Dear CIGAs,
Here is an interesting and simple, yet telling, event on Barrick’s new African, primarily Bulyanhulu, Tanzania, assets package. The chart is compliments of CIGA Eric.
Jim Sinclair’s Commentary
A note to those of you that browse the web regularly for financial information:
Be sure you investigate the sources of writers who make outrageous and shocking claims. If they are doing an editorial it should be labelled as such.
The newest guy on the block has a sensational revelation every day which, as amazing as it is that he is so “informed,” is completely illogical.
Think about that.
Jim Sinclair’s Commentary
To our CIGA pensioners: Not only has Wall Street used pension funds as garbage cans for garbage paper, but now look at this.
New Jersey Settles SEC Fraud Claims Over $26 Billion in Bonds
By Dunstan McNichol – Aug 18, 2010 5:06 PM ET
New Jersey settled claims that it misled investors in $26 billion of municipal bonds by masking underfunding of its two biggest pension plans, in the first Securities and Exchange Commission case to target a state.
Documents for 79 bond offerings from 2001 to 2007 “created the false impression” that the Teachers’ Pension and Annuity Fund and the Public Employees’ Retirement System were adequately funded, hiding that the state couldn’t make contributions without raising taxes or cutting services, the SEC said in a statement today.
Jim Sinclair’s Commentary
Chinese demand for gold is a physical demand which will reveal itself in the comparison of COMEX near delivery contract price and the cash market price.
As they close in on each other that says physical demand. If it ever goes to backwardation then Asia is in charge.
Backwardation, in this case, is a cash physical market bid above COMEX near delivery month. At that point the physical market is in charge of the futures market for gold, a unique currency.
Such a market development, when it occurs, is extremely bullish in the unique market for gold.
Profiting From the Chinese Gold Rush
Jim Trippon
China’s first gold rush is underway. I mentioned in my article how big the coming stampede is.
If you haven’t already read about it then read these bullet points. Changes in China will make 2010 a golden year for investing in gold:
1. China is actively promoting consumer investment in gold
2. China will let many more banks import and export gold for consumption
3. China will also open gold trading to foreign companies in China
4. China is going shopping globally for "large scale" new gold sources
5. Beijing is helping to create new consumer products to boost demand
6. China is stockpiling more gold in its reserves
There are plenty of good reasons why Beijing believes that now is the time for China to go for the gold.
For investors, the important fact is that China will push up global demand. Even though China is the world’s largest gold producer it cannot mine enough of its own ore. China had to import 100 tons of bullion a year even before Beijing’s latest gold drive. The new demand from China will drive gold prices higher worldwide. The important starting point is gauging just how much demand the Chinese will add to the global market.
Jim Sinclair’s Commentary
Here is MOPE at its best. Fiddle the report and then revise it.
Industrial Production: July Up, But June Is Now Negative
by Daryl Montgomery
The Fed reported that industrial production was up 1.1% in July and this got all the media headline attention. Stocks rallied on the bullish news implying economic recovery. Buried in the coverage was that June’s number, originally reported as an increase, was downwardly revised to minus 0.5%.
The government’s handling and media reporting of the industrial production numbers are similar to many other economic reports. Good news is reported in the initial release. Mainstream media gives the good news big headlines and coverage that is so glowing that it is amazing there aren’t cheerleaders in the background waving brightly colored pompoms and shouting "Go US economy, Go US economy, Rah, Rah, Rah" while jumping up and down. (By the way, I am expecting CNBC to steal this idea. I can see the top executives hitting themselves in the head right now and saying, "Why didn’t we think of that?") The downward revisions, and sometimes there are several, that come later on and indicate things aren’t so good or there is even a decline taking place get minimal and sometimes no media attention. There’s no need for a propaganda ministry when the government has a deal like this with the mainstream media.
Both the June and July industrial production reports have the additional problem of unusual situations that made the numbers better. The very hot weather in June spiked the utility component. In July, auto plants didn’t shut down for their usual annual retooling. Because of this, the automotive products component of industrial production increased 8.8%. Most of that in turn was "due to large increase in light truck assemblies." Looking elsewhere in the report it can be seen that ‘Output of Business Equipment’ was up 1.8%. This increase was driven by the transit equipment sub-component that was up 6.3%, an "increase that in large part represented the gain in light truck assemblies" according to the report. So without the big increase in light truck assemblies (which impacted a number of components), industrial production wasn’t strong in July.
Jim Sinclair’s Commentary
QE to infinity. It’s the covert QE that really rocks.
The Fed plans to purchase Treasuries due from August 2016 to August 2020 tomorrow, after purchasing $2.551 billion of securities yesterday to spur the economy by keeping borrowing costs low.
Treasury Yields Near 17-Month Low; Bullard Considers Purchases
August 18, 2010, 7:12 AM EDT
By Matthew Brown and Wes Goodman
Aug. 18 (Bloomberg) — Treasury 10-year yields were near a 17-month low after Federal Reserve Bank of St. Louis President James Bullard said the central bank may need to buy more Treasuries if inflation continues to slow.
The Fed plans to buy Treasuries due from August 2016 to August 2020 tomorrow, after purchasing $2.551 billion of securities yesterday, to hold borrowing costs down. There has been “disinflation,” Bullard, who votes on monetary policy this year, told the Wall Street Journal yesterday. “We should have a plan in place to take action if it moves lower.” German 30-year bond yields reached a record low and Japanese 10-year yields dropped to their lowest in seven years.
“There is still concern on the strength of the recovery, and the risk is that the Fed will expand its balance sheet with further purchases, and that’s giving Treasuries support,” said Orlando Green, assistant director of capital markets strategy at Credit Agricole Corporate & Investment Bank in London.
The 10-year note yield fell two basis points to 2.61 percent as of 6:38 a.m. in New York, according to BGCantor Market Data. The 2.625 percent security due August 2020 rose 7/32, or $2.19 per $1,000 face amount, to 100 3/32. Yields dropped to 2.56 percent on Aug. 16, the lowest since March 2009.
Jim Sinclair’s Commentary
Currency induced cost push inflation along with hot/dry long weather cycle cost induced food inflation is here and growing.
The economically blind liberal jerks and demonic derivative dealing fools simply cannot see it.
Wal-Mart Quietly Raises Prices
By JONATHAN BERR Posted 11:30 AM 08/10/10
Wal-Mart Stores (WMT), which for years has touted its prowess at lowering prices, has been doing the opposite as it tries to bolster its bottom line amid stagnating sales.
A JPMorgan Chase (JPM) study of a Walmart Supercenter in Virginia found that the world’s largest retailer has raised prices by nearly 6% on average over the past six weeks, according to the New York Post. Reuters says it was the biggest sequential increase since JPMorgan started the study in January 2009.
Some Prices Hiked Over 60%
Some of the price hikes were considerably larger. For instance, the price of a 32-ounce bottle of Windex household cleaner jumped 50%, a 12-ounce box of Quaker Oats instant grits climbed 65% and a 50-ounce container of Tide detergent rose by more than 50%. A spokesperson for the Bentonville, Ark., company could not immediately be reached for comment.
The results of the price-hike study aren’t entirely surprising. Shares of Wal-Mart, which rose at the height of the recent recession, are down more than 2% this year amid lackluster performance at its U.S. stores, where same-store sales fell 1.1% during the 13 weeks ended April 30. When Wal-Mart announced a revamping of the management team overseeing these stores, including the departures of CEO and President of Wal-Mart U.S. Eduardo Castro-Wright and Chief Merchandising Officer John Fleming, current Wal-Mart U.S. CEO Bill Simon bluntly said, "our mandate is clear: increase customer traffic, make sure our products are relevant to our customer and never give an inch on price leadership."
Jim Sinclair’s Commentary
So what if it helps the incumbents? Political expediency has always trumped ethics and clean purpose.
Fannie Mae and Freddie Mac reform: Would it add $5 trillion to US debt?
The Obama administration held a conference Tuesday about how to reform mortgage giants Fannie Mae and Freddie Mac. Reform could involve adding Fannie and Freddie’s roughly $5 trillion in obligations, in effect, to the federal balance sheet.
By Mark Trumbull, Staff writer / August 17, 2010
The Obama administration turned its focus squarely on a $5 trillion question Tuesday: What to do with Fannie Mae and Freddie Mac, the giant financiers of US home mortgages that fell into a bankruptcy-style conservatorship two years ago.
These two corporations together own or guarantee about half the mortgage debt in America. What happens to them will affect the ability of the economy and the housing market to recover. It also has big implications for US taxpayers, who could foot even higher bailout bills if the mortgage-insurance business isn’t fixed.
"We will not support a return to the system where private gains are subsidized by taxpayer losses," said Treasury Secretary Timothy Geithner, in remarks Tuesday that opened a day-long conference on how to reform these so-called government sponsored enterprises (GSEs).
Mr. Geithner cited the possibility of giving Fannie Mae and Freddie Mac an "elegant funeral." But that wouldn’t mean a government exit from its prominent role in America’s housing market. In fact, it could mean that the government agrees to stand explicitly behind the GSEs’ obligations, while also putting in place a new system designed to ensure that mortgage credit is available even during recessions or a banking crisis.
"’Without such support, the risk is that future recessions could be more severe because the financial system would not have the capital to support mortgage lending on an adequate scale," Mr. Geithner said in his prepared remarks.
