In The News Today

Posted at 6:30 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Wrong financial targeting produces zero results after the first flush of glee and high fiving.

  1. Who is going to guarantee the Federal paper of bankrupt nations?
  2. After Lehman, what banks are going to have faith in the government guarantee of all and everything? You can make the public happy, but fellows, it is your landsmen who are panicked, not the general depositors.
  3. Government guarantees of all and everything means an infinite printing of paper, be it a non marketable T-bill or pure cash.
  4. The problem to avoid is the allowing of one quadrillion one thousand one hundred and forty-four trillion dollars of notional value to become real value. The Lehman bankrupt counterparty proves this.
  5. Do you fellows really understand the anchor that is sinking your ship? I honestly don’t think so at the level of G7 ministers.
  6. If you are trying to fool the public, the action by FASB this weekend might have some real impact. It is not the public that is in a state of panic. It is an OTC derivative collapse accelerated by the Fed’s error in letting Lehman enter Chapter 11. That moved nominal value to full value.
    Now a move to non-transparency is not going to do anything for the problem of banks trusting banks because of the valueless type of derivative after type of derivative.

The FASB’s reprehensible action might just be a major BACKFIRE.

The FASB is violating their own mandate to protect the general interests of the public through transparent true value and clear auditing procedures.

FASB rushes to get revised fair-value guidance out on Saturday
Why? Because tweaked guidance on valuing assets could boost third-quarter earnings for some companies
By Marine Cole
October 10, 2008 2:05 PM ET

(Excerpt from article)

“Thus, Mr. Willens noted, “it would not be surprising to see third-quarter earnings reports show marked improvement from past periods as the values derived from ‘mark-to-model’ assumptions exceed those resulting from the use of observable inputs, in such prior periods, with respect to the same securities.”


Jim Sinclair’s Commentary

Even though Merrill only got 20 cents and Lehman got .0875 cents on the dollar for their bag of failed derivatives, the financial entities can now put false and misleading values on their worthless OTC derivatives. Maybe they will even mark up the crap to develop totally false and misleading earning.

Remember the problem is between banks and not between the public and banks.

FASB rushes to get revised fair-value guidance out on Saturday
Why? Because tweaked guidance on valuing assets could boost third-quarter earnings for some companies
By Marine Cole
October 10, 2008 2:05 PM ET

The Financial Accounting Standards Board adopted new guidance on fair-value accounting in illiquid markets today, giving financial institutions more leeway to value financial instruments based on internal inputs.

The board will release its final guidance Saturday, and it will be effective upon issuance.

“I think it’s safe to say when we wrote [Financial Accounting Standard 157 on fair-value accounting], we probably didn’t contemplate exactly the current situation that’s developed in the credit and financial markets,” Robert Herz, chairman of FASB, said during today’s meeting.

“Under such conditions, it’s important to understand and apply both the objective of 157 and the framework,” Mr. Herz said. “By doing that, it will require in some cases more analysis, more judgment.”


Jim Sinclair’s Commentary

Well here it comes. The cost of the Formula combined with the derivative madness is beginning to hit the cash register. The USA will be quite fortunate if the next year’s Federal Budget Deficit is only 2 trillion. Now there is a great reason to own US dollars. Do you think the Geek Algorithms will get it now before they get it in the end?

Cost of U.S. Crisis Action Grows, Along With Debt
By Matthew Benjamin

Oct. 10 (Bloomberg) — “The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion.”

Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help. The Federal Reserve said this week it will begin buying commercial paper, the short- term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank- rescue plan passed by Congress last week may have to be significantly larger.

“I always assumed they would be asking for more money along the way if it was necessary, and it looks like it’s going to be necessary,” said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. “At the moment, there’s nothing happening here that’s positive for the budget. Nothing.”

The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley’s chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion.


Jim Sinclair’s Commentary

Hey G7 (should be G13), the problem is called OTC derivatives, not runs on the regional banks.

FASB folds and permits financial entities to egregiously lie to the public, missing the real target which is Bank to Bank confidence.

Traders’ worst fears realized at Lehmans auction
By Stephen Foley in New York
Saturday, 11 October 2008

“The auction set a price for Lehman bonds of 8.625 cents on the dollar. Financial firms that sold credit default swaps, therefore, owe 91.375 cents on the dollar – more than Wall Street had been factoring in. That figure increased nerves about whether everyone in the chain will actually be able to pay the amount that they owe, something that will become clear over the coming days. “


Jim Sinclair’s Commentary

Just in case you missed it this Friday afternoon:

FDIC news release:
Failed Bank Information
Information for Main Street Bank, Northville, MI

On October 10, 2008, Main Street Bank, Northville, Michigan was closed by the Michigan Office of Financial & Insurance Services and the Federal Deposit Insurance Corporation (FDIC) was named Receiver.  No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution.  Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution.  The FDIC has compiled the following information which should answer many of your questions.