Posted at 3:42 PM (CST) by & filed under In The News.

Dear CIGAs,

This argument is interesting, but more so is the inevitability of hyperinflation, the reality of energy as a currency hedge and the scariest of all, Pakistan.

Each equate to a higher oil price, potentially much higher when least anticipated and less understood.

"The certain cure for low oil prices is low oil prices."

Jim Sinclair’s Commentary

The key to exit is the ability of any country to handle it own affairs.

Iraq bomb blasts send death toll to 140 in 24 hours
April 24, 2009

A double suicide bombing at Baghdad’s most revered Shia shrine has left at least 60 people dead, the latest in a bombing blitz that has killed and maimed up to 140 people in just 24 hours.

The attack on Friday prayers at the golden-domed Qaddumiyah mosque in northern Baghdad came a day after security forces claimed to have captured one of the leading al-Qaeda figures in Iraq. The two kamikaze attackers blew themselves up in a crowded market just outside the shrine, one of the holiest in Shia Islam.

At least 20 pilgrims from neighbouring Iran were killed in the back-to-back blasts after thronging to Iraq’s Shia holy places. The Qaddumiyah shrine was also attacked by a suicide bomber in Spring 2004, killing scores of people.

Iranian pilgrims made up the vast majority of the 56 victims of a suicide bombing at a restaurant just north of the capital yesterday, which itself came hard on the heels of another attack inside Baghdad that slaughtered almost 28 internally displaced people as they gathered to collect food aid from police officers.

The onslaught has recalled some of the worst days of Iraq’s sectarian bombings, when al-Qaeda sought to ignite civil war by blowing up Shia shrines and market places, killing thousands of people.

More…

Jim Sinclair’s Commentary

For your information.

New, deadly swine flu hits Mexico, may spread
Fri Apr 24, 2009 6:13pm BST
By Noel Randewich and Armando Tovar

MEXICO CITY (Reuters) – A deadly strain of swine flu never seen before has broken out in Mexico, killing as many as 60 people and raising fears it is spreading across North America.

The World Health Organization said it was concerned about what it called 800 "influenza-like" cases in Mexico, and also about a confirmed outbreak of a new strain of swine flu in the United States. It said about 60 people had died in Mexico.

Mexico’s government said it had confirmed that at least 16 people had died of the swine flu in central Mexico and that there could be another 45 fatal victims.

The government canceled classes for millions of children in its sprawling capital city and surrounding areas on Friday after it noticed a higher number of deaths involving flu-like illness than normal in recent weeks.

"It is a virus that mutated from pigs and then at some point was transmitted to humans," Health Minister Jose Angel Cordova told the Televisa network.

More…

Jim Sinclair’s Commentary

Pakistan


Israel: Pakistan’s nukes could fall to Taliban | International …
Defense official: If Taliban gets bomb, it will be &quota nightmare for the West and will also affect us."
JPost International – http://www.jpost.com/

Jihad Watch: Pakistan: Karachi churches vandalized with "Long live …
By Marisol 
More signs of escalation as Pakistan continues its deterioration into a failed state — a failed state with nuclear weapons. "Taliban attack Christians in Karachi," by Qaiser Felix for AsiaNews, April 23: Karachi (AsiaNews) – Armed men …
Jihad Watch – http://www.jihadwatch.org/

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BBC News

Key talks on Pakistan Sharia deal
BBC News – UK
Officials in North West Frontier Province in Pakistan are meeting to discuss a peace deal with the Taleban that has sparked deep US concern. …
See all stories on this topic

Taliban Advance, Pakistan’s Wavering Worry Obama Team
Washington Post – United States
By Karen DeYoung The Obama administration reacted with increasing alarm yesterday to ongoing Taliban advances in Pakistan, warning the Pakistani government …
See all stories on this topic

Faced with mortal threat, Pakistan chooses denial
USA Today – USA
Nuclear-armed Pakistan is unraveling at a frightening pace. Equally alarming,Pakistan’s leaders appear far less concerned than their American counterparts. …
See all stories on this topic

Clinton warns of Pakistan nuke risk
Washington Times – Washington,DC,USA
By Nicholas Kralev (Contact) and Barbara Slavin | Friday, April 24, 2009 Secretary of State Hillary Rodham Clinton warned Thursday that Pakistan has …
See all stories on this topic


Pakistan – Taliban Nuclear Nightmare : Homeland Security News
By national 
Pakistan Taliban Nuclear Nightmare. Nuclear-armed Pakistan is unraveling at a frightening pace. Equally alarming, Pakistan’s leaders appear far less concerned than their American counterparts. You have to wonder what they’re thinking in …
Homeland Security News – http://www.nationalterroralert.com/

 

Epoch Times – Obama’s Afghanistan-Pakistan Quandary
By By Ashley J. Tellis 
If success in Afghanistan is to be achieved, Washington will have no choice but to erect an effective Afghan state.
Epoch Times | All headlines – http://www.theepochtimes.com/

Posted at 3:23 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold bulls managed to build on yesterday’s technical gains and moved prices on up and into the 40 day moving average before selling appeared the blunt the change higher. It has still not broken free of that downsloping trendline which dominates its daily chart but it is closing in on it. The short term 10 day moving average has turned up which is friendly especially since gold bounced higher off of its rising 100 day moving average but the 40 and 50 days are still moving lower. Thus there is still no clear trend that has been defined – the long term is up (rising 100 day MA), the intermediate is still down (falling 40 and 50 day MA) and the short term is up (rising 10 day MA). That works to give a bit of a mixed signal which is why we need to see further strength next week to build on this week’s impressive performance. Price must take out both the downsloping trendline and the 40 day MA and then 50 day MA to give the bulls all the wind at their back. Bears are hoping to thwart the rise near $920 – $925. The weekly chart looks much better now.

The mining shares as indicated by the HUI and the XAU outperformed their counterpart at the Comex. The HUI in particular has victory within the bulls’ grasp if it can maintain it gains going into the closing bell today. It looks to have confirmed a double bottom near 275 as long as it can close convincingly above the 305 level. A failure here when it closes will embolden bears. That is why it is critical that bulls stand their ground if they hope to engender more short covering and attract new allies. As price now stands on that index at the time I am writing this, it has moved above last week’s high, taken out the 40, 50 and 20 day moving averages, bounced from the 100 day moving average and flipped the 10 day MA higher. It still has some work to do to repair the sharp plunge that occurred in the first week of April but the price action is quite bullish in the short term.

Euro gold has been hovering near the 680 level and thus far looks to be finding fairly good support near that region the last few days. Sterling gold is oscillating around the 610 level. It would be helpful to see it stabilizing and moving higher from here as the ideal setup for sustained gold rallies is a simultaneous move higher for gold priced across a wide basket of currencies. Remember, the last leg higher in gold was led by a move higher while priced in terms of the European currencies. Gold rallies that tend to be only in Dollar price terms do not have the staying power that the alternative does.

Speaking of the Dollar, it suffered a major technical setback in today’s session plunging beneath the 10 , 20, and most importantly, the 100 day moving average. The weekly chart is threatening a breakdown of a bearish pennant formation which would tend to validate the double top formed just above the 89 level. The Dollar has significant double bottom technical support near  83.50 on that same chart and if that were to give way we could see a sharp, swift move down to near the 82 level. It will have to climb back above 87 to get out of immediate danger. For the most part it continues to move inversely to the US equity markets falling when they rise and rising when they fall.  I should note here that the measure of risk sentiment, the Euro-Yen cross, is strongly higher today.

Gold deliveries for April reached 1.28 million ounces. The last two trading days, open interest has increased in the April gold contract and deliveries have increased also. The stoppers obviously have clients who want physical bars or are obtaining them for their own accounts.

Copper recovered a large portion of yesterday’s losses today but it is difficult at this point to say whether this was just shorts ringing the cash register after its sharp decline from the $2.20 level this week or the end of a correction in price after a prolonged, sustained rally dating back to March of this year. Next week’s price action will be most telling as to its future course. Copper has been drawing support from Chinese buying of the metal for restocking purposes and should that buying abate for any reason, it will be left to fend for itself

Crude oil not only managed to claw its way back to the $50 level but exceeded that and pushed on up almost $52. Between strength in crude, sugar and the metals, the CCI (Continuous commodity Index) moved higher today recapturing just about all of this week’s previous losses. It continues to move along a gently, upcurving or rounded bottom formation. It is evident that the commodity markets are no longer pricing in deflation but have now moved to a more forward looking inflation problem down the road ahead. Only a break below the December 2008 low would cause me to change that view. As stated here previously, a rising CCI is beneficial for gold. Again, the kind of chart pattern being carved out by this index is one that does not anticipate a sharp upturn in economic activity but rather a sort of rising crawl out of the current morass. At some point the inflationary impact of the reckless quantitative easing policies of more than a few Central Banks is going to turn this index into a steeper uptrend in price. We will be able to see the shift in psychology take place by monitoring this chart. My fear is that this genie will in no wise be able to be shoved back into his bottle.

That brings me to the action in the bond market. After managing a brief bounce yesterday and allowing the bond bulls to breathe a sigh of relief, bonds resumed their downward trend within that broad range defined by the huge range day of the Fed’s quantitative easing announcement. Bonds are now within a whisker of taking out the low of that day (16 ticks to be exact). If they do break down, the Fed’s intention to artificially prop up the market and by consequence shove long term rates lower, is going to be severely tested. It is looking increasingly likely that the bond market vigilantes – those extinct or at least hibernating species – are making a reappearance. And why should they not? The sum of money that is being printed into existence is a virtual guarantee that the plague of inflation is going to descend on this nation and consume all that it touches, in much the same fashion as the locust swarm did to biblical Egypt. Thus far the locusts have not visited us – but price action in the bond market will tell us when to expect their arrival. The scene I envision in my mind as I watch the price action in the bonds is a picture of a peasant with a straw broom in his hand wildly swinging away at a cloud of locusts swarming all around him and attempting to beat back the millions of invading insects in the desperate hope of avoiding complete ruin.

About the only saving grace that I can see for the bond have been equity weakness. If equities fail near current level then bond bulls will probably dodge a bullet. Barring that however, they are in a tenuous condition to say the least.

Meanwhile US equities continue to move blithely higher in apparent obliviousness to all that ails us. My pal Dave informed me this AM in an email that insider selling has reached levels last seen in October 2007, right before the market peaked and the 17 month bear market began. That is something that should not be ignored.

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

april2409gold1230pmcdt1

Posted at 2:31 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Where there is smoke, there is always fire – rumors of Chinese gold buying have now been proven to have been correct. If anyone wants to know one of the main buyers on any price setbacks in gold, look no further than the emerging global financial power…

Talk of IMF gold sales should receive a dose of reality based upon this revelation from the Chinese monetary authorities. They have indeed been quietly diversifying and accumulating gold and would no doubt welcome any large sales by the IMF, should that even occur at all.

Trader Dan

REUTERS  UPDATE 2-China reveals it has 1,054 tonnes of gold –Xinhua
By Alfred Cang and Lucy Hornby

SHANGHAI/BEIJING, April 24 (Reuters) – China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The world gold market has been buzzing with talk about China buying gold for years as the country’s foreign exchange reserves have rocketed, and speculation has picked up since the global economic crisis threatened to weaken the value of those reserves.

Gold prices <XAU=> jumped on the news and were up 1 percent on the day at $910.80 an ounce at 0540 GMT. By a Reuters calculation, China’s holding of gold would be worth $30.9 billion at current prices.

China recently reported the change in its gold holdings to the International Monetary Fund and would include the latest change in central bank reports and balance of payment statistics, Hu said.

China’s reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said.

China had increased its stocks by buying on the domestic market and from domestic producers.

Gold market participants said Hu’s revelation was good news for the market and signalled likely further buying.

"The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend," said Yao Haiqiao, president of Longgold Asset Management.

Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.

"It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said.

"The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."

The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east.

(Additional reporting by Chris Buckley in Beijing, Polly Yam in Hong Kong, Nick Trevethan in Singapore and Chikako Mogi in Tokyo; Editing by Tom Miles and Nick Macfie)
(([email protected]; +86 10 6627-1200; Reuters Messaging: [email protected]))
((If you have a query or comment on this story, send an email to [email protected]))

China Increases Gold Reserves 76% to Fifth-Largest (Update4)
By Eugene Tang and Bob Chen

April 24 (Bloomberg) — China boosted its gold reserves by 76 percent since 2003 and has the world’s fifth-biggest holding by country, said Hu Xiaolian, head of the State Administration of Foreign Exchange.

The nation increased its reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu said in an interview with the Xinhua News Agency today. The amount is more than Switzerland’s 1,040 tons, World Gold Council data show, and is worth $31 billion at current prices.

China has the world’s largest foreign exchange reserves at $1.95 trillion as of March 31, according to state administration data. The holdings have climbed about sixfold in the past six years as the country had record trade surpluses and inflows of foreign investment. Gold prices have almost tripled to more than $900 an ounce from $337.

“Chinese foreign-exchange reserves have absolutely exploded in the past few years,” said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. “We shouldn’t be surprised that they’re adding a lot of all asset classes. I don’t think they’re shifting away from U.S. dollars into gold.”

Gold climbed to a record $1,032.70 an ounce on March 17 last year and traded 0.9 percent higher today at $912.08 an ounce at 3:18 p.m. local time in Singapore.

More…

China admits to building up stockpile of gold
Alfred Cang and Tom Miles, Reuters
Published: Friday, April 24, 2009

SHANGHAI/BEIJING – China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes – or a pot worth about US$30.9-billion – and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing’s ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China’s barely-visible hand.

Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China’s buying power – and give it yet more reason to diversify into gold, oil and metals.

Gold prices jumped on the news of Chinese buying and were up more than 1% on the day at US$912.05 an ounce at 0715 GMT. By a Reuters calculation, China’s holding of gold would be worth around US$30.9-billion at current prices.

More…

Posted at 9:06 PM (CST) by & filed under General Editorial.

My Dear Friends,

Regarding Pakistan:

When the West should not have attacked pre-emptively, we did.

Months ago when Pakistan was under a different leadership, the West could and should have protected the nukes, but we did not.

Now what shall we do?

This situation is going to be decided in hours and days, not weeks or months.

This situation goes a great deal further than simple border nations. It will open a totally new chapter of world history.

Is anyone driving this bus?

Respectfully yours,
Jim

The Afghan-Pakistan militant nexus

Seven years after 9/11, the US has declared the Afghan-Pakistan border region to be the new frontline in its war on terror. Use the map to see how militants operate on either side of the border. (Text: M Ilyas Khan)

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Kabul’s writ has never run strong in the remote southern plains of Helmand province. Further south, across the border in Pakistan, lies the equally remote Noshki-Chaghai region of Balochistan province.

Since 9/11, this region has been in turmoil. In the Baramcha area on the Afghan side of the border, the Taleban have a major base. The chief commander is Mansoor Dadullah. From there they control militant activities as far afield as Nimroz and Farah provinces in the west, Oruzgan in the north and parts of Kandahar province in the east. They also link up with groups based in the Waziristan region of Pakistan.

More…

Pakistan sends troops to northwest

Pakistan has deployed paramilitary troops to northwestern districts infiltrated by the local Taliban, after US officials expressed concern over the developments.

The move on Thursday coincided with reports that Taliban fighters were patrolling the streets of Buner, a district about 100km outside the capital, Islamabad.

They were warning residents not  to engage in "un-Islamic" activity and barring women from public places.

"We have decided to deploy eight platoons," Zafarullah Khan, commandant of the Frontier Constabulary, told the AFP news agency.

There are roughly 40-45 soldiers per platoon.

Clashes with police

In Buner, one policeman was killed and another wounded when unidentified men opened fire on their vehicle, which was being escorted by paramilitary forces, Syed Azhar, a police officer, told AFP on Thursday.

Several Taliban fighters occupied a police post and vacated it after some time, taking a police inspector with them, Rashid Khan, another police officer, said.

A meeting between tribal elders and the Taliban in Daggar, Buner’s main town, ended without any indication that the Taliban would withdraw.

More…

Alarm Grows Over Pakistan’s Failure to Halt Militant Gains
By CARLOTTA GALL and ERIC SCHMITT
Published: April 23, 2009

ISLAMABAD, Pakistan — As the Taliban tightened their hold over newly won territory, Pakistani politicians and American officials on Thursday sharply questioned the government’s willingness to deal with the insurgents and the Pakistani military decision to remain on the sidelines.

Some 400 to 500 insurgents consolidated control of their new prize, a strategic district called Buner, just 70 miles from the capital, Islamabad, setting up checkpoints and negotiating a truce similar to the one that allowed the Taliban to impose Islamic law in the neighboring Swat Valley.

As they did, Taliban contingents were seen Thursday in at least two other districts and areas still closer to the capital, according to Pakistani government officials and residents.

Yet Pakistani authorities deployed just several hundred poorly paid and equipped constabulary forces to Buner, who were repelled in a clash with the insurgents, leaving one police officer dead.

More…

Posted at 4:49 PM (CST) by & filed under General Editorial.

Dear CIGAs,

This situation has gone critical here and now! The West will act immediately if we have a nuclear capable Taliban.

It is not standing weapons as much as the knowledge and raw materials for production that are the targets. This is a potentially world changing event that seems to not even be properly in focus today.

God help us all!

It is that serious, I assure you, because here is where the next chapter of world history starts. Remember how we had to assemble hundreds of thousands of troops because Saddam had WMDs? Well, here they are. There they are, and what is being done about it?

Soon what can be done about it? Soon is maybe one week.

Gold is a lifeline to more than just your finances. Don’t let the liars scare you out of it!

Taliban closing in on Islamabad: Fazl
By Zulfiqar Ghuman

ISLAMABAD: JUI-F chief Fazlur Rehman warned in a speech in the National Assembly on Wednesday that the Taliban were closing in on Islamabad.

“You talk about Swat and Buner, but according to my information, they have reached Kala Dhaka and Tarbela. And if they continue advancing, there will be only Margalla Hills between them and the federal capital,” he said. He blamed the “civil war-like situation” on former president Pervez Musharraf’s decision to join the US-led war on terror. He said the fallout would also affect India and China.

The Swat peace deal was “based on defeat, not success”, he said. Fazl said there was no writ of the state in the NWFP.

PML-N’s Khawaja Asif urged the government to revisit the deal with Sufi Muhammad saying the Taliban had made public their intention of taking over the whole of Pakistan.

More…

Geopolitical Diary: Taliban Problem Going Critical in Pakistan
April 22, 2009 | 0329 GMT

A spokesman for Pakistan’s military said Tuesday that the peace agreement between the government and Islamist militants in the Swat region has given the Taliban an opportunity to regroup, after having been flushed out by army operations some months back. Elsewhere, the information ministers of both the federal government and North-West Frontier Province warned the Taliban group in Swat, the Tehrik-i-Nifaz-i-Shariat-Muhammadi (TNSM), to uphold its end of the peace deal and disarm, or face government action.

These comments followed statements made during the weekend by TNSM leader Maulana Sufi Muhammad: He denounced Pakistan’s constitution, parliament and Supreme Court as un-Islamic and called for Sharia to be imposed throughout the country. In a related development, the rebellious imam of Islamabad’s Red Mosque, Maulana Abdul Aziz – who led a bloody rising in July 2007 – was released on bail. He told followers to be ready to make sacrifices to ensure that Islam is enforced through the entire country.

As expected, the Swat “Sharia for peace” deal appears to be falling apart – within a week of being ratified. The collapse is yet another manifestation of a weakened Pakistani state being manipulated by Taliban rebels. But a far important point is that the current situation is untenable.

Pakistani government leaders cannot remain on the path of negotiations while the Taliban are going for the jugular. The entire rationale behind the peace agreement was that the insurgency in Swat could be ended if Sharia was enforced in the restive area. The Taliban not only have shown that they are unwilling to disarm, but their ambitions are escalating from a local to a national level.

This leaves the government with two choices: Either continue down the current path – allowing the jihadists to advance their cause while trying to avoid confrontation – or draw the line. In either case, conflict would be inevitable.

More…

Posted at 3:59 PM (CST) by & filed under In The News.

Dear CIGAs,

We have to give credit to Martin Armstrong. April 19th certainly did have merit as a cycle point. Now let us see what June provides. Use Alf for "Price" and "Martin" for Time.

Jim Sinclair’s Commentary

As goes Motors (GM) so goes the USA

U.S. Is Said to Prepare Bankruptcy Filing for Chrysler
By MICHELINE MAYNARD and MICHAEL J. de la MERCED
Published: April 23, 2009

DETROIT — The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

Officials at Chrysler and the Treasury were not immediately available for comment.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall. Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing.

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

More…

Jim Sinclair’s Commentary

Gold is a lifeline to more than just finances

The Power of Gold
April 23, 2009

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

–John Maynard Keynes

More…

Jim Sinclair’s Commentary

The Stress Test will report exactly what it is structured to report.

Banks May Need $1 Trillion After U.S. Tests, KBW Says
By Andrew Frye

April 23 (Bloomberg) — U.S. banks may need another $1 trillion in capital to cushion losses as unemployment rises and borrowers fall behind on payments, KBW Inc. analysts led by Frederick Cannon said today.

The estimate is based on the analysts’ own “stress test” of the strength of top U.S. lenders, Cannon wrote. The government is also evaluating the ability of banks to withstand a deepening recession. Bank of America Corp., the largest U.S. lender by assets, may be forced by the government to accept additional aid by converting preferred shares into common stock, Cannon said.

Bankers may get their first look tomorrow at results of the tests, which are being conducted on 19 of the biggest U.S. financial companies. The examinations will compel lenders to raise more capital by selling shares, converting government stakes to common stock or by seeking more taxpayer funds, according to a person familiar with the matter.

Investors and analyst have been debating which lenders will need the help without knowing exactly how the institutions will be judged. The Federal Reserve is scheduled to release the methods used to calculate the exams tomorrow.

Bank of America will likely pass the test, Cannon said. Still, the Charlotte, North Carolina-based bank may be forced by the government to convert $15 billion to $20 billion of preferred shares into common to bolster the balance sheet, he said.

More…

Jim Sinclair’s Commentary

The Secretary of State of the USA has called the Pakistan situation; "A Mortal Threat to the World." Think about that. Even Iraq did not earn that title before the pre-emptive strike took place.

A Mortal Threat to the World… Ruminate on that for a few moments and then ask yourself what a "Mortal Threat to the World" means to markets when it is a fact that has been accomplished, which it will be on or before January 11th 2010.

Militants burn NATO fuel tankers in Pakistan
By MUNIR AHMAD – 12 hours ago

ISLAMABAD (AP) — Dozens of militants armed with guns and gasoline bombs attacked a truck terminal in northwestern Pakistan on Thursday and burned five tanker trucks carrying fuel to NATO troops in Afghanistan, police said.

NATO and U.S. commanders are seeking alternative transport routes into landlocked Afghanistan amid mounting assaults on the critical main supply line through Pakistan.

Militants attacked the truck depot near the city of Peshawar before dawn, hurling gasoline bombs which set fire to the five tankers, said Abdul Khan, a local police official.

Security guards fled and the assailants made their escape before police arrived, Khan said. Several truckers drove their vehicles out of the terminal to save them from the flames, which were later doused by firefighters, he said.

NATO and the U.S. military insist that their losses on the transport route remain minimal and have had no impact on their expanding operations in Afghanistan. Most of the fuel for U.S. troops in Afghanistan comes from Central Asia.

More…

Jim Sinclair’s Commentary

Somebody just discovered the long term direction of gold production is down!

DJ Gold Mine Output May Decline In 09 On Base Metal Closures-WGC

LONDON (Dow Jones)–Global gold mine production may decline further in 2009 with production lost due to industrial mine closures, the World Gold Council said Thursday.

Gold mine production could fall by up to 10% in 2009 as a result of cuts in industrial metal mines, WGC managing director Marcus Grubb told an audience at an ETF securities seminar in London.

Many industrial metal producers also produce gold as a by-product. Due to declining demand as a result of the global economic crisis, many mines have closed operations or scaled back output and that has cut gold produced at those mines, Grubb said.

Furthermore, output problems in South Africa continue due to power shortages, he said. South Africa used to be the largest gold producer, but now China is the largest producer.

"Because the decline in mine production has not been offset by an increase in other elements of supply, total gold supply continues to decline," the World Gold Council said. "This situation seems unlikely to change anytime soon."

Jim Sinclair’s Commentary

Today in Pakistan:

Taliban Advance: Is Pakistan Nearing Collapse?
By ARYN BAKER/ISLAMABAD
Thursday, Apr. 23, 2009

The move by Taliban-backed militants into the Buner district of northwestern Pakistan, closer than ever to Pakistan’s capital of Islamabad, have prompted concerns both within the country and abroad that the nuclear-armed nation of 165 million is on the verge of inexorable collapse.

On Wednesday a local Taliban militia crossed from the Swat Valley — where a February cease-fire allowed the implementation of strict Islamic, or Shari’a, law — into the neighboring Buner district, which is just a few hours drive from Islamabad (65 miles, separated by a mountain range, as the crow flies).

Residents streaming from Buner, home to nearly a million people, told local newspapers that armed militants are patrolling the streets. Pakistani television stations aired footage of Taliban soldiers looting government offices and capturing vehicles belonging to aid organizations and development projects. The police, say residents, are nowhere to be seen. The shrine of a local Muslim saint, venerated across the country, was closed. The Taliban, which adheres to a stricter version of Islam than is practiced in most of Pakistan, hold that worship at such shrines goes against the teachings of Islam.

Meanwhile courts throughout the Malakand division, of which Swat and Buner are a part, have closed in deference to the new agreement calling for the implementation Shari’a, law. "If the Taliban continue to move at this pace they will soon be knocking at the doors of Islamabad," Maulana Fazlur Rehman, head of one of the country’s Islamic political parties, warned in Parliament Wednesday. Rehman said the Margalla Hills, a small mountain range north of the capital that separates it from Buner, appears to be "the only hurdle in their march toward the federal capital," The only solution, he said, was for the entire nation to accept Shari’a law in order to deprive the Taliban of their principal cause.

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Pak, Afghan Biggest Threat For Israel: Israeli F.M.
4/23/2009 5:39 AM  ET

(RTTNews) -  The threat perception of Iran’s nuclear program to Israel has been relegated to the second position with Pakistan and Afghanistan being identified as the biggest threat to the Jewish nation, according to the new Israeli foreign minister.

In his first interview to a Russian daily after taking charge, Israel’s hardliner Foreign Minister Avigdor Lieberman has said that since he began warning against the nuclear threat from Iran, nuclear threats have become more prevalent. However, he said, a more serious problem has developed in Pakistan and Afghanistan.

With an unstable nuclear-armed Pakistan faced with a potential Taliban takeover and Afghanistan facing a resurgent Taliban and Al-Qaida, the combination formed a contiguous area of radicalism ruled in the spirit of Bin Laden, he said.

"I do not think that this makes anyone in China, Russia or the United States happy… these countries (Pakistan and Afghanistan) are a threat not only to Israel, but also to the global order as a whole," he added.

Iran was not Israel’s greatest strategic threat, rather Afghanistan and Pakistan were, he emphasized, while stating that the strategic threat coming from Iraq was ranked as the third most important issue of concern for his country.

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Jim Sinclair’s Commentary

The following cartoon is from the 1934 Chicago Tribune. Sound familiar?

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Jim Sinclair’s Commentary

Transparency and credibility are ingredients of confidence that the value of currencies have always stood upon. No one puts credence in the statement of the Central Management Committee of government, but degrees of credibility still count.

Wall Street Journal: Bank of America CEO Lewis testifies to NY AG that Bernanke, Paulson wanted Merrill losses kept quiet

WSJ: BofA CEO says was told to be quiet on Merrill
WSJ: BofA CEO Lewis testifies to NY AG that Bernanke, Paulson wanted Merrill losses kept quiet
Thursday April 23, 2009, 10:33 am EDT

NEW YORK (AP) — Bank of America Chief Executive Kenneth Lewis told the New York attorney general he believed former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke wanted him to keep quiet about the worsening terms of the bank’s acquisition of Merrill Lynch, according to testimony reviewed by The Wall Street Journal.

The New York AG’s office plans to release the testimony on Thursday to federal regulators and overseers of bailout funds and banks, the newspaper reported after reviewing a transcript.

"We believe we acted legally and appropriately with regard to the Merrill Lynch transaction," Bank of America spokesman Scott Silvestri told The Associated Press Thursday.

He declined further comment about the report.

Lewis testified in February to New York Attorney General Andrew Cuomo’s office, which has been trying to determine if Merrill and Charlotte, N.C.-based Bank of America failed to provide adequate disclosures to shareholders about the more than $15 billion in losses Merrill incurred in the 2008 fourth quarter and hefty bonus payments. Had they had that information, BofA shareholders might have voted down the deal.

The Journal said in Thursday’s edition that Lewis doesn’t say in the transcript that he was told specifically to remain silent about Merrill’s burgeoning losses. But the paper quotes Lewis as testifying that disclosing that information "wasn’t up to me," and that he was warned by Paulson and Bernanke that failing to complete Merrill’s takeover would "impose a big risk to the financial system."

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Jim Sinclair’s Commentary

This article has drawn significant interest.

The range I see for the price of gold is exactly:

1. $1521
2. $1600
3. $1681
4. $1764

The time for this occurrence is on or before January 14th 1011.

Gold price could hit $1,500
The aggressive monetary policy of central banks around the world is playing havoc with the structure of the bullion market, creating a chronic shortage of gold that may soon push the metal to fresh records above $1,500 an ounce.
By Ambrose Evans-Pritchard
Last Updated: 12:11PM BST 20 Apr 2009

Charles Gibson, a gold expert at Edison Investment Research, argues in a new report that negative real interest rates (below inflation) in the US and beyond has upset the "leasing" machinery in the gold industry and led to a sustained market squeeze.

This is what occurred in the late 1970s, driving gold prices to $850 and ounce – roughly $1,560 in today’s terms. Gold finished last week at $870.

Mr Gibson said the powerful dynamic could lead to a second leg of this gold bull market, even though the metal has already enjoyed a torrid run over the last eight years.

In normal times, gold mining companies sell – or "hedge" – a chunk of their output in advance through bullion banks. These banks cover their positions by leasing gold from central banks. This bread-and-butter trade created excess supply of 500 tonnes each year until the start of this decade.

Low real interest rates have caused the process to reverse, creating a shortfall of about 500 tonnes. The process accelerates as rates turn negative, leading to a scramble by market players to find physical gold.

There are already reports that gold bars are becoming scarce, partly due to fears that futures contracts and other forms of paper gold may not prove reliable if there is a serious break-down in the global financial system. Pure metal — whether Krugerrands, Maple Leaf coins, or the "five tael biscuit" favoured by the Chinese – entail no counterparty risk.

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Jim Sinclair’s Commentary

Hyperinflation is a currency event, not an economic event. It is coming without any doubt.

Harvard’s Feldstein Sees U.S. Inflation Danger After 2010
By Vincent Del Giudice and Thomas R. Keene

April 23 (Bloomberg) — Harvard University economics Professor Martin Feldstein said inflation will emerge as a threat to the economy after a sustained recovery develops next year.

“In the next few years inflation is going to be the bigger problem” than deflation, or widespread declines in consumer prices, Feldstein said in an interview with Bloomberg Radio. He also said “we’re not going to see a sustained turnaround in the economy until next year.”

Feldstein, a former head of the National Bureau of Economic Research and adviser to President Ronald Reagan, warned that the Federal Reserve will have a challenge in heading off inflation because of how it’s conducted monetary policy during the crisis.

Instead of expanding the central bank’s balance sheet by purchasing easy-to-sell Treasuries, the Fed has snapped up mortgage securities that are likely to be tougher to use as a tool to soak up cash, Feldstein said.

In an earlier interview with Bloomberg Television, Feldstein said he didn’t anticipate a lending boom from banks judged to have passed U.S. regulators’ stress tests on their balance sheets. Results from the reviews are scheduled for release May 4.

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Jim Sinclair’s Commentary

This blog has credentials. The questions are reasonable.

Questions (and few answers) after Freddie CFO suicide
Posted by: Stephanie Ditta
April 22nd, 2009

David Kellermann, acting chief financial officer of troubled U.S. mortgage giant Freddie Mac, was found dead in his suburban Virginia home after apparently committing suicide.

Kellermann, 41, was named Freddie Mac’s acting CFO last September after the Treasury Department seized the company, and its sibling mortgage agency Fannie Mae, as the agencies faced deep losses on a crashing U.S. housing market that was rapidly engulfing other financial institutions.

The death of Freddie’s acting finance chief follows several high-profile suicides that have been linked to the global financial collapse. German billionaire businessman Adolf Merckle threw himself in front of a train in January after heavy losses on the stock market. In December, Frenchman Thierry Magon de la Villehuchet, 65, co-founder of money manager Access International, was found dead in a New York office building, reportedly distraught over losing up to $1.4 billion in client money to Bernard Madoff’s fraud.

Unanswered questions

In March, Freddie Mac said that it was cooperating with the Securities and Exchange Commission in an investigation and that employees have been interviewed by investigators.

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Posted at 1:44 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold put on a very impressive breach of upside resistance in today’s session as bulls were finally able to shove prices high enough to reach the bevy of buy stops that had been building above the $902 level basis June.

If you note on the price chart, the downsloping trendline drawn off the February and March peaks is controlling price so bulls will have to take that out to really give the shorts a good scare and induce further short covering. That trendline comes in and splits the difference between the all important 40 day and 50 day moving averages so we can expect the bears to attempt to make a stand in this region. If bulls can dislodge them from there, a trending move to the upside is likely. If bulls hesitate near this level, expect bears to regain some of their composure.

I am not sure what the catalyst was today that provided the impetus to push prices higher other than the fact that the Dollar was down and most of the commodity markets were higher, a few markets excepted. Equities were struggling today and that might have been generating some further safe haven flows but normally on days in which stocks are weak, we have been seeing the Dollar move higher. That was not the case today however. Regardless, the buying was impressive. If gold can close above the $902 region at the end of the pit session today, it would be very constructive on the price charts and could spur some further short covering heading into the weekend tomorrow.

Incidentally, let me make a quick comment here on my recent posting detailing the narrowing of the spreads in the Comex gold futures market. I fielded some emails from a few of you talking about the low interest rate environment being responsible for that. I want to thank those of you who took the time to jot me the notes. So that I can save a bit of time and avoid having to answer any further emails about this individually (Alas – I must trade if I am to make some sort of living) let me just state that I concur with those of you have expressed that concern. Interest rates most assuredly affect the spread structure as they are part of the cost of carry. With gold the interest rate environment affects gold leasing. But it is also important to note that carry involves storage fees or in the case of gold, vault fees, as well as insurance fees against loss. When a futures market moves into a backwardation structure, the market is no longer paying any potential seller of a particular commodity enough to cover those costs. That is what supposedly induces those sellers to part with the commodity NOW rather than later.

Gold is somewhat different from other commodities in the sense that it is not “used up” like the rest of them. While a small portion of gold does goes into industrial use for various items, the amount pales in comparison to its use as a store of wealth and as jewelry. If prices shoot up high enough, some owners can be induced to part with their gold (mainly from jewelry and other scrap sources) and this supply can then be drawn from to meet the increase in demand.

Gold is not yet in a true backwardation condition but the spreads are moving in that direction and are already very tight. Should gold indeed move into backwardation, it would be indeed be most telling as it would signify that demand is so strong that owners/sellers are not being paid to store and insure the gold.

My own view on this is that while the tightening of the spreads does indeed have a key interest rate component to it, it also confirms the many credible reports that we have been seeing detailing tightness in the spot market particularly for gold bullion coins as expressed by the much higher premiums that buyers are having to pay compared to a year/years ago. It also dovetails with the increase in demand coming out of the various gold ETF’s around the world as well as increased share offerings from Central, et all which I might add is coming at a time in which expected gold supply from mining sources is dropping. While there are of course many fine outfits whose primary business is gold mining, it should not be lost on gold investors that more than a few miners of base metals mine gold as a by-product of their larger production. Low prices for base metals has resulted in inefficient operations being shut in until prices recover across the board for base metals. Until those mines are reopened, the gold that they had been supplying, will have to come from other sources to meet the very strong investment demand that currently exists. I believe some of that is also being reflected in the tightening gold spreads. Nuff said on that for now.

Back to the mining shares as indicated by the HUI and the XAU – the HUI, representing the mainly non-hedged miners,  has run right to the 40 day moving average where it is encountering selling resistance. It really needs to get a session close above the 305 level to generate some additional enthusiasm among the bulls and run some of the share shorts out. The XAU’s chart is a bit weaker looking than the HUI at this point.

Bonds are attempting to keep from blowing through downside support which goes all the way back to the day that the Fed first announced its intention to follow the path of quantitative easing. For the better part of a month, they have been slowly grinding down towards the 124 level, which was the previous’ day close before the Fed announcement. If they were to violate that low, it would signify a sea change in the interest rate world. If they bounce – well – Stay tuned on this one…

As mentioned earlier, the Dollar is weaker today with all of the commodity currencies, the Canadian, Australian and New Zealand Dollars a bit higher.  Europe as gauged by the Euro, Swissie and Sterling is higher and the even the Yen is stronger. The Euro-Yen cross is slightly higher as I write this but the trading in there is mixed.

Copper finally backed down below $2.00 as it appears that the Chinese buying which has been supporting it is drying up for now. That makes sense as once restocking needs are through they are not going to chase prices any higher if they do not need to. Copper still needs to be watched however for any clues that the market is expecting some sort of economic recovery on out into the future. It is evident that China will lead the way in this regards.

Crude oil is attempting to get back above the $50 mark but thus far has not been successful. It is probably not helping it much that natural gas continues to break down further. Now if only the utility companies would pass on some of its huge fall off in price, our utility bills would come down especially in regions that burn natural gas to generate electricity.

For you silver guys out there, it has a shot at breaking out and moving high if it can first take out $12.95 in convincing fashion. Its ten day moving average is turning up and price has run exactly to the 40 day moving average which it has thus far not bettered. Should that give way, momentum should carry it to $13.00. A close above there and the 50 day moving average near the $13.06 level.

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

april2309gold1230pmcdt

Posted at 12:42 PM (CST) by & filed under Jim's Mailbox.

Dear Friends,

Our dear long term friend and all around great person, CIGA Carl Seaman, recently passed.

He left a note asking that we be informed.

Carl you will be sorely missed.

Those, like yourself who have so dearly cared for others, must be seen again.

Rest well,
Jim

To CIGA C. Murr,

Thank you for your note. It did not have a return address.

You are quite a courageous and class lady.

I will emulate your strength.

Respectfully yours,
Jim

 

Jim,

Everything is fine over here in the good ole US of A. Just a mild recession.

CIGA BJS

Arizona to cut 5,500 school jobs
Thu, 23 Apr 2009 17:18:48 GMT

n the US state of Arizona around 5,500 school employees, including 4,000 teachers at 120 schools, are on the verge of losing their jobs.

According to a report released by the Arizona Republic on Tuesday, 5,500 school employees and teachers have been given their layoff notices.

School officials blame the new tide of pink slips on the lack of approval of a state budget for the new fiscal year set to begin on July 1.

They further claim that the government has required them to tell teachers by April 15 whether they would keep or lose their jobs.

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Dear Jim,

This one says it all.

All the best,
CIGA Olivier

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Jim,

What have we learned in the last two millenia??

CIGA Richard

"The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
– Cicero , 55 BC

Evidently, not a damn thing…