Posted at 1:55 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

TALK IS CHEAP

Here are the numbers for the first nine months of the 2009 U.S. fiscal year, which ends September 30th.  Federal receipts are down 18% from 2008 levels.  Individual income tax receipts are down 22%, and corporate tax receipts are down 57%.  Meanwhile, federal outlays are up…a lot.  The budget deficit for the nine months now stands at $1.086 trillion versus a deficit of just $286 billion over the same nine months of fiscal year 2008.

As the budget data was released, Treasury Secretary Geithner was in Saudi Arabia speaking to our allies (and financiers) in the Middle East about how the United States would pursue policies that preserve the dollar’s value, and that their U.S. dollar assets are safe.  Geithner assured his audience that, "The policies of the United States are designed to lay the conditions for a strong dollar for more stability in the international monetary system and among the major economies."

In addition to owning significant U.S. assets, the six Arab states that make up the Gulf Cooperation Council (Saudi Arabia, the UAE, Bahrain, Qatar, Oman, and Kuwait) have pegged their currencies to the dollar, or to heavily dollar-weighted baskets.

Secretary Geithner also said that he sees signs of strength returning to the economy.  "We are seeing very active issuance in corporate bonds and equity markets and the banking system itself in the United States shows signs of more confidence thanks to aggressive banking system actions and stimulus programs.”

Secretary Geithner did not discuss the recent calls from Washington lawmakers about the need for more stimulus programs, but instead focused on what his Gulf Cooperation Council (GCC) audience wanted to hear.  He said the United States would quickly unwind the exceptional measures it has put in place and get its budget deficits under control saying, "We are very committed to make sure that as we get through this crisis to bring down our fiscal deficits and to reverse these extraordinary interventions that we have taken."

Of course hoping that Mr. Geithner is right is not enough for the GCC countries…nor should it be for investors around the world.  The GCC countries know that they must have long-term contingency plans that reduce their dependence on the dollar.

RIGID VERSUS FLEXIBLE INVESTMENT POLICIES

The GCC’s bond with the U.S. dollar served them well for many years.  Their economies and wealth grew tremendously as they sold oil to energy thirsty consumers in the developed world.  But as some like to say…nothing lasts forever.

As times change and new trends evolve, the successful adapt.  The declining economic power of the U.S. and the status of U.S. dollar is not necessarily a bad thing.  It is part of an evolutionary process.  The reality is that the increasingly multi-polar global economy demands that investors have more flexibility and more ability to take advantage of macroeconomic changes.

IN OUR SEARCH FOR GROWTH, ASIAN ECONOMIC DATA IS LOOKING BETTER

Singapore’s economy, which is heavily dependent on global trade in technology, financial services, and petrochemicals, was particularly hard hit in the global economic crunch.  After falling for three straight quarters, Singapore’s GDP fell a whopping 12.7% in the first quarter of 2009.  However, the data for the second quarter is in and it shows the economy rebounded strongly, growing by 20.4% over the past three months.

The Singapore government raised its annual economic forecast.  While officials admit it is susceptible to more setbacks, the government said it now expects the economy to contract by 4% to 6% for the full year versus a previous estimate of minus 6% to 9%.

Historically, Singapore’s data has been closely watched since the export-dependent economy has been seen as a bellwether for the rest of Asia and an important indicator of global demand and also because many believe Singapore’s data is less massaged by government officials.

China is to report its second quarter gross domestic product Wednesday, July 15th.  Given Chinese loan growth and fixed asset investment in the past three months, the numbers should be quite good relative to the rest of the world.

South Korea will release its second-quarter figures next week.  Last week, South Korean officials said they expect the fastest quarter-on-quarter growth for five and a half years.

Even though many of the Asian economies’ second quarters benefited from inventory restocking after a dismal first three months of the year, the numbers do point toward growth.  However, we do not expect Europe, the U.S, and Japan to show strong numbers for some time.

INDIAN MONSOONS

For years, discussions of India’s economy revolved around the monsoon rains.  While the Indian service and industrial sectors have grown rapidly and broadened the economy, agriculture still employs over 55% of India’s workers, and represents over 25% of GDP.  This year’s monsoons are getting off to a poor start, and the situation bears watching as outlined in the Reuters article below

NEW DELHI, July 14 (Reuters) – India is scrambling to divert power supplies to the countryside to irrigate rice and oilseed crops and limit damage after the worst start to the vital monsoon season in eight decades has raised fears of a drought.

The shift threatens to worsen the summer power deficit that has plagued India for decades, particularly with the country’s hydropower plants running below 40 percent of capacity as scanty rains have depleted reservoirs.

Power Minister Sushil Kumar Shinde is worried about the shortfall in monsoon rains as hydropower accounts for one quarter of India’s total power generation of 149,400 megawatts.

He said the government had ensured a higher supply of electricity to Punjab and Haryana states, the key grain producing regions, to help irrigation.

"They have the water but they don’t have the power," Shinde said, adding India already faced a power shortage of 15,000-20,000 megawatts.

India’s farm minister, Sharad Pawar, said on Monday that monsoon rains were expected to improve this week, while the latest weather office bulletin forecasts heavy rains in coastal areas of southern India and parts of central India.

Last week the U.S. government said that an El Nino weather pattern is developing, putting countries from Asia to North America on alert for meteorological havoc to crops and infrastructure.

The phenomenon is caused by a warming of seas in the Pacific.

In the mineral-rich eastern state of Orissa, at least 5,000 people were affected by flash floods and 11 people were drowned, Orissa Flood Control Officer B.B. Patnaik said.

In the western city of Mumbai, waters in the main river rose and services on the crucial railway lines were shut because of incessant rain since Monday night.

Television channels showed images of people wading through knee deep water and flooded railway tracks.

In the farm sector, which provides livelihoods to two-thirds of India’s 1.1 billion people, weak monsoons would hit the oilseed crop and could force India to import a record amount of edible oils in the crop year to October.

In central India, the output of the soybean crop may fall, potentially hitting oilmeal exports from Asia’s top meal exporter, traders said.

The government has already shown signs of nerves, stopping wheat exports 10 days after it lifted a two-year ban on shipments this month.

So far, the government has declared four districts in the central Indian state of Jharkhand and the northeastern state of Manipur as drought-hit but these states are not key grain producers.

But sowing of rice, groundnut and soybeans has been delayed in most parts of northern and central India, junior farm minister K.V. Thomas told parliament on Tuesday.

Industry officials are also worried about the fall in domestic oilseed production in India, the world’s top vegetable oils importer after China.

"The erratic monsoon and likely lower summer-sown oilseeds crop will further push imports in September and October months and overall imports are likely to be about 8.0 million tonnes," the Solvent Extractors Association said in a statement.

India’s monsoon rains were 46 percent below normal in the month of June, while in the first week of July, rainfall was 29 percent below normal, according to the Indian Meteorological Department.

India depends heavily on monsoon rains as only 40 percent of its farmland has access to irrigation facilities.

We are looking for opportunities in India.  If the weak monsoons cause the Indian stock market to pull back, we will look for an entry point.

G8 MEETING

Last week’s G8 meetings in Italy received a lot of front page coverage leading up to and during the meetings, but we expect it will be quickly forgotten due to the lack of substantive developments.

China and India are not included in the G8, so the relevance of the G8’s agenda regarding global economics, free trade and energy usage should be questioned.  These meetings are for the cameras.  The more important events between nations take place behind the curtains.  These meetings are great venues for worlds’ leaders to offer sound bites to their electorate from the world stage, perhaps do some passive aggressive diplomacy through the press, and drop hints at what they want in future meetings’ agendas.  There are rarely surprises in the post meeting communiqués.

Every country had an axe to grind last month, last week, this week, and will have an axe to grind tomorrow…

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 1:35 PM (CST) by & filed under Jim's Mailbox.

Jim,

The pension problem gets more complicated while the downward spiral continues.

CIGA Jeff

Calpers Sues Over Ratings of Securities
By LESLIE WAYNE
Published: July 14, 2009

SACRAMENTO — The nation’s largest public pension fund has filed suit in California state court in connection with $1 billion in losses that it says were caused by “wildly inaccurate” credit ratings from the three leading ratings agencies.

The suit from the California Public Employees Retirement System, or Calpers, a public fund known for its shareholder activism, is the latest sign of renewed scrutiny over the role that credit ratings agencies played in providing positive reports about risky securities issued during the subprime boom that have lost nearly all of their value.

The lawsuit, filed late last week in California Superior Court in San Francisco, is focused on a form of debt called structured investment vehicles, highly complex packages of securities made up of a variety of assets, including subprime mortgages. Calpers bought $1.3 billion of them in 2006; they collapsed in 2007 and 2008.

Calpers maintains that in giving these packages of securities the agencies’ highest credit rating, the three top ratings agencies — Moody’s Investors Service, Standard & Poor’s and Fitch — “made negligent misrepresentation” to the pension fund, which provides retirement benefits to 1.6 million public employees in California.

More…

Posted at 3:46 AM (CST) by & filed under Jim's Mailbox.

Hello Mr. Sinclair,

Your "Formula" is making more sense to some hedgies.

Regards,
CIGA Jeff

Greenlight Holds Bullion, Buys Reinsurance Stocks (Update1)
By Saijel Kishan

July 14 (Bloomberg) — Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, July 14 (Bloomberg) — Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter.

“At a minimum this will provide some savings as the costs of storing gold are less than the fees” for the SPDR Gold Trust, the New York-based firm said yesterday in a letter to investors.

Einhorn, 40, told clients in January he was buying gold for the first time amid the threat of inflation from higher government spending. The firm, started in 1996, held 4.2 million shares of SPDR Gold Trust in the first quarter, making the gold- backed ETF its biggest holding. Gold has climbed 5.8 percent this year.

The firm’s Greenlight Capital LP fund gained 16.3 percent in the second quarter, bringing its return this year to 21.5 percent boosted by investments in Ford Motor Co. debt, according to the letter, a copy of which was obtained by Bloomberg News. The fund lost 23 percent last year.

Hedge funds returned an average 9.4 percent this year through June after losing 19 percent in 2008, according to Hedge Fund Research Inc. in Chicago.

Steve Bruce, a spokesman for Greenlight, declined to comment on the letter.

More…

Posted at 6:44 PM (CST) by & filed under In The News.

Dear CIGAs,

The madness continues. How many of these swaps, better known as Credit Default OTC derivatives, do you really believe are properly hedged or just ratio hedged? Ratio hedge is a nice way of saying not hedged. There is very little difference between how MBIA guaranteed against financial failure (which was a cartoon) and how these instruments work.

This is an example of how all the financial intervention simply made Wall Street whole but never focused on making the Weapons of Mass Destruction, the OTC derivative, whole. On top of that the institutions that brought this disaster to you that have now all been rescued are simply going on producing more toxic paper that will not function when called upon to.

On top of that, MOPE (management of perspective economics) says OTC derivatives are just fine by quoting these damn things as indicators of credit worthiness according to the value of the swap. Swap what? Do you really believe the other side is 100% short of the NYT or their debt? They are simply not! They at best have a ratio spread on that. Tomorrow morning if the NYT was broken the instruments would be equally broken.

New York Times Swaps May Double, Analyst Report Says

July 13 (Bloomberg) — The cost to protect against a default by New York Times Co. may almost double as the newspaper publisher fails to pull out of a “nosedive” in revenue, according to Credit Derivatives Research LLC.

Investors should buy credit-default swaps on the publisher of the New York Times and Boston Globe in a bet that its second- quarter earnings report will spark an increase in the derivatives, used to speculate on creditworthiness or to hedge against losses, analyst Byron Douglass said in a July 10 note to clients. The contracts, trading at about 580 basis points, or the equivalent of $580,000 a year for every $10 million of debt protected, may climb to 1,000 basis points, he wrote.

Times Co., looking for new revenue after a 27 percent decline in first-quarter advertising sales, said in a survey sent to print subscribers last week that it’s considering a $5 monthly fee for access to its namesake newspaper’s Web site.

“With advertising revenues falling and not showing any signs of stabilization, we find the company grasping for any sort of additional revenue to be rather distressing for its credit valuation,” wrote Douglass, who is based in Walnut Creek, California.

The “fair value” of credit swaps on Times Co., based on measures including its share price and options on the equity, suggest they should be trading at 1,000 basis points, he wrote. The contracts are down from a record 1,098 basis points on Dec. 8, according to CMA DataVision prices.

Catherine Mathis, a Times Co. spokeswoman, said in an e- mail she didn’t have an immediate comment on the analyst report.

More…

Jim Sinclair’s Commentary

All he had to do was give the money to the poor. He would have been Robin Hood and let off on community service

New York lawyer sentenced to 20 years for financial fraud

NEW YORK, July 13 (Xinhua) — A New York lawyer was sentenced to 20 years in prison Monday for financial fraud, following arch swindler Bernard Madoff’s imprisonment of 150 years last month.

Marc Dreier, a lawyer in Manhattan, admitted he had stole more than 46 million dollars from hedge funds by selling them fake promissory notes.

Dreier’s lawyers asked the court to sentence him only 10 years in prison, however, Dreier was assumed to be sentenced to as long as 145 years in jail. His judge Jed Rakoff sentenced him 20 years in prison, which was obviously much shorter than expected.

Dreier, 59, graduated from Yale University and Harvard Law School, and then became a lawyer in Manhattan. On May 11, 2009, he pledged guilty to eight charges including money laundering, securities fraud and wire fraud.

Dreier reportedly spent a huge amount of money to maintain his luxury lifestyle. He had an ocean view luxury apartment on the Upper East Side New York. He also has several expensive cars and a 18-million-dollar yacht. His office had a large number of art collections including Picasso and Warhol’s works. The estimate value of his collections was 40 million dollars.

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Jim Sinclair’s Commentary

Yes there is something to believe in – GOLD!

The very fabric of society is breaking down around us. What the hell is there left to believe in?

It’s all gone wrong. Our belief in everything has been shattered by a series of shock revelations that have shaken our core to its core. You can’t move for toppling institutions. Television, the economy, the police, the House of Commons, and, most recently, the press … all revealed to be jam-packed with liars and bastards and graspers and bullies and turds.

And we knew. We knew. But we were deep in denial, like a cuckolded partner who knows the sorry truth but tries their best to ignore it. Over the last 18 months the spotlight of truth has swung this way and that, and one institution after another was suddenly exposed as being precisely as rotten as we always thought it was. What’s that? Phone-in TV quizzes might a bit of con? The economic boom is an unsustainable fantasy? Riot police can be a little "handy"? MPs are greedy? The News of the World might have used underhand tactics to get a story? What next? Oxygen is flavourless? Cows stink at water polo? Children are overrated? We knew all this stuff. We just didn’t have the details.

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Jim Sinclair’s Commentary

Prepare yourself for more of this.

FBI: Bank robber cites economy during holdup
HOUSTON CHRONICLE
July 14, 2009, 1:35AM

A pistol-wielding robber blamed the nation’s troubled economy for a holdup this morning at a northwest Houston bank, authorities said.

While demanding cash about 10:30 a.m. from a teller at a Compass bank branch, 12514 Tomball Parkway, the armed robber said, “I’m only doing this to eat. They’re not letting me work,“ FBI officials said.

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Posted at 1:28 PM (CST) by & filed under Jim's Mailbox.

"It is better to approximately right than precisely wrong."
– Fortune Magazine, 1994

Chairman Jim,

The de-leveraging and default of the Formula is absolutely inexorable, and may well accelerate with the commercials also dropping now. Housing is hopeless. Medium and small banks are toast.

CIGA Ursus Terribilis.

Posted at 5:29 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is a link to my interview on the Summit Business News Channel. Click it to view the video.

http://www.summit.co.za/video/face2face/20090710

Views from Joberg

1. Bloomberg says that Bernanke may give his blueprint for how to withdraw the enormous monetary stimulus injected into the world economy.

Since there is NO practical means to accomplish this, I assume Bernanke’s answer will be given in Kswahili.

2. Geithner says the US government has the means to address the CIT potential collapse.

Which is a greater threat to the US economy, the bankruptcy of CIT or California?

The answer is California

3. Which is worse for the dollar, Libor over 4% or under 1%?

The answer to that is under 1% because it indicates extremely low dollar demand.

 

Jim Sinclair’s Commentary

As with most media stories, these are not exactly the facts.

Nationalization demands come from the ANC junior group of younger members.

Powerful ANC ministers refute these demands as the RSA government owns the underlying properties, leasing them to producers. You cannot nationalize yourself.

It however makes Tanzania an even more interesting place for big RSA money.

The USA is a very bad example on this subject. Has the US not just nationalized the huge automotive and financial industry? Has the US not proposed cancelling patented mineral claims and instituting large royalty participations on producing properties?

The answer is yes and yes.

Will South Africa reclaim its mines?
Recent calls to nationalise South Africa’s mines are economically illiterate – but may gather popular support
Monday 13 July 2009 13.30 BST

Nationalisation of the mines is a cry that goes echoing down South Africa’s history. For this country is built on its mines – even today, they account for a good half of exports, let alone foreign exchange, for this is perhaps the most fabulously endowed nation on the planet. Gold, diamonds, platinum, copper, coal, rhodium – you name it, South Africa’s got it.

Before 1948, the Afrikaner nationalists swore they would nationalise the mines. But once they won power, the demand dropped away. For the fact is that the mining companies have dug the world’s deepest and most sophisticated mines here. Their investment is somewhere between R1.2trn and R2trn (£100-150bn). Their expertise in engineering, organisation, marketing and the profitable management of these assets through a hundred years of wars, depressions and wild commodity price swings is awesome.

Anyone who thinks of taking all this over can be forgiven for baulking. For a start, where would one find the money to buy them? Anything less than full compensation would start a panic among the foreign investors on whom South Africa depends. And where would one find the necessary human skills to run and manage them? And the prodigious sums required to sink new shafts?

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Jim Sinclair’s Commentary

China is proud of who they are and what they have accomplished. They would prefer better treatment as the major bankers for the US consumer.

Every time some idiot talking head bashes China or accuses them of wrong doing with their currency management by a US Treasury official they become more righteously upset.

In fact, the Chinese are, simply put, "totally pissed off."

That makes me think their next move is going to shock people.

China takes steps to break sway of the mighty greenback
11:45AM Monday Jul 13, 2009
By Stephen King

Reports of the US dollar’s death have, so far, been greatly exaggerated. It is still, by far, the most liquid currency in the world. The US has the deepest and most liquid capital markets in the world, despite all its sub-prime and banking difficulties. The dollar is used on one side of the vast majority of currency trades.

If someone wants to swap out of Brazilian reals into, say, Korean won, it’s typically a two-step process n from reals into dollars and then from dollars into won. Central banks in the emerging world mostly hold their – in some cases, huge – foreign exchange reserves in the form of US dollars. It is, therefore, the international currency of choice. It remains the world’s reserve currency.

For the US, this makes life very easy. It can issue huge amounts of dollars knowing that people on the other side of the world will happily stash them away for a rainy day. That means the US can raise funds more cheaply in international capital markets than others can. US trade can be cheaply financed because the US doesn’t often have to pay of currency conversion costs. And it can happily run a large balance of payments current account deficit year-in, year-out, without any significant costs to the American people.

For the rest of the world, the dollar’s reserve currency status is a mixed blessing. While it’s useful for other countries to have access to an international medium of exchange and store of value, the dollar is ultimately under American control.

Should there be a conflict between the interests of American voters and foreign creditors, the foreign creditors will probably lose out. Today, those creditors – many of which are emerging market governments and central banks – have built up trillions of dollars of holdings of US assets. Is their money safe? If not, what should they do about it?

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Jim Sinclair’s Commentary

How comfortable are you with your "Honest Abe" gold certificates?

In this world the only depository you can have faith in is the "Vault of You!"

Missing gold could have left mint in liquid form
Experts speculate on how $15M in bullion slipped past elaborate security
BY IAN MACLEOD, THE OTTAWA CITIZENJULY 13, 2009 6:29 AM

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OTTAWA — Was gold worth $15 million stolen from the Royal Canadian Mint dissolved in liquid, rendering it invisible to metal detectors?

Two gold-refining industry sources say gold chloride dissolved in an acid solution can be unrecognizable to metal detectors like those guarding the mint’s high-security Sussex Drive refinery.

“It could be taken out in that form … in a liquid chemical form,” says one U.S. refining executive.

A similar method was used to hide two Nobel laureates’ gold medals from the Nazis when Germany occupied Denmark in 1940.

The mint dissolves gold in hydrochloric acid as part of the process to refine the precious metal to 99.99- and 99.999-per-cent purity, the finest gold in the world. The process electro-chemically disintegrates the metal into imperceptible particles of gold chloride suspended in the black-coloured acid solution.

“Being a high security facility, the mint does not discuss its various security procedures and protocols,” says Christine Aquino, mint spokeswoman. “But I can confirm that we have methods to detect such a liquid.”

The alternative, spiriting even miniscule quantities of solid gold from one of Ottawa’s most secure buildings, seems all but impossible, save for a Hollywood gold-heist plot, which seems almost as improbable.

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Jim Sinclair’s Commentary

Here is a surprise for the so-called US old China hands, and F-TV talking heads that love to bash China.

BYD the first half of sales by 176 percent year-on-year,

The first half of 2009, the shadow of the financial crisis has not been fully dispersed, the Chinese automobile market is extremely strong and has set a record in history. Statistics show that during the first half of 2009, domestic car production and sales will exceed six million, the data in 2008 year-on-year during the first half of 3.609 million representing an increase of 66.25%. Cutting-edge local Shenzhen BYD Automobile Brand for five consecutive years in the high growth of 100 percent, based on sales during the first half of 2009 once again soaring sales grow 176 percent year-on-year, higher than the industry growth rate of nearly 110% , deserved to become the first half of the fastest growing automotive brand.

Earlier this year, drawn up in 2009 BYD 400,000 sales plan sales goal, more than doubled in 2008. To the target for attack, the first half of 2009, BYD Automotive for the introduction of high-quality products and services, full use of the existing production capacity, speeding up the dealer network and improve the marketing strategy of innovation, BYD car is moving The first echelon of the Chinese market steadily towards the goal of competitors.

The first half of 2009, BYD Automobile homogeneous models were all made, and the completion of sales of 176,795 for the whole year target of 400,000 has laid a solid foundation. Among them, the performance of BYD F3 model Gongxun stability, breaking sales of 20,000 in March, they continue to sit tight in the 20,000 Club. In addition, high quality car F0 and F6 in the first half of this year car sales are also way higher, the performance is outstanding, F6 sell hundreds of cars from one month into the 5000 sales mark, selling high-class cars into the first camp, a breakthrough the ceiling of own brands. F0 steady sales growth, sales in May exceeded 7000, and gradually become F3, F6, as among the best in the sub-market sales model.

Just past May, overall sales of BYD as high as 32,633, beyond the success of FAW Toyota, Chery Automobile, Chang’an Ford and so on, to become the top ten cars sold in the seventh level. In addition, according to the National car license data show that in May the Department of BYD car models on the whole a total of 28,017 licenses beyond Chery Automobile, to become its own brand sales champion enterprises.

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Jim Sinclair’s Commentary

You really believe it will ever be paid back in many cases?

No, they go from rank speculation to rank business conditions.

Banks will ‘take years’ to pay back taxpayers’ money
Hugo Duncan
13.07.09

UK Financial Investments (UKFI), the quango in control of the Government’s stakes in British banks, today warned that it will take years for taxpayers to get their money back.

It said there was no quick fix for selling state holdings in Lloyds Banking Group and Royal Bank of Scotland (RBS), and indicated it would be a complicated and drawn out process involving any number of financial instruments.

UKFI chief executive John Kingman said that every UK household will have more than £3000 invested in shares in RBS and Lloyds. He pledged to maximise the value of those investments.

"UKFI will not interfere in the day-to-day running of the banks, but will continue to engage strongly on strategic issues which could impact value including board membership, risk management and remuneration policy," Kingman added.

The taxpayer took a 43% stake in Lloyds at an average of 121p a share and a 70% stake in RBS at an average of 51p a share to save the banks from collapse last year.

UKFI was set up by the Treasury to look after the stakes and sell at a profit – with the Government hoping the process will begin before it calls a General Election.

More…

 

Jim Sinclair’s Commentary

The Formula moves East.

A financial downward spiral without intervention at the cause point fails. That failure to intervene properly always results in the downward spiral accelerating as it attacks the real economy, therein giving birth to new momentum.

I could have prevented this and/or fixed it completely in a heartbeat before Lehman was left to fall. This is why I want you to either download these lessons or Purchase a Compendium.

There is knowledge contained within that took me more than 50 years and an apprenticeship to learn.

Between the two Compendiums there are roughly 10,000 articles. It is traditional practical knowledge of economic and markets.

Someday, somebody may actually want it and apply it.

A waste of experience offered is life wasted.

AP: 11% Drop in Texas Sales Tax Revenue
Bryan Rupp
Story Created: Jul 12, 2009 at 3:14 PM CDT

Sobering numbers on Texas’ current economic situation were released on Saturday, July 11, 2009. The Associated Press reported the state’s most recent monthly sales tax revenues dropped more than 11 percent from 2008, the latest sign that the recession is now seeping into Texas.

The $1.5 billion collected in June 2009, which reflected sales in May 2009, is off from the $1.7 billion collected in the same month in 2008.

One state budget official estimated that sales tax collections are $100 million below projections and could fall $550 million short when the fiscal year ends in September 20

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Jim Sinclair’s Commentary

How long have I been telling you this is the NA one that impacts the social order of Canada and the USA big time!

Pensions experts predict ‘horrific news’ on funds
Calls for the trustee system to be overhauled, as the retirement funds crisis deepens and Royal Mail mulls changes to its pensions scheme.
By Jonathan Sibun
Published: 6:35PM BST 12 Jul 2009

For Adam Crozier, things could be about to get a lot worse. The chief executive of Royal Mail saw 10,000 of his workers strike last week, but Britain’s top postie knows that could be just the beginning.

While postal workers are up in arms about job cuts and working conditions, their anger could soon pale into insignificance under the cloud of a far greater threat. At stake for many of them is their future financial security. The postal giant is considering whether to close the company’s retirement scheme to existing members, forcing them to join a new pension pot with less lucrative benefits.

Pension industry insiders believe such a move could spark widespread strikes at Royal Mail. More worrying for British industry, trouble will not be reserved to the postal service. Over the next few months companies are expected to highlight the scale of Britain’s pension crisis by revealing deficits on an unprecedented scale. Strikes and corporate failures could follow.

Company executives will be in the firing line, but many will choose to point the finger elsewhere. For Jane Newell, the chairman of Royal Mail’s pension trustees, and the 100,000 or so other trustees around the country, life could get very tough. Traditionally the silent power brokers of corporate Britain, pension trustees are about to find themselves dragged kicking and screaming into the limelight.

"Over the next few months we are going to see some horrific news on pension funds," says Ros Altmann, a former pensions adviser to the Government. "Around half the pension funds out there have a three-year valuation cycle that ended in March 2009. Trustees will face some awful deficit challenges as the new valuations come to light."

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Jim Sinclair’s Commentary

And now as I suggested, a market can begin. Let say the NASDAQ symbol is FLUSH!

California IOUs to be shunned by big banks after today
Bank of America and other big institutions plan to enforce a cutoff, making it harder to cash vouchers. To protect IOU holders from third-party speculators, the SEC defines the vouchers as securities.
By Tiffany Hsu
July 10, 2009

People holding California state IOUs — including taxpayers, vendors and local governments — will soon have a tougher time redeeming them, as most major banks are standing firm on a vow not to cash the vouchers after today.

Many credit unions say they will continue to redeem the IOUs for customers. But without mainstream banks as an option, recipients of the IOUs who need cash immediately could be tempted to sell them at a discount to third-party speculators, including ones popping up on the Internet.

Responding to that potential, the Securities and Exchange Commission determined Thursday that the IOUs are securities under federal law, which will generally require anyone trading them for profit to be a registered securities dealer.

The move is aimed at limiting the risk that IOU recipients could be defrauded by individuals or companies that offer to buy the scrip.

"The SEC’s action has the potential to, at least a bit, reduce the shark factor and potential for taxpayers to get defrauded," said Tom Dresslar, spokesman for State Treasurer Bill Lockyer.

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Jim Sinclair’s Commentary

The rescue of General Motors is a classic Wall Street solution. Its main accomplishments so far are:

1. Paper Shuffling.
2. Worker benefits elimination.
3. Worker elimination.
4. Factory shutdowns.
5. Debt repudiation.
6. Litigation proofing.
7. Union subjugation.
8, Introduction of the Volt, a profit-less, purpose-less entity. It is ass backwards. You do not make a regular car an electric car by sticking old questionable technology into a standard body. You call the Tesla Car Company and buy it.

Now let’s see if it can sell cars to anyone other than the US government to hold up demand.

Maybe GM’s first production run, after coming out of bankruptcy, will only be Black Suburbans.

Congressman: Michigan could hit 20% jobless thanks to Obama
@ 2:19 pm by Michael O’Brien
July 10, 2009

Michigan’s unemployment rate could hit as high as 20 percent with the Obama administrationto blame, one Michigan congressman warned Friday.

Rep. Thaddeus McCotter (R-Mich.) said that Michigan’s unemployment — already the highest in the country at 14.1 percent — could go even higher as General Motors and Chrysler continue to shed jobs after their government-financed bankruptcies.

"Sadly, we’ve seen estimates, because of the radical restructuring that the auto task force demanded, that this year, Michigan wind up over 20 percent unemployment," McCotter said during an appearance on a conservative news radio program.

The Wolverine State hasn’t yet exceeded its previous record for unemployment in modern history, when it reached 16.9 percent in November of 1982.

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Jim Sinclair’s Commentary

Here is interesting reasoning from Zoo management.

I think it might be the other way around. Keep the animals and shoot the management.

Boston zoo says it won’t have to kill its animals due to budget cuts

BOSTON, Mass. (AP) — The operators of the Franklin Park Zoo, who last week warned that some animals might have to be destroyed if state lawmakers don’t restore funding, say they won’t be euthanizing any animals as a result of state budget cuts.

Officials at Zoo New England had said in a letter to legislators last week that without more funding they’d have to shut down the Boston zoo, whose wild animals include lions and giraffes, in October and close its smaller counterpart, the Stone Zoo in Stoneham. They said as many as 200 animals might have to be destroyed because it likely would be impossible to find new homes for all of them.

In a revised statement released Saturday, Zoo New England said it meant the state would be forced to care for the animals or euthanize them.

At the Franklin Park Zoo, there are hundreds of exotic animal species from around the world in exhibits including a tropical rain forest, the Australian outback and the African savannah. The Stone Zoo features animals including reindeer, black bears, jaguars and goats.

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Jim Sinclair’s Commentary

Who ever made a sale by chasing no bids lower?

Home Sellers in U.S. Cut Prices by $27 Billion, Trulia Says
By Daniel Taub

July 10 (Bloomberg) — U.S. home sellers cut the prices of their properties by a total of $27.1 billion as the recession and rising foreclosures curtailed demand, Trulia Inc. said.

One quarter of sellers with homes on the market as of July 1 reduced their price by an average of 10 percent, the San Francisco-based real estate data provider said today. Properties listed for more than $1 million had the biggest cuts, with owners taking about 13 percent off the asking price.

Prices of existing U.S. homes dropped 17 percent in May from a year earlier, according to the most recent data from the Chicago-based National Association of Realtors. The decline helped boost purchases 2.4 percent to an annual rate of 4.77 million sales, NAR said.

“Sellers just have to discount their prices to reflect what’s going on,” Pete Flint, chief executive officer of Trulia, said in an interview. “Price reductions will stabilize the market, but I think we’re still some way off.”

The average discount on homes priced for less than $1 million was 9 percent, Trulia said.

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Jim Sinclair’s Commentary

Insurance is only as good as the entity insuring it.

Good means a strong balance sheet. This is MBIA with one difference. The FDIC via the US Treasury and Fed can simply print the paper to repay your deposit.

The rub is by doing so the paper you get will buy ever less amounts of goods and services.

MOPE says if you say it is guaranteed, the guarantee will not be called upon.

This is the road to California, financial highway 666

FDIC expands bank deposit protection
July 12, 2:59 PM

Still leery of getting back into the stock market?

The good news is that your bank holdings are protected from bank failure by the Federal Deposit Insurance Corporation (FDIC) for another four years at the increased rates. Through December 2013, the FDIC will insure savings accounts, retirement accounts, trust accounts, and certificates of deposit (CDs) up to $250,000 per account, per person. So if you set it up right, you personally could be fully insured for up to $1 million per bank; couples can be insured up to $2 million.

That’s a huge difference from last fall. Before the crisis in the financial industry, FDIC insurance per person/account maxed out at $100,000. Then news of the falling stock market and weakened banks sent people scrambling to spread their cash around…to other banks, under mattresses, and who knows where else. Trying to avoid total collapse of the industry, Congress voted for a temporary deposit coverage increase first through December 2009 and has now expanded it through 2013.

On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and certain other retirement accounts, which will remain at $250,000 per depositor.

Want to know if you’re fully covered at your bank? Go to EDIE, or the Electronic Deposit Insurance Estimator. EDIE can calculate your FDIC insurance coverage for each FDIC-insured bank where you have deposit accounts. It lets you know in a printable report for each bank whether your deposits are within or exceed coverage limits. Before you begin you’ll need all the deposit accounts you have at FDIC-insured banks, your current balances and names of all account owners and beneficiaries.

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Jim Sinclair’s Commentary

The only value input to the US dollar is MOPE (Management of Perspective Economics) developed confidence. That has 117 days to go! That does not mean it goes higher here. It goes lower here.

Lack of recovery a crisis in investor confidence
July 13, 8:32 AM

One question some people have started asking is why the economy is not showing any signs of an accelerated recovery. Since the Great Depression the US has had numerous short recessions, but the economic recovery following them was usually a strong 5-7% increase in the GDP for the year following the slump. The current recession is not displaying any signs that it will recover at that pace.

The problem has its foundation in a twist of the economy. The original slump started because of too much private debt and an over-leveraged investment sector. As the markets attempted to correct, there was a massive drop in real estate values and that drop shook the economy.

However, under normal circumstances, the economy would by now have cleared most of the over-capacity and be moving forward in recovery. Economist and New York Times columnist Paul Krugman complained that the issue is a liquidity crisis, and that the failure of banks to loan money is the issue. He is partially correct because the failure of banks to loan money and the drop in business investment created by that failure is the driving force, but his reasoning as to why is incorrect.

Our economy is going through a severe confidence crisis. Businesses are not confident in the economy, nor in the promise that the government will leave them to be profitable in the near future and it is effecting their decisions. During the downturn, many companies cutback production and services within the US in an effort to reduce capacities and inventories. Now that they have an opportunity to turn their factories back on, most are looking carefully at costs and regulations. Unfortunately for the US economy, few appear to be confident in the future of the US markets and what manufacturing they are restarting is largely overseas.

This is a significant issue and can be seen in recent stock market shifts. Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent.

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Jim Sinclair’s Commentary

From the sanctified heights of Wall Street Madness comes every new way to pick your pocket, create casino markets and basically destroy everything they touch.

In the sense of keeping you informed of the deformed thinking of the money grubbers and lack of referees in this game, please read the following, then yak.

Toxic Equity Trading Order Flow on Wall Street
The Real Force Behind the Explosion in Volume and Volatility
By Sal L. Arnuk and Joseph Saluzzi 
A Themis Trading LLC White Paper

INTRODUCTION

Retail and institutional investors have been stunned at recent stock market volatility.  The general thinking is that everything is related to the global financial crisis, starting, for the most part, in August 2007, when the Volatility Index, or VIX, started to climb.  We believe, however, that there are more fundamental reasons behind the explosion in trading volume and the speed at which stock prices and indexes are changing.  It has to do with the way electronic trading, the new for-profit exchanges and ECNs, the NYSE Hybrid and the SEC’s Regulation NMS have all come together in unexpected ways, starting, coincidently, in late summer of 2007.

This has resulted in the proliferation of a new generation of very profitable, high-speed, computerized trading firms and methods that are causing retail and institutional investors to chase artificial prices.  These high frequency traders make tiny amounts of money per share, on a huge volume of small trades, taking advantage of the fact that all listed stocks are now available for electronic trading, thanks to Reg NMS and the NYSE Hybrid.  Now that it has become so profitable, according to Traders Magazine, more such firms are starting up, funded by hedge funds and private equity (only $10 million to $100 million is needed), and the exchanges and ECNs are courting their business.

This paper will explain how these traders – namely liquidity rebate traders, predatory algorithmic traders, automated market makers, and program traders – are exploiting the new market dynamics and negatively affecting real investors.  We conclude with suggestions on what can be done to mitigate or reduce these effects.

To illustrate most situations, we will use a hypothetical institutional order to buy 10,000 shares of a stock at $20.00 that has been input into algorithmic trading systems, which most buy side traders use.  Algorithmic or “algo” trading systems chop up big orders into hundreds of smaller ones that are fed into the market as the orders are filled or in line with the volume of the stock in question.  Typically, such orders are easy to spot as they commonly show that the trader has 100 or 500 shares to sell or buy.

LIQUIDITY REBATE TRADERS

To attract volume, all market centers (the exchanges and the ECNs) now offer rebates of about ¼ penny a share to broker dealers who post orders.  It can be a buy or sell order, as long as it is offering to do something on the exchange or ECN in question.  If the order is filled, the market center pays the broker dealer a rebate and charges a larger amount to the

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Posted at 1:53 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

It is amazing what one little ol’ analyst can create with a “buy” recommendation on Goldman Sachs. That is exactly what happened this morning to lift the US equity markets higher after they were down sharply overnight in the futures markets on the news concerning CITI. That was all promptly forgotten after the analyst comments hit the wire as equity perma bulls went absolutely giddy with delight.

That then caused a rush back into “risk” and down went the Dollar after it had been moving higher, up went crude oil as it was being knocked $1.60 lower and of course, up went gold.

I am not really sure what to make of all this except for the fact that the “green shoots” were revived once again and all the hedgie algorithms went beserk on the buy side. Heaven help us for what these fund idiots have done to our markets. I am glad to see that more and more writers are echoing my sentiments in regards to these damnable funds and the destructive effects of their algorithms on the price discovery mechanism.

What is noteworthy, at least in my view, is that the long bond barely moved lower even as the S&P futures shot sharply higher. Someone appears to not believe the hoopla and the day’s euphoria. Wait until tomorrow – the stock market will probably sell off and the Dollar will shoot higher and take the Yen with it after the Yen was once again ignominiously dumped with the rush back into risk.

Crude oil and the Dollar are the two markets that gold is keying off of right now so its fortunes are linked directly to both. Crude oil moving higher causes the hedge fund algorithms to shoot buy orders to the gold pit as the inflation play then comes back into existence with commodities across the board generally moving higher.

Strangely enough, the mining shares were not particularly impressive even though they moved up but they did seem to be reluctant to follow gold higher for a while this morning. Again, I am not sure what to make of this one day price action because it is just more of the same choppiness and inability to sustain any trends in one direction or the other.

Technically, the move above $920 in gold is friendly as it serves to reinforce the support level that has been emerging just above the $900 level. Gold will still need to clear $950 to generate any real upside excitement. Before it can do that it will first need a close above $940. Downside support remains intact near today’s low followed by strong support near the $880 level.

The major moving averages in gold are all above today’s session high so gold has some definite work to do before one can get all that excited about today’s gains however the RSI’s sideways trend is still intact meaning that the consolidation pattern continues with its slight upward bias.

I have not been sending a daily chart recently because there really is not that much to look at on the charts other than what I am describing. If something changes I will make a point to get that illustrated. Open interest is basically going nowhere in gold as players exit out of boredom.

For now, more of the same sideways action, back and forth, up and down, etc, etc, etc….

Posted at 8:16 AM (CST) by & filed under General Editorial.

Dear CIGAs,

So you think the dollar can remain in this range as the momentum of usage drops?

Do you really think foreign buying of US Treasury instruments is going to rise to meet the increasing offerings?

You are kidding yourself when even a state of the USA, Japan, wants diversification.

Have you asked yourself why so many want diversification? That cannot be because these nations feel the dollar is going to increase in value.

What does China, Indian, Russia and Japan know that the US sheeple do not? They know that hyperinflation is a currency event, not an economic event. They know that MOPE does not have legs when the matter is a reserve currency.

MOPE does not have legs when the matter is a reserve currency because the decision makers at their level understand economics even if they have not practiced it according to their understanding of it.

They know that Confidence in the dollar is its only value input.

They know that when the currency to be at cause to hyperinflation is a reserve currency the world is in deep trouble.

DPJ’s Nakagawa Says Japan Should Diversify Reserves
By Keiko Ujikane and Kyoko Shimodoi

July 13 (Bloomberg) — Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.

“In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing,” Masaharu Nakagawa, the shadow finance minister in the Democratic Party of Japan, said in an interview in Tokyo on July 9. “Many countries are starting to diversify their reserves.”

Japanese investors are the biggest foreign holders of Treasuries after China with $685.9 billion of the securities in April, and Finance Kaoru Yosano said last month his trust in the bonds is “unshakable.” The DPJ yesterday beat the ruling Liberal Democratic Party in elections for Tokyo’s city assembly, boosting its prospects ahead of national polls that Prime Minister Taro Aso today called for Aug. 30.

“The current reality of Japan’s foreign-currency reserves is that their heavy weighting toward dollar assets means any fall in the dollar’s value leads to valuation losses,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. “The DPJ is opposed to a foreign-currency reserve policy that is so wholly skewed to the dollar.”

The yen traded at 92.39 per dollar at 2:11 p.m. in Tokyo from 92.54 late July 10. It has gained 4.3 percent this month.

‘Unshakable’ Trust

Nakagawa said Japan should consider purchases of new bonds issued by the International Monetary Fund that will pay an interest rate pegged to the fund’s basket of currencies — the dollar, euro, yen and pound — and known as Special Drawing Rights. The dollar is the principal component of SDRs. The IMF said this month it would issue bonds to its 186 members for the first time.

“We should start considering that as an option,” Nakagawa said. “I am not saying we should do it right away. If everyone starts doing it all of sudden, it may sway the dollar.” He didn’t say Japan should sell any of its dollar holdings.

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