Posted at 11:05 AM (CST) by & filed under General Editorial.

Dear Friends,

Last night I told you the return of Mr. P was coming. Here comes the spam perfectly timed to an F-TV interview.

It is the same message that has been sent for the last many years.

During the interview the email spam came pouring into my inbox. Next came 500 emails inquiring on this subject.

Please try the search feature on the site before firing off your emails in panic.

Normally this simply re-confirms the bull.

Regards,
Jim

Posted at 10:20 PM (CST) by & filed under General Editorial.

Dear CIGAs,

I have been working diligently with two people that I admire to create for the community what might be considered our last great campaign to inform those we care about who are still lost in “MOPE” and accept “Pretend and Extend” as some sort of economic recovery.

Project 1 is titled “Squeeze The People,” an album of original contemporary folk music by singer and composer Bill Carleton.

Bill interviewed me to focus his inspiration on creating an album that both entertains and teaches.

I feel he has caught it perfectly, in all his compositions, from singing about the Federal bailout, OTC derivatives and the Central Bank to Main Street being caught in the hands of a roulette wheel. His piece properly focusing on the children having to pay the tariff of debt is especially moving. For fun there is the $300 dollar cheeseburger that is such a great bargain that you must not tell anyone or they will be all gone.

For those that will not read, maybe they will listen to music. For the grandkids music is better than Grandpa’s unwelcome lectures. For those in lala land on the subject, good music could lead to an understanding.

“Why I Mine Gold” is both timely and the story of my life.

I put up the money to create this professional album but I will not take one penny back. I have done this for the community and for a deserving artist, right thinking, and quality young man. When he is not working on his music he is a behaviorist for challenged children and adults.

“Squeeze The People,” will be ready very soon.

Project 2 is titled “A Pocketbook of Gold – A Survival Manual for Monetary Mayhem.”

I have worked over the past few months with my friend Peter Carlin for whom I have the most profound respect.

Our purpose was to put together the most succinct, easy to read treatise on “Why Gold.”

This publication will define for you, if you should ever doubt it, why you are in gold. It will be my hand to hold that you can carry with you. It is the most serious of publications.

I might say if this cannot convince the doubter then there is no hope for that person.

I am not sure it will be ready for Christmas but it is in final form going to the printers now.

Yes, special projects are what I do for relaxation, certainly when there is nothing important to post at 2am.

Posted at 10:18 PM (CST) by & filed under In The News.

Dear CIGAs,

Here is a warning for you this evening:

Prechter is at it again. This time he is going low budget on YouTube. Next will come spam.

 

Jim Sinclair’s Commentary

Pretend and Extend.

U.S. Foreclosures to Reach 3.9 Million in Second Record Year
Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. Said
By Dan Levy

(Bloomberg) — Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said.

This year’s filings will surpass 2008′s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said.

"We are a long way from a recovery," John Quigley, economics professor at the University of California, Berkeley, said in an interview. "You can’t start to see improvement in the housing market until after unemployment peaks."

Foreclosure filings exceeded 300,000 for the ninth straight month in November, RealtyTrac said today. A weak labor market and tight credit are "formidable headwinds" for the economy, Federal Reserve Chairman Ben S. Bernanke said in a Dec. 7 speech in Washington. The 7.2 million jobs lost since the recession began in December 2007 are the most of any postwar economic slump, Labor Department data show. Unemployment, at 10 percent last month, won’t peak until the first quarter, Quigley said.

Loan-modification programs and an expanded government tax credit for first-time homebuyers are helping slow the monthly pace of filings and "keeping a lid" on further foreclosures, James Saccacio, RealtyTrac’s chief executive officer, said in the statement.

More…

Jim Sinclair’s Commentary

True, but when bank regulators overlook overvalued assets or accept non performance as performance defaults come late and with a greater vengeance.

For regulators to act this way is another example of "Pretend and Extend."

The Coming Wave Of Debt Defaults
Sam Rovit and David Sweig, 12.08.09, 05:29 PM EST

The worst is not yet past. Be prepared.

The trouble in the commercial real estate markets is getting ugly, as the precarious situation of Dubai World has made all too clear.

Expect many more unpleasant situations like that one. Speculative-grade debt issuers are bracing for the default rate to hit 12% to 14% by the end of 2009, according to our projections at Bain & Company. The last time the U.S. economy experienced default rates of that magnitude was 28 years ago. The current long-term average default rate is 4.5%; as recently as 2007, it was just under 1%. These failures are not limited to small or marginal firms; they are happening at large companies with at least $100 million in assets, and have, after all, already hit legendary businesses like General Motors, Lehman Brothers and General Growth Properties.

What’s significant is not just that big, high-profile companies have defaulted–by missing a payment, making a distressed exchange with lenders to buy time or filing for bankruptcy–but that virtually every sector of the U.S. economy has been touched, including automotive, home building, industrial products, entertainment, media and financial services. Now watch for commercial real estate.

In aggregate, default rates will probably peak this year, but above-average default rates will last through 2011, since defaults historically lag changes in gross domestic product by 12 to 18 months. Like depth charges, defaults will continue to explode as cash positions sink, even as the economy recovers. By the end of this year, we will have seen nearly 300 speculative-grade issuers default on their debt in 2008 and 2009; only 116 did in the four years between 2004 and 2007. Yet as many as 300 more companies are likely to default by the end of 2011, and that could increase if current GDP expectations prove too optimistic. This could hit commercial real estate particularly hard since cash flows there are tightly linked to employment growth, making prolonged high unemployment an additional challenge on top of other economic woes.

More…

Jim Sinclair’s Commentary

The deluge of Gold bears, silent for a while now, are raising a great cacophony

The gold market is alive and well!

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Jim Sinclair’s Commentary

To those that believe that you can profit in the dollar market with total dependence on technicals and rank disregard for fundamentals, I suggest the following:

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Jim Sinclair’s Commentary

Which would you prefer, an ETF that clearly states it is NOT required to hold physical bullion (GLD) or an ETF strictly limited to physical gold (PHY)?

That is a no brainer.

New Quasi-Competition For Gold Trust ETF (GLD, PHYS)
Posted: December 9, 2009 at 2:50 pm

It looks like the SPDR Gold Shares (NYSE: GLD) is about to get some new competition, albeit far a far smaller trading vehicle.  A F-1 filing at the SEC was made today by Sprott Physical Gold Trust, which is going to be selling units via an initial public offering.  Be advised that this is a Canadian trust established as an Ontario trust, and it was created to invest and hold substantially all of its assets in physical gold bullion.  In short, it wants to compete against the “GLD.”  While no terms beyond a $10.00 offering price are formally listed, it noted in the filing that it will sell up to $575 million in this IPO.

The filing noted that the initial public offering price will be $10.00 per unit to investors who are prepared to invest a minimum initial subscription amount of $1,000.00.  The trust intends to file an application to list its units on the New York Stock Exchange for the ticker “PHYS” and the Toronto Stock Exchange under the ticker “PHY”.

Underwriters are listed as Morgan Stanley and RBC Capital Markets.  As far as how this compares in size, The SPDR Gold Trust has a market cap somewhere north of 50-times that of this new filing.

You can join our open email distribution list to hear more news on ETF and commodity trends, key analyst calls, day trader alerts, mergers and acquisitions, Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

More…

Jim Sinclair’s Commentary

This is the pot calling the kettle black.

Former BOE Official Buiter Says Greece May Be First EU Default
By Svenja O’Donnell and Elliott Gotkine

Dec. 9 (Bloomberg) — Former Bank of England policy maker Willem Buiter said Greece may be the first major country in the European Union to default on its debts since the aftermath of World War II.

“It’s five minutes to midnight for Greece,” Buiter, who will join Citigroup Inc. as its chief economist next month, said in a Bloomberg Television interview today. “We could see our first EU 15 sovereign default since Germany had it in 1948.”

The EU’s economic affairs commissioner said late yesterday that officials are ready to help Greece with its budget deficit after concerns about its public finances sparked a rout in Greek government bonds. Fitch Ratings cut its rating on the nation’s debt yesterday to BBB+ and two other major ratings companies are threatening to follow.

“Default is not unavoidable,” Buiter said. “But unless there are radical fiscal actions, lasting cuts in spending and tax increases of at least 7 percent of GDP, the writing is on the wall” for Greece.

There’s “absolutely” no risk Greece will default, Finance Minister George Papaconstantinou said in an interview today with Bloomberg Television. Greek banks are “fundamentally sound” and Greece will not seek an EU aid package, he said.

More…

Jim Sinclair’s Commentary

More and more of this will be happening.

As a society will we soon be shooting to kill for the theft of a loaf of bread?

Think about that and then think about how OTC derivative manufacturers and distributors are rewarded by making them 100% whole.

Accused Stamford bank robber told police he needed money for rent
Suspect admits in statement to ‘terrible decision-making’
By Jeff Morganteen
Posted: 12/09/2009 09:40:23 PM EST
Updated: 12/10/2009 06:16:01 AM EST

STAMFORD — Just before 4 p.m. on a Tuesday afternoon last month, Jesse Lee Dinius sat in his landlord’s car on Morgan Street and mulled over what to do about his rent. He owed his landlord $1,000 and was one and a half months behind in paying her. He had been unemployed for the past two and a half months after getting laid off from an advertising agency.

Before getting into the car, he took his roommate’s BB gun, which resembled a Beretta pistol, from his Oak Street apartment, only a few blocks from the KeyBank on Bedford Street. He wrote a note in the kitchen. It read: "I have a gun! Give me cash now! 15 seconds — stay quiet or die."

Dinius, 26, a Fairfield University graduate from a wealthy Boston suburb, never used the note. Police stopped him outside the bank, found the note and BB gun, and arrested him on felony attempted robbery charges. He was held in lieu of $250,000 bond that a judge eventually lowered to $175,000.

On Wednesday, police also charged Dinius in the attempted robbery of a Wachovia bank in Glenbrook and the successful holdup of a Bank of America branch in Springdale, both from the fall. He faces felony robbery and larceny charges in these incidents.

Dinius told police he needed money for rent, food and bills. For the first time in his life, he was scrounging for money, he said, so on three separate occasions this fall, police believe he grabbed his roommate’s BB gun and looked to hold up a Stamford bank, court documents show.

More…

Jim Sinclair’s Commentary

1. Israel makes a major miscalculation
2. Pakistan goes Taliban
3. Turkey is a victim

Iran can build nuclear bomb today’

The international community’s efforts to head off Iran before it could build a nuclear weapon have failed, said Gen. Yossi Baidatz, head of the research division of Israel’s Military Intelligence.

In a briefing to the Knesset Foreign Affairs and Defense Committee on Monday, Baidatz said that Iran now has all the technical capability to build a nuclear warhead, and has enriched over 1,800 kilograms of uranium, enough for at least one bomb.

Baidatz suggested that he believes the only reason Iran hasn’t built a bomb yet is because it is focusing on upgrading its missile delivery systems. The Islamic Republic recently tested a new locally-produced ballistic missile that can reach all of Israel and much of Europe.

Prime Minister Benjamin Netanyahu also addressed the committee and said that over the past year, "two things have happened: Iran has advanced its military nuclear program, and the international community has lost its legitimacy."  

More…

Posted at 5:09 PM (CST) by & filed under Jim's Mailbox.

Harm to Americans From "Pretend and Extend"
by CIGA Richard B
We have been discussing Washington’s strategy of letting US banks assign their own, individually calculated values to the least wanted, least sellable “toxic” assets on their balance sheets. This was accomplished by pressuring the Financial Accounting Standards Board (“FASB”) to suspend fair value accounting requirements for these assets beginning the first quarter of this year.

Banks responded by assigning values many times what they could sell them for, generating false paper profits that gave the banking sector the illusion of getting better. This is the “pretend” part of your aptly named “pretend and extend” strategy.

The following two articles highlight the danger this sanctioned “pretending” poses to the American people. We see that Citigroup is ready to launch a $15-$17 billion equity offering in order to try to pay back its $20 billion in TARP bailout funds.

All of the major banks’ eagerness to pay back TARP funds stems from their resentment at laws passed after the fact limiting the pay of executives at banks that received TARP funds. It does not reflect improved financial health.

This explains the statement that “Citi’s regulators [are] concerned that the bank may not be strong enough to pay back the [TARP] funds.” Washington’s “pretend” strategy empowered bank management to (again) put its own interests ahead of the bank’s shareholders, the regulatory structure and the American public.

We see that at the very least, Citi’s actions will be terribly dilutive of its existing shareholders. If the repayment causes the bank’s finances to become unstable, that becomes a problem for the FDIC and the American people, as it has already been established that Citi is too big to fail.

Next, we see that Washington’s “pretend” strategy is giving the Kuwait Investment Authority (“KIA”) an opportunity to pull out the $3 billion equity investment it make in Citi in January 2008. This is one of the equity investments banks had to scramble to find back when they were being forced to admit the toxic assets on their books were rapidly declining in value.

The KIA was initially “bagged.” The value of its investment began to plunge as Citi was forced to admit higher and higher losses from its toxic assets over the ensuing quarters. However, when Washingon’s “pretend” strategy kicked in this year, Citi and other banks were permitted to reverse this process and declare false paper profits from the soaring value of these same toxic assets. Now that the value of Citi’s stock has risen high enough, the KIA finally has a change to get its money out at a nice profit.

Yet we also see that the KIA is not leaving happy. It knows it almost lost its entire investment because Citi’s management was not wholly forthcoming about the extent of losses on Citi’s balance sheet. It also knows the only reason that it has the opportunity to escape the situation is the US government-sanctioned creative accounting of the value of Citi’s toxic assets. So not only is it taking back its initial investment and running, it’s also going to remove all the deposits it has historically placed with Citi from its oil sales.

We next have to ask who the parties are that pumped up the value of Citi’s stock by coming in and buying this year. The answer is, whichever investors did not figure out that all the bank’s newly found profits were a government-sanctioned accounting trick. In all likelihood, the bulk of them are American investors through their individual accounts, pension fund and mutual funds.

So, in the final analysis, Washington’s “pretend” solution to this economic crisis is not victimless. The American people have been lulled into making unsound investments, will be paying off the banks’ depositors through the FDIC and will be paying to keep the too-big-to-fail banks alive once they can no longer pretend they are healthy.

Citigroup in talks for equity offering
By Francesco Guerrera and Henny Sender in New York
Published: December 9 2009 21:45 | Last updated: December 10 2009 01:44

Citigroup is in advanced talks with regulators over plans to raise more than $15bn in an equity offering, in an effort to repay $20bn in bail-out funds as early as Thursday.

People close to the situation said that Citi was also planning to raise around $2bn of mandatory convertible securities – a new form of security that converts into equity when a bank’s capital ratio falls below a predetermined level.

The talks were at a delicate stage and could collapse without a deal as some among Citi’s regulators were concerned that the bank might not be strong enough to repay the funds from the troubled asset relief programme, these people said.

More…

Citi faces snub from Kuwaitis
By Henny Sender in New York
Published: December 9 2009 23:30 | Last updated: December 9 2009 23:30

The Kuwait Investment Authority has held internal discussions about scaling back its banking relationship with Citigroup in a move that could include transferring funds currently deposited with the US bank, people familiar with the matter say.

A withdrawal of KIA funds from Citi would mark another setback for the bank as it seeks to recover from the financial crisis and pay back government bail-out funds.

According to KIA officials, most of Kuwait’s oil revenues are deposited at Citi – a decades-long relationship.

More…

Dear CIGAs,

Here is a note to the physical gold buyer CIGAs.

The cheapest gold is on the Comex. Coin premiums have gone through the roof and are being bought like crazy.

Why would you pay a 35% premium when you can buy gold at the cash price? Triple Witch tends to be an ideal time for purchase.

Respectfully,
CIGA JB Slear, "The Real Stuff Delivery Man"

Dear CIGAs,

Yesterday, Fort Wealth/PFG Precious Metals Inc.  had the smaller denomination coins (less than 1 ounce gold Eagles) for sale at a 35% +/- markup (not including freight) from the spot price. Now they are sold out too… It’s a wonder why Gold is trading so low with all this demand picking up. Treasury Sales will be done today and Friday is the last trading day for December currency contracts. Next week is the infamous Triple Witch Week. Routinely this is the quarterly time period when gold/silver makes their correction and start to move higher going into the next quarter. Those that wish to get the 100 ounce bars from COMEX (obviously the best price out there) best have their accounts open and funded and have a December Gold contract in the account before Christmas Eve close, or they will have to wait for delivery in January 2010. Happy Holidays and happier trades to you all!!

CIGA JB Slear

Fort Wealth Trading Co LLC.
866-443-0868 Ext 104
817-717-5489
Fax;817-764-2537
www.FortWealth.com

Jim Sinclair’s Commentary

The final pillar of gold’s foundation is the breakdown of the 23 year bull market.

That breakdown will be a currency event.

Jim,

It’s easier to see the subtle cracks in the bond market when studying 30-Yr yields.

CIGA Eric

Click chart to enlarge

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Jim Sinclair’s Commentary

Here is the Formula, Pretend and Extend, in chart form. Courtesy of CIGA Eric.

Click to enlarge

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Dear Jim,

"The danger point comes not now, and not in 2010, but at the start of 2011", so says Lady Vadera who was the main economic advisor to Gordon Brown in last year’s financial crisis. She says she still has nightmares about it.

Click here to view the article in The Telegraph…

Best regards,
CIGA Jeroen

Dear Jeroen,

You might inform Lady Vadera that Jim expects it on or before January 14th 2011 and Martin feels it will occur in June of 2011.

One of us will be right.

Respectfully,
Jim

 

Dear Jim,

I guess bailouts for bankers comes ahead of putting New York kids through school. What is this world coming to!

Best,
CIGA BT

"ALBANY, N.Y. — Gov. David Paterson said Wednesday that New York has run out of cash and he’s directing budget officials to reduce state aid payments to schools, local governments and nonprofit service providers until things improve."

More…

Posted at 5:24 PM (CST) by & filed under General Editorial.

Dear CIGAs,

In my opinion there are two reasons why gold will, without any reservation, trade at $1650 after which it will seek both Alf and Martin’s price objectives.

For those with ears to hear it was outlined this morning in an interview with the top man of Starwood Real Estate on, of all places, F-TV.

The first reason is that we do in fact we have a 90s type Resolution Trust, but it carries another name. This time the Resolution Trust is the Federal Deposit Insurance Corporation. When you examine the mode of operation and consider what they will be required to do over the next two years and on into the future at an increasing rate, there is no question this is correct.

The second fact is that the ENTIRE plan for financial recovery is to “PRETEND and EXTEND.”

Federal and State bank examiners are being extremely lenient in allowing real estate loans of all categories, from commercial to residential, to be carried on the books of the institutions at full value even if they are behind on payments and indebtedness to the institution is greater in size than the asset’s worth is in liquidation.

This is crystal clear when you examine the numbers that are public as the FDIC takes over the bankrupt institutions.

This defines the word “PRETEND.”

The word “EXTEND” refers to all the rescue programs that wholly depend on stimulus to work. The financial industry is worse than the walking wounded. It is the walking dead. Therefore applying the name “Zombies” to major corporations and financial institutions is appropriate.

We also know that the economy of the USA is bouncing along a bottom, but far from what would have been anticipated in light of the degree of stimulation initiated. There are definitive reasons for the lack of expected results but they are not germane to this review.

In conclusion you must know that whatever the cost in terms of continued and increased stimulation, all that is required to infinity will be provided. There will be no serious attempts to drain any liquidity. Interest rates will be held at practically zero for as long as it takes or even if the economic recovery fails.

That strength in the US dollar is at best transitory as it is totally contra-indicated for business recovery in the US.

Fundamentally, PRETEND and EXTEND will create an ever increasing supply of dollars and demand for borrowing, both of which stand as the last pillar in the erection of gold as a permanent building.

So to those that understand what gold is (insurance) these wild gyrations mean nothing whatsoever to the upward trend of the entity.

The outrageous moves about to occur are simply what gold is multiplied in orders of magnitude by the total madness of the hedge funds and their automated trading systems pushing hundreds of billions of dollars into and out of markets, churning them incessantly without any regard in the case of gold. Gold cannot handle funds that size.

If you cannot stand gold’s heat then you must leave the arena now. If you choose to leave the arena please do not come back because it is only going to get harder.

Truly Main Street is in the hands of a casino.

In a sense hold my hand as we go through these outrageous machinations, as the price that gold is going to is much higher than I have anticipated.

Posted at 5:23 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

I’m left without words reading the original sales price for these properties and the amount they just sold for at auction.  Isn’t it surprising how F-TV doesn’t discuss this?

CIGA Marc77

Another Conservatory Lot and a Ginn-Developed Hammock Beach Condo Sold at December Tax Deed Sale
Several properties scheduled to be sold were either redeemed or rescheduled, leaving only two Ginn developed properties on yesterday’s sale schedule.
By Toby Tobin

Palm Coast, FL – December 9, 2009 – For the second time in two months, property in Ginn-developed communities were sold at a Flagler County tax deed sale. A lot in The Conservatory and a Hammock Beach Club one-bedroom condo were sold at yesterday’s sale. In each case, there was more than one bidder; forcing the final selling price above the minimum opening bid.

The minimum opening bid is equal to the accumulated back taxes, interest, penalties, and administrative costs. The starting bid for the Conservatory lot was $17,039.53. One hundred dollars at a time, bidders arrived at the final price of $20,100 totally furnished. The lot at 403 Bourganville Drive overlooks a lake and the ninth hole of the Tom Watson-designed golf course. It sold in 2005 for $439,900.

Since a Conservatory lot sold at the October tax deed sale, several sellers (including banks) dropped their prices. A fairly active market has since developed for Conservatory lots, but selling prices are in the high teens and low twenties. These lots sold out quickly during a Ginn real estate sales launch where 337 lots were sold for prices ranging from $329,900 to $529,900. The launch generated approximately $142 million in sales revenue.

More…

 

Dear Jim,

When I wasn’t watching we blew thru 12 trillion!

http://www.truthin08.org/

Dear Jim,

This lot is unbelievable! What do you think the downside would be if they said good riddance?

It is my take economics are awful in the UK and will only get worse (aka your Formula). What scares me is the rubbish happening in the UK usually comes to pass in all Anglo Saxon nations eventually if we let it! Forewarned is forearmed, keep up the great work!

"The president of Britain’s second largest bank has issued a veiled threat that the country’s elite financiers could join a mass exodus from the City of London if the Government pushes ahead with a bonus supertax today"

(This must be one paper they do not own yet!)

Best,
CIGA BT

Barclays boss warns of exodus of the bankers
Bob Diamond (who earns up to £40m a year) warns Government against supertax on bonuses
By James Moore, Deputy Business Editor
Wednesday, 9 December 2009

The president of Britain’s second largest bank has issued a veiled threat that the country’s elite financiers could join a mass exodus from the City of London if the Government pushes ahead with a bonus supertax today.

The Chancellor, Alistair Darling, is widely expected to use his pre-Budget report to introduce a one-off windfall tax on banking bonuses to help assuage public anger over six- and seven-figure pay-outs just months after the Government’s multibillion-pound bailout of the banks.

More…

Dear Big Tatanka,

These are the guys who have destroyed the world.

They have taken Main Street hostage with their Casino mentality.

Good riddance to the scum.

Regards,
Jim

 

Jim Sinclair’s Commentary

The final pillar of Gold is a breakdown of the three generation long bull market in long bonds.

Charts are courtesy of CIGA Eric.

Click to enlarge

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Jim Sinclair’s Commentary

Please read CIGA Richard B’s analysis along with the note I sent to you today on "PRETEND and EXTEND." There is really nothing more you need to know.

This is the fundamental case summed up. The technical side is simple.

As the dollar goes so goes gold in the inverse.

The dollar outside of the "Wild Ones" at the hedge funds has nowhere to go. Algorithms are purely mathematical and therefore without a fundamental brain.

The dollar is the most fundamental market among all markets out there.

Present and Future Downgrades of RMBS (Residential Mortgage-Backed SecurityRMBS), CMBS (Commercial Mortgage backed Security) and ABS (Asset Backed Security)

Dear CIGAs

The following piece that appeared on the Research Recap web site dated December 8th, 2009, provides valuable information on the reality of banks’ financial performance this year.  The article summarizes Fitch’s views that in 2010, CMBS, RMBS and CDOs will be susceptible to more negative ratings actions.

However, a very interesting part of Fitch’s comments is the comparison of these expected ratings downgrades to what occurred in 2009.  Fitch state "downgrades will likely continue in the RMBS, CMBS and CDO sectors, though at a slower pace."

If the pace of downgrades is predicted to be slower (but still significant) in 2010, then the pace of downgrades in 2009 had to have been relatively high. Yet there were very few articles written in 2009 about downgrades of structured financials instruments and how that was affecting banks’ balance sheets.

Prior to this year, when the FASB’s suspension of fair value accounting requirements gave banks a license to write up the value of their toxic assets to levels completely disconnected from reality, negative ratings decisions were big news because they warned of coming bank losses. More often than not, this caused banks to have to announce losses much greater than would have been expected based on their continuing operations.

Often just days prior to its earnings release a bank would announce that it raised new capital, the amount of which invariably reflected the losses it would be announcing days later. In fact, banks’ announcements of raising new capital became a pretty dependable means of estimating the losses they were about to announce.

Downgrades of banks’ toxic assets failed to generate headlines this year because they no longer resulted in banks being forced to acknowledge losses. To the contrary, banks spent the year writing up the value of their toxic assets and claiming healthy profits as a result.

This is additional evidence that the suspension of fair value accounting requirements, which was put in place conveniently just days before banks were set to report their first quarter earnings, was nothing more than a sleight of hand designed to permit banks to disguise their worsening financial condition. Knowing that the assets the banks were writing up in value were actually being downgraded throughout 2009 let us look past the subterfuge and realize that these banks in fact experienced another year of heavy losses due to falling values of the toxic assets on their books.

Respectfully yours,
CIGA Richard B.

Fitch predicts another tough year for most US structured finance sectors

Though the U.S. economy is on a slow path to recovery, collateral performance will continue to be weak for all U.S. structured finance sectors next year,  Fitch Ratings says in its 2010 outlook report.

"Despite modestly weakening collateral performance, ABS ratings are expected to remain largely stable. Elsewhere, downgrades will likely continue in the RMBS, CMBS and CDO sectors, though at a slower pace."

More…

Posted at 5:21 PM (CST) by & filed under General Editorial.

LETTERS TO THE EDITOR – Profit centers too big to fail.
By YRA HARRIS.

30 August 2002
Financial Times
From Mr Yra Harris.

Sir, John Plender ("How banks got in a mix", August 21) correctly identifies the systemic dangers that accompanied the passage of the Graham-Leach-Bliley act. The repeal of Glass-Steagall has pushed the US banking system to the brink of "moral hazard". The conglomeration of all financial services under one roof has entangled banks in numerous ethical conflicts. Additionally, Graham-Leach-Bliley has made several institutions so large that the Fed cannot allow them to fail.

A single institution’s deep involvement in every facet of financial dealings does not create greater synergy but greater risk. These large, private profit centres know they are too big to collapse. This realisation adds great uncertainty to the entire financial landscape. Rewarding private profits while socialising the risk is a pathway to disaster. Glass-Steagall should never have been repealed without a bank forfeiting its right to Federal Deposit Insurance Corp insurance.

Yra Harris, Lincolnwood, IL

Posted at 4:58 PM (CST) by & filed under In The News.

Dear CIGAs,

Being in gold is not for the faint of heart. Very soon we will be going the other way.

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Jim Sinclair’s Commentary

Under the concept outlined to you this AM of "PRETEND and EXTEND," the following guarantees a gold price of $1650 on its way to Alf and Martin’s numbers.

U.S. consumer gloom deepens.
Even as the economy inches forward, Americans have sunk deeper in their gloom over the past three months because of worries about unemployment and the economy, according to a new Bloomberg survey. Almost half of those polled now feel less financially secure than when President Obama took office in January, a sentiment that could hurt holiday season retail sales. Fewer than 1 in 3 think the economy will improve in the next six months.

Report sees slow growth ahead.
The U.S. will grow at just 2% for much of 2010, but should accelerate to 3% in 2011, as low interest rates prevail through next year and unemployment remains stuck in double digits, according to a report published by the UCLA Anderson Forecast group. "With such sluggish growth, the unemployment rate will likely peak at 10.5% in Q1 and remain at or above 10% for almost all of next year," the closely-watched report said. Last month, OECD forecast that the U.S. economy will grow a more robust 2.5% percent next year

Jim Sinclair’s Commentary

"Extend and Pretend" guarantees without any doubt that whatever stimulation is required to the level of infinity will occur.

There simply is no other choice!

Congress readies huge year-end spending bill
Lawmakers wrap the budgets of 9 Cabinet agencies into a $1.1 trillion bill
updated 3:27 p.m. MT, Tues., Dec . 8, 2009

WASHINGTON – Amtrak passengers could carry handguns in their checked baggage as part of catch-all spending legislation being finalized by Congress.

Amtrak riders could transport firearms that are unloaded and in a securely locked container checked in a baggage car, giving them rights comparable to those enjoyed by airline passengers. The Senate backed the idea in September.

The move comes as lawmakers wrap the budgets of nine Cabinet agencies into a $1.1 trillion spending bill they hope to complete by Christmas.

The measure would combine six of the dozen annual appropriations bills for the budget year that began Oct. 1. It combines a huge increase in foreign aid with an 18 percent cut to a program that helps states with the cost of incarcerating criminal illegal immigrants.

The proposal would permit detainees held at the Guantanamo Bay detention center to be transferred to the U.S. to stand trial but not to be released.

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Jim Sinclair’s Commentary

I am sure glad our governing bodies don’t see any problems otherwise I’d be worried…

U.S. Mint now suspends all one ounce gold coin sales due to shortage of physical gold!
Once again the U.S. mint has had to suspend sales of all its one-ounce gold coins, and some fractional ones too, as its supplies of physical gold cannot meet the demand.
Author: Lawrence Williams
Posted:  Monday , 07 Dec 2009

LONDON – "The United States Mint has depleted its inventory of 2009 American Buffalo One Ounce Gold Bullion Coins. … No additional inventory will be made available. As additional information becomes available regarding 2010-dated American Buffalo One Once Gold Bullion Coins, you will be notified."   So said a memorandum issued Friday to authorized purchasers of U.S. Mint gold coins and reported by Jim Sinclair..

Mineweb reported only two weeks ago, on November 25th, the suspension of sales of American Gold Eagle coins by the Mint – U.S. Mint suspends American Eagle 1-ounce gold coin sales – again, which, at the time, reckoned such sales would be resumed early this month – but in the event, not only is the suspension of the Gold Eagle coin sales continuing, but also now the American Buffalo one ounce gold coin sales have also been suspended, with no new sales now planned until sometime in 2010 – although the current sharp fall in the gold price may provide the Mint with a bit of respite from its supply/demand woes.

But supply problems also persist with smaller gold coins, particularly given the enormous demand for fractional sized gold coins following the suspension of the one ounce Gold Eagles. Thus the Mint was forced to issue a second memo on Friday saying "the American Eagle Gold Tenth-Ounce Coin inventory was depleted" and that "inventory for the half-ounce and quarter-ounce coins remains very limited." Following the sale of these remaining gold coins on Friday, the Mint anticipated that it would again offer all fractional sizes by mid-December, but in an allocation process.

On a more positive note for the Mint, the resumption of American Silver Eagle bullion sales will resume today. These silver coins were suspended along with the one ounce gold coins a week ago – also due to depletion.

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Jim Sinclair’s Commentary

More proof of the thesis “PRETEND and EXTEND,” which stands on the premise of a positive economic event from stimulants.

Like drugs, to get your fix you need more all the time. Wait until you see the withdrawal.

Liquidity and stimulus to infinity is the street level prescription

Geithner: bailout program extended to October
Dec 9, 12:36 PM (ET)
By JEANNINE AVERSA and DANIEL WAGNER

WASHINGTON (AP) – Treasury Secretary Timothy Geithner told Congress Wednesday that the administration will extend the government’s financial bailout program until next fall, saying it’s needed to protect against fresh economic shocks.

In a letter to House and Senate leaders, Geithner said the extension is "necessary to assist American families and stabilize financial markets."

Money from the $700 billion taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others. That’s angered many Americans, who feel the government hasn’t provided them with relief from high unemployment and rising home foreclosures.

The Troubled Asset Relief Program that Congress passed during the height of the financial crisis in October 2008 was scheduled to expire at the end of the year. Geithner said it will be extended until Oct. 3, 2010. He has the authority to extend the TARP simply by notifying lawmakers.

"The recovery of our financial system remains incomplete," Geithner told lawmakers. "And, near-term shocks to that system could undermine the economic recovery we have seen to date."

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Jim Sinclair’s Commentary

In Iraq, but more so in Afghanistan, these people have been fighting for generations.

They know their children will avenge them therefore the conflict will go on forever.

When people refer to this as a quagmire they are not kidding.

127 dead as bombers aim for heart of government
Five devices including three suicide bombs bring carnage to Baghdad ministries on the day national elections are announced
By Patrick Cockburn
Wednesday, 9 December 2009

Car bombers yesterday killed as many as 127 people in Baghdad in a series of attacks that left the city’s streets strewn with the wreckage of burning vehicles and the charred bodies of the dead.

The five bombs, including three that were detonated by suicide bombers, exploded in succession across the Iraqi capital over the course of an hour yesterday morning, targeting a mosque, a market, a government ministry, an educational college and a court. Some 425 people were wounded.

The coordinated assault is likely to be the work of al-Qa’ida in Iraq, which has adopted the tactic of launching devastating bombing attacks about every six weeks to maximise political and psychological impact. One aim is to discredit the government’s claim that it has greatly improved security in the last couple of years. Some 155 people were killed in the last big attack by bombers on 25 October and over 122 in an earlier assault in August. The Iraqi foreign, justice and trade ministries were all targeted.

The sound of screams and police sirens followed the detonation of each bomb as a cloud of oily black smoke from burning vehicles rose over the capital. Among the buildings hit was the headquarters of the Rafidain Bank which was housing the Finance Ministry, whose building was damaged by a bomb in August.

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Jim Sinclair’s Commentary

Today in the Middle East. This is definitely not in the Christmas spirit.

Iran to target Israel’s military sites if attacked
Updated: 2009-12-10 02:59

TEHRAN — Iran’s Defense Minister Brigadier General Ahmad Vahidi said Wednesday that Iran will target Israel’s military sites, including its nuclear establishments, if attacked, the state-run IRNA news agency reported.

Iran will give a crushing response to any threats posed by the "Zionist" (Israeli) forces, Vahidi told reporters upon his arrival in Damascus.

"Should the Zionist forces pose any threat against Iran, we will never hesitate to target their nuclear sites," he was quoted as saying.

Promoting relations and cooperation between the two countries and boosting defense ties are the main objectives of Vahidi’s visit to Syria.

He described Iran and Syria as "two strategic allies" that have worked for establishment of peace and stability in the region.

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Jim Sinclair’s Commentary

Pakistan yesterday.

NightWatch
For the Night of 8 December 2009

Pakistan:  Dr. Kaleem of Rescue 1122 stated that at least 12 people were killed and 10 others injured in twin blasts in the Qasim Bela area of Multan Cantonment, near the local headquarters of the Interservices Intelligence Directorate, the News International reported 8 December.

Multan is the location of one of the Pakistan Army’s two armored attack corps. The latest attacks in Rawalpindi, Lahore and now Multan suggest ex Army and other security personnel are involved in the planning process.

Interior Minister Rehman Malik said evidence of India’s involvement in terror incidents in Pakistan have been given to the foreign office in Islamabad, APP news service reported 7 December.

These accusations appear crafted to try to deflect onto Indian agents some of the blame for Pakistan’s lethal intelligence and security failures.

The Pakistan economy is the most important potential victim of the rash of bombings and the security operations. A quick survey shows the economy has done well during the world wide recession, growing at over 5% per annum. Reserves are high but foreign direct investment has plummeted owing to the decrease in internal security.

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Jim Sinclair’s Commentary

Yesterday in Turkey

Obama rebukes Turkey’s leader on Israel
December 8, 2009

WASHINGTON (JTA) — President Obama rebuked the Turkish prime minister for belligerent anti-Israel rhetoric, saying it was harming Turkey’s profile.

"In the president’s meeting with Prime Minister Erdogan yesterday, the president told the prime minister that his anti-Israel rhetoric was eroding his nation’s ability to effectively lead on the issue as it had in the past," said a statement relayed Tuesday to JTA by a U.S. official. "The president pressed the prime minister to make rebuilding Turkey’s ties with Israel a priority."

Obama and Tayyip Erdogan met Monday to discuss ties between the two nations. Turkey is seeking to reinforce its ties with the United States as it is increasingly isolated from Europe because of tensions over its candidacy for membership in the European Union and the Islamist tilt of Erdogan’s government.

Erdogan has heightened criticism of Israel more than any other Turkish leader since ties were established in the early 1950s, accusing Israel of war crimes during last winter’s Gaza war, and defending Iran’s nuclear progtam.

In remarks after the meeting, Erdogan said he hoped to resume Turkey’s role as a peace broker in the region; that role has been eroded in part because of tattered Turkey-Israel ties. He also suggested he was more conciliatory about containing Iran’s nuclear ambitions.

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