Jim Sinclair’s Commentary

Today was a closely strategized day starting with an Administration review of the results of the stimulus plan, a media slam on Greece followed by the IMF repeating its mistake pricewise of the 1970s.

The sheeple ran over each other.

I assure nothing has changed. Gold will trade at $1650 and then on to Alf and Martin’s price objectives.

The sharp rally of the euro yesterday was blasted today in the media. The release below was repeated every six or so minutes on the scrolling news on F-TV all day. It was relentless.

Goldman Sachs, Greece Didn’t Disclose Swap Contract
February 17, 2010, 01:34 PM EST
By Elisa Martinuzzi

Feb. 17 (Bloomberg) — Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.

No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.

Failing to disclose the swap may have allowed Goldman, a co-lead manager on many of the sales, other underwriters and Greece to get a better price for the securities, said Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP, a London-based broker and fund manager.

“The price of bonds should reflect the reality of Greece’s finances,” Blain said. “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”

Michael DuVally, a spokesman at Goldman Sachs in New York, declined to comment.

More… ^[1]

 

Jim Sinclair’s Commentary

Another name for vigilantes is SHORTS.

Bond Vigilantes Say EU Needs Better Plan to Fix Greece Deficit
By Matthew Brown and Anchalee Worrachate

Feb. 18 (Bloomberg) — European Union leaders are failing to persuade bond investors that Greece can fix its budget.

The yield on Greece two-year notes have remained above 5 percent, the highest in the EU by more than 3 percentage points, even after officials urged the nation this week to reduce its deficit. The premium investors demand to hold the notes instead of benchmark German securities has held above 4 percentage points, the most since the Mediterranean nation joined the euro and more than 10 times its 35 basis point average the past decade.

After driving yields to the highest in 10 years, bond investors are keeping up the pressure on the EU to support Greece. Concern that the nation’s inability to narrow a deficit that is more than four times the EU limit will be replicated in countries such as Portugal and Spain prompted Societe Generale SA’s top-ranked strategist Albert Edwards to predict Feb. 12 that the euro region was poised to break up.

“The market has replaced the EU as the chief enforcer of fiscal discipline, and the movement in spreads is testament to that,” said Charles Diebel, senior interest-rate strategist at Nomura International Plc in London. “What the bond markets have done to Greece could be the salvation of Europe.”

No Specific Measures

Investors who push up debt yields in an effort to alter government policy are known as vigilantes, a term coined in 1984 by economist Edward Yardeni, president of Yardeni Investments Inc. in New York. They were credited with forcingBill Clinton to cut the U.S. deficit after he came into office in 1993, helping drive10-year Treasury yields down to about 4 percent by November 1998 from above 8 percent in 1994.

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Jim Sinclair’s Commentary

At 5:45 PM EST and the most illiquid time in gold trading as Asia is just coming online, the following was released.

See Trader Dan and my comments above on this MOPE event where management becomes manipulation.

IMF to Start Open-Market Sales of Its Gold ‘Shortly’ (Update1)
By Sandrine Rastello

Feb. 17 (Bloomberg) — The International Monetary Fund, which set out in September to sell about 13 percent of its gold reserves, said it will “shortly” expand sales to the open market after central banks bought 212 metric tons in private deals.

“In accordance with the priority of avoiding disruption of the gold market, the on-market sales will be conducted in a phased manner over time,” the Washington-based IMF said in an e-mailed statement today.

The institution has 191.3 tons left to sell after purchases by the central banks of India, Mauritius and Sri Lanka. Central banks still have the option to buy more of the metal, which would reduce the amount available on the market, the IMF said.

The lender’s executive board on Sept. 18 approved the sale of 403.3 tons of bullion as part of a plan to shore up its finances and lend at reduced rates to low-income countries. With the gold price surge last year, the fund pocketed $7.15 billion from its sales to central banks.

After the IMF’s announcement, gold futures in New York fell as much as 1.3 percent in after-hours trading. Gold for April delivery traded at $1,107 an ounce as of 4:53 p.m. on the Comex unit of the New York Mercantile Exchange, after dropping as low as $1,105.50. Earlier, the contract settled at $1,120.10.

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Jim Sinclair’s Commentary

What got airplay every 6 minutes on F-TV was "Goldman Sachs, Greece Didn’t Disclose Swap Contract," not what is below.

Merkel Slams Greek ‘Scandal’ as Attention Turns to Goldman Role
By Tony Czuczka

Feb. 18 (Bloomberg) — German Chancellor Angela Merkel said it would be a “scandal” if banks helped Greece massage its budget figures, as attention turned to Goldman Sachs Group Inc.’s role in Greek efforts to conceal the size of the country’s deficit.

“It’s a scandal if it turned out that the same banks that brought us to the brink of the abyss helped fake the statistics,” Merkel said in a speech in northern Germany late yesterday, without naming Goldman Sachs directly. Greece “falsified statistics for years.”

Merkel’s comments came as her government questioned whether Goldman Sachs, Wall Street’s most profitable securities firm, helped Greece hide its deficit as it struggled to comply with European Union limits. Michael Meister, financial affairs spokesman for Merkel’s Christian Democratic Union, said Feb. 15 that a swap agreement managed by New York-based Goldman Sachs in 2002 “broke the spirit of the Maastricht Treaty.”

EU regulators this week ordered Greece to disclose details of currency swaps after an inquiry by the country’s Finance Ministry uncovered a series of agreements with banks that it may have used to conceal mounting debts. The swaps were employed to defer interest payments by several years, according to a Feb. 1 report commissioned by the Finance Ministry in Athens.

Merkel’s remarks, made during a 30-minute speech to party supporters, followed opposition from within her coalition to providing any financial aid for Greece. Horst Seehofer, leader of her Bavarian allies, said yesterday that “not a single euro” should go to Greece from Germany.

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Thought For This Morning:

The political solution to any situation is to form a committee.

 

Jim Sinclair’s Commentary

Not according to the speech that I just listened to.

New wave of foreclosures by end of 2010 is feared
About 4 million U.S. homeowners are 90 days or more delinquent on their loans or in foreclosure proceedings, Moody’s Economy.com says. A federal loan modification program is helping a relative few.
By Jim Puzzanghera and Don Lee
February 16, 2010 | 6:59 p.m.

Reporting from Washington – Experts fear that a new wave of foreclosures will hit this year as prolonged unemployment makes it difficult for millions of homeowners to pay their mortgages — and many of them aren’t likely to get much help from a federal program aimed at keeping them in their houses.

Banks participating in the Home Affordable Modification Program, announced a year ago this week by President Obama, have been slow to turn temporarily reduced mortgage payments into permanent ones.

"The overarching sense is that the mortgage modification process has not worked that well," said Bert Ely, an independent banking consultant.

Obama administration officials acknowledge that the $75-billion program, which offers banks cash incentives to reduce payments, has had growing pains, and they said they were considering revisions to make it more effective.

Still, the program is expected to show continued progress when data from January are released Wednesday after a strong push by Treasury Department officials to get banks to make more of the modifications permanent.

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Jim Sinclair’s Commentary

Quite scary, yet totally logical.

Drowning in Debt: What the Nation’s Budget Woes Mean for You
Economists Predict Cutbacks, Tax Increases That ‘Aren’t Even Imaginable’
By DEVIN DWYER
WASHINGTON, Feb. 17, 2010

American political and economic leaders have sounded the alarm for years about the red ink rising in reports on the federal government’s fiscal health.

But now the problem of mounting national debt is worse than it ever has been before with — potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform.

"It keeps me awake at night, looking at all that red ink," said President Obama in Nashua, N.H., on Feb. 2. "Most of it is structural and we inherited it. The only way that we are going to fix it is if both parties come together and start making some tough decisions about our long-term priorities."

Obama will sign an executive order tomorrow that establishes a bipartisan National Commission on Fiscal Responsibility and Reform to make recommendations on how to reduce the country’s debt.

Over the past year alone, the amount the U.S. government owes its lenders has grown to more than half the country’s entire economic output, or gross domestic product.

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Jim Sinclair’s Commentary

These are the 2nd largest buyers of US Treasuries. Acrimony is sure to take them to the 20th largest buyer of US Treasuries.

The herd of talking heads says they will never sell Treasuries.

US vs. China: a dangerous phase has begun
China is a formidable adversary whose ultimate strength is not its military hardware but its economic prowess, and whose diplomatic weapon is not saber rattling but great patience.
By Martin Jacques / February 16, 2010

The spats between the United States and China appear to be getting more numerous and more serious. The Chinese objected in strong terms to Washington’s latest arms deal with Taiwan and threatened to take sanctions against those firms involved. President Obama recently accused the Chinese of currency manipulation. At Davos, Larry Summers, the director of the White House’s National Economic Council, made an oblique attack on China by referring to mercantilist policies.

The disagreement between China and the US at December’s Copenhagen climate summit has continued to reverberate. The Chinese government reacted strongly to Google’s claims – supported by the US administration – that cyberattacks against it had originated in China and its statement that it would no longer cooperate with government censorship of the Internet. The US has been increasingly critical of China’s unwillingness to agree to sanctions against Iran. And finally the Chinese government is accusing the US administration of interference in its internal affairs by insisting on the meeting this week between Barack Obama and the Dalai Lama in Washington.

The issues of contention have come thick and fast. For the most part, however, they are hardly new. The Chinese reaction to the Taiwan arms deal was entirely predictable, the only novelty being the threatened sanctions. Taiwan remains the most important priority for Chinese foreign policy. Their response to the Dalai Lama in Washington is equally predictable.

Obama’s and Summers’ statements about currency manipulation and mercantilism, respectively, are a little different. True, they are not entirely new; Treasury Secretary Timothy Geithner accused the Chinese of currency manipulation in January 2009. But since Mr. Geithner’s ill-judged remark, the US administration has until now chosen to be more discreet.

Google and climate change are relatively new bones of contention. But we should not be surprised by these disputes. China’s rise means that it is now involved in areas of the world and on issues where previously it had little or no stake. As China increasingly becomes a global power with interests to promote and defend around the world, it is bound to come into conflict with the United States on a growing number of subjects.

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Jim Sinclair’s Commentary

OTC derivatives are not victimless transgressions against mankind.

Rising tide of suburban homeless across U.S.
‘Truly reaching a stage of being alarming,’ one official says
updated 4:02 p.m. MT, Tues., Feb. 16, 2010

ROOSEVELT, N.Y. – Homelessness in rural and suburban America is straining shelters this winter as the economy founders and joblessness hovers near double digits ― a “perfect storm of foreclosures, unemployment and a shortage of affordable housing,” in one official’s eyes.

“We are seeing many families that never before sought government help,” said Greg Blass, commissioner of Social Services in Suffolk County on eastern Long Island.

“We see a spiral in food stamps, heating assistance applications; Medicaid is skyrocketing,” Blass added. “It is truly reaching a stage of being alarming.”

The federal government is again counting the nation’s homeless and, by many accounts, the suburban numbers continue to rise, especially for families, women, children, Latinos and men seeking help for the first time. Some have to be turned away.

“Yes, there has definitely been an increased number of turnaways this year,” said Jennifer Hill, executive director of the Alliance to End Homelessness in suburban Cook County, Illinois. “We’re seeing increases in shelter use along the lines of 30 percent or more.”

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Jim Sinclair’s Commentary

Why comment on the obvious?

Goldman Sachs, Greece Didn’t Disclose Swap, Investors ‘Fooled’
By Elisa Martinuzzi

Feb. 17 (Bloomberg) — Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.

No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.

Failing to disclose the swap may have allowed Goldman, a co-lead manager on many of the sales, other underwriters and Greece to get a better price for the securities, said Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP, a London-based broker and fund manager.

“The price of bonds should reflect the reality of Greece’s finances,” Blain said. “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”

Michael DuVally, a spokesman at Goldman Sachs in New York, declined to comment.

More… ^[9]

Jim Sinclair’s Commentary

I am listening to a speech concerning the magnificent recovery, and freedom from further business challenges.

CMBS Delinquencies and Special Servicing Hit Record Highs
by DIANA GOLOBAY
Monday, February 15th, 2010, 11:57 am

As HousingWire reported over the weekend, the delinquency rate on commercial mortgage-backed securities (CMBS) conduit and fusion loans posted the largest single monthly increase on record. US CMBS loans are also transferring to special servicing status faster and greater than ever before.

The delinquency rate on CMBS conduit and fusion loans, structured finance revolving liquidity platforms, rose by 52 bps in January, driving the total rate to 5.42% in February, according to a report by Moody’s Investors Service.

The total delinquent balance is more than $36bn – a $3bn rise over the previous month. It marks the largest increase in the delinquency rate, by dollars and basis points, as recorded in the current downturn by Moody’s:

^[10]

A total 409 CMBS conduit and fusion loans became newly delinquent in January.

The multifamily loan category grew 63 bps to 8.77% delinquent in January. The South region led multifamily delinquencies; although this district represents 30% of the overall multifamily balance, it represents more than 40% of the overall newly delinquent balance. The southern multifamily delinquency rate grew 85 bps in January, reaching 12.3% delinquent – the highest of the four regions.

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Jim Sinclair’s Commentary

This is a great time for a public stoning of Toyota in DC.

Actually, this is too stupid to be stupid.

Japan becomes top Treasury holder. ^[12]
Foreign demand for Treasurys fell by a record amount in December. China sold $34.2B in Treasury holdings, paring its holdings to $755.4B. This made Japan into the largest holder of U.S. government debt with $768.8B, the first time it has claimed the top spot since August 2008. Though China’s sales don’t necessarily reflect a loss of confidence in the U.S., economists have long worried what would happen if China ever chose to give up its role as one of the country’s key creditors.

Jim Sinclair’s Commentary

Not even wealthy nations will use their assets to make things right.

The profit of taking down countries does come with certain additional risks.

Spanish intelligence probing debt "attacks"-report

MADRID, Feb 14 (Reuters) – Spain’s intelligence services are investigating the role of investors and media in debt market turbulence over the last few weeks, El Pais reported on Sunday.

Currencies

Citing unnamed sources, El Pais said the National Intelligence Centre (CNI) was looking into "speculative attacks" on Spain following the Greek debt crisis.

"The (CNI’s) Economic Intelligence division…is investigating whether investors’ attacks and the aggressiveness of some Anglo-Saxon media are driven by market forces and challenges facing the Spanish economy, or whether there is something more behind this campaign," El Pais said.

Officials at the CNI were not available for comment.

The report comes days after Public Works Minister Jose Blanco protested "somewhat murky manoeuvres" were behind financial market pressure on Spain.

"None of what is happening in the world, including the editorials of foreign newspapers, is coincidental or innocent," Blanco said.

Economists have cast doubt on forecasts that Spain’s economy will grow by some 3 percent by 2012, on which the government has based predictions it will cut back on its gaping budget deficit.

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Jim Sinclair’s Commentary

MOPE says this was continuing anger over the death of a teenager in a police incident?

Bomb explodes outside JP Morgan Athens, none hurt
Wed, Feb 17, 2010
Reuters

ATHENS (Reuters) – A bomb exploded on Tuesday outside the Athens offices of JP Morgan, the second largest U.S. bank by assets, causing minor damage and no injuries, police and the company said.

The explosion is the latest in a series of blasts that have rocked the country since the police killing of a teenager in December 2008 sparked the country’s worst riots in decades.

"It was a time-bomb outside JP Morgan’s offices at the second floor of an Athens building," said a police official who declined to be named.

"The explosion damaged the door, furniture, computers and smashed some windows," the official added.

Police had cordoned off the area after a local newspaper received a warning call. Ambulances and fire engines blocked streets in the upmarket central district of Kolonaki, where JP Morgan’s Greek offices are situated, a Reuters witness said.

JP Morgan confirmed the incident and said there were no injuries.

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