In The News Today

Posted at 6:27 PM (CST) by & filed under General Editorial.

Control |kənˈtrōl|

noun
1 the power to influence or direct people’s behavior or the course of events : the whole operation is under the control of a production manager | the situation was slipping out of her control.
• the ability to manage a machine or other moving object : he lost control of his car | improve your ball control.
• the restriction of an activity, tendency, or phenomenon : pest control.
• the power to restrain something, esp. one’s own emotions or actions : give children time to get control of their emotions.
• (often controls) a means of limiting or regulating something : growing controls on local spending.
• a switch or other device by which a machine is regulated : the volume control.
• the place where a particular item is verified : passport control.
• the base from which a system or activity is directed : communications could be established with central control | mission control.
• Bridge a high card that will prevent opponents from establishing a particular suit.
• Computing short for control key .

Things are out of control.

The draconian action taken by the Federal Reserve today was their entry into locked credit markets that are defined by the Libor Rate and Rate on Commercial Paper. This action prevented the triggering of a total implosion of all markets, with the exception of gold, the currency of ultimate final refuge.

“Out of Control” can be defined as a day the Dow crashes 500 points when the Chairman of the Federal Reserve and the President of the United States spoke on national TV, right on the heels of the much touted Bailout Bill, combined with the entrance of the Fed into the OTC derivative business with no binding limits set on the high side of this initiative.

This is a downward spiral in which now four major interventions have failed.

The only case study in History is the Weimar experience. You cannot compare this to the credit lockup of Livermore and JP Morgan times. Arguments against that point are hollow.

What I find inexplicable is that the “Uptick Rule for Short Selling” has not been reinstated. That rule is more powerful than even banning short selling. These people are not STUPID so one can only assume this “Out of Control” situation is not a surprise.

Do not be surprised by additional intervention failures, gold taking out $1000 on the 3rd try, three consecutive TIC reports failing to support the Trade Deficit, a Federal budget deficit of unprecedented proportions, a dollar trading at .72, .62 and .52 and gold trading at and above $1650.

I told you in the middle of the recent dismal state of mind many gold investors were in that I never felt better about gold. That may have sounded nuts to some of you.

I now say that I have never felt more confident about gold and silver juniors with good property, good management and money in the bank.

Jim Sinclair’s Commentary

Here is an example of the struggle between paper gold and the bullion gold market. This means violence beyond your wildest expectations with FINANCIAL FAILURES ON BOTH SIDES.

Bullion lending by central banks all but dries up
By Javier Blas in London , Financial Times, 7 Oct 2008

Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.

The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association.

Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven years.

Traders said the jump reflects the fact that central banks – mostly European – have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis.

“A number of central banks have been cutting back on their gold lending,” said Tom Kendall, a precious metals strategist at Mitsubishi in London.

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Jim Sinclair’s Commentary

The US dollar cannot stage any kind of a bull market with this type of supply out there.

Fed to buy massive amounts of short-term debt
Tuesday October 7, 10:33 am ET
By Jeannine Aversa, AP Economics Writer

Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt

WASHINGTON (AP) — The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy.

The Federal Reserve, invoking Depression-era emergency powers, will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

In more normal times, about $100 billion of these short-term IOUs were outstanding at any given time, sold by companies to buyers that included money market mutual funds, pension funds and other investors. But this market has virtually dried up as investors have become too jittery to buy paper for longer than overnight or a couple days.
That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week.

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Jim Sinclair’s Commentary

If regulators don’t care to apply their regulations, maybe God will.

Bonfire of the hedgies
Only the strongest will survive as the global crisis lashes the funds sector
Kate Walsh

In happier times, the bronzes in the window of WH Patterson’s gallery in London’s Mayfair would have been quickly snapped up. Their titles – Lioness Attacking, Lioness Stalking and Cheetah I and II – would have appealed to the hedge-fund managers who work in the area and fancy themselves as financial-market predators.

To them, the asking price of £10,000-plus would have been little more than small change; but those days have gone and the hunters are rapidly becoming the hunted.

A handful of managers in London and New York were forced last week to liquidate funds, including the flagship funds at MKM Longboat and Powe Capital, as investors demanded their money back. It is only the beginning.

Experts are predicting a 30% reduction in the hedge-fund industry – there are roughly 10,000 funds worldwide, and the industry is worth approximately $2 trillion. One broker said: “Small firms are bleeding. Assets are being sold off, investors are redeeming money and the managers are scuttling off to work somewhere else.”

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Jim Sinclair’s Commentary

Please note this extremely important set of facts.

Notice the words EQUITY LOST FOREVER and tell me what value to maturity means. I believe that it means nonsense, and the newest attempt at spinning worth-less to worth-full which will remain worth-less FOREVER.

The largest fabrication is that the worthless paper now being bought to an infinite amount by US taxpayers will someday return to significant value. They simply will not.

US Real Estate: From Goldmine To Money Pit – Mortgage Backed Securities and Derivatives are Flawed and Failing
by Kenn spacefield

The mortgage debt problem is simple really, it has been a total mis-appropriation of equity. The equity lost on flat screen TV’s, boats, new cars, vacations, and other living expenses; is equity lost forever. This loss of equity spent on consumer goods and expenses is a pyramid scheme of hyper-capitalism that is flawed and failing. Equity not spent on the property the equity comes from, is equity lost forever, a mis-appropriation of funds, and inappropriate; it is a failing economic model.

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