Jim Sinclair’s Commentary
One of the biggest mysteries to me is how the Pakistani stock market, as thin as it is, could actually be doing well as the country dissolves into the most dangerous of places. I even considered a form of international MOPE.
KSE plunges 426 points in horror session
By Our Staff Reporter
Monday, 19 Oct, 2009
KARACHI: The share market received a massive battering on Monday and plunged by 4.34 per cent or 426.83 points at 9,411.29 eroding Rs120bn from the market capital on panic-selling originating from all the quarters on security concerns.
‘It appears to be belated investor reaction to security concerns in the backdrop of military operation in Waziristan and threats of attacks by the terrorists in other major cities,’ analysts said. ‘The terror attack in Iran and heavy human loss further aggravated the situation,’ they added.
‘The bull rout was total,’ said a leading analyst and added that as the leading market rescuers kept to sidelines, the small investor prayed for God’s help to mitigate their financial losses.
However, it was not a single-day record loss in the benchmark index as it had dropped by 635.80 points or 4.57 per cent after the former president imposed emergency on Nov 3, 2007 and 696.25 points at 14,075.83 on Dec 27, 2007 after the assassination of Benazir Bhutto.
But the investor mood at the KSE reflected that from now onward sailing may not be that easy until law and order improves.
Jim Sinclair’s Commentary
Today’s number one winner in the MOPE category.
The Fed does not need to test anything. Yes, a reverse repo would contract liquidity with the entity you did the repo with in the first place.
When you hear this think "CIT."
Fed says testing reverse repos for future use
Bonds rise as central bank says tests not hints of tighter monetary policy
By Deborah Levine, MarketWatch
Oct. 19, 2009, 11:33 a.m. EDT
NEW YORK (MarketWatch) — The Federal Reserve Bank of New York said Monday that it has been testing reverse repurchase agreements so the operations will run smoothly when and if Fed officials decides they should be used.
The tests are "a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening," the bank said in a statement.
In reverse repurchase agreement operations, the Fed sells some of the securities it holds to dealers for a specific — and usually short — period, with the promise of giving them back at a certain price. The operations, known as reverse repos, have been used in the past to temporarily drain reserves from the financial system.
The statement followed much discussion in the bond market in recent weeks about the Fed testing such operations. Some have speculated the central bank may soon begin using the operations, which several Fed officials have said could be used to tighten monetary policy when the appropriate time comes.
The statement helped the bond market rebound from earlier weakness, sending prices up and yields down.
Jim Sinclair’s Commentary
This is what the countdown on the dollar is all about.
It is the CONSEQUENCES of the implosion of confidence that we anticipate here.
I wonder if Mr. Einhorn will have had to bear all the nasty incoming emails that I have had to for so long on this subject.
Einhorn bets on major currency ‘death spiral’
Major institutions should be broken up if necessary, Greenlight manager says
By Alistair Barr, MarketWatch
Oct. 19, 2009, 2:39 p.m. EDT
NEW YORK (MarketWatch) — Greenlight Capital is betting on the possibility of a major currency collapse and a surge in interest rates, the hedge-fund firm’s manager David Einhorn said Monday, citing ballooning government deficits in some of the world’s most developed countries.
Einhorn, who warned about Lehman Brothers’ frailty before it collapsed last year, also said financial institutions that are deemed as "too big to fail," such as Citigroup Inc.(C), should be broken up.
Greenlight has been buying physical gold this year because Einhorn is concerned that efforts to save the financial system and fuel economic recovery are undermining the value of such currencies as the U.S. dollar.
On Monday, he said Greenlight has added new trades to this investment theme, buying long-dated options on much higher interest rates in Japan and other developed regions — effectively giving the firm the chance to make big profits from a jump in rates. The options, bought from major banks, are tied to interest rates four to five years out, Einhorn noted.
"Japan may already be past the point of no return," he said during a presentation at the Value Investing Congress in New York.
Jim Sinclair’s Commentary
For your information.
CME To Allow Gold As Margin Requirement Collateral
Submitted by Tyler Durden on 10/19/2009 08:41 -0500
Is JPMorgan in urgent need of gold replenishment? If one reads between the lines of today’s surprising announcement out of the CME, that the Chicago exchange will allow the use of gold as collateral for margin requirements (for up to $200 million), with the actual physical gold to be stored at JPM’s bank in London, that is one possible explanation. From a Nasdaq press release:
U.S.-based clearing house CME Group Inc. (CME) will allow physical gold to be used as collateral for margin requirements on all exchange products, a spokesman said Monday.
The new global policy is effective Oct. 19 in accordance with a member’s notice issued late Friday, said spokesman Jeremy Hughes in London.
Clearing member firms will be allowed to post up to a maximum of $200 million worth of gold as collateral to cover performance bond, or margin, requirements, Hughes said.
The gold will be held at J.P. Morgan Chase & Co.’s (JPM) bank in London.
Jim Sinclair’s Commentary
Just more of the same.
FDIC Failed to Limit Commercial Real-Estate Loans, Reports Show
By Alison Vekshin
Oct. 19 (Bloomberg) — The Federal Deposit Insurance Corp. failed to enforce its own guidelines to rein in excessive commercial real estate lending by at least 20 banks that later collapsed, reports by the agency’s watchdog show.
The FDIC’s Office of Inspector General analyzed 23 lenders taken over by regulators from August 2008 to March and found that for 20, the agency’s examiners didn’t identify the issue early enough or should have taken stronger supervisory action after recognizing the banks had dangerously high levels of the loans before they failed. The findings are in separate reports posted this year on the inspector general’s Web site.
“It’s often we’ll see in our reports that the FDIC detected problems in the bank in a timely fashion, but in some cases forceful corrective action wasn’t required by the FDIC to be taken quickly enough,” Jon Rymer, the FDIC’s inspector general, said in a telephone interview.
The failure to follow up on the 2006 recommendation, that banks avoid letting commercial real-estate holdings exceed 300 percent of capital, has emerged as FDIC Chairman Sheila Bair steps up her effort to expand the agency’s role in regulating the financial-services industry.
Bair, a 55-year-old appointed by President George W. Bush, is lobbying the Democratic-led Congress to give the FDIC the authority to unwind any failing bank holding companies. The FDIC’s powers are limited to disassembling commercial banks and thrifts, and it lacks authority to unwind Federal Reserve- regulated holding companies such as New York-based Citigroup Inc. and Bank of America Corp. in Charlotte, North Carolina, that have businesses beyond taking deposits and making loans.
Jim Sinclair’s Commentary
Add an OTC derivative loss (credit swap) of $5 billion.
Armageddon in Alabama Proves Parable for Local U.S. Governments
By Ken Wells
Oct. 19 (Bloomberg) — In its 190-year history, Jefferson County, Alabama, has endured a cholera epidemic, a pounding in the Civil War, gunslingers, labor riots and terrorism by the Ku Klux Klan. Now this namesake of Thomas Jefferson, anchored by Birmingham, is staring at what one local politician calls financial “Armageddon.”
The spectacle — a tax struck down, about 1,000 county employees furloughed, a politician indicted over $3 billion in sewer debt that may lead to the largest municipal bankruptcy in history — has elbowed its way up the ladder of county lore.
“People want to kill somebody, but they don’t know who to shoot at,” says Russell Cunningham, past president of the Birmingham Regional Chamber of Commerce.
One target of their anger is Larry P. Langford, who was the county commission’s president in 2003 and 2004 and is now mayor of Birmingham. The 61-year-old Democrat goes on trial today, charged in a November 2008 federal indictment with taking cash, Rolex watches and designer clothes in exchange for helping to steer $7.1 million in fees to an Alabama investment banker as the county refinanced its sewer debt.
Jefferson County’s debacle is a parable for billions of dollars lost by state and local governments from Florida to California in transactions done behind closed doors. Selling debt without requiring competition made public officials vulnerable to bankers’ sales pitches, leaving taxpayers to foot the bill for borrowing gone awry.
Jim Sinclair’s Commentary
Not friends of the USA for starters, but some energy producers and OPEC members are accelerating the move away from the dollar and now in that most sensitive area, energy settlements.
ALBA currency to take effect by next year
Date Posted: Monday 19 October, 2009
COCHABAMBA, Bolivia-THE proposed shared currency of the Bolivarian Alliance for the Americas (ALBA), the Sucre, was recently approved for virtual implementation throughout member countries by January of 2010.
The decision was reached at a weekend meeting in Bolivia between Latin America and Caribbean leaders after much discussion on the issue.
Venezuelan President Hugo Chavez, the founder of ALBA, called the Sucre currency a “revolution of paradigms” and a way for ALBA members to fight against “the tyranny of the [US] dollar”.
“The Sucre – an autonomous and sovereign monetary system that will be agreed upon today so that it can be implemented in 2010,” Chavez said prior to the meeting in Bolivia.
While the currency is anticipated by Chavez to bolster the global trading power of ALBA’s nine current members, it does pose some challenges for member countries that are also a part of the Eastern Caribbean Currency Union (ECCU), as it would directly conflict with the Eastern Caribbean Dollar that is already used to trade in those countries.
Antigua and Barbuda, St. Vincent and the Grenadines and Dominica are the only full members of ALBA from the ECCU, and following the weekend meeting it was reported by BBC Caribbean that those countries would not “initially be participating in the proposed currency”.
