Posted at 10:30 AM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Increased selling pressure hit the gold market during today’s session as the broken neckline support level that had been serving to hold prices from moving lower finally gave way overnight. While the equity markets were not soaring higher, neither were they giving up much of their gains from yesterday. That too served to undercut safe haven flows in the yellow metal. The last straw was the ETF, GLD, finally showed some movement in its reported holdings yesterday – unfortunately that movement was a drop of 8 tons – the first such movement in nearly three weeks. Adding insult to injury, more Dollar strength left the bulls little to reinforce their side today.

Investment demand has been the driver of gold prices recently with the sharp climb in the ETF holdings serving to more than offset any slowdown in jewelry demand and increase of scrap sales. That investment demand, like it or not, is gauged by the industry by monitoring these reported gold holdings. Yesterday I mentioned whether or not the recent buyers of GLD were “sticky”; they had not been selling while gold at the Comex was moving lower in price. The drop in reported holdings is therefore worrisome although one day a trend does not make (I sound like Master Yoda speaking here).

Gold has now moved down the test the former swing low made in early April. Bulls must hold prices here to avoid a sharp drop down to $852 – $850. Watching the price action by the minute today, it is evident that the bears are working hard to breach that level and get to the sell stops sitting just under that level. Longs are valiantly attempting to prevent that from occurring  but they need help from some other outside source (much stronger crude, a change in the Euro-Yen cross, or sharply lower stocks) to bolster their line of defense. The problem is that judging from the open interest readings, not only are some longs running, but new sellers are now coming into the market with several funds taking sizeable short positions. That 100 day moving average is keenly watched by technically oriented trading funds and now that it has been breached, their algorithms have them selling. It will take some strong value based buying early next week to keep the technical picture from breaking down further. Bulls need to push prices back above $880 pronto like.

The HUI and the XAU look to be targeting the early March lows.

Safe haven flows into bonds are also seemingly coming to an abrupt halt with prices moving to a one month low. They still remain trapped within the confines of that huge price range made the day of the Fed’s announcement of quantitative easing but they are well off the spike high that occurred back then and less than two points away from that day’s low. A break of that level would have profound implications for the future course of interest rates. I find it telling that in spite of widely publicized and much heralded Federal Reserve buying of longer dated Treasuries, prices cannot move higher. It is obvious that a huge supply is lurking above the market with traders apparently deeply concerned how much of this mammoth amount of new debt can be sold.  What should be particularly troubling, is that we have just now scratched the surface of this new indebtedness, that has now effectively enslaved not only the current generation of Americans, but your children and their children.

The CCI is showing some strength today with the move higher in the energies supporting it while weakness in the metals is undercutting it.

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

april1709gold1230pmcdt

Posted at 11:39 PM (CST) by & filed under General Editorial.

Dear Extended Family,

My job in this chapter of my life is to protect and serve.

There is no way that I am leaving you.

I have dedicated all I have to my corporate interests, without reservation, and all I am to you, without reservation.

I have no concern that the challenges of a totally rotten world and deeply mean spirited people will tire me.

I have never felt stronger nor had more clarity in my life than right now, this instant.

You want a VOW, you can take all the above.

Goodnight for today.

Respectfully yours,
Jim

Posted at 10:41 PM (CST) by & filed under General Editorial.

Dear Friends:

It is either April 19th to the 21st or in June, but it is coming.

Here is Alf on the numbers.

I recently completed the same mathematics that helped me so much in 1980 to determine the price that would be required to balance the international balance sheet of the U.S.

Balancing the international balance sheet is gold’s mission in times of crisis.

I recently did the math again and was sadly shocked to see what the price of gold would have to be to balance the international balance sheet of the USA today. That price for gold is more than twice Alf’s projected maximum gold price.

My compliments go to Alf for his work which has been spot on for a good deal of time.

All our tools are a crystal ball of sorts, a kind not having 100% input from the adopted discipline. Certainly Alf’s work involves more than simple technical analysis talent. It is quite rare for two Gann guys ever to see the same thing in an axiom of TA.. You might recall it was Alf who correctly called the uranium market.

None of us get it right all the time. For the speculator, you are only as good as your last call. I think Alf has it nailed. Bravo to him.

Respectfully yours,
Jim

Elliott Wave Gold Update 23
By Alf Field

As this is going to be the last of these Updates, it is appropriate to review the reasons for writing this series of articles on Elliott Wave and the gold price. This will involve revealing a lot of personal detail and also unveiling an extremely high forecast for future gold prices. The first article titled "Elliott Wave and the Gold Price" was published on 25 August, 2003. This article can be reviewed at the following site:…

In August 2003 the gold price was in the region of $350 and there were a number of conflicting views about the future direction of the gold price. Robert Prechter, for example, was predicting a move to below $253 and possibly below $200. For a number of reasons I was of the opinion that gold was in the very early stages of a major bull market. My views were thus the opposite of Prechter’s and I eventually plucked up the courage to say so.

I count Robert Prechter as a friend, so my purpose was not to disparage his views. I was more interested in setting up some parameters or guidelines that would help determine the likely outcome if the gold price exceeded those levels. I concluded that if the gold price dropped below $309, the odds would favour Prechter’s view. If it pushed above $382, then my bullish view would probably be favoured.

This was more than just an academic exercise because in 2002 I had made a major change to our family investments, moving some 40% of the capital into gold and silver bullion plus a selection of gold and silver mining shares. If Prechter’s view prevailed, our family finances would have taken a serious drubbing.

Another reason for publishing the Updates was to illustrate a major advantage of the EWP, which is the ability to prepare a template forecast (or "road map") of how the market is likely to unfold in both the long and short term, including the possible terminal prices. The original article produced a template based on the rhythms that had been observed in the early stages of the bull market, based naturally on the assumption that my bullish views would prevail.

The early stages of the bull market revealed corrections of 4%, 8% and 16% at increasing orders of wave magnitude. Those numbers were used in the original template published in that 2003 article, a template that forecast that the first major move upwards could reach $630 after which a correction of the order of 25% to 33% would probably follow. In fact, if the sequence had been extended logically, the larger correction should be double 16%, or 32%, but this was shaved to 25-33%.

I thought that the $630 forecast was conservative and that this number would probably have to be adjusted upwards later once the minor waves unfolded. In 2003, with gold in the mid $300′s, a forecast of $630 was both courageous and extremely daring. There was no purpose served in taking the exercise beyond that point until after the $630 target had been achieved.

In addition, the 2003 article concluded that if $382 was surpassed, then the gold price would move rapidly to $424 without a serious correction. That did indeed happen, with gold reaching $425 before the anticipated correction occurred. That success encouraged me to write an article updating the original forecast. I did not anticipate that the consequence of that first update would be the production of this Update 23 some five years later.

There was a further undisclosed reason for writing these articles and that was to eventually highlight the massive potential of the gold bull market. I was reluctant to reveal what I really believed in 2003 as it was so bullish that it would have invited the arrival of the guys with straight jackets and padded cells.

As this will be the last of these Updates, I will reveal my previously unpublished "back of the envelope" calculations in 2003. They were as follows:

Major ONE up from $256 to approximately $750 (a Fibonacci 3 times the $255 low);

Major TWO down from $750 to $500 (a serious decline of 33%);

Major THREE up from $500 to $2,500 (a Fibonacci 5 times the $500 low);

Major FOUR down from $2,500 to $2,000 (another serious decline);

Major FIVE up from $2,000 to $6,000 (also a 3 fold increase, same as ONE)

A case can be made for an 8 fold increase in Major FIVE, which would continue the Fibonacci sequence 3, 5, 8. You can do the maths if you like, but the fact is you can pick your own number for the gain in Major FIVE. Three times the low of $2,000 was actually the conservative expectation, producing a bull market peak target of $6,000.

I would not have invested 40% of the family capital into gold, silver and the corresponding mining shares based solely on my bullish EWP expectations. The following is a quote extracted from "Elliott Wave and the Gold Price" written in 2003 and referenced above:

"I am not a gung ho advocate of the EWP. I discovered not only its strengths but also its weaknesses. I prefer to have fundamentals, technicals and the EWP all in place (if possible) before committing myself to an investment."

As mentioned in this quotation, I prefer to have fundamental and technical analyses in line with the EWP before committing to a position. Obviously I was satisfied with the fundamental and technical out look for gold when I made the dramatic change in our investment portfolio in 2002.

The technical analysis included the following:

The 21 year bear market in precious metals had ended with the multi-decade down trend line being broken on the upside.

The precious metal markets were oversold with sentiment and emotional indicators sporting extreme negative readings with bullish connotations.

In the 1970′s bull market, gold increased from a low of $35 to a peak of $850, a massive 24.3 times the low price. If the current bull market was to be of the same order, then one could project an ultimate peak of over $6,221 ($256 x 24.3). This matched the $6,000 target determined under the EWP.

The fundamental analysis was the real clincher. I had become convinced that the world, and especially the USA, was heading for a major financial crisis that would be so powerful that it would overwhelm all other factors. It would become the single most important criteria impacting on investment decisions.

Privately I referred to this as the "Big Kahuna" crisis.

I anticipated that the Big Kahuna would give rise to the risk of a systemic meltdown, which would result in the authorities "throwing money at problems", bailing out all the banks and large corporations that got into trouble. This would lead to the destruction of the currency. I wrote about this in more detail in "Seven D’s of the developing Disaster" in April, 2005, an article that can be found at the following site:…

The consequence of the systemic meltdown would be a vast increase in newly created money which would result in a massive rise in the gold price of the order that I was anticipating. A further consequence would be the introduction of new national and international monetary systems. Several articles followed in the next few years, culminating in "Crisis Cogitations" which was published just 2 weeks ago at the following site:…

If you haven’t read "Crisis Cogitations", I would urge you to do so in order to better understand the current crisis. Obviously the current financial crisis is the Big Kahuna that I had been anticipating, although I didn’t expect it to take five years to emerge.

Reverting back to the situation in 2003, both the technical and fundamental underpinnings for gold seemed to be pretty solid. Consequently I felt confident that the bullish EWP forecasts, both the shorter term and the undisclosed longer term expectation, would work out. There was no purpose served in revealing the potential for the market to reach $6,000. To get there, gold had to get to the $630 target first, which was a sufficiently daring forecast in 2003.

The current situation:

The chart below depicts the Comex Gold price on a weekly basis. In February 2006, in Update IV, the $630 target was increased to $768 as a result of intervening market action. A couple of months later the gold price exceeded $630 and moved to $733 in May 2006. From that point a 23% correction to $563 occurred.

Confusion reigned because a relatively minor correction had been anticipated, to be followed by a rise to $768. Thereafter the long awaited 25% to 33% correction was scheduled to occur. Instead, the decline measured 23% and the obvious conclusion was that this was the long awaited 25% to 33% correction, albeit slightly stunted. Quite possibly I was overly influenced by my previously unpublished rough target of $750 followed by a decline to $500. The actual outcome of a peak of $733 and a correction to $563 was remarkably close to my rough estimate and seemed to adequately fit the requirement for the end of Major ONE and the corrective wave Major TWO. In coming to this conclusion I glossed over the fact that the correction to $563 was an obvious triangle, and triangles are almost always 4th waves, yet I was calling it a 2nd wave, Major TWO. I also glossed over the fact that the correction was below the 25% to 33% magnitude required.

I mentioned previously that the early corrections were 4%, 8% and 16% at increasing orders of magnitude. If one were to be pedantic, one would say that the next level of correction should be 32%. Looking at the chart below, the correction from $1015 to $699 is 31%! It sticks out like a sore thumb. Surely this is exactly the 32% correction that we should have been anticipating for Major TWO?

Assuming that the $699 low on 23 October 2008 turns out to be the actual low point of the correction, and that remains to be proven, then we can conclude that we have seen the low point for Major TWO. That will allow us to update my original "back of the envelope" template to much higher levels, as follows:

Major ONE up from $256 to $1,015 (actually 4 times the $255 low);

Major TWO down from $1015 to $699, say $700 (a decline of 31%);

Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);

Major FOUR down from $3,500 to $2,500 (a 29% decline);

Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)

Once again, you can pick your number for the gain in FIVE and multiply it by $2,500. The numbers become astronomical and can really only be possible in a runaway inflationary environment, something which many thinking people are suggesting has become a possibility as a result of the actions taken during the current crisis.

Concentrating on the $3,500 target for Major THREE, which is a five fold increase from the low point of about $700, there is a case advanced in "Crisis Cogitations" for a five fold increase in money and prices in order to arrive at a "Less Hard" economic landing. In the USA, total debt recently exceeded $50 trillion and this is unsustainable given an economy with a GDP of only $14 trillion. The suggestion is that the debt level will reduce through bankruptcies to say $35 trillion while the new money created to save the situation will push up the nominal GDP to $70 trillion. A $35 trillion debt level is manageable with a GDP of $70 trillion.

It requires a five fold increase in prices to achieve the above result. Gold has retained its purchasing power over the centuries and will no doubt continue to do so in the current environment. Consequently gold will almost certainly increase five fold (or more) if the level of prices in the USA increases five fold.

In "Crisis Cogitations" it is acknowledged that the current credit/debt deflation could get out of hand and result in a serious deflationary depression. There is debate as to how gold will react in a deflationary environment, but the fact is that in a serious depression bankruptcies will be rife and price levels will decline. This may result in cash and Government bonds performing better than gold, but this is not certain. Gold cannot go bankrupt and is thus an asset that people can hold with confidence in a deflationary depression. It is possible that demand for a "safe haven" investment may be large enough to cause the metal to perform better than cash or Government Bonds.

The odds, however, strongly favour an inflationary outcome. Given a strong will and the ability to create any amount of new money via the electronic money machine, it seems a foregone conclusion that runaway inflation will be the end result. If Mugabe could do it in Zimbabwe, there seems little doubt that Ben Bernanke and his associates in other countries will have no trouble in doing it too.

Why quit writing these reports? I have noticed from the emails that I receive that many people are using these reports to guide their trading activities in gold. I have had no objection to this in the past, but feel that it would be foolish to trade gold in the circumstances of the Big Kahuna crisis that we are living though at the moment. It has become a question of individual financial survival in an environment where things are happening more rapidly and with increasing violence. I feel very strongly that it is time to quietly hold onto one’s gold insurance and not attempt to trade it. I do not wish to provide interim levels that may cause people to be encouraged to trade their gold to skim a few extra fiat dollars or other currencies, but lose their gold as a result.

So it is Good Bye, Good Luck and God Bless.

Alf Field
25 November 2008
Comments to: [email protected]

 

Posted at 10:37 PM (CST) by & filed under In The News.

Dear CIGAs,

Fuzzy Math? Isn’t that just dandy where our auditing board is concerned.

I am glad that I am 68.

Is there a future for my grandchildren?

My answer is to leave them minerals, not cash, in order to give them some protection in an ever growing heartless and meaner world.

Big banks’ fuzzy math
JPMorgan and Wells Fargo play up an obscure measure of their profitability to show how strong they are – but surging credit losses may hint otherwise
By Colin Barr, senior writer
Last Updated: April 16, 2009: 1:23 PM ET

NEW YORK (Fortune) — Just in time for TARP repayment season, the big banks have found a new way to show off their supposedly good health.

New York-based JPMorgan Chase (JPM, Fortune 500) became the latest financial giant to beat Wall Street’s expectations Thursday, posting a first-quarter profit of $2.1 billion, or 40 cents a share.

CEO Jamie Dimon has spent the past year boasting of his bank’s "fortress balance sheet," but he shifted gears Thursday, stressing another factor that he said will see JPMorgan through the economic crisis: the underlying earnings power of its core consumer, commercial and investment banking businesses.

JPMorgan said its pretax, pre-provision earnings — reflecting the profits the firm brings in before paying Uncle Sam or taking account of current and future loan losses — were $13.5 billion in the first quarter.

The bank hasn’t previously publicized this figure, which is favored by analysts but isn’t recognized under generally accepted accounting principles, in its earnings releases. But JPMorgan isn’t the only bank trotting it out.

A week ago, for instance, Wells Fargo (WFC, Fortune 500) surprised investors by saying it expected to post a $3 billion profit in its first quarter — double Wall Street’s expectations. Just in case the message wasn’t clear, the bank also said in that release that its pretax, pre-provision earnings for the quarter were $9.2 billion.

More…

Jim Sinclair’s Commentary

The is the "end of the beginning" and "the beginning of the end" for Pakistan as an ally of anybody allied to the West. Still, where is the analysis of what this will mean to markets? It is nowhere to be seen.

Out on bail, radical cleric calls for Islamic law across Pakistan
BY SAEED SHAH
ISLAMABAD — A radical cleric, just freed from detention on bail, returned in triumph Thursday night to the Red Mosque in the Pakistani capital and raised the slogan of Islamic revolution before thousands of excited supporters.

Bearded men packed the mosque, long associated with extremist Islam and with links to al-Qaida, while outside on the sidewalk rows of women sat clad in all-enveloping black burkas, only their eyes showing. Many were young adults who had come from Islamic seminaries.

"We will continue our struggle until Islamic law is spread across the country, not just in Swat," Abdul Aziz, who had been chief cleric at the mosque, told the fired-up congregation. Dressed in white flowing traditional clothes, with a white turban and his long white beard, he looked a messianic figure.

Aziz was carried in on the shoulders of supporters after arriving in a motorcade from the nearby city of Rawalpindi. He had been under house arrest since 2007 over terrorism-related charges until a court granted him bail earlier this week.

Earlier this week, Pakistan’s president bowed to pressure from extremists and agreed to impose Islamic law in Swat, a valley northwest of Islamabad, in a bid to end a two-year insurgency there by Pakistani Taliban. Now with Aziz’s release, Islamists have an ideologue to rally around.

More…

Jim Sinclair’s Commentary

That is a hard call to make if the trading profits are really "at risk" trading profits. Are they?

JPMorgan, Goldman trading profits unlikely to last
Fri Apr 17, 2009 12:29am BST
By Elinor Comlay – Analysis

NEW YORK (Reuters) – JPMorgan Chase and Goldman Sachs Group racked up billions of dollars in trading profits in a volatile first quarter — but don’t expect these lucrative markets to last into the next quarter, or to necessarily benefit other banks, analysts say.

Goldman and JPMorgan, seen as probable long-term survivors amid the carnage that ravaged most of the industry, boosted their trading risk levels in the first three months of the year to exploit swings in asset prices.

They both expanded market share following Lehman Brothers’ demise in September and Bank of America Corp’s capture of Merrill Lynch & Co.

Citigroup Inc, another major competitor in past years and under intense scrutiny following a government rescue, will see whether its hobbled financials significantly weakened its trading business when it reports quarterly results on Friday.

But trading profits and market-share gains may not be so easy to come by in the second quarter, analysts caution, and it may be too late for other banks like Morgan Stanley — which reports next Wednesday — to catch up.

More…

Jim Sinclair’s Commentary

What else is shrouded?

If you would like to be terrified read about it in Webbot.

Fed Shrouding $2 Trillion in Bank Loans in ‘Secrecy,’ Suit Says 
By Mark Pittman

April 16 (Bloomberg) — U.S. taxpayers need to know the risks behind the Federal Reserve’s $2 trillion in lending to financial institutions because the public is now an “involuntary investor” in the nation’s banks, according to a court filing by Bloomberg LP.

The Fed refuses to name the borrowers, the amounts of loans or assets banks put up as collateral under 11 programs, arguing that doing so might set off a run by depositors and unsettle shareholders. Bloomberg, the New York-based company majority- owned by Mayor Michael Bloomberg, sued Nov. 7 under the Freedom of Information Act on behalf of its Bloomberg News unit. It made the new filing yesterday.

“The Board’s arguments are based on wispy speculation, lack evidentiary support and are contradicted by economic theory,” said Thomas Golden and Jared Cohen, lawyers with New York-based Willkie Farr & Gallagher LLP, in a motion asking the judge to require disclosure.

“These government actions, which have been shrouded in secrecy, are at the heart of Bloomberg’s FOIA requests,” the attorneys said.

Members of Congress also have demanded more information than President Barack Obama and former President George W. Bush have disclosed on the bailout of the U.S. financial industry. Congress approved $700 billion to bolster banks, whose losses on mortgage securities and home loans contributed to the recession.

More…

Just a Reminder:

Armstrong’s dates are a product of his write up "It’s Just Time." They are mathematics, not good guesses.

He sees either April 19th or June for the low in the gold market. Assuming it is June then he sees gold reaching $5000.

Don’t let the bastards get you down!

Jim Sinclair’s Commentary

This is definitely coming because it already exists.

Will public pensions be next bailout?
4/16/2009 8:53:00 AM
John Nothdurft

Along with the stock market, retirement savings, and taxpayers’ sanity, state and municipal government employee defined-benefit pension funds are reeling from the financial meltdown.

The current economic turmoil and stock market downturn have caused government employee pension funds to lose hundreds of billions of dollars. The crisis only reinforces the need for states to move their pension systems from the onerous defined-benefit obligation to a more mobile and sustainable defined-contribution model.

It’s a potentially catastrophic problem.

According to the Center for Retirement Research at Boston College, as of Dec. 16, 2008 public pensions in the United States were underfunded by nearly $1 trillion. Worst is Illinois, where the pension system has only 54 percent of the necessary funding and an unfunded liability of $54.4 billion.

Even before our current financial shakeup, more than 20 million state and local government employees’ pensions nationwide were in dire fiscal shape.

For example, in June 2007 New Jersey’s unfunded liability was already $28 billion. Since then the number has soared to more than $52 billion, with roughly 45 percent of the obligation unfunded.

More…

Jim Sinclair’s Commentary

Mark to market accounting is a truth machine. Here is what is properly defined as a gimmick, a falsehood machine.

Wells Fargo’s Profit Looks Too Good to Be True: Jonathan Weil
Commentary by Jonathan Weil

April 16 (Bloomberg) — Wells Fargo & Co. stunned the world last week by proclaiming it had just finished its most profitable quarter ever. This will go down as the moment when lots of investors decided it was safe again to place blind faith in a big bank’s earnings.

What sent Wells shares soaring on April 9 was a three-page press release in which the San Francisco-based bank said it expected to report first-quarter net income of about $3 billion. Wells disclosed few details of what was in that figure. And by pushing the stock up 32 percent that day to $19.61, investors sent a clear message: They didn’t care.

Dig below the surface of Wells’s numbers, though, and there are reasons to be wary. Here are four gimmicks to look out for when the company releases its first-quarter results on April 22:

Gimmick No. 1: Cookie-jar reserves.

Wells’s earnings may have gotten a boost from an accounting maneuver, since banned, that it used last year as part of its $12.5 billion purchase of Wachovia Corp. Specifically, Wells carried over a $7.5 billion loan-loss allowance from Wachovia’s balance sheet onto its own books — the effect of which I’ll explain in a moment.

First, a quick tutorial: Loan-loss allowances are the reserves lenders set up on their balance sheets in anticipation of future credit losses. The expenses that lenders record to boost their loan-loss allowances are called provisions. As loans are written off, lenders record charge-offs, reducing their allowance.

More…

Jim Sinclair’s Commentary

This is what OTC derivatives have done to people.

Economic survivalists take root
By Judy Keen, USA TODAY

When the economy started to squeeze the Wojtowicz family, they gave up vacation cruises, restaurant meals, new clothes and high-tech toys to become 21st-century homesteaders.

Now Patrick Wojtowicz, 36, his wife Melissa, 37, and daughter Gabrielle, 15, raise pigs and chickens for food on 40 acres near Alma, Mich. They’re planning a garden and installing a wood furnace. They disconnected the satellite TV and radio, ditched their dishwasher and a big truck and started buying clothes at resale shops.

"As long as we can keep decreasing our bills, we can keep making less money," Patrick says. "We’re not saying this is right for everybody, but it’s right for us."

Hard times are creating economic survivalists such as the Wojtowicz family who are paring expenses by becoming more self-sufficient.

Reviving "almost lost" skills and preparing for tough days make people feel more in control, says Charlotte Richert, consumer sciences educator for Oklahoma State University’s Extension Service in Tulsa County.

Karen Gulliver, MBA program chair at Argosy University in Eagan, Minn., expects the movement to grow as the sour economy forces people to reassess priorities. People are asking, "Do I really want to be 100% vulnerable with no self-sufficiency skills if something happens?" she says.

More…

Jim Sinclair’s Commentary

Just to keep you balanced as the media assures you of everything everywhere.

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Jim Sinclair’s Commentary

This strategy is by no means limited to South America.

The West has no plan, reacting only to immediate problems and needs.

Asia plans 100 years in advance ands works the plan. No wonder the dollar is headed South while Asia, especially China, rises consistently.

China bashers simply don’t get it.

It is patriotic to see what is and make a plan, not what isn’t and just act reactively.

Deals Help China Expand Sway in Latin America
By SIMON ROMERO and ALEXEI BARRIONUEVO
Published: April 15, 2009

CARACAS, Venezuela — As Washington tries to rebuild its strained relationships in Latin America, China is stepping in vigorously, offering countries across the region large amounts of money while they struggle with sharply slowing economies, a plunge in commodity prices and restricted access to credit.

In recent weeks, China has been negotiating deals to double a development fund in Venezuela to $12 billion, lend Ecuador at least $1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion in Chinese currency and lend Brazil’s national oil company $10 billion. The deals largely focus on China locking in natural resources like oil for years to come.

China’s trade with Latin America has grown quickly this decade, making it the region’s second largest trading partner after the United States. But the size and scope of these loans point to a deeper engagement with Latin America at a time when the Obama administration is starting to address the erosion of Washington’s influence in the hemisphere.

“This is how the balance of power shifts quietly during times of crisis,” said David Rothkopf, a former Commerce Department official in the Clinton administration. “The loans are an example of the checkbook power in the world moving to new places, with the Chinese becoming more active.”

Mr. Obama will meet with leaders from the region this weekend. They will discuss the economic crisis, including a plan to replenish the Inter-American Development Bank, a Washington-based pillar of clout that has suffered losses from the financial crisis. Leaders at the summit meeting are also expected to push Mr. Obama to further loosen the United States policy toward Cuba.

More…

Jim Sinclair’s Commentary

More Armstrong dated April 15th 2009

Martin Armstrong – Financial Panics = Political Change!
Wednesday, April 15, 2009

As promised, here is Mr. Armstrong’s latest.

In it he covers a wide gamut from talking about what I call the “events that tend to follow economic events,” to the concentration of capital, to debts.

But then he sets out to explain the way things should work in his well informed opinion. Restore Rule of Law, abolish the income tax as our forefathers envisioned, regulatory reform, and even changing our currency system.

He is correct that a window of opportunity is coming. His inputs are unique and deserve consideration.

More…

 

Jim Sinclair’s Commentary

Be very careful of what you plan without full knowledge.

It might just embarrass the critic.

Nassim Taleb Says Banks `Hijack Us,’ Can’t Be Trusted

Jim Sinclair’s Commentary

The level off at these numbers is not good news.

General Growth Files Biggest U.S. Property Bankruptcy (Update1)
By Daniel Taub and Brian Louis

April 16 (Bloomberg) — General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner.

The owner of Boston’s Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties.

“We intend to emerge as a leaner company,” General Growth President Thomas Nolan said in an interview today. “We want to come out as a less leveraged company. Our business model remains strong.”

General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values. Banks have reduced lending amid mortgage-related writedowns. Commercial real estate prices in the U.S. dropped 15 percent last year, according to Moody’s Investors Service. Retail sales in the U.S. unexpectedly fell in March as soaring job losses forced consumers to pull back.

The filing lists Eurohypo AG, a unit of Commerzbank AG, as General Growth’s largest unsecured creditor with claims totaling $2.59 billion under two loans. Noteholders are owed about $4 billion.

More…

Posted at 2:47 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold succumbed to selling pressure which was widespread across all of the metals in today’s session. Silver was hit particularly hard as the recent huge drawdown in Comex warehouse stocks came to an end (at least as of yesterday). Copper was derailed with the lower than expected Chinese GDP numbers undercutting recent bullish enthusiasm for the red metal while both platinum and palladium were weaker. With crude oil moving lower or at least unable to maintain its footing above the $50 level, gold simply ran out of friends today.

The technical picture for gold suffered a setback with its break under the 100 day moving average which has also taken it beneath the broken neckline of the head and shoulders topping pattern on the short term charts. Bulls have the onus upon them to hold prices near $880 and from setting back much further and threatening the $865 level. If they fail there, the bearish flag formation will be complete as well as bringing the head and shoulders pattern back into effect. That would give gold potential to move down to near $850. Failure there would target $816 – $820. About the best the bulls seem to be able to do right now is to keep it from falling further as they are unable to push it strongly enough to dislodge the sellers lurking overhead near the $910 level.

Gold just seems to be acting “tired” right now. Keep in mind that modern markets have now morphed into being all about momentum. Funds do not make money if prices do not move particularly to the upside. Once momentum stalls out, funds go and look for opportunities elsewhere. That is what we are seeing in gold for now. Generally when this sort of thing occurs and funds exit, the bullion banks have been the ones supplying the buying as they cover existing shorts into the fund selling. Physical market buying from India and other points to the mid and far East tend to reinforce the demand picture as buyers move in to take advantage of the lower prices. The key in determining whether gold will maintain its footing above its chart support levels is whether that buying is sufficiently large enough to offset investment side liquidation. One thing that clouds this picture somewhat is that the reported holdings of the big gold ETF, GLD, have remained unchanged at 1127 tons for the last three weeks. That is quite odd given the weakness in gold over this same period. One would expect to have seen those numbers drop off given the fact that open interest in Comex gold has fallen off nearly 40,000 contracts over that same period. Are the buyers of GLD, “sticky buyers”, who are long term holders and is the selling in gold a Comex phenomenon? I am simply not sure but it is difficult to envision gold falling much further if the GLD numbers do not drop off as they have generally done in years past during periods of gold price weakness. We’ll keep an eye on this for you.

I want to draw your attention to the entire commodity complex as a whole as indicated by the Continuous Commodity Index or the CCI. I am including a weekly chart to show a broader picture of what is taking place. If you notice, the CCI bottomed out in December of last year and has spent the last 4 months slowly grinding higher. Notice that there is no sharp, upward thrust but rather a steady, tortoise-like crawl higher. I monitor this chart to try to get some sort of visual gauge depicting the battle between the deflationists and the inflationists. Commodities are the arena in which this battle will play itself out so by keeping a watchful eye on this chart, we can see which side is gaining the upper hand. I would suggest that the deflationist forces have seen their best days and the mood is ever so painfully slowly shifting towards concerns related to inflation. The inflation numbers yesterday suggested the contrary but those are not forward looking. With quantitative easing in full force, commodity markets are already anticipating the return of inflation. This is another factor that will eventually works in gold’s favor  as an uptrending CCI is not conducive to falling gold prices. Odds favor a continuation of this pattern in the CCI with the chance of a sharp upward spike at this time quite remote. Only a break below that December low would give the deflation side argument any new life.

I might add this is why crude oil has been trading so contrary to its current negative fundamentals. Crude oil has become a proxy for inflation and trades more like a currency than an outright commodity. That is one of the main reasons crude oil traders are tearing their hair out trying to understand what is taking place in that market.

Chart patterns on the HUI and the XAU are decidedly bearish with both indices now moving downs toward the 100 day moving average. Both the 10 day and 20 day moving averages are now moving lower reinforcing the short term negative technical picture. The one saving grace that I can see on the daily charts of both indices is that some of the technical indicators are now down in the oversold zone from which prices have popped higher over the last 4 months.

We are not getting much if any help from the bond market as far as clues for what we might expect in the economy moving forward. They are trapped in directionless, sideways trade with the very short term pattern looking bearish but the pattern over the last few months typical of a broad range trade. Bonds have not been able to best the high made the day that the Fed first announced its debt monetization policy but neither have they gone back down to revisit the low made that very same day prior to the announcement that afternoon.

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

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Posted at 1:32 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

It looks like you were right about lobbying. It IS the best investment in the world. A 22,000% rate of return proves your point.

Regards,
CIGA Pedro

Investments Can Yield More on K Street, Study Indicates
One Tax Break Brought Companies 22,000% Rate of Return on Lobbying Costs
By Dan Eggen
Washington Post Staff Writer
Sunday, April 12, 2009; Page A08

In a remarkable illustration of the power of lobbying in Washington, a study released last week found that a single tax break in 2004 earned companies $220 for every dollar they spent on the issue — a 22,000 percent rate of return on their investment.

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Jim Sinclair’s Commentary

JB Slear brings our attention to the “disappearing jobs” map below:

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Posted at 5:19 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Ok, who did it? That was supposed to be our Easter Weekend!

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Jim Sinclair’s Commentary

This has to give the geriatric frat boys a big laugh at the NYC suburbia country clubs.

GM bonds: Big trouble for small investors
Nearly $6 billion of GM’s unsecured debt is held by individual investors like Harley VanDeloo. A GM bankruptcy could mean a ‘significant’ loss to his income.
By Chris Isidore, CNNMoney.com senior writerApril 15, 2009: 3:38 AM ET

NEW YORK (CNNMoney.com) — Harley VanDeloo, a 69-year old retiree in Thousand Oaks, Calif., has resigned himself to losing an important piece of his retirement income: interest payments from $25,000 worth of General Motors bonds.

The bonds were due to pay VanDeloo about $1,000 twice a year, an important supplement to his social security benefits that he said are his main source of income.

"It’s not going to kill us, but it’s significant," he said about the loss of income.

VanDeloo, a self-described car enthusiast who says his GM van is the best car he’s ever owned, bought the bonds at a 20% discount just over a year ago. He believed GM (GM,Fortune 500) was on the verge of a turnaround and that the bonds were relatively safe despite having already been downgraded to junk bond status by the rating agencies.

He said he didn’t care about the bonds’ prices. He was attracted instead to the better than 8% yield the bonds paid. "They were due to be paying off well after I’m gone," he said about the debt, which matures in 2033.

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Jim Sinclair’s Commentary

Jim’s 2006 Formula functions:

Select a city.
It is omnipresent.
It cannot be reversed by Tarp, or any acronym.
Your town and city are experiencing just this, no matter where you live.

Prepared text of Villaraigosa’s State of the City speech
Tuesday, 14 April 2009
Fellow Angelenos:

These are no ordinary times in the City of Los Angeles, or for that matter, any place where people depend on the global economy.

Here in L.A., the recession is taking a terrible toll.  230,000 Angelenos now standing on unemployment lines.  The jobless rate simmering at 12% and rising. The mortgage crisis has now forced 21,000 of our families to box up their belongings and vacate their homes, many experiencing for the first time in their lives the humiliating pain — the frustration — that comes in having to put your hand out and rely on the help of strangers to survive.

We have thousands of business owners struggling to make payroll.  Trade flows and ship traffic are idling at the port.  And the recession has done lasting damage to one of our most vital civic institutions: our great newspapers.

Needless to say, the recession has hit government particularly hard.

The need for our services is up.  Revenue to pay for them is down. Here in L.A., we face a $530-million  deficit this year alone.

The situation at the state level — where the system seems hardwired for failure — is even more extreme.  That’s why it is absolutely critical that we lock arms and approve the bipartisan budget stabilization package on May 19 to prevent us from destroying the very services that Californians depend on.

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Jim Sinclair’s Commentary

Consider what Pakistan means to markets as a major domino about to fall.

Pakistan grants bail to detained hard-line cleric
By ZARAR KHAN – 8 hours ago

ISLAMABAD (AP) — Pakistan’s Supreme Court ordered the release on bail Monday of a hard-line cleric who had been detained since shortly before soldiers stormed his mosque in 2007, killing scores of people and energizing the country’s Islamist insurgency.

Maulana Abdul Aziz was granted bail while the court considers the charges against him in relation to the siege of the Red Mosque in the capital, Islamabad, his lawyer Shaukat Siddiqui told reporters outside the court. Prosecutors were not available for comment.

Aziz was arrested as he tried to sneak out of the mosque dressed in an all-covering burqa worn by some Muslim women.

Several days later, security forces stormed the mosque and adjoining buildings after scores of heavily armed militants inside refused to surrender. The government says 102 people, including 11 security personnel, were killed in the standoff.

Aziz is facing a raft of charges ranging from abetting terrorists to illegally occupying a building.

Pakistan has a history of failing to successfully prosecute militants, many of whom are believed to have once had links with the country’s armed forces.

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Jim Sinclair’s Commentary

Note how concerned the youngsters are. Even if this is a professional act it is a great act and deserves a reward.

It is definitely getting very bad…

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(Female cats are drama queens)

Jim Sinclair’s Commentary

It is absolutely amazing that Nassim Taleb did not get the hook on financial TV this morning.

He ripped into every plan and every person of note from the Treasury, Federal Reserve and right up to the Fat Cats.

The look on the interviewer’s face was a marvel to behold. He says nothing has changed. Nothing is strengthening. The weaknesses are still there and there is no effective plan or people to change that.

I understand he is a professor of Risk Engineering so I wonder what he teaches when you listen to his views.

Professor Taleb, I am open to invitation to a lecture and promise to sit quietly and attentively. I will gladly pay for a ticket if it is public.

Please listen to this man if you have not heard him interviewed.

Black Swan Author Nassim Taleb Joins Arianna on CNBC’s Squawk Box


 

Nassim Nicholas Taleb, author of The Black Swan, joined Arianna on Squawk Box to discuss the financial meltdown, mark-to-market accounting and ways to build a more robust economic system.

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Ten principles for a Black Swan-proof world
By Nassim Nicholas Taleb
Published: April 7 2009 20:02 | Last updated: April 7 2009 20:02

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess.

Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without

disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging”

products, and from gullible regulators who listen to economic theorists.

More…

Posted at 4:24 PM (CST) by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

Ursus Terribilis checks in to see if we are still here:

Chairman Jim,

This release today on the attempts to unwind AIG derivatives is a good look at the business.

What this says, IMHO, is that the saleable assets are now sold, and likely the remainder is not saleable.

This is just a mere trillion or two here, and one can easily extrapolate similar results to the $600 trillion around the planet, (per the BIS), and the hundreds of trillions at the other U.S. banksters. How about that bulletproof, teflon JPM, and their mere $90 trillion of no write offs?

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGgfmRHA_6Ss

Another quarter of having to report more facts, even with sanctioned fraudulent accounting, should be even more entertaining.

CIGA Ursus Terribilis.