Dear CIGAs,
Here is the thought for the morning which I agree with 100%:
"The action in the Yen suggests the dollar bounce is all Euro related. The carry trade is still on, otherwise the dollar would be rallying against the yen."
–CIGA Eric
Jim Sinclair’s Commentary
In all probability this will be settled, not tried.
In my opinion the case on OTC derivatives can never be pleaded without exposing the mounting pile of garbage also infested with fraud.
Italy Seizes Bank of America, Dexia Assets Amid Probe (Update2)
By Elisa Martinuzzi
Feb. 3 (Bloomberg) — Italy’s financial police are seizing 73.3 million euros ($102 million) of assets from Bank of America Corp. and a unit of Dexia SA as part of a probe into an alleged derivatives fraud in the region of Apulia.
Police are investigating losses on derivatives linked to the sale of 870 million euros of bonds sold by the regional government in 2003 and 2004, according to an e-mail from the prosecutor’s office in Bari today. The banks misled the municipality, located in the heel of Italy, on the economic advantages of the transaction and concealed their fees, the prosecutor said.
The region, also known as Puglia, joins more than 519 Italian municipalities that face 990 million euros in derivatives losses, according to data compiled by the Bank of Italy. In Milan, prosecutors seized assets from four banks including JPMorgan Chase & Co. and UBS AG in April and requested they stand trial for alleged fraud. Hearings started this month.
“Italy, like other countries, is full of these examples,” said Dario Loiacono, a banking lawyer in Milan who isn’t involved in the case. “It’s the result of the unavoidable asymmetry of information between the banks and the municipal borrowers.”
Police are sequestering a further 30 million euros that the municipality was set to place in a fund managed by the banks on Feb. 6, the prosecutor said. The magistrate also asked that Charlotte, North Carolina-based Bank of America be stopped from doing business with Italian municipalities for two years. A hearing is slated for next month.
Jim Sinclair’s Commentary
The Euro is down from $1.52 based on the weakness of Greece and Spain. Neither of those two countries contributes anywhere near percentage wise what California contributes to the USA’s GDP.
The US dollar is no safe haven from anything.
Teachers pension fund is $43 billion short
The California State Teachers’ Retirement System says that as of June 30, 2009, it could meet only an estimated 77% of its future pension obligations — far less than the 100% recommended by actuaries
By Marc Lifsher
January 29, 2010
Reporting from Sacramento – Another pension alarm bell is ringing in Sacramento, this time at the teachers retirement system, where the nation’s second-largest public pension fund is reporting a $43-billion shortfall.
The California State Teachers’ Retirement System said that as of June 30, 2009, it could meet only an estimated 77% of its future pension obligations — far less than the 100% recommended by actuaries.
Known as CalSTRS, the fund took a big hit during the 2008-09 fiscal year, losing a quarter of its value. Since then, its investment returns have improved, but the growth isn’t strong enough to keep up with a widening funding gap.
What’s worse, CalSTRS Chief Executive Jack Ehnes said in a report to be presented to the board Feb. 5, the fund could be broke in 35 years — the length of a typical teaching career.
To avoid that calamity, Ehnes wants the state Legislature to raise employer pension contributions paid by the state and, indirectly, California’s 1,043 school districts in the next few years.
Jim Sinclair’s Commentary
In time the concept of keeping your bankers happy will be proven correct.
This is negotiation by bullying. The risk is tremendous.
China hits back at US over trade and currency
China has hit back at the US a day after President Barack Obama promised to take a tougher line with Beijing over currency and trade.
Chinese foreign ministry spokesman Ma Zhaoxu insisted the value of the Chinese yuan was not the main reason for China’s trade surplus with the US.
Mr Obama vowed to ensure that countries were not giving their currencies an unfair advantage over the dollar.
Ties between the US and China have been strained over an arms deal with Taiwan.
Tensions have also risen over reports of Chinese cyber attacks on US-run websites and a planned visit to the US by the Dalai Lama.
US companies have long complained that China keeps its currency artificially undervalued, allowing a steady flow of cheap exports around the world.
Jim Sinclair’s Commentary
Two dollar bulls.
Jim Sinclair’s Commentary
In this mad, mad world, who cares.
These are only our hard working senior citizens about to go into the rat trap, the ultimate culling of the gene pool.
Wall Street passes out bonuses at historic and vomit producing rates. The guy on Main Street loses his house, his job, his wife and his kids but who the hell cares about him anyway.
The senior citizens eat cat food or no food.
Next in Line for a Bailout: Social Security
by Allan Sloan
Thursday, February 4, 2010
Don’t look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.
A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.
Instead of helping to finance the rest of the government, as it has done for decades, our nation’s biggest social program needs help from the Treasury to keep benefit checks from bouncing — in other words, a taxpayer bailout.
No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.
The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).
Jim Sinclair’s Commentary
Management of Perspective Economics today.
Note that no one was disappointed and the figures showed moderation in the decline which is of course good news.
Job market shows some improvement.
Monster’s Employment Index(.pdf), released this morning, slipped one point in January to 114 and is down 3% Y/Y. The numbers reflect continued moderation and there’s been "subtle signs of firming in hiring trends, even for sectors like finance in recent months.” According to Challenger’s Job-Cut Report, released yesterday, January layoffs numbered 71,482, a 59% increase from December’s nine-year low but 70% below the layoffs registered in January 2009. Yesterday’s ADP Jobs report showed similar signs of moderation, with January payrolls falling 22K vs. -30K expected and -61K in December. The January employment decline was the smallest since employment began falling in Feb. 2008.
Jim Sinclair’s Commentary
The implication here is that of course Bernanke is a really good guy that is only interested in the US’s best interest and therefore quite dollar positive.
Four more years with Bernanke.
Bernanke was sworn in yesterday for another four-year term as Federal Reserve Chairman. In his swearing-in speech, he already began making the case for Fed independence, saying it "allows the Federal Open Market Committee to make monetary policy in the longer-term economic interests of the American people, rather than in the service of short-term political imperatives." Bernanke also said the bank will work to increase the amount of information it makes public.
Jim Sinclair’s Commentary
Does it not seem as if nothing whatsoever has been negative since April of 2009?
Jim Sinclair’s Commentary
Today in Pakistan.
Soldier Deaths Draw Focus to U.S. in Pakistan
By JANE PERLEZ
Published: February 3, 2010
ISLAMABAD, Pakistan — The deaths of three American soldiers in a Taliban suicide attack on Wednesday lifted the veil on United States military assistance to Pakistan that the authorities here would like to keep quiet and the Americans, as the donors, chafe at not receiving credit for
The soldiers were among at least 60 to 100 members of a Special Operations team that trains Pakistan’s paramilitary Frontier Corps in counterinsurgency techniques, including intelligence gathering and development assistance. The American service members are from the Special Operations Command of Adm. Eric T. Olson.
At least 12 other American service members have been killed in Pakistan since Sept. 11, 2001, in hotel bombings and a plane crash, according to the United States Central Command, but these were the first killed as part of the Special Operations training, which has been under way for 18 months.
That training has been acknowledged only gingerly by both the Americans and the Pakistanis, but has deliberately been kept low-key so as not to trespass onto Pakistani sensitivities about sovereignty, and not to further inflame high anti-American sentiment.
Even though the United States calls Pakistan an ally, the country, unlike Afghanistan and Iraq, has not allowed American combat forces to operate here, a point that is stressed by the Pentagon and the Pakistani Army, the most powerful institution in Pakistan.
Jim Sinclair’s Commentary
For those that love green cars this puts the GM Volt on the map which up to now was questionable.
Keep in mind that Japan is a major banker of the USA.
Toyota Says Prius Brakes Had Design Flaws
Toyota admitted Thursday that the hybrid-electric Prius had problems with its anti-lock braking system, the latest blow to the beleaguered company and one that affects the symbol of the automaker’s engineering prowess. A spokesperson for the company said Toyota had found design problems in models sold before late January, but that it had corrected them in models sold since then, the Associated Press reported.
The Prius was drawn into the mounting crisis for Toyota on Wednesday as Japanese officials ordered the company to investigate problems with the brakes on the 2010 model.
American safety officials also said they had received dozens of similar complaints.
Jim Sinclair’s Commentary
2% goes to 6%, then to 10%, then to food stamps for everybody.
Taxes are one stupid way of trying to fix overspending.
Phoenix gives OK to 2% tax on food
Move will help fix budget, save Police, Fire dept. jobs
by Scott Wong – Feb. 3, 2010 12:00 AM
Desperate to save police, fire and other city jobs, a divided Phoenix City Council on Tuesday approved a sales tax on grocery items that will generate tens of millions of dollars a year.
The 2 percent food tax will take effect April 1 and expire after five years, though Mayor Phil Gordon said the council has the option of reversing its decision after it hears from the public during 15 budget hearings planned for this month.
The tax on milk, meat, vegetables and other food purchased by shoppers will generate an estimated $12.5 million for the fiscal year that ends June 30. It will raise another $50 million for fiscal 2011. Food purchased with food stamps will not be taxed.
The extra tax revenue means Phoenix will have more money in its coffers to help close a $241 million general-fund budget deficit through June 2011. Last week, budget officials proposed cutting $140 million in services. Other special funds for things like transit also could get money.
City Manager David Cavazos proposed eliminating 1,379 citywide positions, including nearly 500 police officers and firefighters. Among the dozens of targeted cuts, libraries and senior centers would be closed, an after-school program would be dismantled, and bus and light-rail service would be significantly reduced.
Jim Sinclair’s Commentary
Change this headline to "Bernanke’s constant MOPE on draining as well as stopping QE, the Brits BS on stopping QE, yesterday’s nonsense on a strong dollar policy, and crappy jobs numbers, in that order, pushed stocks down sharply."
There is no recovery of sustainability anywhere in the West, so if these guys at the central banks keep up the raving BS then the economic apple cart is going over hard and heavy. States of the US will go bankrupt by the dozens, forget about cities! The need for bailouts then goes ballistic.
Ballistic bailouts will be met by QE to infinity or the US Fed is history. Meanwhile the banksters have cleaned out their respective treasuries with historically high bonuses because it is clearly the last chance they will have in this generation.
Habeas Corpus is history. Washington declares who is a terrorist and who is not.
However, MOPE tells us every day that everything is better than OK! The F-airwaves will tomorrow continue their daily flag waving.
The world has gone so clearly mad the gods must be ready to destroy it. The Mayans are looking far smarter right now than they have ever been given credit for.
Sovereign Debt and Job Worries Push Stocks Down Sharply; Dow Industrials Fall 2.6%
Two of Wall Street’s biggest fears — a deteriorating employment picture and the debt woes facing foreign governments — re-emerged on Thursday, pushing stocks sharply lower. The Dow Jones industrial average fell 2.6% and briefly dipped below 10,000 before closing at 10,002.18 in preliminary figures; broader indexes slid nearly 3 percent.
Thursday’s trading brought hefty declines across the board, with a possible crisis in the European financial system overshadowing news of robust earnings for technology companies.
