The problem with socialism is that you eventually run out of other people’s money.
–Margaret Thatcher
Dear CIGAs,
Here are some tidbits for today:
1. 33 camps are shut down in Maine, some with up to 100 campers with H1N1 in isolation.
Please prepare yourself with actions like extra food supplies to cover the flu season simply because you may not wish to go to the market if CDC predictions prove to be even 50% correct.
2. Dubai’s Gold trade is up 12%:
Dubai Gold Trade +12% In 1H 2009 At $14.69 Billion – DMCC
DUBAI (Zawya Dow Jones)–The Dubai Multi Commodities Centre, or DMCC, said Wednesday that the value of gold traded in the first half was $14.69 billion, a 12% jump from $13.07 billion a year earlier.
"No doubt the market witnessed some volatility in gold prices and was compounded by lower retail sales of gold jewelry, however, the overall investment appeal of gold remained strong throughout the first half of this year," said David Rutledge, chief executive officer at DMCC, in an emailed statement.
In the first six months of the year, a total of 300 tons of gold was imported into Dubai, up 13% from 265 tons in the same period of 2008. Gold exports from Dubai reached 213 tons, a 19% increase from 179 tons in 2008.
The gold price averaged $922 per ounce in the first half of the year, up from $910 per ounce during the same period in 2008, the DMCC said.
Jim Sinclair’s Commentary
Here is another casualty of the OTC derivative manufactures and distributors who have reaped huge profits for their contribution to society.
Pension black hole at FTSE 100 companies hits record £96bn
The pension fund shortfall of Britain’s biggest companies has more than doubled to a record £96bn in a year, a report said on Wednesday.
Published: 5:54AM BST 05 Aug 2009
Actuaries Lane Clark & Peacock (LCP) said the financial crisis had helped send the combined deficit of FTSE 100 companies’ pension schemes soaring from £41bn a year ago. It was £12bn two years previously.
The current £96bn funding gap, calculated from data last month, is the largest recorded shortfall recorded under the international accounting rules currently used for Footsie pension funds, the firm added.
LCP said the plunging values would pile more pressure on companies to stop offering defined benefit pension schemes for employees.
Just three FTSE 100 companies – Cadbury, Diageo and Tesco – said they offered defined benefits to new employees, the report said.
The report also calculated the FTSE 100 share index would need to rise from its current level of 4,600 to more than 7,000 to wipe out the deficits.
LCP partner Bob Scott said the deficits had ballooned since March this year as historically low interest rates hit bond yields, which are a major source of pension scheme funding.
He said: "The collapse of Lehman Brothers in September 2008 had a significant impact on the UK pension schemes of FTSE 100 companies.
Jim Sinclair’s Commentary
The Green Hornet sent us this. I would post his quote but the sensors would go wild.
Think about what is said here. It is outrageous even to conceive of.
About half of U.S. mortgages seen underwater by 2011
Wed Aug 5, 2009 5:12pm EDT
By Al Yoon
NEW YORK (Reuters) – The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.
Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.
"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.
Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties’ value, up from 29 percent, it said.
"The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13 percent of the total market.
Jim Sinclair’s Commentary
I think I told you that we were in this leg. $1224 is a better number.
Why Gold Could Hit $1,300 This Year
August 04,
Gold may be nearing its next major leg up.
No investment ever goes straight up or straight down. During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. However, during that time, there was a period of 18 months in which gold fell nearly 50% (see the chart below).
As you can see, from mid-1971 to December 1974, gold rose 471%. It then fell 50%, from December ’74 to August ’76. After that, it began its next leg up, exploding 750% higher from August ’76 to January 1980.
Now, in its current bull market (2001 to March 2008), gold rose over 300% from $250 to a little over $1,000. And just like in the mid-70s, it began showing signs of weakness after its first big rally up to $1,014 in March ’08. At one point, it even fell to $700, a 30% retraction.
Granted, it wasn’t a full 50% retraction like the one that occurred from 1974-76. But we are experiencing a financial crisis. And gold is the most common catastrophe insurance.
If we were to go by the historic pattern of the gold market in the ‘70s, gold should experience upwards resistance for 19 months after its first peak today. Gold’s recent peak was $1,014 in March ’08 (roughly 17 months ago).
If this bull market parallels the last one, then gold should renew its upward momentum in a very serious way starting in October 2009. And this next leg up should be a major one (the biggest gains came during the second rally in gold’s bull market in the ‘70s).
Jim Sinclair’s Commentary
IMF gold sales are NO FACTOR for the bear side in 2009-2011, just as they were NO FACTOR in the 70s for the bear side.
Central Bank net gold sales show huge drop in first half 2009
A report by GFMS for Societe Generale suggests the volume of Central Bank gold sales this year is likely to be among the lowest on record.
Author: Lawrence Williams
Posted: Tuesday , 04 Aug 2009
LONDON – In a report released Monday, precious metals consultancy GFMS, for Societe Generale, looked at the recent rate and volume of gold sales from official sources and concluded that in the first half of the current year the net sales volume was a relatively minuscule 39 tonnes – down a massive 73% year on year. Indeed in the second quarter, GFMS estimates that banks were net buyers of gold after being net sellers in the first quarter.
In effect, the majority of these sales came from within the Central Bank Gold Agreement, with its signatories selling some 92 tonnes, but this was offset by net purchases from Central Banks and institutions in other countries which turned out to be net buyers of around 56 tonnes. There were also a few tonnes of sales from banks outside the CBGA. GFMS notes that all these figures may be subject to alteration due to the lag that often exists between Central Bank activity in the gold market taking place and it being identified.
The biggest sellers of gold in the period included France which had announced some time back that it would sell 600 tonnes over the life of the five-year CBGA, which ends on September 26th. France sold some 44 tonnes in the first five months of the year and it is likely, says GFMS, that it would also have sold a little more in June. With a total of 576 tonnes of sales over nearly 5 years under the Agreement up until May that left only a further 24 tonnes to sell June to September.
The second biggest seller was the European Central Bank with 35.5 tonnes.
There are a few Central Banks which still have gold to sell under announced gold sales programmes, but these in total amount to very little, and GFMS reckons that in the second half of 2009 Central Bank sales will remain fairly low at around 100 tonnes which would mean that net official sector sales in 2009 overall, at some 140 tonnes, would be at the lowest level since 1994′s trough of 130 tonnes.
Jim Sinclair’s Commentary
What in the world makes the writer think this is limited to Australia or even focused there?
China looking for choice pickings among Australian Junior miners
The loss of face over Chinalco’s tie up with Rio hasn’t curbed the country’s enthusiasm for Australians.
Author: Joseph Chaney and James Regan
Posted: Wednesday , 05 Aug 2009
KALGOORLIE, Australia, (Reuters) – Who ever said China’s loss of face over Chinalco’s collapsed $19.5 billion Rio Tinto (RIO.AX) tie-up bid would curb the country’s hunger for Australian natural resources?
Chinese state-owned and privately-held metals firms are actively on the prowl for acquisition and financing deals with Australia’s small and medium-capped miners of base metals and iron ore, analysts and bankers say.
"I reckon there’s still a few in the cards, there’s still more to do — particularly in steel-related products," said James Wilson, an analyst at DJ Carmichael.
"You can’t shut the door on these guys because they are related to the long-term health of the mining industry here," Wilson said, adding that Chinese companies account for a huge proportion of Australian mining firm’s customers.
"It’s a symbiotic relationship these days."
China’s hunger for Australian assets is far from satisfied, two regional investment banking sources told Reuters, even though most of the distressed deals have already been completed earlier this year in the immediate wake of the global financial crisis.
Jim Sinclair`s Commentary
Get ready for Pa. IOUs.
Pennsylvania gets stop-gap budget, Philly left out
Wed Aug 5, 2009 1:39pm EDT
By Jon Hurdle
HARRISBURG, Pennsylvania (Reuters) — Pennsylvania Governor Ed Rendell on Wednesday signed an $11 billion "stop-gap" budget for fiscal 2010 that lets state employees and vendors get paid, but requires lawmakers to resume negotiations on education and other major state spending.
Senate Majority Leader Dominic Pileggi, a Republican, reiterated that budget negotiations should take precedence over a bill that would allow Philadelphia to deal with its own financial crisis by raising the city’s sales tax and deferring pension payments.
"The budget needs to come first," Pileggi said.
Philadelphia Mayor Michael Nutter, who was in Harrisburg again on Wednesday seeking support for the measures, warned he will have to lay off around 3,000 workers and close some city agencies — unless the measures are approved by August 15.
Rendell, the Democratic governor, vetoed $12.9 billion worth of spending line items in a budget bill that was first approved by the Republican-controlled Senate in early May. He urged legislators to return to the bargaining table more than a month after missing the July 1 budget deadline.
"We have work to do and we must get back to doing it post-haste," Rendell said at a news conference.
Jim Sinclair`s Commentary
Briefs (referring to brain power).
OTC derivatives buried GMAC.
GMAC turns to Fed for money. Battered lender GMAC reported that its Q2 loss widened to $3.9B, with revenues falling 22% to $1.03B and loan loss provisions rising 50% from the year before to $1.16B. GMAC also confirmed it’s in discussions with the Federal Reserve over $5.6B in new capital it needs to raise by November to satisfy the government’s stress test requirements. Since the government has already invested $12.5B in GMAC, the lender is unlikely to find external investors willing to help with capital raising.
Jim Sinclair`s Commentary
And here are the new GM bosses.
Cash for Clunkers May Cost Up to $45,354 Per Vehicle
The "Cash for Clunkers" program has been a "great success", at least according to the government, and the auto industry. Within days of its kickoff, all $1 billion allocated to the program has been used up by Americans who have eagerly lined up to trade their clunkers for new vehicles.
Some refreshingly honest reporting has come from Edmunds.com, a car buying site that is telling the truth, in spite of benefiting from an increase in business and site traffic, due to the program. According to Edmunds, about 200,000 old low mileage cars would normally be traded in, every 3 months, in exchange for more efficient higher mileage cars, without this program.
The highest rebate is $4,500, and the lowest is $3,500. If everyone qualified for $4,500 per vehicle, about 222,000 vehicles would have just taken advantage of the government’s money. At $3,500, 286,000 vehicles will have been sold.
Jim Sinclair`s Commentary
Russia today. Each news item is involved with the other regardless of claims to the contrary.
US ‘continues’ to supply Georgia with arms
Wed, 05 Aug 2009 11:32:24 GMT
Amid escalating tension between Moscow and Tbilisi, a top Russian official says the United States continues to supply Georgia with weapons.
Two Russian subs seen patrolling off US coast
Wed, 05 Aug 2009 04:48:38 GMT
Two Russian nuclear attack submarines have been patrolling off the eastern coast of the United States in a rare move that has alarmed the Pentagon.
US, Russian presidents discuss South Ossetia
Wed, 05 Aug 2009 01:18:53 GMT
Rising tensions between Russia and Georgia have prompted the Russian president to hold talks with his US counterpart over the worsening situation.
As Russia puts troops on alert, Georgia warns of war
Tue, 04 Aug 2009 15:27:40 GMT
Russia says troops in independence-seeking South Ossetia are on increased combat readiness on the de facto border with Georgia, amid rising tension between the sides of last year’s war.
Jim Sinclair`s Commentary
94 days to go.
When China prepares its « Great Escape » from the dollar-trap for the end of summer 2009
LEAP/E2020 believes that the next stage of the crisis will result from a Chinese dream. Indeed, what on earth can China be dreaming of, caught – if we listen to Washington – in the “dollar trap” of its USD 1,400-billion worth of USD-denominated assets? If we believe US leaders and their scores of media experts, China is only dreaming of remaining a prisoner, and even intensifying the severity of its prison conditions by always buying more US Treasuries and Dollars.
In fact, everyone knows what prisoners dream of. They dream of escaping of course, of getting away from prison. Therefore, LEAP/E2020 has no doubt that Beijing is constantly striving to find the means of disposing, as quickly as possible, of the mountain of « toxic » assets which US T-Bonds and Dollars have become, keeping the wealth of 1,300 billion Chinese citizens prisoner.
In any good escape story, the prisoners do not spend their time making announcements that they are preparing to get away. In fact, on the contrary, they tend to avoid arousing their guards’ vigilance. According to our team, the Chinese declaration of March 24th asking for the replacement of the US dollar by an international reserve currency was both a “testing of the waters” and a warning: a direct poll to make an assessment of the forces at work (within the G20 in particular) when it comes to moving to a post-Dollar era (1), and a constructive and destructive (depending of the reaction to the previous idea) warning sent to the various global players. A responsible player (and Beijing is one) must send discreet signals to the other players likely to follow or help “planning the job”. The preparation (2) and implementation of a « Great Escape » (3) requires the collaboration of several partners and no one who would have been willing to co-operate must end up in trouble because he was not informed (4).
Jim Sinclair`s Commentary
The USDX is going to .7285, will have a small rally and then move on to .6200.
No end in sight for bank bailouts
Even as the industry recovers, winding down last year’s rescue programs and new ones put in place by the Obama administration may be easier said than done.
By David Ellis, CNNMoney.com staff writer
Last Updated: August 5, 2009: 4:24 AM ET
NEW YORK (CNNMoney.com) — After rescuing the nation’s banking system from utter disaster last fall, Washington now faces an arguably much trickier task: putting the bailout genie back in the bottle.
Several initiatives are on course to expire later this year, putting regulators and the White House in the difficult position of having to decide whether the nation’s banking industry is strong enough to go it alone.
"They would love to get out of the middle of all this stuff if they could," said John Douglas, a former general counsel at the Federal Deposit Insurance Corp, who now heads the banking regulatory practice at law firm Davis Polk & Wardwell. "The question really is whether the financial system and capital system is vibrant enough to exit without a government backstop."
So far, most of the signs from the banking industry lately have been somewhat encouraging.
The credit markets seem to be returning to normal. The London Interbank Offered Rate — or Libor — a widely relied upon measure of bank-to-bank lending rates, is now well below the record high it hit after Lehman Brothers filed for bankruptcy last fall.
Jim Sinclair`s Commentary
The Green Hornet says this is definitely a major bull market!
Consumer Bankruptcy Filings Most Since October 2005 (Update1)
By Andrew M. Harris
Aug. 4 (Bloomberg) — Consumer bankruptcy filings in the U.S. rose to the highest level since October 2005, the American Bankruptcy Institute said in a statement.
More than 126,000 new cases were filed by consumers last month, the nonpartisan research group said today, citing figures furnished to it by the National Bankruptcy Research Center. That was an 8.7 percent rise from June and a 34 percent increase from July 2008.
“Today’s bankruptcy filing number reflects the sustained and growing financial stress on U.S. households,” ABI Executive Director Samuel Gerdano said in the statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.
Congress, in October 2005, enacted the Bankruptcy Abuse Prevention and Consumer Protection Act, a legislative reform package intended to make it harder for consumers to get court orders wiping out their uncollateralized debt.
The act required debt counseling and a means test for would-be filers.
More than a quarter of the filings last month were by consumers seeking to reduce their debt under the U.S. Bankruptcy Code’s Chapter 13 provisions. Filers also have the option to seek liquidation of debt under Chapter 7.
Jim Sinclair`s Commentary
Monty, is Connecticut looking good?
Judges Order California to Reduce State Prisoner Population
By Joel Zand on August 4, 2009 4:58 PM
A panel of three federal judges ordered the State of California to reduce its inmate population because of prison overcrowding, resulting in the release of approximately 43,000 prisoners during the next two years so that the state’s prisons can operate at 137.5% of their design capacity.
In a 184-page opinion, the panel ordered California to provide an inmate reduction plan within 45 days to carry out the court’s directive "in no more than two years."
