Posted at 8:45 PM (CST) by & filed under General Editorial.

My Dear Friends,

You can take your waves, percentages, algorithms, quants and quarks and throw them directly into the basket. The time for lines and squiggles are behind us. The common shares of the US dollar are and have been in a long term downtrend. That downtrend is 81 days from implosion. The selling of the US dollar and US dollar instruments is increasing in international markets, making it ever more difficult to manipulate the popular US dollar index, the USDX.

The price of gold is all in the dollar, times 100.

The manipulators have built a fundamental spring into gold by their capping activities.

COT has cooked its own goose.

Where the price of gold is concerned, there is no other focus of interest as all points of interest have but one common denominator.

That entity is the US dollar.

The Fundamental illustration below is dollar flow momentum.

China holds in its hands the future of the category, “Foreign Purchasers of US bonds.”

China wishes the annihilation of the Fed policy of “Quantitative Easing.”

The Fed wishes to accommodate China.

The US Treasury is absolutely opposed to any such consideration as it would cement the present Administration into a one term wonder.

The US Treasury must win this battle because the boss of this opposition has the power to appoint the new Chairman of the Fed, either Summers or Geithner.

Political control of the US Fed and therefore of monetary policy is in the cards.

China as spokesman for the BRICs has publicly stated their desire for the institutions of a Super Sovereign Currency. This is not an intended as an immediate substitute for the dollar as a reserve currency but rather an alternative in new commitments.

Only the misinformed assume the desire for an SSCI is a desire for a total exchange of dollar reserves.

The desire of the BRICs and in truth all other major trading nations is for dollar diversification in order to break away from the dollar dictating their futures. It means a significant decrease in purchases of US dollar denominated instruments.

Selling is not required for substantial depreciation in a major currency.

Momentum collapse in buying is all that is required for a severe depreciation in any major currency.

The USA in all probability will not be able politically to deliver support for the SSCI, however political control of monetary policy is CERTAIN as the Fed cannot win this contest against the Administration in the form of the US Treasury.

Bernanke becomes a team player or a team player will replace him.

The later is becoming a probability as it is hard to trust a prior adversary.

The depreciating dollar was a tool of Roosevelt’s failed anti-deflation program that like monetary stimulation is believed to have been abandoned too soon in the 30s by Administration intellectuals. Because of this, the US dollar is out of the picture for serious Administration consideration other than as a sales issue on US treasuries.

It is my understanding that the BRIC countries, not China alone, have given the US until early November to deliver.

As a result of the above I see 81 days left for the US dollar.

The gold price has but one criteria and that is the US dollar. Armstrong and Alf are correct on the levels awaiting the gold price.

I know $1224 and $1650 are certain.

Note: Eric’s humility is the sign of his maturity and genus. Well done eric.

Respectfully yours,
Jim

Guys,

I know that Dan’s TIC work is far superior to mine, but I find this simple chart so ominous I had to send it. Decelerating year-over-year inflows and outflows across the board. Stick your head in the sand if you like, but string this trend out a little longer and you’re going to have flight from the dollar.

CIGA Eric

Click chart to enlarge

TIC

Pimco Says Dollar to Weaken as Reserve Status Erodes
By Garfield Reynolds and Wes Goodman

Aug. 19 (Bloomberg) — Pacific Investment Management Co., the world’s biggest manager of bond funds, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy.

The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.

“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.

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Guys,

PCE as %GDP reaches all time high Q209 @70.6%. Nothing has changed!

For analysis of other GDP components archived in the photo section, see http://home.rr.com/supreed

CIGA Eric

Click chart to enlarge

PCE

Posted at 8:09 PM (CST) by & filed under Jim's Mailbox.

Jim,

This is truly comical at this point.

CIGA BJS

Investors’ fears are eased on Talf
By Tom Braithwaite in Washington and Nicole Bullock in New York
Published: August 17 2009 20:05 | Last updated: August 17 2009 23:35

The Federal Reserve and the US Treasury on Monday extended a $200bn programme designed to revive the securitisation market, bringing relief to investors concerned that the supply of cheap government financing was set to end.

The term asset-backed securities loan facility (Talf), in which the Fed lends to investors wanting to buy securitised loans, is to be extended by three to six months from the original year-end expiry date.

“Conditions in financial markets have improved considerably in recent months,” the Fed and Treasury said. “Nonetheless, the markets for asset-backed securities backed by consumer and business loans and for commercial mortgage-backed securities are still impaired and seem likely to remain so for some time.”

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Jim Sinclair’s Commentary

For those that believe OTC derivatives are victimless crimes, read the following.

Jim,

I didn’t realize what awful effects might occur when a bank is closed by the FDIC.

Greeley bank auction may bury farmers
Today’s sale of failed Greeley bank’s notes "could be devastating"
By Miles Moffeit
Posted: 08/18/2009 01:00:00 AM MDT
Updated: 08/18/2009 11:53:49 AM MDT

The federal government today will auction off 418 farm loans stranded on the books of failed Greeley-based New Frontier Bank.

The auction is believed to be the largest sale of farm notes since the aftermath of the 1980s savings-and-loan crisis, and it has many Colorado farmers fearful they will lose their property as a result.

Farmers suspect investors or banks will snap up their notes at fire-sale prices, then liquidate their collateral to score a quick profit.

"It could be devastating," said Bob Winter, a board member of the Colorado Farm Bureau. "That is what’s going to happen with many of the loans. The buyers will take what equity they will get and move on."

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Posted at 8:57 PM (CST) by & filed under In The News.

Dear CIGAs,

Here is the new symbol of Wall Street.

clip_image002

Jim Sinclair’s Commentary

Tic, tock the dollar drops…

Treasury International Capital (TIC) Data for June

WASHINGTON –The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for June 2009. The next release, which will report on data for July 2009, is scheduled for September 16, 2009.  

Net foreign purchases of long-term securities were $90.7 billion.

Net foreign purchases of long-term U.S. securities were $123.6 billion. Of this, net purchases by private foreign investors were $105.2 billion, and net purchases by foreign official institutions were $18.4 billion.

U.S. residents purchased a net $32.9 billion of long-term foreign securities.

Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $71.3 billion.

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $19.5 billion. Foreign holdings of Treasury bills decreased $11.3 billion.

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Jim Sinclair’s Commentary

And around the country it goes, the royal screwing of the geezers and those looking forward to retirement.

You know, "Cash for Coggers" or "Gas for Geezers" might be a necessary program quite soon. If you can’t pull your own weight it is Dr. Kevorkian time.

State pensions
Discourage double dipping
Tribune Editorial
Updated: 08/18/2009 05:48:37 PM MDT

Utah’s pension system for government workers took a hit from the Wall Street collapse, and actuaries estimate it is now underfunded by about $3 billion. One way to cut those losses would be to discourage early retirements.

This state has a peculiarly generous policy that allows people to retire and take pension benefits from the system, then go back to work full time for a state agency and receive large 401(k) contributions from their employer. According to an audit in 2006, no other state has a policy like this that encourages double-dipping. The Legislature should put an end to it.

Admittedly, the resulting savings will not come anywhere close to rescuing the state’s retirement system, but it’s a start.

Utah traditionally has provided state and local government employees, including teachers, police officers and firefighters, a defined benefit pension plan. The employee receives a lifetime benefit based on a formula which accounts for years of service and average salary. The employer has funded the entire plan.

This contrasts with a defined contribution plan, such as a 401(k), in which an employee has an individual account to which both she and the employer contribute. The employee decides how to invest the money and there are no guaranteed benefits.

Often, a police officer will retire after 20 years of service and begin to draw his defined-benefit pension. But if he goes back to work for a different police agency that is part

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Jim Sinclair’s Commentary

Here comes the royal screwing of Main Street.

CalPERS Admits California "Pension Costs Unsustainable" – So What To Do About It?

In an unusual display of honesty CalPERS Actuary Says "Pension Costs Unsustainable"

The CalPERS chief actuary says pension costs are "unsustainable," and the giant public employee pension system plans to meet with stakeholders to discuss the issue.

"I don’t want to sugarcoat anything," Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. "We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions."

Dwight Stenbakken of the League of California Cities told the seminar that pension benefits are "just unsustainable" in their current form and difficult to defend politically.

"I think it’s incumbent upon labor and management to get together and solve this problem before it gets on the ballot," he said.

"I actually think it is sustainable," said Terry Brennand of the Service Employees International Union. He said the basic problem is investment losses, not high benefit levels.

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Jim Sinclair’s Commentary

Disaster, phase two, starts in September.

Mortgage deliquency rate hits all time high in 2Q
Aug 17 02:39 PM US/Eastern
By EILEEN AJ CONNELL

NEW YORK (AP) – The delinquency rate on U.S. mortgage loans hit an all-time high in the second quarter, but the pace of growth for the rate slowed, a possible sign the mortgage crisis may be beginning to turn the corner.

Data provided by credit reporting agency TransUnion shows the ratio of mortgage holders who are 60 days or more behind on their payments increased for the 10th straight quarter, to 5.81 percent nationwide for the three months ended June 30.

That’s up 65 percent, from 3.53 percent, in the 2008 second quarter.

Deliquency of 60 days is considered a precursor to foreclosure, because of the difficulty homeowners would have coming up with two back payments to bring themselves current.

While the deliquency rate hit a new high, however, the increase from the first quarter to the second was 11.3 percent. In the two prior quarters, the rate jumped nearly 16 percent.

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Jim Sinclair’s Commentary

Soon China will have all the minerals and energy but few of the dollars.

Heard any pinhead, xenophobic, talking head idiots say China is in a dollar prison lately?

Exxon, China ink $41 billion Australian gas deal
Tue Aug 18, 2009 7:36am EDT
By Fayen Wong and Chris Buckley

PERTH/BEIJING (Reuters) – Australia and China struck their biggest trade deal ever on Tuesday as the world’s two most valuable listed oil companies, Exxon Mobil and PetroChina, agreed a $41 billion liquefied natural gas deal.

"It’s a statement about the nature of our two economies and the fact that Australia is important to China, just like China is important to Australia," Australian Resources Minister Martin Ferguson told Reuters in Beijing.

The gas sale agreement between Exxon and PetroChina comes just weeks after Exxon inked a A$10 billion Gorgon LNG sales deal with India’s Petronet, which marked Australia’s first ever LNG contract with India.

The deals, along with regulatory approvals process from the federal government now nearing completion, means that the Gorgon project partners could approve the massive LNG project, located off Western Australia, by early as next month.

The latest Gorgon gas sale would bring PetroChina’s total LNG purchase from the project to a total of 3.25 million tonnes per annum (mtpa) for 20 years — making it the largest buyer of gas from the project.

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Jim Sinclair’s Commentary

Does not 9.4 people rather than 9.5 people out of 10 unemployed cure all our financial problems?

This writer apparently does not watch F_TV

Joblessness spurs foreclosure fears
Published: Aug. 17, 2009 at 11:36 PM

WASHINGTON, Aug. 17 (UPI) — Worsening joblessness is taking the place of subprime mortgages as the major cause of U.S. foreclosures, financial industry professionals say.

Citing Mortgage Bankers Association figures, The Washington Post reported Monday that the largest share of foreclosures during the first quarter of 2009 shifted from subprime loans to prime loans — indicating larger numbers of unemployed Americans going to foreclosure. Bankers and economists are concerned growing unemployment will further complicate efforts to unwind the foreclosure crisis, the newspaper said.

Citing a report on Moody’s Economy.com, the newspaper said an estimated 1.8 million homeowners will lose their homes in 2009 — up from 1.4 million in 2008. At the same time, the federal government has encountered more difficulty helping people keep their homes after job loss than in the case of mortgage payments shooting up due to higher interest rates.

Mark Calabria, director of financial regulation studies at the Cato Institute, a libertarian think tank based in Washington, told the newspaper (foreclosures caused by) unemployment are a "much harder nut to crack."

"It’s much easier to bash lenders than to create jobs," he said.

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Jim Sinclair’s Commentary

Rolling thunders is heard over middle America

CIT Second-Quarter Loss Narrows, Reserve for Bad Loans Triples
By Linda Shen and Dakin Campbell

Aug. 18 (Bloomberg) — CIT Group Inc., the commercial lender seeking to avoid bankruptcy, had a ninth straight quarterly loss as reserves for bad loans more than tripled.

The net loss narrowed to $1.62 billion, or $4.30 a share, in the second quarter from $2.07 billion, or $7.88, in the same period a year earlier, New York-based CIT said yesterday in a regulatory filing. Nine analysts surveyed by Bloomberg estimated a per-share loss of $1.53.

CIT Chief Executive Officer Jeffrey Peek is negotiating with bondholders and considering asset sales to stave off a bankruptcy filing. The lender, which provides financing to almost a million small- and mid-sized businesses, has lost more than $5 billion in the past nine quarters as bad debts soared and the company was cut off from the commercial-paper market, its traditional source of funding.

“I don’t think there’s any good news to come in terms of credit quality,” said Sameer Gokhale, an analyst with KBW Inc. in an interview before the earnings were released.

Provisions for loan losses in the quarter rose to $588.5 million, more than triple the $152.2 million in the year-ago period. Net charge-offs rose to 2.81 percent, up from 2.41 percent in the first quarter, the company said.

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Jim Sinclair’s Commentary

China will buy only if China wishes to buy. China is not in dollar prison. Whomever tells you that is a xenophobic fool.

China cuts US Treasury holdings in June
Updated: 2009-08-18 10:45

NEW YORK: China reduced its holdings of US Treasury debt in June by the biggest margin in nearly nine years, according to a US Treasury Department report issued on Monday.

China cut its net holdings by 3.1 percent to $776.4 billion in June from $801.5 billion in May, the report says. This is also the first large-scale reduction of US Treasury debt by China so far this year.

However, its June holdings were still larger than April’s $763.5 billion and $767.9 billion in March, according to the statistics of the Treasury Department.

Reuters data show the drop in China’s Treasury holdings in June was the biggest percentage reduction since a 4.2 percent cut in October 2000.

On the other hand, Japan, the second-largest holder of US Treasury securities, increased its holdings to $711.8 billion in June from $677.2 billion in May.

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Jim Sinclair’s Commentary

Merkel’s speech would have you believe she does not know or has not heard of the Wall Street takeover of Washington DC.

Merkel sees "old arrogance" back on markets
Mon Aug 17, 2009 1:39pm EDT

BERLIN, Aug 17 (Reuters) – German Chancellor Angela Merkel said on Monday arrogance was returning to financial markets and politicians should take steps to ensure they could not be "blackmailed" in future.

Merkel, in an election campaign speech to her conservative Christian Democrats (CDU), did not say which financial market players she was talking about; but last month she said bankers on Wall Street and in the City of London should not be allowed to dictate how money is made.

Merkel is seeking re-election as chancellor in a federal vote on Sept. 27. Parties on both the left and the right of the political spectrum have repeatedly attacked the role played by banks in the financial crisis.

Tighter controls of the financial sector were crucial to ensuring "sustainable growth" in the global economy, she said.

Merkel said that as states struggled with the financial burden of propping up the global economy "an old arrogance was returning" among some market players.

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Jim Sinclair’s Commentary

Check out the following video of me driving an amphibious car.

 

Jim Sinclair’s Commentary

Mark to market accounting needs no defense as it mandates TRUTH. Arguments to the contrary mandate blatant LIES.

In Defense Of Mark-To-Market
Jeremy Newman, 08.18.09, 01:05 PM EDT

It is consistent, objective and transparent.

Blame for the global economic turmoil and subsequent banking crisis has, throughout the last 18 months, been placed at the door of many parties: from rating agencies to governments, regulators to bankers and many more. More recently, mark-to-market accounting has been given a share of the blame.

Accounting standards and the accountancy profession are not responsible for the banking crisis. The losses incurred by banks are not merely accounting losses, they are very real cash losses. Many banks are suffering huge liquidity problems, not merely accounting conundrums . A mark-to-model system–in which each financial organization would be allowed to value and account on an individual model basis–is less transparent than mark-to-market and will lead to inconsistencies and lack of comparability. It is a far riskier system.

Mark-to-market, on the other hand, has the benefits of consistency, objectivity and transparency. It ensures that two similar financial assets are given similar values whether they were originated by the financial institution or bought in the market place; and it ensures that assets are valued by reference to an objective external market view rather than a potentially biased internal view.

In the wake of the banking crisis, many changes have taken place–or are taking place–in mark-to-market accounting. The Financial Accounting Standards Board (FASB) in the U.S. has relaxed mark-to-market rules after political pressure from banking and financial services lobbies.

The International Accounting Standards Board initially said it would not follow suit and warned against rash changes. However, after substantial pressure, the IASB has issued an exposure draft that is similar in many ways, albeit with some potentially significant differences, to the FASB guidelines. Throughout September, the IASB will hold round tables across North America, Asia and Europe to debate these proposals. At the same time, the FASB has announced this week that it may now expand the use of mark-to-market to cover all financial instruments. Who would have thought accounting standards could prompt such a heated debate?

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Jim Sinclair’s Commentary

There isn’t a snowball’s chance in hell that Banksters will do this unless forced by the turn coat cowards at FASB.

Banks Should Give Better Data on Illiquid Assets, Scholes Says 
By Jeff Kearns and Shannon Harrington

Aug. 18 (Bloomberg) — Banks should give fair-value estimates for more of their illiquid assets, by listing them on public exchanges and expanding mark-to-market accounting, because investors deserve a clearer picture of their worth, Nobel Prize-winning economist Myron Scholes said.

Investors need better pricing data to accurately value the debt and equity securities of banks, he said in a Bloomberg Radio interview today. Scholes, 68, was awarded the Nobel for helping invent a model for pricing options.

“I’d like to see us encourage many more securities held on the books of the banks be migrated to exchanges if possible,” he said. Doing so would “allow for market discovery and market pricing as much as possible,” Scholes added.

The Financial Accounting Standards Board said Aug. 13 that it will consider expanding fair-value rules to loans, a step that might accelerate banks’ recognition of losses and trigger lower earnings and book values. Accounting rules now let companies recognize most loan losses only when management judges them probable. Applying fair value to loans would require earlier recognition of losses.

Regulators need to “blow up or burn” the private over- the-counter derivative markets to help solve the financial crisis, Scholes said on March 6. Because markets had frozen, investors weren’t getting timely prices to inform their decisions, he said then, speaking at New York University’s Stern School of Business.

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Jim Sinclair’s Commentary

After all the surges and high fives, no matter how many, SUSTAINABILITY is the name of this deadly game.

Pakistan Not Ready to Fight Taliban Again
August 18, 2009 1:35 PM
Posted by Farhan Bokhari

Pakistan’s army may require months to prepare for a new military offensive against the Taliban in a restive region along the country’s unsettled border with Afghanistan, a senior Pakistani general on Tuesday told President Obama’s envoy for the Afghanistan-Pakistan region according to senior Pakistani officials.

Lt. Gen. Nadeem Ahmed, a widely respected army commander, met with Ambassador Richard Holbrooke, Mr. Obama’s envoy, to brief him on Pakistan’s northwest frontier province, specifically the areas at the center of Taliban activity.

It is this region which is of the most interest to the U.S. as Afghanistan heads in to Thursday’s presidential elections. In the past, U.S. officials have complained about Taliban militants crossing the border with relative ease to attack Afghan and western troops in Afghanistan before returning to Pakistan’s soil to reorganize.

Earlier this month, Baitullah Mehsud, the senior leader of Taliban militants in Pakistan, was killed in a missile attack which was widely believed to have been carried out by a U.S.-operated drone.

Mehsud’s killing prompted speculation that the Pakistani military may attack the southern part of the Waziristan region along the country’s border with Afghanistan, taking advantage of disarray among the Taliban. Mehsud’s killing led to infighting among the Taliban. So far, the Pakistani Taliban have failed to rally behind a new leader who could emerge as a replacement for Mehsud.

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Jim Sinclair’s Commentary

When the lights go out at CIT, the lights go out in the real economy.

CIT is to the real economy as Lehman was to the fraud ridden financial industry.

That makes CIT much more important.

NY Fed, FDIC See Threats Posed By CIT
By DONNA CHILDS | A Dow Jones Newswires column

The Federal Reserve Bank of New York and the U.S. Federal Deposit Insurance Corp. at last appear to be getting to grips with CIT Group Inc. That they recognize the threats posed by the company should be a lesson to Wall Street firms.

The N.Y. Fed last week ordered CIT report daily cash positions and daily client funding, some weeks after the FDIC had issued a cease and desist order against CIT Bank prohibiting it from accepting brokered deposits and requiring it to submit a capital plan.

In their second-quarter earnings calls, leaders of various investment banks unequivocally dismissed their risk exposures to CIT. Such confidence looked misplaced, for CIT has complex and opaque financial relationships.

In some cases, CIT advances funds against the accounts receivable it buys from small businesses. In others, it provides trade credit, protecting clients against payment default by their customers.

In such cases, clients obtain financing from banks, collateralizing the bank loans by assignment of the credit balances from CIT. The failure of CIT to release those balances in a timely manner impairs the clients’ ability to repay their banks. Those banks, in turn, have financial obligations to investment banks.

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Jim Sinclair’s Commentary

Japanese economic stimulus "Cash for Clunkers" program?

Top 10 vehicles bought by people trading clunkers
(AP)

As of Friday, car buyers in the U.S. had signed deals to trade in 358,851 clunkers for new vehicles, getting rebates of up to $4,500 from the federal government. Most of the trades have been pickup trucks and sport utility vehicles. The top 10 vehicles purchased by those making clunker trades:

1. Toyota Corolla
2. Honda Civic
3. Ford Focus
4. Toyota Camry
5. Toyota Prius
6. Hyundai Elantra
7. Ford Escape (front-wheel-drive)
8. Honda Fit
9. Nissan Versa
10. Honda CR-V (four-wheel-drive)

Jim Sinclair’s Commentary

While the West sleeps China is cornering the world’s keynatural resources.

They have a plan and the West does not.

China and Australia sign energy deal
By Jamil Anderlini in Beijing and Peter Smith in Sydney
Published: August 18 2009 16:04 | Last updated: August 18 2009 16:04

China’s largest energy company agreed on Tuesday to buy $41bn worth of Australian natural gas at a signing ceremony intended to put a positive gloss on strained relations between the two trading partners.

Martin Ferguson, Australia’s energy and resources minister, was in Beijing to witness the signing of Petrochina’s agreement to buy 2.25m metric tonnes a year of liquid natural gas from the Gorgon project off the coast of Western Australia.

At current gas prices, the deal, which is with ExxonMobil, the world’s largest western oil company, would be worth $41bn over the next 20 years and is Australia’s largest-ever trade deal, Mr Ferguson said.

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Jim Sinclair’s Commentary

Hyperinflation is the least understood economic phenomena.

It is always a currency event as a collapse in confidence. It always occurs during dire business conditions.

81 days to go!

Millions, Billions, Trillions
Germany in the Era of Hyperinflation
By Alexander Jung

During the hyperinflation in Germany of 1920s, the country’s currency, the mark, went crazy. The government of the Weimar Republic may have been able to clear its debts, but it came at the cost of the citizens’ savings. It’s an era that is still part of the national psyche today.

Editor’s note: During the global economic crisis, politicians and economists in the United States and Britain often criticized Berlin for its reluctance to initiate the kinds of expensive stimulus programs promoted by Washington. One of the most oft-cited reasons in Germany for racking up more debt than necessary to revive the economy was the fear of hyperinflation. From 1922-1923, hyperinflation plagued Germany and helped fuel the eventual rise of Adolf Hitler. The following article about this national trauma has been translated from a special issue of SPIEGEL on the history of money.

You could say journalist Eugeni Xammar had a stroke of reporter’s luck when the Barcelona daily La Veu de Catalunya sent him to Berlin in the fall of 1922, a pivotal moment in the country’s history. In the months that followed, it was the most exciting place in the world to report from. Germany’s financial structures collapsed, and the mark began its descent into near worthlessness.

"The price of tram rides and beef, theater tickets and school, newspapers and haircuts, sugar and bacon, is going up every week," Xammar wrote in February 1923. "As a result no one knows how long their money will last, and people are living in constant fear, thinking of nothing but eating and drinking, buying and selling. There is only one topic on everyone’s lips in Berlin: the dollar, the mark, and prices. … Have you seen this? For heaven’s sake, stop! I’ve just bought a six-week supply of sausages, ham, and cheese."

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Jim Sinclair’s Commentary

"So what," is quite correct.

The FDIC is adjusting something else to QE.

Everything of size that requires bailing out will be bailed out. You and I can go to hell!

The FDIC Is Broke. Now What? (Part II)
August 18, 2009

Making Matters Worse

An additional pressure on the DIF stems from the fact that losses from prior FDIC enforcements have been dramatically higher than initial estimates. With each new FDIC report, we see less money in the DIF kitty than expected. This next article does a great job of articulating that this is because bank assets are worth a lot less than originally thought:

On January 1 2009 the FDIC reported it had $17,276 million in the DIF and according to press releases for each failed bank, the estimated total costs for FDIC’s DIF during Q1 amounted to $2,146 million, leaving $14,997 million in the fund. However, according to the latest FDIC Quarterly report the fund counted $13,007 million at the start of Q2, – a difference of $1,990 million.

In other words, the estimated spending on failed banks during Q1 was $2,147 million, but the bill ended up around $4,137 million instead (and probably still counting).

This is why Q2 is even more interesting, since the estimated costs are $11,504 million, thus leaving only $833 million in the fund for supporting failing banks in the future. Moreover, the real total cost for the first quarter in 2009 was almost twice the estimates. If Q2 is even close to this figure, the FDIC’s DIF will (very) soon be out of funds.

However, we have detected that DIF costs/bank assets have steadily increased under the period of discussion.

We believe the main reason for this lies in a de facto relaxation of accounting standards, even before the FASB 157 amendment on March 15 earlier this year. Basically the relaxation allows banks to write-off the parts of their losses caused by the slowdown in the market – but it does this by allowing them to decide what a fair price in a ‘normal’ market would be.

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Jim Sinclair’s Commentary

In case you have not read this you might consider it.

Indicators suggest gold poised for big breakout by end Q3
In an assessment of the current gold market, Donald W. Doyle, chairman of top coin dealers Blanchard &
Co. sees very positive signs for the gold price in the short term.
Author: Blanchard & Co.
Posted:  Tuesday , 04 Aug 2009

NEW ORLEANS  – The slow trading months of summer are usually a time when gold prices decline, but economic analysts at Blanchard and Company, America’s largest precious metals investment firm, say that indicators this year have them believing the metal is poised for a big breakout by the end of the third quarter.

Specifically, inflation, possible hyper-inflation, dollar weakness, and supply/demand and investor demand fundamentals are all positive for the price of gold toward the end of the summer, says Donald W. Doyle, Chairman and CEO of Blanchard and Company.

While gold remains range bound, it does so at levels above $900 per ounce, which Doyle says he sees as a springboard to greater price gains, and even new record highs, through the remainder of the year – and beyond.

‘"Gold is performing strongly at the same time the stock market is making a mild rally and as the dollar continues to stay at a level that we consider to be inordinately high," Doyle says. "Typically, gold would be declining – but that’s not happening, and there are solid reasons why."

Doyle says demand is central to gold’s current sustained high price levels, with Chinese and Russian central banks adding to their holdings and investor demand continuing at record levels.

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Jim Sinclair’s Commentary

There is a serious problem between the Administration and the Fed, but the problem is Quantitative Easing and Bernanke’s reluctance to go to infinity.

The Fed has to lose this one as the Administration appoints Bernanke’s successor. The Fed is headed towards being cops on the traffic beat.

Trouble Ahead: Obama And The Fed
Irwin M. Stelzer: More Questions Than Answers Expected In the Coming Months
August 17, 2009

(Weekly Standard)  Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).

Almost exactly two years ago economists discovered that the problems in the housing and mortgage markets had spread to the financial sector. Subprime mortgages proved highly infectious, a couple of Bear Stearns funds collapsed, banks suddenly looked at their neighbors with such suspicion that they refused to lend to them, and economists dusted off their copies of histories of the Great Depression, looking for a guide to the future.

One year later they returned those books to the shelves as the "real economy" seemed to prove itself resistant to the diseases afflicting those greedy, over-bonused bankers. But summer’s lease on a recovery proved all too short, and in a few months there was a run on the essays of one Ben Bernanke, in an effort to learn what the Federal Reserve Board chairman had in mind to stop the rush to economic collapse. We discovered that he was indeed in the great tradition of Walter Bagehot, who wisely advised in 1873 that "whatever bank or banks keep the ultimate banking reserve of the country must lend that reserve more freely in time of apprehension." The Fed not only pumped money into a frozen credit system to thaw it out, but joined the federal government in inventing new ways to cope with what was clearly a panic.

And now, two years after subprime mortgages became the domino that toppled or almost toppled many institutions, one year after the mother of all recessions scared consumers into zipping their wallets, corporate executives into cutting investment and letting inventories run down, it is glad, confident morning again in America.

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Jim Sinclair’s Commentary

Green shoots are illusions of MOPE.

Jobless spike compounds foreclosure crisis
Economists estimate 1.8 million borrowers will lose their homes this year
By Renae Merle
updated 9:36 p.m. MT, Mon., Aug 17, 2009

WASHINGTON – The country’s growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.

Economists estimate that 1.8 million borrowers will lose their homes this year, up from 1.4 million last year, according to Moody’s Economy.com. And the government, which has already committed billions of dollars to foreclosure-prevention efforts, has found it far more difficult to help people who have lost their paychecks than those whose mortgage payments became unaffordable because of an interest-rate increase.

"It’s a much harder nut to crack, unemployment," said Mark A. Calabria, director of financial regulation studies at the Cato Institute. "It’s much easier to bash lenders than to create jobs."

During the first three months of this year, the largest share of foreclosures shifted from subprime loans to prime loans, according to the Mortgage Bankers Association. The change to prime loans — traditionally considered safer — reflects the growing numbers of unemployed who are being caught up in the foreclosure process, economists say.

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, has proposed using $2 billion in government rescue funding to provide emergency loans to these borrowers. "We are going to be seeing more foreclosures because of prolonged unemployment," he said. "These are people who weren’t in trouble and wouldn’t be in trouble if they hadn’t lost their job."

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Jim Sinclair’s Commentary

The US dollar is no safe haven. Read the BBC.

China reduces holdings in US debt

China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury.

China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC’s Chris Hogg.

Japan and the UK – second and third largest holders of US debt – increased their holdings over the same period.

China’s holding of US debt is about 7% higher than at the turn of the year.

Inflation fear

In recent months the US government’s budget deficit has widened thanks in part to the Obama administration’s costly stimulus plan.

Our correspondent in Shanghai says that China is worried about this, and fears the stimulus efforts will fuel inflation in the US, reducing the value of the dollar.

This would then erode the value of the debt China holds in the US currency.

In June, China cut its holdings of US securities by about $25bn, a fall of 3.1%.

‘Dollar alternative’

The sales were made as the US treasury secretary was visiting Beijing to try to reassure the Chinese that their investment in his country’s government debt is safe.

In 2008, the Chinese increased their holdings in US debt by 52% over 12 months.

"China has said it would like to establish an alternative to the US dollar as the world’s favoured currency for foreign exchange reserves," said our correspondent.

"So far there is no evidence that there is a suitable alternative. But these figures suggest they are exploring ways to diversify their investments where they can."

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Jim Sinclair’s Commentary

According to John Williams of the must have www.shawstats.com report:

- July Housing Starts Showed Ongoing Depression
- Volatile PPI Reflected Unusual Seasonal Factors

Mark to market graph Bloomberg.jpg

Posted at 7:23 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Here is the answer being received by CIGAs in return for their comment on support of the "Above bid – up tick short selling rule."

Let’s get 500,000 comments in to the SEC on this proposed rule.

To not act is to sit back and let the pounding shorts have their way with your investments.

Thank you,
Jim

Thank you for your e-mail to the Chairman’s Office of the U.S. Securities and Exchange Commission.  Your comments and concerns are very important to us.  Unfortunately, because of the large volume of e-mail received, the Chairman can not personally respond to each message.  We do read and carefully consider the opinions expressed in all of the e-mails that we receive.

If you are an investor with a complaint about a securities professional, firm or a public company, please visit our Complaint Center, at http://www.sec.gov/complaint.shtml, to file a complaint.  If you have a securities-related question, please visit our website at http://www.sec.gov/answers.shtml to find fast answers to your questions and solutions to common investment problems.  If you are a securities professional needing assistance on technical matters, please check our "information for" pages on the top right of our website, www.sec.gov.

We deeply appreciate your taking the time to communicate your thoughts and concerns to the Securities and Exchange Commission.

                                Sincerely,

                                Mary S. Head 
                                Acting Director 
                                Office of Investor Education and Advocacy 
                                U.S. Securities and Exchange Commission

Posted at 4:53 PM (CST) by & filed under Jim's Mailbox.

Explosive setup for strong junior gold miners
by Eric 8/18/09

  • USDX – Retest and close below resistance on decreasing volume from the swing high is a bearish setup.
  • Gold – Gold trades inversely with USDX.  Bearish setup in USDX implies bullish setup in gold.
  • Stocks – Retest and close above gap support on decreasing volume from the gap is a bullish setup.  Still need to close above the gap.
  • Trading Logic – Bearish setup suggest lower dollar, lower dollar = higher gold and stocks, higher gold and stocks = extremely bullish environment for strong junior gold miners.

Dear Jim,

Legislators, realizing the success of the President’s "Cash For Clunkers" rebate program, have revamped a major portion of their National Health Care Plan.

President Obama, speaker Pelosi, and Sen. Reed are expected to make this major announcement at a joint news conference later this week. I have obtained an advanced copy of the proposal which is named…

"CASH FOR CODGERS" and it works like this… Couples wishing to access health care funds in order to pay for the delivery of a child will be required to turn in one old person. The amount the government grants them will be fixed according to a sliding scale. Older and more prescription dependent codgers will garner the highest amounts.

Special "Bonuses" will be paid for those submitting codgers in targeted groups, such as smokers, alcohol drinkers, gold bugs, dollar shorts, persons 10 pounds over their government prescribed weight, and any member of the Republican Party.

Smaller bonuses will be given for codgers who consume beef, soda, fried foods, potato chips, lattes, whole milk, dairy products, bacon, Brussel sprouts, or Girl Scout Cookies.

All codgers will be rendered totally useless via toxic injection. This will insure that they are not secretly resold or their body parts harvested to keep other codgers in repair.

Sincerely,
CIGA Deep Cover

Jim,

Is Tanzania better suited for China anyway than these governments that have been aligned with the West?

CIGA BJS

Beijing bites back over Kadeer visa and iron ore prices
Greg Sheridan and Michael Sainsbury | August 18, 2009

AUSTRALIA’S relationship with China has plunged to a decade low, with Beijing taking a series of tough measures, including cancelling high-level visits, to convey its displeasure with the Rudd government.

The Chinese have effectively banned visits by senior officials and sanctioned a press campaign against Australia, angered by several recent Rudd government decisions, such as granting a visa to exiled Uighur leader Rebiya Kadeer.

It is believed that the Chinese have also intimated that they may not co-operate readily with Australia over Asia Pacific regional architecture, which would make Kevin Rudd’s plan for an Asia Pacific community difficult to achieve.

More…

Dear BJS,

Yes, China and Tanzania have a very long history of friendship.

Regards,
Jim

Jim,

We have not spoken in a very long time, yet I know you are relentlessly bombarded by calls from folks who refuse to read the missives which you faithfully post daily. It’s a shame that you have to constantly defend the wisdom you so generously share with us. I would suggest that you recommend via your site that those who wish to own gold do all three of the following:

1) Buy only the amount of physical gold they can afford.
2) Buy some out of the money puts and hold them to expiration so they don’t freak out every time the bullion banks put on a raid.
3) Find a copy of "How you can profit from the coming devaluation" Copyright 1969 by Harry Browne (and actually read it !!!!)

Perhaps holding a 40 year old text in hand and reading what you so valiantly try to instil will finally quiet the doubters and allow you to direct your efforts to perfecting our knowledge.

A quote from an author on the subject of another type of speculation reads "If you can control your nerves and your greed you can honestly make all the money you want."

Another reads" "Scared money never wins."

Yet another: “You now have the tools, with them you can build a cathedral… or dig a hole.”
CIGA MR. B.

Posted at 1:28 PM (CST) by & filed under General Editorial.

Dear Extended Family

I implore you to act. Send this or an email in your own words to Chairman Shapiro of the SEC.

All gold shares are small caps. That is why they have been prey to these destructive elements.

This site is read by 500,000 people.

Please make this small effort for the hard work we do to help you all on a daily basis.

Please remember in the body and in the subject to say, "In support of the above bid short selling rule."

Email your response to: [email protected]

Sincerely,
Jim

Dear Chairman Shapiro,

Subject: In support of the "above bid short selling rule."

As a seasoned investor and due to hedge fund organized short raids pounding all bid in sight, markets in general and financial institutions specifically collapsed in March and are still on very precarious grounds, despite help from the "invisible" hand of the Fed. Many smaller stocks have never recovered, despite a solid future ahead of them.

I understand that you are still soliciting commentary on the matter of the Uptick Rule (above bid rule) and short selling. Illegal short selling persists and investors are being unduly punished for the benefit of "rogue traders" and under the pretext of maintaining liquidity supported by academic studies and a large parade of self interested professors.

I have no problem with legitimate short sellers. Naked short selling (the most damaging of all) via Canada and other non-US sites persists, despite the fact it is considered illegal. What do you need to see to reinstate integrity to North American financial markets, and save investors, pensioners and businesses (large and small) that have been the foundation of a thriving America?

The time has come to take action. The frequency trading, front running, quasi-derivatives, insider trading and wanton naked short selling make a mockery of our markets. They make Mr. Madoff look like a Saint. Everyone knows it. Who will be left to trade at the end of this?

Chairman Shapiro, I realize it takes time to get up to speed on the issues confronting your organization. Please hurry, time is not on our side. You and I are getting older and future generations will pay the consequences of our inaction.

Thank you for listening,

Best Regards,
Jim Sinclair

SEC Seeks Comment on Alternative Uptick Rule

FOR IMMEDIATE RELEASE
2009-185

Washington, D.C., Aug. 17, 2009 — The Securities and Exchange Commission today announced that it is seeking public comment on an alternative approach to short selling price test restrictions that may be more effective and easier to implement than previously proposed price test restrictions currently under consideration.


Additional Materials

The alternative uptick rule would allow short selling only at an increment above the national best bid. As a result, the Commission has determined to reopen the comment period for 30 days in order to receive input specifically on this alternative.

"Today’s request for additional comment is consistent with the very deliberative process of determining what is in the best interest of investors," said SEC Chairman Mary Schapiro. "We want to ensure that everyone has a full opportunity to provide their comments on this alternative uptick rule before the Commission reaches any conclusions."

In April, the Commission proposed two approaches to restricting short selling. One approach would apply on a market-wide and permanent basis, and would implement short sale restrictions based on either the last sale price or the national best bid. The other approach, considered a "circuit-breaker," would apply only to a particular security during severe declines in the price of that security. Once triggered, the circuit breaker would impose a short sale halt or short sale restriction based on either the last sale price or the national best bid.

Unlike proposals in April, the alternative uptick rule would not require monitoring of the sequence of bids (that is, whether the current national best bid is above or below the previous national best bid), and as a result the alternative uptick rule would be easier to monitor. It also may be possible to implement this approach more quickly and with less cost than the prior proposals.

The initial comment period for the April proposals ended on June 19, 2009. The comment period will now be extended for 30 days from the date of publication of an associated notice in the Federal Register. The Commission particularly seeks comments on the alternative uptick rule as a permanent market-wide approach, as well as whether the alternative uptick rule should be combined with a circuit breaker approach.

# # #

http://www.sec.gov/news/press/2009/2009-185.htm