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Trader Dan’s Commentary

The article below is a follow up to an article posted Thursday about a new breed of computer viruses to be used as weapons of war.

Tehran confirms its industrial computers under Stuxnet virus attack 
Exclusive Report September 25, 2010, 6:07 PM (GMT+02:00)

Mahmoud Alyaee, secretary-general of Iran’s industrial computer servers, including its nuclear facilities control systems, confirmed Saturday, Sept. 25, that 30,000 computers belonging to classified industrial units had been infected and disabled by the malicious Stuxnet virus.

This followed DEBKAfile’s exclusive report Thursday, Sept. 23, from its Washington and defense sources that a clandestine cyber war is being fought against Iran by the United States with elite cyber war units established by Israel. Stuxnet is believed to be the most destructive virus ever devised for attacking major industrial complexes, reactors and infrastructure. The experts say it is beyond the capabilities of private or individual hackers and could have been produced by a high-tech state like America or Israel, or its military cyber specialists.

The Iranian official said Stuxnet had been designed to strike the industrial control systems in Iran manufactured by the German Siemens and transfer classified data abroad.

The head of the Pentagon’s cyber war department, Vice Adm. Bernard McCullough said Thursday, Sept. 22, that Stuxnet had capabilities never seen before. In a briefing to the Armed Forces Committee of US Congress, he testified that it was regarded as the most advanced and sophisticated piece of Malware to date.

According to Alyaee, the virus began attacking Iranian industrial systems two months ago. He had no doubt that Iran was the victim of a cyber attack which its anti-terror computer experts had so far failed to fight.  Stuxnet is powerful enough to change an entire environment, he said without elaborating. Not only has it taken control of automatic industrial systems, but has raided them for classified information and transferred the date abroad.

More… ^[2]

Jim Sinclair’s Commentary

Only two this Friday.

Bank Closing Information – September 24, 2010
These links contain useful information for the customers and vendors of these closed banks.

North County Bank, Arlington, WA ^[3]
Haven Trust Bank Florida, Ponte Vedra Beach, FL ^[4]

http://www.fdic.gov/ ^[5]

Jim Sinclair’s Commentary

Do you take comfort knowing SIPC insures your brokerage account? Maybe not?

It was revealed in congressional testimony that Madoff claims have busted SIPC.

 

Jim Sinclair’s Commentary

Recent events between China and Japan are grossly misunderstood.

1. Fishing is not the problem. It is oil and gas in the South China sea that is up for grabs.
2. It is weapons testing and the weapon is strategic materials.
3. The weapon has proved totally devastating.
4. Meanwhile the num-nuts pass bills to challenge China economically.

 

Jim Sinclair’s Commentary

The problems are over? You have to be kidding. 30 billion for credit unions and that is only a start. QE to infinity is assured.

Credit Unions Bailed Out
U.S. Backs $30 Billion in Bonds to Stabilize Key Institutions; Subprime Legacy
By MARK MAREMONT And VICTORIA MCGRANE

Two years after the peak of the financial crisis, the federal government swooped in to stabilize a crucial part of the credit-union sector battered by losses on subprime mortgages.

Regulators announced Friday a rescue and revamping of the nation’s wholesale credit union system, underpinned by a federal guarantee valued at $30 billion or more. Wholesale credit unions don’t deal with the general public but provide essential back-office services to thousands of other credit unions across the U.S. The majority of retail credit unions are sound, but they will have to shoulder the losses through special assessments over the next decade.

Friday’s moves include the seizure of three wholesale credit unions, plus an unusual plan by government officials to manage $50 billion of troubled assets inherited from failed institutions. To help fund the rescue, the National Credit Union Administration plans to issue $30 billion to $35 billion in government-guaranteed bonds, backed by the shaky mortgage-related assets.

Officials said the plan won’t cost taxpayers any money. Still, it marks the latest intervention by the U.S. government into a financial system weakened by the real-estate bust. Bad bets on mortgage-backed securities have now killed five of the nation’s 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments.

More… ^[6]

Jim Sinclair’s Commentary

Volker is too smart to be stupid, and too old to be bullied.

Volcker Spares No One in Broad Critique
By Damian Paletta

Former Federal Reserve Chairman Paul Volcker scrapped a prepared speech he had planned to deliver at the Federal Reserve Bank of Chicago on Thursday, and instead delivered a blistering, off-the-cuff critique leveled at nearly every corner of the financial system.

Standing at a lectern with his hands in his pockets, Volcker moved unsparingly from banks to regulators to business schools to the Fed to money-market funds during his luncheon speech.

He praised the new financial overhaul law, but said the system remained at risk because it is subject to future “judgments” of individual regulators, who he said would be relentlessly lobbied by banks and politicians to soften the rules.

“This is a plea for structural changes in markets and market regulation,” he said at one point.

Here are his views on a variety of topics.

More… ^[7]

Jim Sinclair’s Commentary

Leaving in 2010 to work on the 2012 campaign? Somehow that sounds quite questionable.

Axelrod leaving White House next year to work on campaign
September 24, 2010 5:45 AM

David Axelrod, a top advisor to President Obama and the main architect of his election victory in 2008, will be leaving the White House next year and returning to Chicago to work on the president’s re-election campaign, a White House aide said Thursday.

Axelrod has not specified a departure date, but he plans to remain in his current position "well into 2011,” the aide said.

Axelrod, who calls himself a "Chicagoan on assignment,” has long made clear he missed his hometown and would return before the end of the four-year term. His wife still lives in the city.

One of Obama’s most trusted aides, Axelrod occupies a small office just steps from the Oval Office. On a wall in Axelrod’s office hangs a picture of the White House drawn by his daughter. The Chicago skyline is shown in the reflecting pool.

His portfolio is a broad one. He shapes the president’s message, oversees the speechwriting team, plots political strategy and advises on policy. A longtime campaign strategist, he is aware of his limitations when it comes to complex policy matters. He once made a self-deprecating reference to himself as "a duffer” when it comes to policy.

Other White House aides said part of Axelrod’s role is reminding the staff of the president’s campaign commitments and making sure that the White House agenda stays true to Obama’s promises.

More… ^[8]

Jim Sinclair’s Commentary

I am not sure if they are ignorant, insane, or both.

China targeted in bill on currency manipulation
By MARTIN CRUTSINGER (AP)

WASHINGTON — A bill that would give the U.S. government the power to impose economic sanctions on China and other countries found to be manipulating their currencies to gain trade advantages has won approval from a key House committee.

The Ways and Means Committee approved the legislation Friday and Democratic leaders said the measure would be taken up by the full House next week. Supporters say the bill would protect U.S. jobs against unfair trade competition at a time of high unemployment.

The measure was expected to win easy House passage, although trade analysts said it was unlikely to be taken up in the Senate before the November elections. However, they said the proposal would send a clear message to China that it risks U.S. trade sanctions unless it moves faster to allow its currency to rise in value against the dollar.

The House action comes as the Obama administration has stepped up its pressure on China to make more progress on currency reform and other contentious trade issues. The White House said that President Barack Obama pushed Chinese Premier Wen Jiabao to move faster on currency revaluation during a two-hour meeting the two leaders held in New York on Thursday.

American manufacturers contend that China’s currency is undervalued by as much as 40 percent against the dollar. That makes Chinese products cheaper and more competitive in the United States and American products more expensive in China.

More… ^[9]

Jim Sinclair’s Commentary

I wrote a book on the following subject in the early 80s titled "The Strategic Metals War." ^[10]

China’s Hold On Metals Worries Washington
By NATHAN HODGE And JAMES T. AREDDY

WASHINGTON—China’s control of a key minerals market has U.S. military thinkers and policy makers alike worried about access to materials that are essential for 21st-century technology like smartphones—and smart bombs.

The concern over supplies of so-called rare-earth elements was highlighted this week by a report that Chinese customs officials had blocked exports of the materials to Japan. On Thursday, Beijing denied those reports. "China doesn’t block rare-earth exports to Japan," said Chen Rongkai, a spokesman for China’s Ministry of Commerce.

At issue is a group of 17 metallic elements with magnetic properties suited for high-tech applications such as computer hard drives and digital cameras. Rare-earth elements are also key to "green" technology: Energy-efficient light bulbs use europium and yttrium, while hybrid car batteries and wind-power turbines use neodymium.

While rare-earth ore deposits are found around the globe, China’s dominance in mining and processing the elements has raised alarms in Washington. According to an April 2010 Government Accountability Office report, China now produces approximately 97% of the world’s rare-earth oxides, the raw materials that can be further refined into metals and blended into alloys that can be made into finished components.

Over the past year, China has imposed global export quotas on the elements. Its Commerce Ministry has said total exports for the year would be capped at just under 30,300 metric tons, down 40% from last year. Only 7,976 tons of that were allocated for the second half of this year. Experts say much of that has already been shipped.

More… ^[11]

Jim Sinclair’s Commentary

Here is a list of FDIC enforcements. If your bank is on this list you ought to know!

Recent Enforcement Decisions
FINAL ORDERS ISSUED PURSUANT TO SECTION 8(b), 12 U.S.C. 1818(b)
(Consent Orders)

SouthPoint Bank, Birmingham, Alabama; FDIC-10-414b; Issued 8/10/10 – PDF ^[12]

Farmers Exchange Bank, Louisville, Alabama; FDIC-10-382b; Issued 8/10/10 – PDF ^[13]

United Pacific Bank, City of Industry, California; FDIC-10-392b; Issued 8/5/10 – PDF ^[14]

Western Commercial Bank, Woodland Hills, California; FDIC-10-575b; Issued 8/20/10 – PDF ^[15]

First Guaranty Bank and Trust Company of Jacksonville, Jacksonville, Florida; FDIC-09-686b;
Issued 8/11/10 – PDF ^[16]

Syringa Bank, Boise, Idaho; FDIC-10-314b; Issued 8/19/10 – PDF ^[17]

Builders Bank, Chicago, Illinois; FDIC-10-535b; Issued 8/5/10 – PDF ^[18]

Bank of the Prairie, Olathe, Kansas; FDIC-10-459b; Issued 8/26/10 – PDF ^[19]

The Community Bank, A Massachusetts Cooperative Bank, Brockton, Massachusetts; FDIC-10-588b;
Issued 8/12/10 – PDF ^[20]

More… ^[21]

Jim Sinclair’s Commentary

There is a long term top coming in the 30 Year Treasuries. It is a beast to trade so I am top fishing with puts.

U.S. About To Drop Off The List Of the Top Ten Safest Credit Ratings

According to CMA Datavision, the U.S. ranks below nine other countries in terms of the safety of its sovereign debt. Norway is #1 followed by Finland and Germany.

Sweden and Hong Kong are new members of top ten list, displacing France and Belgium.

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More… ^[23]

Jim Sinclair’s Commentary

QE to infinity is the disgrace of the so called dollar rally from .89 to under .80, on its way to .72 and lower.

That is one hell of a safe haven A top in long bonds must occur.

Bernanke Says U.S. Economic Growth Too Slow Even With Fed Bond Purchases
By Craig Torres and Joshua Zumbrun – Sep 24, 2010 9:01 PM PT Sat Sep 25 04:01:00 GMT 2010

Federal Reserve Chairman Ben S. Bernanke said damage from the financial crisis has left the U.S. economy growing at a slower pace than policy makers want even as the central bank’s more than $1 trillion in bond purchases have reduced interest rates.

“By buying mortgage-backed securities and Treasuries we did, I think, additionally stimulate the economy,” Bernanke said yesterday in response to a question after he spoke at a Princeton University conference.

“We avoided what could have been a global meltdown,” Bernanke said. “But even so, we got a taste of how powerful a financial crisis is on real activity. That blow which knocked the world economy into a deep recession in the second half of ‘08 and the early ‘09, we are only recovering from that at a pace slower than we would like.”

U.S. central bankers said Sept. 21 they were “prepared to provide additional accommodation if needed to support the economic recovery.” They also left the benchmark lending rate in a range of zero to 0.25 percent while noting that inflation measures were at levels “somewhat below” the central bank’s mandate to achieve stable prices and full employment.

The Fed statement boosted speculation the central bank will buy more Treasuries sometime later this year. Yields on U.S. 2- year notes fell to a record low of 0.407 percentage point Sept. 21 and were 0.440 percentage point in New York trading yesterday. The Standard & Poor’s 500 Index rose 2.1 percent to 1,148.67, a four-month high. Fed officials next meet Nov. 2-3.

More… ^[24]

Jim Sinclair’s Commentary

Here is another trillion dollar bag of worms. This means QE to infinity must occur or the black hole the Western world finances are in will be revealed with results so shocking they should not be discussed.

No wonder the present administration is losing people weekly.

Commentary: The Silence over Repos Is Shocking
Published: Friday, 24 Sep 2010 | 7:55 AM ET
By: Gillian Tett, Financial Times

Four months ago, New York bankers issued a 43-page report on the tri-party repurchase, or “repo”, market, which solemnly described some of the sector’s shortcomings. The New York Federal Reserve then issued additional comments – and called for reform.

Both reports almost immediately vanished from public view. They were not, for example, mentioned in all the US Congress summer debates. Indeed, the Dodd-Frank bill barely touches them at all. And, this month, as European and US regulators have marked the second anniversary of the collapse of Lehman Brothers by unveiling new financial reforms, the issue has barely cropped up at all.

Perhaps this is unsurprising: after all, until 2008 the workings of the repo market – or the part of finance where banks raise short-term loans backed by collateral – seemed distinctly dull. But in many ways this silence is shocking.

After all, the sector is huge: the total volume of so-called “tri-party repo contracts” – or those arranged via a third-party broker – in the US peaked at about $2,800 billion in early 2008 and is now at about $1,700 billion.

Moreover, the repo market was central to the dramas of 2008. One of the main reasons why entities such as Lehman Brothers collapsed, after all, was that investors fled from repo deals, because they became frightened about counterparty risk. They also feared that the collateral backing these deals was losing value, particularly in relation to mortgage bonds, which represented 37 percent of collateral.

More… ^[25]

Jim Sinclair’s Commentary

China shut down Japan on their need for strategic metals and materials and the next day the fisherman were released.

The flag waving legislative pandering for votes in November is playing with economic dynamite by taking on China, their banker and source of raw materials for high tech

Risk of trade war rises as key US committee backs tariffs on China
The risk of a trade war between the US and China has increased after a key Congressional committee backed a bill to allow US companies to seek tariffs on Chinese imports.
By Richard Blackden, US Business Editor
Published: 11:00PM BST 24 Sep 2010

The adoption of the measure by the Ways and Means Committee on Friday means it will now be voted on by the House of Representatives on Wednesday.

"China’s exchange-rate policy has a major impact on American businesses, and Americans jobs, which is what this is all about," said Sander Levin, a Democrat from Michigan and chairman of the committee.

China’s determination to shackle the strength of its currency helped turn the country into the world’s manufacturing hub for everything from iPods to T-shirts and, until the recession bit, attracted few critics. But an unemployment rate of 9.6pc in the US, as well as upcoming Congressional elections, is spreading anger across Capitol Hill.

According to the bill’s supporters, a properly valued yuan would move jobs back to the US as exports from China become more expensive. The Peterson Institute for International Economics in Washington argues up to 500,000 American jobs could be created.

The move by the committee is awkward for the White House which has steered clear of officially classifying China as a "currency manipulator" for fear of the repercussions of a trade war. President Barack Obama urged Chinese premier Wen Jiabao to take more aggressive steps when they met at the United Nations on Thursday, but the Chinese leader said that the value of the yuan was not the cause of the $145bn (91bn) trade deficit the US is running with China.

More… ^[26]

Jim Sinclair’s Commentary

The Green Hornet mentioned that if we owned a Chevy Volt we better have a bicycle rack on top.

Remember when This was going to be a hot seller for GM? What a bad joke this is.

GM: Volt Can Go 25-50 Miles on Batteries

(DETROIT) — General Motors on Thursday altered the expected range that its Chevrolet Volt electric car can travel on battery power alone.

The automaker now says the Volt can go 25 to 50 miles on battery power, compared with the 40 miles it had previously said it would travel.

The distance will depend on temperature, terrain, driving technique and the age of the lithium-ion batteries.

More… ^[27]

Jim Sinclair’s Commentary

Why not? You know she was a major victim of OTC derivatives with palace size losses.

UK Queen tried to use state poverty funds to heat her palaces

Queen tried to use state poverty fund to heat Buckingham Palace
Ministers were asked if money earmarked for schools, hospitals and low-income families could be used to meet soaring fuel bills
By Robert Verkaik
Friday, 24 September 2010

The Queen asked ministers for a poverty handout to help heat her palaces but was rebuffed because they feared it would be a public relations disaster, documents disclosed under the Freedom of Information Act reveal.

Royal aides were told that the £60m worth of energy-saving grants were aimed at families on low incomes and if the money was given to Buckingham Palace instead of housing associations or hospitals it could lead to "adverse publicity" for the Queen and the Government.

Aides complained to ministers in 2004 that the Queen’s gas and electricity bills, which had increased by 50 per cent that year, stood at more than £1m a year and had become "untenable".

More… ^[28]