Posted at 9:00 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

This article speaks for itself.

The Big Collapse Could Be Very Near
SUNDAY, MAY 31, 2009

The Federal Reserve appears to be increasingly nervous about the long term bond market. This is serious. How panicked are they? After leaking a story on Friday, they are back at it on Sunday.

The Federal Reserve leaked to CNBC’s Steve Liesman on Friday that they weren’t targeting long rates. Why such a leak? Probably because the Fed did not want to appear impotent in controlling the long rate. So they put out the word through Liesman that they weren’t targetting the long rate. Can you imagine what would happen to the markets if it sensed long rates were beyond the control of the Fed?

The Fed can of course print money to buy up every Treasury bond in existence, but the inflationary ramifications would be Zimbabwe like, and crush the dollar on international currency markets. Are we near the phase where all hell breaks loose? I have never even answered,maybe, to this question before. It’s always been, "no." Now it’s maybe.

What really has me spooked is another article out this afternoon (on a Sunday) that Drudge has even picked up. It’s a Reuters story by Alister Bull. The headline: Federal Reserve puzzled by yield curve steepening.

Translation, the Fed doesn’t know what is going on, but they are really scared.

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Jim Sinclair’s Commentary

There is no stopping the runaway locomotive heading directly at the US dollar.

Now starts the parting of the ways between regions over who or why the disaster is upon us.

Germany Blasts ‘Powers of the Fed’
By JOELLEN PERRY
JUNE 3, 2009

German Chancellor Angela Merkel, in a rare public rebuke of central banks, suggested the European Central Bank and its counterparts in the U.S. and Britain have gone too far in fighting the financial crisis and may be laying the groundwork for another financial blowup.

"I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line," Ms. Merkel said in a speech in Berlin. "We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years’ time."

Ms. Merkel also said the ECB "bowed somewhat to international pressure" when it said last month it plans to buy €60 billion ($85 billion) in corporate bonds — a move that is modest in comparison to asset-buying by its counterparts, the U.S. Federal Reserve and Bank of England. Details are to be unveiled by the ECB’s president, Jean-Claude Trichet, Thursday.

The public criticism is unusual — and not only because German politicians rarely talk harshly about central banks in public. When politicians around the world do criticize their central banks, they almost always gripe that they are too tightfisted.

The conservative German leader’s comments came as Europe’s statistical agency reported that unemployment in the 16 countries that share the euro rose to 9.2% in April — the highest level since September 1999 and still below the 11.5% that the European Commission forecasts for 2010.

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Jim Sinclair’s Commentary

Of course it will. There is oil there.

Opinion: Global Warming Could Pose A Threat to NATO
Published yesterday by Christopher Szabo

According to news reports, those most affected by global warming live in the 50 least developed countries, but this could change. Recent moves by Russia could call into question the NATO alliance’s naval defenses in the Arctic Circle region.

A new Russian military force, especially developed for arctic conditions, is past the planning stages, according to Jane’s Defence. The force, once deployed, would be equipped with: “Special ammunition, ammunition and transport” for the freezing Arctic conditions.

In the wake of the first ice-free month of the Northwest Passage in September, 2007, and Russian claims to most of the High North region, based on it’s claim to the Lomonosov Shelf, which Russia regards as being part of its own exclusive economic zone of 200 nautical miles, the creation of the new military force seems somewhat sinister.

Unlike the Antarctic, the Arctic has no treaty banning commercial exploitation of its resources and not only Russia, but also the U.S., Canada, Denmark, Norway, Sweden, Iceland and Finland have laid claims to the region.

While NATO officials and analysts have stressed the peaceful nature of Russia’s new force, comparing it with Russian cooperation with the West in the Mediterranean and fighting pirates off Somalia, Russian behaviour has not always been that of a good neighbour, especially in areas it considers to be part of its exclusive sphere of influence, such as the former Soviet Union republics. Russia has brutally crushed a Chechen separatist movement as well as fighting a brief war against the former Soviet Republic of Georgia last November.

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Posted at 9:33 PM (CST) by & filed under Jim's Mailbox.

Jim,

This is thought out well and in line with what you have posted most recently…

"The American people will never knowingly adopt socialism. But under the name of ‘liberalism’ they will adopt every fragment of the socialist program until one day America will be a socialist nation without knowing how it happened… I no longer need to run as a Presidential candidate for the Socialist Party. The Democrat Party has adopted our platform.
– Norman Thomas, six-time U.S. presidential candidate for the Socialist Party, 1944.

On that chart I shipped you, historically the fall of Napoleon in the early 1800s opened the door for Anglo-American dominance of the world. With the fall of the pound, and now the dollar, that era will end soon by your reckoning and many others. I find it quite interesting that Greenspan has publicly said the Euro will become the new world currency, and he had urged the gulf states to break their dollar peg about a year ago. In reality, the euro is just another piece of garbage, but perception sometimes trumps reality for a time as we all know. It could easily be that the euro is just further advanced in terms of currency than what Asia offers at this time, so it will precede it by some years. This fits prophetically, so I sit by and watch. The "one is" refers to the emerging power in Europe, first by the Kaiser and then Hitler/Mussolini, that twice went to war against the Anglo-Saxon hegemony and lost. The one "yet to come" will emerge from its cocoon when the dollar goes down and needs to be replaced on the world’s stage. Perhaps the repatriation of US/Britain gold to both Germany and the emirates is in anticipation of this. It’s always follow the money as you well know. Fascinating times to be sure. Prophetically, China/Russia will emerge to challenge the Euro state. When the baton of power is passed back across the Atlantic, we will know we are getting down to the short strokes.

CIGA Yahn

Dear Jim,

Since the paper certificates are no longer available, do you have any guidance/suggestions on the best way to purchase gold stocks at this time?

CIGA Beth B.

Dear Beth,

That is not entirely correct that paper certificates are not available.

When you make you purchases instruct your broker that you wish "Direct Registration" at the transfer agent, the 2nd best method of holding your assets.

Thereafter and when confirmed that you are in "Direct Registration" system, contact the transfer agent and request paper certificates.

In many cases it will work. This is certainly true for AMEX:TRE/TSX:TNX.

Regards,
Jim

Posted at 6:13 PM (CST) by & filed under In The News.

Dear Friends,

Here is an interesting question for us to ponder.

It does not take a brain surgeon to figure out that there has been the largest theft in human history in the past two years.

What is it that makes the perps firmly believe that they can do this in blatantly obvious ways and totally get away with it? I do not accept political contacts as the legislative is a loose cannon in such a case.

What is it that gives them such comfort?

Why was it so important to do in their minds that doing it almost publicly gives them no concern?

This tells me to be prepared for a substantive world changing occurrence within the time frame we have been discussing as positive for gold on the maximum momentum basis. That time is between now and 2012.

Are you prepared?

Regards,
Jim

 

Jim Sinclair’s Commentary

Don’t let the numbing spin and off the scale development with equities put you in an exposed mode. The dollar is dead – that is becoming quite clear.

The ramification of the demise of the dollar this year are severe. The sheeple are sleeping, dope smoking, snorting or doing something else to disengaged their brains.

Gold is going to $1650 then on to Alf’s numbers. The dollar is going to .52 and maybe lower on the USDX. The long bonds are going to Hades. The IMF is going to be the world Federal Reserve.

There will be a SDR tied to gold as I have suggested, in the form of a basket of mainly non-dollar currencies that will be the one world currency.

The agenda of those that seek the above is unfolding. Democracy will become an underground movement. About all this there is no question.

Are you prepared?

Dollar Declines as Nations Mull Reserve Currency Alternatives
By Oliver Biggadike and Chris Fournier

June 2 (Bloomberg) — The dollar weakened beyond $1.43 against the euro for the first time in 2009 on bets record U.S. borrowing will undermine the greenback, prompting nations to consider alternatives to the world’s main reserve currency.

The euro gained for a fourth day versus the dollar as the Russian government said emerging-market leaders may discuss the idea of a supranational currency. The pound rose to the highest level since October and the Canadian dollar traded near an eight-month high on speculation signs of a recovery in U.S. and U.K. housing will spur higher-yield demand.

“There’s been a lot of talk out of Russia about a new global currency, and that’s contributing toward this latest bout of dollar weakness,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s largest currency trader. “These latest comments are just adding to the general dollar weakness we’ve seen recently.”

The dollar slid 1.1 percent to $1.4317 per euro at 4:21 p.m. in New York, from $1.4159 yesterday. It touched $1.4331, the weakest level since Dec. 29. The dollar depreciated 1.1 percent to 95.54 yen, from 96.59. The euro traded at 136.77 yen, compared with 136.78.

Sterling rose as much as 0.9 percent to $1.6596, the highest level since Oct. 30, while the Canadian dollar advanced 1.2 percent to C$1.0806, near the strongest level since Oct. 3.

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Jim Sinclair’s Commentary

Didn’t the media inform us yesterday that China was CONFIDENT concerning US debt? This does not read like a confident bull on either the US dollar or US debt.

China’s Yu Tells U.S. Not to Be Complacent About Debt (Update1)

June 2 (Bloomberg) — China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”

Yu said he is scheduled to meet Geithner today at the Grand Hyatt Hotel in Beijing.

China is the biggest foreign holder of U.S. Treasuries with $768 billion at the end of the first quarter. Premier Wen Jiabao in March called for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.

“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”

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Jim Sinclair’s Commentary

Let’s have a round of applause for those OTC derivative dealers that are giving many a vacation experience called "Hutment at the Horwith Station."

Be assured it will be an experience that millions of US citizens will never forget.

Are you prepared?
Uncle Dave Macon explains the origin of our financial plight:

Jim Sinclair’s Commentary

It always starts on the West Coast, but certainly moves into all states in one degree or the other.

Schwarzenegger says day of reckoning is here
Sacramento Business Journal – by Kathy Robertson Staff writer

The state wallet is empty. The bank closed. Credit has dried up, Gov. Arnold Schwarzenegger told lawmakers in a special Tuesday morning address at the Capitol.

“California’s day of reckoning is here,” he said. With no action, the state will run out of cash in 14 days. Three months after the state budget was approved, California faces a $24 billion deficit.

Schwarzenegger has already proposed massive cuts to education, health care and prisons. Now he’s looking for structural reform to make government more efficient and stretch taxpayer dollars.

He’s asked the State Board of Education, for example, to make textbooks available in digital formats — a move that could save millions.

In 2004, the governor talked about blowing up boxes and consolidating agencies, but the initiatives never gained traction.

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Jim Sinclair’s Commentary

I would suggest the key comment in the Dow Jones story below is the lack of new reserves which inherently says how important the juniors are.

"We are simply not finding any new reserves anywhere in the world," Jacobsz said at a New York Society of Security Analysts metals and mining conference. Further, deposits where gold can be relatively easily extracted are being tapped out, he said.

DJ Inflation, Economy, Waning Supply To Support Gold – Producers

NEW YORK (Dow Jones)–Declining supply and investor demand driven by economic uncertainty and future inflation are likely to keep gold prices high, mining company officials said Tuesday. "Our view is that the gold market is in probably one of its most promising phases," said Willie Jacobsz, head of investor relations with Gold Fields Ltd. (GFI).

He cited economic uncertainty around the world, future inflation and "a very real decline in global mine supply" as cause for his company’s optimism on the gold price.

"We are simply not finding any new reserves anywhere in the world," Jacobsz said at a New York Society of Security Analysts metals and mining conference. Further, deposits where gold can be relatively easily extracted are being tapped out, he said.

Meanwhile, investors have been snapping up the metal as a currency, uncertainty and inflation hedge.

"The current rally in the gold price is driven by investment demand," Jacobsz said. "We don’t see sentiment changing very soon."

Gold prices will remain strong as long as investors keep flocking to the metal, said Victor Flores, senior mining analyst with HSBC.

"There has been a great deal of interest in gold from investors," Flores said. "As long as gold ETF [exchange-traded fund] demand remains robust, you will see gold [prices] hold up." Although deflationary pressures are strong at the moment, higher inflation and weaker currencies will probably assert themselves down the road as results of government stimulus efforts to fight the economic downturn, Flores said.

"At the moment we are fighting deflation," Flores said. "What’s really lurking around the corner is inflation."

Investors historically have bought gold as a hedge against inflation because they see it holding its value more strongly than other assets amid rising prices. It is also bought as a safe-haven in times of political and economic uncertainty.

"Gold is the only asset class that withstood the current economic downturn," said William Biggar, president and chief executive of North American Palladium Ltd. (PAL), which last month completed the acquisition of Cadiscor Resources Inc. and its gold mine in Quebec.

"Our growth strategy is focused on precious metals and acquiring quality gold assets," Biggar said.

-By Matt Whittaker, Dow Jones Newswires; 201-938-5959;
[email protected]

Jim Sinclair’s Commentary

As a multi-rated pilot I can assure you that none of us wish to speak with the FAA, declare an emergency, or worst of all, tell them about anything flying near us that is not another aircraft with a clearly visible tail number.

The hassle is beyond your wildest imagination, yet this commercial pilot opted to file a report knowing what it means.

He must firmly believe that the aircraft was shot at with the intention of taking him down.

What would the police find if a hand held surface to air was used by a trained person?

Liberty Co., FAA to discuss report of object near plane
By MIKE GLENN Copyright 2009 HOUSTON CHRONICLE
June 1, 2009, 11:38PM

Liberty County Sheriff’s officials are expected to meet with the FAA on Tuesday to discuss what a Continental Express pilot reported as a “missile or rocket” flying near his airplane.

A pilot reported to the Federal Aviation Administration that at about 8:15 p.m. Friday, an object passed within 150 feet beneath the aircraft, sheriff’s officials said.

The aircraft was near the southern edge of the county, flying at about 13,000 feet, officials said.

“The pilot, from what we understand, was former military. He was able to get the coordinates down real quick,” said Cpl. Hugh Bishop with the Liberty County Sheriff’s Department.

Sheriff’s deputies searched Friday night for signs of evidence where a missile might have been launched or landed.

“We couldn’t find anything,” Bishop said.

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Posted at 11:05 PM (CST) by & filed under General Editorial.

Dear Mr. Saab,

I apologize for any slight you might have felt from the brief response by our reporter, Vito Racanelli, to your thoughtful letter of April 30. We do value our readers and their opinions. In fact, over my long career at Barron’s, I have seen many articles generated by an idea, question or doubt posed by one of our readers.

As to your specific complaint, that the "All That Glitters" story was inaccurate and unfair, we feel that it was an honest piece, based on several weeks of research and input from numerous sources, both pro and con. Obviously, who is correct will be determined by the merciless test of time. As you probably know, we revisit stories periodically and disclose whether we were right or wrong. We eventually will return to this one, too.

Reasonable people certainly can disagree, as you and Mr.. Racanelli do about the prospects of Tanzanian Royalty Exploration. Thanks for your input.

Regards,

Richard Rescigno
Managing Editor
Barron’s

 

Dear Richard,

Thank you so much for your polite and timely response. The world is filled with people that have different ideas about what is right and what is wrong. As an editor, your challenge is to make sure that the facts underlying your articles are correct and not suspect particularly for a newspaper/magazine of your reputed caliber.

On my behalf, I must say that I am more comfortable with the market’s recent assessment of Tanzanian Royalty Exploration (TRE). Following your story of April 13, 2009 TRE stock careened down to a low of $2.73 from a previous close of $4.05 on April 9th. The short position which was at an all time high on the day the story was published reached a higher peak slightly above 4,000,000 shares – double the norm.

While I appreciate your response on May 28th, you have not addressed or acknowledged the misinformation in your article that I had so clearly addressed. Allow me to indulge myself for a minute as I add to my thoughtful letter of April 30th so that the gross inaccuracies and misrepresentations of your article are not left unhealed.

1) Stockholder breakdown… Your article states that 83% of TRE shareholders are American. If you check your facts, you will find 83% of registered shareholders are Americans but they represent less than 20% of the company’s total shareholders! Registered shareholders have obtained their shares in Certificate form or are directly registered with the Transfer Agent. The correct figures are 43% of the company’s stockholders are from the U.S. and 57% are Canadian or other. Could it be that the several weeks of research and input to Barron’s editorial staff must have been from the wrong sources?

2) Accounting issues… Your publication and its big brother The Wall Street Journal have railed against the onerous provisions of Sarbanes Oxley, which were designed for mega corporations and have done little to stop the inordinate levels of abuses revealed in the last two years! Yet you pick on a statement on page 15 of the TRE Annual Report that states "we have limited accounting personnel with expertise in generally accepted accounting principles to enable effective segregation of duties over the transaction process with respect to financial reporting of matters and internal controls over financial reporting". You fail to state that it is management that has openly come out with this statement which is a direct consequence of Sarbanes Oxley. The CFO in Toronto is a CPA and there is a CPA equivalent at TRE’s exploration office in Tanzania. Out of a total of 53 employees, six are full time on the accounting process. I would challenge the Dow Jones group to have that kind of ratio! Meanwhile, note that KPMG, a world class auditor, has given their approval on page 17. Furthermore this a Canadian company attempting to satisfy both Canadian and U.S. requirements which is quite a challenge for a company of this size!

There are many more examples of failure to fact checking massaged into innuendo that constitutes an article with the intention to destroy, not inform.

For the short interest to rise and peak with the article would suggest that the people who informed Mr. Racanelli took good advantage of him, of you and of Barrons.

Richard, I could go on and on. The facts that I have presented on April 30th and the few that I present today speak for themselves. If they are investigated in a true journalistic fashion (in the old tradition of Barron’s faithful style), they truly put into question the value and integrity of your publication. At first glance, it appears you have been the unconscious victim of a "short play". As the editor you will come to your senses quickly and revisit this story with the real unaltered truth on a front page story. I can just see the headline "Tanzanian Royalty Exploration proves Barron’s wrong", with a sub-headline "The greatest company growth story based on a return to traditional mining… Jim Sinclair does it again!"

The objective of a truly world class financial publication should be to present facts with basis so that opinions may be formed correctly and decisions taken correctly on behalf of your readers.

Thank you again for your attention.

Faithfully Yours,
SS

Posted at 3:30 PM (CST) by & filed under In The News.

Dear CIGAs,

I don’t often ask you to review two postings. Today I have to.

Who knows best what Communism looks like than former and maybe present Communists?

Secondly, the letter posted yesterday written by Andrew Cuomo, AG of New York State, is revealing of the calibre of financial leadership we have. Today is the day the US officially enters into a Communist state, if not by edict then certainly in practice.

God help us all!

American capitalism gone with a whimper
Stanislav Mishin
From PRAVDA.ru June 1, 2009

It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.

True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.

Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.

First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather then the classics. Americans know more about their favorite TV dramas then the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blind the foolish.

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Jim Sinclair’s Commentary

The key point to China’s increase in gold holdings is that the world was informed not over six years, but practically speaking, in one day.

What does that mean for the dollar when young Chinese students are smart enough, if not a tad rude, to laugh when the Secretary of the US Treasury informs them that the dollar is safe?

Why is China Buying Gold?
Jun 1st, 2009 | By Byron King

Remember the old expression, “I wouldn’t do that for all the tea in China.” People used to associate China with tea. Well, now it’s time to associate China with gold, and a lot of it. Because the Chinese recently announced that they control over 33.89 million ounces of gold for monetary purposes. That’s an increase of 75% in Chinese gold holdings over the past six years.

This kiloton of Chinese gold makes the Middle Kingdom the world’s sixth largest holder of the yellow metal. The U.S. — courtesy of President Roosevelt’s gold confiscation in 1933 – tops this list of the world’s largest gold holders, followed by Germany, the IMF, France and Italy.

How did the Chinese accumulate so much gold? China purchased it over the past six years through its State Administration of Foreign Exchange (SAFE). SAFE is quite distinct from the People’s Bank of China (PBOC). The SAFE purchases meant that the gold did not appear as part of China’s officially reported monetary reserve figures.

The Chinese gold purchases, evidently, were part of a slow and steady buying program between 2003 and the present. It makes you wonder what the Chinese were thinking back in 2003. I happen to know, courtesy of an acquaintance at the Naval War College, that the Chinese were quietly forecasting that the U.S. would destroy its dollar by going to war in Iraq.

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Jim Sinclair’s Commentary

Factor the following in to the absolute truth that if when GM and Chrysler come out of bankruptcy, post 60 day car sales MUST BE RISING or the s**t will hit the fan big time for whatever is then left of the US dollar.

Subprime meltdown over; now comes the bad news

So much has been made of the subprime mortgage meltdown that you would think it was almost totally responsible for the economic collapse, and that once the subprime problem was fixed then the worst would be over.

Unfortunately nothing could be further from the truth, despite hitting new highs in foreclosure listing. Instead it was the first round of a three part collapse, and we are on the edge of the second round.

I will demonstrate with a fantastic series of charts below, most of them were created by the T2 Partners.

Round One

First, let’s take a look at the subprime and overall housing market.

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As you can see, the huge wave of subprime mortgages resettings from "teaser" rates to market rates has virtually ended.

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Jim Sinclair’s Commentary

Northwestern Mutual is generally known as a responsible company. No doubt like other insurers it probably lost a fair amount on dodgy fixed income in the past few years.

Note his comment on downside potential in stocks vs. gold.

Northwestern Mutual Makes First Gold Buy in 152 Years
By Andrew Frye

June 1 (Bloomberg) — Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in 152 years to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped 30 cents to $980 at 11:47 a.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder owned Northwestern Mutual, based in Milwaukee, ranks thirds by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

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Jim Sinclair’s Commentary

Today investors have rewarded failure by goosing equities over 200 points. Bankruptcy is failure no matter how it is spun. The new means of bankruptcy in screwing the bond holders therefore has to be considered as having punished production.

There has never been nor ever will be a society that can survive in leadership with that approach.

The entire mass of money bunny glee assumes that car sales will be no less than holding the 10,000,000 level after bankruptcy.

I am sure all government buying of vehicles will take place the month after GM and Chrysler come out of bankruptcy.

If car buying craters after that, as President Obama said today – what is good for GM is good for the USA. The other side of that is what kills the Second Coming of GM and Chrysler will tank the US dollar as the common share of the USA.

This is going to be a cold, hard winter.

U.S. Auto Sales Likely Tumbled 35% on Chrysler, Jobs (Update1)
By Alex Ortolani and Doron Levin

June 1 (Bloomberg) — Chrysler LLC, idling plants and shutting dealerships in bankruptcy, probably helped shrink the U.S. auto market by 35 percent in May as the industry endured its worst start to a year since at least 1976.

The seasonally adjusted sales rate tumbled to 9.2 million last month from 14.2 million a year earlier, based on 7 analysts surveyed by Bloomberg. Chrysler may have fallen 51 percent and General Motors Corp., which filed for bankruptcy today, may have fallen 37 percent, according to 5 analysts.

May sales at that rate would mark a fifth straight month at fewer than 10 million units, the deepest slump in 33 years of Bloomberg data. U.S. joblessness at the highest since 1983, Chrysler’s Chapter 11 case and GM’s slide toward court protection all likely helped keep buyers out of showrooms.

“It’s still a rough road out there,” said Jeff Schuster, an automotive sales analyst with J.D. Power & Associates in Troy, Michigan. “There’re still a lot of issues with the economy and a lot of uncertainty in consumers’ minds.”

GM, the biggest U.S. automaker, and No. 3 Chrysler began receiving emergency federal loans in December while they worked to restructure outside of court.

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Jim Sinclair’s Commentary

Even the kids in China understand the future of the US dollar.

Geithner gets laughed at by Chinese students when saying $ assets are safe
June 1, 2009
Tom Bawden

Geithner tells China its dollar assets are safe

Mr Geithner, in China on his first visit as US Treasury Secretary, reiterated that US would cut its huge fiscal deficits

Timothy Geithner moved today to reassure the Chinese Government that its huge holdings of dollar assets were safe as he reaffirmed his faith in a strong US currency.

Mr Geithner, in China on his first visit as US Treasury Secretary, sought to allay concerns that Washington’s growing budget deficit would fan inflation which, in turn, would undermine the dollar and US bonds.

“Chinese assets are very safe,” Mr Geithner said, answering a question after his opening address at Peking University this morning.

His answer was greeted with laughter by the students, who question the wisdom of China spending huge amounts of money on US bonds instead of improving domestic living standards.

China is the biggest foreign owner of US Treasury bonds, holding $768 billion (£468 billion) at the end of March.

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Jim Sinclair’s Commentary

Just because they busted their bank with unregulated paper isn’t a good enough reason for regulation of their affairs in their opinion.

Even in Crisis, Banks Dig In for Fight Against Rules
By GRETCHEN MORGENSON and DON VAN NATTA Jr.
June 1, 2009

As the financial crisis entered one of its darkest phases in October, a handful of the nation’s largest banks began holding daily telephone sessions. Murmurs were already emanating from Washington about the need for a wide-ranging regulatory overhaul, and Wall Street executives girded for a fight.

Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives — the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster.

The nine biggest participants in the derivatives market — including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America — created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money.

To oversee the consortium’s push, lobbying records show, the banks hired a longtime Washington power broker who previously helped fend off derivatives regulation: Edward J. Rosen, a partner at the law firm Cleary Gottlieb Steen & Hamilton. A confidential memo Mr. Rosen drafted and shared with the Treasury Department and leaders on Capitol Hill has, politicians and market participants say, played a pivotal role in shaping the debate over derivatives regulation.

Today, just as the bankers anticipated, a battle over derivatives has been joined, in what promises to be a replay of a confrontation in Washington that Wall Street won a decade ago. Since then, derivatives trading has become one of the most profitable businesses for the nation’s big banks.

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Jim Sinclair’s Commentary

It is comforting to know that time tested experience honed in the running of major enterprise is the qualified hand that now molds the USA’s business future as a nation.

Any guess at his fraternity association at Yale?

The 31-Year-Old in Charge of Dismantling G.M.
By DAVID E. SANGER
Published: May 31, 2009

WASHINGTON — It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.

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But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing — “he’s got this beard that appears and disappears,” says Steven Rattner, one of the leaders of President Obama’s automotive task force — Mr. Deese was thrown into the auto industry’s maelstrom as soon the election-night parties ended.

“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”

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Jim Sinclair’s Commentary

A never ending story. Remember the Russian experience here and what it did to the USSR?

17,000 US troops in Afghanistan by mid-July
Sun, 31 May 2009 20:39:35 GMT

The bulk of the extra 17,000 US troops will be deployed in Afghanistan by mid-July as Washington strives to tighten its grip on the region.

"10,000 marines are beginning to arrive now and will continue to arrive for the next month and a half or so and they will be principally located in Helmand but also in Farah," Colonel Greg Julian, spokesman for US forces told Reuters on Sunday.

He added that some 7,000 US army troops along with "additional helicopters" will also be deployed to the mainly "rural areas" of southern Kandahar province by the set date.

Julian said that a further 4,000 troops will also be sent to the south and west of the war-torn country by August, mainly to train Afghan security forces.

Despite the growing presence of foreign troops in the southern Helmand province and the western Farah district, the area is considered as a haven for insurgents, where many NATO alliance troops deployed in the country, have met their deaths.

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Jim Sinclair’s Commentary

Destabilization? There are 2,500,000 Pakistanis homeless and on the march. What do you call that?

Pakistan ‘fears destabilizing’ US policies
Fri, 29 May 2009 07:09:53 GMT

The Islamabad government is worried that the US President Barack Obama’s move to boost its military presence in Afghanistan could further destabilize Pakistan.

Pakistan’s Dawn News revealed on Friday that Civilians and military officials in Islamabad believe that an increase of 21,000 US troops in Afghanistan could further destabilize Pakistan by pushing more militants across the border.

Sources said increased US military activity may also spark an influx of refugees from insurgency-hit southern Afghanistan into border areas of Pakistan.

Meanwhile, US Central Command chief Gen David Petraeus paid a secret visit to Islamabad during this week to allay Pakistan’s concerns that the troops build-up in the war-ravaged Afghanistan would add to its woes, according to the report.

"Gen Petraeus told his interlocutors that the US had very few options other than to increase the number of troops in Afghanistan and that all possible efforts would be made to minimize its fallout on Pakistan," a diplomatic source told Dawn.

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Posted at 2:20 PM (CST) by & filed under Jim's Mailbox.

Jim,

As you have said countless times, this is it and it is NOW!

Replace Dates Country and Dollars with Now, the USA and Alf’s numbers!

CIGA "The Gordon"

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Dear Gordon,

Now there is an example of a currency event causing hyperinflation. Note when it happens, it explodes.

Regards,
Jim

Jim,

In determining the path to hyperinflation I come to a stopping point at the wage-price spiral. If the past few months have shown us anything, it’s that the average working-class American lacks the backbone to make a stand again corporate fascism. Hyperinflation requires wage increases so the consumer can still afford goods. In Weimar Germany, the labor unions were apparently quite powerful, which facilitated the process. In the present-day US, other than UAW and a couple of others, the labor class is nearly powerless in the economic process. There is a shortage of good jobs in the real economy and thus workers will be beggars and they will have little bargaining power.

In your model how will higher commodity prices and a Treasury bond selloff translate into higher wages in this economy under such conditions to initiate a wage-price spiral when the workers have such little power these days?

All the best,
CIGA Subir

Dear Subir,

Let us assume the US dollar goes into a free fall whereby groceries are rising in price by 20% per week. Nobody is going to work five days for what will only buy them a half day’s worth of food.

Your thoughts are driven by the assumption that hyperinflation is a demand pull or cost (wage push) type of inflation when it is not.

Hyperinflation has always been and will always be a product of prices escalating as a result of a currency falling in value rapidly.

Currency Hedge Funds internationally utilizing enormous leverage as short sellers will bring hyperinflation to the USA, not unions.

October/November of 2009 will give the US its first taste of hyperinflation since the collapse of the Confederate Dollar hit the South or from the collapse of the US Continental for the Colonial hinterland citizens still holding them.

Respectfully yours,
Jim

Dear Jim,

As your views on the economy, gold, Pakistan and just about everything else have been stellar, I have a lot of respect for your opinions.

If you would, can you please elaborate on ‘Israel’s Miscalculation", and if possible opine on the better alternative??

Thank you,
CIGA Ed

CIGA Ed,

A lot of Iran’s words are right now a bluff, but Israel cannot take the chance that it is either a bluff or will not eventually be true.

The potential for Israel, now unilaterally, to act in the extreme is high.

You do not practice full out unless you anticipate a need for it soon.

To demand, under penalty of law that every citizen seek a bomb shelter in practice is quite out of the ordinary.

Let’s pray Pakistan is not in Taliban hands at that time. The surge in Pakistan is much to do about nothing in terms of sustainability, the key element in containing the Taliban.

Jim