Thought For The Day:
The point made by every gold bear is that the recovery of the economy is so strong that business activity’s recovery will create a stronger dollar in much of 2010 for a multiple of reasons.
The key then is what will the economy do as it bounces along the bottom of housing and consumer demand.
Statistics of growth are way below the real rate of inflation at the checkout counter.
We still have Faber and Biggs quoted every 20 minutes on F-TV as dollar bulls. F-TV calls this a rally with legs.
I respectfully disagree. The rally is a MOPE rally that was decided upon by money managers at many luncheon discussions about the carry trade.
Historical Fact:
When Nero debased the silver standard of Rome, he did not simply clip the coins.
He left the denarias pure silver on the outside, and copper/silver inside.
He hid his activities much like the fact that we are not to know what took place in the bailout of the financial industry.
Sound somewhat familiar?
As Bill Carleton’s song says; when asking for the bailout details, the answer is it is time to "just move on."
Jim Sinclair’s Commentary
The Chinese do not believe that OTC derivatives are victimless crimes.
"And they said that the data showed that courts nationally would be working through the recession’s consequences for years, much as they did with the flood of cases stemming from the crack cocaine epidemic of the 1980s, even after the epidemic had slowed."
"There is a notable increase in cases seeking to commit people for mental health treatment because of stress-related conditions."
The Recession Begins Flooding Into the Courts
By WILLIAM GLABERSON
Published: December 27, 2009
New York State’s courts are closing the year with 4.7 million cases — the highest tally ever — and new statistics suggest that courtrooms are now seeing the delayed result of the country’s economic collapse. The Great Recession may be showing signs of easing, but the legal fallout from the financial troubles, the numbers suggest, may have only just begun.
And the increase in New York offers a preview of the recession-related cases showing up in courts across the nation.
New York’s judges are wading into these types of cases by the tens of thousands, according to the new statistics, cases involving not only bad debts and soured deals, but also filings that are indirect but still jarring measures of economic stresses, like charges of violence in families torn apart by lost jobs and homes in jeopardy.
Contract disputes statewide in 2009 are projected to be up 9 percent from the year before. Statewide home foreclosure filings increased 17 percent, to 48,127 filings. Cases involving charges like assault by family members were up 18 percent statewide. While serious crime remains low, misdemeanor charges in New York City were up 7 percent and lesser violations were up 18 percent in 2009.
Judges and lawyers say the tales behind any number of cases, including low-level offenses like turnstile jumping and petty theft, are often a barometer of bad times. And they said that the data showed that courts nationally would be working through the recession’s consequences for years, much as they did with the flood of cases stemming from the crack cocaine epidemic of the 1980s, even after the epidemic had slowed.
Monty Guild’s Commentary
If you want to read a really great article read the comments in today’s Dec 30,2009 FT by Paul Kennedy, the eminent history professor from Yale who points out why Afghanistan will prove to be a huge mistake for the US.
This analysis is hard to ignore.
Jim Sinclair’s Commentary
Monty is spot on with who will lead the next 500 years.
The decade the world tilted east
By Niall Ferguson
Published: December 27 2009 18:23 | Last updated: December 27 2009 18:23
I am trying to remember now where it was, and when it was, that it hit me. Was it during my first walk along the Bund in Shanghai in 2005? Was it amid the smog and dust of Chonqing, listening to a local Communist party official describe a vast mound of rubble as the future financial centre of south-west China? That was last year, and somehow it impressed me more than all the synchronised razzamatazz of the Olympic opening ceremony in Beijing. Or was it at Carnegie Hall only last month, as I sat mesmerised by the music of Angel Lam, the dazzlingly gifted young Chinese composer who personifies the Orientalisation of classical music? I think maybe it was only then that I really got the point about this decade, just as it was drawing to a close: that we are living through the end of 500 years of western ascendancy.
“Western Ascendancy”: that was the grandiose title of the course I taught at Harvard this past term. The subtitle was even more bombastic: “Mainsprings of Global Power”. The question I wanted to pose was not especially original, but increasingly it seems to be the most interesting question a historian of the modern era can address. Just why, beginning in around 1500, did the less populous and apparently backward west of the Eurasian landmass come to dominate the rest of the world, including the more populous and more sophisticated societies of eastern Eurasia?
My subsidiary question was this: If we can come up with a good explanation for the west’s past ascendancy, can we then offer a prognosis for its future?
Put differently, are we living through the end of the domination of the world by the civilisation that arose in western Europe in the wake of the Renaissance and Reformation – the civilisation that, propelled by the scientific revolution and the Enlightenment, spread across the Atlantic and as far as the Antipodes, finally reaching its apogee in the age of industry and empire?
The very fact that I wanted to pose those questions to my students says something about the past 10 years. I first began to teach in the US because an eminent benefactor of New York University’s Stern school of business, Wall Street veteran Henry Kaufman, had asked me why someone interested in the history of money and power did not come to where the money and power actually were. And where else could that be but downtown Manhattan?
At Least Six Americans Killed in Attack at Base in Afghanistan
By ALISSA J. RUBIN
Published: December 30, 2009
KABUL — At least six Americans were killed Wednesday when a suicide bomber wearing an explosive vest made his way into an American base in Khost Province in southeastern Afghanistan, according to NATO military officials.
The bomber managed to elude security and reach the base’s gym, said one official, who did not want to be identified because the official was not authorized to speak about the incident.
The official said the attack took place at Forward Operating Base Chapman, which one official described as “not a regular base,” meaning that it was used by American intelligence agencies. It was unclear exactly where on the base the explosion occurred.
The suicide bomber died in the blast and six Americans were also wounded, some of them seriously, suggesting that the death toll could climb, the officials said.
Khost Province borders Pakistan and has been prime operating ground for insurgent groups with links to Al Qaeda and for other extremists hiding in Pakistan’s tribal areas.
Jim Sinclair’s Commentary
Currency strength will follow economic ascendancy based on a sound national balance sheet.
This is the foundation of political and social ascendency which is the state of a nation that has also grown militarily during this process.
This is the ascendancy of Asia in leadership economically, politically, socially and militaristically.
This belonged, as a process, to the US from 1775 to 2000.
China may build Middle East naval base
China’s rapidly-expanding navy is considering building its first foreign naval base, according to a senior admiral.
By Malcolm Moore in Shanghai
Published: 2:09PM GMT 30 Dec 2009
In a sign of the growing confidence of the Chinese military, Admiral Yin Zhuo said that the country may set up a base in the Gulf of Aden in order to support missions against Somali pirates.
Since the end of last year, China has sent four flotillas to the Middle East in order to take part in anti-piracy operations together with US, European, Indian and Russian warships. The latest mission, which departed from China in October, involved two missile frigates.
Mr Yin said a permanent base in the region would help supply Chinese ships. "We are not saying we need our navy everywhere in order to fulfil our international commitments," he said, cautiously. "We are saying to fulfil our international commitments, we need to strengthen our supply capacity."
His words, which came just a few days after China rescued 25 sailors from Somali pirates, were posted in an interview on the Defence ministry website. China is reported to have paid a USD4 million (Pounds2.5 million) ransom to free the De Xin Hai, a coal carrier.
Mr Yin, who is a senior researcher at the navy’s Equipment Research centre, pointed out that the first Chinese ships in the Gulf of Aden spent 124 days at sea without docking, a logistical challenge.
Jim Sinclair’s Commentary
Hey, start with the bonuses for failure in the business sense.
Lawmakers Want Probe Into Treasury Aid for Fannie, Freddie
By MICHAEL R. CRITTENDEN
WASHINGTON — The Treasury Department’s surprise Christmas Eve move to uncap the potential aid to Fannie Mae and Freddie Mac should be investigated, lawmakers from both political parties said Wednesday.
Rep. Dennis Kucinich (D., Ohio) said his congressional subcommittee plans to investigate Treasury’s decision to lift the existing $400 billion cap on government cash available to the two firms. Separately, Reps. Scott Garrett (R., N.J.) and Spencer Bachus (R., Ala.) called for the House Financial Services Committee to hold a hearing on the matter.
Mr. Kucinich, who chairs the domestic policy subcommittee on the House Oversight and Government Reform panel, said he is concerned about how the two government-controlled firms will use their new flexibility.
"This cannot be used simply to purchase toxic assets at inflated prices, thus transferring the losses to the U.S. taxpayers and acting as a back door [Troubled Asset Relief Program]," Mr. Kucinich said in a statement released by his office.
Messrs. Garrett and Bachus raised similar concerns in a letter to Rep. Barney Frank (D., Mass.), who chairs the Financial Services panel. The two GOP panel members decried what they called a "transparent attempt to hide the news from the American people" by announcing the news the day before a major holiday.
Jim Sinclair’s Commentary
Nobody will ever say that Bill and Chris lack cojones.
Dear Friend of GATA and Gold:
GATA today brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank’s records of its surreptitious market intervention to suppress the monetary metal’s price.
The suit was filed in U.S. District Court for the District of Columbia and targets Fed records involving gold swaps, exchanges of gold with foreign financial institutions. In a letter dated September 17 this year to GATA’s law firm, William J. Olson P.C. of Vienna, Virginia, (http://www.lawandfreedom.com) Fed Board of Governors member Kevin M. Warsh acknowledged that the Fed has gold swap agreements with foreign banks but insisted that such documents remain secret:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
Jim Sinclair’s Commentary
Comments from the pits by Yra Harris.
Notes From Underground: Putin, you wily rascal?
By Yra
Last week we wrote about the need for Russia to create some mischief in the world. Lo and behold, we have two stories out of Moscow that could be unsettling to the politics and thus economics of the global economy.
First, Russia is still threatening to cut off of oil supplies that are delivered to Europe through the Ukrainian pipeline. This action is brought to the fore as Russia is unhappy with the Ukraine’s demands for higher transit fees on oil shipped from Russia to Europe via pipeline. The threat is not nearly as great as the disruption of natural gas, as the amount of oil is much less relative to natural gas. It seems that the Russians are only getting Europe’s attention as next month’s Ukrainian elections will limit Gazprom’s ability to act. The Kremlin is trying to prevent the election of Viktor Yuschenko, who the KGB poisoned in London, while supporting the present Ukrainian ruler, Yulia Tymoshenko. It seems that little action will take place as they don’t wish to provoke an anti-Russian vote, which would go to Yuschenko.
After the election, in the midst of the coldest part of winter, we will see how Russian energy demands are put in to action. If Tymoshenko loses, we can be sure that Russian belligerence to the Ukraine and Europe will increase. The primary concern for the Ukraine is the need for higher transit fees on energy to support a government budget that is in severe imbalance. Similar to the rest of Eastern Europe, the global downturn left the Ukrainian economy in tatters and they have already turned to the IMF for help. The Russians will remind Europe and the Ukraine that they are still a strong voice and their ability to disrupt the European economy is very great.
Second, out of Russia comes word that Prime Minister Putin raised the issue about restraining hot capital inflows into Russia. The vast amount of money that has flowed in has put upward pressure on the ROUBLE, which the Russian Central bank has attempted to stem by lowering interest rates several times this year. These rate cuts have not been successful in halting the ROUBLE’s rise, forcing the central bank to buy dollars and adding to Moscow’s burgeoning foreign reserves. Putin hinted that the restrictions would not be like Brazil’s but would act to inhibit the inflow of funds. The potential action has not been implemented yet, but this is another move to restrain the flow of international capital at a time of great financial fragility.
Jim Sinclair’s Commentary
The following article by Eric Sprott breaks down the quite important statistics on who has been the buyers in the bond market.
With forecasts of at least 40% more bond offerings next year you will see that the Fed cannot exit its QE without drastic results on the already prostrate Main Street.
Click here to view Eric Sprott’s article in PDF format…
Jim Sinclair’s Commentary
Transactions tend to be culturally driven.
Reduction and reduction maybe two different things.
China vows to cut red tape for foreigners
Government says it will make it easier for foreign investors to start businesses in the country, especially in its western provinces
Published on Wednesday, Dec. 30, 2009 6:43AM EST
China will make it easier for foreign investors to start businesses in the country, especially in its western provinces, the government said in a statement on Wednesday.
It said China would open a wider range of sectors to foreign investors and would encourage them to establish labour-intensive businesses in the west, the State Council, or cabinet, decided at a routine meeting.
The statement on the government’s website gave few details. The cabinet’s decision will serve as a guideline for local governments to develop specific policies for implementation.
China drew $77.9-billion in foreign direct investment (FDI) in the first 11 months of 2009, 9.9 per cent less than in the same period of 2008.
Inflows, which surged in the years after the country joined the World Trade
Organization in 2001, are in the midst of recovering after being hit hard late last year by the global economic slowdown.
Jim Sinclair’s Commentary
Here are the brown shots of business that Faber, Biggs, Soros, Buffett and about 300 others must not be looking at in their dollar bullishness.
Credit-card delinquencies tick higher.
November U.S. credit card chargeoffs rose half a percentage point to 10.56%, halting a two-month run of improvement, Moody’s said. Delinquencies also rose, to 6.2%. Trends suggest bad debts will continue to rise through much of the winter, and support Moody’s outlook that chargeoffs will peak at 12-13% in mid-2010. The payment rate, or percentage of the principal balance cardholders repaid, fell to 16.4% from 17.3%, largely due to November being a shorter month.
Fewer shoppers finish holiday buying.
An unprecedented 22% of U.S. consumers didn’t finish their Christmas shopping this year, as fewer discounts kept many wallets closed, according to a report by Britt Beemer. "This is the lowest number of consumers finishing shopping in all my 26 years of tracking retail sales during the holiday season," Beemer said. Typically, 82-88% of shoppers make it to the finish line. Many said they couldn’t afford to spend more, while others opted to give cash instead of presents.
Consumer confidence grows, in a sense.
The Conference Board’s Consumer Confidence Index rose to 52.9 from 50.6 in November, just short of the consensus estimate of 53. The increase was fueled by a rise in the Consumer Expectations Index to 75.6 from 70.3, while the Present Situation Index declined to 18.8 from 21.2 – somewhat surprising given that the present situation index is highly correlated with the labor markets, which have improved significantly in recent readings. The index suggests consumers may be skeptical about recent employment data.
Home price recovery flattens.
The decline in U.S. home prices improved for the ninth straight month in October, according to S&P/Case-Shiller, but monthly growth flattened in most markets. Year-on-year prices in the index’s 10-city and 20-city readings declined 6.4% and 7.3%, while prices remained flat from last month. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip," the report said. "Before jumping to conclusions, recognize that the one time that happened, at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today."
Home price recovery flattens.
The decline in U.S. home prices improved for the ninth straight month in October, according to S&P/Case-Shiller, but monthly growth flattened in most markets. Year-on-year prices in the index’s 10-city and 20-city readings declined 6.4% and 7.3%, while prices remained flat from last month. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip," the report said. "Before jumping to conclusions, recognize that the one time that happened, at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today."
Jim Sinclair’s Commentary
Come on now, we know banksters would never do such a thing!
Banksters said "They do the work of a loving, caring God.’
Suit alleges Morgan sold garbage as gold.
A Virgin Islands pension fund sued Morgan Stanley (MS), alleging the investment bank marketed a $1.2B CDO, and collaborated with credit raters to ensure AAA ratings, while shorting nearly all the assets. The Libertas CDO was backed mainly by residential mortgage-backed securities. The complaint said Morgan Stanley knew securities in the CDO were suffering a dramatic rise in delinquencies, but provided a misleading risk factor in its prospectus, noting rising delinquencies "may" hurt values in the RMBS market, which the complaint compared to "Captain Smith’s telling passengers of the Titanic that some ships have ‘recently sunk’ in the Atlantic, and therefore ‘our ship may sink,’ without mentioning the facts that his ship struck an iceberg, had a hole in it, and was filling with water."
Jim Sinclair’s Commentary
Go Sir George Kahama!
Tanzania: Communication Growth Records 20.5 Percent
28 December 2009
Dar Es Salaam — THE communication sector has emerged as a strong growth-driver of the economy for the year 2008/09.
According to the Minister for Finance and Economic Affairs Mr Mustafa Mkulo, the communication sector grew at 20.5 per cent during the period followed by the financial mediation with 11.9 per cent.
In his annual economic performance report to the International Monetary Fund (IMF) released last month, Mr Mkullo said that the strong performance in communication sector was mainly explained by the increase in mobile phone subscribers and the attendant increase in sales of airtime.
He said the construction sector was the third with 10.5 per cent in the ranking.
He said that strong performance of financial intermediation mirrored the effect of the ongoing financial sector reforms, strong growth in credit to the private sector and increased competition in insurance services.
However, he noted that despite the good performance of the economy as a whole, a notable slow down of growth was observed in mining and quarrying sub-activities which dropped to 2.5 per cent from 10.7 per cent in 2007.
Tanzania economy grew by 7.4 per cent in 2008, slightly higher than the 7.1 per cent recorded in 2007, with the economy slowing toward the end of the year.
Jim Sinclair’s Commentary
This is the basic premise of the school of economic thought called "Management of Perspective Economics," expounded in public testimony by former Chairman Greenspan. The premise is if you can manage markets in a manner of significant public improvement then you can influence the thinking of business decision makers resulting in an improvement of business conditions. This is the first time in 79 years that MOPE has been applied in a situation of severe balance sheet deterioration to destruction. What the speaker promised below is "QE to infinity." I am sure she was in total shock when she ran into rampant disbelievers among the real estate group that are mainly born bulls.
Extend and Pretend ( Pray?)
"What do want we should do, bankrupt all the banks??"
CRAIG: In George Ure’s column today (see link) he discusses comments from a friend who attended a very senior level CRE conference. To protect the banks from massive write-downs and bankruptcy it appears the Treasury is working towards a policy of "extend and pretend" on the massive amount of CRE mortgages that are coming due.
"Here is the real stunner. A senior person at Treasury said to a small group of us that it is now official Treasury policy to extend and pretend on [commercial] real estate loans. In other words, the policy statement from last week says, if you can make an analysis that says even if the current value is less than the loan, if you can do a spreadsheet that shows if you extend for 3-5 years, and if the economy gets better, and if the loan can be amortized down to where the loan is no longer more than the value, then the lender does not have to take an impairment -write down. Loans are to be modified by rate reductions, deferral of reserves, deferral of amortization or what ever.
Just NOT principal reduction. This is just like they are doing in housing.
Giant make believe. The free market seeking an equilibrium price is no longer economic policy. In short, the working of the free market is suspended. She went on to say it was administration policy that they will create new employment and by doing so they will boost the economy, and so then real estate values will return to old levels. There were 50 of the most senior and smartest real estate people in the room. They ripped her to pieces. It looked like one of the town hall meetings of August, except everyone there was a very senior, polished professional. At one point everyone was calling out or moaning at her. It was clear to all she had been given a few talking points and she was told to stick to them no matter how foolish she looked. The group told her in no uncertain terms this is terrible public policy. They said for jobs to be created you need to lower rents so the cost of occupancy was at a level to encourage more hiring. If the loan is kept at old levels and building values not reduced, then landlords can’t reduce rents to where they need to be to make taking space by tenants economically viable. Retailers costs remain higher than they should be making it harder to lower prices to induce sales. So there is a massive make believe going on. When I pressed the issue of political interference she said -what do you want us to do, bankrupt all the banks.
http://urbansurvival.com/week.htm
Jim Sinclair’s Commentary
Why not? We are paying for it all, bonuses included.
GM rehires lobbyists — and taxpayers foot the bill
By: TIMOTHY P. CARNEY
Examiner Columnist
December 30, 2009
If you’ve flown into Ronald Reagan Washington National Airport and your plane took the northern approach coming down the Potomac, you may have looked out the window at the five-, six- or seven-bedroom homes on both the Maryland and Virginia sides of the river, with three-car garages and swimming pools. Thanks to the Obama administration and General Motors, your tax dollars are now subsidizing the millionaire lobbyists who live in these neighborhoods.
GM, the failed carmaker whose $400 million in monthly losses is borne mostly by U.S. taxpayers, has in recent months hired high-priced K Street lobbyists to petition Washington for subsidies, special tax breaks and other government favors on top of the $52 billion in aid the Treasury has already provided.
In June, GM began firing its outside lobbyists as part of downsizing its entire $10 million-a-year lobbying operation. As company spokesman Greg Martin told Roll Call, "We have begun notifying our outside consultants that we will be terminating their contracts." But GM has since rehired two of its old K Street firms, the Duberstein Group and Greenberg Traurig, and picked up new representation in the firm GrayLoeffler.
Rounding out GM’s K Street quartet is the well-connected Washington Tax Group, which began representing the company in 2007 and kept its affiliation with GM over the summer, according to a search of the House and Senate lobbying databases. GM’s Martin told me Monday that these were GM’s only outside lobbying firms.
Among the four firms, 18 lobbyists are registered to represent GM, including many wealthy and well-connected revolving-door players from both parties.
