Dear Jim,
The following FDIC press release is remarkable in a number of ways:
1. We now have a new form of US Government Agency debt, namely, FDIC-backed residential mortgage backed securities (“RMBS”).
2. The $1.8 billion of notes are backed by loans with “aggregate unpaid balances of approximately $3.6 billion.” Translation: they had to take 50 cents on the dollar to unload these loans.
3. “The timely payment of principal and interest due on the notes are guaranteed by the FDIC, and that guaranty is backed by the full faith and credit of the United States.” Translation: We the People are on the hook for these RMBS.
Not even Fannie Mae and Freddy Mac RMBS came with such a specific guaranty of backing by the US taxpayer.
If there was still any doubt that the US Taxpayer will be on the hook for any losses the FDIC cannot absorb, that has now been put to rest. QE to Infinity!
Respectfully yours,
CIGA Richard B.
FDIC Closes on Sale of $1.8 Billion of Notes Backed by Mortgage-Backed Securities
Transaction Adds Liquidity to DIF and Stimulates Investor Demand
FOR IMMEDIATE RELEASE
March 12, 2010
The Federal Deposit Insurance Corporation (FDIC) today closed on a sale of notes backed by residential mortgage backed securities (RMBS) from seven failed bank receiverships. The sale was conducted through a private placement priced and allocated on March 5th. The transaction was met with robust investor demand, with over 70 investors participating across fixed and floating rate series. The investors included banks, investment funds, insurance funds and pension funds. All investors were qualified institutional buyers.
The $1.81 billion of notes is backed by 103 non-agency residential mortgage-backed securities. The aggregate unpaid balance of the 103 securities was approximately $3.6 billion at the time of the sale. The FDIC retained an equity interest in each series.
The transaction features two series of senior notes, each backed by a separate pool of RMBS. The larger series of approximately $1.3 billion, is based on option ARMS and has a floating rate tied to the one-month LIBOR. The smaller series of $480 million is based mostly on fixed-rate RMBS and pays a fixed rate. Both series priced at rates comparable to Ginnie Mae collateralized mortgage obligations.
The timely payment of principal and interest due on the notes are guaranteed by the FDIC, and that guaranty is backed by the full faith and credit of the United States.
Full release:
http://www.fdic.gov/news/news/press
Retail Sales in U.S. Unexpectedly Rose in February (Update2)
CIGA Eric
Sales at U.S. retailers unexpectedly climbed in February as shoppers braved blizzards to get to the malls, signaling consumers will contribute more to economic growth.
More consumption driven growth! Like historical (nominal) comparisons of net worth and equity prices, retail sales comparisons are also meaningless because the currency is not a stable measuring stick over time.
Even real, or CPI adjusted sales prices are not comparable because the CPI is not a stable measuring stick either.
Real or CPI-Adjusted Retail Sales (RRS) and YOY Change: 
The only unbiased trend is gold-adjusted retail sales. The effects of currency devaluation are removed when retail sales are converted into ounces purchased. This number is historically comparable and shows no unexpected monthly or year-over-year gain.
Gold-Adjusted Retail Sales (RSGLDR) and YOY Change: 
Source: bloomberg.com
Source: shadowstats.com
Picking a Bottom
CIGA Eric
Have we witnessed the birth of a new secular bull market in real estate and stocks as suggested on F-TV? No. To pick bottoms, you must love when everyone else hates, and hates when everyone else loves. The trick is learning how to quantify that axiom.
Market Value of Residential Real Estate As A % Total Assets And Corporate Equities and Mutual Funds As A % Total Assets: 
Residential Real Estate Affordability has improved. I suspect, however, that is will improve a lot more in the next five years.
Residential Real Estate Affordability: Market Value of Real Estate As A % Disposable Personal Income 
Tropicana raising orange juice prices
CIGA Eric
PepsiCo Inc (PEP.N) will downsize its 64-ounce cartons of Tropicana orange juice to 59 ounces but leave the price unchanged, after cold weather damaged Florida’s orange crop.
It’s always the weather. The weather shrinks the size that never seems to return to normal after the weather related effects subside.
There’s no inflation, but the size of everything from ice cream to orange juice cartons continues to shrink at the grocery store. Maybe when our portion sizes are the size of a Dixie cup people will equate the ever shrinking shelf size as a consequence of devaluation.
Source: reuters.com
Jim Sinclair’s Commentary
What John cannot show you, but probably does not need to.
Household leverage is rolling over, and this will be difficult to buffer. The voting public will scream bloody murder. How much will they be willing to print? The next hemorrhage phase could be equally big.
COT U.S. Dollar Diffusion Index
CIGA Eric
The up trend in the dollar diffusion index has failed. Ready or not, against the prevailing consensus/hype, the trend line roll over implies: (1) a lower dollar, (2) higher gold, (3) and a return of the giddiness of the carry trade on Wall Street in the near future.
U.S. Dollar Index and the Commercial Traders COT Futures and Options U.S. Dollar Diffusion Index (DI): 
Flow of Funds Report
CIGA Eric
There’s always some interesting trends reveals by the flow of funds report. While F-TV talks of recovery and new bull market, they ignore the fact that total credit market debt as percentage of GDP at 362.5% remains only a small down tick from the all-time in 2009.03 of 372% and well above the second Great Depression high of 325%. This suggest that debt liquidation, a necessary precursor to the next secular recovery, has been minimal at best.
Total Credit Market Debt As A% GDP: 
Jim Sinclair’s Commentary
Please read this is OUTSTANDING analysis of bank closings by CIGA Richard. Please note the most salient point, which is a direct gift of FASB’s capitulation, which allowed for rampant overvaluation of assets on the books of ALL USA financial entities. This once again made balance sheets and earnings statements world class dangerous cartoons.
Dear Jim,
Between Friday, February 26, 2010 and Thursday, March 11, 2010, the FDIC announced the closings of seven relatively small banks. That brought the year’s total (so far) to 27.
The seven banks had combined assets of approximately $2.1 billion and combined deposits of approximately $1.68 billion. The FDIC’s estimated cost of the closures was $432.7 million – about 26% of deposits.
While that cost figure is certainly not the worst seen in this crisis, there continues to be a huge disparity between the stated values of the closed banks’ assets and their market values estimated by the FDIC. Taken as a whole, the estimated market value of the seven banks’ assets ($1.25 billion) was only about 59% of the value claimed.
The largest of the banks closed, Rainier Pacific Bank of Tacoma, Washington, had stated assets of $717.8 million and deposits of $446.2 million, and the FDIC’s loss estimate was $95.2 million. That means the FDIC valued Rainier’s assets at about $351 million, only 49% of the value claimed.
Similarly, Centennial Bank of Ogden, Utah, had stated assets of $215.2 million and deposits of $205.1 million, and the FDIC’s loss estimate was $96.3 million. That means the FDIC valued Centennial’s assets at $108.8 million, only 51% of the value claimed.
Yesterday’s announcement of the closing of Liberty Pointe Bank of New York, NY, was unusual in that it came on a Thursday. It will be interesting to see what Friday evening brings.
Respectfully yours,
CIGA Richard B.
Dear Jim,
Does this look sustainable? Don’t worry, Washington will save us!
CIGA Marc
