Posted at 7:20 AM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Please see the following charts for a view of the Dollar along with some assorted charts of interest.

I have also included the COT charts for both the US Dollar and Comex Gold.

For gold, there is not much of interest this week other than the fact that the Swap Dealers were the big sellers with Managed Money actually selling as well. The other Reportables, (some of the big locals, CTA’s,) did some net buying as did the general public. The Producer/User category added fresh shorts but those were outnumbered by more fresh longs. All in all, nothing to get excited about. For gold to trend higher it will need the managed money category to stop selling and begin further rebuilding their net long position.

 

Click here to view this week’s charts on the US Dollar Index, the HUI, Gold/Bonds Ratio, Dow Jones/Gold Ratio and Disaggregated Commitment of Traders charts with commentary from Trader Dan Norcini

Posted at 7:01 AM (CST) by & filed under In The News.

Dear CIGAs,

Friday March 12th. Observe how concerned I am about the sloppiness of gold.

Turn off the quote machine and put on a good flick. Be prepared for a major upwards move in the price of gold coming out of March into the year’s end.

Like it or not, this is a set up for a very exciting rest of 2010. Gold, as we know, can be painful from time to time. How much you want to suffer is totally up to you.

Think about handling the situation as I do. No suffering required.

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Jim Sinclair’s Commentary

If major gold producers want reserves they are going to have to buy them.

SAfrica gold output down 18.2 pct yr/yr in Jan
Thu Mar 11, 2010 9:41am GMT

JOHANNESBURG, March 11 (Reuters) – South African gold output fell 18.2 percent in volume terms and total mineral production rose 7.7 percent in January compared with the same month in the previous year, official data showed on Thursday

Production of non-gold minerals rose 12.2 percent, Statistics South Africa said on its website www.statssa.gov.za (Reporting by James Macharia)

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Jim Sinclair’s Commentary

Want to know what is really going on? Pay up and John will tell you. We have no financial connection of any kind whatsoever.

Retail Sales Revisions Boosted January Headline Gain but Reduced Reported Sales Levels
- Sales Still Bottom-Bouncing Net of Inflation 
- January Trade Deficit Was GDP-Neutral
- Fleeting Census Jobs Creation Will Have Offsetting Losses

"No. 285: Outlook Update, Retail Sales, Trade Deficit"
http://www.shadowstats.com/

Jim Sinclair’s Commentary

And other African countries where the Mining Law is rational, fair and long term due to good government.

China on prowl to invest in South African mines
Published on: March 12, 2010 at 17:00

NEW YORK (Commodity Online): Like India’s steel giants, China is also showing interest in investing in South Africa’s mining sector.

According to the minister of mines in South Africa, China had shown strong interest in investing in the African nation’s mining sector.

China, Africa’s biggest emerging market partner, has been investing in the continent’s mining and energy sectors.

China is interested in manganese, platinum and uranium. But S Africa is also cautious to see if their investment is going to benefit South Africa. It is critical for the country to ensure its own interest.

The Chinese were keen to invest in processing of minerals in the country, a key priority of South Africa’s government, which hopes to extract as much value from its mines as possible and boost job creation.

Investor appetite for South Africa’s mining sector, one of the country’s major employers, was high, and the country was keen to attract just as many investors as in mining peers Australia and Canada.

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Jim Sinclair’s Commentary

Just as any weak EU nation needing a bailout will get it, so will every state of the USA that implodes.

QE is going to infinity! California don’t worry, Washington will come. Maybe sooner if you were not, you know, with bad political company.

States may hold onto tax refunds for months

By William M. Welch, USA TODAY

Residents eager to get their state tax refunds may have a long wait this year: The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months.

States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls.

"It’s an indicator of how bad it is," says Scott Pattison, executive director of the National Association of State Budget Officers. "You know things are bad when you have to do that."

New York, hit with a $9 billion deficit, may delay $500 million in refunds to keep the state from running out of cash, says Gov.David Paterson.

Hawaii’s Department of Taxation says some residents may not see state income tax refunds until the end of August, TheHonolulu Advertiser reported. It was part of a plan by Gov.Linda Lingle to deal with a revenue drop-off by pushing costs into the next fiscal period, which begins in July.

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Jim Sinclair’s Commentary

To the sheeple, wake up! The Western world is imploding.

All currencies are in a race to the bottom. Gold is the only currency with no liabilities attached.

Half of Kansas City public schools to close

KANSAS CITY, Mo. — The Kansas City school board is closing nearly half of the district’s schools in a desperate bid to stay afloat.

The board’s 5-4 decision Wednesday night means 29 out of 61 schools will shut down at the end of the school year. The district is seeking to erase a projected $50 million budget shortfall.

Teachers at six other low-performing schools will have to reapply for their jobs, and the district will sell its downtown central office. The plan, proposed by Superintendent John Covington, also will eliminate about 700 of 3,000 jobs, including 285 teachers.

"The bottom line is the quality of education we’re offering children in Kansas City is not good enough," Covington said. "One reason it’s not good enough is that we’ve tried to spread our resources over far too many schools."

Covington’s move comes after decades of dropping enrollment but few efforts to reduce buildings or staff. Over the past 40 years, enrollment has dropped from more than 75,000 students to about 17,500.

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Jim Sinclair’s Commentary

The only thing wrong with this picture is that the last word at the bottom of the sign should be plural.

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Jim Sinclair’s Commentary

The why of the present rally in equities. The notes point to the FASB change in mark to market rules.

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Jim Sinclair’s Commentary

Foreclosures help the home sales figures as the bank usually bids the balance of mortgages and taxes due at the foreclosure auction. It is a wash transaction.

New round of foreclosures threatens housing market
By Renae Merle
Washington Post Staff Writer
Friday, March 12, 2010

The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.

The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.

"Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale," said Diane Westerback, a managing director at Standard & Poor’s. Westerback said it could take 33 months to clear the backlog.

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Jim Sinclair’s Commentary

The US dollar is no Safe Haven

U.S. credit rating at risk.
The triple-A credit rating of the U.S. is at risk, warned ratings agency S&P, unless the country creates a credible medium-term plan to rein in fiscal spending. If no action is taken, "external creditors could reduce their U.S. dollar holdings, especially if they conclude that eurozone members are adopting stronger macroeconomic policies." This could hurt the dollar’s status as a global reserve currency and consequently "weigh on the AAA rating on the U.S."

Jim Sinclair’s Commentary

The Chinese do not talk to hear their voice. China will retaliate in an economic way via their US Treasury holdings.

China tells U.S. to back off yuan appreciation calls.
Chinese officials warned the U.S. not to make a political issue out of the yuan, while the White House is trying to decide whether to label China as a "currency manipulator" and yesterday called on the country to move to a "more market-oriented exchange rate." China said the U.S. should look to itself to boost exports (see below) and not blame other countries.

Jim Sinclair’s Commentary

Please read this authoritative piece on China and gold.

China assesses its gold strategy
By Russell Hsiao

Chinese leaders convening in Beijing for the annual plenary session of the National People’s Congress (NPC) – China’s ceremonial legislature – this week will, among other things, hammer out a blueprint for the ascendancy of the country’s currency, the yuan (or renminbi).

China’s 2010 economic blueprint, which was officially unveiled at the plenary’s opening, set the country’s target growth rate at the proverbial 8%, which is the rate Chinese economists deem sufficient to generate enough domestic demand to make up for dwindling exports to regions such as the United States and Europe.

The 8% growth target has remained the same since 2004 and is also widely seen as politically necessary to create enough jobs to stave off social unrest. While the world’s largest economy – the United States – struggles to stem the bleeding of jobs in its ailing economy, its biggest creditor – China – has been quietly increasing its gold reserves in an apparent effort to hedge the weakening value of the US dollar and stabilize the value of its massive foreign exchange (forex) reserves.

Depending on the pace and scope of China’s forex reserves diversification strategy, this trend will have broad implications for the internationalization of the yuan and China’s US$2.27 trillion forex reserves, which are mostly parked in US Treasuries.

One of the key issues that Chinese leaders will have to tackle is whether to let the yuan rise to help restructure the domestic economy and rebalance the global economy. If they decide to allow the yuan to appreciate against the dollar and other currencies, gold may increasingly become an attractive alternative to include within the basket of China’s reserves.

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Jim Sinclair’s Commentary

Rebuked by the US and mad as hell, the EU is moving forward to restrict credit default derivatives. CDSs will continue regardless.

EU pushing forward on hedge fund rules.
The U.K.’s Gordon Brown and France’s Nicolas Sarkozy will meet today to try to reach a compromise on proposed EU financial reforms. Specifically, the U.S. and U.K. are concerned that the tighter regulatory controls proposed could hurt the hedge fund and private equity industries.

Jim Sinclair’s Commentary

There will be no meaningful plan nor will there be a reduction in the US Federal Budget because of the internal rollover of states, commercial credit problems and misstatements on bank balance sheets, high unemployment, false balance sheet recovery and many other problems.

Those selling gold in anticipation of such are sorely mistaken. 

S&P issues warning over America’s top-tier rating
By David Oakley in London and Michael Mackenzie in New,York
Published: March 12 2010 02:00 | Last updated: March 12 2010 02:00

The triple A rating of the US is at risk, S&P has warned, unless the country adopts a credible medium-term plan to rein in fiscal spending.

In a report published yesterday, the ratings agency said that there were risks that "external creditors could reduce their US dollar holdings, especially if they conclude that eurozone members are adopting stronger macroeconomic policies".

This could undermine the dollar’s status as the global reserve currency, it said, an outcome which would "weigh on the triple A rating on the US."

"In our opinion, fiscal outturns, inflation figures, trade volumes, foreign exchange volatility and the current account will be the leading indicators if the dollar’s role were to diminish," S&P said.

But the ratings agency said that the US could lose its reserve currency status and still hold on to its triple A rating. It added that the loss of a currency reserve status has historically been a gradual process, taking place over decades in the case of UK, for example.

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Jim Sinclair’s Commentary

One early report this week and now three more. Maybe Friday is no longer sacred for reporting busted banks.

Bank Closing Information – March 12, 2010
These links contain useful information for the customers and vendors of these closed banks.

Statewide Bank, Covington, LA
Old Southern Bank, Orlando, FL
Park Avenue Bank, New York, NY

Jim Sinclair’s Commentary

Just like Greece, all the states of the USA that roll over will be bailed out.

States Facing Financial Doomsday as Debts Mount
By Dunstan Prial
FOXBusiness

That’s not some apocalyptic bumper sticker. It’s the learned opinion of numerous financial experts when describing the budget crises facing a number of U.S. states, notably Illinois, California and New Jersey.

“This is an unprecedented crisis,” said Laurence Msall, president of the Civic Federation, an influential Illinois-based tax and fiscal policy research group.

While a General Motors-style bankruptcy is off the table – states are prohibited by law from filing for protection from their debtors – the alternative is no less alarming.

Msall said that in a worst-case scenario, states sliding toward insolvency will simply stop paying their bills, whether they be to public colleges, private vendors or municipalities. And when they do, those entities will either have to eat the losses or make up the difference.

It’s already happening in Illinois, Msall said, where the state has reneged on payments promised to public colleges, and those colleges in turn have threatened 20% tuition increases.

Private vendors, as they did last year in California, will have to accept government vouchers – IOUs in effect – or lose their money, and municipalities will have to raise property taxes in order to cover their own expenses.

In other words, the money needed to keep insolvent states running at some minimum operational level will have to come from somewhere.

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Jim Sinclair’s Commentary

There is no way out, and the only way to stall the inevitable is QE to Infinity.

Detroit family homes sell for just $10
Family homes in Detroit are selling for as little as $10 (£6) in the wake of America’s financial meltdown.
Published: 10:05AM GMT 12 Mar 2010

The once thriving industrial city has suffered a dramatic decline following the global economic crisis.

According to Tim Prophit, a real estate agent, the crisis has led to a unprecedented portfolio of homes, but they are failing to sell.

He said there were homes on the market for $100 (£61), but an offer of just $10 (£6) would be likely to be accepted.

Speaking on a BBC 2 documentary, Requiem for Detroit, to be screened on Saturday, Mr Prophit said: "The property is listed by the city of Detroit as being worth $35,000 (£22,000), but the bank know that is impossible to ask.

"This part of town has got a lot of bad press in the media because it featured in Eminem’s film ‘Eight Mile’, but that particular road is fifteen minutes up the road and that is a long way in Detroit."

Homes offered in viewing brochures as early 1920s example of colonial architecture would once have made handsome homes but are no longer sought after.

Mr Prophit, of The Bearing Group, said: "This house was foreclosed by the bank a couple of months ago and was offered to us to sell.

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Jim Sinclair’s Commentary

QE to infinity. There is no other alternative.

New wave of foreclosures threatens market
Up to 7 million homes are potentially eligible but haven’t been repossessed
By Renae Merle
updated 3:52 a.m. MT, Fri., March. 12, 2010

WASHINGTON – The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners.

And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.

The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.

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Posted at 7:04 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

The following FDIC press release is remarkable in a number of ways:

1. We now have a new form of US Government Agency debt, namely, FDIC-backed residential mortgage backed securities (“RMBS”).

2. The $1.8 billion of notes are backed by loans with “aggregate unpaid balances of approximately $3.6 billion.” Translation: they had to take 50 cents on the dollar to unload these loans.

3. “The timely payment of principal and interest due on the notes are guaranteed by the FDIC, and that guaranty is backed by the full faith and credit of the United States.” Translation: We the People are on the hook for these RMBS.

Not even Fannie Mae and Freddy Mac RMBS came with such a specific guaranty of backing by the US taxpayer.

If there was still any doubt that the US Taxpayer will be on the hook for any losses the FDIC cannot absorb, that has now been put to rest. QE to Infinity!

Respectfully yours,
CIGA Richard B.

FDIC Closes on Sale of $1.8 Billion of Notes Backed by Mortgage-Backed Securities
Transaction Adds Liquidity to DIF and Stimulates Investor Demand
FOR IMMEDIATE RELEASE
March 12, 2010

The Federal Deposit Insurance Corporation (FDIC) today closed on a sale of notes backed by residential mortgage backed securities (RMBS) from seven failed bank receiverships. The sale was conducted through a private placement priced and allocated on March 5th. The transaction was met with robust investor demand, with over 70 investors participating across fixed and floating rate series. The investors included banks, investment funds, insurance funds and pension funds. All investors were qualified institutional buyers.

The $1.81 billion of notes is backed by 103 non-agency residential mortgage-backed securities. The aggregate unpaid balance of the 103 securities was approximately $3.6 billion at the time of the sale. The FDIC retained an equity interest in each series.

The transaction features two series of senior notes, each backed by a separate pool of RMBS. The larger series of approximately $1.3 billion, is based on option ARMS and has a floating rate tied to the one-month LIBOR. The smaller series of $480 million is based mostly on fixed-rate RMBS and pays a fixed rate. Both series priced at rates comparable to Ginnie Mae collateralized mortgage obligations.

The timely payment of principal and interest due on the notes are guaranteed by the FDIC, and that guaranty is backed by the full faith and credit of the United States.

Full release:
http://www.fdic.gov/news/news/press

Retail Sales in U.S. Unexpectedly Rose in February (Update2)
CIGA Eric

Sales at U.S. retailers unexpectedly climbed in February as shoppers braved blizzards to get to the malls, signaling consumers will contribute more to economic growth.

More consumption driven growth! Like historical (nominal) comparisons of net worth and equity prices, retail sales comparisons are also meaningless because the currency is not a stable measuring stick over time.

Even real, or CPI adjusted sales prices are not comparable because the CPI is not a stable measuring stick either.

Real or CPI-Adjusted Retail Sales (RRS) and YOY Change:
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The only unbiased trend is gold-adjusted retail sales. The effects of currency devaluation are removed when retail sales are converted into ounces purchased. This number is historically comparable and shows no unexpected monthly or year-over-year gain.

Gold-Adjusted Retail Sales (RSGLDR) and YOY Change:
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Source: bloomberg.com
Source: shadowstats.com

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Picking a Bottom
CIGA Eric

Have we witnessed the birth of a new secular bull market in real estate and stocks as suggested on F-TV? No. To pick bottoms, you must love when everyone else hates, and hates when everyone else loves. The trick is learning how to quantify that axiom.

Market Value of Residential Real Estate As A % Total Assets And Corporate Equities and Mutual Funds As A % Total Assets:
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Residential Real Estate Affordability has improved. I suspect, however, that is will improve a lot more in the next five years.

Residential Real Estate Affordability: Market Value of Real Estate As A % Disposable Personal Income
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Tropicana raising orange juice prices
CIGA Eric

PepsiCo Inc (PEP.N) will downsize its 64-ounce cartons of Tropicana orange juice to 59 ounces but leave the price unchanged, after cold weather damaged Florida’s orange crop.

It’s always the weather. The weather shrinks the size that never seems to return to normal after the weather related effects subside.

There’s no inflation, but the size of everything from ice cream to orange juice cartons continues to shrink at the grocery store. Maybe when our portion sizes are the size of a Dixie cup people will equate the ever shrinking shelf size as a consequence of devaluation.

Source: reuters.com

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Jim Sinclair’s Commentary

What John cannot show you, but probably does not need to.

Household leverage is rolling over, and this will be difficult to buffer. The voting public will scream bloody murder. How much will they be willing to print? The next hemorrhage phase could be equally big.

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COT U.S. Dollar Diffusion Index
CIGA Eric

The up trend in the dollar diffusion index has failed. Ready or not, against the prevailing consensus/hype, the trend line roll over implies: (1) a lower dollar, (2) higher gold, (3) and a return of the giddiness of the carry trade on Wall Street in the near future.

U.S. Dollar Index and the Commercial Traders COT Futures and Options U.S. Dollar Diffusion Index (DI):
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Flow of Funds Report
CIGA Eric

There’s always some interesting trends reveals by the flow of funds report. While F-TV talks of recovery and new bull market, they ignore the fact that total credit market debt as percentage of GDP at 362.5% remains only a small down tick from the all-time in 2009.03 of 372% and well above the second Great Depression high of 325%. This suggest that debt liquidation, a necessary precursor to the next secular recovery, has been minimal at best.

Total Credit Market Debt As A% GDP:
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Jim Sinclair’s Commentary

Please read this is OUTSTANDING analysis of bank closings by CIGA Richard. Please note the most salient point, which is a direct gift of FASB’s capitulation, which allowed for rampant overvaluation of assets on the books of ALL USA financial entities. This once again made balance sheets and earnings statements world class dangerous cartoons.

Dear Jim,

Between Friday, February 26, 2010 and Thursday, March 11, 2010, the FDIC announced the closings of seven relatively small banks. That brought the year’s total (so far) to 27.

The seven banks had combined assets of approximately $2.1 billion and combined deposits of approximately $1.68 billion. The FDIC’s estimated cost of the closures was $432.7 million – about 26% of deposits.

While that cost figure is certainly not the worst seen in this crisis, there continues to be a huge disparity between the stated values of the closed banks’ assets and their market values estimated by the FDIC. Taken as a whole, the estimated market value of the seven banks’ assets ($1.25 billion) was only about 59% of the value claimed.

The largest of the banks closed, Rainier Pacific Bank of Tacoma, Washington, had stated assets of $717.8 million and deposits of $446.2 million, and the FDIC’s loss estimate was $95.2 million. That means the FDIC valued Rainier’s assets at about $351 million, only 49% of the value claimed.

Similarly, Centennial Bank of Ogden, Utah, had stated assets of $215.2 million and deposits of $205.1 million, and the FDIC’s loss estimate was $96.3 million. That means the FDIC valued Centennial’s assets at $108.8 million, only 51% of the value claimed.

Yesterday’s announcement of the closing of Liberty Pointe Bank of New York, NY, was unusual in that it came on a Thursday. It will be interesting to see what Friday evening brings.

Respectfully yours,
CIGA Richard B.

 

Dear Jim,

Does this look sustainable? Don’t worry, Washington will save us!

CIGA Marc

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Posted at 7:02 PM (CST) by & filed under Greg Hunter.

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Whistleblower Harry Markopolos is on the stump promoting his new book titled “No One Would Listen.” It is about how it took 8 ½ years for the Securities and Exchange Commission to crack down on the Bernie Madoff scam.  Markopolos says he sent letters to the SEC that were “too many to count” in an effort to expose the fraud.  In an interview on “The Daily Show” this week, Markopolos said something about the SEC that really caught my attention.  He said, “They still have all the same people there.  They haven’t fired anybody, that’s the problem.”  (The complete Daily Show segment is below)

The SEC missed the single biggest fraud in history (estimated at $65 billion) and not a single regulator lost their job over this screw-up?  What is this regulatory body for but to protect investors?  Is the SEC really just a public relations ploy to make people think Wall Street is being regulated?  That’s the way it looks to me when I hear there is no house cleaning going on.  There is no effort to change the tone and direction of the agency.  It is just business as usual, and that’s the way Wall Street likes it.

Speaking of the Madoff scam, angry investors are suing the Securities Investment Protection Corporation (an industry insurance fund) to get some of their money back.  May I simplify the real problem for you here?  I called SIPC yesterday and asked how much is in the insurance fund to pay jilted investors?  I was told it was “$1.159 billion at the end of February.” How long do you think that is going to last when considering Madoff’s crime was $65 billion?  How many other scams will this be able to pay off?  There is simply not a lot of money in their fund considering the trillions of dollars in investments it is insuring.  Is SIPC real insurance for a large calamity or just PR to make you “feel” safe?

What about the rest of Wall Street? Certainly there have been new laws and big changes made to protect against another meltdown?  After all, it was Wall Street’s reckless investments that caused the financial crisis.  Eighteen months after the mess started, there is not a single new law or regulation for the financial industry! According to a new Harris Poll released this week, 82% of Americans want the government to clamp down on the financial industry.  There is legislation currently in Congress for new regulation and consumer protection, but there is no telling when or if anything will be passed.

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Posted at 2:10 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

The move lower in gold today was attributed to easing concerns over Greece and consequently Europe in general which led some to move back into the Euro and out of gold as fears subsided and safe haven trades were reversed. The thinking among some is that the worst is over in Europe and that the Euro is cheap. Even the British Pound received a lift today. So too was the Swiss Franc as “Buy Europe” was on the table today.

The result was that while the Dollar here was weaker here, gold moved lower as did the mining stocks.

It was a strange day in the commodity markets for while in general the weaker Dollar has seen algorithm buying in this sector, crude oil, copper, silver, were all down. Even corn was lower. Even more strange was to see the bonds higher here since they tend to move in tandem with the Dollar since a falling Dollar is seen as a sign that “risk” is back in.

Truthfully, I cannot make much sense out of any of this today. It seems more a case of position unwinding in many of these markets than anything, particularly coming on a Friday which at times can make getting a read on things iffy in the first place.

The HUI will be okay as long as it can stay above 405. Failure there and it will tend to move towards the 390 level.

The Us Dollar is flirting very dangerously with the 79.80 – 80.00 level. A breach of that level that stays down for at least a day, will send the speculative longs, which are still loaded up in this market, packing. Eventually that will get the attention of gold and provide it some good buying support once this repositioning in regards to Europe eases.

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 2:59 PM (CST) by & filed under In The News.

"Money, when considered as the fruit of many years’ industry, as the reward of labor, sweat and toil, as the widow’s dowry and children’s portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency."
–Thomas Paine

Jim Sinclair’s Commentary

Commercial loans carried on the books of regional banks are in general not being marked down to a proper value.

When the loan goes bankrupt it can no longer be carried at this false value. This is now starting and in its own way will be many little Lehmans in terms of commercial loans.

The US dollar is no safe haven.

Silverstein May Default on Debt for 575 Lexington (Update2)
By Brian Louis and David M. Levitt

March 10 (Bloomberg) — New York developer Larry Silverstein, who teamed with the California State Teachers Retirement System to buy a 35-story skyscraper in 2006, now faces “imminent default” on debt tied to the property, Fitch Ratings said today.

Silverstein and Calstrs paid $400 million for the tower at 575 Lexington Ave. in Midtown Manhattan near the height of the U.S. property boom. A loan balance of $325 million was turned over to so-called special servicing today, Fitch said.

The transfer “was done at our request to help facilitate ongoing discussions with our lender about a modification to our loan, which is not currently in default,” Silverstein spokesman Dara McQuillan said in an e-mailed statement.

Investors are defaulting on loan payments for commercial real estate at record levels as vacancies at malls, offices and industrial properties climb and rents fall. Delinquencies on loans packaged and sold as commercial mortgage-backed securities rose to a record 6.7 percent in February from 1.7 percent a year earlier, according to New York-based research firm Trepp LLC.

Kushner Cos. said last week that it sought special servicing on the debt it used to buy Manhattan’s 666 Fifth Ave. in 2007 for $1.8 billion, what was then a record price for a U.S. office building. Vornado Realty Trust, the New York-based real estate investment trust founded by Steven Roth, last week asked that a $217 million loan on properties it owns in North Carolina be sent to a special servicer, saying it wasn’t prepared to fund any shortfalls on the debt.

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Jim Sinclair’s Commentary

This is interesting because it is not friday.

Bank Closing Information – March 11, 2010
These links contain useful information for the customers and vendors of these closed banks.

LibertyPointe Bank, New York, NY

Jim Sinclair’s Commentary

Few understand that hyperinflation has already occurred in the bailouts and gifts to the financial industry, and the result of this hyperinflation are coming towards us like a freight train.

Maybe you should send this to those that are lost in semantics and therefore will be lost period.

Bernanke’s Dilemma: Hyperinflation and the U.S. Dollar
March 10, 2010
Ron Hera

Ben Bernanke, Chairman of the US Federal Reserve, faces a Sisyphean task because US banks are experiencing debt deflation and, because lending is now at much lower levels, monetary deflation is encumbering the domestic US economy as existing debts continue to be serviced. Government deficit spending can only offset lower consumer spending to a degree, and the mushrooming debt of the US government raises the question of whether the US can repay or roll over its debt obligations, given that tax receipts are likely to fall.

Despite deflationary pressure, the value of the US dollar is in a downtrend trend pointing to higher prices for imported goods and energy. Devaluing the US dollar will reduce the value of debts in real terms, thus it can make debt levels sustainable, but higher prices will exacerbate debt defaults, worsening the condition of US banks. Mr. Bernanke’s dilemma is how to salvage the balance sheets of US banks without sparking high inflation or unleashing hyperinflation.

Where the US dollar is concerned, opinions on hyperinflation range from the view that hyperinflation of the world reserve currency is impossible in principle (because, for example, the values of other currencies are linked to that of the US dollar), to the view that hyperinflation of the US dollar has already happened and that all that remains are the consequences.

The two most widely accepted theories of hyperinflation are the monetary model, where a positive feedback cycle is caused by a disproportionate increase in the velocity of money as a consequence of increasing the money supply too quickly, and the confidence model, where the monetary authority issuing a given currency is perceived to be insolvent or no longer legitimate.

The view that hyperinflation is the inevitable result of a central bank issuing too much money or of a government taking on too much debt, while correct, both states the obvious and presupposes that some previously known or predictable limit is reached. The ability to service debt is one such measure, but the value of a debt in real terms depends on the value of the currency.

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Jim Sinclair’s Commentary

Is there any question about that having occurred?

Mess with a Connecticut Yankee and there will be payback.

Connecticut gets moody over false ratings.
Connecticut’s attorney general is suing Moody’s (MCO) and S&P (MHP) over their ratings of risky investments. AG Richard Blumenthal claims the firms "violated public trust" by knowingly providing false ratings on investments that subsequently pushed the country into a recession. Blumenthal is seeking penalties and fines that could total hundreds of millions of dollars.

Jim Sinclair’s Commentary

Knowing the efficiency of government management of financial entities, can you imagine how many seniors that do not owe anything on loans will find the social security check garnered or non-existent?

Defaulted Loans May Haunt Seniors
by Ellen E. Schultz
Monday, March 8, 2010

A little–noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.

Social Security benefits are off–limits to creditors, such as credit–card companies and banks. But the U.S. can collect debts to federal agencies by "offsetting," or withholding Social Security and disability payments.

The Treasury currently withholds benefits of 3.1 million Social Security recipients to recover defaulted student–, farm– and small–business loans, unpaid income taxes, amounts veterans owe for health care, and other debts to the government.

Previously, the U.S. hasn’t been able to withhold Social Security payments to recover most debts delinquent for more than ten years.

But a provision in the 2008 Farm Bill lifted the ten–year statute of limitations on the government’s ability to withhold Social Security benefits in collecting debts other than student loans—for which the statute of limitations was lifted in 1997—and income taxes, where the limit remains 10 years.

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Jim Sinclair’s Commentary

The snowball is rolling down hill and will obliterate December’s promised Jobless Economic Recovery.

Big ax looming at the FDNY: Threat of 1,000 layoffs, closing of 62 fire companies
BY Jonathan Lemire
DAILY NEWS STAFF WRITER
Thursday, March 11th 2010, 4:00 AM

The FDNY is bracing for doomsday.

The department will be forced to close a staggering 62 fire companies and lay off more than 1,000 firefighters if the bad-news state budget becomes reality, Commissioner Salvatore Cassano told the City Council Wednesday.

"We would be very, very taxed," warned a grim-faced Cassano. "Our operations would be impacted and every neighborhood in this city would feel the effect."

Even if lawmakers in Albany – already facing an April 1 deadline and a $9 billion budget gap – find a way to pump in more cash, the city’s fiscal woes may still force the FDNY to shutter 20 companies, Cassano warned.

"We’re going to try not to close a single company or a single firehouse," Cassano told the Fire and Criminal Justice Services Committee, "but if we have to, we will."

Sixteen fire companies were set to close last year until the Council restored funding for an extra 12 months.

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Jim Sinclair’s Commentary

It would be quite wise to use the resources given here to see if your bank is on the list.

List of banks under stress keeps growing
Check the financial health of your financial institution with BankTracker
By Bill Dedman
updated 5:45 a.m. MT, Wed., March. 10, 2010

The number of banks with risky levels of bad loans rose only slightly in the last quarter of 2009, partly because the FDIC closed so many failing banks, according to federal data analyzed by the Investigative Reporting Workshop at American University in Washington.

Four ways to check your financial institution:

Look up any bank in the BankTracker.
Look up any credit union.
Check the list of the 400 largest banks.
Check the banks with the highest levels of bad loans.

A total of 389 banks had “troubled asset ratios” above 100 at the end of December, up slightly from 369 banks in September, according to the analysis. A ratio above 100 means a bank had more troubled loans than money set aside to cover potential losses.

The FDIC closed 140 failed banks in 2009, including 45 in the fourth quarter alone. Nearly all had very high levels of bad loans.

The new analysis relies on information reported by banks to the Federal Deposit Insurance Corp. as of Dec. 31. Journalists at American University calculated each bank’s troubled asset ratio, which compares troubled loans against the bank’s capital and loan loss reserves.

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Jim Sinclair’s Commentary

While talking out one side of their mouth about draining liquidity, they are guaranteeing obligations beyond their ability to meet at today’s dollar value.

Fed Shoulders AIG Loan Losses to Ease Sale to MetLife (Update1)
By Hugh Son

March 11 (Bloomberg) — The Federal Reserve Bank of New York and American International Group Inc. agreed to shoulder as much as $450 million in losses tied to the insurer’s Japan real estate bets as part of the sale of a division to MetLife Inc.

MetLife won an accord to split most declines on $1 billion in commercial mortgages included in the $15.5 billion purchase of the AIG unit, according to a MetLife regulatory filing and the company’s chief financial officer. A corporate vehicle owned by the Fed and New York-based AIG will use MetLife stock gained in the sale to pay for future real estate losses, reducing the assets left to repay taxpayers, said two people with knowledge of the arrangement.

AIG’s Japan mortgage holdings were deemed a “more troubled asset” by MetLife, which is also indemnified from losses on one of the U.K. businesses it will acquire in the purchase of American Life Insurance Co. AIG said March 8 it is divesting Alico, which operates in more than 50 countries including Japan, to pay down bailout debts on a $60 billion Fed credit line.

“You have to ask yourself, ‘does the American taxpayer have any hope of getting their money back any other way besides selling this business?’” said William Cohan, a former JPMorgan Chase & Co. banker and author of “House of Cards,” about the financial crisis. An agreement for one side to retain some risk is typical in deals “when the buyer and seller have a difference of opinion about an asset,” he said.

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Jim Sinclair’s Commentary

The state ward is starting to overflow. They are guaranteeing everything without consideration that may be called upon to perform.

Sounds a little like the mono-line companies that sold credit guarantees that ended up worthless.

Fannie, Freddie’s $125 billion tab still growing
Sixteen months after being seized, the firms remain wards of the state
updated 4:06 a.m. MT, Thurs., March. 11, 2010

The federal government has spent the past half year seeking to roll back its emergency efforts at propping up the financial markets ― with the notable exception of its involvement in mortgage giants Fannie Mae and Freddie Mac.

As the government has pledged more and more money to cover the companies’ losses, it has assured the public that planning was underway for overhauling the firms so the bailouts would end. As recently as December, the Obama administration said it expected to release a preliminary report on how to remake Fannie Mae and Freddie Mac around Feb. 1.

But no plan was produced, and in response to questions from lawmakers, Treasury Secretary Timothy F. Geithner clarified last month that it would be another year before the government proposes how to restructure the firms.

Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system.

Some members of Congress have complained that the huge public commitment is unsustainable. But the administration has been reluctant to start reforming Fannie Mae and Freddie Mac, officials and analysts say, because the firms in their current form play an essential role in supporting the housing market at a time when it is still under severe stress.

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Jim Sinclair’s Commentary

A business without an exit strategy is an example of government management – none.

GMAC Bailout Could Cost Taxpayers $6.3B
Updated March 10, 2010

New watchdog report says the Treasury Department sank billions into auto finance giant GMAC without an exit strategy or proof the company was viable – a decision that could cost taxpayers $6.3 billion.

WASHINGTON – The Treasury Department sank billions into auto finance giant GMAC Inc. without an exit strategy or proof the company was viable — a decision that could cost taxpayers $6.3 billion, a new watchdog report says.

The government said the $17.2 billion bailout was a necessary step to save troubled automakers General Motors and Chrysler. GMAC provides critical financing to auto dealers, who borrow to finance their fleets until the cars can be sold to consumers.

Yet GMAC faced far fewer conditions than the bailed-out automakers, the report says. When the automakers were rescued, they were forced into bankruptcy. Shareholders lost their investments, creditors took a hit and executives were forced to detail plans for making the companies viable.

GMAC was treated more like banks that received bailouts without having to explain what they were doing with the money, the report says.

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Jim Sinclair’s Commentary

Who owns Washington?

Geithner warns EU on hedge fund regulation plan

LONDON (AFP) – – US Treasury Secretary Timothy Geithner has warned the European Commission its plans to regulate hedge funds and private equity groups could spark a transatlantic row, a paper reported Thursday.

Geithner hit out at a draft European Union directive that would impose tighter restrictions on the investment funds in a letter to the EU’s internal market commissioner, Michel Barnier, the Financial Times said.

Proposed new rules might damage US hedge funds, private equity groups and banks by curbing their ability to do business with Europe, Geithner argued in the one-page letter sent on March 1.

The changes would restrict the access of EU investors to funds based outside the 27-nation bloc, and non-EU funds would also be forced to comply with new rules in order to do business inside the bloc.

The directive could also force EU-based investment funds to use local banks for parts of their business, said the report.

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Jim Sinclair’s Commentary

I wonder if the Fed has figured out that they could buy state debt and camouflage a bailout via QE.

They bought trillions of OTC derivatives from Wall Street.

Detroit Sells $250 Million of Its Debt Without Recent Disclosure Filings

March 11 (Bloomberg) — Detroit, the largest U.S. city whose debt is rated below investment grade, will ask investors today to buy $250 million of its debt without having filed annual financial reports on time for five years.

The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, is providing a June 30, 2008, financial statement, its most recent, to investors. A fiscal 2009 report is expected to be complete by May 31, said city spokesman Dan Lijana, in an e-mail

“This issue is not for the faint of heart,” said Richard Ciccarone, chief research officer of Oak Brook, Illinois-based McDonnell Investment Management, which oversees $6.8 billion of municipal debt. “It certainly raises eyebrows.”

Detroit will provide backing by payments of state aid from sales taxes to the general obligation issue, which enabled the issue to maintain investment grade. Michigan’s state treasurer can pay the aid directly to the trustee for the bonds, bypassing the city to ensure the debt is serviced, according to offering documents. The treasurer also agreed not to withhold payments when the city is late filing financial statements, as it has in the past.

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Jim Sinclair’s Commentary

Interested is where we are all going in the Western world?

Gov. Pat Quinn wants 33 percent tax hike for education
March 10, 2010
Posted by Ray Long, Monique Garcia, Bob Secter and Rick Pearson at 12:23 p.m.; last updated at 6:20 p.m.

SPRINGFIELD — Gov. Pat Quinn today called for a 33 percent increase in the state income tax rate to raise money for education and ease deep cuts he’s proposed in his new budget plan.

In his short budget speech to the House and Senate, Quinn argued that an income tax "surcharge" would be enough to restore Illinois’ education budget to current levels and allow the state to get caught up on some of the millions owed to public schools, community colleges and four-year universities.

Quinn wants to increase the personal income tax rate from 3 percent to 4 percent — a 33 percent increase — with the corporate tax rate rising from 4.8 percent to 5.8 percent. The tax hike would bring in $2.8 billion a year.

"I believe this 1 percent for education makes sense, and I think the people of Illinois will understand. We must invest in the future, even in these tough economic times," Quinn said. This is urgent. We don’t have six months. We don’t have six weeks. I challenge the General Assembly to take immediate action to enact the 1 percent for education initiative."

Last year, Quinn unsuccessfully tried to raise the personal income tax rate from 3 percent to 4.5 percent and provide some tax relief.

The political dynamics for a tax increase have grown only worse as the election-seeking Democratic governor confronts campaigning legislators who fear a voter backlash in the Nov. 2 general election.

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Posted at 2:45 PM (CST) by & filed under Jim's Mailbox.

Trade deficit shrinks as auto and oil imports drop
CIGA Eric

The U.S. trade deficit unexpectedly shrank in January, reflecting a big drop in imports of oil and foreign cars. American exports also fell, a potential blow to hopes that the economic recovery will be aided this year by U.S. sales abroad.

A country that habitually consumers more than it produces, the definition of structural deficits, will always see its trade deficit decline when the economy slows. If this was unexpected, then the strength of the economy going forward should be unexpectedly weaker.

The Obama administration is also hoping to get a boost in exports from a fall in the dollar’s value against the Chinese yuan. It has been lobbying China to allow the yuan to rise in value against the dollar, responding to complaints from American manufacturers that China is unfairly manipulating its currency by holding down the yuan’s value to gain trade advantages.

No worries, devaluation, not investment in new plant, equipment and innovation, will save us. Unfortunately, Americans, sold on the idea that the worse is over, thus, by extension a recovery is around the corner, will have to experience the harsh reality of scrapping along the bottom for many years. The imports to exports trend from 1991-1997 gives a similar, but smaller model of the scrapping yet to come.

Import to Export Ratio:
clip_image001[1]

And while we wait, import prices, similar to late 2007 to early 2008 have reached double digit growth rates in January. Last time this happened the stock market was in process of rolling over.

Import and Export Price Change YOY:
clip_image002[1]

Source: finance.yahoo.com

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Jim Sinclair’s Commentary

Here are my comments on the algorithm driven gold gun slingers and semantic fundamentalists:

It is becoming evident to anyone with a brain that the ravingly bullish end of year televised economic pep rally was pure propaganda.

Enter the proverbial question of deflation or inflation, which is semantics only. Hyperinflation is a currency event and not an economic event. Therefore it can occur under any condition that causes a flop in confidence.

That condition is building and building in the Western world as the lies become more evident everywhere.

The money managers and computer nerds have been selling gold for four days. It was evident on the first day as the dollar fell and gold failed to react much at all.

They will be back buying at higher prices. Gold is going to $1650 and higher.

Half of Kansas City’s schools to close by fall
CIGA Eric

The school board narrowly approved the plan Wednesday night to close 29 of the district’s 61 schools to try to stave off bankruptcy. The closures have angered many parents, students and teachers, but administrators say they had no choice because without them, the district would have been in the red by 2011.

The public, readers, inherently know that the future greatness of our country will be defined by our children and their children’s children. Numerous cities, not limited to Kansas City, are making tough choices, such as wholesale school closings to ensure their financial survival. Yet, as many world leaders have rushed to support the OTC derivative winners, while the masses retreat into survival mode, what message are we sending to the future generations? For me, this stuff is largely business, but this never implies that I am not embarrassed as citizen about the choices being made.
Source: news.yahoo.com

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Trade deficit shrinks as auto and oil imports drop
CIGA Eric

The U.S. trade deficit unexpectedly shrank in January, reflecting a big drop in imports of oil and foreign cars. American exports also fell, a potential blow to hopes that the economic recovery will be aided this year by U.S. sales abroad.

A country that habitually consumers more than it produces, the definition of structural deficits, will always see its trade deficit decline when the economy slows. If this was unexpected, then the strength of the economy going forward should be unexpectedly weaker.

The Obama administration is also hoping to get a boost in exports from a fall in the dollar’s value against the Chinese yuan. It has been lobbying China to allow the yuan to rise in value against the dollar, responding to complaints from American manufacturers that China is unfairly manipulating its currency by holding down the yuan’s value to gain trade advantages.

No worries, devaluation, not investment in new plant, equipment and innovation, will save us. Unfortunately, Americans, sold on the idea that the worse is over, thus, by extension a recovery is around the corner, will have to experience the harsh reality of scrapping along the bottom for many years. The imports to exports trend from 1991-1997 gives a similar, but smaller model of the scrapping yet to come.

Import to Export Ratio:
clip_image001[1]

And while we wait, import prices, similar to late 2007 to early 2008 have reached double digit growth rates in January. Last time this happened the stock market was in process of rolling over.

Import and Export Price Change YOY:
clip_image002

Source: finance.yahoo.com

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Jim Sinclair’s Commentary

Direct bidders is simply QE in Camouflage.

30-Year Treasury Auction Results
CIGA Eric

Wow! 29.6% of the accepted offers were taken down by direct bidders. For further discussion search auction results, or click. Direct bidders are starting to dominate the auctions across the yield curve.

30-Year Auction Results:
clip_image003

Source: treasurydirect.gov

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Derivative CDS mess
CIGA Eric

Let’s not play babe in the woods here. The problem not limited to Greece, Spain, or the EU. Derivatives have infected the balances sheets of corporations, nations, states, and municipalities across the globe.

The solution will be bailouts – either transparent or opaque. Little respect or consideration will be given to preservation of purchasing power of the currencies denominating those bailouts. This is why gold is rising, and when the public begins to catch on en mass, it will continue to rise much higher for years to come.

Forget Greece: Italy derivatives bomb also ticking

Financial markets are gripped by the role derivatives have played in Greece’s debt crisis, but Italy also has a derivatives time bomb, and hundreds of cities are in the 24 billion euro blast zone.

EU prepares in case Greek woes spread to Spain

If Greece’s debt crisis is giving the European Union a headache, it is minor compared to the pain it will suffer if a large member state such as Spain sinks into similar trouble.

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NYSE Composite Average
CIGA Eric

Options expiration is coming next week. Trading leading up to and during expiration dates tend to push to the extremes. As a result, technical interpretations during these windows can be quite difficult. Retail money can get confused by the technicals caused by the confluence of expiration flows.

As the equity trees continue to reach endlessly higher into the sky, caution is still warranted. A few days ago I pointed out that the NYSE put/call ratio was 0.67. As of yesterday’s close, the number has dropped to 0.61. This means for every put traded, there were 1.64 calls traded. This low number, which can push below 0.5, reflects the equity trees pushing higher into the sky. This is a warning flag.

In addition, the energy of the tape since February has been anemic. An indicator called REV(E), cumulative measure of energy behind the tape, illustrates the divergence of price with the October and January highs. Today’s REV reading lags behind not only the January but also October high. This serial, double divergence with price and tape energy is troublesome. The single divergence foreshadowed the equity correction in January. Skepticism towards price must reign as long as these divergences exist.

NYSE Composite with Exchange Volume:
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Jim Sinclair’s Commentary

CIGA Bernie comments on the financial propaganda of yesterday:

Jim,

IN THE NEWS:

US budget deficit hits record high in February

WASHINGTON: The US government registered a record budget deficit in February, the 17th consecutive month of running in the red, the Treasury said on Wednesday.

IN THE GOOD NEWS:

The reading, however, was slightly better than the consensus analyst forecast of a deficit of 222 billion dollars.

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CIGA Bernie

 

Dear Jim,

"Whether CDS swaps make much difference is questionable. The contracts are traded between banks or funds. They have little impact on the underlying debt, except to create mood music in the markets."
– AEP. Telegraph

He’s categorically wrong here, isn’t he? The CDS market allows the specs to make money shorting bonds and being long the CDS, there-in taking a country down at a profit, doesn’t it? I thought that is the main objection to the CDS market.

CIGA Keith

Dear Keith,

Wrong is the understatement of the age. Prepare to see a lot of propaganda out on the street on how CDS are kind and caring instruments.

Regards,
Jim