Thoughts For The Day

1. A curtailment of bank trading department’s activities will not impair the price of gold as the gold banks are not on the long side.

You can forget that foolish rumor. It is more likely if any bank regulation is passed that it will require short covering.

2. The propaganda that China will not buy IMF gold is back.

China already said the contrary but who listens to China when Reuters quotes some unknown as saying the opposite.

 

Jim Sinclair’s Commentary

This has been an interesting day. The gold websites that publish every kind of opinion are working feverishly to produce bearish material. The run of the mill money manager is yelling deflation as they come to realize a Jobless Recovery is a world class oxymoron.

Few understand that hyperinflation is a currency event, not an economic event.

After China decidedly and without any doubt said along with India that they will bid for IMF gold, Reuters published an article to the contrary so the sheeple went contrary.

When I read the articles of the new gold experts I want to yak. Gold is going to $1650 and quite possibly $5000. Asia will take it there without your help and over the dead bodies of shorts.

In between it is all noise and fury signifying nothing whatsoever.

China Prepares to Transform the Gold Market
March 10, 2010
Peter Cooper

The inscrutable Chinese are hardly likely to inform the world that they are on a gold buying spree for fear of sending the gold price through the roof before they can finished their acquisition plans.

China’s gold reserves amount to 1,054 tons, ranking fifth in the world, said Yi Gang, central bank vice governor on Tuesday. China is the largest gold producer in the world, with more than 300 tons of gold produced annually, all of it consumed locally and not exported.

Private gold reserves

China is the second largest gold consumer in the world, with a consumption of over 400 tons of gold a year, second only to India. And it has been conservatively estimated that there are far more than 3,000 tons of gold accumulated among Chinese people.

Indeed it was only at the start of last year that China suddenly announced to the IMF that it had doubled its official gold reserves to 1,054 tons from 2003. Nobody knew anything about it before then, although there must have been suspicions in the trade.

Ah but let me run that past sharp readers again. Yesterday the Chinese central bank announced gold reserves of 1,054 tons, exactly the same figure as it gave the IMF a year ago. Is that not suspicious? When will we see the true figure including whatever they bought last year?

More… ^[1]

Jim Sinclair’s Commentary

It is open warfare. About that there is no question whatsoever.

Investment Banks are conducting themselves as if they were countries. Mark my word, they are going to pick on a country soon lead by someone that will not take it.

Economic Warfare? Europe versus Wall Street
By Michael Collins

(March 10) Wall Streets is headed toward international pariah status thanks to two recent actions by the European Union (EU).

On Tuesday, the EU announced that it was banning Wall Street banks from the lucrative government bond business in Europe. They didn’t express official concern or fire off a warning shot. They simply banned Wall Street from financing government bond deals like the one Goldman Sachs sold to Greece. The Guardian pointed out that Wall Street bond business from European governments has gone down over the last two years. Now the business is gone period. In effect, the EU has labeled Wall Streets business tactics as too dangerous for their governments to handle.

Then on Wednesday, the President of the European Commission said that the EU was considering a ban on government debt speculation through Credit Default Swaps (CDS) President José Manuel Barroso announced that, "the Commission will examine closely the relevance of banning purely speculative naked sales on Credit Default Swaps of sovereign debt." While not an outright ban, the threat of banning CDS on national debt would be a major loss for the world’s financial speculators, particularly those in the United States and Great Britain.

These two hostile moves toward Wall Street by Europe were discussed by officials in the context of the current Greek debt crisis. Wall Street firm Goldman Sachs has been implicated in helping the Greek government hide the true nature and size of the debt. Discovery of this sleight-of-hand action exacerbated an already challenging crisis.

While the Greek crisis was presented as the proximate cause of the anti Wall Street actions, these announcements follow a March 6 national referendum in Iceland. Citizens voted overwhelmingly, 93% to 2%, to reject their government’s plan to have citizens to cover the losses of Iceland’s second largest private bank, around $6 billion.

More… ^[2]

Jim Sinclair’s Commentary

The Western world is imploding. Gold is the only currency that carries no liability.

Wall Street and the media would have you throw your gold away for dollars.

Don’t!

Pimco’s El-Erian Says Public Finance Shock May Deepen (Update2)
By Garfield Reynolds

March 11 (Bloomberg) — Mohamed A. El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances around the world may affect the global economy more than is currently realized.

“The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is “at present being viewed primarily — and excessively — through the narrow prism of Greece,” he wrote.

Governments may have to raise taxes and slash spending to cope with swelling deficits after nations including the U.S. borrowed unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross. A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said.

Pimco has said debt strains in Greece, Portugal and Spain underscore its view that 2010 will be a year of slower-than- average growth, and predicts there will be a shrinking global role for the U.S. economy.

More… ^[3]

 

Jim Sinclair’s Commentary

The dollar is not a safe haven.

US home value decline steepens in January – Zillow
* Home values fell 0.33 pct in Jan vs 0.27 pct Dec drop
* Values fell 4.8 pct yr-over-yr Jan vs 5.5 pct Dec/Dec
By Julie Haviv

NEW YORK, March 9 (Reuters) – Home prices continued to weaken in many U.S. markets during January as the impact of government tax credits on housing demand lost momentum, real estate Website Zillow.com said on Tuesday.

Nationally, while the annualized appreciation rate continued to rise, increasing from negative 5.5 percent in December to negative 4.8 percent in January, home values fell 0.33 percent from the prior month, a slightly larger monthly depreciation than the 0.27 percent recorded in December, according to Stan Humphries, chief economist at Zillow.

Humphries said that of the markets he focuses on, four stayed in positive or flat territory in terms of month-over-month appreciation: Los Angeles (0.2 percent), Philadelphia (0.2 percent), San Diego (0.0 percent) and San Francisco (0.3 percent).

Meanwhile, five markets stayed in positive territory in terms of year-over-year appreciation: Boston (1.7 percent), Denver (0.4 percent), Los Angeles (0.9 percent), San Diego (0.2 percent) and San Francisco (0.9 percent).

Additionally, the number of homeowners losing their homes to foreclosure remained unchanged in January from December, but was still pegged at the highest level seen in Zillow’s data, which began in 1996. In January, more than one in every 1,000 homes in the U.S. reached the final stage of foreclosure.

More… ^[4]

Jim Sinclair’s Commentary

There is no such thing as a Jobless Economic Recovery.

Unemployment rises in 30 states in January
By CHRISTOPHER S. RUGABER, AP Economics Writer –2 hrs 51 mins ago

WASHINGTON – Unemployment rose in 30 states in January, the Labor Department said Wednesday, evidence that jobs remain scarce in most regions of the country.

The data is somewhat better than December, when 43 states reported higher unemployment rates, but worse than November, when rates fell in most states.

Still, five states reported record-high joblessness in January: California, at 12.5 percent; South Carolina, 12.6 percent; Florida, 11.9 percent; North Carolina, 11.1 percent; and Georgia, 10.4 percent.

Michigan’s unemployment rate is still the nation’s highest, at 14.3 percent, followed by Nevada, with 13 percent and Rhode Island at 12.7 percent. South Carolina and California round out the top five.

There were some signs of job creation. Thirty-one states added jobs in January, up from only 11 in the previous month. But the job gains weren’t enough, in many cases, to lower theunemployment rate.

More… ^[5]

Jim Sinclair’s Commentary

The US dollar is not a safe haven.

Record monthly deficit for U.S.: $221 billion
By Annalyn Censky, staff reporterMarch 10, 2010: 4:19 PM ET

NEW YORK (CNNMoney.com) — The United States dropped a record $220.9 billion further into the red in February, the Treasury Department reported Wednesday.

The shortfall was up from the previous record $193.9 billion shortfall in February last year.

It’s the 17th straight month that the U.S. government has posted deficits. The last time the government posted a monthly surplus was in September 2008, when the government reduced the deficit by $45.7 billion.

The cumulative deficit for fiscal 2010, which started in October, reached $651.6 billion, up from $589.8 billion in the same period the year before. The Obama administration is forecasting that the deficit will hit $1.56 trillion this year.

Receipts totaled $107.5 billion, up from $87 billion in February last year and outlays totaled $328.4 billion, up from $281 billion.

Despite the government’s record losses, the year-over-year boost in revenue during February is at least one hopeful sign that the economy is faring better, said Robert Bixby, executive director for the Concord Coalition, a federal budget watchdog group. It was the first time since April 2008 that the government posted higher revenue when comparing monthly data year-over-year.

More… ^[6]

Jim Sinclair’s Commentary

QE to infinity or the Fed is history.

Jobless claims bill OK’d by Senate
By Tami Luhby, senior writer March 10, 2010: 3:17 PM ET

NEW YORK (CNNMoney.com) — The Senate on Wednesday approved a wide-ranging bill that would push back the deadline to file for extended unemployment insurance until year-end and extends dozens of expired tax breaks.

The bill, passed by a 62-36 vote, is the latest job creation effort to go before lawmakers, though it contains virtually no new initiatives. Its price tag has wavered between $140 billion and $150 billion, which is partially offset. Its next stop is the House.

Lawmakers have come under pressure from both the White House and unemployed Americans to do more to spur hiring. But after many speeches, officials have enacted little to help the nearly 15 million looking for work.

The latest efforts — which include a $15 billion job creation effort that the Senate will take up next — have come under fire from both sides. Some say that more must be done to boost employment. Others, particularly Congressional Republicans, have voiced concerned about adding to the deficit.

While the House passed a comprehensive $154 billion job creation bill in December, the Senate has opted to address the unemployment issue with a series of smaller measures. Senate Majority Leader Harry Reid, D-Nev., has said he will soon unveil additional efforts, including those aimed at small businesses.

The bill passed Wednesday would push back the deadline to file for extended jobless benefits and the federal subsidy for COBRA health insurance until Dec. 31.

More… ^[7]

Jim Sinclair’s Commentary

There is no such thing as a Jobless Recovery outside of economic propaganda.

No bottom yet
Big revenue source down 12th straight month
By BRIAN BARBER World Staff Writer
Published: 3/9/2010  2:23 AM
Last Modified: 3/9/2010  10:15 AM

Tulsa’s sales-tax revenue this month dropped 11.6 percent or about $2 million from March 2009, capping off 12 straight months of negative numbers.

That’s actually $122,000 above the revised budget projections for the month, Finance Director Mike Kier said.

Considering the city’s use taxes — those levied when products are bought from another state — were below estimate by $332,000, there’s still less money going out of than into the general operating fund.

But at this point, no additional cuts are planned, Kier said.

"We are going to hold for the moment," he said. "I think succeeding months are becoming more important, not just for the rest of this fiscal year (which ends June 30), but for expectations for next year."

April’s sales-tax check will be particularly telling because it was April 2009 when the city’s downward spiral began, Kier said.

More… ^[8]

Jim Sinclair’s Commentary

The only improvement in the financial industry is FASB’s permission to lie and TARP.

We have been saying this for quite some time yet just now you are reading it in the New York Times.

Ailing Banks May Require More Aid to Keep Solvent
By STEVE LOHR
Published: February 12, 2009

Some of the nation’s large banks, according to economists and other finance experts, are like dead men walking.

A sober assessment of the growing mountain of losses from bad bets, measured in today’s marketplace, would overwhelm the value of the banks’ assets, they say. The banks, in their view, are insolvent.

None of the experts’ research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are federally insured. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.

But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department’s plan outlined this week.

The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets.

More… ^[9]

Jim Sinclair’s Commentary

I do not consider economic statistic developed by the survey method to be indicative of anything. They do however influence transactions and expectations of the glib.

There is no such thing as a Jobless Economic Recovery in a consumption driven Western world.

Consumer Confidence Lowest Since March 2009: IBD
March 9, 2010

NEW YORK (Reuters) – U.S. consumer confidence fell in March to its lowest level in a year, as high unemployment and the ways in which the government is using taxpayer money draw mounting apprehension in households, a research group said on Tuesday.

Investor’s Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index slipped to 45.4 in March from February’s reading of 46.8.

It was the lowest level the gauge has hit since March 2009. Readings above 50 indicate optimism, while those below 50 point to pessimism.

"Confidence has been hurt by continued job declines and concerns about the economy’s lack of vigor," said Terry Jones, associate editor of Investor’s Business Daily.

"Despite the spending of trillions of dollars of taxpayer money on stimulus and ‘too-big-to-fail’ bailouts, the economy doesn’t appear to have entered into anything resembling a self-sustaining expansion," Jones said, adding that persistent attempts to pass a "wildly unpopular" health care bill has added to Americans’ apprehensions.

More… ^[10]

Small business spirits downcast in February
Tue Mar 9, 2010 10:49am EST

(Reuters) – Optimism among the country’s small businesses slipped in February as entrepreneurs worried about repeatedly weak sales, the National Federation of Independent Business said in a survey released on Tuesday.

Small Business

The NFIB said its monthly small business optimism index dropped 1.3 points to 88.0 in February from January with the index below 90 for 17 straight months, and below 90 in all but four months since January 2008.

"Credit access is not a major factor holding up economic growth, at least the kind of growth we want," said William Dunkelberg, chief economist for NFIB.

The survey showed 34 percent of the small business owners said weak sales are their top business problem.

"Owners will borrow when expectations that sales will rise and generate new revenue to pay for investments and new hires become positive," Dunkelberg said.

Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stocks.

More… ^[11]

Jim Sinclair’s Commentary

There are two considerations here:

1. Wall Street owns Washington and derivatives are their main source of income. That makes it doubtful that meaningful changes will occur.
2. The argument will be that they did not play the euro short via CDS pressure on debt. They are correct. They played the debt itself short.

CFTC Chairman Gensler urges end to derivatives secrecy
By Aline van Duyn
Financial Times, London
Wednesday, March 10, 2010

A leading US financial regulator on Tuesday called for the prices of derivatives trades to be disclosed in the same way as stock prices, saying only large Wall Street banks benefited from the current lack of transparency.

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), said standard credit default swaps and other privately traded over-the-counter derivatives needed drastic reform, reflecting their role in the financial crisis.

His call came as European leaders including Angela Merkel, German chancellor, called for a clampdown on speculative trading in sovereign credit default swaps, which offer investors protection against a government default.

"The only parties that benefit from a lack of transparency are Wall Street dealers," Mr Gensler told a New York derivatives conference. "Right now we have a dealer-dominated world, and that nearly drove us off a cliff."

Mr Gensler, a former Goldman Sachs executive, said: "To promote public transparency, standard over-the-counter derivatives should be traded on exchanges or other trading platforms." He also called for explicit regulation of derivatives dealers and the use of clearing for standard OTC derivatives.

More… ^[12]

Jim Sinclair’s Commentary

The US dollar is not a safe haven. Stay the course!

Foreign versions of our coming crisis
Greece and the United Kingdom are suffering a dire funding problem that is headed for US shores.
By Bill Fleckenstein

Regrettably, these days it seems that ferreting out the right investment decisions is sort of all macro, all the time. The top-down economic overview is far more important, I think, than the bottom-up fundamental view of any company or stock.

Important pieces to that macro jigsaw puzzle are Greece and the United Kingdom, as the U.S. is headed for a variation of the funding crisis, though how severe ours will be remains to be seen. Without a money-printing press — because it uses the euro, not a currency of its own — Greece is forced to consider austerity measures to deal with its debt woes. The U.K., on the other hand, is not as bad off as Greece, and it does have a press.

For America: A Greco-Anglo scenario?

A crisis of confidence has invaded Greek and U.K. shores, and we can all learn a bit about what our future might look like as we watch developments there. (The U.K. may be the most useful example for us, since we also have a printing press.)

We will soon find out whether Bank of England Gov. Mervyn King will extend quantitative easing and, if he does, how the bond market will respond to a renewed effort to pump money directly into that economy. (The pound is already under a good deal of downward pressure.)

I would say that the U.K.’s funding crisis — to use my ballgame analogy — is probably in the third inning or so, even if we are still taking batting practice over here. (Read "Economy sinks as we save bankers" and "The next crisis has already begun" to brush up on that analogy.)

More… ^[13]

Jim Sinclair’s Commentary

Wall Street owns Washington, making the advent of serious and effective new regulations questionable.

Financial reform tips toward bankers
So far in congressional debate, it’s lenders 1, consumers 0
updated 8:42 a.m. MT, Tues., March. 9, 2010

WASHINGTON – As Congress this week inches toward a new set of rules to avert another global financial collapse, it is focused on two conflicting goals: reforming the banking system to protect consumers while still giving lenders the freedom to take risks.

So far the score looks like: Bankers 1, Consumers 0.

More than a year after a wave of risky mortgage bets brought Wall Street to its knees, banks and other financial institutions are still playing by the same rules that got them into the mess.

Reforming the sprawling financial regulatory system ― a patchwork of federal agencies and state commissions ― is a tall task under the best of circumstances. It’s even tougher with Congress already polarized over the health care debate, an economy on a wobbly path to recovery, banks facing a wave of foreclosures and households licking their wounds from $7 trillion in lost home equity and near double-digit unemployment.

Proponents of comprehensive regulatory reform hope for sweeping measures to protect consumers from predatory lending, rein in high-stakes Wall Street trading in arcane derivatives, boost capital requirements for banks that want to bet big with depositors’ money and spread some regulatory sunshine on the dark pools of the “shadow banking system” that caught regulators flat-footed when the market spiraled into the abyss in the fall of 2008.

“We cannot afford to let the status quo continue,” Sheila Bair, head of the Federal Deposit Insurance Corp., told a meeting of business economists in Washington.

More… ^[14]

Jim Sinclair’s Commentary

Effectively this means nothing. As long as the CDS market is anywhere in the universe and is quoted daily by F-TV as the ultimate common denominator of a sovereign debt it will impact that sovereign debt.

Wall Street will retain North Korea to launch a rocket to the moon and make the market from there if they have to.

Unless the CDS OTC derivative is made a capital crime in every country on the planet, it cannot be stopped.

Europe eyes ban on CDS contracts used against Greece
Europe’s leaders have launched a concerted attack on financial speculation, blaming the crisis in Greece on the use of debt derivatives by hedge funds.
By Ambrose Evans-Pritchard
Published: 6:00AM GMT 10 Mar 2010

German Chancellor Angela Merkel called on Washington to back proposals for a restrictions on credit default swaps used to target countries in trouble. "The US needs to make a gesture. We believe that the persistent speculation against the eurozone countries must be dealt with as soon as possible," she said.

Jose Manuel Barroso, the European Commission’s chief, said Brussels is examining a ban on "purely speculative naked sales" of CDS contracts where traders do not own the underlying collateral.

There is clearly a joint move across the EMU-system to rein in hedge funds. France’s Nicolas Sarkozy has been working with Eurogroup chair Jean-Claude Juncker to craft a joint assault on derivatives. Greek premier George Papandreous said in Washington that "unprincipled speculators" had brought his country to its knees, adding that he intended to lobby President Barack Obama for help in taming Wall Street.

Whether CDS swaps make much difference is questionable. The contracts are traded between banks or funds. They have little impact on the underlying debt, except to create mood music in the markets.

What matters is whether long investors continue to buy Greek bonds at tolerable prices, given the parlous state of Greek finances and debt compound risks. If they stay away, this will show up quickly in bond spreads, replacing CDS as a barometer.

More… ^[15]

Jim Sinclair’s Commentary

The West debt-wise is imploding, and only gold is a currency with no liability attached to it.

All week EU states will be bailed out. All weak US states will be bailed out.

Only gold will bail you out.

Fitch Ratings warns UK about debt
March 10th, 2010
Author: Jeff Taylor

According to the Ambrose Evans-Pritchard in Times, the head of Fitch Ratings, Brian Coulton, has branded the British government’s response to its growing public debt as “pedestrian”. He said that Britain has “the most rapid rise in the ratio of public debt to GDP of any AAA-rated country” and that a clear plan of austerity is needed for us to maintain world-wide confidence.

This after hugely disappointing trade deficit figures and the pound sliding below $1.50.

With other nations biting the bullet with clear plans to cut deficits the danger is that the UK’s mountainous debt will soon overshadow every other countries’ with the clear risk that our AAA rating may be affected.

According to Fitch, the UK seems to be relying on a Korean model of recovery by hoping that increased output and tax revenues will eventually fill the gap. Fitch believes this to be optimistic and believe that Britain is more likely to be heading for a Japanese style ‘lost decade’ unless we change course soon.

Fitch also believes that, although Greece was in bad shape and not out of the woods yet, the danger of the Greek problem spreading around the globe has been overhyped. Whereas the dire position that Italy is in has been understated.

More… ^[16]

 

Jim Sinclair’s Commentary

My experience tells me that the following says any Chinese bank and its banker that deals in an OTC derivative has not getting paid as the least of his worries.

Executive Pay at Chinese Banks to be Tied to Risk Management Performance
By Cheng Zhiyun
Published: 2010-03-10

Chinese bankers may find it a little harder to earn annual bonuses running into the millions of yuan at the end of this year, as, according to a source working in one of China’s commercial banks, the China Banking Regulatory Commission (CBRC) is currently considering a plan that will link executive pay to a banker’s ability to handle long-term risk management.

Under the proposed plan, the CBRC may even require banks to cancel any bonus payments made to executives that are later found to have engaged in business that exposed the bank to excessive risk.

More… ^[17]

 

Jim Sinclair’s Commentary

Greece presents its case for the banning of the CDS market, and gets the following answer in Washington:

"The U.S. made clear it doesn’t believe Greece’s primary budget problems stem from market speculators."

That sounds like a rebuke of a request to ban the CDS market.

Greek PM meets with White House on debt reduction. ^[18]
Greek Prime Minister George Papandreou met with Obama yesterday to discuss a European proposal to crack down on speculative trading (see details below) and to outline the steps his country will take to reduce its debt. Papandreou said he didn’t ask the U.S. for financial help, which is good because the White House says Greece’s problems "can and should" be resolved by the EU. The idea of curbing financial speculation will be discussed at the next G-20 meeting, though the U.S. made clear it doesn’t believe Greece’s primary budget problems stem from market speculators.

EU discusses ban on speculative trading. ^[19]
The European Commission may ban "purely speculative naked sales on credit default swaps of sovereign debt," and will ask for a similar move globally at the G-20 meeting in June. European officials are pushing the U.S. to join in the crackdown on speculators, with Germany’s Merkel saying "quick action is needed" and the U.S. should "make a gesture" to curb the trades in question. Though he didn’t go so far as to recommend a ban, Commodity Futures Trading Commission Chairman Gary Gensler said in a speech yesterday that there should be new limits on credit-default swaps.