When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.
–Frederic Bastiat

 

Jim Sinclair’s Commentary

Bond vigilantes are the damn OTC Derivative dealers out to kill anything that is sovereign and moves.

 

Jim Sinclair’s Commentary

Me undercover

^[1]

Jim Sinclair’s Commentary

Someone will go to MOPE hell for this.

Economists: The stimulus didn’t help
By Hibah Yousuf, staff reporter
April 26, 2010: 3:56 AM ET

NEW YORK (CNNMoney.com) — The recovery is picking up steam as employers boost payrolls, but economists think the government’s stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday.

In latest quarterly survey by the National Association for Business Economics, the index that measures employment showed job growth for the first time in two years — but a majority of respondents felt the fiscal stimulus had no impact.

NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act, which the White House’s Council of Economic Advisers says is on track to create or save 3.5 million jobs by the end of the year.

That sentiment is shared for the recently passed $17.7 billion jobs bill that calls for tax breaks for businesses that hire and additional infrastructure spending. More than two-thirds of those polled believe the measure won’t affect payrolls, while 30% expect it to boost hiring "moderately."

But the economists see conditions improving. More than half of respondents — 57% — say industrial demand is rising, while just 6% see it declining. A growing number also said their firms are increasing spending and profit margins are widening.

More… ^[2]

Jim Sinclair’s Commentary

Keep your eyes on the golden ball. Do not let yourself get derailed by the EU problems.

Any fear of failure of debt anywhere increases gold buying.

^[3]

Jim Sinclair’s Commentary

There is no question in my mind that the US dollar will meet the downside estimates given.

Dollar, Euro, Pound Are All ‘Ugly Sisters,’ HSBC’s King Says
April 26, 2010, 10:46 AM EDT
By Jennifer Ryan

April 26 (Bloomberg) — The dollar, euro and pound are all unappealing investments, either because of policies of “benign neglect” or concerns on the euro region’s stability, said Stephen King, chief economist at HSBC Holdings Plc.

“It is a competition between ugly sisters, they are none of them particularly attractive” he said in an interview today in London. In the U.S. and U.K., “there will be a policy of a desire not so much to drive the currency low, but a policy of benign neglect. If the dollar weakens and sterling weakens, the authorities in those countries will be more than happy.”

The European Central Bank won’t want to see a weaker euro because that would imply a loss of investor confidence in the single currency, King said. The euro has dropped against the dollar and sterling on concern that Greece won’t get a rescue package to help it meet its debt payments.

“If the euro weakens, it’s more a worry about the stability of the euro zone and that’s more of a concern to the ECB,” he said. “You’ve got on the one hand the benign neglect approach from the States and the U.K., on the other you have the worries about the structural integrity of the euro, which is obviously weakening the euro.”

King’s book, “Losing Control: The Emerging Threats to Western Prosperity,” will be published next month.

The euro is down about 1.5 percent against the dollar this month and traded at $1.3331 as of 2:39 p.m. in London. The currency has dropped 3.3 percent against the pound in the same period to 86.13 pence.

More… ^[4]

Jim Sinclair’s Commentary

Now who exactly is going pay back TARP?

You, if you buy the shares.

Treasury announces plans to sell some Citigroup stock
By Martin Crutsinger,

WASHINGTON — The Treasury Department said Monday that its first sales of Citigroup stock (C) will cover up to 1.5 billion shares.

That would amount to about 20% of the 7.7 billion shares of Citigroup common stock the government owns.

It received the shares as compensation for the financial support it extended to the bank during the height of the financial crisis.

In a statement Monday, Treasury said it plans to proceed with the sales of the Citigroup common stock "in an orderly fashion under a pre-arranged trading plan with Morgan Stanley, Treasury’s sales agent."

Treasury did not disclose in its brief announcement exactly when the stock sales would begin or how long the sales would last.

Treasury said Morgan Stanley has authority to make the sales "under certain parameters" and Treasury expected to give the company the authority to sell additional shares after the initial 1.5 billion shares had been sold.

More… ^[5]

 

Jim Sinclair’s Commentary

Are we going to have to watch this tragic comedy of MOPE over the balance of the financially weak EU states?

Germany refuses to help Greece unless it agrees to tougher terms
Germany’s finance minister Wolfgang Schauble has raised fresh obstacles to the €40bn (£35bn) aid package for Greece, warning that Berlin will not transfer funds until Athens agrees to tougher terms.
By Ambrose Evans-Pritchard and Edmund Conway
Published: 10:47PM BST 25 Apr 2010

Mr Schauble said no decision had yet been taken by Berlin or the European Union and that the outcome may yet be "negative". "It depends entirely on whether Greece goes through with the strict austerity in coming years," he told Bild Zeitung.

George Papaconstantinou, Greece’s finance minister, insisted in Washington that the Germans were "completely on board" and that other EU states and the International Monetary Fund would provide a bridging loan if necessary. He said funds "will lose their shirts" if they have taken short bets on Greek debt. "I want to categorically state that any restructuring is off the table."

Mr Papaconstantinou also warned that other EMU states with big debts could fall foul of the markets. "What we are talking about is not merely a Greek problem. There are broader issues around the eurozone."

Dominique Strauss-Kahn, head of the IMF, said everybody involved "recognises the need for speed. We are all aware of the seriousness of the situation and the courageous efforts being made by the Greek people."

Mr Schauble will meet Bundestag leaders today (Monday) amid rising doubts among Free Democrats (FDP) and Bavaria’s Social Christians (CSU) over the wisdom of open-ended help.

More… ^[6]

Jim Sinclair’s Commentary

These are the damned OTC derivatives that can easily be manipulated to make the debt look as if it is going from bad to worse.

Cost of Insuring Greek Debt Soars
BY KATIE MARTIN AND MICHAEL WILSON

LONDON—Hopes that Greece’s formal request for international financial aid might help stabilize the financial markets are proving short-lived Monday, with the cost of insuring Greek debt against default soared to a new record.

The euro also took a dive, after briefly rebounding from a 12-month low of $1.32 against the dollar Friday after Greece officially requested the financial aid promised last month by euro-zone finance ministers and the International Monetary Fund.

As Monday trading got off in earnest, though, concerns over the lack of detail on how this aid will be implemented shoved the euro below $1.33 against the dollar

More… ^[7]

Jim Sinclair’s Commentary

Two points:

1. It is amazing that the evil of derivatives is just coming from people who have dealt significantly in OTC derivative.
2. There is no cure for 90% of the enormous number of outstanding OTC derivatives because they have NO standards. No standards means no fix possible. That is an ABSOLUTE fact!

Deal Near on Derivatives
Berkshire Presses Lawmakers to Roll Back Proposed Curbs
By DAMIAN PALETTA And SCOTT PATTERSON

WASHINGTON—Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives.

Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett’s Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say.

A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett’s Berkshire Hathaway. John Bussey and David Weidner discuss.

Sunday night’s deal, hammered out by Senate Banking Chairman Chris Dodd (D., Conn.) and Senate Agriculture Chairwoman Blanche Lincoln (D., Ark.) reflects the populist, anti-bank sentiments simmering on Capitol Hill. A Senate Democratic official said the two have "worked out a deal," which is expected to be folded into a broader Democratic measure that revamps the U.S. system of financial regulation in the wake of the catastrophic financial collapse that occurred in 2008. The agreement includes a proposal that could force banks to spin off their lucrative derivative trading operations, reshaping Wall Street.

The fate of Berkshire’s effort to influence the legislation remains uncertain. Senate officials said Sunday night that most of the details of the agreement haven’t yet been finalized.

More… ^[8]

Jim Sinclair’s Commentary

Of course it will not.

Rogoff Says Greece May Not Be Europe’s Last Bailout (Update1)
April 26, 2010, 5:53 AM EDT
By Simon Kennedy

April 26 (Bloomberg) — Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff.

“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”

Portuguese, Spanish and Irish bond yields jumped last week as investors questioned their ability to reduce budget deficits and avoid Greece’s fate. Greece on April 23 triggered a 45 billion-euro ($60 billion) rescue package from the IMF and the euro region after its soaring deficit sent borrowing costs surging and sparked concern about a default.

At 14.3 percent of gross domestic product, Ireland had the euro region’s largest deficit last year. Greece’s was 13.6 percent, Spain’s was 11.2 percent and Portugal’s 9.4 percent.

The likelihood is “better than 50-50” that others in the 16-nation euro area will end up requiring help from the Washington-based lender, said Rogoff, 56. He expects the IMF will eventually dispatch more loans to Greece than the as-much- as 15 billion euro it’s currently offering.

More… ^[9]

 

Jim Sinclair’s Commentary

This is chump change compared to the Wall Street philanthropic contribution called a bailout.

IMF speeds up Greek aid. ^[10]
The IMF is accelerating its efforts to provide Greece with aid before €8.5B ($11.3B) of the country’s bonds mature on May 19. Officials from the IMF, the European Commission and the European Central Bank will finish talks in the next week or so regarding the terms and conditions of the aid. Among other qualifications, Greece has been asked to provide detailed plans ^[11] of how it plans to meet its budget deficit reduction targets in 2011 and 2012.

Jim Sinclair’s Commentary

Exactly who will end up paying on this? The answer is you.

Fannie offers loan incentive to reduce foreclosures. ^[12]
Fannie Mae (FNM ^[13]) is rolling out new rules that incentivize homeowners to avoid foreclosure. Struggling homeowners who choose to voluntarily transfer ownership through a "deed in lieu of foreclosure" or by completing a short sale will be eligible to apply for a new Fannie-backed mortgage in two years rather than the current four years. Yet the new policy may have little impact, as short sales generally have the same effect on a borrower’s credit score as foreclosures do, making it unlikely that borrowers will be able to repair their credit quickly enough to take advantage of the reduced waiting period.

Jim Sinclair’s Commentary

Major legislation passed in haste because of political expedience will always fail and make matters worse.

Financial reform pushes ahead. ^[14]
Lawmakers said yesterday they were close to reaching bipartisan agreement on financial reform legislation. A procedural vote is scheduled for late today to begin debate on the matter; Republicans will likely vote against the debate unless a bipartisan agreement has already been reached, but this would only slow the legislation, not derail it.

 

Jim Sinclair’s Commentary

Greece is 3% of the EU GDP according to Yra Harris.

California is 12% of the US GDP.

30 States Take Out Loans To Pay For Unemployment Benefits
THURSDAY, APRIL 22, 2010

California and more than 30 other US states have taken out loans to pay for jobless benefits. With repayment of these loans starting in 2011, many of these cash-strapped states have raised unemployment insurance taxes – further discouraging employers and potential employers from adding new jobs to the economy. See the following post from Expected Returns.

California takes down the prize for being the state with the worst finances, followed closely by about 40 other states. States are starving for cash, which will result in higher taxes and cuts in services. States can’t even come up with the cash to insure millions of unemployed Americans who are watching this apparent economic recovery unfold from the sidelines. From Reuters, California leads in borrowing for jobless benefits:

The Golden State has borrowed $8.8 billion so far to cover jobless benefits during a recession where the national unemployment rate crested above 10 percent. It is not alone. More than 30 states have had to take out similar, albeit smaller, federal loans to keep their unemployment benefit systems afloat.

Their combined debt tops $40 billion and the U.S. Labor Department expects 40 states to be in debt to the federal government by year’s end, underscoring the labor market’s problems in the deepest recession since World War Two.

To give cash-strapped states a break, the federal economic stimulus program enacted last year suspended interest on the loans to states for two years. Without an extension, interest payments resume next year and Washington could raise payroll taxes on employers in delinquent states if loan balances remain outstanding.

More… ^[15]