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Jim Sinclair’s Commentary

The only recovery is at Goldman.

U.S. Foreclosure Filings Set Third Record-High in Five Months
By Dan Levy

Aug. 13 (Bloomberg) — Foreclosure filings in the U.S. climbed to a record for the third time in five months in July as falling home prices and the recession left more homeowners unable to keep up payments or refinance.

A total of 360,149 properties received a default or auction notice or were seized last month, according to data seller RealtyTrac Inc. One in 355 households got a filing, the highest monthly rate in RealtyTrac records dating to January 2005, the Irvine, California-based company said in a statement.

“We’re in a deep hole,” Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., said in an interview. “There is a whole new wave of foreclosures tied to the cyclical dynamics of the economy.”

Foreclosures increased as the U.S. recorded another 247,000 job losses in July and home prices fell, leaving an increasing number of mortgage holders owing more than their properties were worth. The median price of an existing single-family house dropped 15.6 percent to $174,100 in the second quarter, the most in records dating to 1979, the National Association of Realtors said yesterday. Almost one-quarter of U.S. mortgage holders are underwater, property data firm Zillow.com said Aug. 11.

“There are a slew of factors showing fundamental weakness on the demand side: tighter underwriting, job loss, investors who’ve been badly burned,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate in Los Angeles. “We have not seen the bottom of the housing market.”

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Colonial BancGroup and Pennsylvania thrift shut
Regulators shut Colonial BancGroup and Pennsylvania thrift; 74 US bank failures this year
By Marcy Gordon, AP Business Writer
On Friday August 14, 2009, 8:58 pm EDT

WASHINGTON (AP) — Regulators on Friday shut down Colonial BancGroup Inc., a big lender in real estate development that marked the biggest U.S. bank failure this year, and a small bank in Pennsylvania.

The closures boosted to 74 the number of federally insured banks that have failed in 2009.

The Federal Deposit Insurance Corp. was appointed receiver of Montgomery, Ala.-based Colonial, with about $25 billion in assets, and Dwelling House Savings and Loan Association, located in Pittsburgh. The agency approved the sale of Colonial’s $20 billion in deposits and about $22 billion of its assets to BB&T Corp., which is based in Winston-Salem, N.C. The failed bank’s 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of BB&T, the FDIC said.

Dwelling House had $13.4 million in assets and $13.8 million in deposits as of March 31. PNC Bank, part of Pittsburgh-based PNC Financial Services Group Inc., has agreed to assume all of Dwelling House’s deposits and about $3 million of its assets; the FDIC will retain the rest for eventual sale.

Dwelling House’s lone office in Pittsburgh will reopen Monday as a branch of PNC Bank, the FDIC said.

The FDIC estimates that the cost to the deposit insurance fund from the failure of Dwelling House will be $6.8 million. The failure of Colonial is expected to cost the deposit insurance fund an estimated $2.8 billion.

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Jim Sinclair’s Commentary

What, no major employee go away bonuses?

AIG Consumer Lender Cuts 900 Jobs as Losses Mount (Update2)
By Jamie McGee and Tian Huang

Aug. 13 (Bloomberg) — American International Group Inc.’s money-losing consumer lender slashed 900 jobs in the first half of the year as revenue plunged amid the recession.

American General Finance Corp. also closed 145 branches, the Evansville, Indiana-based lender said today in its quarterly report to regulators. The cuts represent about 11 percent of the 7,900 employees American General had as of Dec. 31, according to a separate regulatory filing. The company has about 1,400 branches according to its Web site.

The consumer unit scaled back lending and securitized receivables after losing access to usual funding sources. American General recorded a $1.3 billion net loss last year tied to subprime mortgages and was cut to the lowest investment grade by Moody’s Investors Service last month.

“We may implement further measures to preserve our liquidity and capital,” including securitizing loans and shutting more branches, American General said in the filing. “The exact nature and magnitude of any additional measures will be driven by prevailing market conditions.”

The second-quarter loss widened to $227.2 million from $31.8 million in the year earlier period, the lender said today. Revenue fell by about a third. Lauren Day, a spokeswoman for New York-based AIG, didn’t return a call seeking comment.

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Jim Sinclair’s Commentary

No bees, no bats, no food. This is not a joke.

Bee Afraid, Bee Very Afraid

May Berenbaum, entomologist at the University of Illinois at Urbana-Champaign and inspiration for the X Files fictional entomologist Bambi Berenbaum, talks about colony collapse disorder and disappearing bees, as well as the importance of honeybees in agriculture.

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Jim Sinclair’s Commentary

Santa strikes again. The great auto give away of your money.

The Great Auto Industry Shakeout
Paul Ingrassia, 08.14.09, 04:11 PM EDT

The bailout of America’s auto industry–General Motors, Chrysler, their finance units, their parts suppliers, Cash for Clunkers, etc.–is costing American taxpayers more than $100 billion. Let’s put that in perspective: It’s enough to pay for every car and truck sold in America for the first half of this year. For now, nobody really knows what we taxpayers will get for our money. Everybody hopes (or should hope) that GM and Chrysler become viable companies once again, but in truth, whether either company makes it is far from certain.

On paper, the new General Motors ( GMGMQ.PK – news – people )–shorn of excess debt, dealers, employees and brands–should be in great shape. But none of that painful cutting will matter unless the company can restore the faded luster of Chevrolet and Cadillac, its two core brands. The two others, Buick and GMC Truck, don’t matter nearly as much.

GM has some excellent engineers, as demonstrated by such worthy cars as the Cadillac CTS and Chevrolet Malibu. But for decades the engineers have been ham-strung by a corporate culture bereft of accountability. While GM was racking up tens of billions in losses during this decade, the only guy who got fired was former CEO Rick Wagoner–and it took President Obama to do it. Thus it was puzzling when new CEO Fritz Henderson’s first round of executive appointments all were promotions from within. In other words, there are new people in key positions but no new blood.

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Jim Sinclair’s Commentary

The greatest illusion is the US dollar.

Recovery Delusion
August 14, 2009

Summary

Economic recovery is not about to come soon. Recent indications of a turnaround in the economy should not be considered permanent, as they mainly result from hugely increased government spending. Long term changes in the savings rate of the US economy point towards a necessary structural type of adjustment  before growth and full employment are restored. In addition, limited financing availability resulting from the financial crisis will not change in the short run, further restraining activity.

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Jim Sinclair’s Commentary:

Israel will make a major miscalculation.

Israel urged to ‘rush’ into attack on Iran
Thu, 13 Aug 2009 09:23:39 GMT

An Israeli defense official believes Tel Aviv must rush to carry out a military strike against Iran’s nuclear facilities evenwithout US approval, a report says.

A ‘senior defense official’ said that Tel Aviv believed a military strike could ‘significantly delay’ what it claims to be an Iranian nuclear weapons program, the Israeli daily Maariv reported on Wednesday, without revealing the official’s name.

The official added that Israel could carry out such an attack without US approval but time was running out for it to be effective.

“The Iranians are creating fortifications and camouflage to defend against a strike from the air,” said the official.

“The military option is real and at the disposal ofIsrael’s leaders, but time is working against them.”

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Jim Sinclair’s Commentary:

In Truth CIT should request the Fed’s Plan.  This is a situation that if not rectified immediately has the ability to deal a death blow to the real economy. Who knows, CIT might well be to the real economy, what Lehman Brothers was tto the make believe Wall Street economy.

Fed orders CIT to submit capital plan
Thu Aug 13, 2009 4:31pm EDT
By Elinor Comlay

NEW YORK (Reuters) – The U.S. Federal Reserve has ordered CIT Group Inc, the cash-strapped corporate lender struggling to avoid bankruptcy, to submit a plan for raising capital and meeting debt obligations within 15 days.

The order from the powerful regulator comes as CIT, which on Monday again warned it may seek bankruptcy protection if debt restructuring efforts fall through, scrambles to line up new financing. CIT’s shares climbed by as much as 19 percent after it announced Wednesday’s order on Thursday.

CIT, which became a Fed-supervised bank holding company in December, agreed that within 60 days it would outline how it will manage credit risk and review its system of setting aside money for loan and lease losses.

Within 75 days, CIT must submit a business plan to improve its financial condition and outline actions to strengthen its management and corporate governance, the Fed said. CIT also requires approval from the Fed before paying dividends or pursuing other transactions.

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Jim Sinclair’s Commentary:

You think Mother Earth is angry? I do! Get long smoked salmon!

Millions of salmon fail to turn up in Canada
AFP – Friday, August 14

OTTAWA (AFP) – - Millions of salmon have mysteriously failed to turn up in a Canadian river as part of their annual spawning, leaving experts baffled and the local fishing industry in despair.
 
The Canadian government’s Department of Fisheries and Oceans projected that between six and 10 million sockeye salmon would return to the Fraser River this month.
 
But the official count for the annual ‘summer run’ — by far the largest of four salmon migrations that see millions of fish return to Canada’s lakes and rivers from the Pacific each year from June to late August — is now just 600,000.
 
Where the others went remains a mystery.
 
Local fishermen, quoted by the daily Globe and Mail, described the situation as "shocking," a "catastrophe" and a "crisis," while public broadcaster CBC said 2009 could end up being the worst year ever for the industry.
 
A record number of salmon smolts were born in the Fraser in 2005 and migrated to the ocean. Nature dictates that most of them should have returned by now to spawn.

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Jim Sinclair’s Commentary:

The basic thesis is that the people who caused the crisis have no real interest nor ability to heal the crisis. Sounds quite logical to me.

‘Incompetent’ Leaders Pose Threat to Recovery: ‘Black Swan’
12 Aug 2009 | 9:36 AM ET
 
Incompetent policymakers are to blame for a financial crisis that will continue until substantial changes are made, author Nassim Taleb, known as the "Black Swan," told CNBC.
 
Taleb, principal at Universa Investments and coiner of the "Black Swan" term to explain drastic, unpredictable events, said in a live interview that choking debt, continued high unemployment and a system that rewards bad behavior will hamstring an economic recovery.
 
"It is a matter of risk and responsibility, and I think the risks that were there before, these problems are still there," he said. "We still have a very high level of debt, we still have leadership that’s literally incompetent …"
 
"They did not see the problem, the don’t look at the core of problem. There’s an elephant in the room and they did not identify it."
 
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Jim Sinclair’s Commentary:

You know that I co-authored a book about this in the middle 90s titled, "BOOM."

China backtracks on PC software filters
By Kathrin Hille in Beijing
Published: August 13 2009 20:01 | Last updated: August 13 2009 20:01

Beijing has stepped back from attempts to force the installation of a filtering software on all personal computers produced or sold in China, finally defusing a controversy that caused uproar in the industry and threatened to spark friction over trade with the country.

The government will continue to install Green Dam/Youth Escort, a program developed at Beijing’s behest by two domestic software makers, on PCs in schools, internet cafés and other public spaces, said Li Yizhong, minister for industry and information technology.

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Jim Sinclair’s Commentary:

The winners on the OTC derivatives have been bailed out. The degree of what else was done compared to taking care of the Fast Cats is pitiful.
 
Bleak sales are another reality check for economy
Retail sales bleak for July, reinforcing fears consumers won’t spend the economy to recovery
By Christopher S. Rugaber, AP Economics Writer
On Thursday August 13, 2009, 10:10 pm EDT
 
WASHINGTON (AP) — A bleak report on retail sales Thursday reinforced a nagging worry of economists: Shoppers won’t spend enough to help a recovery take hold.
 
The figures served as a reality check for an economy that lately has appeared poised to emerge from recession and grow again. Consumer spending powers about 70 percent of economic activity.
 
The Cash for Clunkers rebate program helped give auto sales to their biggest jump in six months in July, but sales sank elsewhere. Gas stations, department stores, electronics outlets and furniture stores all suffered.

Overall, sales fell 0.1 percent, the Commerce Department said, after two months of modest gains. Economists had expected a 0.7 percent increase. Excluding autos, sales fell 0.6 percent, also much worse than predicted.
 
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Jim Sinclair’s Commentary:

Change the word "MAY" to "WILL" and you have the real story

China May Boost Energy, Mining Acquisitions by Half
By John Duce

Aug. 14 (Bloomberg) — China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.

State-owned Yanzhou Coal Mining Co. yesterday agreed to buy Australia’s Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), a day after Sinochem Corp., China’s biggest chemicals trader, offered to buy Emerald Energy Plc for 532 million pounds ($881 
million) to gain oil fields in Syria and Colombia.

China National Petroleum Corp.’s plan to buy Repsol YPF SA’s Argentine unit may push Chinese purchases of overseas commodity assets to $43 billion this year, a 48 percent increase on 2008, according to data compiled by Bloomberg.

“The Chinese don’t have enough nickel, don’t have enough oil, and they  don’t have enough copper,” Jim Rogers, chairman of Rogers Holdings and  the author of books including “Investment Biker” and “Adventure  Capitalist”, said in a telephone interview yesterday. “There’s a  crisis coming. They are going around the world buying up what they  can. They’re preparing for a rainy day.”

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Jim Sinclair’s Commentary:

In minerals, you are with China in Africa or you have missed the train.

August 14, 2009
China Warms to New Credo: Business First
By MICHAEL WINES

BEIJING — So far this week, the World Trade Organization has rebuffed China in an important case involving Chinese restrictions on imported books and movies. The Chinese government dropped explosive espionage charges against executives of a foreign mining giant, the Anglo-Australian Rio Tinto, after a global corporate outcry. And on Thursday, the government said it had backed off another contentious plan to install censorship software on all new computers sold here.

Throughout its long economic boom, China has usually managed to separate its aggressive push into the global business arena from domestic politics, which remained tightly controlled by the Communist Party. But events this week raise the question of just how long it will be before the two meet.

In each of those matters, politics and business collided, and business won. Business does not always win, and when it does, as in these cases, the reasons are as often as not a matter of guesswork. But in at least some high-profile matters, China appears to be facing the reality that the outside business world can be freewheeling and defiant when its profits are threatened. And so China’s authoritarian system may also have to evolve in ways its top leaders may not readily endorse.

Beijing has a global footprint now, a consequence of its booming domestic growth and breakneck international expansion. And decisions that once were made on purely parochial grounds — like censoring Web sites, protecting the interests of its state-owned companies and restricting the flow of foreign news and entertainment into China — now have international ramifications.

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