In The News Today

Posted at 3:57 PM (CST) by & filed under General Editorial.

Dear CIGAs,

I am in shock. the American Banker’s Association is not satisfied. They want to go back to “computer model only” valuation for market-less OTC derivatives which have been and will continue to be a total cartoon.

FASB gave them back an enormous break by allowing significant fabrication of values and still that is not enough.

When in the history of the USA did they fall to such organized lows? Why should they have any laws or rules over anything at all if they can be adjusted or as above cancelled altogether when inconvenient to the big wigs.

Is this what you call the WILD WEST?

Bankers group asks SEC to overide FASB on fair value rules
American Bankers Association sends letter advocating reliance on internal estimates rather than market pricing
October 13, 2008 3:22 PM ET

(Reuters)-The American Bankers Association on Monday asked the U.S. Securities and Exchange Commission to override U.S. accounting rule-makers’ new guidelines on mark-to-market accounting, saying they still rely too heavily on distressed asset values.

The staff of the Financial Accounting Standards Board released guidance on Friday intended to formalize a Sept. 30 joint clarification from the SEC and FASB which said that banks could rely on internal estimates, rather than currently deeply discounted market prices, to value assets in illiquid markets.

In a letter to SEC Chairman Christopher Cox, the American Bankers Association said FASB’s guidance was “circular” and “refuses to recognize the realities of the current situation” by requiring companies to still evaluate liquidity risk in their calculations.

“Given the importance of this issue, the impact it has on the crisis in the financial markets, and the seeming inability of the FASB to address in a meaningful way the problems of using fair value in dysfunctional markets, we believe it is necessary for the SEC to use its statutory authority to step in and override the guidance issued by FASB,” Edward Yingling, president and CEO of the American Bankers Association, said in the letter.

The FASB staff’s guidelines, titled “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” differed slightly from the original Sept. 30 statement. The changes reflected concerns raised in more than 90 comment letters sent to FASB last week on the change.


Jim Sinclair’s Commentary

The last paragraph says it all.

“A physical shortage demonstrated by the “ballistic” demand for coins in the past few months has probably driven rates higher, but the fact many people have gold in their accounts is probably an even bigger factor, Mr. Norman suggested. Investors are likely allocating their bullion, which means it is physically set aside in a vault with their name on it. If the bank holding it fails, it can still be collected because the gold cannot be lent out.”

Hoarding pushes gold leasing rates up
Price spike forecast as banks stockpile bullion
Jonathan Ratner, Canwest News Service
Published: Friday, October 10, 2008

The cost of borrowing gold has surged to its highest level since May 2001 as central banks appear to be hoarding the precious metal.

The one-month lease rate for gold has soared more than threefold, to 2.68 per cent, in just more than a week and the parabolic move — symbolic of the expanding reach of the credit crunch — has experts labelling it another bullish sign for bullion. Prices continue to hover around $900 U.S. an ounce after rising 22 per cent in the past year.

“This (the lease rate for gold) usually precedes a sharp move in the gold price,” said Steven Isenberg, chief executive officer of Toronto-based M Partners. The cost of borrowing gold rose dramatically in March 2001, on signs that central banks were making less bullion available to speculators, mining companies and jewellers. This helped gold rally more than 12 per cent in the following two months.


Jim Sinclair’s Commentary

  1. Small correction, 2nd line should read Fed Reserve via unlimited off balance sheet arrangements called swaps provides dollars for European Nations to inject.
  2. Small correction, 2nd line should not read capital, but rather “dollars.”
  3. Small correction, 3rd line. The US Treasury, at the current rate of $50 billion per tranche, has the ability to do the same, just a hell of a lot less via the Bailout Bill.
  4. Small correction, 4th and 5th line. The article failed to mention that foreign investors so far in needy financial entities in the US have been royally screwed.
  5. Small correction 6th, 7th, 8th and 9th line. Too much reference to the 1929 Crash makes any further Dow index declines quite disturbing to the masses. This is a spin failure that could be quite costly.

Stocks Soar by 11% After Aid to Banks
The New York Times
Monday, October 13, 2008 — 4:16 PM ET

Stocks roared on Monday, erasing much of last week’s losses,
on news that European nations had injected capital into major
banks, that the Treasury was working on plans to do the same
in the United States, and that a deal for a major Japanese
bank to provide new capital to Morgan Stanley was in place.
The S.&P. 500 posted a gain of 11.6 percent, its largest
since the Great Depression, to close at 1,003.35, in
preliminary figures. The Dow industrials gained 936.42 points
to close at 9,387.61.

Read More:

Jim Sinclair’s Commentary

The Fed is permitting world central banks to flood the world markets with dollars, offering swaps on an unlimited amount basis.

Europe and other world central banks say they are placing more than two trillion in markets.

The following is a reasonable definition of a dollar swap:

Currency swap
From Wikipedia, the free encyclopedia

A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped.


Currency swaps can be negotiated for a variety of maturities of up to 30 years. Unlike a loan, a currency swap is not considered to be a loan by United States accounting laws and thus it is not reflected on a company’s balance sheet. A swap is considered to be a foreign exchange transaction plus an obligation to close the swap being a forward contract.


What miracles can be brought by changing a name from loan to swap?

The Fed is giving possibly trillions of dollars to the world banks and financial entities by funding central banks around the world should they wish to call on this “not a loan, off the US balance sheet” technique.

If you supply more apples in even a neutral apple market does the price of apples not go lower?

If you supply more dollars in even a neutral dollar market does the price of dollars not go lower, especially when unlimited amounts are supplied? Unlimited to me means infinite.

An infinite supply of dollars means an infinite price for gold. Believe it or not.


Jim Sinclair’s Commentary

I always felt that people with stored food were a tad neurotic. I now apologize for that.

Icelandic Shoppers Splurge as Currency Woes Reduce Food Imports
By Chad Thomas

Oct. 13 (Bloomberg) — After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.

“We have had crazy days for a week now,” said Johannes Smari Oluffsson, manager of the Bonus discount grocery store in Reykjavik’s main shopping center. “Sales have doubled.”

Bonus, a nationwide chain, has stock at its warehouse for about two weeks. After that, the shelves will start emptying unless it can get access to foreign currency, the 22-year-old manager said, standing in a walk-in fridge filled with meat products, among the few goods on sale produced locally.

Iceland’s foreign currency market has seized up after the three largest banks collapsed and the government abandoned an attempt to peg the exchange rate. Many banks won’t trade the krona and suppliers from abroad are demanding payment in advance. The government has asked banks to prioritize foreign currency transactions for essentials such as food, drugs and oil.

The crisis is already hitting clothing retailers. A short walk from Bonus in the capital’s Kringlan shopping center, Ragnhildur Anna Jonsdottir, 38, owner of the Next Plc clothing store, said she can’t get any foreign currency to pay for incoming shipments and, even if she could, the exchange rate would be prohibitively high.


Jim Sinclair’s Commentary

This must be a result of Islamabad just realizing there are only 22 days left before the Presidential Election.

Pakistan president heads to China amid strained US ties

ISLAMABAD (AFP) – Pakistani President Asif Ali Zardari flies to China on Tuesday seeking economic investment and support for his country as its ties with the United States come under increasing strain.

Pakistan is one of China’s closest allies in Asia, with Beijing seeing the country as a counter-balance to India.

Islamabad has been a key ally of the United States in its “war on terror,” but that relationship is on rocky ground due to Pakistan’s inability to shut down Taliban and Al-Qaeda fighters based in its tribal belt.

Though the four-day visit is Zardari’s first state visit since he assumed office in September, he met US President George W. Bush in New York late last month for the UN General Assembly.

Retired army general Talat Masood told AFP that Zardari was still “learning on the job” and had a difficult diplomatic balancing act to pull off.