Posted at 8:43 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

This one is a humdinger.

Note the letter from CIGA Richard B who looked at all five from Friday in light of an undercapitalized FDIC. Drain liquidity or reduce QE? You have to be kidding.

Apparently they waited to announce the fifth failure of the week! Based on the size of the bank we can see why.

Bank Failures Hit 120 as United Commercial Bank Fails
By MICHAEL R. CRITTENDEN

WASHINGTON — U.S. regulators closed five more banks on Friday, reaching 120 for the year, as souring loans and the lingering effects of last year’s financial crisis continued to weigh on the nation’s financial institutions.

San Francisco-based United Commercial Bank became the fifth and largest bank to be taken over by regulators on Friday evening, as annual failures hit levels not seen since the savings and loan crisis of the early 1990s. There were 25 bank failures in 2008, and three in 2007.

The Federal Deposit Insurance Corp. said in a release that East West Bank of Pasadena, Calif., would take over United Commercial’s roughly $7.5 billion in deposits, as well as $10.2 billion in assets. The deal includes all of United Commercial’s branches in the U.S., a branch in Hong Kong, and a subsidiary headquartered in Shanghai, China.

The agency said that it would continue to protect the bank’s domestic deposits, while Hong Kong deposits would be covered by the Hong Kong Deposit Protection Scheme. U.S. regulators are also working with their counterparts in China on the bank’s operations in that country, the agency said.

The failure is estimated to cost the FDIC’s deposit insurance fund an estimated $1.4 billion. That’s represents a significant hit for the fund, which has come under increasing pressure this year as failure costs have topped the agency’s initial loss projections. Federal regulators are currently considering a proposal that would have U.S. banks pay three years worth of premiums in advance in order to raise $45 billion to provide more liquidity to the fund.

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Jim Sinclair’s Commentary

Loss of confidence by a public is the reason for every event of currency driven hyperinflation ever.

With that in mind it is interesting to see the New York Times publicly embarrass the Administration’s statistical unemployment level.

Yes, it is even higher, but the sheeple are as dumb as a rock.

Public revelation by establishment media that the unemployment figure is BS is the material from which confidence eventually implodes.

Broader Measure of Unemployment Stands at 17.5% 
By DAVID LEONHARDT
For all the pain caused by the Great Recession, the job market still was not in as bad shape as it had been during the depths of the early 1980s recession — until now.

With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.

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Posted at 8:34 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

The FDIC closed another five banks on Friday 11/6/09. I find the details of the closings more interesting than the number of banks closed, though both figures are quite sobering.

The largest bank closed was United Commercial Bank of San Francisco, California, which had (according to the FDIC’s Press Release) 63 branches in California, China and Hong Kong, $11.2 billion in assets and $7.5 billion in deposits. The projected cost to the FDIC is $1.4 billion, plus the FDIC entered into a loss-share arrangement with the acquiring bank on approximately $7.7 billion of United Commercial Banks’ assets. It’s not clear to me whether the $1.4 billion estimated cost to the FDIC includes a projection of the losses it will take under the loss-share arrangement or whether one is in addition to the other.  However, the nature of a loss-share arrangement implies the assets in question are so illiquid and hard to value that neither party is willing to assume the full risk of future losses.  Therefore, the $1.4 billion needs to be understood as a bare minimum cost to the FDIC.

$1.4 billion is a big hit in absolute terms, particularly to an agency that’s already broke.  The fact that this closing will pass with very little press coverage is a testament to how overwhelming this economic disaster has become. We have literally become numb to the enormity of these figures.

What’s even more disturbing, however, is what these numbers say about the terrible condition this bank was in by the time the FDIC got around to closing it. To repeat, the FDIC says the bank had about $7.5 billion in deposits and the FDIC’s projected cost of closing the bank is at least $1.4 billion. That means that about one-fifth of the deposits had effectively disappeared.  Also, $7.7 billion of the bank’s assets turn out to be of such questionable value that the acquiring bank will only take them subject to a loss sharing agreement with the FDIC.  That implies that in the final analysis, none of the deposits were backed by collateral that could be characterized as being of sound value.

The remainder of the banks closed this week, while much smaller in size, show a similarly alarming loss of value by the time the FDIC got around to closing them.

Gateway Bank of St. Louis, MO, had total deposits of about $28 million, and the FDIC projects it will cost about $9.2 million to close it — about one third of the value of the deposits.

Prosperan Bank of Oakdale, MN, had total deposits of about $176 million, and the FDIC projects it will cost $60.1 million to close it — a bit more than one third of the value of the deposits.

Home Federal Savings Bank of Detroit, MI, had total deposits of about $12.8 million, and the FDIC projects it will cost $5.4 million to close it — a bit more than two-fifths of the value of the deposits.

United Security Bank of Sparta, GA, had total deposits of about $150 million, and the FDIC projects it will cost $58 million to close it — just shy of two-fifths of the value of the deposits.

It’s pretty terrifying to think that institutions directly under the FDIC’s supervision, that are not alleged to have engaged in fraud, were allowed to lose such a large chunk of the value of their customers’ deposits before the FDIC got around to closing them. It’s clear the FDIC is overwhelmed, both practically and financially. It’s also quite likely that the architects of MOPE will continue to try to limit the number of banks that are permitted to fail each week in order to manage peoples’ perceptions of the health of the banking sector. Therefore, it stands to reason that future bank closings will continue to show increasing losses to the FDIC as a percentage of deposits.

This is just one of the many ongoing indicators screaming that this financial crisis is far more serious than anything this country has ever experienced.

Against this background, it is truly incredible that people continue to buy into the MOPE that the situation is under control and that Western governments’ printing tens of trillions of dollars to prop up the banking sector will not have serious negative consequences. It brings to mind Monty’s recent sage advice, one should never underestimate markets’ abilities to behave irrationally over prolonged periods of time.

Respectfully yours,
CIGA Richard B.

 

Jim,

Commercial trader outflows as the dollar rally illustrates the formation of a textbook bearish setup.  See 2006-2007 for comparison.  The most aggressive portion of this primary downleg should begin within in weeks.  Jim, you know what that means for gold and silver.

CIGA Eric

Click chart to enlarge in PDF format

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Dear Jim,

When I started following JSMineset close to four years ago it was often difficult for me to get through as much as a paragraph of the discussion. You and other contributors have such a facility with the subjects you discuss it’s probably beyond your comprehension how "greek" all of it sounds to someone who has never been exposed to it before.  I’m not sure when that changed for me exactly, but I know it happened because I kept reading the words over and over until they began to make sense to me.

The amazing thing for me now is that I can look at an article like the following and know before the end of the first sentence the key point that will come out in the discussion. A gold and silver miner has a record quarter in terms of production and revenue, yet suffers a multi-million dollar loss.  How is that possible?  Answer: derivatives.

I hope everyone who has found their way to this site will stick with it and put in the time to understand what is being taught. These are unprecedented times and I believe the contributors to this site are among a very few who understand the keys elements of what is happening.

Respectfully yours,
CIGA Richard B.

Coeur loses money despite record precious metals production, revenues
Author: Dorothy Kosich
Posted:  Friday , 06 Nov 2009

RENO, NV – While Coeur d’Alene Mines has experienced what CEO Dennis Wheeler called "a year of exhilarating growth" with record gold and silver production, the Idaho-based silver miner still reported a net loss during the third quarter of $17.3 million or negative 52-cents per share.

Wheeler told analysts Coeur will mine 18 million ounces of silver this year, twice the 2008 production levels. The company also expects to produce 70,000 ounces of gold for this year, a 52% increase over last year.

However, losses on derivatives based on the Palmarejo gold royalty obligations, the Franco-Nevada warrant, put and call options, the gold lease facility and forex contracts cost the company $35.7 million in income during the third quarter.

Losses on derivative instruments for the first nine months of this year were $49.6 million, while interest expense was $12 million related to the gold lease facility, royalty obligations and other short-term borrowings.

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Posted at 10:20 PM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

The score for this Friday is 4 broken banks so far at 8 PM this evening.

Bank Closing Information – November 6, 2009
These links contain useful information for the customers and vendors of these closed banks.

Gateway Bank of St. Louis, St. Louis, MO
Prosperan Bank, Oakdale, MN
Home Federal Savings Bank, Detroit, MI
United Security Bank, Sparta, GA

http://www.fdic.gov/

Jim Sinclair’s Commentary

You can’t play both sides.

Turkey’s final decision will not be in the interest of the EU.

Sudan leader’s planned visit sparks Turkey-EU row
Fri Nov 6, 2009 8:48am EST

ANKARA (Reuters) – Turkey’s President Abdullah Gul accused the European Union on Friday of "interfering" after the bloc asked Ankara to reconsider a decision to invite indicted Sudanese President Omar Hassan al-Bashir to an Islamic summit.

The exchange underscores the risk for EU candidate Turkey that Bashir’s plans to attend Monday’s summit in Istanbul of the Organization of the Islamic Conference (OIC), in defiance of an warrant from the International Criminal Court (ICC), could escalate into a diplomatic crisis with Brussels.

Muslim Turkey has not ratified the 2002 Rome Statute that established the ICC, but it is under pressure to do so to bring it closer to EU standards.

Turkey, which has deepened commercial and energy ties with Sudan, has announced it has no plans to arrest Bashir, who was indicted by the ICC in March for crimes against humanity and war crimes in Sudan’s Darfur region.

In a diplomatic note seen by Reuters, Brussels asked Turkey to reconsider its invitation to Bashir to attend the OIC summit.

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Jim Sinclair’s Commentary

Huffington does not think much of the new legislation on OTC derivatives, nor does anyone that really understands these weapons of mass financial destruction.

New Bill Would Keep Public In The Dark About Threats To Financial System
First Posted: 11- 6-09 01:45 PM | Updated: 11- 6-09 05:02 PM

Members of Congress and the general public may not be told of "potential emerging threats to the stability of the financial system," thanks to a Thursday vote by a House panel shepherding the bill that’s supposed to end "too big to fail."

An amendment offered by Rep. Gregory Meeks (D-N.Y.) and unanimously approved by a voice vote in the House Financial Services Committee specifically deletes a provision in the Financial Stability Improvement Act of 2009.

The two draft versions of the bill originally called for the proposed overseer of threats to the entire financial system to prepare an annual report to Congress describing, among other things, "significant financial market developments and potential emerging threats to the stability of the financial system."

But on Thursday, Meeks’ amendment deleted that language and instead compels the council to describe:

"Significant financial and regulatory developments, including insurance and accounting regulations and standards, and assesses the impact of those developments on the stability of the financial system."

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Jim Sinclair’s Commentary

Who knows, maybe this unmitigated gall, as Dr. Bob calls it, will cure our Wall Street problem. Let’s hope so.

Visit msnbc.com for Breaking News, World News, and News about the Economy

 

 

Jim Sinclair’s Commentary

Actually it is not so subtle.

Central banks lead subtle shift away from dollar
Tue Nov 3, 2009 4:31pm EST
By Steven C. Johnson – Analysis

NEW YORK (Reuters) – Central banks with trillions of dollars in reserves that are already stepping up euro and yen purchases will likely continue doing so in coming years, driven by worries over the stability of the greenback.

A record U.S. budget gap and the rise of dynamic developing economies like China suggest the dollar, down over 20 percent since 2002 on a trade-weighted basis, has further to fall.

Of course, the dollar comprises some two-thirds of global reserves and will remain dominant in most holdings, as attempts to dump it would destroy the value of central bank portfolios.

But with the speed of reserve accumulation increasing after a crisis-induced lull late last year, policy makers can choose to park more new cash in euros and yen without having to sell existing dollar assets.

"I think 2009 will be remembered as a watershed moment for currencies," said Neil Mellor, strategist at BNY Mellon, which has some $20 trillion in assets under custody. "I don’t think there will be an imminent move, but it is quite clear there’s a plan to shift reserves to a more balanced portfolio."

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Jim Sinclair’s Commentary

This move by the Saudis was as much to break a building bear price manipulation as it is a move away from the US dollar.

Venezuela Reviews Oil Pricing Change
By DAN MOLINSKI and BRIAN BASKIN

PORLAMAR, Venezuela — Venezuela’s oil minister applauded Saudi Arabia’s decision to move away from West Texas Intermediate crude benchmark pricing for oil sold in the U.S., and said his country may do something similar.

"We support (Saudi Arabia) in its decision … a very important decision," Rafael Ramirez said on the sidelines of an oil conference.

Argus Media said last week that Saudi Aramco, the state-owned oil company, would in January switch to using its Argus Sour Crude Index as a pricing benchmark for oil sold in the U.S., instead of West Texas Intermediate. The abandonment of WTI, the longtime standard, for Argus’s five-month-old index by the world’s biggest oil exporter instantly sparked speculation that other major producers would follow.

Asked whether Venezuela may adopt the Argus pricing as well, Mr. Ramirez said, "I don’t have information right now, but let’s just say we are actively reviewing it."

Venezuela was the third-biggest exporter of oil to the U.S. in August, sending one million barrels a day, according to the U.S. Energy Information Administration. Saudi Arabia was fifth, sending 745,000 barrels a day. Combined, the two countries supplied about 9% of U.S. oil demand that month.

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Dear Readers,

Calls are overwhelming me today. Sometimes four at a time are coming in as people call all my numbers.

My cell phones are dancing across my desk with vibrate on high.

Everything you need to know is here. Please understand if I am driven nuts I cannot be that good to you.

Respectfully,
Jim

 

Jim Sinclair’s Commentary

Here is your by subscription handle on data reality.

- Annual Payroll Loss Rivals End of World War II Production Shutdown
- Unemployment Jumps to 10.2% (22.1% SGS)
- Systemic Liquidity Problems Still Intensifying
- Fed Continues to Explode Monetary Base

No. 256: Updated General Outlook, Employment/Unemployment, Money Supply"
http://www.shadowstats.com

Jim Sinclair’s Commentary

Keep this headline at hand as Market Watch will need it as gold trades at $1224, $1650 and on to Alf’s numbers.

Gold taps new record as U.S. joblessness hits 10%
Nov. 6, 2009, 11:36 a.m. EST
By Nick Godt, MarketWatch

NEW YORK (MarketWatch) — Gold futures barreled to a new record high above $1,100 an ounce on Friday, as news that the U.S. unemployment rate topped 10.2% in October boosted expectations the Federal Reserve will keep interest rates near zero well into next year, pressuring the dollar.

Gold for December delivery, the most active futures contract, rose as high as $1,100.50 an ounce on the New York Mercantile Exchange. It gained up to $1,101.90 an ounce in electronic trade. It recently gained $5.20, or 0.5%, to $1,094.50 an ounce.

Industrial metals, such as copper, however, moved lower. Copper, sometimes called "the metal with a Phd in economics," fell 1 cent, or 0.4%, to $2.94 a pound.

"With unemployment at 10%, the implications for Fed policy is that they have their hands tied and cannot defend the dollar," said Joe Foster, manager of the Van Eck International Investors Gold Fund.

"We’re going to see lots of new records going forward," he said. "By year end, it wouldn’t surprise me to [see gold] test $1,200 and then $1,300 by early next year before we see some consolidation."

The U.S. economy shed 190,000 jobs last month, lifting the unemployment rate above the 10% mark for the first time in 26 years, the Labor Department said. The report also revised statistics for September and August.

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Jim Sinclair’s Commentary

Even though people remain blissfully ignorant, the Iran/Turkey/Pakistan/Israel situation has the potential of changing the form of geopolitics for your lifetime.

Iran tested advanced nuclear warhead design – secret report
Exclusive: Watchdog fears Tehran has key component to put bombs in missiles
guardian.co.uk, Thursday 5 November 2009 20.45 GMT

The UN’s nuclear watchdog has asked Iran to explain evidence suggesting that Iranian scientists have experimented with an advanced nuclear warhead design, the Guardian has learned.

The very existence of the technology, known as a "two-point implosion" device, is officially secret in both the US and Britain, but according to previously unpublished documentation in a dossier compiled by the International Atomic Energy Agency (IAEA), Iranian scientists may have tested high-explosive components of the design. The development was today described by nuclear experts as "breathtaking" and has added urgency to the effort to find a diplomatic solution to the Iranian nuclear crisis.

The sophisticated technology, once mastered, allows for the production of smaller and simpler warheads than older models. It reduces the diameter of a warhead and makes it easier to put a nuclear warhead on a missile.

Documentation referring to experiments testing a two-point detonation design are part of the evidence of nuclear weaponisation gathered by the IAEA and presented to Iran for its response.

The dossier, titled "Possible Military Dimensions of Iran’s Nuclear Program", is drawn in part from reports submitted to it by western intelligence agencies.

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Jim Sinclair’s Commentary

Yeah sure, now find the real one.

About that advanced nuclear warhead tech, no problem if you like to glow in the dark.

ElBaradei: Inspectors found nothing worrying in Iran
Thu, 05 Nov 2009 22:18:41 GMT

The International Atomic Energy Agency (IAEA) chief says that UN inspectors have found "nothing to be worried about" in Iran’s latest nuclear facility.

"The idea was to use it as a bunker under the mountain to protect things," Mohamed ElBaradei told the Thursday print of the New York Times, pointing to Iran’s Fordo nuclear facility, some 160 kilometers southwest of Tehran.

"It’s a hole in a mountain," the IAEA chief said.

Nuclear inspectors had visited the newly constructed nuclear facility in October.

The IAEA is expected to declare details of the inspection in its next report due in mid-November.

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Jim Sinclair’s Commentary

India is always preparing for war with Pakistan, but China as well?

India is preparing for possible war with China and Pakistan
October 31, 8:25 PM
Sahit Muja

Tensions have flared between both China and India militaries along their disputed 2,175 mile-long border, with both sides alleging more frequent troop incursions in recent weeks. China is upset when the Indian prime minister recently visit the disputed region. China considers an Indian-occupied piece of it’s own Tibetan Autonomous Region, has added flames to the fire.

China of course already deeply resents the fact that the top Tibetan leader, and several hundred thousand exiled Tibetans, are allowed to reside in India.

India’s Maoist rebels are now present in 20 states and have evolved into a potent and lethal insurgency. In the last four years, the Maoists have killed more than 900 Indian security officers. Indian leaders are now preparing to deploy nearly 70,000 paramilitary officers to hunt down the guerrillas.The Maoists, however, do not want to secede or be absorbed. Their goal is to topple the system.

India’s rapid economic growth has made it an emerging global power but also deepened stark inequalities in society. Maoists accuse the government of trying to push tribal groups off their land to gain access to raw materials and have sabotaged roads, bridges and even an energy pipeline.

India is preparing the military for possible war with China and Pakistan. India and Russia have agreed two military pacts, including a 10-year deal on weapons, aircraft, and maintenance contracts potentially worth at least $5 billion, Indian defense officials said. India plans to spend $30 billion over the next five years to buy modern weapons systems and attack planes.

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Jim Sinclair’s Commentary

Most, if not all tier one and tier two gold shares are up to their respective asses in short of product derivatives as it was used to finance new production.

If not on the company books the short of product derivatives are hidden in the development/production loan indenture. All are subject to a contract agreement that acts exactly like a margin call even if not named a margin call.

Meanwhile China, devoid of any derivatives, continues to suck up world minerals.

Where is North America’s head at? Probably the same place as where they are up to in short of product derivatives.

This is not limited to gold and silver entities but also exists in base metals.

U.S. is losing control of the world’s natural wealth to China
October 25, 11:31 AM

China has an insatiable appetite for the world’s natural resources to sustain an economic boom that powers ahead despite the global downturn.

The quest for raw materials is the central goal of the country’s foreign policy. And virtually every natural resource imaginable is found just over the border.

Russian far East have large reserves of natural gas, oil, diamonds and gold, while millions of square miles of birch and pine provide supplies of timber.

All this amounts to an astonishing combination. A densely packed country trying to keep its economy roaring ahead by laying its hands on natural resources, living alongside a largely empty region with huge mineral wealth and fewer inhabitants every year.

Russia and China might operate a tactical alliance, but there is already tension between them over the Far East. Moscow is wary of large numbers of Chinese settlers moving into this region, bringing timber and mining companies in their wake.

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Jim Sinclair’s Commentary

Iraq had no WMDs, but they do have a lot of oil.

You think the US has any intentions of leaving Iraq’s oil supplies defenceless? Do you really believe Iraq will ever be strong enough to protect a SUPERGIANT oil deposit against Iran?

Maybe discovering oil in your country is NOT good news. It certainly wasn’t for the Nigerian people. It will not be for Sudan’s outback.

ExxonMobil-led consortium nets ‘supergiant’ Iraq oil field
Group wins bid to develop west Qurna as baghdad signs up slew of big contracts
Friday, November 06, 2009
Ahmed Rasheed and Muhanad Mohammed

BAGHDAD: An ExxonMobil-led consortium has beaten rival Russian, French and Chinese groups to bag initial rights to develop Iraq’s West Qurna field, the Oil Ministry said, adding momentum to Iraq’s bid to unlock its oil riches. With reserves of 8.7 billion barrels, West Qurna is among the prized Iraqi fields eyed by Western oil majors as they face flat or lower output at home and stiff competition from Chinese and Indian oil companies in bidding for oilfields elsewhere.

“The consortium led by ExxonMobil, which includes Shell, won the contract to develop West Qurna Phase One oilfield,” Oil Ministry spokesman Asim Jihad said.

The initial deal was signed in Baghdad on Thursday but needs Cabinet approval before it can be finalized.

The 20-year contract is part of a raft of deals Iraq is close to formalizing in a bid to catapult itself to the world’s third largest oil producer after decades of war and economic decline.

There is no guarantee that Iraq’s next government – to be elected in January ­– will honor the deals, but it injects optimism into prospects for Iraq’s battered oil sector and a second oil bid-round in December, after a lacklustre June auction.

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Jim Sinclair’s Commentary

The best comment this morning on the unemployment and discouraged workers report was that it is a "Rear View Mirror report, a lagging figure."

The US dollar is NOT a safe haven no matter what F-TV tells you.

Jim Sinclair’s Commentary

Curtain QE and drain liquidity? Who are they kidding.

Unemployment in U.S. Jumps to 10.2%, Payrolls Fall (Update2)
By Timothy R. Homan

Nov. 6 (Bloomberg) — The unemployment rate in the U.S. soared to a 26-year high of 10.2 percent in October and employers cut more jobs than forecast, underscoring why Federal Reserve policy makers say interest rates will remain near zero.

Payrolls fell by 190,000 workers last month, compared with a 175,000 drop anticipated by the median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The jobless rate gained from 9.8 percent in September and exceeded 10 percent for the first time since 1983.

Stock futures slid and Treasury notes gained on concern the emerging economic recovery will cool as American consumers retrench. Fed policy makers this week said the economy will probably “remain weak for a time” and reiterated a pledge to keep borrowing costs low for an “extended period.”

“The rise in the unemployment rate is very ugly,” Ethan Harris, chief U.S. economist at Bank of America Merrill Lynch, said in an interview with Bloomberg Television in New York. “This is a big backward step to get this high of an unemployment number this early in the recovery.”

Futures on the Standard & Poor’s 500 Stock Index fell 0.8 percent to 1,054.70 at 8:55 a.m. in New York. Treasuries rose, pushing the yield on the 10-year note down to 3.47 percent from 3.53 percent yesterday.

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Jim Sinclair’s Commentary

Note how none of these cases find their way to court. Now ask yourself, why?

It is not kick backs.

JPMorgan Ends SEC Alabama Swap Probe for $722 Million (Update2)
By Martin Z. Braun and William Selway

Nov. 4 (Bloomberg) — JPMorgan Chase & Co. agreed to a $722 million settlement with the U.S. Securities and Exchange Commission to end a probe into sales of derivatives that helped push Alabama’s most populous county to the brink of bankruptcy.

JPMorgan will give Jefferson County, Alabama, $50 million, pay a $25 million penalty and cancel $647 million in fees the county faced to unwind the transactions, according to an SEC news release. In addition, the agency charged two former JPMorgan employees for their roles in an “unlawful payment scheme” that allowed them to win bond and interest-rate swap business with the county.

The settlement comes a week after Larry Langford, the former president of the Jefferson County Commission and Birmingham mayor, was convicted for accepting $235,000 in designer clothes, Rolex watches and cash from an Alabama banker who JPMorgan paid almost $3 million to help arrange the swaps associated with a refinancing of the county’s sewer debt.

“It’s a good day for us,” said Jefferson County Commission President Bettye Fine Collins. “Finally, we’re seeing some movement. We have been victimized by our creditors.”

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Jim Sinclair’s Commentary

Daddy, please increase my allowance for my bad report card!

Fannie’s Draws From Emergency Treasury Fund Reach $60 Billion
By Dawn Kopecki

Nov. 6 (Bloomberg) — Fannie Mae, the mortgage buyer seized by regulators, plans to tap emergency U.S. capital for a fourth time this year, bringing its draws of taxpayer money to $60 billion as the company sees no immediate end to its losses.

Fannie Mae will seek $15 billion in Treasury Department financing after posting an $18.9 billion third-quarter net loss, according to a Securities and Exchange Commission filing late yesterday. The Washington-based company, which posted $101.6 billion in losses over the previous eight quarters, has already tapped $44.9 billion from the $200 billion emergency lifeline.

“They’re going to need that $200 billion in capital, if not more, when this thing’s all said and done,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

The Treasury Department is also holding up an agreement Fannie Mae reached in the third quarter to sell about $2.6 billion in low-income housing tax credits, the company said. The company may have to write down the value of the credits and take a charge if it can’t find a use for the credits.

Losses will continue and the company remains “dependent on the continued support of Treasury to continue operating,” Fannie Mae said in the filing. The company said any profit it does make would be eaten up by $6.1 billion in annual dividend payments owed on the Treasury borrowings, a cost that exceeded its annual net income for five of the past seven years.

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U.S. Jobless Rate Hit 10.2% in October, Highest in 26 Years, as Employers Cut Payrolls by 190,000
By JAVIER C. HERNANDEZ
Published: November 6, 2009

For Americans who wake up each morning thinking about their job hunt, Friday’s unemployment report offered little reassurance that their search would soon pay off, even as the broader economy showed signs of strengthening.

The United States economy shed 190,000 jobs in October, and the unemployment rate reached a 26-year high of 10.2 percent, up from 9.8 percent in September, the Department of Labor said Friday in its monthly economic appraisal.

While the pace of job losses has slowed significantly since the peak of the recession last winter, the unemployment rate, which measures the number of people actively seeking work, continues to climb, and economists do not foresee relief until well into next year.

“There’s no doubt that the slashing and burning of jobs has abated quite a lot,” said Allen L. Sinai, the founder of Decision Economics, a research firm. “The economy is recovering, but it is a very soft recovery.”

The biggest losses came in the construction, manufacturing and retailing sectors. Health care companies added 29,000 jobs to their payrolls, and the number of temporary workers grew by 34,000 — a significant gain that could indicate employers are beginning to expand their businesses again.

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Posted at 10:17 PM (CST) by & filed under Jim's Mailbox.

Jim,

More and more countries are getting frustrated with the U.S.

U.S. international influence is losing ground very, very quickly.

After Pakistan, Israel, Japan, China, now we have the Arab league. And at a certain point Europe (disagreement on financial regulation and executive bonuses).

The reasons for this frustration are various: economical, financial, geopolitical.

Unless President Obama change radically the way he handles foreign policy (which I doubt) in the next few weeks, I believe we could see a rapid rise in protectionism at all levels, which is the last thing we want to see in such crisis.

Best regards,
CIGA Christopher

Obama Push for Mideast Peace Dealt Setback, Arabs Say (Update1)
By Indira A.R. Lakshmanan and Bill Varner

Nov. 5 (Bloomberg) — The Obama administration’s effort to end the Middle East conflict has suffered a setback, the Arab League said at the United Nations after Secretary of State Hillary Clinton assured Egyptian leaders of the U.S. commitment.

“He is a good man and his intentions are good, but we are back to square one,” Arab League Ambassador Yahya Mahmassani said of President Barack Obama’s bid during his first year in office to make headway toward Israeli-Palestinian peace talks and a state for Palestinians. “His words have not led to actions so far.”

Clinton returned from five days of crisscrossing the region yesterday, after adding a stop in Cairo to try to ease Arab anger over her statements Oct. 31 in Jerusalem. She came under fire for hailing as “unprecedented” Israeli Prime Minister Benjamin Netanyahu’s proposal to restrict, rather than halt, settlement construction in the West Bank.

The outcry from Arab governments overshadowed Clinton’s Mideast tour and came as Arabs pressed at the UN for prosecution of Israeli officials for alleged war crimes during the December- January offensive in the Gaza Strip. Israel has said it won’t resume peace talks while facing possible war-crimes charges.

For three days starting at a meeting of Arab leaders in Morocco Nov. 2, Clinton insisted that U.S. policy on Israeli settlements hasn’t changed.

More…

Jim,

Same old same old…

Birth/Death Model

Birth/death model continues on its pace of estimate nontraditional job creation in the face of massive traditional job loss.  For instance, during the period of 2008.01-2008.10 birth/death creation and traditional job lost were 802 and -1800 thousand, respectively.  From 2009.01-2009.10 birth/death creation was 793 thousand jobs.  This number is comparable to the 2008.01-2008.10 period.  Traditional job losses during 2009.01-2009.10 was -4226.  This number is substantially higher than 2008.01-2008.10 and raises questions as to the consistency of the birth/death model.

Average Weekly Insurance Claim (AWIC)

As expected, backing away from recent highs.  I expect this series to roughly trace the illustrated pattern.

Job creation histogram (JCH)

Job destruction continues to outpace labor force decline.  In other words, the real unemployment is rising and much higher than reported.

CIGA Eric

Click charts to enlarge in PDF format

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Jim,

They just got $800 billion.

CIGA BJS

Dear BJS,

Wars are not free, especially two, not counting black opts.

Regards,
Jim

Pentagon Expected to Request More War Funding
By ELISABETH BUMILLER
Published: November 4, 2009

WASHINGTON — The nation’s top military officer said Wednesday that he expected the Pentagon to ask Congress in the next few months for emergency financing to support the wars in Iraq and Afghanistan, even though President Obama has pledged to end the Bush administration practice of paying for the conflicts with so-called supplemental funds that are outside the normal Defense Department budget.

The financing would be on top of the $130 billion that Congress authorized for the wars just last month.

The military officer, Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, did not say how much additional money would be needed, but one figure in circulation within the Pentagon and among outside defense budget analysts is $50 billion.

More…

Posted at 2:55 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

By now the government’s data release of this morning’s unemployment number is already baked into the market cake. The crummy news served to reinforce the notion, that helicopter Ben and company will continue their mission of protecting us all from global warming by filling the air with so many scraps of paper (aka – dollars) that they will serve to blot out the sun and keep us much cooler. No wonder it is so dad gum cold this year. In plain speak – Quantitative easing is alive and well and shows no signs whatsoever of being endangered any time soon.

The news sent gold careening upward breaking through the $1,100 barrier and making yet another all time high in nominal terms. Pre-weekend selling emerged as profit takers met up with gold perma bears to back gold off the session high but dip buyers continued to come in and push it back off the lows. Again, this is occurring with the Dollar actually gaining against the Euro and selling emerging in crude oil, the grains, natural gas and sugar and livestock. I mention this point because the hedge fund algorithms that have taken over the commodity markets would generally be selling gold under such circumstances. Yet gold is higher in spite of these factors. That is most remarkable. Not only that, this time the mining shares are actually higher even with the stock market struggling to hold on to its meager gains today.

As a point of interest, many of you follow John William’s wonderful work over at Shadowstats which cuts through the BS that the ministry of propaganda publishes on a regular basis and serves up to the generally gullible sheep. You have thus long known that the official statistics regarding the unemployment rate are not at all credible. I do find it interesting however that even at the government’s own official web site (http://www.bls.gov/news.release/empsit.t12.htm), the more realistic U6 numbers are actually horrendous (Seasonally adjusted at 17.5% compared to the headline number of 10.2%). If even these numbers are fudged, and we know that they are, one can only imagine how bad the true rate of unemployment is in this nation.

That is why chatter about the Fed withdrawing liquidity from the system is so imbecilic. The only reason some Fed governors even broached that subject a while back was a quixotic attempt to prevent a complete rout in the US Dollar by carry traders. Today’s data makes their public ponderings seem even more futile than ever notwithstanding all the publicity and hoopla surrounding their little ol’ dry run attempt to fine tune their actual mechanism with which to do so.

Technically gold is very strong on the weekly charts with all of the major moving averages trending solidly higher. It is a bit overbought on the daily chart and is showing some signs of selling but that is not to be unexpected after its performance this past week. The news from India this week brought about an entire new dynamic in the market and has many now looking for further Central Bank purchases to provide a strong floor of support on any bouts of price weakness.

We will more than likely see a repeat of last week’s data in this week’s Commitment of Traders data with swap dealers and commercials adding to shorts while managed money and CTA’s added to longs. The specs are in the driver’s seat right now and have not shown any signs yet that they are tiring.

Gold in terms of both the Euro and British Pound continues to perform exceptionally well. Yen priced gold is holding up fairly well but has been somewhat held back by the run into the Yen during periods of equity weakness and risk aversion.

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Posted at 12:23 PM (CST) by & filed under General Editorial.

Dear Friends,

Gold traded above $1100 this morning.

The US dollar is not a safe haven regardless of what F-TV tells you.

Gold is headed to $1224, $1650 and then on to Alf’s numbers. Shorts still attempting to hold down juniors will fail. Majors with huge short of gold derivative losses have endangered their balance sheets, and will take action to repair them which dilutes assets and represents a loss.

I will write up and review the gold share field this weekend.

Regards,
Jim

 

From Jim’s Mailbox, November 5, 2009:

Dear Jim,

How do the majors seem to survive covering short of gold derivatives without going broke?

Why did they wait so long?

CIGA Arlen

Dear Arlen,

Have you not seen that each of the majors experiencing this do two things:

1. They sell everything they have that is not in full production.

2. They float major bond deals to fill the hole caused by the losses taken.

As to why they wait so long, it is my opinion they would not even now have covered except for a hidden margin call feature of the short of gold OTC derivative. A clause in the arrangement focuses on the bond rating and balance sheet condition of the hedger. The loss on the hedge is calculated against the company’s assets and liabilities. If the balance sheet is challenged to the limit it triggers an obligation to pay up or close the commitment. Many of the reductions and closing of hedge books has not been as much a decision as it is a contract requirement.

Regards, 
Jim

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

Dear CIGAs,

Martin Armstrong has written a new article titled "Is America On The Verge Of Another Bank War? Should We End The Fed Or Goldman Sachs?"

The subject is something we have spoken about here. The Fed is under political pressure not to SAY or DO anything that would be perceived by the Administration or Wall Street as a derailment of the procedures seen as necessary to economic recovery.

The needs of politics and Wall Street are always in present time and not forward looking.

Armstrong points out the history of such events, but in my opinion there has never been a challenge to a central bank as serious as what is now in place.

Armstrong’s article can be accessed here…

 

Jim Sinclair’s Commentary

And on it goes. Once you open Pandora’s box of ‘Too Big To Fail," and government underwriting of private losses, how do you stop?

You can’t without the fallout being worse than anyone can estimate.

The Third Seal may well have been broken by Wall Street.

Fannie Seeks $15 Billion in U.S. Aid After Ninth Straight Loss
By Dawn Kopecki

Nov. 5 (Bloomberg) — Fannie Mae, operating under a federal conservatorship, said it will seek $15 billion in aid from the U.S. Treasury as its ninth straight quarterly loss once again drove the mortgage-finance company’s net worth below zero.

A third-quarter net loss of $18.9 billion, or $3.47 a share, pushed the company to request its fourth draw on a $200 billion lifeline from the government, Washington-based Fannie Mae said in a filing today with the Securities and Exchange Commission.

Fannie Mae, which posted $101.6 billion in losses over the previous eight quarters, has already taken $44.9 billion in federal aid since April. Its shares, which peaked at $87.81 in December 2000, closed at $1.12 today in New York Stock Exchange composite trading.

More…

 

Jim Sinclair’s Commentary

Not the best way to deal with your banker.

US slaps duties on Beijing steel pipe imports
By Sarah O’Connor in Washington
Published: November 6 2009 00:17 | Last updated: November 6 2009 00:17

The US hit China with another big trade action on Thursday as it slapped ­preliminary anti-dumping duties on $2.6bn worth of Chinese pipe imports.

The commerce department’s decision to impose duties of up to 99 per cent on imports of some steel pipes is the latest in a string of trade spats between over tyres, cars and chickens. It comes less than a fortnight before President Barack Obama’s first visit to China.

The ruling will affect more imports by value than Mr Obama’s recent move to impose duties on Chinese tyres, which sparked an international row in which Beijing accused the US of “rampant protectionism”.

The decision was a victory for steel companies, including US Steel Corporation, that petitioned for the duties in April. The United Steelworkers union said the decision was “an overdue message for thousands of American laid-off workers that trade laws are being enforced”. It says nearly half the domestic industry’s workers have been laid off.

More…

 

Jim Sinclair’s Commentary

Turkey today.

Turkey: Sudanese president welcome to visit, shouldn’t fear arrest
By ASSOCIATED PRESS

A Turkish Foreign Ministry official said Sudan’s indicted president is free to attend a meeting of Islamic nations in Turkey despite an international arrest warrant against him.

Sudanese President Omar al-Bashir, wanted by the International Criminal Court for war crimes and crimes against humanity, is expected to arrive in Istanbul this weekend to attend a meeting of the Organization of Islamic Conference.

The official said Thursday that Turkey is not a party to the International Criminal Court and has no obligation or intention to arrest Bashir. She spoke on condition of anonymity because she was not authorized to speak to media.

Iranian President Mahmoud Ahmadinejad and Afghan President Hamid Karzai are also expected to attend the meeting next Monday.

More…

Jim Sinclair’s Commentary

The march to gold has begun.

When the COT takes on governments it loses.

Buy whatever China is buying has been a formula for success over the past few years. India was simply quicker on the draw this round and front ran the Chinese while they were waiting for a bargain.

Gold will go to $1224, $1650 and then on to Alf’s numbers.

Sri Lanka c.bank buying gold to diversify reserves
11.05.09, 04:55 AM EST

NEW DELHI, Nov 5 (Reuters) – Sri Lanka’s central bank has been buying gold for the past five or six months as it diversifies its reserves amid volatile markets, the bank’s governor said in an interview on Thursday.

‘We have been fairly strong accumulators of gold reserves over the past few months,’ Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai.

‘We haven’t stopped yet,’ he added, declining to quantify how much gold the central bank had bought or how much of the more than $4.8 billion of the country’s reserves were in gold.

‘Many countries are today diversifying. They are also looking at intrinsic value of their reserves, so gold would be a natural candidate for that kind of reserve accumulation,’ he said.

More…

Jim Sinclair’s Commentary

You think it might be a little late to figure this out?

Apparently the Formula did not get much respect.

Allstate Sells Municipals as Governments Run Deficits (Update3)
By Jamie McGee and William Selway

Nov. 5 (Bloomberg) — Allstate Corp., the largest publicly traded U.S. home and auto insurer, is paring its municipal-bond holdings because state and local governments are “not in great shape,” Chief Executive Officer Thomas Wilson said.

“We’ve just recently begun to reduce our exposure to municipals because we are uncomfortable with some of the fiscal practices of some of the government entities,” Wilson said yesterday in an interview after the Northbrook, Illinois-based company reported a third-quarter profit. “If you look at their balance sheets or income statements and put it in financial terms, they are not in great shape.”

Allstate cut its municipal holdings 8.3 percent to $22.1 billion in the third quarter as tax-exempt yields plunged to a 42-year low and governments struggled to maintain budgets amid the recession. State tax collections declined by 16.6 percent in the three months through June from the year-earlier period, the largest quarterly decline since at least 1963, the Nelson A. Rockefeller Institute of Government said in a report last month.

Officials “haven’t adjusted their spending, so they are running deficits,” Wilson said. “When we look at the risk- return profile we don’t think we are being paid enough to take that risk today.”

Within its municipal portfolio, Allstate is reducing holdings of health-care debt and zero-coupon bonds, Chief Investment Officer Judith Greffin said today in a conference call with analysts and investors.

More…

Jim Sinclair’s Commentary

Simply put, India front ran China.

India Shows Hedge-Fund Savvy With Huge Gold Buy: William Pesek
Commentary by William Pesek

Nov. 5 (Bloomberg) — Barack Obama and Timothy Geithner must be as annoyed as they are bewildered.

Didn’t India get the memo? Developing nations are supposed to keep their excess cash in Treasuries, the U.S. president and his Treasury secretary are no doubt thinking. Gold? That relic of the past that doesn’t pay interest or dividends and can’t be eaten? A fool’s game best left to the dinosaurs out there.

India is going its own way with a $6.7 billion gold purchase. The transaction turned heads in markets. It should do the same in capitals from Beijing to Washington.

India’s 200 metric-ton deal wasn’t huge considering how much gold central banks hold. It’s the symbolism that matters as the U.S. struggles to keep the dollar’s slide orderly and panic- free. Consider India the vanguard of central banks more aggressively diversifying reserves away from U.S. assets.

As markets brace for that inevitability, here are four things we can conclude from India’s gold rush.

One, the dollar’s plight just got worse. Mounting U.S. debt is bumping up against a dismal employment picture, a toxic mix that may get the attention of credit-rating companies. This U.S. recovery looks to be a uniquely jobless one, complicating things for a president already grappling with two unpopular wars.

More…

Jim Sinclair’s Commentary

Non sustainable and without any practical method of exit. This is quite dollar negative.

It is what the final pillar is of the Gold Bull market.

U.S. to Sell $81 Billion in Long-Term Debt Next Week (Update2)
By Rebecca Christie

Nov. 4 (Bloomberg) — The U.S. Treasury Department said it plans to sell a record $81 billion in its quarterly auctions of long-term debt next week and will replace the inflation- protected 20-year bond with a reintroduced 30-year security.

The Treasury will auction $40 billion in three-year notes on Nov. 9, $25 billion in 10-year notes Nov. 10 and $16 billion in 30-year bonds Nov. 12. The amounts were in line with the median forecast of $80 billion in a Bloomberg News survey of nine analysts.

The U.S. is headed for a second straight year of budget deficits exceeding $1 trillion, and the country’s legal limit on debt may be reached next month. Treasury debt-management director Karthik Ramanathan told bond market participants this week to expect another year of government debt sales of $1.5 trillion to $2 trillion, minutes of the meeting showed today.

“Treasury debt managers will continue to remain aggressive in managing financing needs while minimizing potential market implications,” the Treasury said in a statement in Washington.

More….

Posted at 7:47 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

How do the majors seem to survive covering short of gold derivatives without going broke?

Why did they wait so long?

CIGA Arlen

Dear Arlen,

Have you not seen that each of the majors experiencing this do two things:

1. They sell everything they have that is not in full production.

2. They float major bond deals to fill the hole caused by the losses taken.

As to why they wait so long, it is my opinion they would not even now have covered except for a hidden margin call feature of the short of gold OTC derivative. A clause in the arrangement focuses on the bond rating and balance sheet condition of the hedger. The loss on the hedge is calculated against the company’s assets and liabilities. If the balance sheet is challenged to the limit it triggers an obligation to pay up or close the commitment. Many of the reductions and closing of hedge books has not been as much a decision as it is a contract requirement.

Regards,
Jim