Posted at 11:12 PM (CST) by & filed under In The News.

Dear CIGAs,

Do you really want to know what came out of the G20? Read below.

China positioning its currency for a run at world supremacy
By Don Lee 
April 3, 2009

clip_image001

In a series of what might be called baby steps, Chinese officials recently have moved to globalize the yuan and promote its influence overseas, with Shanghai designated as command central.

Since last December, China has signed deals with six countries, including South Korea, Malaysia and most recently Argentina, for currency swaps that would inject Chinese money into foreign banking systems. That would allow foreign companies to pay for goods they import from China in yuan, bypassing the dollar — the currency that dominates international trade and finance, including foreign exchange reserves.

Beijing is also taking initiatives to use the yuan, also known as the renminbi, to settle trade accounts between some Chinese provinces and neighboring states, starting with Hong Kong.

"The central bank has set promoting the renminbi for payment settlements as the main task for this year’s work," said Shi Lei, an analyst in the global financial markets section at Bank of China in Beijing.

China is also spreading the yuan’s influence in Asia by making loans and investments in other countries, as well as through its many tourists who carry loads of Chinese currency abroad. In Cambodia, where the dollar has long dominated, a tour guide in Angkor Wat recently asked visitors if they could pay him in yuan.

Meanwhile, Chinese officials have called attention to the risks of an international monetary system that relies on the dollar, which many analysts have begun to see as unstable because of heavy deficit spending embraced by Washington to combat the recession.

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Jim Sinclair’s Commentary

The G20 is going to fix all the secondary fallout from this? What are you smoking?

Bankruptcy Filings by Businesses Increase 78% in First Quarter
By Bill Rochelle

April 3 (Bloomberg) — Bankruptcy filings by larger companies liquidating or reorganizing in Chapter 11 in the first quarter rose 78 percent from the same period a year earlier and almost tripled from 2007 as the U.S. was mired in the 15th month of a recession.

Almost 131,000 bankruptcies of all types were filed in March, the most for any month since 2005, when Congress erected barriers to individuals looking to rid themselves of debt.

Filings increased 9.2 percent in March over February, according to data compiled by Automated Access to Court Electronic Records, a service of Jupiter ESources LLC in Oklahoma City. March bankruptcies rose 38 percent from a year earlier and 79 percent from 2007.

The surge of filings in March “suggest that earlier estimates of 1.4 million to 1.5 million cases in 2009 should be revised to somewhere in the 1.5 million to 1.6 million range,” said Mike Bickford, president of AACER, a bankruptcy data and management service. If Bickford’s high estimate proves correct, 2009 filings would exceed 2008 by about 45 percent.

Public companies filing for bankruptcy or reorganization through March 31 had a combined $101 billion in debt, according to a report earlier this week by Bankruptcydata.com. That’s almost ninefold higher than the $11.7 billion in the same period last year.

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Jim Sinclair’s Commentary

You often ask what event has the potential of throwing all the spin right against the wall in terms of disturbing the social order. Here it is.

$1 trillion hit to pensions could cost taxpayers, workers
Published: Friday, April 3, 2009 at 10:15 a.m. 
Last Modified: Friday, April 3, 2009 at 10:15 a.m.

SANTA FE, N.M. — Massive investment losses sustained by public pension funds are pressuring state lawmakers from New Mexico to New York to spend more taxpayer money to shore up their programs, boost the retirement age for newly hired government workers and seek more from employee paychecks.

Pensions need $270 billion in additional contributions over the next four years, and more than $100 billion annually for two decades hence, according to the Center for Retirement Research at Boston College.

The pension trouble is just one more economic challenge for states. Income and sales tax collections are dropping fast as unemployment rises. Jobless benefits funds are running dry, requiring federal borrowing. And because of substantial budget holes, states are cutting back on a wide range of services, including child care subsidies for low-income families and aid to public schools, and in some cases laying off workers.

But as bad as the budget picture looks, it is dwarfed by the size of the gaps in states’ pensions, which have collectively lost at least $1 trillion as financial markets swooned over the past year. Public pensions cover about 14 million state and local employees and paid out almost $163 billion to seven million retirees in 2006-2007, according to the Census Bureau.

Because pensions involve long-term obligations and investments, there’s no immediate risk that states will be unable to pay retiree benefits. But replenishing pensions could squeeze states for years to come, forcing lawmakers and governors to juggle their spending priorities — pitting pensions against schools, colleges, health care, prisons and other government services.

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Jim Sinclair’s Commentary

Add to this Dr. Doom, the means of production, the knowledge of how to, and delivery systems. Now how much of that can you move or protect.

Security of Pakistan’s nuclear weapons
By Hari Sud
Column: Abroad View

Published: April 03, 2009

Toronto, ON, Canada, — In the midst of all the turmoil in Pakistan, who is watching the country’s nuclear weapons? It is a declared intention of Osama bin Laden’s al-Qaida terrorist group to acquire nuclear weapons. Are Pakistan’s nuclear weapons within their reach?

All the terrorists would have to do is bribe a few guards, kill any who could not be bribed, and get away – if not with a full-blown nuclear weapon, then at least with enough nuclear material to set off a dirty bomb.

Thanks to the links between Pakistan’s intelligence service and terrorist elements, it is no longer possible to distinguish friend from foe. The Taliban have been reorganized, trained and sheltered by Pakistan’s intelligence agency. They have been bold enough to mount terror operations in Islamabad, Lahore, Karachi and other big cities.

Over the past eight years, new recruits and new Taliban leaders in association with al-Qaida have started waging war with Pakistani forces. Their grievances include Pakistan’s cooperation with NATO and the United States. After killing a large number of Pakistani troops in frontier provinces, the Pakistani Taliban has forced the civilian government to permit the practice of ancient Islamic Sharia law there.

The Taliban’s objective is to split the Pashto-speaking frontier provinces from Pakistan and join them with Pashto-speaking areas in Afghanistan to create a nation called Pashtunistan. The bombings in recent months and the daring attack on a police academy near Lahore were designed to avenge the excesses of Pakistani forces in the frontier area. Slowly the Taliban are moving to achieve their objective. Today Sharia law, tomorrow a separate homeland and later full nationhood.

More…

 

Jim Sinclair’s Commentary

In a universal game of liar’s poker, an honest man had but one choice to make.

This speaks ill of any opportunity of recovery before abomination.

Hold on to your gold lifeline as all finance is a lie. The world is broken. The system is smashed. The OTC derivatives have done their dirty work.

You do not sign off on an audit for one reason only. It is a fraud.

Jonathan Weil, Honest Man Emerges From Muck of Banking Crisis
April 2, 2009.

Relevant excerpts:

Remember this man’s name: Charles Bowsher. He’s one of the few people leaving the banking crisis behind with his reputation enhanced.

Bowsher, who was comptroller general of the U.S. from 1981 to 1996, had a simple reason for resigning last week as chairman of the Federal Home Loan Bank System’s Office of Finance. He didn’t want to put his name on the banks’ combined financial statements, because he was uncomfortable vouching for them. Bowsher, 77, had held the post since April 2007.

“I was not comfortable as an audit-committee member in signing off on the financial statements, after I became aware of the standards and processes for valuing the mortgage-backed securities,” Bowsher told me.

Bowsher told me he was concerned, in part, with the methods used for determining when losses on hard-to-value securities should be included in banks’ earnings and regulatory capital. The way the accounting rules work, as long as such losses can be labeled “temporary,” they don’t count in net income.

The FASB’s rules on this subject, which have never been well defined, are now in flux. Today, after caving in to pressure by the banking industry and members of Congress, the Financial Accounting Standards Board is set to vote on a plan to relax its rules on mark-to-market accounting, so that companies can disregard market prices and ignore losses on their securities indefinitely.

While that wouldn’t make the banks any healthier, it would make their numbers look prettier. The FHLBanks have been among the most vocal lobbyists pressing for the change.

Bowsher said the process of valuing such assets was fraught with doubt already. “Now if you think about it, the FASB might be changing the whole thing, and everybody might mark their assets up,” he said. “Who wants to be part of that?”

Full article…

Jim Sinclair’s Commentary

The US Fed and now the US Treasury have taken the 5th Amendment.

You might consider this the new world order as transparency has now expired.

Don’t throw away your lifeline.

Watchdogs: Treasury won’t disclose bank bailout details
By Chris Adams | McClatchy Newspapers

WASHINGTON — The massive programs designed to rescue the nation’s financial sector are operating without adequate oversight, with vague goals and limited disclosure of their details to the taxpayers who are paying for them, government watchdogs told a Senate panel Tuesday.

The Troubled Asset Relief Program, or TARP, was launched in the midst of last fall’s collapse of the nation’s banking system and is designed to get loans flowing to businesses and individuals.

But "without a clearer explanation" about parts of the program, "it is not possible to exercise meaningful oversight over Treasury’s actions," said Elizabeth Warren, a Harvard Law School professor who leads a special congressional oversight panel monitoring the TARP program. Her comments came in a Senate Finance Committee hearing on the bailout program.

Noting that TARP passed Congress six months ago, Warren said that her group has repeatedly called on the Treasury Department to provide a clear strategy for the program — and that "the absence of such a vision hampers effective oversight."

Although she has asked Treasury to explain its strategy, "Congress and the American public have no clear answer to that question."

More…

Jim Sinclair’s Commentary

Getting a straight story from FASB is becoming impossible. It seems that the FASB caved on permanently impaired assets (totally worthless paper) but held back some on mark to market. You need to be a CPA PhD to figure this one out. I know such a person and will keep up the effort to get you a straight answer.

Under New Accounting Rule, Toxic Assets May Be Revalued
By Binyamin Appelbaum and Zachary A. Goldfarb
Washington Post Staff Writers
Friday, April 3, 2009; A15

The board that sets U.S. accounting rules voted yesterday to let financial firms report higher values for some troubled assets, a controversial step likely to increase some banks’ reported earnings but also heighten suspicions that the companies are concealing problems.

The move by the Financial Accounting Standards Board was made with unusual speed under intense pressure from Congress and the financial industry, which have argued that the old rules exacerbated the financial crisis by forcing banks to overstate expected losses.

But the decision to ease what are known as mark-to-market requirements has raised concerns among some financial experts who warn that it will become harder for banks and investors to agree on what the troubled assets are actually worth and thus discourage their sale. The ability of financial firms to sell assets to investors is considered essential for an economic revival because this could restore the major source of funding for bank lending to consumers and businesses.

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Jim Sinclair’s Commentary

The G20 has fixed everything. I feel they have not fixed anything and only added another $1 trillion in monetary inflation. God help us all in this emotional world of hyper-spin.

One in 10 Americans gets help to buy food
Fri Apr 3, 2009 1:41am BST

WASHINGTON (Reuters) – A record 32.2 million people — one in every 10 Americans — received food stamps at the latest count, the government said on Thursday, a reflection of the recession now in its 16th month.

Food stamps, the major U.S. anti-hunger program, help poor people buy groceries. The average benefit was $112.82 per person in January.

The January figure marks the third time in five months that enrollment set a record.

"A weakened economy means that many more individuals are turning to SNAP/Food Stamps," said the Food Research and Action Center, an anti-hunger group, using the acronym for the renamed food stamp program, the Supplemental Nutrition Assistance Program.

The U.S. unemployment rate was 8.1 percent in February, the highest in 25 years. New claims for jobless benefits totaled 669,000 last week, the highest in 26 years, the government said on Thursday.

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Jim Sinclair’s Commentary

As more people get food coupons and the jobless fall off the unemployment benefits time out, it is only predictable that crime will rise, first in anger directed at the illegal and legally employed immigrants. This is the extreme of just that.

Gunman kills up to 13 hostages, some 26 others injured in U.S.
22:33 03/ 04/ 2009

NEW YORK, April 3 (RIA Novosti) – At least 13 people were killed and another 26 injured when a gunman stormed an immigration centre in Binghamton, near New York, American media reported.

CNN said that the one of the gunmen, who was armed with a high-powered rifle, had been killed by police. It also said two hand guns were recovered from the scene.

David Paterson, the governor of New York, told CNN "that there are fatalities. We are monitoring the situation and I have directed the State Police to assist the Binghamton Police Department, in any way, they can."

Eyewitnesses earlier told a CNN reporter that police had taken two Asian men, who were both handcuffed, out of the American Civic Association building, which is currently surrounded by police snipers. The men have been taken to a local detention center.

Sky News said that FBI negotiators and SWAT teams had entered the building, 140 miles from New York, and freed 20 hostages. However, around 40 hostages are reported to still being held hostage.

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G20 – Lies, damned lies and Gordon Brown lies

Gordon Brown has really surpassed himself in creative alchemy. He has turned $100 billion of G20 new commitments into $5 trillion of air!

Gordon Brown has really surpassed himself in creative alchemy. He has turned $100 billion of G20 new commitments into $5 trillion of air!

Take $100 billion of committed new money, add $500 billion of already committed money, add non-committed but discussed amounts of $500 billion and you present a headline lie of $1.1. trillion. But it gets worse, Gordon Brown then claims the largest fiscal stimulus in history of $5 trillion. This is another lie. The $5 trillion contains no new funds but only the IMF’s estimate of the rise in the G20’s government borrowings between 2008 and 2010.

Poor Benjamin Disraeli is turning in his grave when he hears these lies. (The phrase,”lies damned lies and statistics” originates from the former UK prime minister).

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Jim Sinclair’s Commentary

The key point of the story is dead wrong.

The nuance here, not seen as you would have to be a floor trader to know, is that the borrowers of gold for delivery would not be the COMEX but rather the short who then remains short but now to the ECB, still at risk to price.

The Default would have to be first the member, then the exchange itself, then the total assets of all members individually.

BY TAKING DELIVERY OUT OF THE COMEX WAREHOUSE YOU ARE FORCING THE SHORT TO PRESENT THE GOLD ANY WAY THEY CAN ARRANGE TO DO IT. THAT IS WHAT HAPPENED HERE. THAT IS WHAT WE WISH TO DO, NOT DEFAULT THE PLAYING BOARD.

This may be the most well read article on the web and the least understood.

Most, if not all of the expert commentary and this article is dead wrong.

Did the ECB Save COMEX from Gold Default?
April 02, 2009

On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000 + contracts, representing about 15% of the April COMEX gold futures contracts remained open. Technically, short sellers are required to give “notice” of delivery to long buyers. However, in reality, buyers are the ones who control the amount of gold to be delivered. They “demand” delivery of physical gold by holding futures contracts past the expiration date. This time, long buyers were demanding in droves.

In normal times, very few people do this. Only about 1% or less of gold contracts must be delivered. The lack of delivery demand allows the casino-like world of paper gold futures contracts to operate. Very few short sellers actually expect or intend to deliver real gold. They are, mostly, merely playing with paper. It was amazing, therefore, when March 30, 2009 came and passed, and so many people stood for delivery, refusing to part with their long gold futures positions.

On Tuesday, March 31st, Deutsche Bank (DB) amazed everyone even more, by delivering a massive 850,000 ounces, or 8500 contracts worth of the yellow metal. By the close of business, even after this massive delivery, about 15,050 April contracts, or 1.5 million ounces, still remained to be delivered. Most of these, of course, are unlikely to be the obligations of Deutsche Bank. But, the fact that this particular bank turned out to be one of the biggest short sellers of gold, is a surprise. Most people presumed that the big COMEX gold short sellers are HSBC (HBC) and/or JP Morgan Chase (JPM). That may be true. However, it is abundantly clear that they are not the only game in town.

Closely connected institutions, it seems, do not have to worry about acting irresponsibly, in taking on more obligations than they can fulfill. Mysteriously, on the very same day that gold was due to be delivered to COMEX long buyers, at almost the very same moment that Deutsche Bank was giving notice of its deliveries, the ECB happened to have “sold” 35.5 tons, or a total of 1,141,351 ounces of gold, on March 31, 2009. Convenient, isn’t it? Deutsche Bank had to deliver 850,000 ounces of physical gold on that day, and miraculously, the gold appeared out of nowhere.

The announcement of the ECB sale was made, as usual, dryly, without further comment. There was little more than a notation of a sale, as if it were a meaningless blip in the daily activity of the central bank. But, it was anything but meaningless. It may have saved a major clearing member of the COMEX futures exchange from defaulting on a huge derivatives position. We don’t know who the buyer(s) was, but we don’t leave our common sense at home. The ECB simply states that 35.5 tons were sold, and doesn’t name any names. Common sense, logic and reason tells us that the buyer was Deutsche Bank, and that the European Central Bank probably saved the bank and COMEX from a huge problem. What about the balance, above 850,000 ounces? What will happen to that? I am willing to bet that Deutsche Bank will use it, in June, to close out remaining short positions, or that it will be sold into the market, at an opportune time, if it hasn’t already been sold on Tuesday, to try to control the inevitable rise of the price of gold.

Circumstantial evidence has always been a powerful force in the law. It allows police, investigators, lawyers and judges to ferret out the truth. Circumstantial evidence is admissible in any court of law to prove a fact. It is used all the time, both when we initiate investigations, and once we seek indictments and convictions. We do this because we deal in a corrupt world, filled with suspicious actions and lies, and the circumstances are often suspicious enough to give rise to a strong inference that something is amiss. Most of the time, when the direct evidence is insufficient to prove a case beyond a reasonable doubt, or even by a preponderance of direct evidence, circumstantial evidence fills the void, and gives us the conviction. We even admit evidence of the circumstances to prove murder cases. In light of that, it certainly seems appropriate to use circumstantial evidence in evaluating possible regulatory violations. The size and timing of the delivery of Deutsche Bank’s COMEX obligation is suspicious, to say the least, when taken in conjunction with the size and timing of the ECB’s gold sale. It is circumstantial evidence that the gold used by Deutsche Bank to deliver and fulfill its COMEX obligations, came directly or indirectly, from the ECB.

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Jim Sinclair’s Commentary

The following is from John Williams’ www.shadowstats.com by subscription

SGS-Alternate Unemployment Rate at 19.8%

Click here to visit the site…

Posted at 8:14 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

Don’t know if you’ve seen this one yet.

Regards,
CIGA Pedro

"… if we did discover that Deutsche Bank got its gold from the ECB, one glaringly strong inference arises. When a major derivatives dealer goes begging for gold, to the ECB, it is very strong circumstantial evidence that not enough physical gold is available for purchase on the OTC wholesale market."

More…

Dear Pedro:

You are one of the few that really understand this situation. See my posting on it today.

Regards,
Jim

A letter to a Friend

A few thoughts:

1. All hyperinflations are currency events, not economic events.

2. All hyperinflations have occurred in what can be called deep deflationary depressions.

3. Quantitative Easing, the wanton printing of money, has been the key to all hyperinflations in history, no exceptions.

4. The recent example of Zimbabwe certainly occurred in the deepest economic doo-doo ever.

5. Don’t mix up hyperinflation with a deflationary business environment as mutually opposed when they are locked in step."

Jim Sinclair’s Commentary

My former partner and floor trader Yra Harris in today’s discussion:

“The world sits on a conundrum of epic proportions – Quantitative Ease or Perish

Where does this lead us in the trading realm? Well if the Fed goes to full QE, the dollar will be sold and the long end of the debt market will rally (I prefer the tens and possibly to be long the tens and short the twos as many traders have steepeners on and although the steepeners in the longer term make perfect sense and will be right, in the short term the pain will be real.) The gold will rally on a QE but I think the currencies will outperform in the near term and gold will truly not get its legs until the ECB joins the QE party. Then it will be official that most fiat currencies will be under stress against the "barbarous relic." Again, I must stress the gun is to the Fed’s head to prevent the onslaught of a deflationary spiral at all costs. As my friend Bernard Connolly continues to allude to, what is the real rate of return on long-term debt and if it is as high as the incipient deflation suggests, the Fed must begin to act and quickly. If they do, the equities worldwide will get the rally that many are looking for but its duration will depend on whether or not the inflation view takes hold. If not, the equity rally will be short-lived. To complete the global-macro picture, a depreciating dollar prompted by QE will give a lift to the deleveraged commodity markets as money seeks out anything of value and believes that depressed commodities offer good returns and have the need TLC (transparency, liquidity, and creditworthiness) to support an investment. The commodity markets will get an added push if the Europeans join the QE party.”

–Yra Harris

Hi Jim,

Remember the big stink about the strong durable goods orders?

I saved the linked in my Facebook group: Higher durable goods orders augur well for economy….

While the world focuses on the shock and awe of G20, data is quietly revised. That’s the beauty of spin – it assumes people are too intellectually lazy to notice.

Manufacturers’ New Orders: Nondefense Capital Goods Excluding Aircraft have already been revised lower. The February and January 2009 new orders have been revised lower by $302M and $517M respectively. The first revision occurs only a week after the highly praised and heavily spun headline release on March 25th. Remember the light at the end of the tunnel?

This is likely one of many future revisions.

Click here to view the source…

Best Regards,
CIGA Eric

Dear Mr. Sinclair,

On days like yesterday, maybe a new icon on the website would alert the more jittery gold bugs appropriately. See my suggestion below.

Warm regards,
CIGA Annette

image

 

Hi Jim,

Is my conclusion correct of the g20 world phony fix that according to them I should not see another bailout, stimulus package, government program like tarp etc.? I heard the consensus was that they will not need to devalue their currencies and $1 trillion has fixed it all.

CIGA BJS

Dear BJS,

Yes and if you believe this put a tooth under your pillow for the tooth fairy. Note the BS meter above from CIGA Annette.

Jim

Posted at 6:48 PM (CST) by & filed under General Editorial.

My Dear Friends,

All that has changed is more of what caused this problem in the first place. You are being lied to yet again.

1. Gold is your lifeline, nothing else. I assure you of this.

2. When reality hits, as it will, it will be too late to seek a lifeline.

3. If you let go of your lifeline you have put more into harm’s way than just an investment or a portfolio item.

4. In the final analysis gold and the dollar are inverse to each other.

5. The dollar is only considered a lifeline when viewed from the intoxicants of spin.

6. Gold is a currency.

7. Gold currency is the monetary unit of last resort. Reality is that we all will require a last resort.

8. The G20 was not an intervention that can stop a downward spiral because it produced more of the stuff that caused the disaster in the first place, monetary inflation. 9. Monetary inflation is what the downward spiral is made of.

10. Be logical.

11. Stop being emotional.

12. Anything you can stare down, you can overcome. Stare down your foolish emotions and adhere to reason.

The following is hot air and fabrication. There is no new world. All that has occurred is the plan to create USD $1 Trillion in new monetary inflation. The G20 was all PR that produced more of what has caused the disaster in the first place, another one trillion in monetary inflation that has no means of being withdrawn ever from the international system.

New world Order, you have to be kidding!

G-20 Shapes New World Order With Lesser Role for U.S., Markets
By Rich Miller and Simon Kennedy

April 3 (Bloomberg) — Global leaders took their biggest steps yet toward a new world order that’s less U.S.-centric with a more heavily regulated financial industry and a greater role for international institutions and emerging markets.

At the end of a summit in London, policy makers from the Group of 20 yesterday delivered a regulatory blueprint that French President Nicholas Sarkozy said turned the page on the Anglo-Saxon model of free markets by placing stricter limits on hedge funds and other financiers. The leaders also pledged to triple the resources of the International Monetary Fund and to hand China and other developing economies a greater say in the management of the world economy.

“It’s the passing of an era,” said Robert Hormats, vice chairman of Goldman Sachs International, who helped prepare summits for presidents Gerald R. Ford, Jimmy Carter and Ronald Reagan. “The U.S. is becoming less dominant while other nations are gaining influence.”

A lot was at stake. If the leaders had failed to forge a consensus — Sarkozy this week threatened to quit the talks if they didn’t back much tighter regulation — it might have set back the world’s economy and markets just as they’re showing signs of shaking off the worst financial crisis in six decades.

That’s what happened in 1933, when President Franklin D. Roosevelt torpedoed a similar conference in London by rejecting its plan to stabilize currency rates and in the process scotched international efforts to lift the world out of a depression.

More…

Posted at 4:09 PM (CST) by & filed under General Editorial.

As the Economy Tanks, Doomsayers and Commodity Traders Say It’s Time to Invest in the Shiny Stuff
By Nathan Paluk
Hartford (Connecticut) Advocate
April 2-8, 2009

http://www.hartfordadvocate.com/article.cfm?aid=12386

On a chilly, silent day in early March, James Sinclair sits in his refined home office in Sharon, Connecticut. His small white dog is on his lap, his secretary is in the other room, and the price of gold is right under $940 an ounce. You’d think that Sinclair, a former trader and speculator, a precious-metals expert who directs a gold exploration company from that office, would be basking in bullish gold glory. The last time gold was at such high price levels was in 1980, and he reportedly profited $15 million. But Sinclair, 68 years old now, is deeply concerned.

"Gold is a bell, like a church bell, but when it rings, it’s not good news," says Sinclair. "It’s screaming right now."

Gold is at its highest price in more than 25 years because of demand from investors who are growing fearful of owning anything else. Invest in stocks, when major corporations and the financial system are on the brink of collapse? Buy treasury notes, when the U.S. government just decided to take on record debt? And dollar bills? Those worry Sinclair the most.

"The concern is the increased amount of paper currency," Sinclair says. He is certain that inflation will arrive soon, caused by the federal bailout plan and rampant use of over-the-counter derivatives (those unregulated financial hedging contracts used disastrously by AIG). "Anywhere in the world, when the currency comes into question, gold comes into demand."

Gold — soft and yellow, wonderfully malleable, and so difficult to find — is taking center stage in our frighteningly unstable world economy. Investors are rushing to buy gold bars, old coins, and gold stocks to preserve their wealth. Gold enthusiasts say "I told you so," the metal is not a commodity and needs to be respected as a standard for currency. There have been reports of hobbyists and prospectors alike panning for gold in the river beds of the mountains of Virginia and California. The rest of the population, meanwhile, is raiding their jewelry boxes and cashing in, lured by the high prices and an abundance of buyers. They go to jewelry stores and temporary setups in hotels; they mail their jewelry to companies and even invite buyers over for "gold parties."

Sinclair gets up from his chair and returns with two bills from Zimbabwe. The first is a 50 billion Zimbabwe dollar bill, printed on May 15, 2008 and worth $312. The second bill is 100 billion, only worth $9 the day it was printed 6 weeks later. The inflation-stricken country recently chopped 12 zeroes off its currency and many of its citizens are desperately fleeing to South Africa.

Is Sinclair really saying that Zimbabwe-like inflation is going to happen?

"That’s the trend," he says. "The same economic policies and to the same degree are happening here that happened in Zimbabwe." He then pulls back and admits he doesn’t think it will really happen, but "shouldn’t someone raise the alarm?"

Sinclair has been making bold predictions and sounding alarms since the ’70s. He famously predicted that gold would reach $900 per ounce, and in 1980 it almost did, creeping up to $875 (that’s around $1,900 in today’s dollar).

"You couldn’t open the newspaper in the ’70s without seeing his name in the paper," says Monty Guild, a friend of Sinclair since 1968. "He was probably the most widely quoted expert in gold."

Sinclair has been profiled in major magazines and newspapers the past several years and is a guest expert on financial shows.

"Ask me a question and I’ll tell you the truth," Sinclair said in a March, 2009, Bloomberg radio interview.

His newest major prediction is that gold will reach $1650 per ounce, then oscillate between $1400 and $1800.

After selling his position in gold in 1980, Sinclair closed his brokerage firm, moved to Sharon with his family and began other entrepreneurial pursuits. (He also became a twin-engine and helicopter pilot and could make it to the Wall Street heliport in 28 minutes, although the town of Sharon denied his request for his own heliport in 2003.)

In 2002, after having first traveled to Tanzania in ’89 to check out mining possibilities, Sinclair became CEO of a Tanzania Royalty Corporation, which is currently exploring 4,154 square miles directly south of Lake Victoria.

He’s not in it for mere speculation this time around, he says. Sinclair, now a widower, wants to leave a company for his three daughters.

Well-heeled businessmen, not just doomsayers and gold bugs, are going out and buying bricks of bullion. A recent Newsweek article described a man walking out of the vaults of a New York City HSBC branch carrying a newly purchased gold bullion bar, worth almost $100,000, in his briefcase.

Monty Guild, who heads an investment firm in California, believes that most of the gold-buying in the U.S. is to store wealth; it’s not speculative. He receives calls about twice a day from primarily older, wealthy individuals who ask how to buy gold. "People call us all the time and they say ‘I have 5 million dollars, and I want to buy 2 million dollars in gold,’" he says.

The World Gold Council reports that Americans bought 77.8 tons of gold in 2008 for investment purposes — 34.8 tons in the fourth quarter alone — compared to 16.6 tons in 2007. During the same time period, worldwide gold investing jumped from 410 to 769 tons. In dollar amounts, this means the world exchanged $9 billion for gold in 2007 and $21 billion in 2008.

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Posted at 3:06 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold continues to struggle against the headwinds created by the slowdown in safe haven buying. While bulls have put in a valiant effort to sustain the range trade, it just simply is acting “tired”. One gets the impression from observing the price action that a substantial portion of the selling coming in is from longs who are now throwing in the towel however, having given up on its prospects of retesting $1000 any time soon. The bulls cannot generate enough enthusiasm for the buy side to push it above resistance. That has changed the pit psychology to one of selling rallies and led to further discouraged-long liquidation (open interest is tailing off sharply).

It appears to me that the most likely scenario is for it to continue to slowly drift lower down towards stronger support near the $890 – $880 level. I would prefer to see it hold there as it would prevent a bout of serious long liquidation and a sharp move down to near $860 – $850. The 860 level is near the 50 week moving average on the longer term charts. There is not much support below that level until you get down to near the 100 week moving average that comes in at the $828 level. For the bulls to get anything going, they are going to have to push price above the $940 level. It is just that simple. Until they do, the bears are gaining the technical edge with the short term indicators all favoring their view.

The sell off in the mining shares and their failure to extend the Wednesday upside price breakout during yesterday’s session  was a short term technical sell signal to some. That was confirmed when both indices took out yesterday’s low early in today’s trading session. The HUI and the XAU will appear to have confirmed a short term top if they cannot close above last week’s low at end of trading today. What compounds the problem for bulls is that the rally that both indices began back in October of last year has taken them to exactly the 50% Fibonacci retracement level from their high early last year and the low made in October. Failure to extend on up and past this important technical level will not cause technicians to smile upon them as that too becomes a sell signal for many technicians, especially those with longer-term horizons. Bulls will need to immediately hold prices from dropping much further to prevent a more serious bout of selling pressure.

Interestingly enough, once again copper continued its move higher smashing through the $2.00 level in strong fashion. I still do not quite know what to think about that. Conventional thinking is that copper is a leading economic indicator but one of the things that has contributed to its sharp rise recently is purchases from China to replenish shrinking stockpiles. The Chinese have been using their massive reserves to acquire the red metal while prices were cheap and hedge funds and index funds were throwing it away in droves. There is some thought that once this stockpiling is complete, copper prices will drop off quickly as current economic activity is not yet at levels sufficient to support the price after these hefty gains. All I do know is that the price chart for copper is very, very strong and that, for now, the path of least resistance is up as there is not yet any sign of a technical top in the market. If copper prices continue to move higher, it is going to be difficult for analysts to argue against the “worst of the economy is behind us” view. Right now, rising copper prices are not helpful to gold because it undercuts the need for a safe haven play. The converse of that is that if copper has signaled a shift with crude oil and lumber also showing a definitive bottom, then one could make the case that the inflationary effects of quantitative easing coupled with fiscal stimulus is taking hold. That will eventually underpin gold as it works to re-establish the link between a falling Dollar and a rising commodity prices overall. A new leg down in the Dollar will then see gold moving back higher. If the Fed has been attempting to reinflate the commodity world, they are succeeding.

I also think it telling to see the bonds getting shellacked once again today. Selling in the bonds is picking up momentum; should they take out 126^24 on a close, they could experience a quick move down to retest their recent bottom. It seems as if the Fed is going to have their work cut out for them. If the equity world comes to firmly believe that the economy is on the mend, the Fed’s announced purchases of bonds will still not be sufficient to keep this market afloat as huge sums of monies currently residing in bonds will flow out and go to work in equities and while the Fed’s $300 billion is a huge sum, it is nothing to the extent of the amount of cash and liquidity sitting on the sideline that is waiting to be put back into markets.

I keep mentioning the bonds because if we see a scenario in which bonds are breaking down, equities are stabilizing and moving higher, commodity prices in general and particularly crude oil and copper prices are moving higher, gold is not going to stay down long as it will indicate that the chokehold of the deflationists upon the markets is giving way to the inflationists. All that will then be missing will be a falling Dollar and the inflationists will have bested the deflationists. My own view is that what we seeing is much like the change of winter to spring. It never happens in one fell swoop but rather in a sort of tug of war back and forth with periods of warming temperatures giving way to late season snow storms and falling temperatures which then give way to warming temperatures and fewer and fewer bouts of cold weather until the change is complete. In the interim, we watch the drama unfold as it will.

One last thing – once again yesterday there was a sharp drawdown of silver from the Comex warehouse stocks – over 2 million ounces once again in a repeat of what happened the previous day. Gold too was drawn down although not to the same extent as silver. This is fascinating to watch to see how long it is going to continue. Deliveries in the April gold contract were rather small today with open interest in that particular contract dropping off 1,000 + contracts yesterday.

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

Posted at 9:18 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

When I read the article below it is obvious to me that we owe many kudos to Jim Sinclair.

Jim pointed out that Enron was doing these same kind of maneuvers (see article below) years ago. At the time he explained it was all about tax evasion and money laundering to avoid taxes.

As usual Jim was correct and early in his announcements. He brought this and many things to our attention long before the mainstream press picked it up.

AIG is just using the model Enron pioneered. Jim explained the Enron model long before the Enron collapse.

Let me be very clear: those who read Jim and listen to his wisdom are going to get an education which is unparalleled in the world of finance. His wisdom pervades far and wide; it begins with information on gold, economic and political events, but it extends into many areas of economics, mining, banking and finance. Our advice is be alert to Jim’s wisdom and use it to your benefit.

Respectfully yours,

Monty Guild

www.GuildInvestment.com

WSJ: AIG’s Tax Shelter Business Was ‘Even Bigger’ Than Their CDOs; IRS Calls At Least One Of Them A ‘Sham’
By Susie Madrak Wednesday Apr 01, 2009 6:45am

And apparently phony, to boot! I don’t know about you, but I’m feeling even better about writing AIG that blank check. Joe Cassano was the head of AIG’s financial products division who insured all those bad CDOs – you know, the ones that helped trigger this global meltdown?

The Feds are closing in on a criminal fraud case against Joseph Cassano, reports ABC News, which tracked down the former AIG Financial Products czar wearing blue spandex and a sheepish expression outside his home in London. And before you wonder why a Brooklyn College educated swaps dealer with a name like Joe Cassano lives in London again, the answer is probably "taxes" — and decimating taxes, it may not shock you to know, is fast emerging as the cornerstone of the AIG business model.

An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.

"This is the other very important issue underneath the AIG scandal," said [tax law expert Jack] Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."

And as breathtaking as the sum of taxpayer dollars AIG has managed to put down in its post-crisis nationalized afterlife, the zombie insurer might possibly have indirectly scammed the government out of more money back in its Triple-A days. Today the Wall Street Journal explores AIG’s euphemistically-named "tax structuring" business in a story about an IRS battle with Hewlett-Packard over an offshore entity — or what the IRS terms a "sham that lacked economic substance and a business purpose" — that AIG set up for the company to collect $132 million in tax credits. AIG’s tax business, is "even bigger than the credit-default swaps business that led to the company’s meltdown," a person "familiar with the business" tells the Journal.

But that might be compartmentalizing things: we are beginning to suspect the credit default swap business and the tax "structuring" business were the same thing — not just because they served the same end.

An attorney and tax shelter expert we spoke with today says AIG FP was one of the biggest players in the business of engineering offshore tax shelters for corporate and private clients that resembled a multibillion dollar tax evasion scheme called Son of Boss (we don’t have time to figure out why) that thousands of corporations and wealthy individuals used to book phony capital gains losses and evade most or all of their income taxes in the late nineties and early 00s. The mind-numbing litany of esoteric loopholes such tax shelters employ to concoct said phony losses is something you don’t want to hear about at this hour — trust us — but they are generally anchored by a set of exotic unregulated derivative securities whose ‘notional value’ can help fabricate losses that don’t actually exist. Which is where Cassano came in — only, obviously, the losses existed.

More…

Posted at 9:13 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

All is well and if it isn’t the G 20 will make it well. Come on, you’re dreaming.

Commercial real estate loan defaults skyrocket
Defaults on loans for office buildings, shopping malls soar as economic picture worsens
Alan Zibel, AP Real Estate Writer
Thursday March 26, 2009, 5:46 pm EDT

WASHINGTON (AP) — With loan defaults rising, analysts say the struggling commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s.

Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or shut their doors.

The commercial real estate market’s fortunes are tied closely to those of the sinking economy, especially unemployment, which hit 8.1 percent in February.

"Until jobs start coming back and industry starts doing better we don’t see performance increasing" among landlords, said Christopher Stanley, an associate with research firm Reis Inc.

While the commercial real estate industry’s woes led to the recession of nearly 20 years ago, this time the industry is "the victim of the economic and financial crisis," said Hessam Nadji, managing director at Marcus & Millichap Real Estate Investment Services in Walnut Creek, California.

More…

Jim Sinclair’s Commentary

And the 1 Trillion G20 SDR creation will fix this problem even though the more than 10 trillion spent by the USA has produced the following…

U.S. consumer loan delinquencies soar to record
Thu Apr 2, 2009 6:00pm IST

NEW YORK, April 2 (Reuters) – More U.S. consumers have fallen behind on loan payments than ever before, and the problem may worsen as millions more find themselves out of a job, a study released Thursday shows.

According to the American Bankers Association, which represents most large U.S. banks and credit card companies, the percentage of consumer loans at least 30 days late rose to a seasonally-adjusted 3.22 percent in the October-to-December period from 2.9 percent in the prior quarter.

The ABA said the fourth-quarter rate was the highest since it began tracking the data in 1974, with delinquencies rising in nearly every category. It said these credit trends are unlikely to improve before 2010. Many consider the deep recession the worst since the Great Depression of the 1930s.

"Job losses have really hurt the economy and will continue to inflict pain for several months," James Chessen, the ABA’s chief economist, said in an interview. "The greater the losses are, the more severe an impact it has on all credit markets."

The ABA study covers direct auto, indirect auto, closed-end home equity, home improvement, marine, mobile home, personal, and recreational vehicle loans. It excludes bank credit card and education loans. (Reporting by Jonathan Stempel; editing by John Wallace)

More…

So Much Ado About So Little

"A sale of 12.9 million ounces of gold as ‘probably the most viable’ option to ensure the long-term funding of the IMF. Proceeds would be used for an interest-bearing endowment."
–WSJ, 26 February 2008.

12.9 million ounces of gold at $906 per ounce, as I write, is slightly less than $12.4 billion. The Chinese would buy $12.4 billion in gold with a telephone call.

Central banks would be willing to buy twice or even ten times that amount.

How foolish the IMF and Gordon Brown have been in gold. Both sold to major buyers at historic lows in price. Brown sold at $248 and the IMF started their sales at $106 in the 70s.

What in the world are you worried about?

Their sales at any amount will, as in the past, be an enduring monument to their lack of acumen in knowing the gold price.

In fact they are both the two dumbest gold haters that exist.

Jim Sinclair’s Commentary

What are you worried about? Listen to your intellect, not your emotions.

IMF gold available for sale is worth less at $906 than 1% of the amount of monetary stimulation done by the US Fed and the US Treasury.

Jim Sinclair’s Commentary

The Lesson of 1923 is the Weimar Retenmark, a commodity currency.

The lesson of 1923 for those hammered by the Weimar experience is if you owned gold you had no problem at all.That is the key lessons of Weimar.

Weimar 1923 may have more lessons than US 1932
Are we heading for another Great Depression?
By Martin Hutchinson, breakingviews.com
Last Updated: 5:02PM BST 01 Apr 2009

Many baffled forecasters are asking just that, and studying what the US did wrong after the stock market crashed in 1929. But the more relevant policy errors might have been those made earlier across the Atlantic – in Weimar Germany from 1919 to 1923.

Policymakers have learned from the US mistakes. This time around, there has been no shrinkage of the money supply and no repetition of President Hoover’s increase in tariffs in 1930 and income taxes in 1932. On the contrary, money supply has expanded rapidly while fiscal policies have been expansionary and protectionism limited.

But look at the Weimar government. Suffering from the trauma of defeat in the First World War and the burden of reparations, it was too weak to raise taxes. It ran large budget deficits instead. Interest rates were kept far below the rate of inflation, while money supply expanded rapidly. About half of government expenditure was funded by newly printed money.

The great economist John Maynard Keynes provided an acid comment in 1920. "The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."

In Germany, the result was hyperinflation. By November 1923, the mark was worth one trillionth of its 1914 value. Pay packets were collected in wheelbarrows. Foreign depositors in German banks were wiped out.

More…

Jim Sinclair’s Commentary

Pakistan today:

Japan adviser says Pakistan key for Afghan security
Reuters – USA
By Yoko Kubota TOKYO (Reuters) – Stabilising Pakistan’s economy and fighting poverty there are key to combating the insurgency in neighbouring Afghanistan, …
See all stories on this topic

 

Attacks in Lahore "aimed at Pakistan’s heart"
Reuters – USA
By Robert Birsel LAHORE, Pakistan (Reuters) – Militants who have launched two audacious attacks in the Pakistani city of Lahore in the past month want to …
See all stories on this topic

U.S. aid to Pakistan: Democrat warns that $1.5 billion could …
Chicago Tribune – United States
chairman of the Senate Armed Services Committee, said he thought the Pakistanstrategy would be effective only if Pakistanis have decided to forcefully …
See all stories on this topic

Sen. Carl Levin questions Pakistan aid plan
Los Angeles Times – CA,USA
The US will increase its cross-border cooperation and intelligence-sharing with neighboring Pakistan, a top American military official said….
See all stories on this topic

World Report: Disunity at Arab League summit, terror in Pakistan
The Daily of the University of Washington – Seattle,WA,USA
Armed gunmen stormed a police academy in Lahore, Pakistan Monday, beginning a siege that lasted eight hours and ended with more than 12 dead, raising fears …
See all stories on this topic

Missile Strike Said to Kill 10 in Pakistan
New York Times – United States
By PIR ZUBAIR SHAH and ALAN COWELL PESHAWAR, Pakistan — Missiles fired from what was believed to be an American drone struck a militant training camp in …
See all stories on this topic

Jim Sinclair’s Commentary

This article is correct and worth reviewing today.

Gold To Gain As Currency, Inflation Play-Fund Manager

NEW YORK (Dow Jones)–Gold prices appear set to rise over the short to intermediate term as investors buy the metal as an alternative currency, and there may be more gains in store longer term if inflation increases when the economy exits its recession, a precious metals fund manager said Thursday.

Even though he sees prices rising, Mark Johnson, portfolio manager with the USAA Precious Metals and Minerals Fund (USAGX), said gold mining stocks are likely to outperform the commodity itself as input costs decline, boosting margins.

"We’re anticipating much wider profit margins in 2009," Johnson told Dow Jones Newswires in an interview. "This is the year for the stocks rather than the commodity."

In the short to intermediate term, gold prices are likely to be strong as the amount of paper currencies grows with government financial and economic stimulus efforts, he said. Investors often buy gold as an alternative currency.

As the Federal Reserve’s quantitative easing continues, the effective printing of money will likely lead to higher inflation in the longer term whenever the U.S. emerges from its recession, Johnson said. After that, he does not see the Fed draining money out of the system quickly because the central bank will want to make sure economic strength has taken hold and avoid a "double-dip" recession.

In addition to its role as an alternative currency, investors buy gold as a hedge against inflation because they see it holding its value more strongly in an environment of rising prices.

In recent years, gold as a commodity has outperformed stocks of the companies that explore for and produce the metal because company margins were squeezed by rising input costs, such as those for oil, and by tightening credit.

But that is changing as the metal’s price rises while input costs fall, Johnson said.

As for companies, Johnson said AngloGold Ashanti Ltd. (AU), the world’s third-largest producer of the precious metal, is probably the best-valued senior gold company.

"It’s a management turnaround story," he said. Some of his smaller picks include Anatolia Minerals Development Ltd. (ANO.T) and Great Basin Gold Ltd. (GBG.T).

He expects that smaller exploration companies, known as juniors, will reverse their recent underperformance of larger producers.

"Value is at the smaller end of the spectrum," Johnson said.

Posted at 5:59 PM (CST) by & filed under General Editorial.

Dear CIGAs,

It appears there is a great deal of confusion about what the FASB did today.

It appears where impaired assets losses are concerned, FASB has caved in and is not requiring immediate write offs.

It appears that where valuation of portfolios is concerned, the rule REMAINS fair market value.

This is the present condition according to FASB.

The assumption in the market today was that FASB had caved in on Fair Market Value which they have not. This is good news for whatever ethics there is left in this degraded system.