, the bank warned investors to expect a federal takeover after regulators forced a writedown of its risky mortgage investments and a bid to raise new capital failed
Guaranty has $13.4 billion in assets and operates 160 branches in Texas and California — two of the three best banking markets in the nation, thanks to their size and population growth.
But the bank’s capital problems and its smallish, scattered network of branches could detract from Guaranty’s appeal, making it tough for regulators to find a buyer quickly — or without substantial federal subsidies.
"This may not be closed as quickly as you think, since it will require bids and rebids," said Miami banking consultant Ken Thomas.
Jim Sinclair’s Commentary
A very active Friday!
Regulators shut down banks in five states
By MARCY GORDON and IEVA M. AUGSTUMS
WASHINGTON -Regulators on Friday shut down banks in Florida, New Jersey, Ohio, Oklahoma and Illinois, boosting to 69 the number of federally insured banks to fail this year amid the pressures of the weak economy and mounting loan defaults.
The Federal Deposit Insurance Corp. was appointed receiver of the five banks.
The agency shut down Integrity Bank of Jupiter, Fla., with $119 million in assets and $102 million in deposits, and First BankAmericano, based in Elizabeth, N.J., with $166 million in assets and $157 million in deposits.
Also closed were Peoples Community Bank, West Chester, Ohio, with $705.8 million in assets and $598.2 million in deposits; First State Bank of Altus, in Altus, Okla., with $103.4 million in assets and $98.2 million in deposits; and Mutual Bank of Harvey, Ill., with $1.6 billion in assets and $1.6 billion in deposits.
Mutual Bank was the largest of the five. It was closed Friday by the Illinois Department of Financial Professional Regulation’s division of banking, which appointed the FDIC as receiver. United Central Bank of Garland, Texas, is assuming the deposits and essentially all of the assets. In addition, the FDIC and First United Central Bank entered into a loss-sharing agreement covering $1.3 billion of the assets of Mutual Bank. Its 12 branches will reopen Saturday as offices of United Central Bank.
First State Bank of Altus was closed by the Oklahoma State Banking Department, which appointed the FDIC as receiver. Herring Bank, based in Amarillo, Texas, is assuming the deposits and about $64.4 million of the assets of First State Bank of Altus and the FDIC will retain the remaining assets for eventual sale. The failed bank’s branches will reopen Saturday as offices of Herring Bank.
Jim Sinclair’s Commentary
Massive rescue and bailout of the FDIC is moving towards the front burner.
FDIC Loan Report and Plan C: Nearly Half of the $7.7 trillion in Loans Outstanding at FDIC Insured Banks are in the form of Commercial Real Estate. USPS Contracting CRE Space. Drop in Restaurant Traffic.
The commercial real estate debacle is heating up. Although the market is cheering the better than expected drop in second quarter GDP, much of the reason for a less than spectacular fall came from the “G” in the equation, government spending. By the way, we revised Q1 GDP lower to -6.4 percent but not much interest was given to that minor detail. Who is to say we do not revise the advanced estimate for Q2 lower? Either way, the GDP release tells us that commercial real estate is on precipice of implosion. Is it any wonder that the U.S. Treasury is secretly working on a preemptive bailout program called Plan C gearing up taxpayers dollars for another toxic mortgage industry that has $3 trillion in loans? The failure of 2008’s residential mortgage bailout should tell you that bailing out CRE loans is a losing cause especially for taxpayers.
The problem for commercial real estate is the shrinking demand from consumers who have now found a new form of forced austerity. With 26,000,000 Americans unemployed or underemployed the demand for armies of strip malls is no longer a pressing issue. Sure, we can offer gimmicks like cash for clunkers but where is this money coming from? Most people realize that conspicuous consumption by consumers, Wall Street, and the government led us here and our solution is more conspicuous consumption?
Jim Sinclair’s Commentary
More than net income is not only an insult to the public who bailed them out, but is a crime against stockholders.
NY AG: Banks Paid Bonuses That Were Substantially Greater Than The Banks’ Net Income
By Meg Marco, 2:22 PM on Fri Jul 31 2009
New York Attorney General Andrew Cuomo’s report on the bonus structures of the banking industry is out and — oh my— it’s damning. The AG says that 3 banks, Goldman Sachs, Morgan Stanley, and JP. Morgan Chase, paid out bonuses that " were substantially greater than the banks’ net income."
The report says that combined, these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 billion. Why did this happen? Because, according to Cuomo, when times were good the bankers rewarded themselves based on performance. When the economy started to sour — they decoupled the bonus structure from reality and kept rewarding themselves.
From the report:
As one would expect, in describing their compensation programs, most banks emphasize the importance of tying pay to performance. Indeed, one senior bank executive noted recently that individual compensation should not be set without taking into strong consideration the performance of the business unit and the overall firm. As this executive put it, "employees should share in the upside when overall performance is strong and they should all share in the downside when overall performance is weak."
But despite such claims, one thing is clear from this investigation to date: there is no clear rhyme or reason to the way banks compensate and reward their employees. In many ways, the past three years have provided a virtual laboratory in which to test the hypothesis that compensation in the financial industry was performance-based.
Jim Sinclair’s Commentary
Dump the politicians and keep police, firemen and education.
Where is your rage?
More Cuts for Colleges Are Likely Even After States Pass Budgets
July 27, 2009
By Eric Kelderman
A few weeks after wrapping up their budgets for the new fiscal year, lawmakers in some states already expect a new round of spending cuts, including to higher education, as tax revenues continue to fall.
Estimates of states’ revenue shortfalls have grown worse since the spring, reaching a total of nearly $143-billion when most states began the 2010 fiscal year, on July 1, according to a survey by the National Conference of State Legislatures. But at least 11 states are already expecting to make midyear cuts, totaling more than $22-billion, according to the Center on Budget and Policy Priorities, an advocacy group.
California Budget Deal Cuts $2.8 Billion Higher Ed, Saves Financial Aid
by Peter Galuszka
Jul 27, 2009, 01:38
After marathon sessions including all-nighters, the California Legislature has passed a budget deal that will bring new gloom to higher education by slashing funding for public colleges by $2.8 billion and school districts and community colleges by $5.7 billion.
The cuts are part of a deal worked out by Gov. Arnold Schwarzenegger to plug a $26 billion hole in the state’s $92 billion general fund budget by slicing funds for education, prisons, transportation and localities. The Legislature ended up approving cuts of $24 billion after rejecting Schwarzenegger’s calls for a $2 billion reserve fund.
Although public higher education is being whipsawed again by the cuts, the damage seems not as great as once feared since the state’s student financing arm will not be touched.
The University of California and California State University systems are expected to see cuts of about $2.8 billion on top of a cut of $548 million approved earlier. The 100-campus community college system and other school districts will see further funding cuts of $5.7 billion. This would be in addition to the $8 billion in cuts for schools and community colleges proposed earlier this year.
130,000 Illinois college students denied financial aid
State, short of money, cut off help months early
July 30, 2009
BY DAVE NEWBART Staff
The state will deny the financial aid applications of an estimated 130,000 students — the most in Illinois history.
They were denied because they applied for state aid after May 15, a cutoff months earlier than in years past, thanks to Springfield’s budget woes.
Hardest hit? Students at community colleges and returning adult students, because they tend to apply for aid later.
What’s more, under the state budget compromise reached earlier this month, which slashed funding for the state’s Monetary Award Program in half, no student at any Illinois school will receive aid for the second half of the 2009-2010 school year.
