Dear CIGAs,
This morning’s most entertaining event was on F-TV.
The drama of breaking news took place twice with the second figure being worse than the first. There was a moment of silence on the housing news, faces showed shock and voices took a few words to recover.
The confidence figure fell 1 1/2% yet they could not recognize the fact. They actually announced the figure as improved.
This is second only to the Bernanke hearing where they showed dissenting speeches with the speaker’s mouth moving, but no sound as the F-TV money bunny spoke over the speech on other totally divergent subjects.
You must never lose your sense of humor or all is lost. F-TV is becoming funnier than the comedy channel.
Jim Sinclair’s Commentary
Come on, have a little Christmas spirit! Thing are tough at the North Pole as well.
Santa Robs Bank On Old Hickory Boulevard
Posted: Dec 22, 2009 12:29 PM
By Jeff Tang
HERMITAGE, Tenn. "It was a little unbelievable. He was actually jovial which was scary. He explained he had to rob the bank because Santa had to pay his elves," said Jones.
Jim Sinclair’s Commentary
John Embry has the subject nailed!
Jim Sinclair’s Commentary
Let us test a few more of those reverse repos, but test is all there will be.
The Fed has no tools to drain the international liquidity they have created. Talk about that is total bull.
Please note there are other ways to do interest rate swaps, but the risk is the same or more.
From Harvey Organ’s – The Daily Gold
Note: the fall in the Long Bond to 116.09. You will recall that the centre of the huge derivative bonds is the so called interest rate swaps.
Here JP is the largest player. In simplistic terms, the trade is as follows:
JP shorts the 3 month treasuries with a yield of .09% and buys 30 yr bonds with a yield of 4.5%, all in the future.
The total future bond purchases are in the hundreds of trillions of dollars.
Kirby has identified this in his article the Elephant in the Room.
Suffice to say, this move forces mega purchases of real bonds and keeps interest rates low. However, if bond yield rise above 5% or if the price of the bond falls below 116.00, then
JP would face a huge loss that they cannot pay.
We believe that they themselves own over 100 trillion dollars of these future bonds.
A one percent rise in yield or a fall in price of 1% would cause a loss of $1 trillion dollars to JP. (100 trillion dollars x 1% equals 1 trillion dollars).
This is the neutron bomb that will level the entire banking field.
The US Government has exactly the same problems as Iceland, Greece, Dubai, the UK, Spain, Italy, and all the East European countries (to single out only the worst offenders!) in that more and more debt is being written against a rapidly declining tax base. Even the best economic recovery that can be hoped for in the US will never generate enough increase in GDP that the debt burden can be paid back through increased tax receipts. If Treasury Debt prices start to fall this will be obvious to everyone. The markets are threatening such a fall and this puts the US Government in "cornered wild animal syndrome".
Jim Sinclair’s Commentary
Sure, the Fed is going to retire its buying from mortgage rates instruments.
BULL!
"If there is one thing the Fed hates more than losing control of the stock market, it is losing control of the mortgage market. In the past few days, in addition to FFIP going off the charts as Fed Fund futures traders start panicking, we have seen a gradual divergence in the 10 Year – 30 MTG spread. Will this continue? Yes, until such time as Goldman HoldCo and OpCo decide to kill equities one more time before the March expiration of QE. The rush to safety (which unfathomably still includes MBS and agencies) should collapse the spread for the last time before the hyper [deflationary/inflationary] collapse finally sets in. In the meantime equity traders, i.e., the guys who trade 3 shares amongst each other, are hoping the top is at least one more day away. But at this point who cares about a bid-less market: with so many HFT programs, it just. can’t. happen."
Jim Sinclair’s Commentary
Pretend and Extend is a loser in the mortgage business.
Only a long moratorium will MOPE the figures.
Freddie Mac sheds mortgage assets, delinquencies up
Wed Dec 23, 2009 9:04am EST
NEW YORK, Dec 23 (Reuters) – Freddie Mac’s (FRE.N) mortgage investment portfolio shrank in November while the rate of delinquencies on the loans in guarantees escalated, the U.S. home funding company said on Wednesday.
The unpaid principal balance of its mortgage-related investments fell at a 12.9 percent annual rate last month to $761.8 billion, for a 5.8 percent drop through the first 11 months of the year.
At the 2009 peak, the retained mortgage assets were about $867 billion in March.
The steady decline comes as mortgage securities got rich to purchase while the Fed has sopped up more than $1 trillion of the securities to help keep down mortgage rates and revive the housing market.
The company, as well as Fannie Mae (FNM.N) — both taken under government control in September 2008 as loan failures ate away at capital — is mandated to reduce the portfolio by 10 percent annually starting in 2010.
Jim Sinclair’s Commentary
Why not. They certainly do not want dollars.
Flaherty Says Russia, China May Buy Canada Dollars
December 23, 2009, 10:44 AM EST
By Theophilos Argitis and Christopher Fournier
Dec. 23 (Bloomberg) — Canada’s Finance Minister Jim Flaherty said China, with the world’s largest currency reserves of $2.3 trillion, may be poised to buy Canadian dollars as it seeks to shield its reserves against the U.S. dollar’s decline.
“It does not surprise me that China and Russia would take greater positions in the Canadian dollar than they have previously,” Flaherty, 59, said during an interview in his office in Ottawa. “I would expect countries looking around the world to invest in market currencies that are reliable.”
The U.S. dollar has declined against all but one of the 16 most-active currencies this year, prompting major reserve- holding countries such as Russia and China to express concern about their U.S.-denominated investments. Russia last month said it will add Canadian dollars to its reserves to lower its dependence on the U.S. currency.
The Bank of Canada has warned “persistent strength” in the currency is a main risk for the economy, potentially acting as a “significant” drag on growth. Canada’s currency has gained 15 percent this year against the U.S. dollar. Chinese purchases of Canadian dollars would also cement growing economic links between the U.S.’s two largest trading partners.
Chinese Premier Wen Jiabao said in March that the nation was “worried” about the safety of its investment in U.S. debt, as a weakening dollar eroded the value of its reserves. China’s currency regulator said earlier this month it will “improve” its utilization of foreign-exchange reserves.
Jim Sinclair’s Commentary
When a person is out of work, cut back on hours, or collecting unemployment, only a moratorium of payments will keep the house.
The approach of Pretend and Extend on in default mortgages is clearly the ultimate waste of time and a very weak attempt at MOPE.
Borrowers with modified loans falling into trouble
Report says homeowners whose loan payments are cut by 20 percent or more still falling behind
By Alan Zibel, AP Real Estate Writer , On Monday December 21, 2009, 4:43 pm EST
WASHINGTON (AP) — One of the biggest challenges to ending the foreclosure crisis is this: A surprising number of homeowners who get their monthly payments reduced fall behind again within a year.
When borrowers get into financial trouble, lenders have several ways to help. They can offer grace periods, longer repayment schedules, lower interest rates or reduced balances.
But nearly 40 percent of homeowners who had their monthly payments cut by 20 percent or more last year were delinquent again within a year, according to a report Monday from the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
With the economy still weak and employers continuing to cut jobs, "even if you’ve gone through a modification, your situation may deteriorate," said Fred Phillips-Patrick, director for credit policy at the thrift office.
That’s an ominous sign for the Obama administration’s plan to stem the foreclosure crisis. Lenders participating in the program have offered trial loan modifications to 760,000 eligible borrowers since it was launched in March. As of last month, just 31,000 of them had been made permanent, which requires at least three on-time payments and proof of income. Nearly the same number had dropped out of the program or were found to be ineligible.
Jim Sinclair’s Commentary
This is why the Lobby business is booming. Buy your politician now, and avoid the New Year rush! No returns or store credits entertained.
This is a classic sign of a Democracy that isn’t and why new jails will have to be built called the Iron Lobby.
There is an ancient belief that where the world becomes so depraved a divine personality takes birth.
Keep an eye on all the maternity wards and no-vacancy inns.
Big payoffs to senators on health bill stoke public anger
By: Susan Ferrechio
December 23, 2009
With the approval rating of Congress sinking in the polls and public opinion of their health care plan going down along with it, Democrats may have done themselves one favor too many this week when they riddled the bill with special deals for individual lawmakers.
As Senate Majority Leader Harry Reid, D-Nev., struggled to pull together his 60 Democratic-controlled votes needed to pass the bill, certain holdout lawmakers were able to carve out extra money, benefits or exemptions that senators from other states didn’t get.
Reid said the deal making is just part of how legislation gets done in the Senate.
"It’s not different from other pieces of legislation," Reid said. "We work compromises. That’s what legislation is all about, the art of compromise."
He added that for those senators who did not carve out something for themselves, "it doesn’t speak well of them."
Jim Sinclair’s Commentary
The Fed, even if they wanted to drain it, can’t.
The "Peanut Brittle Recovery" has no capacity to handle that without rolling over into something worse than the Great Depression.
Thank you all you pig rich OTC derivatives manufactures and distributors still deeply in the continuing practice of an economic mortal sin.
Sales of U.S. New Homes Unexpectedly Fell in November (Update2)
By Bob Willis
Dec. 23 (Bloomberg) — Purchases of new homes in the U.S. unexpectedly fell last month, indicating a recovery from the worst housing slump since the Great Depression will be slow to develop.
Purchases dropped 11 percent to an annual pace of 355,000, lower than the lowest estimate of economists surveyed by Bloomberg News, figures from the Commerce Department showed today in Washington. The median sales price decreased 1.9 percent from November 2008.
The prospect that a government tax incentive would expire, combined with a 10 percent jobless rate and competition from foreclosed properties may have hurt builders such as Beazer Homes USA Inc. Last month’s decrease signals a sustained housing recovery may be difficult to secure without additional assistance from policy makers.
“The tax credit put a Band-Aid over the housing problem and in October and November we ripped it off” as it was set to expire, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected sales would fall. “Demand for housing is not likely to pick up on a consistent basis until we start to see some improvement in employment.”
Stocks dropped following the report, erasing earlier gains. The Standard & Poor’s 500 Index was little changed at 1,116.97 at 10:25 a.m. in New York. The S&P Homebuilder Supercomposite was down 0.2 percent.
Jim Sinclair’s Commentary
Your word is your bond? Death before dishonor?
You live your life in training for the moment your code of honor demands a decision.
AIG bonus return pledge goes mostly unfulfilled
Executives give back only about $19 million of $45 million promised
By Brady Dennis
When word spread earlier this year that American International Group had paid more than $165 million in retention bonuses at the division that had precipitated the company’s downfall, outrage erupted, with employees getting death threats and President Obama urging that every legal avenue be pursued to block the payments.
New York Attorney General Andrew M. Cuomo threatened to publicize the recipients’ names, prompting executives at AIG Financial Products to hastily agree to return about $45 million in bonuses by the end of the year.
But as the final days of 2009 tick away, a majority of that money remains unpaid. Only about $19 million has been given back, according to a report by the special inspector general for the government’s bailout program.
