Dear CIGAs,
We are looking at $1000 gold on the third tap. The battle should be interesting but $1000 will fall.
The move to $1650 then begins.
Jim Sinclair’s Commentary
The Chinese are doing exactly the right thing. Can you imagine discipline in finance?
Maybe the President of AIG thinks that is a crime as he does about A.G. Cuomo’s focus on AIG’s mad bonus program.
We are running banks here on a zero reserve basis.
China tells some banks to halt new business-report
09.03.09, 12:32 AM EDT
BEIJING, Sept 3 (Reuters) – China’s banking regulator is refusing to allow banks with a capital adequacy ratio below 9 percent to start new lines of business or open new branches, a government researcher said in remarks published on Thursday.
Ba Shusong, a vice director with the Development Research Centre, was quoted by the official China Securities Journal as saying that Beijing’s stimulative fiscal and monetary policies were having a positive impact but the authorities had to be wary of the risks posed by rapid lending.
Ba’s think tank reports directly to the State Council, China’s cabinet.
An official from the China Banking Regulatory Commission (CBRC) told Reuters that he was unaware of the reported steps against thinly capitalised banks.
Jim Sinclair’s Commentary
Giving you gold price objectives has not proved in the past to be in your best interest as we are read by both sides of the gold market spectrum.
However, one time ONLY, here they are:
- $1000. Three tries and success. This is the third try.
- $1024
- $1089
- $1156
- $1225
- $1296
- $1369
- $1444
- $1521
- $1600
- $1681
Then on to Alf’s numbers.
Alf refuses to give his levels as he is too concerned that those who know them will attempt to trade them, resulting in their being out of position as an upward explosion takes place.
Jim Sinclair’s Commentary
Consider the effect a consuming public will have on this.
China pushes silver and gold investment to the masses
A report suggests that the Chinese government is pushing the general public into buying gold and silver bullion, which could have a dramatic effect on the markets.
Author: Lawrence Williams
Posted: Thursday , 03 Sep 2009
LONDON – We are indebted again to Paul Mylchreest’s Thunder Road Report for news that will bring big smiles to gold and silver investors everywhere. Apparently China is pushing the idea of buying gold and silver for investment purposes to the general population in the way that Western television sells soap powder. If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market!
The report notes that China’s Central Television, the main state-owned television company, has run a news programme letting the public know how easy it is to buy precious metals as an investment. On silver investment the announcer is quoted as saying " China has introduced its first ever investment opportunity for silver bullion. The bars are available in 500g, 1kg, 2kg and 5kg with a purity of 99.9%. Figures show that gold was fifty times more expensive than silver in 2007, but now that figure has reached over seventy times. Analysts say that silver has been undervalued in recent years. They add that the metal is the right investment for individual investors and could be a good way to cash in."
What appears to have happened in China is a total relaxation of strictures on holding precious metals by the individual with the government pushing gold and silver as an investment option, seemingly at every opportunity. This is a far cry from the situation only a few years ago where the distribution of gold and silver was strictly controlled. Now, the Thunder Road Report notes that every bank will sell gold and silver bullion bars in four different sizes to individuals and gold related investments are said to be soaring in popularity.
Around a year ago, Leyshon Resources managing director, Paul Atherley, in an investor presentation in London – and no doubt delivered elsewhere in the world too – commented that some employees at the company’s gold mining project in northern China would, on pay day, go to the local bank and buy a small gold bar as an investment and wealth protector. To an extent we put this down at the time to mining company hype – but this seems to be exactly the same phenomenon noted by Thunder Road. The Chinese are being converted from being the lowest per capita gold consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of gold is likely to exceed that of India, which has been for years the world’s biggest gold market. And one suspects that the potential for gold purchasing by individuals is only in its earliest stages. As more and more Chinese move into the cities and individual wealth grows, this trend is only likely to accelerate.
Paul ends the piece on Chinese gold and silver potential with the following comment: "Simply put, the Chinese government is trying to trigger a national gold craze…and it’s working. The Chinese public now has gold trading platforms on steroids…. …Also, for the first time in history, Chinese investors can even trade gold abroad (in London) with the swipe of a ‘Lucky Gold’ card. I can’t even get Bank of America to open a foreign currency account."
Jim Sinclair’s Commentary
Ok he is from Audi, but I know cars. He is absolutely correct. You cannot take a standard frame attached to old technology and sell it at a premium price when it is really only a 40 mile miracle.
If you want to see an electric car, look at the TESLA.
Audi President: Chevy Volt Is a ‘Car for Idiots’
By RICHARD S. CHANG
September 3, 2009, 10:50 AM
“No one is going to pay a $15,000 premium for a car that competes with a Corolla. So there are not enough idiots who will buy it.”
Those were the words of Johan de Nysschen, president of Audi of America, who recently spoke (quite candidly) to Lawrence Ulrich in MSN Autos about the Chevrolet Volt. Early estimates for the price of the Volt is around $40,000, and Mr. de Nysschen said that he doesn’t see many people paying that much for a car that competes with small compacts, which top out at around $25,000. He called the the Chevy plug-in hybrid “a car for idiots.”
Mr. de Nysschen was clearly making a point, as Mr. Ulrich, a frequent contributor to The Times’s Automobiles section, goes on to explain:
De Nysschen expressed frustration with regulators and policymakers, saying the public has been hoodwinked into believing that E.V.’s are the only answer to global warming. The U.S. government, he said, is pouring billions of dollars into E.V. technology, yet diesel technology could deliver a more immediate and dramatic decrease in global-warming emissions. And the man knows of what he speaks: Modern diesels already power half of Audi’s cars in Europe and have helped Audi dominate recent runnings of the 24 Hours of Le Mans. Diesels have been shown to emit 25 percent less carbon dioxide than gasoline engines, while using 25 to 35 percent less fuel.
Jim Sinclair’s Commentary
The move in China concerning unilateral novation of OTC derivatives has sent a message that has a lot to do with the recent move in the price of gold.
The move by Hong Kong to hold your gold at home is simple common sense as we move towards phase 2 of this OTC derivative disaster.
Hong Kong recalls gold reserves, says it can store it at home
Invites Asian states to store bullion in new facility, in bid to become gold hub
By Chris Oliver, MarketWatch
Sep 3, 2009, 4:29 a.m. EST
HONG KONG (MarketWatch) — Hong Kong is pulling all its physical gold holdings from depositories in London, transferring it to a newly-built high-security depository at the city’s airport, in a move that won praise from local traders Thursday.
The facility, industry professionals said, would support Hong Kong’s emergence as Swiss-style bullion trading hub and help lessen dependency upon London as center of settlement and storage.
"Having a central government-sponsored vault would create a situation where you could conceivably look at Hong Kong as being a hub, where metal could be traded for the region," said Sunil Kashyap, managing director at Scotia Capital in Hong Kong, adding that the facility was the first with official government backing in the region.
The Hong Kong Monetary Authority, which functions as the territory’s unofficial central bank, will complete the transfer of its gold reserves form London by the end of the year, the Hong Kong government said in an earlier statement.
About half the HKMA’s gold reserves are held in physical form, totaling about 2,000 bars valued at 250 million Hong Kong dollars ($32.35 million), according to estimates published by the South China Morning Post.
Jim Sinclair’s Commentary
CIGA Eric says:
“The cash-for-clunkers program was so successful in getting Americans to buy new cars that it ran out of money early. Now, a sequel, dollars-for-dishwashers, is coming to an appliance store near you.”
‘Clunkers’ Sequel Rattles Appliance Producers
By TIMOTHY AEPPEL and PAUL GLADER
The cash-for-clunkers program was so successful in getting Americans to buy new cars that it ran out of money early. Now, a sequel, dollars-for-dishwashers, is coming to an appliance store near you.
But the $300 million program, funded through the federal government’s economic stimulus plan, is certain to lack the same pop, said appliance makers and retailers. The program’s intent is to spur sales of energy-efficient appliances, but its small size would provide just a minor boost for struggling appliance makers such as General Electric Co., Whirlpool Corp., and Sweden’s Electrolux AB.
Unlie the clunkers plan, the program allows each state to pick qualifying models and tailor rebate amounts. Ohio might decide one washing machine qualifies for a $100 rebate, while California picks another for $125.
Jim Sinclair’s Commentary
No regulation has any capacity to go backwards.
Nothing short of cancelling the nominal value of one quadrillion, one thousand one hundred and forty four trillion dollars worth of OTC derivatives will work. That was the last reasonable value the BIS gave before they adopted the value to maturity computer model which cut the number practically in half.
Before Lehman went broke this could actually have worked. By flushing Lehman, all practical solutions were trashed.
Everybody lies. This problem has long legs.
G-20 Risks ‘Catastrophe’ as Push Ebbs for Regulation (Update3)
By Rich Miller and Simon Kennedy
Sept. 2 (Bloomberg) — Economic policy makers from the Group of 20 nations gathering this week in London are finding that their drive to prevent the next financial crisis may be jeopardized by their success in countering the current one.
Stock markets are rebounding, with the MSCI World Index of 23 developed nations gaining 59 percent since March 9, when it reached its lowest level since 1995. Signs of economic revival are also appearing in countries such as the U.S. and the U.K. after the worst slumps since World War II.
The rally is sapping the political push to impose tougher regulations on financial-services companies. While that might help earnings for New York-based Citigroup Inc., the third- largest U.S. bank, and Barclays Plc, the U.K.’s second-biggest lender, it may also leave the global economy susceptible to a fresh cycle of boom then bust.
“We’re getting a recovery, so dealing with the true problems is going to be more difficult,” said Raghuram Rajan, a former chief economist at the International Monetary Fund who is now a professor at the University of Chicago. “The risk is that we’re just going to tool around until the next crisis.”
U.S. Treasury Secretary Timothy Geithner, Bank of England Governor Mervyn King and other G-20 finance ministers and central bankers meet Sept. 4 and Sept. 5 to prepare for the Pittsburgh summit of leaders three weeks later. They are convening five months since their governments blamed “major failures” in supervision as one of the “fundamental causes” of the worldwide credit crunch and vowed to “strengthen financial regulation to rebuild trust.”
Jim Sinclair’s Commentary
There are so many boots to fall it is hard to say which one will go first or if they just might be all at once in 66 days.
Thank you CIGA Doug for this gem …
FHA Likely To Be The Next Shoe To Drop
The FHA is a big reason that home prices haven’t fallen even further. The FHA’s aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. The FHA is an even larger percentage of the new home mortgage industry, with nearly 25% market share, according to HUD.
The FHA insurance fund, however, is likely running dry. According to a report from mortgage finance experts (click here to read the report), the FHA will not meet its minimum requirement as of its fiscal year-end, which is only 27 days from now. For months, we have been investigating this and reporting our findings to our clients.
While almost all of the experts believe that Congress would support the FHA if necessary (it’s currently self-funded), we wonder if FHA officials will be under pressure to continue tightening their lending policies, which currently allow 96.5% mortgages to people with 600 FICO scores. Already, FHA has contracted its own standards to require a 10% down payment for those with credit scores below 500.
Claims against the insurance fund have climbed, with roughly 7% of all FHA-insured loans now delinquent.
Jim Sinclair’s Commentary
Here comes all the screaming and yelling sponsored by the OTC Derivative Lobby.
There is one glaring fact: Had the West just dumped "Long Term Capital," one of the first OTC derivative hedge fund bankruptcies, there would have been a serious problem, but not the planetary nuclear financial event only starting to unwind.
China has a taken a position that is perfectly correct.
OTC derivatives, no matter how complex, are simple wagers. Wagers are unenforceable agreements except in the state of Nevada.
There was a time, and it still may be true, that in Germany losses on listed commodity trading were unenforceable because such activity is considered wagering.
China considers bailing out of costly futures contracts
Sep 3rd 2009 | HONG KONG
From The Economist print edition
GIVEN its vast reserves and seemingly healthy economy, a default by China’s government or one of its tentacles should be one of the lesser concerns for international markets. This perception was jolted on August 28th by reports that the State-owned Assets Supervision and Administration Commission (SASAC) might endorse a move by large state-controlled enterprises under its umbrella to break derivatives contracts that were purchased last year from international banks to protect them from rising commodity prices.
Details, inevitably, are fuzzy. There is no official comment; terrified international bankers are silent. But reports in the local press and some elaboration by participants suggest that efforts by the country’s large shippers, airlines and power companies to cope with high oil prices by taking out futures contracts produced steep losses as the market reversed and prices fell.
That apparently prompted SASAC to launch an investigation, in part to find out if its wards were engaged in outright speculation, rather than hedging, but also to determine if a bail-out could be arranged. The bluntest remedy would be to break the contracts entirely; another, to force contracts to be rewritten and losses reduced. Either outcome would be costly for the foreign banks, in the short run through lost profits and in the long run because a growing business in derivatives would be badly undermined.
For China, too, the consequences would hurt. Counterparties would presumably charge more in future to offset the risk of being stiffed. There would be legal fallout as well. If the contracts were arranged outside China through subsidiaries in Hong Kong, Singapore or London, which is common, then they were almost certainly done under non-Chinese laws that are unlikely to be sympathetic to deliberate deadbeats. Given the direct ties these companies have to the state, a default could in theory trigger a sovereign credit failure and the legitimate seizure of state-owned assets (though it is a stretch to believe that any bank with interests in China would push a case that far). If the contracts were arranged inside China, the companies might claim to have lacked the authority to have engaged in them, but that would undermine their ability to do business abroad.
Jim Sinclair’s Commentary
The trend to bring gold into the sphere of private property and ultimate insurance against the US dollar is growing fast in Asia.
COT has taken on government and is now going to get creamed.
Gold Depository Means to Raise Hong Kong’s Financial Standing
Olivia Chung
The Standard, Hong Kong
Tuesday, November 21, 2006
A gold depository at Hong Kong International Airport is in the final planning stages, Airport Authority chairman Victor Fung Kwok-king said Monday.
"The gold depository would enhance Hong Kong’s status as an international financial center," Fung told reporters on the sidelines of a Hong Kong General Chamber of Commerce luncheon. "We are discussing with the Hong Kong gold industry how to operate it."
Alvin Ching Man-kit, former president of the Hong Kong-based Chinese Gold & Silver Exchange Society, said earlier that the HK$20 million gold depository, the first large commercial one of its kind in Asia, will provide gold storage for central banks and other large financial institutions that are often forced to keep their gold in the United States and Europe.
Ching expects a company for the gold depository to be set up by December, and that it will start accepting gold next year.
Meanwhile, Fung said the Airport Authority has not yet decided whether a third runway at Chep Lap Kok should be built.
Jim Sinclair’s Commentary
Warnings made in 2006:
1. Pakistan goes Taliban.
2. Israel makes a serious miscalculation.
3. Turkey is a victim
Israel has Iran in its sights
Unless Tehran responds by late September to international proposals on its nuclear program, history strongly suggests the Israelis will act alone.
By Micah Zenko
August 30, 2009
Iran has until late September to respond to the latest international proposal aimed at stopping the Islamic Republic from developing a nuclear weapon. Under the proposal, Iran would suspend its uranium enrichment program in exchange for a U.N. Security Council commitment to forgo a fourth round of economic and diplomatic sanctions.
But if diplomacy fails, the world should be prepared for an Israeli attack on Iran’s suspected nuclear weapons facilities. As Adm. Michael Mullen, the chairman of the U.S. Joint Chiefs of Staff, recently acknowledged: "The window between a strike on Iran and their getting nuclear weapons is a pretty narrow window."
If Israel attempts such a high-risk and destabilizing strike against Iran, President Obama will probably learn of the operation from CNN rather than the CIA. History shows that although Washington seeks influence over Israel’s military operations, Israel would rather explain later than ask for approval in advance of launching preventive or preemptive attacks. Those hoping that the Obama administration will be able to pressure Israel to stand down from attacking Iran as diplomatic efforts drag on are mistaken.
The current infighting among Iran’s leaders also has led some to incorrectly believe that Tehran’s nuclear efforts will stall. As Friday’s International Atomic Energy Agency report on Iran’s nuclear programs revealed, throughout the political crises of the last three months, Iran’s production rate for centrifuges has remained steady, as has its ability to produce uranium hexafluoride to feed into the centrifuges.
So let’s consider four past Israeli military operations relevant to a possible strike against Iran.
Jim Sinclair’s Commentary
CIGA Green Hornet sees MOPE failing and confidence waning. You have to agree with Armstrong that this combination is super gold bullish.
Almost 90 percent in US believe economy in recession: poll
WASHINGTON — Almost nine in 10 Americans believe the US economy is still mired in recession, a new CNN poll released Thursday found.
Fully 87 percent of those questioned in the CNN survey said they believe the United States was in a serious, moderate or mild recession.
Public perceptions about the economy’s wellbeing are very important, particularly in the United States where two-thirds of economic activity is consumer spending.
"Economists may be speculating that the recession is over, but don’t tell that to the American public," says CNN Polling Director Keating Holland.
"The good news — if you can call it good news — is that the number who say things are going badly has been dropping steadily since last fall — from an all time high of 83 percent in November to 77 percent in April and 69 percent now," Holland added.
The percentage of people surveyed who believe the United States is in a serious recession eased a bit from 42 percent in May to 36 percent now.
Jim Sinclair’s Commentary
Now what nitwits are going to say China is dollar bound?
Here is a $50 billion flip from dollars to SDRs, a form of a super sovereign currency.
The dollar is toast with 66 days to go before confidence implodes.
IMF Signs US$50 Billion Note Purchase Agreement with China
The Managing Director of the International Monetary Fund (IMF), Mr. Dominique Strauss-Kahn, and the Deputy Governor of the People’s Bank of China, Mr. Yi Gang, have signed an agreement under which the People’s Bank of China would purchase up to SDR 32 billion (around US$50 billion) in IMF notes.
The note purchase agreement is the first in the history of the Fund, and follows the endorsement by the Executive Board on July 1, 2009 of the framework for issuing notes to the official sector. The Chinese authorities had expressed their intention to invest up to US$50 billion in IMF notes in June (see Press Releases No. 09/204 and No. 09/248).
The agreement offers China a safe investment instrument. It will also boost the Fund’s capacity to help its membership — particularly the developing and emerging market countries — weather the global financial crisis, and facilitate an early recovery of the global economy.
Jim Sinclair’s Commentary
It certainly makes more sense than their investments in Bear Stearns and Lehman.
Chinese sovereign wealth fund dumping dollars for strategic investments like gold
Reports suggest that China’s main sovereign wealth fund and other state entities are under pressure to invest in strategic Western assets as the country tries to offload its dollars for firmer-based wealth including gold and oil.
Author: Lawrence Williams
Posted: Thursday , 03 Sep 2009
LONDON – Several reports are coming out of China that there is pressure on state-controlled organisations – notably the country’s main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds – and the possibility of more from the government – may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.
While CIC was set up only two years ago, funded with $200 billion in initial capital, a report to the U.S. Congress noted that according to top Chinese officials, it was created to improve the rate of return on China’s $1.5 trillion in foreign exchange reserves and to soak up some of the nation’s excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC might be allocated more of China’s growing stock of foreign exchange reserves – and this has already proved to be the case.
Probably the most interesting of the recent reports of what is happening with Chinese sovereign wealth fund investment outside China has come from Paul Mylchreest’s Thunder Road Report where an ex-U.S. intelligence service member is quoted. He reports that he has a friend who is in the Chinese Sovereign Wealth fund sector who says – hearsay I know and it wouldn’t stand up in court – indicated that the wealth fund analysts were working all hours of the day and night trying to put investment deals together – particularly in the oil and precious metals sectors. The conclusion is that China recognises that the U.S. dollar is going to tank and it wants to convert as much of its trillions of dollars of holdings into strategic assets as possible before the collapse really takes hold.
Jim Sinclair’s Commentary
This is the first advertisement for Asian national versus New York Federal Reserve Bank gold bullion storage
Hong Kong opens first precious metal depository
By Channel NewsAsia’s Hong Kong Bureau Chief Roland Lim
02 September 2009 2248 hrs
HONG KONG: Hong Kong has opened its first precious metal depository. Built at a cost of $2.5 million, it is believed to be the first large-scale commercial facility in Asia.
The depository has an area of 340 square metres and is located at the Hong Kong International Airport. It allows for gold and precious metal storage, as well as settlement for its members and market participants.
Hong Kong Financial Secretary John Tsang said: "I have just visited the precious metals depository and it is an impressive facility – sort of like our own Fort Knox.
"Precious metals, primarily gold, will be stored right here under the most secure conditions at one of the world’s busiest airports. The gold can be moved quickly and safely to and from virtually anywhere in the world."
Hong Kong Airport Authority’s chief, Stanley Hui, and Hong Kong Mercantile Exchange’s president, Albert Helmig, were also present on Wednesday to sign an agreement requiring all clearing members of the exchange to keep gold-bar stock at the depository.