Dear CIGAs,
Think past economics and ask yourself if S&P opining on anything such as a defense budget is meritorious.
Now we have these damn rating agencies making foreign policy. Do you think the US ever has a secret defense budget?
All governments have secrets. All governments will always have secrets. Defense departments are full of secrets.
Have these rating people gone totally mad? How will they rate the US as non-US entities slow down their purchases of US treasuries?
This is another chip out of dollar confidence. This is a very slippery slope S&P has placed themselves on.
S&P downgrades Greece while concerns mount over secret defence budget
Standard & Poor’s has become the second rating agency to downgrade Greek sovereign debt to near junk levels of BBB+, issuing a withering verdict on Spartan plans unveiled this week by premier George Papandreou.
By Ambrose Evans-Pritchard
Published: 7:51PM GMT 16 Dec 2009
“The downgrade reflects our opinion that the measures to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden. If political considerations and social pressures hamper progress, we could lower the ratings further,” it said.
The move came as Spyros Papanikolaou, head of Greece’s Public Debt Management Agency, held back-to-back meetings with bankers in London in a bid to stop the crisis spiralling out of control.
Yields on 10-year Greek bonds surged to 5.75pc, a spread of 254 basis points over German Bunds. Borrowing costs are nearing levels that risk setting off an interest compound spiral. The public debt is already 113pc of GDP. S&P said it is likely to reach 138pc by 2012. “The increasing debt-service burden narrows the scope for debt stabilization,” it said.
Fitch Ratings precipitated the Greek crisis earlier this month with a surprisingly harsh downgrade to BBB+, accompanied by a “negative outlook”.
It emerged yesterday that Greece had raised €2bn (£1.77bn) at a premium of 30 basis points in a private placement shortly after the Fitch move, avoiding the public glare of an auction.
Jim Sinclair’s Commentary
Here is another NEGATIVE fundamental dollar event.
There is no sustainable bull market in the US dollar coming. None!
Current account deficit widens in Q3
Wed Dec 16, 2009 8:38am EST
WASHINGTON (Reuters) – The current account deficit widened as expected in the third quarter to $108 billion, largely driven by a big trade shortfall, a Commerce Department report showed on Wednesday.
Economy
The deficit rose from a downwardly revised $98 billion in the second quarter and was in line with analysts’ forecasts for a third quarter shortfall of $108 billion.
The third-quarter deficit equaled 3 percent of gross domestic product, up from 2.8 percent in the April-June period, a Commerce Department official said.
The current account is the broadest measure of total U.S. trade with the rest of the world, covering goods, services and income transfers.
U.S. exports and imports both rose in the July-September quarter, a sign that world trade is recovering after being hampered by last year’s global financial crisis.
Jim Sinclair’s Commentary
Here is a dollar negative fundamental that is world class.
"The national debt currently accounts for 53 percent of GDP, up from 41 percent a year ago.”
US needs plan to tame debt soon, experts say
Mon Dec 14, 2009 5:20pm EST
By Andy Sullivan
WASHINGTON, Dec 14 (Reuters) – The U.S. government must craft a plan next year to get its ballooning debt under control or face possible panic in financial markets, a bipartisan panel of budget experts said in a report on Monday.
Though the government should hold off on immediate tax hikes and spending cuts to avoid harming the fragile economic recovery, it will need to make such painful changes by 2012 in order to keep debt at a manageable 60 percent of GDP by 2018, according to the Peterson-Pew Commission on Budget Reform.
Without action, investors could lose confidence in the United States, driving down the dollar and forcing up interest rates, said the former lawmakers and budget officials who crafted the report. That could cause a sharp decrease in the country’s standard of living.
"We will be less free if we don’t tackle this," said Jim Nussle, a Republican member of the commission who earlier served as a White House budget director and chairman of the budget committee in the U.S. House of Representatives.
Jim Sinclair’s Commentary
This places the pressure on the Administration to improve the job market via stimulus and QE.
It sounds like MOPE to me. There is not a lot of 2009 left.
Dollar Rises as Fed Says Labor Market Deterioration ‘Abating’
By Ben Levisohn and Oliver Biggadike
Dec. 17 (Bloomberg) — The dollar rose to a one-week high against the yen as the Federal Reserve said deterioration in the labor market is “abating” while reiterating it will keep its target rate at virtually zero for an “extended period.”
The greenback has appreciated 3 percent against the currencies of major U.S. trading partners since the Dec. 4 payrolls report showed employers cut the fewest jobs since before the recession began. It’s the fastest nine-day rally in the dollar since June.
“There was a reluctant acknowledgement that things are getting better, and that has the market looking at it as a glass half full,” said Samarjit Shankar, a foreign-exchange group managing director in Boston at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets.
The dollar traded at 89.78 yen at 7:02 a.m. in Tokyo, after increasing 0.2 percent yesterday and touching 89.99, the highest level since Dec. 7. The dollar was little changed at $1.4533 per euro after climbing on Dec. 15 to $1.4504, the strongest level in more than two months. The euro traded at 130.46 yen, following an increase of 0.1 percent.
Jim Sinclair’s Commentary
Brittle? Believe it. This equity market turned two weeks after the FASB surrendered.
The equity market’s best hope is Weimar. It might just get it.
Then new equity highs will occur on depreciating dollars.
U.S. Said to Reconsider Quick Sale of Citigroup Stake
By ERIC DASH
Published: December 16, 2009
Two days after Citigroup moved to untangle itself from Washington, the Treasury reversed course Wednesday and backed away from plans to immediately sell a portion of its stake in the banking giant, according to a person briefed on the situation.
The decision came after Citigroup badly misread the financial markets on Wednesday and struggled to sell new shares to pay back its bailout funds.
The new stock is expected to be priced at $3.15 a share — below the $3.25 price at which the government assumed its one-third stake in Citigroup. The Treasury is now expected to retain its stake and try to sell the stock over the next 6 to 12 months.
The trouble with the share sale underscored the lingering worries over Citigroup’s financial health and raised concern that the bank’s eagerness to free itself from government oversight on issues such as employee pay might come at a high cost to shareholders. It also may heighten pressure on Citigroup’s chief executive, Vikram S. Pandit.
Jim Sinclair’s Commentary
Do you want to know what is really going on? Then you need a subscription to www.shadowstats.com. I have no financial connection to them, I am simply a subscriber.
- Bad Seasonals Turn Data Topsy-Turvy
- Annual CPI-U Inflation Jumps to 1.8% (SGS 8.8%)
- November versus October Annual Inflation Swings Positive by 2.0% for the CPI, 4.3% for the PPI
- November Annual Real Retail Sales Were Unchanged
- November Housing "Gain" Statistically Not Different from Zero
"No. 266: November CPI, PPI, Production and Housing "
http://www.shadowstats.com/
Jim Sinclair’s Commentary
How do you "Not properly underwrite a Mortgage"?
Has the same mortgage been put in multiple unrelated securitization instruments?
Has the mix been other than what is represented in credit quality even before the crisis?
Has the underlying paperwork been misplaced?
This has not been mentioned in public before, but was the subject of an emergency meeting of the 7 major firms doing this business, called by the New York Federal Reserve Bank well before it all hit the fan. It then was referred to as a back office jam.
FDIC Delays Restrictive Securitized Asset Plan
By Joe Adler, American Banker
December 16, 2009
WASHINGTON — The Federal Deposit Insurance Corp. delayed a proposal Tuesday to place new restrictions on securitizations after board members disagreed about its impact.
The initial plan’s goal was to crack down on institutions that did not properly underwrite mortgages and other assets before selling them into the secondary market. The FDIC wanted to ensure these institutions jumped through a variety of hoops to earn the "safe harbor" accorded to securitized assets in a failure.
But two board members said the plan would conflict with pending legislation and could harm the securitization market. They convinced the FDIC to release a broad advance notice of proposed rulemaking that merely asks for comment on the best way to proceed.
"This approach will stimulate robust comment on this issue now, but in a way that will minimize unintended consequences," said Comptroller of the Currency John Dugan.
The fight over the securitization proposal came as the FDIC board voted to increase the agency’s budget by 55%, to $4 billion, to deal with the rising number of bank failures. Funding to deal with receiverships next year jumped 92%, to $2.5 billion. The agency also nearly doubled its temporary staff, to 3,421, primarily to deal with resolutions.
Jim Sinclair’s Commentary
You all know what happens when you are named "Man of the Year” by Time.
One gold bear said the top in gold is the day Sinclair is "Time’s Man of the Year." I would run for Holy water and a Shaman.
Federal Reserve’s Bernanke Named Time’s ‘Person of the Year’
By Chris Dolmetsch
Dec. 16 (Bloomberg) — Federal Reserve Chairman Ben Bernanke was named “Person of the Year” by Time magazine today for leading the “most-powerful, least-understood government force shaping our lives,” Managing Editor Richard Stengel said.
Bernanke, 56, was picked for his efforts to shepherd the U.S. out of the biggest economic slump since the Great Depression, Stengel said while announcing the choice on NBC’s “Today” show this morning.
“He was the great scholar of the Depression, and he saw what looked like another depression coming and he decided he would do whatever it takes to forestall that,” Stengel said. “And I think he did. It could have been a lot worse; there were things he could have done better. One of his responsibilities is to put full employment in society and he hasn’t really stepped up on that. But in terms of influence and how the economy went this year, Bernanke was the guy.”
There were six finalists for “Person of the Year,” including U.S. President Barack Obama; House Speaker Nancy Pelosi; Steve Jobs, Apple Inc.’s co-founder and chief executive officer; the Chinese worker, an “increasingly influential group”; General Stanley McChrystal, the top U.S. and NATO commander in Afghanistan; and Jamaican sprinter and Olympic gold-medalist Usain Bolt.
Jim Sinclair’s Commentary
Nobody is listening to Volcker in this Administration.
He is hung tinsel for the Conservative Democrats.
Volcker’s Wake Up Call: Spread the Word
December 15, 2009
By Simon Johnson
The guiding myth underpinning the reconstruction of our dangerous banking system is: Financial innovation as-we-know-it is valuable and must be preserved. Anyone opposed to this approach is a populist, with or without a pitchfork.
Single-handedly, Paul Volcker has exploded this myth. Responding to a Wall Street insiders‘ Future of Finance “report“, he was quoted in the WSJ yesterday as saying: “Wake up gentlemen. I can only say that your response is inadequate.”
Volcker has three main points, with which we whole-heartedly agree:
1. “[Financial engineering] moves around the rents in the financial system, but not only this, as it seems to have vastly increased them.”
2. “I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy” and most important:
3. “I am probably going to win in the end”.
Volcker wants tough constraints on banks and their activities, separating the payments system – which must be protected and therefore tightly regulated – from other “extraneous” functions, which includes trading and managing money.
This is entirely reasonable – although we can surely argue about details, including whether a very large “regulated” bank would be able to escape the limits placed on its behavior and whether a very large “trading” bank could (without running the payments system) still cause massive damage.
Jim Sinclair’s Commentary
Be real careful of TA on the dollar. The US dollar is probably the most fundamental market out there.
This is more guano on the buck. Nobody wants the continuing source of OTC derivatives that are still WMDs which happens to be a reserve currency because it exports madness and monetary mortal sin to the holders of that unit of disaster.
When did finance become a means of destruction, known as such, and fully accepted here?
Gulf petro-powers to launch currency in latest threat to dollar hegemony
The Arab states of the Gulf region have agreed to launch a single currency modelled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate.
By Ambrose Evans-Pritchard
Published: 7:12PM GMT 15 Dec 2009
“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.
The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.
Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.
The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.
The Gulf states remain divided over the wisdom of anchoring their economies to the US dollar. The Gulf currency – dubbed “Gulfo” – is likely to track a global exchange basket and may ultimately float as a regional reserve currency in its own right. “The US dollar has failed. We need to delink,” said Nahed Taher, chief executive of Bahrain’s Gulf One Investment Bank.
Iran tests upgraded long-range missile
December 16, 2009 11:52 a.m. EST
Tehran, Iran (CNN) — Iran tested an upgraded version of a surface-to-surface missile with a range that makes it capable of reaching parts of Europe, state-run television reported Wednesday.
Iranian Defense Minister Gen. Ahmad Vahidi said on Press-TV that the solid-fuel, high-speed Sajil-2 missile has "great maneuverability" and can access targets more than 2,000 kilometers (1,242 miles) away, making Israel and U.S. military bases in the Gulf reachable.
Vahidi said the missile has a shorter launch time and is intended to boost Iran’s deterrent capability.
Iran tested the initial version of the Sajil-2 back in May.
Then in September, days before a key meeting over nuclear issues with industrialized powers, Iran tested two types of long-range missiles.
Those tests drew condemnation after the Islamic republic revealed the existence of a covert uranium enrichment site near the city of Qom.
Iran shocked the world with that revelation. Since then, it has allowed inspectors from the U.N. nuclear watchdog agency to visit the plant.
Jim Sinclair’s Commentary
Congratulations to all of us for payment of CITI’s TARP obligation.
This is the ultimate “other people’s money.”
Do you think we might be able to get this kind of help to buy mining machinery or infrastructure for our businesses?
Citi wins big tax break.
While Citigroup (C) fends off arbitration claims, it is celebrating an IRS decision to forgo collecting billions of dollars in potential taxes to help the bank repay its TARP loans. Tax law allows companies to offset taxable income with prior losses, but limits the transfer of those losses to new ownership so that profitable companies don’t buy losers just to avoid taxes. Under the law, the government’s sale of its 34% stake in Citigroup, combined with Citi’s share sales, qualify as a change in ownership. The IRS ruling (.pdf) stipulates that the government’s share sale does not count toward the definition of an ownership change. "I’ve been doing taxes for almost 40 years, and I’ve never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts," a tax expert said
Jim Sinclair’s Commentary
Why would you whine when you can purchase it at 8 times the current price?
Abu Dhabi attacks Citi share sale.
Abu Dhabi Investment Authority – one of the world’s top two sovereign wealth funds – wants to rescind an agreement that would otherwise force it to buy Citigroup (C) stock for more than 8X its current price. The fund, which is seeking more than $4B in damages if the deal goes ahead, has claimed "fraudulent misrepresentations" tied to an agreement to buy $7.5B of common stock. Citi said in a statement the claims have no merit. On Monday, Citi said it would sell $17B in shares to help repay $20B in bailout funds. That would trigger losses for the Investment Authority, which purchased Citigroup equity units in November 2007; Citi’s shares have dropped 89% since then. Analysts were doubtful ADIA could win in court, but said its goal may be to get Citi to renegotiate the terms of their deal.
Jim Sinclair’s Commentary
Come on WaMu, no Bankster would ever do that.
WaMu accuses JPM of "fire sale".
Washington Mutual, once the largest savings & loan in the country, wants a federal court to grill the Fed, the Treasury and a dozen others over its seizure and firesale to JPMorgan (JPM) a year ago. WaMu said the alleged misconduct includes JPM, which it accused of disclosing confidential information to government officials and others in an effort to harm WaMu’s credit rating and stock price. WaMu said it has been investigating possible claims since mid-2009.
Jim Sinclair’s Commentary
FASB rewards banks by allowing junk to be marked up to whatever value the institutions wishes, so why enforce international capital rules? It would not be consistent.
You can fool the fools but not forever.
Banks get more time on capital rules.
Banks around the world could get ten years to transition to new capital rules that will take effect in 2012, sources say. The news lifted shares of some banks, with MUFG (MTU) and Sumitomo Mitsui Financial (SMFJY.PK) surging more than 14% and European banks rising more modestly. This week, the Basel Committee on Banking Supervision is expected to issue new proposals to toughen financial regulations, which had raised concerns about banks scrambling to raise capital quickly. While regulators don’t plan to set a specific time frame for the transition period, media reports said it would be at least 10 years, the same period banks were given to transition when Basel II was introduced in 2004. New rules will likely take a broader view on the definition of liquid assets and core capital, while the minimum capital threshold will likely be raised to help buffer against future losses.
Jim Sinclair’s Commentary
What makes you think governments will not Pretend and Extend?
Also when a government debt, like the USA, is in the currency of the government exactly how do you execute a default?
Greece sees few glimmers of hope
By Patrick Jenkins in London and Kerin Hope in Athens
Published: December 16 2009 02:00 | Last updated: December 16 2009 02:00
With Greece’s budget deficit at record levels and the country’s banks exposed to troubles both at home and abroad, doomsayers are predicting that Greek banks will go the way of Iceland’s.
Many investors clearly think their gloom is justified. Greek banks’ shares fell by a quarter in the four weeks to December 11 on the Athens stock exchange.
And this week bank shares fell again on fears that structural reform measures announced by the Socialist government would not be enough to restore confidence in the economy.
On Monday, Standard and Poor’s, the ratings agency, said Greek banks face the "highest risks in western Europe". Last week it warned of a possible downgrade of Greece’s A minus credit rating.
Athens-based lenders have borrowed about€40bn ($58bn) from the European Central Bank at cheap rates to invest in higher-yielding Greek bonds, which they used as collateral. Their bondholdings helped the four big banks to show respectable nine-month profits in spite of a drastic slowdown in domestic credit expansion.
Jim Sinclair’s Commentary
This is courtesy of Monty Guild.
ECB-Gold reserves up by 1 mln euros in wk
Tue Dec 15, 2009 9:06am EST
FRANKFURT, Dec 15 (Reuters) – Gold and gold receivables held by euro zone central banks rose by 1 million euros to 238.146 billion euros in the week ending Dec. 11, the European Central Bank said on Tuesday.
Net foreign exchange reserves in the Eurosystem of central banks fell by 1.1 billion euros to 163.4 billion euros, the ECB said in its regular weekly consolidated financial statement.
Gold holdings rose because of a purchase by one euro zone central bank, the ECB said.
The ECB’s balance sheet totalled 1.745 trillion euros, down from 1.759 trillion a week earlier.
For details of the report, please see the website: www.ecb.int/press
Jim Sinclair’s Commentary
Bernie wants to know if this is bullish for the dollar.
If you mean the supply of dollars continuing to rise, then yes.
U.S. already $292 bln in the red this year – CBO
WASHINGTON, Dec 4 (Reuters) – The U.S. government racked up a gaping shortfall in the first two months of this fiscal year after posting a record budget deficit last year, congressional analysts said on Friday.
In October and November, the government spent $292 billion more than it took in, the nonpartisan Congressional Budget Office said.
That was even worse than the same period last year, when the government was on its way to posting a record $1.4 trillion deficit for the fiscal year that ended Sept. 30.
Jim Sinclair’s Commentary
Any further questions about how Turkey’s extremely complicated new politics might make them a victim?
GOOD MORNING TURKEY – PRESS SCAN FOR DEC. 16
Wednesday, December 16, 2009
ANKARA – Anatolia News Agency
These are some of the major headlines and their summaries in Turkish press on Dec. 16, 2009. The Hürriyet Daily News does not verify these stories and does not vouch for their accuracy.
HURRIYET
– CONSTRUCTION OF SUBWAY BRIDGE BEGINS
A platform and steel pipes manufactured in Portugal are to be used in the construction of Halic passage bridge, one of the most important routes of Istanbul subway. The bridge’s construction will start in February.
The subway will travel to Unkapani over the new bridge, and then go to Sehzadebasi, Aksaray, through a tunnel. It will reach Yenikapi, be integrated into Marmaray and connected to the Kartal-Kadikoy line.
The subway will also be connected to Sishane-Taksim-Haciosman line and become integrated to the Airport-Olimpiyatkoy-Basaksehir line.
