Jim Sinclair’s Commentary

Here is the "smallest" Bloomberg report in history. It is also the most important Bloomberg report in history.

The Federal ruling that the Fed must disclose its secretive recent bank activity and the reappointment of Fed Chairman Bernanke are connected events.

The following is the entire report. It is one sentence long.

Fed Must Make Public Reports on Emergency Loans, U.S. Judge Says

Aug. 24 (Bloomberg) — The Federal Reserve must make public reports about recipients of emergency loans from U.S. taxpayers under programs created to address the financial crisis, a federal judge ruled.

More… ^[1]

Federal Reserve loses suit demanding transparency
Mon Aug 24, 2009 8:39pm EDT

NEW YORK (Reuters) – A federal judge on Monday ruled against an effort by the U.S. Federal Reserve to block disclosure of companies that participated in and securities covered by a series of emergency funding programs as the global credit crisis began to intensify.

In a 47-page opinion, Chief District Judge Loretta Preska of the federal court in Manhattan said the central bank failed to show that disclosure would cause borrowers in the Federal Reserve System to suffer "imminent competitive harm," by stigmatizing them for using Fed lending programs.

"The board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed," she wrote. "Conjecture, without evidence of imminent harm, simply fails to meet the board’s burden."

Monday’s ruling comes as lawmakers and investors demand greater disclosure in how the government manages a series of programs designed to lift the economy out of its deepest recession in decades.

The case arose when two Bloomberg News reporters submitted requests under the federal Freedom of Information Act (FOIA) about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan Chase & Co (JPM.N).

More… ^[2]

Jim Sinclair’s Commentary

"Layaway has its roots in the Great Depression. It became passé in the past two decades with the rise of credit cards.

But the recession and financial crisis have caused banks to raise rates, pare credit limits and close accounts. For some consumers, layaway is the best option to budget for purchases."

Consumer strain: Pens and notebooks put on layaway
Even cheap stuff put on layaway for back to school, casting cloud over holiday shopping
By Anne D’Innocenzio, AP Retail Writer
On Monday August 24, 2009, 1:48 pm EDT

NEW YORK (AP) — To gauge consumers’ strain, look no further than the rows and rows of plastic bags awaiting layaway payments at Kmart. They are filled with back-to-school basics — not just T-shirts and jeans but notebooks, magic markers and pencils.

It is unheard of for layaway rooms to be so packed at back-to-school time and for the packages to include relatively cheap school supplies.

A record number of shoppers, shut off from credit and short on cash, are relying on Kmart’s layaway program to pay for all of their kids’ school needs, said Tom Aiello, a spokesman for Kmart’s parent Sears Holdings Corp. Layaway allows shoppers to pay over time, interest- free, and pick up their merchandise when it’s paid in full.

"It’s a sight. In the past, we would see layaway start to pick up around Halloween" as people get a jump start for Christmas, said David Travis, manager of a Kmart store in Conover, N.C.

More… ^[3]

Jim Sinclair’s Commentary

Here is an important figure that China bashers NEVER refer to.

This is a number that is obliterated by the $12 trillion pumped into the US OTC derivative meltdown to make the winners whole.

This is a number that can easily be cut in half in the last 12 months by simple purchases of assets and loans to internationally operating private Chinese firms and joint ventures.

"Brad Setser, a former US Treasury official, estimates that China now holds $700bn in US long-term bonds."

China is not a prisoner of the US or does it have that much risk to the dollar at the present time. The nit-wits that expose this are just that – nit wits.

Jim Sinclair

There is no question in my mind. It is a 1932 re-do

The risk of a double-dip recession is rising
By Nouriel Roubini
Published: August 23 2009 18:55 | Last updated: August 23 2009 18:55

The global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal.

That effort worked and the free-fall of economic activity eased. There are three open questions now on the outlook. When will the global recession be over? What will be the shape of the economic recovery? Are there risks of a relapse?

On the first question it looks like the global economy will bottom out in the second half of 2009. In many advanced economies (the US, UK, Spain, Italy and other eurozone members) and some emerging market economies (mostly in Europe) the recession will not be formally over before the end of the year, as green shoots are still mixed with weeds. In some other advanced economies (Australia, Germany, France and Japan) and most emerging markets (China, India, Brazil and other parts of Asia and Latin America) the recovery has already started.

On the second issue the debate is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels.

More… ^[4]

Jim Sinclair’s Commentary

I would say this guarantees there is no end to QE.

Obama to Nominate Bernanke for Second Term as Fed Chief, Aides Say
By EDMUND L. ANDREWS
Published: August 24, 2009

President Obama plans to nominate Ben S. Bernanke to a second term as chairman of the Federal Reserve, administration officials said Monday night.

The nomination, while expected, comes after Mr. Bernanke has had perhaps the most tumultuous term of any Fed chairman, helping to steer the economy through its greatest downturn since the 1930’s. Mr. Bernanke is a Republican who was appointed by President George W. Bush. Mr. Obama’s plan was confirmed by Robert Gibbs, the White House press secretary.

A top White House official said Mr. Obama had decided to keep Mr. Bernanke at the helm of the Fed because he had been bold and brilliant in his attempts to combat the financial crisis and the current deep economic recession.

"The president thinks that Ben’s done a great job as Fed chairman, that he has helped the economy through one of the worst experiences since the Great Depression and that he has essentially been pulling the economy back from the brink of what would have been the second Great Depression,” an administration official said on Monday night.

More… ^[5]

Jim Sinclair’s Commentary

As recently as yesterday I had a very rich hedge fund manager at my house.

In our discussions he asserted that China had no choice because of its dollar position but to continue buying US Treasuries and even support the US dollar if necessary.

I told him to do his research and not parrot what F-TV says daily. He and all of those who actually believe this glib are totally wrong.

"It is becoming quite humorous watching the continual efforts of Western commentators (mostly American) to bash the Chinese economy.

The accusations these pundits make are as numerous as they are ludicrous.

Perhaps the most-frequent criticism is that because it is the U.S.’s largest foreign “creditor” (i.e. lender), that China has a serious “problem” due to the fact that the U.S. is totally unable to repay what it has borrowed from China. Frankly, it is hard to imagine any adult without a severe mental disability reaching such an idiotic conclusion."

China’s ‘Problem’: Too Much Money
August 23, 2009
Jeff Nielson

It is becoming quite humorous watching the continual efforts of Western commentators (mostly American) to bash the Chinese economy. The accusations these pundits make are as numerous as they are ludicrous.

Perhaps the most-frequent criticism is that because it is the U.S.’s largest foreign “creditor” (i.e. lender), that China has a serious “problem” due to the fact that the U.S. is totally unable to repay what it has borrowed from China. Frankly, it is hard to imagine any adult without a severe mental disability reaching such an idiotic conclusion.

For anyone who places any credence in this assertion, I suggest that you do a little private research. Go to the bank who holds the mortgage on your house, and say to them, “I can’t pay my mortgage payments, which means that you have a serious problem.”

Once the bank’s loan officer finishes laughing, he or she would reply, “No problem. We’ll simply take your house.” In short, it is obvious that defaulting on debt is almost always a much more serious problem for the party defaulting than for the creditor.

Now, if China had racked-up massive, national debts, and then been foolish enough to lend the United States trillions of dollars, then the dynamics could be much different. However, as an economy with a large operating surplus, even if it had to write-off every penny of U.S. debt, China could make up those losses through future surpluses.

More… ^[6]

 

Jim Sinclair’s Commentary

I wrote a book titled the Strategic Metals War in the early 1980s.

What China intends is quite serious, however it is based on internal demand as China gears up to provide excellent technology at very comfortable prices for industry consumers.

World faces hi-tech crunch as China eyes ban on rare metal exports
By Ambrose Evans-Pritchard
Published: 5:58PM BST 24 Aug 2009

Beijing is drawing up plans to prohibit or restrict exports of rare earth metals that are produced only in China and play a vital role in cutting edge technology, from hybrid cars and catalytic converters, to superconductors, and precision-guided weapons.

Grind to a halt: China mines over 95pc of the world?s rare earth minerals, mostly in Inner Mongolia, pictured, which Beijing is drawing up plans to prohibit or restrict exports of 
A draft report by China’s Ministry of Industry and Information Technology has called for a total ban on foreign shipments of terbium, dysprosium, yttrium, thulium, and lutetium. Other metals such as neodymium, europium, cerium, and lanthanum will be restricted to a combined export quota of 35,000 tonnes a year, far below global needs.

China mines over 95pc of the world’s rare earth minerals, mostly in Inner Mongolia. The move to horde reserves is the clearest sign to date that the global struggle for diminishing resources is shifting into a new phase. Countries may find it hard to obtain key materials at any price.

Alistair Stephens, from Australia’s rare metals group Arafura, said his contacts in China had been shown a copy of the draft — `Rare Earths Industry Devlopment Plan 2009-2015’. Any decision will be made by China’s State Council.

More… ^[7]

Jim Sinclair’s Commentary

This is terminal news for the FDIC. The rescuer will have to be rescued.

The Bad News Banks
Carl Gutierrez, 08.24.09, 04:00 PM EDT

Star analyst Richard Bove thinks 150 to 200 more banks will fail within the next year. So much for things looking up.

Richard Bove, one of Wall Street’s most influential analysts, foresees further trouble for banks on the horizon. In fact, he believes an additional 150 to 200 will fail within the next 12 months.

Bove, who is the vice president of equity research at Rochdale Securities, made the call in a report that examined the Federal Deposit Insurance Corporation’s capacity to meet the continued challenges of the financial crisis. The bright side is that the nation’s top 19 banks appear in a good position.

More… ^[8]

Jim Sinclair’s Commentary

Whatever you hear, multiply it by 2.

F-TV has conducted a major effort to sell the US dollar as a safe haven.

The dollar is the most dangerous haven out there.

Meltdown 101: Huge budget deficits expected
By CHRISTOPHER S. RUGABER (AP) – 2 hours ago

WASHINGTON — Get ready to hear a lot of huge numbers Tuesday: The Obama administration is expected to boost its estimate of the federal deficit over the next decade by $2 trillion, a move likely to trigger political wrangling over who’s to blame and how harmful all the red ink will be.

The White House’s Office of Management and Budget is expected to forecast $9 trillion in deficits over the next 10 years, up from a $7 trillion estimate earlier this year, according to White House officials who spoke last week on the condition of anonymity. The increase is largely due to lower-than-expected tax revenues as a result of the recession.

Meanwhile, the Congressional Budget Office will issue its own deficit forecasts Tuesday. The CBO estimated in March that the deficit for 2010-19 would total $9.1 trillion.

Here are some questions and answers about all the numbers.

Q: Why do the agencies’ estimates differ?

A: Both the White House and Congress have their own budget agencies to analyze tax and spending trends, and both agencies are required to issue regular budget updates.

More… ^[9]

Jim Sinclair’s Commentary

This report represents the fundamental economic condition of the US for which the dollar is the common share.

Buying the dollar, the common share of the USA, is no way to insure against further fundamental downward spiralling.

CBO Warns of Higher Unemployment: Washington Worries About the Deficit
By Dean Baker – August 24, 2009, 4:28PM

The Congressional Budget Office (CBO) will release a new set of economic and budget projections for the next decade on Tuesday. These projections are likely to show a cumulative deficit over the next 10 years that is $2 trillion higher (@ 1 percent of GDP) than the deficit CBO projected in January.

The reason for the higher projected deficit is not that Congress has suddenly blown another 2 trillion of the taxpayers’ dollars on frivolous projects. Rather, the main reason for the jump in the projected deficit is that CBO is now projecting lower growth and higher unemployment over this decade than it did last January.

In other words, CBO now believes that the collapse of the housing bubble will cause even more and longer lasting damage than it did back in January. As a result of slow growth and high unemployment, the government will collect considerably less in tax revenues over the next decade than would have been implied by the earlier set of economic projections. The government will also be paying out more money in unemployment benefits, food stamps and other transfer programs than would be the case if the economy were healthier.

The real story in the new CBO projections should be the more dire economic outlook. CBO now expects the unemployment rate to be near 10 percent through most of 2010. Its new projections will show that the unemployment rate will only return to more normal levels in 2013 or even 2014, more than six years after the collapse of the housing bubble threw the economy into recession.

The implication of the new CBO projections is that millions more people will be needlessly suffering because of the economic mismanagement of the Greenspan-Bernanke-Bush crew. CBO views 4.5 percent unemployment as being the sustainable rate of unemployment. If the unemployment rate is 10 percent, more than 8 million people are needlessly out of work, with another 5 million or so being forced to work part-time because they cannot find full-time employment. These people will be struggling to pay their health care bills, cover their mortgage or rent payments, and meet other necessary expenses for themselves and their families.

More… ^[10]

^[11]

Jim Sinclair’s Commentary

This is clearly a repeat of 1932.

"Taylor Bean was one of the largest independent home-loan providers before it closed down its mortgage-lending operation Wednesday in the wake of the FHA move. Among originators of FHA mortgages, Taylor Bean was the third-largest, and it was the nation’s 12th-largest home-mortgage lender overall, according to Inside Mortgage Finance, a trade publication."

Mortgage Company Taylor Bean Files For Bankruptcy Protection
August 24, 2009: 02:40 PM ET

Taylor, Bean & Whitaker Mortgage Corp. announced it has filed for Chapter 11 bankruptcy protection, the move coming three weeks after a chain of events " crippled the company’s business operation."

The death spiral began after the Federal Housing Administration suspended Taylor Bean’s authority to issue FHA-insured loans. That was immediately followed by notices from Ginnie Mae and Freddie Mac (FRE) suspending Taylor Bean as an issuer of mortgage-backed securities and a mortgage servicer.

Taylor Bean was one of the largest independent home-loan providers before it closed down its mortgage-lending operation Wednesday in the wake of the FHA move. Among originators of FHA mortgages, Taylor Bean was the third-largest, and it was the nation’s 12th-largest home-mortgage lender overall, according to Inside Mortgage Finance, a trade publication.

The company was forced to lay off some 2,000 workers and Taylor Bean said Monday it "has no way to continue normal business operations" as it appeals the actions by the FHA, Ginnie Mae and Freddie Mac. While under bankruptcy protection, it will work to recover, restructure and possibly liquidate its assets.

Taylor Bean put the blame for the events on the investigations surrounding the failure of Colonial Bank, which for years was Taylor Bean’s primary bank. But it froze nearly 100 Taylor Bean bank accounts in the days after the federal suspensions on Taylor Bean. "This action created myriad problems in processing borrower payments and making payments on their behalf – such as homeowner’s insurance premiums and real estate taxes," the company said Monday.

More… ^[12]

Jim Sinclair’s Commentary

Of course banks and financial institutions are going to have losses.

1st quarter profit was a gift from the sell out of ethics by FASB that allowed worthless paper to be marked up to fantasy levels.

2nd quarter profits were a gift of TARP money at miniscule cost to be put out dearly.

Now, it is real business, and there is very little.

U.S. Stocks Erase Advance as SunTrust CEO Predicts Bank Losses
By Jeff Kearns

Aug. 24 (Bloomberg) — U.S. stocks swung between gains and declines as financial institutions slumped after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. Rallies in commodity prices had sent equities higher earlier.

Banks in the Standard & Poor’s 500 Index fell 1.7 percent as SunTrust Chairman and Chief Executive Officer James Wells III said “the industry is a long way from declaring any sort of victory.” Ford Motor Co. declined 4.3 percent before the “cash for clunkers” program for cars expires today. Commodities and equities rallied globally as leaders of the biggest central banks buttressed confidence in the economic recovery.

The S&P 500 rose 0.1 percent to 1,026.99 at 1:59 p.m. in New York after earlier climbing as much as 0.9 percent. The Dow Jones Industrial Average added 11.79 points, or 0.1 percent, to 9,517.75. The MSCI World Index of 23 developed nations advanced 0.7 percent. The UBS Bloomberg Constant Maturity Commodity Index increased 1 percent.

“Maybe we’re not completely out of the financial crisis,” said E. William Stone, who oversees $101 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “We’ve had almost no economic data, plus light trading and a good week last week, so that may give people an itchy trigger finger to take profits if they sniff trouble.”

More… ^[13]