“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.”
–Abraham Lincoln

^[1]

 

Dear CIGAs,

Here is a great summation from my former partner and ace trader Yra Harris:

"Cash for Clunkers – a classic case of inter-temporal dislocation."

^[2]

Jim Sinclair’s Commentary

And who exactly will the broke state turn to? The Federal Government who then will turn to the fading international bond market or plain old QE?

The dollar rally on fake statistics has NO legs.

Cities Turn to State for Pension Relief
Posted Thursday, August 6, 2009 ; 06:00 AM

CHARLESTON  — City officials from around the state say their communities can no longer afford to cover the benefits of retired police officers and firefighters, so they are asking the state Legislature for help.

Specifically, they want state lawmakers to redirect a portion of state surcharges on insurance premiums to helping cities cover their retirement pension obligations. They also want to enroll new hires in new pension plans that help them save money.

If nothing changes, cities such as Huntington could have fewer police officers and firefighters on the streets as they are forced to cut back staffs because of increasing pension obligations. The city’s last six police and fire department retirees will likely draw $1.5 million each in pension benefits over the course of their retirements, even though each person made less than $900,000 during his or her career, according to Deputy Mayor Tom Bell said.

“What happened here is we just can’t afford to dedicate that amount of money” to pensions, Bell said.

Huntington is in the worst shape, but other cities around the state also are struggling to cover their pensions.

Collectively, city governments are facing $700 million in unfunded liability thanks to what officials say are the generous benefits paid out of the firefighters and police officers.

The West Virginia Municipal League, which represents the state’s cities, wants state lawmakers to meet in special session either in August or September to consider municipal pension reforms.

More… ^[3]

Jim Sinclair’s Commentary

If you are not in China and Africa in the next 25 years, you are nowhere.

China, others shove U.S. in scramble for Africa
Thu Aug 6, 2009 7:30am EDT

JOHANNESBURG (Reuters) – A presidential visit followed by U.S. Secretary of State Hillary Clinton’s African tour cannot conceal a stark reality: China has overtaken the United States as Africa’s top trading partner.

That is one of the main problems facing Clinton on a seven-nation jaunt meant variously to spread Washington’s good governance message and shore up relationships with its key oil suppliers on the continent.

U.S. officials are keen to trumpet a 28 percent jump in 2008 in trade with sub-Saharan Africa to $104 billion, even if the increase is attributable mainly to the high price of oil, which accounts for more than 80 percent of U.S. imports from Africa.

However, there is another statistic that says more about the direction of development on the poorest continent: this decade’s tenfold increase in trade with China to $107 billion last year, narrowly eclipsing the United States.

The financial and then economic crisis that has pushed U.S. and European economies into recession and forced their companies to crimp overseas expansion is only likely to accelerate the trend, analysts say, despite the regional goodwill toward U.S. President Barack Obama, whose father was Kenyan.

More… ^[4]

Jim Sinclair’s Commentary

Greed isn’t good. It is one of the seven most vile of passions.

View on Bonuses for bankers: Amid financial meltdown, Wall St. pay party goes on

To curb obscene compensation, give shareholders more say on pay.

Last year, you may recall, was a debacle for Wall Street. Financial firms suffered staggering mortgage-related losses and had to be rescued by the federal government.

Amid the wreckage, you might think the banks would have been ashamed to pay any bonuses. You’d be wrong.

As New York Attorney General Andrew Cuomo reported last week, nine major financial institutionsthat collectively received $175 billion in bailout money paid $33 billion in bonuses in 2008.

Citigroup, which lost $27.7 billion and received $45 billion in bailout money, paid $5.3 billion in bonuses, including 738 that were more than $1 million. Merrill Lynch, which lost $27.6 billion and had to be absorbed into Bank of America, paid $3.6 billion in bonuses, including 696 of more than $1 million.

You get the idea.

What this shows is that the people who work at these institutions do not see bonuses as part of the business, as a reward for a job well done. To them, bonuses are the business.

Financial firms pay huge bonuses when they reap fat profits. They pay them when they experience horrendous losses. They pay them because they promised them. They pay them to prevent a brain drain.

More… ^[5]

Jim Sinclair’s Commentary

"Now consider who would want to take the risk of a country’s debt when there is no manufacturing within its border" – CIGA JB Slear

"The amazing thing is that the business in OTC derivatives is the devil brew that caused this meltdown. It is growing because default swaps are credit default OTC derivatives. These WMDs are quoted daily as if they were secure instruments." –Jim Sinclair

Russia Beats California as Default Swaps Favor BRICs (Update1)
By Laura Cochrane

Aug. 7 (Bloomberg) — Investor demand for emerging-market bonds is driving the cost of insuring against debt defaults below industrialized governments for the first time.

Credit-default swap prices from Turkey to Indonesia are falling as bonds rise amid signs that their economies are recovering faster than developed nations. As the U.S. and U.K. borrow record amounts to fund bank bailouts and stimulus, Brazil, Russia, India and China have $3 trillion in reserves, up 19 percent from January 2008 and now 43 percent of the worldwide total, data compiled by Bloomberg show.

The annual cost of protecting holdings in Turkey’s bonds fell by half to $200,000 per $10 million for five years, or 200 basis points, sinking below New York City swaps for two weeks starting July 22, Bloomberg data show. Indonesia debt insurance dropped below Michigan the next day. Brazil swaps just had their biggest four-month slide ever. For China, protection is near the cheapest in a year. Eleven years after Russia defaulted, investors want less to insure its debt than California’s.

“This would have been impossible to imagine a year ago,” said Dmitry Sentchoukov, an emerging-market credit strategist at Dresdner Kleinwort in London. “Now it’s clear emerging economies are going to outperform the Group of Seven in growth, and that makes investors comfortable with the idea that developing countries can be priced richer than developed.”

More… ^[6]

Jim Sinclair’s Commentary

A step in the right direction. Now look NORTH.

SEC says brokers violated ‘naked’ short sale rule
By CHRISTOPHER S. RUGABER (AP) – 1 day ago

WASHINGTON — The Securities and Exchange Commission for the first time has enforced new rules intended to limit a practice known as "naked" short-selling.

The SEC said Wednesday that two traders and their firms have agreed to settle charges that they violated the rules without admitting or denying guilt.

The rules were put in place last year at the height of the financial crisis, and the SEC made them permanent last month.

The agency says New York-based Stephen Hazan and Hazan Capital Management LLC have agreed to pay $3 million to settle the charges, while Chicago-based TJM Proprietary Trading LLC agreed to a penalty of $541,000.

The two firms were charged with circumventing a rule that requires brokers to promptly produce shares in "naked" short-selling transactions.

More… ^[7]

Jim Sinclair’s Commentary

I have no argument with the headline. Remember that there are consequences.

Stimulus cannot stop. The dollar is toast in the final quarter of 2009.

Top adviser says stimulus is preventing economy’s free fall
By Ed Henry

WASHINGTON (CNN) — White House economic adviser Christina Romer declared the president’s stimulus plan "absolutely" is working to slow the economy’s decline, though she still held open the possibility of a second stimulus package a few months down the road.

More… ^[8]

Jim Sinclair’s Commentary

When will it end? Not in the next three years.

Fannie Mae needs another $10.7B in federal aid
The mortgage insurer narrowed its quarterly loss to $14.8 billion, but it is still leaning on the Treasury Department to survive
By Tami Luhby, CNNMoney.com senior writer
August 6, 2009: 6:41 PM ET

NEW YORK (CNNMoney.com) — Fannie Mae, the government-controlled mortgage insurer, said Thursday that it needs another $10.7 billion from the Treasury Department to stay afloat.

The new infusion means the troubled company has drawn a total of $45.9 billion of its $200 billion lifeline this year. Fannie Mae and its sister firm, Freddie Mac (FRE, Fortune 500), were taken over by the federal government last September amid the global financial meltdown.

In one hopeful sign, Fannie Mae (FNM, Fortune 500) narrowed its quarterly loss to $14.8 billion, or $2.67 per diluted share, down from $23.2 billion, or $4.09 per share, in the previous quarter. The company lost $2.3 billion, or $2.54 per share, in the second quarter last year.

Credit losses from the housing crisis are still to blame for Fannie Mae’s dour results. The company racked up $18.8 billion in credit-related expenses during the latest quarter. However, the company reduced its provision for credit losses to $18.2 billion, from $20.3 billion in the first quarter, because of a slowdown in the increase of estimated defaults and losses per default.

The value of non-performing loans on its books increased to $171 billion as of June 30, compared with $144.9 billion on March 31 and $119.2 billion on December 31.

More… ^[9]

 

Jim Sinclair’s Commentary

Town meetings are starting to carry more than just political risk. What we need is Ethan Allan and the Green Mountain Boys.

Rowdy protesters overrun health care meetings
Joe Garofoli, Chronicle Staff Writer
Thursday, August 6, 2009

(08-05) 20:25 PDT — House Speaker Nancy Pelosi sent her chamber home for the summer recess with a list of talking points to respond to constituents’ questions about pending health care legislation.

But those traditionally sleepy town hall meetings have become rowdy shout-fests across the nation, including Northern California, with opponents hanging members in effigy and mocking them with Nazi and devil imagery in an effort to derail discussions of health care.

They’re organized in part by conservative think tanks like FreedomWorks, which offers tips on how to disrupt a meeting ("Watch for an opportunity to yell out and challenge the Rep’s statements early," says one) and helped in some cases by anti-tax "Tea Party" sympathizers.

More than 500 people packed a Napa town hall hosted this week by Rep. Mike Thompson, D-St. Helena, some shouting down panelists by yelling "This is America!" and "What’s wrong with profit?"

Three Aug. 15 East Bay town halls scheduled by Rep. Pete Stark, D-Fremont, one of the health care legislation co-authors, are the targets of one Tea Party group calling for a "counterprotest."

More… ^[10]

Jim Sinclair’s Commentary

You think California is under any impression that their problems will be solved by "Cash for Clunkers"?

California Won’t Accept Its Own IOUs
By MARIA DINZEO

SAN FRANCISCO (CN) – Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors’ federal class action claims the state is trying to balance its budget on their backs.

Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California "paid" her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called "sale" of the uniforms.

The class consists mostly of small business owners, many of whom rely on income from government contracts to keep afloat. They say California has used them as "suckers" as it looks for a way to bankroll its operations while avoiding its own financial obligations.

"Instead of seeking funds through proper channels, the State has created a nightmare," the class says. "Many of these businesses will not survive if they are required to wait until October 2009 to have these forced IOUs redeemed by the State."

The class claims the state is violating the Fifth and Fourteenth Amendments. It demands that California be ordered to honor its own IOUs, plus interest. They are represented by William Audet.

More… ^[11]

Jim Sinclair’s Commentary

Here is a must watch video:

AARP Town Hall Meeting on Health Care – Dallas
August 4, 2009

 

Jim Sinclair’s Commentary

What is all the uproar about? You voted for change and you got it!

Upcoming town hall meeting will be by phone
Castor heartened by reaction to town hall tumult

TAMPA – U.S. Rep. Kathy Castor, the focus of tumultuous reaction at a town hall meeting Thursday night, said in an interview this morning that the event has strengthened her conviction to support health care reform.

"It has strengthened my resolve to stand up for families and seniors," Castor said. "Floridians are bearing a great burden in health care costs, more than almost any other state."

"A healthy debate is good, but the rude behavior is not helpful," she said. "I think it backfires. The response we’re receiving today is pretty overwhelming to speak up for families and bring down the cost of health care."

Castor said her office is receiving "hundreds" of calls and e-mails in support of her stand.

Asked about whether she considers the protests at the event Thursday night to be a genuine expression of grassroots opposition or, as some Democrats have charged, manufactured by opponents, Castor didn’t respond directly.

More… ^[12]

Jim Sinclair’s Commentary

That is if they sell any at all.

European central banks: Annual gold sales capped at 400 tons
Posted : Fri, 07 Aug 2009 10:35:40 GMT

Geneva – European central banks have extended a cap on gold sales for another five years but changed the ceiling to 400 tons per year, a joint statement announced. The previous agreement, which allowed for 100 more tons a year, was set to end on September 27. The new one would be reviewed in five-years time.

In all, 19 central banks, including the European CentralBank, signed the agreement. The other banks include those of: Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Portugal, Slovenia,Slovakia, Malta , the Netherlands, Austria, Finland, Sweden and Switzerland.

The statement also recognized the International Monetary Fund’s plan to sell off gold.

"The signatories recognise the intention of the IMF to sell 403 tons of gold and noted that such sales can be accommodated within the above ceiling," the statement said.

The Swiss National Bank said in an accompanying message that it had no plans for any further gold sales in the foreseeable future.

More… ^[13]

Jim Sinclair’s Commentary

Wall Street celebrates SKEWED figures while Detroit starves.

If there is anything to Karma the sick rat population is going to grow for eons.

These guys do not deserve to be toads.

Hunger hits Detroit’s middle class
Food has long been an issue in this city without a major supermarket. Now demand for assistance is rising, affecting a whole new set of people.
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: August 7, 2009: 12:38 PM ET

DETROIT (CNNMoney.com) — On a side street in an old industrial neighborhood, a delivery man stacks a dolly of goods outside a store. Ten feet away stands another man clad in military fatigues, combat boots and what appears to be a flak jacket. He looks straight out of Baghdad. But this isn’t Iraq. It’s southeast Detroit, and he’s there to guard the groceries.

"No pictures, put the camera down," he yells. My companion and I, on a tour of how people in this city are using urban farms to grow their own food, speed off.

In this recession-racked town, the lack of food is a serious problem. It’s a theme that comes up again and again in conversations in Detroit. There isn’t a single major chainsupermarket ^[14] in the city, forcing residents to buy food from corner stores. Often less healthy and more expensive food.

As the area’s economy worsens –unemployment was over 16% in July — food stamp applications and pantry visits have surged.

Detroiters have responded to this crisis. Huge amounts of vacant land has led to a resurgence in urban farming. Volunteers at local food pantries have also increased.

More… ^[15]

Jim Sinclair’s Commentary

We can’t call our French brothers sheeple.

Molex shuts French factory after workers clash with US manager
2:56 PM CDT, August 6, 2009

TOULOUSE — Lisle-based Molex Inc. temporarily closed a car parts factory Thursday after a manager was assaulted allegedly by the plant’s employees.

Executives at Lisle-based Molex cited security reasons for the closure of their factory in Villemur-sur-Tarn, near the southern city of Toulouse, and lodged a police complaint against four workers over the incident. Molex Chief Executive Martin Slark also accused French police of failing to respond to calls for assistance when manager Eric Doesburg and two security guards were allegedly attacked late Tuesday.

Doesburg, based in the U.S., was in France for talks on the fate of the 283 workers when the plant shuts down for good in October and production is relocated to the U.S.

About 40 workers allegedly kicked and punched Doesburg following a meeting of the factory’s works council to discuss layoffs, but a union official said the manager "did not receive any blows, just eggs."

According to Bloomberg News, the plant’s employees, who have been on strike over Molex’s plans to close the unit, returned to work Thursday. Industry Minister Christian Estrosi welcomed the decision to resume work in an e-mailed statement and called for further talks between management and unions, Bloomberg reported.

More… ^[16]