Dear CIGAs,

Please check out this CNBC Squawk Box Europe interview with Egon von Greyerz from the Zurich Stock exchange.

 

Jim Sinclair’s Commentary

The Formula of 2006 grinds on.

• Applications for unemployment benefits in the U.S.  unexpectedly increased last week to 500,000, indicating that companies are stepping up the pace of layoffs as the economy slows.
• The Index of U.S. Leading Indicators rose in July by 0.1% in July. This was the second time in 4 months that extends a see-saw pattern that indicates slower growth through the end of the year.
• The Federal Reserve Bank of Philadelphia’s general economic index dropped in August to -7.7% from 5.1% in July.
• The Congressional Budget Office forecasted that the U.S. budget deficit will be slightly less in 2010 than projected in March, at $1.342 trillion. The deficit for 2011, however, will be modestly higher than the March estimate at $1.066 trillion

More… ^[1]

Jim Sinclair’s Commentary

QE to infinity. Currency Induced Cost Push Inflation is set in cement.

The deflation emphasis is simply ignorant of what is happening now.

Fed May Need to Buy More US Treasurys: Bullard
Published: Thursday, 19 Aug 2010 | 1:33 PM ET

The Federal Reserve may need to ramp up its purchases of U.S. Treasury debt if price levels in the U.S. economy continue to show signs of softening, St. Louis Fed President James Bullard said on Thursday.

Bullard said such actions were not yet warranted at the moment, given expectations for a continued economic expansion.

But he added that, if further signs of easing price pressures were to emerge, the central bank should not be shy about using the remaining tools in its policy arsenal.

"Should economic developments suggest increased disinflation risk, purchases of Treasury securities in excess of those required to keep the size of the balance sheet constant may be warranted," he said in prepared remarks.

In a significant policy shift last week, the Fed announced it would begin using the proceeds from maturing mortgage securities in its portfolio to buy Treasury notes, an effort to prevent monetary conditions from tightening.

More… ^[2]

Jim Sinclair’s Commentary

Mc Donald’s better have enough net yuan profit or Ronald McDonald is a raving economic idiot who will have to get his job back at the circus.

How can people be so dense?

McDonald’s Sells Yuan Bonds in Hong Kong, First by Foreign Firm
By Shelley Smith and Henry Sanderson – Aug 19, 2010 6:20 AM ET

McDonald’s Corp., the world’s largest restaurant chain, became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong.

McDonald’s, based in Oak Brook, Illinois, sold 200 million yuan ($29 million) of 3 percent notes due in September 2013, offer manager Standard Chartered Plc said in an e-mailed statement today.

The issue “opens up more potential issuers to tap this market, especially those who have sizable operations in China,” said Arthur Lau, a Hong-based fixed-income fund manager at JF Asset Management Ltd.

China is expanding its financial system, and will use Hong Kong as a testing ground for yuan-denominated products, according to the city’s former central bank chief Joseph Yam. Foreign companies in February became eligible to issue yuan bonds as part of efforts to bolster the ex-British colony’s financial status and expand its role in promoting China’s currency for global commerce.

Bank of East Asia Ltd. and HSBC Holding Plc’s China unit sold yuan bonds in Hong Kong in 2009, becoming the first non- China banks to do so, according to data compiled by Bloomberg. Hopewell Highway Infrastructure Ltd., controlled by Hong Kong billionaire Gordon Wu, was the first non-financial company to enter the market when it issued 1.38 billion yuan of 2.98 percent notes in July, the data show.

More… ^[3]

Jim Sinclair’s Commentary

This is not quite dollar positive.

A most impolite word has been applied to the weaker nations of the euro. It might be wise for North America not to throw stones in a glass house.

Jobless claims rise to highest level in 9 months
Initial requests for jobless benefits jump to 500,000, highest level since November
Christopher S. Rugaber, AP Economics Writer, On Thursday August 19, 2010, 9:18 am

WASHINGTON (AP) — Employers appear to be laying off workers again as applications for unemployment insurance reached the half-million mark last week for the first time since November.

Initial claims for jobless benefits rose by 12,000 last week to 500,000, the Labor Department said Thursday. It was the fourth increase in the past five weeks and evidence that the economic recovery has weakened.

Homebuilders and other construction firms are laying off more workers as the housing sector slumps after the expiration of a popular homebuyers’ tax credit. State and local governments are also cutting jobs to close large budget gaps.

"This is obviously a disappointing number that shows ongoing weakness in the job market," said Robert Dye, senior economist at the PNC Financial Services Group.

The four-week average, a less volatile measure, rose by 8,000 to 482,500, the highest since December.

More… ^[4]

Jobless claims at 9-month high
CIGA Eric

New U.S. claims for unemployment benefits unexpectedly climbed to a nine-month high last week, yet another setback to the frail economic recovery.

‘Unexpectedly climbed’ for everyone but Insight and community readers. Expect this adjective grouping until the 2011 minor cycle date.

Average Weekly Initial Claims State Unemployment (AWIC) And YOY Change:
^[5]

Average Continuing Claims State Unemployment (ACC) And YOY Change:
^[6]

Source: reuters.com ^[7]

More… ^[8]

 

Jim Sinclair’s Commentary

New York, Illinois and California are not hogging the headlines any more. Here comes Connecticut.

Like everywhere else these guys think short term and take a “thumb in the dike” approach to problem solving.

The Formula will grind on here and the $520 million will be blown with more needed almost immediately.

Connecticut may have just a week’s worth of cash
On Thursday August 19, 2010, 1:12 pm EDT

NEW YORK (Reuters) – Connecticut this autumn probably would have just a little more cash than it needs to pay a week’s expenses unless it issues $520 million of debt, according to the state treasurer.

Treasurer Denise Nappier, in a letter to the Connecticut Bond Commission, outlined her response to concerns that were raised about the state’s finances by a legislator.

If the planned offering of general bond obligations were delayed until 2011, "This coming fall the state would likely have just over a week’s worth of expenses in the bank — a level lower than advisable," Napier wrote in an August 13 letter that is posted on her web site:http://www.state.ct.us/ott/pressreleases/press2010/PRNappierToSBC081310.pdf ^[9]

"Conceivably, the State may run out of funds for capital expenses that have already been authorized, allocated and incurred, such as school construction projects," she added.

So before the end of the year, Connecticut expects to offer the $520 million of general obligations and as much as $600 million of special tax obligations, which would raise money for transportation. Both issues likely would be offered via negotiation.

More… ^[10]