Posted at 9:59 PM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

No surprise there.

FDIC chief expects 2010 bank failures to exceed 2009
Monday, January 25, 2010, 8:32pm EST  |  Modified: Monday, January 25, 2010, 8:34pm

Reacting to President Barack Obama’s recent proposal to impose limits on the size and scope of banks, Federal Deposit Insurance Corp. Chair Sheila Bair said during a visit to Miami Monday that institutions should wall off their non-bank financial activities from their insured deposits.

On Thursday, Obama said he wants to prevent financial institutions that own a bank from also owning, investing in or sponsoring a hedge fund, private equity fund or proprietary trading operations that are not related to serving their customers. The president also said that large financial firms could not increase their national market share of assets other than insured deposits beyond a certain point.

Just before speaking to the Florida Banker’s Association on Monday night, Bair said she hasn’t seen enough details of Obama’s proposal to say whether she supports it or not. She said financial institutions could do a better job of walling of their FDIC-insured banks from some of their more risky financial activities so that the banks aren’t hurt by losses in those areas.

“The bulk of these problems actually occurred outside the insured deposit banks. Just look at Lehman Brothers and AIG,” Bair said.

She added that large institutions should have a self-liquidation plan filed with regulators in case they need to be wound down.

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Jim Sinclair’s Commentary

Doing business with major Chinese companies has collateral benefits.

China Wealth Fund Weighs New Commodities Bets After 2009 Gains
By Bloomberg News

Jan. 27 (Bloomberg) — China’s $300 billion sovereign wealth fund is considering new investments in resource-related companies after bets on commodities producers from the U.S. to Kazakhstan paid off in 2009.

China Investment Corp. increased spending on energy and minerals assets last year to profit as the global economy recovers. The Beijing-based fund avoided the worst of the credit crunch in its first full year in 2008 and may have had a return of more than 10 percent in 2009, said London-based Jan Randolph, director of sovereign risk, analysis and forecasting at IHS Global Insight.

“They have timed the upside well both in market terms, but also to fit in with the longer-term diversification strategy,” Randolph said.

CIC has had “early” talks for direct investments in Brazil, the world’s second-biggest iron-ore exporter, and Mexico, the No. 2 silver producer, CIC Chairman Lou Jiweisaid at the Asian Financial Forum in Hong Kong on Jan. 20. Jiwei pumped about $10 billion into commodity-related companies in the second half of 2009, according to data compiled by Bloomberg.

With China’s reserves at $2.4 trillion and swelling by an average of $37.8 billion a month last year, CIC has asked the government for another $200 billion, the Economic Observer reported Nov. 21, citing a person it didn’t identify.

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Jim Sinclair’s Commentary

If this is the estimate based on a firm economy, consider what will occur if bottom bouncing fails.

Deficit to hit $1.35 trillion in 2010, CBO says
Economic growth to remain ‘muted,’ analysts estimate
By Robert Schroeder, MarketWatch
Jan. 26, 2010, 3:18 p.m. EST

WASHINGTON (MarketWatch) — The U.S. government will in 2010 record its second-biggest budget deficit since World War II, the Congressional Budget Office estimated Tuesday, while economic growth will probably stay "muted" for the next few years.

Assuming current laws and policies remain unchanged, the deficit will hit $1.35 trillion in 2010, CBO said in its annual budget outlook. The report was released about one week before President Barack Obama transmits his fiscal 2011 budget to Congress, and underscored the fiscal challenges facing the year-old administration.

CBO expects that the economy will continue to grow, albeit at a slower pace than in earlier recoveries. The unemployment rate will average more than 10% during the first half of 2010 before beginning a gradual decline, the congressional analysts also estimate

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Jim Sinclair’s Commentary

$80 billion will not scratch the surface of the problem. Note the starting of aid to states.

Senate Democrats Said to Consider $80 Billion Jobs Legislation
By Brian Faler

Jan. 26 (Bloomberg) — Lawmakers are set to consider a jobs-stimulus package totaling about $80 billion that would provide tax credits to small and medium-sized businesses that hire workers, a Democratic senator said.

The plan, to be presented today to Senate Democrats, would include aid to state governments to prevent layoffs and additional funding for infrastructure projects, said the senator, who asked not be identified. The package also will likely include energy-related provisions such as incentives to weatherize homes, a Senate aide said.

Democratic leaders hope to have the measure on the Senate floor by the second week in February, the aide said, speaking on condition of anonymity.

The proposal is smaller than an economic aid package approved last month by the House, in part because lawmakers plan to approve extensions in unemployment benefits costing tens of billions as part of separate legislation.

The House plan, costing more than $150 billion, eschewed small business tax cuts in favor of spending $53 billion to extend unemployment benefits including so-called COBRA subsidies to help the jobless buy health insurance.

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Jim Sinclair’s Commentary

Hello, I am from the government here to help you with fast processing and effective delivery.

Foreclosure relief program riddled with flaws
Latest effort to save homes having only limited impact, faces challenges
By John W. Schoen
updated 9:59 a.m. ET, Tues., Jan. 26, 2010

Millions of Americans who are struggling to save their homes from foreclosure are trapped in a labyrinth of disappointment and misinformation created by the very institutions they’ve been told are trying to help them.

Ten months into the government’s third program in two years to stop a record wave of foreclosures, homeowners, housing counselors, consumer advocates and attorneys working with borrowers report that the latest effort is falling far short of its goal. In many cases, lenders are moving to foreclose even after homeowners get approved for loan modification, housing counselors and attorneys say.

The problem, they say, goes beyond the paperwork snafus and staffing shortages at lenders and mortgage servicers that have created massive bottlenecks for the millions at risk of losing their homes. Those have plagued the government’s foreclosure relief efforts since the first government-industry joint program, the Hope Now Alliance, was launched in October 2007.

Homeowners face numerous hurdles trying to get their mortgage modified. In some cases, applications are rejected with little or no explanation. It’s impossible to independently verify if a homeowner qualifies because the Treasury has not disclosed the eligibility formula used by lenders — a complex set of calculations that housing counselors and consumer attorneys have dubbed “the black box.” Housing attorneys report that some lenders are ignoring the program’s guidelines altogether and moving to foreclose without properly reviewing mortgages for possible modification.

“It’s been a stubborn challenge," said a Treasury official, who agreed to an interview but requested anonymity. "But this is something that’s never been done before."

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Jim Sinclair’s Commentary

The political axiom is if you cannot stop it, adopt it.

Interest rates must rise as international funding of the US deficit is not going on much longer or at a satisfactory level. Funding the deficit then has to turn in on itself, impacting all varieties of US Treasuries across the interest rate curve. Set a rate as a spread rather than as a hard number.

Sinclair16

Fed mulls new benchmark rate.
Federal Reserve officials begin a two-day FOMC meeting today, and one of the items on the agenda is whether to adopt a new benchmark interest rate to replace the one that’s been used for the last two decades. Instead of the federal funds rate, officials may choose to use the interest paid on excess bank reserves.

Jim Sinclair’s Commentary

The devil is always in the details.

This is not going to do much at all and politically can only harm his liberal power base.

Now note the job stimulus bill to control political damage caused by "Volcker Rules" and "Budget BS" with the liberal support.

White House aims for stimulus, and reduced spending.
Gearing up for the State of the Union address tomorrow, the White House released details on a series of initiatives meant to help middle-class families, including a set of tax credits and an automated-IRA system for workplaces. Obama also proposed a three-year freeze on domestic spending accounting for one-sixth of the federal budget. The freeze would save $250B by 2020. In addition, Democratic lawmakers are considering an $80B jobs-stimulus package that would provide tax credits to small and medium-sized businesses that hire workers.

Jim Sinclair’s Commentary

The only way a Democrat will win in November is by shifting parties.

Management just doesn’t get it. Main Street makes or breaks November. Wall Street is meaningless during this time.

People on the unemployment line have never heard of Volcker. You have to love the MOPE of "Volcker Rules." Someone honestly believe that will get votes on Main Street in November.

Banks pull another $1 billion from small business lending
By Catherine Clifford, staff reporter
January 18, 2010: 2:50 PM ET

NEW YORK (CNNMoney.com) — The nation’s biggest banks cut their collective small business lending balance by another $1 billion in November, according to a Treasury report released late Friday. The drop marked the seventh straight month of declines.

The 22 banks that got the most help from the Treasury’s bailout programs have cut their small business loan balances $12.5 billion since April, when the Treasury began requiring them to file monthly reports on the tally. The banks’ total lending has fallen 4.6% in that seven-month period, to $256.8 billion.

As Wall Street megabanks return to health — and celebrate with lavish bonuses — President Obama and his administration have been pushing financiers to help spur a Main Street recovery. Small business owners are still reporting difficulty finding banks willing to extend the credit they need to launch, run and grow their ventures.

In December, the President met with a dozen CEOs of the nation’s biggest banks to pressure them to reverse their small business lending declines.

Hitting bottom: There are some signs the credit drop may be at or near its nadir.

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Jim Sinclair’s Commentary

This is modest progress, but only the uptick rule and mandatory borrowing of shares to deliver against a short sale is meaningful.

SEC May Approve Restrictions on Short Sales When Stocks Plunge
By Nina Mehta

Jan. 23 (Bloomberg) — Concern that short-sellers accelerate stock declines may prompt the Securities and Exchange Commission to adopt a rule next month aimed at curbing bearish bets when equities are plunging.

The regulation would require the trades be executed above the best existing bid in the market when shares fall 10 percent in a day, said Brian Hyndman, the senior vice president in transaction services at Nasdaq OMX Group Inc. In a short sale, an investor borrows an asset and sells it, hoping to profit from a decrease by repurchasing it later at a lower price.

Forcing short sellers to wait for a stock to rise above the best price bid may prevent them from flooding the market with sell orders and causing losses to multiply. Some exchange officials say the restrictions known as uptick rules don’t work, citing studies that show they may be less effective during panics that drive prices down and volatility up.

“There is no empirical data to support the introduction of a new rule,” Hyndman said yesterday at a securities industry conference in Chicago. “But this is the least intrusive of the proposals the SEC was considering.”

Hyndman expects the SEC to adopt a so-called alternative uptick rule that includes a 10 percent trigger, changing regulations that were eliminated from U.S. markets in 2007. The commission asked the public last April to comment on strategies to cushion the impact of short selling following criticism that hedge funds and other speculators used trading tactics to deepen market retreats that began in 2008.

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Jim Sinclair’s Commentary

No military base equals no rating?

Standard & Poor’s warns may downgrade Japan

TOKYO — Standard & Poor’s warned Tuesday that it might downgrade its credit rating for Japan’s sovereign debt, saying efforts to put the public finances in order were slowing under the new government.

The ratings firm revised its outlook on Japan’s "AA" long-term government bond rating to "negative" from "stable".

"The outlook change reflects our view that the Japanese government’s diminishing economic policy flexibility may lead to a downgrade unless measures can be taken to stem fiscal and deflationary pressures," S&P said.

"The ratings on Japan could fall by one notch if economic data remain weak and measures to boost medium-term growth are not forthcoming, given the country’s high government debt burden and its weak demographic profile."

An "AA" rating, the third highest possible, means Japan is seen as having an extremely strong capacity to repay its borrowings.

The Organisation for Economic Cooperation and Development has warned that Japan’s public debt is set to soar to more than 200 percent of gross domestic product by 2011.

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Jim Sinclair’s Commentary

Sounds like a sci-fi movie where the machines take over the Earth.

Wall Street has invented this disaster. Why should the algorithms not melt the exchanges as well? It only seems fair.

Computer-driven trading raises meltdown fears
By Jeremy Grant in London
Published: January 25 2010 23:06 | Last updated: January 25 2010 23:06

An explosion in trading propelled by computers is raising fears that trading platforms could be knocked out by rogue trades triggered by systems running out of control.

Trading in equities and derivatives is being driven increasingly by mathematical algorithms used in computer programs. They allow trading to take place automatically in response to market data and news, deciding when and how much to trade similar to the autopilot function in aircraft.

Analysts estimate that up to 60 per cent of trading in equity markets is driven in this way.

Concerns have been highlighted by news that NYSE Euronext, the transatlantic exchange operator, has fined Credit Suisse proprietary trading arm for the first time for failing to control its trading algorithms. In the Credit Suisse case, its system bombarded the NYSE’s systems with hundreds of thousands of “erroneous messages” in 2007, slowing down trading in 975 shares.

The case was far from isolated, say traders. CME Group, the Chicago-based futures exchange, is investigating a case this month where a trader in “mini” S&P Index futures contracts “inadvertently traded approximately 200,000 contracts as both buyer and seller”.

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Jim Sinclair’s Commentary

Politics runs economics, not common sense.

Senate rejects task force to tackle deficit
Vote comes hours after new estimate of $1.35 trillion deficit for 2010

WASHINGTON – The Senate has rejected a plan backed by President Barack Obama to create a bipartisan task force to tackle the deficit this year.

The special deficit panel would have attempted to produce a plan combining tax cuts and spending curbs that would have been voted on after the midterm elections. But the plan garnered just 53 votes in the 100-member Senate, not enough because 60 votes were required. Anti-tax Republicans joined with Democrats wary of being railroaded into cutting Social Security and Medicare to reject the idea.

Obama endorsed the idea after being pressed by moderate Democrats. The proposal was an amendment to a $1.9 trillion hike in the government’s ability to borrow to finance its operations.

The defeat of the Obama-backed plan comes just hours after the Congressional BudgetOffice released its prediction of a $1.35 trillion deficit for this year.

The report sees a slow rebound of the economy, with unemployment averaging 10.1 percent this year as the economy grows by just over 2 percent. It would grow only slightly more next year with an unemployment rate of 9.5 percent.

"Economic growth in the next few years will probably be muted in the aftermath of the financial and economic turmoil," the CBO report says.

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Jim Sinclair’s Commentary

The greatest success MOPE has had in the last three weeks is that it has convinced the Sheeple that Greece is more of a challenge to the euro than states of the US are to the US dollar. Fundamental reality will out.

Public Employee Unions Are Sinking California
Months after closing its last budget gap, the Golden State is $20 billion in the red.
By STEVEN GREENHUT

An old friend of mine has a saying, "Even the worm learns." Prod one several hundred times, he says, and it will learn to avoid the prodder. As California enters its annual budget drama, I can’t help but wonder if the wisdom of the elected politicians here in the state capital equals that of the earthworm.

The state is in a precarious position, with a 12.3% unemployment rate (more than two points higher than the national average) and a budget $20 billion in the red (only months after the last budget fix closed a large deficit). Productive Californians are leaving for states with less-punishing regulatory and tax regimes. Yet so far there isn’t a broad consensus to do much about those who have prodded the state into its current position: public employee unions that drive costs up and fight to block spending cuts.

Earlier this month, Gov. Arnold Schwarzenegger proposed a budget that calls for a $6.9 billion handout from Washington (unlikely to be forthcoming) and vows to protect current education funding, 40% of the state’s budget. He does want to eliminate the Calworks welfare-to-work program and enact a 5% pay cut for state employees. These are reasonable ideas, but also politically unlikely.

As the Sacramento Bee’s veteran columnist Dan Walters recently put it, the governor’s budget is "disconnected from economic and political reality." Mr. Walters suspects what will happen next: "Most likely, [the governor] and lawmakers will, to use his own phrase, ‘kick the can down the road’ with some more accounting tricks and other gimmicks, and dump the mess on whoever is ill-fated to become governor a year hence."

Mr. Walters’ Jan. 10 column was fittingly titled, "Schwarzenegger Reverts to Fantasy with Budget Proposal." Shortly before releasing his budget, the governor and Democratic state Senate President Pro Tem Darrell Steinberg held a self-congratulatory news conference. Mr. Steinberg used the spotlight to bemoan what he deemed to be unfair attacks on California. Mr. Schwarzenegger told a hokey story about his pet pig and pony working together to break into the dog’s food. It was an example, he said, of how "last year, we here in this room did some great things working together."

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Jim Sinclair’s Commentary

China does the right thing for China and still gets bashed by the West.

China raises select reserve ratios.
Asian markets traded heavily down (see details below) following reports that China moved forward today with a planned increase in required reserves for some of its banks. Some banks were also told to suspend new lending for the rest of the month. In another move that surprised markets, the central bank left yields unchanged in its closely watched one-year bill sale, though analysts think this is just a pause in tightening policy and not a reversal.

Posted at 5:53 PM (CST) by & filed under Jim's Mailbox.

Notes From Underground: Will the last person at Davos please sweep out the stables?
Yra | January 26, 2010 at 4:51 pm

All we can do is ponder why Davos is in the limelight again. This self-absorbed group is meeting of under the banner of the World Economic Forum again to discuss the problems of the global financial system. If we took a roll call, we would find that most of the attendees were the megalomaniacs who got us into this mess. Yes, we know that Nouriel Roubini and other doomsters are there to ensure some debate. But as always their views provide the comic relief of court jesters. Maybe these leaders of industry and all-right thinking will find new ways to look for aid from world governments after their ill-thought out plans go awry. Adam Smith himself warned of "Kapitalists" and their acts of subterfuge emanating from cocktail parties. Enough is enough, but we wished to put an end to the nonsense that is reported out of this Potemkin village of intelligent thought.

 

Paper Tiger Operation
CIGA Eric

The paper tiger operation on gold and silver continues to run stops and shakeout weak hands. State of the Union address, another series of large bond auctions, Fed meeting, and basic (interpreted as not the only) seasonal tendencies for gold & silver – see chart, adds up to shooting fish in barrel. Keep your eyes peeled for bearish gold comments from Prechter on the newsfeeds. It would seal the fate of another paper tiger operation.

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Dear Jim,

Am I correct in saying it does not matter what the rest of the world does… only what the Chinese do? This sounds reasonable seeing as they are now the largest producer and consumer of gold (COT is toast and so is the dollar).

Best,
CIGA BT

Dear Big Tatanka,

You are 100% correct.

Regards,
Jim (Little Tatanka)

Chinese dig deep to join the gold rush
Sellers enjoy a golden period as demand soars, China named as the world’s biggest gold consumer
Tania Branigan in Beijing
guardian.co.uk, Monday 25 January 2010 20.04 GMT

The assistant pushed the red velvet sacks across the counter discreetly. The customer quickly slipped them into her bag. With a brief, nervous look around, she walked briskly from the shop, already clutching her car keys.

Few people feel comfortable lugging around a kilo of pure gold bars. But that doesn’t stop Chinese shoppers from thronging to Caibai, the number one place for buying the precious metal. The Beijing store’s 5,000 daily customers are at the forefront of a new gold rush.

Since 2007, when South Africa fell behind, China has been the world’s biggest gold producer. Now the World Gold Council and industry analysts believe it may have overtaken India – for centuries the dominant buyer – to become the biggest consumer too. The China Gold Association estimated demand would exceed 450 tonnes last year, up from 395.6 tonnes in 2008 (the actual figures are not yet available).

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Dear Eric,

Japan lacks a plan?

What exactly is the US’ plan to rein in debt? What is the Brit’s plan to rein in debt?

Why does this look prejudice? This is a prime example of the kettle calling the pot black!

Regards,
Jim

Japan’s Ratings Outlook Cut on Lack of Hatoyama Plan
CIGA Eric

Japan’s sovereign credit rating outlook was lowered by Standard and Poor’s on concern Prime Minister Yukio Hatoyama’s administration lacks a plan to rein in the world’s largest debt load.

Clearly Japan remains the only country lacking a plan to rein in debt.

The yen pared gains immediately after the release, before resuming a rally
against the dollar.

Yeah that persistent Yen strength despite the prevailing consensus. The Yen has slammed into formidable gap resistance. It sits over price like an anvil. There’s some work to be done here, but I suspect the outcome will surprise the consensus.

Japanese Yen ETF (FXY):
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Source: bloomberg.com

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Posted at 4:56 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

The market seems a bit confused in today’s session as conflicting trades could be seen across a variety of markets. The Yen and the Dollar were both higher as those currencies generally benefit when the “risk averse” trades are in play. The bond market moved higher with prices making a 5 week high before setting back slightly as that market too was the recipient of safe haven flows. Commodities were generally out of favor today leading to weakness in both silver and copper, yet gold was higher nonetheless. I prefer to see this as a good sign as it testifies that gold is not being completely overwhelmed by hedge fund algorithm-based selling but seems to have currently a long side sponsor down near and just below the $1100 level. This level is important from a technical perspective so the big sponsors of gold will have to stave off the bearish assault aided by speculative long liquidation out of the managed money camp to prevent further liquidation.

The mining shares as indicated by the HUI bounced higher following gold bullion at least for today but that index has a fair amount of work to yet accomplish before technically oriented buying will increase. For starters it will have to climb back above 437 – 438 to spook the recent bearish converts along with the usual always-present sellers in that sector.

The bonds are worth watching right now because they have just about completed a 50% retracement of their latest decline that began in late November and continued into the end of the year. You might recall that was when a wave of “happy talk” was dominating the US markets with the Santa Claus rally in equities in full swing. The New Year brought the stark realities of an economy that is moving in its “L” shaped recovery however instead of the big “V” that many analysts had convinced themselves was shortly in order. With what is occurring in the states across the US, this “L” recovery runs the risk of looking more like a pause in an impending storm. For whatever reason, the bond market is suspicious of improving economic conditions to begin this new month of the year and has taken long term yields much lower than when the markets opened for trading at the beginning of this month. A push through today’s high that has some legs to it and the bonds will have voted what they are looking for.

I am not reading too much into today’s bounce in the equity markets mainly because after falling vertically as they have, some profit taking by shorts ringing the cash register is not out of order. Technical momentum is negative in the equity markets right now so before the bulls can get too happy about today’s bounce higher, they will need to take prices back up through last Friday’s high to recruit more converts to their side.

The Dollar’s move higher has brought it back into the same zone where it encountered some strong selling resistance back in December last year. There are bearish divergence signs showing up in many of the technical indicators that I employ which in themselves, do not mean that much, but which give reason for traders to be alert for signs of an upside failure. Dollar bulls will have to be able to muster sufficient force to take the USDX above 79 and keep it there for a couple of sessions if they expect further upside. While the bulls have managed to put in a short term bottom in the greenback, they have yet to overcome the rather resolute selling that has surfaced in the last few days. Stay tuned as this one plays itself out.

Friday’s session will bring in some end-of-the-month positioning as next Monday begins the trading for a brand new month. Expect an increase in volatility which is hard to believe considering where we already are in regards to these herky-jerky markets.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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Posted at 11:09 PM (CST) by & filed under In The News.

"The principle of spending money to be paid by posterity under the name of funding, is but swindling futurity on a large scale."
–Thomas Jefferson

 

Dear CIGAs,

I would label this political and economic suicide. Who is advising these people? All the economic recovery is so far is bottom bouncing.

Read today’s FDIC article by CIGA Richard B to understand the condition of the US banking industry.

Consider the fact Tishman folded on commercial loans this week in excess of $5 billion. It was reported as returning the collateral.

Main Street did not cause this problem as the mortgage four-flushers they are now being painted as.

Wall Street and the Bahnhofstrasse caused this problem via the OTC derivative meltdown that killed everything else.

The public does not give a damn about the deficit. Main Street does not give a damn about the deficit. Ask someone in Detroit their opinion concerning that subject.

Main Street only cares about jobs. The voter rebellion cannot be blunted by more of this Wall Street thinking. Main Street hates the Banksters but that always ebbs and flows with the economy. Punishing Main Street for the spending sins of central government and financial sins of Wall Street is going to pour gasoline on the voter rebellion.

I have never accepted the excuse that management is stupid. Today may be an epiphany.

The administration is NOT going to win back Main Street by punishing Main Street in the spending sense. The only way for a Democrat to win in November is to change parties and become a Republican.

These people may really be DUMB. Who is advising them in their political panic?

If management is stupid rather than sly, we are REALLY IN TROUBLE.

Obama Seeks Freeze on Many Domestic Programs
By JACKIE CALMES
Published: January 25, 2010

WASHINGTON — President Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Mr. Obama’s State of the Union address on Wednesday and of the budget he will send to Congress on Monday for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, from air traffic control and farm subsidies to education, nutrition and national parks.

But it would exempt the budgets for the Pentagon, foreign aid, the Veterans Administration and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.

The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional debt the government is expected to accumulate over that time.

The initiative holds political risks as well as potential benefits. Because Mr. Obama plans to exempt military spending while leaving many popular domestic programs vulnerable, his move is certain to further anger liberals in his party. Senior Democrats in Congress are already upset by the possible collapse of health care legislation and the troop buildup in Afghanistan, among other things.

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Jim Sinclair’s Commentary

John Embry is conservative.

Click here to read John Embry’s latest article titled "Expect Gold To Gain More Than 30% This Year"

 

Jim Sinclair’s Commentary

Daddy Warbucks is not the famous "Our Crowd" Warburg family. He is a fictional character from the stage play Annie.

However the character represents a group that makes huge profits from the means and materials consumed in war versus the Banksters who make equal funds from shuffling paper.

#2 Warbucks, Oliver "Daddy"

Net Worth: $27.3 billion clip_image001
Source: Defense Industries
Age: 52
Marital Status: Divorced, one child
Hometown: New York, N.Y.
Education: S.U.N.Y. Stony Brook, B.S.

Iraqi conflict has been kind to Warbucks; recipient of multiple defense contracts; cat-food holdings also up. Since adopting daughter Annie, has spent or given away much of his fortune, but still fiction’s second-richest man. Rarely seen in public without bodyguards Punjab and Asp; both reputed to have mystical powers and great strength. Press reports charge Warbucks frequently pulls Annie out of school for globe-trotting jaunts with Sandy, her Airedale terrier. Member since 1924. — Matthew Herper

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My Dear Friends,

My African daughter told me today that she will be arriving on Wednesday to visit me for a few days.

What a wonderful piece of news that your daughter cares so much as to leave her family to visit her Dad.

You can be sure that I will keep you posted with what is happening Wednesday, Thursday and Friday, but updates to the site may be limited.

If anything important occurs that requires direct communication you will receive an email on the subject. If you have not already, sign up for our free email service in the top right corner of the homepage.

Regards,
Jim

 

Thought For The Day:

Washington belongs to Wall Street, but has no clue what their masters do for a living.

Lawmakers are clueless. We have always known this, but today was like electric shock to read the following.

Unbelievable. The FDIC is going to offer OTC derivatives to save the banking system that has been brought to its knees by OTC derivatives.

These guys in government really do not have a clue!

FDIC Mulls Securitizing Banks’ Troubled Assets: Report
Published: Monday, 25 Jan 2010 | 6:53 AM ET

The Federal Deposit Insurance Corporation (FDIC) in the US is considering packaging assets from failed banks into securities, the Financial Times reported Monday on its Web site.

The move would mark a milestone in government efforts to rid the banking system of troubled assets, as it will help restart the markets for mortgage-backed bonds, the paper wrote.

The FDIC has over $36 billion on its books from institutions that failed during the financial crisis, according to the FT.

The plan to use troubled assets to back securities is at a preliminary stage and a final decision will depend on finding a structure to provide a sufficient return, people involved in discussions told the paper.

The FDIC declined to comment to the FT.

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Nassim Taleb Lists Bernanke’s Six Problems

Nassim Taleb presents a list of six problems that encumber Federal Reserve chairman Ben Bernanke:

1. His education is in tools that aren’t helpful – and he doesn’t know it.
2. He studied the Great Depression, but the current economic environment is not comparable.
3. Bernanke doesn’t recognize that 99% of risk is tied to debt/leverage and the explosion of connectivity. It’s like he did not see a truck coming right at him.
4. He has no notion of nonlinearities, and how monetary policies can be responsive in non-linear ways.
5. He doesn’t understand fat tails.
6. He doesn’t realize that the biggest risk of failure is signified by the Federal Reserve. We do not need more regulation. We actually need smaller institutions.

In an interview with ai5000 editor Kip McDaniel, Taleb also says that investors need to understand the value of doing nothing with their money. "It’s like smokers," he explains. "The best thing you can do for a smoker’s health is to tell him not to smoke. And what has been the best investment over the past ten years? Cash and short-term bonds."

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Jim Sinclair’s Commentary

These countries have ancient traditions of constant warfare. There is no solution when the tradition is that grandchildren decades later will avenge the murder of a family member.

You cannot democratize those whose cultures are its antithesis.

Iran, Iraq, Afghanistan and Pakistan will bleed their enemies to death. The bleeding process is economic.

The dollar will not win this war.

See the movie "The Man Who Would Be King" to see Peachy’ and Danny’s experience with this problem.

More than 30 killed as bombers hit Baghdad
January 25, 2010

At least 36 people were killed today when insurgents set off a series of car bombs outside some of Baghdad’s best known international hotels, including one which hosts the offices of The Times.

The three huge explosions rocked the Iraqi capital shortly before the Government announced the execution of Saddam Hussein’s cousin Ali Hassan al-Majid, also known as "Chemical Ali". It was unclear whether there was any connection between the two events.

The first explosion, at 3.40pm, targeted the Ishtar Sheraton hotel, a Baghdad landmark on the eastern side of the Tigris, sending a huge plume of smoke into the sky. Shortly afterwards, a car bomb was set off at the Babylon hotel which is used by Iraqi travellers and sometimes for government meetings.

Oliver August, a correspondent for The Times, said that the final blast caused widespread destruction at the al-Hamra hotel, where the newspaper has its office.

August said that he watched from a balcony at the Hamra, on the western side of the river, as a gun battle broke out. He saw a white van bulldoze its way through the security cordon at high speed and stop only 15 metres (50ft) from the hotel.

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Jim Sinclair’s Commentary

Lest you forget, the US dollar rally was presented to us based on a sustainable US economic recovery. Then came the mindless algorithms.

December Existing Home Sales were reported at a seasonally adjusted annual rate of 5.45M this morning, below the 5.90M reading economists had forecasted. This marked a 17% drop from November; the biggest drop on record month over month.

 

Jim Sinclair’s Commentary

They better consider something, and fast.

Not to worry, the FDIC will probably get a US Federal full faith and moral guarantee.

The US is going guarantee everything then issue US Treasury Bonds to cover the FDIC bond guarantees.

US eyes bond issues to offload $36bn of troubled bank assets
By Aline van Duyn and Francesco Guerrera in New York
Published: January 25 2010 02:00 | Last updated: January 25 2010 02:00

The US Federal Deposit Insurance Corporation is working on plans to package billions of dollars of assets from failed banks into securities, a move that will help restart the still dysfunctional markets for mortgage-backed bonds.

If the FDIC goes through with the bond issues it would mark a milestone in government efforts to rid the banking system of troubled assets. The FDIC has more than $36bn (£22.4bn) in assets on its books from failed institutions seized during the financial crisis.

People involved in discussions said the plan to use the troubled assets to back securities – "securitisation" – is at a preliminary stage. A final decision, which could come in weeks, will depend on finding a structure to provide a sufficient return to the deposit insurance fund.

"The FDIC is going to be a big issuer in the securitisation markets this year," said Christopher Whalen, managing director of Institutional Risk Analytics. "This could lead the way in terms of recreating the securitisation market, as the FDIC deals could end up being the new template."

The FDIC plan is similar to a strategy used in the US savings and loan crisis by the Resolution Trust Corporation (RTC), the state-owned asset management company charged with liquidating assets from insolvent lenders in the 1980s. "The FDIC is dusting off the playbook of the RTC," said one person involved in the talks. The FDIC – created by the US government to guarantee deposits after a wave of bank failures during the Great Depression – declined to comment.

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Jim Sinclair’s Commentary

It doesn’t get much bigger in historical commercial real estate failures, but mum is the word.

MOPE works in reverse as well as forward. What you don’t want to say comes at the bottom of the column on page #44.

Major NY real estate project goes to creditors.
Tishman Speyer Properties and BlackRock (BLK) turned over their massive New York real estate project to creditors this morning. The two owners bought the Stuyvesant Town and Peter Cooper Village apartments for a record $5.4B in 2006, and said the decision to hand the property over to creditors was because "a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city." The decision marks the collapse of one of the most high-profile deals of the real estate boom.

 

Jim Sinclair’s Commentary

So politically motivated, and in the political sense, not aimed properly.

Notes From Underground: Jim O’Neill & the 5% Solution
Yra | January 24, 2010 at 8:44 pm

We know, we know. The president’s threatened war on Wall Street is the supposed news of the week, but to us the proposal is so convoluted and fraught with political expediency that we have yet to really figure out its impact. We are on record as favoring the type of change that was put on the table and it has the right name: THE VOLCKER RULE. Barney Frank, who ought to have jumped on this, cautions that this could be a 3- to 5-year process. When one of the most "liberal" voices in the Congress says this, we know that whatever sausage grinds its way forward it will not have a lot of spice but will be a bland concoction. Next thing we will hear is that they are convening a "blue ribbon panel." This Congress is running from its own shadow and is now terrified of making any type of mistake.

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Posted at 6:50 PM (CST) by & filed under General Editorial.

Jim Sinclair’s Commentary

You want to know the facts about the US banking system?

Please read CIGA Richard’s excellent and detailed analysis. Alternatively you can sleep on, lulled by MOPE.

Dear CIGAs,

Below is a study of key FDIC enforcement actions I have been working on for some time.

Best regards,
CIGA Richard B.

STUDY OF KEY FDIC ENFORCEMENT ACTIONS 2005 TO DATE

Click here to open the full article in PDF format…

During 2009, there was an explosion in the FDIC’s handing down of the most serious kinds of enforcement orders it has the power to impose on member banks. To put this in perspective, there were more of these type orders issued in the six months between June and November, 2009, than in all of 2005, 2006, 2007 and 2008 combined.

The orders in question are called Orders to Cease and Desist and Supervisory Prompt Corrective Action Directives. For ease of reference, I will refer to both as “C&Ds”.

C&Ds speak directly to a bank’s solvency. The common findings underlying their issuance are that the bank has become significantly undercapitalized and bank management has become ineffective in managing risk. The bank in question becomes subject to a strict supervisory program aimed at recapitalizing the institution and restoring effective risk management procedures.

The radical increase in these C&Ds flies directly in the face of the MOPE the public has been force-fed over the past year saying the health of the U.S. banking sector was improving. A look at the hard facts shows not only that the banking sector’s health got progressively worse throughout 2009, but also that the FDIC’s enforcement powers have become ineffective in preventing losses at U.S. banks.

A. Background On FDIC Enforcement Actions

Information about FDIC enforcement actions is made public in a monthly press release toward the end of each month covering the prior month’s actions. The release also publicizes facts about other types of enforcement actions relating more to individuals’ prohibition from working at banks or with bank practices that violate specific laws not necessarily affecting a bank’s solvency. These other types of enforcement actions are not addressed in this analysis.

Upon being issued a C&D, the bank in question becomes subject to a strict supervisory program aimed at recapitalizing it and restoring proper management procedures. Bank management loses the ability to take actions significantly affecting the bank’s finances without first receiving approval from the FDIC. It is given short deadlines to come up with plans to recapitalize, overhaul management and implement effective risk management procedures. It is subjected to frequent, comprehensive reporting requirements.

The goal of C&Ds is to return the bank to health within a reasonable amount of time, whereupon the C&D is terminated. Banks that prove unable to meet the requirements of C&Ds are normally taken over by healthier banks or closed by the FDIC.

As recently as early 2007, the issuance of a C&D was a relatively rare occurrence, and it often prompted a separate FDIC press release discussing its specifics. More recently, the FDIC’s monthly press release of enforcement actions has begun to list 30 to 40 banks newly subjected to C&Ds in the prior month alone.

B. A Look At The Numbers

The following chart summarizes the number of new C&Ds issued since 2005 and tracks the number of banks during that period that were either closed or succeeded in having their C&Ds terminated. Yearly totals are provided for years 2005, 2006, and 2007, and a monthly breakdown is provided beginning in January 2008.

The first column from the left indicates the time period in question. The second column indicates the number of new C&Ds levied against banks during that period. The third column states the number of those banks in Column 2 that have been closed by the FDIC as of January 22, 2010. The fourth column indicates the number of those banks in Column 2 that have had their C&Ds terminated as of January 22, 2010.

[Information current as of January 22, 2010]

Date Covered

New C&Ds

Issued

Bank Closed

After C&D

C&D

Terminated

November 2009

37

1

0

October 2009

42

5

0

September 2009

28

3

1

August 2009

26

2

0

July 2009

24

4

0

June 2009

29

5

0

May 2009

20

3

0

April 2009

24

10

0

March 2009

23

3

1

February 2009

22

10

0

January 2009

13

2

0

Total 2009

(through Nov.)

288

48

2

       

December 2008

16

5

1

November 2009

8

1

0

October 2008

16

6

1

September 2008

7

3

0

August 2008

11

1

0

July 2008

5

3

1

June 2008

6

2

1

May 2008

4

1

0

April 2008

3

1

1

March 2008

9

1

3

February 2008

8

1

3

January 2008

3

0

1

TOTAL 2008

96

25

12

       

TOTAL 2007

48

2

24

       

TOTAL 2006

24

0

20

     

TOTAL 2005

16

0

16

Sources: FDIC Press Releases March 3, 2006 through January 22, 2010 (http://www.fdic.gov/news/news/press); FDIC Enforcement Decisions and Orders Search Engine (http://www.fdic.gov/bank/individual/enforcement/begsrch.html);

Failed Bank List (http://www.fdic.gov/bank/individual/failed/banklist.html).

C. Observations Based On Data

In years 2005 and 2006, there were relatively few C&Ds issued, and almost all of the orders were eventually terminated. For example, in all of 2005 there were 16 banks that were issued C&Ds. Of these, none were closed, and all 16 had their C&Ds terminated as of the last reported enforcement period (Nov. 2009).

In all of 2006, there were 24 banks that became subjected to C&Ds. Of these, none have failed so far and 20 have had their orders terminated.

The numbers of C&Ds issued begins to increase substantially beginning in 2007. However, the most staggering increase is seen in the last six months reported in 2009.

The FDIC’s “track record” of turning around troubled banks also begins to deteriorate beginning in 2007. It turns truly dismal by 2009.

In 2007, there were 48 banks that were issued C&Ds, but only two failed while 24 had their orders terminated. This is a ratio of one failure to 12 turnarounds.

By 2008, of 96 banks that became subject to C&Ds, 25 failed while only 12 had their orders terminated. This is a ratio of about 2 failures to 1 turnaround.

In 2009 (through November), there were 288 banks newly issued C&Ds, of which 48 since failed while only 2 had their orders lifted. This is a ratio of about 24 failures to 1 turnaround.

D. FDIC Actions Ineffective

Looking at specific examples in 2009, there are many instances in which it appears the FDIC’s enforcement action was a complete waste of effort, as the banks were closed within days of when the C&Ds went into effect. Several examples are as follows:

United Commercial Bank of San Francisco, California, was issued a Supervisory Prompt Corrective Action Directive on November 2, 2009. It was closed by the FDIC four days later, on November 6, 2009.

United Commercial Bank reportedly had assets of $11.2 billion and deposits of $7.5 billion, and its closure cost the FDIC an estimated $1.4 billion. That means the true value of its assets was only about $6.1 billion, and had been over-stated by approximately 84%.

Both North Houston Bank, Houston, TX and Madisonville State Bank, Madisonville, TX were issued Orders to Cease and Desist on October 7, 2009. Both were then closed by the FDIC 23 days later, on October 30, 2009. They were among a group of nine banks closed that day which all together reportedly had assets of 19.4 billion and deposits of $15.4 billion, and which cost the FDIC an estimated $2.5 billion (16.2% of the value of the deposits) to close. That means the true value of this group’s assets was only about $12.9 billion, and had been over-stated by approximately 50%.

New Frontier Bank of Greely, Colorado, was subjected to an Order to Cease and Desist on April 6, 2009, and was closed by the FDIC four days later, on April 10, 2009. New Frontier reportedly had assets of $2.0 billion and deposits of $1.5 billion, and its closure cost the FDIC $670 million (44.7% of the value of its deposits. That means the true value of its assets was only about $830 million, and had been over-stated by approximately 141%.

Great Basin Bank of Nevada, Elko, NV, was issued an Order to Cease and Desist on April 15, 2009, and the FDIC closed it two days later, on April 17, 2009. Great Basin reportedly had assets of $270.9 million and deposits of about $221.4 million, and its closure cost the FDIC $42 million (19% of the value of its deposits). That means the true value of its assets was only about $179.4 million, and had been over-stated by approximately 51%.

Sherman County Bank of Loup City, NE, was issued an Order to Cease and Desist on February 9, 2009, and the FDIC closed it four days later, on February 13, 2009. Sherman reportedly had assets of $129.8 million and deposits of about $85.1 million, and its closure cost the FDIC $28 million (33% of the value of its deposits). That means the true value of its assets was only about $57.1 million, and had been over-stated by approximately 127%.

There are at least eight more cases of banks being closed in 2009 within one month of being issued a C&D, and at least 10 more cases of banks beings closed within two months of being issued a C&D. These are symptoms of a banking system in disarray. By the time the FDIC got around to doing something about these banks it was too late to save them and it cost the FDIC unprecedented amounts to make good on their deposits.

All of this runs contrary to the incessant MOPE-sponsored reporting last year that bank conditions were improving. In truth, the only thing that improved in 2009 was banks’ own internally generated estimates of the value of their assets. This was the result of the Financial Accounting Standards Board (“FASB”) caving in to political pressure and suspending fair value accounting requirements.

E. Most Failures Outside Enforcement Structure

Worse than the image painted by these enforcement statistics is the fact that since late 2007, most bank closings occurred completely outside the FDIC’s enforcement structure. Therefore, it is a given that full extent of problems in the U.S. banking is much worse than what the enforcement statistics alone would indicate.

Between January 1, 2007 and January 22, 2010, there were 432 banks that became subject to C&Ds, of which 75 were closed. The total number of FDIC banks closed during this same period was 177. Therefore, 102 of the 177 banks closed (about 58%) had never been the subject of any major FDIC enforcement action prior to their failure.

Notable examples of this are Washington Mutual Bank (with reported deposits of $188 billion at the time of its closure), Colonial Bank of Montgomery, Alabama ($20 billion), IndyMac Bank ($19.06 billion), Downey Savings & Loan ($9.7 billion) and BankUnited, FSB, of Coral Gables, FL ($8.6 billion).

G. Little Reason To Believe Troubled Banks Will Get Better

We can also see that there are approximately 319 banks that were issued C&Ds since January, 2007, that have not been closed and not had their C&Ds terminated. It is impossible to predict exactly how many of these will eventually fail, but the statistics regarding banks that received C&Ds in 2009 are certainly not encouraging.

If the economic landscape were more like it was in 2005 or 2006, there might be hope that many of these 319 banks would regain their footing. However, contrary to the incessant MOPE-inspired commentary from mainstream news sources, a realistic look at current economic conditions suggests it is unlikely that any significant percentage of these troubled banks will recover.

As of the beginning of 2010, credible reports regarding the economic factors most likely to affect banks’ future stability indicate the following:

One in every 7.5 homeowners in the U.S. is either delinquent on their home loan or in foreclosure;

A record number of homeowners received foreclosure notices in 2009, approximately one in 45 households;

Home prices are likely to continue to decrease significantly in the years ahead;

There is a huge wave of resets of pay option ARMs coming in 2010-2011 that will likely cause a new wave of defaults and foreclosures rivaling that of subprime;

The true jobless rate in the U.S. may be as high as 22%, and any turn-around in the employment picture is likely to be slow and protracted;

Credit card charge-offs are at record highs of 12.56%, with no relief in sight;

The rate of U.S. office vacancies has just reached a new15-year high;

U.S. commercial property default rates are soaring; and

A huge number of balloon payments on loans for commercial real estate are coming due in 2010 and 2011, while the values of the properties securing these loans have plummeted well below the remaining loan balance.

Common sense dictates that in the current environment, banks that have been found to be in a precarious financial condition are not likely to improve any time soon.

H. Frightening Projections Based On Current Statistics

U.S. government policy is to keep the public in the dark regarding the extent of problems in the banking sector, and the FDIC never makes specific projections regarding future bank failures. However, if we were to try to come up with some estimates based on current trends, we might easily conclude that we have not even begun to see the full extent of failures within this crisis.

Within the FDIC enforcement scheme alone, there remain 319 banks subject to C&Ds. Using 2009’s ratio of 24 failures to 1 recovery suggests approximately 306 of those are likely to fail. Considering that to date, banks that had never been targeted by FDIC enforcement efforts represented 58% of total failures, this suggests that 422 more will fail outside the FDIC enforcement structure. In sum, we might expect a total of 728 more failures based on current enforcement statistics alone.

These estimates do no take into account the fact that at the present time, based on the last six months reported, an average of about 31 new banks are becoming subject to C&Ds each month. If we were to start making projections based on new enforcement actions reasonably anticipated, the number of expected failures could easily grow to several thousand.

The relevance of this is not to try to make accurate projections about future bank failures. That is impossible given the limited access the public has to key information.

Rather, we need to keep these implications in mind when we are exposed to “consensus views” regarding things like improvement in the U.S. banking sector and the turnaround of the U.S. economy. These opinions are constantly being repeated in the mainstream press as if they are facts. They have been the basis of countless arguments made in 2009 that the U.S. dollar would inevitably be gaining value while gold and other hard assets would be losing value.

Today, more than any other time in recent memory, there is a complete lack of inquiry on the part of mainstream news sources as they parrot “facts” being handed down by government sources. For example, I am unaware of any major news source having looked at the radical increase in FDIC enforcement actions and tried to square it with the conclusion that conditions have been improving within the U.S. banking sector.

Accepting the conclusions of commentators who have not taken the time to look at important facts will turn out to have been a very hazardous choice in the near future. MOPE is a government policy that soon will be recognized as having been disastrously misguided. By that time, anyone who accepted the party line will have been damaged economically beyond repair.

Respectfully yours,
CIGA Richard B.

Posted at 2:41 PM (CST) by & filed under Jim's Mailbox.

Obama share scare: Market drop shows vulnerability
CIGA Eric

Politicians will be watching the market’s reaction closely.

Grover Norquist, the conservative head of Americans for Tax Reform, said the nation’s investor class is increasingly calling the shots in elections. He says Obama is hurting himself with his bank bashing.

"A lot of Americans own 401(k)s — and he’s just made them a lot poorer," he said, creating "a lot of bitterness" among voters.

Now there’s some spin. The recent decline has made Americans a lot poorer? On the surface, it looks like a reasonable argument. By extension, this argument implies that the stimulus under the current Administration has made them a lot richer.

The nominal stock market has rallied 38% in U.S. dollar terms since 2009.01. Many cite this percentage gain as the definition of richer. In a previous post titled, shades of 1932, it illustrates that this return is largely an illusion based on devaluation. When stock returns are priced in constant currency, the 38% rally falls to 4%. This is illustrated in the LCSTRIGOLDR chart.

Bank bashing? It will fall victim to bureaucratic red tape and a new flavor of the day. The wealth effect derived from the equity rally is nothing more than an illusion. Few within the general public are significantly "richer" in equities since 2009.01.

What matters is jobs. Devaluation and the false illusion of the wealth effect cannot create them. Job creation takes investment, innovation, and rising aggregate demand.

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Posted at 6:39 PM (CST) by & filed under In The News.

Thought for the day:

Happy ride to the abattoir.

The Chairman of the Federal Reserve and the Secretary of the US Treasury have credible threats to their tenure in office. MOPE has you convinced it means nothing to the US dollar.

Consider what would happen to any other currency on the planet if the same were true.

Tell the lie loud and long enough, and the populous will believe it UNTIL the real downside pain of the fundamental implications are felt.

Most people forget to quote (paraphrased above) the second part of Goebbels’ key lesson on the value and application of state propaganda (MOPE).

Sleep on Sheeples as you take the happy ride to the abattoir.

 

Second Thought For The Day:

Remember what happened to the US dollar versus the Swiss/DM when people started to realize the quality of leadership under the Carter Administration?

Reputation of management has a lot of input to a currency’s value.

 

Jim Sinclair’s Commentary

Here is a dollar bull chart reader not concerned about anything.

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Jim Sinclair’s Commentary

Hello, I am from the Federal government here to help you with your mortgage.

450,000 at risk in foreclosure-prevention program
By Tami Luhby, senior writerJanuary 23, 2010: 7:25 AM ET

NEW YORK (CNNMoney.com) — Hundreds of thousands of troubled homeowners who are making lower mortgage payments on a trial basis are at risk of being kicked out of President Obama’s foreclosure-prevention program.

Companies that service the mortgages have until Jan. 31 to review all trial modifications that have been underway for several months under the Home Affordable Modification Program (HAMP), according to a Treasury Department guideline issued late last month. The Treasury Dept. said it would issue new guidelines next week, but wouldn’t give details.

During the review period, servicers must determine whether borrowers have made all their payments and have handed in all the necessary paperwork. Those who haven’t will get letters giving them 30 days to comply.

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Jim Sinclair’s Commentary

Another bankruptcy that has guaranteed all and any comers. Now they are trying to close the barn door after the cows have gotten out, thereby adding complications to an already complex economic problem.

Failure of a sustained economic recovery here is another bailout target.

FHA raises fees, tightens loan standards
Agency trying to shore up finances, prevent possible need for bailout
updated 2:11 p.m. ET, Wed., Jan. 20, 2010

WASHINGTON – The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.

The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of the year, "are among the most significant steps to address risk in the agency’s history," FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price — and that didn’t change. 

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Jim Sinclair’s Commentary

For what it is worth, from panic city.

Axelrod: No White House shake-up in the works
Sunday, January 24, 2010; 9:42 AM

WASHINGTON — President Barack Obama’s top political aide says there’s no White House shake-up in the works even as Obama’s campaign manager is given a greater role in the administration.

David Plouffe (pluhf) will deal mainly with this fall’s elections involving Congress and governors as reeling Democrats try to rebound after last week’s shocking Senate defeat in Massachusetts.

Obama’s chief political strategist, David Axelrod, says Plouffe will take a more active role. But Axelrod says don’t expect a staff shake-up. He says "nothing gets Washington more excited than someone losing their job."

Obama’s spokesman, Robert Gibbs, calls Plouffe as smart as anybody "ever seen in politics."

Axelrod appeared on CNN’s "State of the Union." Gibbs was on "Fox News Sunday."

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Jim Sinclair’s Commentary

In the US Wal-Mart is the Economic Indicator.

Wal-Mart cuts about 11,200 Sam’s Club staffers
By MAE ANDERSON, AP Retail Writer – 39 mins ago

NEW YORK – Wal-Mart Stores Inc. said Sunday it is cutting about 11,200 jobs at its Sam’s Club warehouse division as it outsources in-store product sampling to marketing company Shopper Events in an effort to win more customers and boost lagging sales.

The terminations represent about 10 percent of the warehouse club operator’s 110,000 staffers across its 600 stores. About 10,000 members of the demonstration department, most part-time workers, were let go. The company also cut its new business membership representative positions, affecting about 2 staffers per store, or about 1,200 staffers in total.

The cuts represent about 10 percent of the warehouse club operator’s 110,000 staffers across its 600 stores. That includes 10,000 workers, mostly part-timers, who offer food samples and showcase products to customers. The company also eliminated 1,200 workers who recruit new members.

Employees were told the news at mandatory meetings on Sunday morning.

"In the club channel, demo sampling events are a very important part of the experience," said Sam’s Club CEO Brian Cornell in a phone interview with The Associated Press. "Shopper Events specializes in this area and they can take our sampling program to the next level."

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Jim Sinclair’s Commentary

Jobs via QE to infinity:

Obama Moves to Centralize Control Over Party Strategy
By JEFF ZELENY and PETER BAKER
Published: January 23, 2010

WASHINGTON — President Obama is reconstituting the team that helped him win the White House to counter Republican challenges in the midterm elections and recalibrate after political setbacks that have narrowed his legislative ambitions.

Mr. Obama has asked his former campaign manager, David Plouffe, to oversee House, Senate and governor’s races to stave off a hemorrhage of seats in the fall. The president ordered a review of the Democratic political operation — from the White House to party committees — after last week’s Republican victory in the Massachusetts Senate race, aides said.

In addition to Mr. Plouffe, who will primarily work from the Democratic National Committee in consultation with the White House, several top operatives from the Obama campaign will be dispatched across the country to advise major races as part of the president’s attempt to take greater control over the midterm elections, aides said.

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Jim Sinclair’s Commentary

More fodder for the chart dollar bull.

Debt Burden Now Rests More on U.S. Shoulders
By FLOYD NORRIS
Published: January 22, 2010

THE United States government borrowed more money than ever before in 2009, but its largest lender — China — sharply reduced the amount it was willing to lend.

The United States Treasury estimated this week that during the first 11 months of last year China raised its holdings of Treasury securities by just $62 billion. That was less than 5 percent of the money the Treasury had to raise.

That raised its holdings to $790 billion, leaving it the largest foreign holder of Treasury securities — Japan is second at $757 billion and Britain a distant third at $278 billion. But China’s holdings at the end of November were lower than they were at the end of July.

Not since 2001, when China was still a relatively minor investor in Treasury securities, had the country shown a decline in holdings over a six-month period.

During the full year of 2009, the volume of outstanding Treasury securities owned by the public — as opposed to United States government agencies like the Federal Reserve or the Social Security Administration — rose by $1.4 trillion, a 23 percent gain, to $7.8 trillion. In dollar terms, that was the largest annual increase ever, but as a percentage increase it slightly trailed 2008.

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Jim Sinclair’s Commentary

You ask why the world hates Banksters?

Wall Street pros always support exactly what is NOT in the public’s best interest. The only people who are worse are those members of the world’s oldest occupation, experts that will testify to whatever you pay them to testify to, the economic professors.

The uptick rule, as it was, is not in the interest of the banksters, it was in the public’s interest.

SEC May Approve Restrictions on Short Sales When Stocks Plunge
By Nina Mehta

Jan. 23 (Bloomberg) — Concern that short-sellers accelerate stock declines may prompt the Securities and Exchange Commission to adopt a rule next month aimed at curbing bearish bets when equities are plunging.

The regulation would require the trades be executed above the best existing bid in the market when shares fall 10 percent in a day, said Brian Hyndman, the senior vice president in transaction services at Nasdaq OMX Group Inc. In a short sale, an investor borrows an asset and sells it, hoping to profit from a decrease by repurchasing it later at a lower price.

Forcing short sellers to wait for a stock to rise above the best price bid may prevent them from flooding the market with sell orders and causing losses to multiply. Some exchange officials say the restrictions known as uptick rules don’t work, citing studies that show they may be less effective during panics that drive prices down and volatility up.

“There is no empirical data to support the introduction of a new rule,” Hyndman said yesterday at a securities industry conference in Chicago. “But this is the least intrusive of the proposals the SEC was considering.”

Hyndman expects the SEC to adopt a so-called alternative uptick rule that includes a 10 percent trigger, changing regulations that were eliminated from U.S. markets in 2007. The commission asked the public last April to comment on strategies to cushion the impact of short selling following criticism that hedge funds and other speculators used trading tactics to deepen market retreats that began in 2008.

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