In The News Today

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Jim Sinclair’s Commentary

Between 400,000 and 1,000,000 STILL cannot get access to their savings.

Don’t follow the spin, and let your guard down. This is the beginning, not the end. This could have been you!

The primary target that should be faced has not been even been aimed at. That target is called over the counter derivatives.

Part of the rescue is the use of an OTC derivative by the Federal Reserve – a swap.

Reserve Funds investors still waiting for their money
30 Oct 2008 11:53 am

This isn’t good:

At least 400,000 people, and perhaps as many as a million, can’t get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.

Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.

“Longer term, I just don’t know how we’ll deal with it,” said John Oakes, a retired engineer in Austin, Tex., who can’t tap $20,000 in a Reserve account to pay his mother’s nursing home bill. “They say we may get some money this week, but we don’t know if we’ll get 100 percent, 90 percent or 30 percent.”

Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets –invested in the Reserve US Government Fund.

“They even bragged that you could sleep at night if you invested in their funds,” Mrs. Dews said. “In the past month and a half, we don’t sleep at all.”

Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.

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Jim Sinclair’s Commentary

Gold will never entirely separate from the US dollar. The tie may loosen in favour of gold, but will never fully part. Look at the dollar supply and demand. The world needs hundreds of billions of dollars to stave off a potential Weimar situation until the USA joins that club themselves.

The world does not need the same in euros, yen or rubles; only dollars. Is the Federal Reserve the lender of last resort to the entire planet? Does that not make many of you the lenders of last resort to those who accept worthless collateral or swaps that promise to pay paper backed by nothing in exchange for freshly created electronic paper backed by nothing sometime in the distant future?

IMF needs hundreds of billions of dollars more: Brown

RIYADH (AFP) – Prime Minister Gordon Brown said the International Monetary Fund (IMF) needs “hundreds of billions of dollars” to help countries at risk of collapsing amid the world financial crisis.

Brown, who is in Saudi Arabia, told reporters Saturday during a four-day tour of Gulf states that countries which had benefited from recent high oil prices could contribute to the plan.

Brown also stressed that Britain welcomed investment from Gulf sovereign wealth funds “as long as they play by our rules and operate in a commercial manner.”

Brown, whose struggling premiership has been boosted by his leadership in the financial panic, wants the IMF’s 250 billion dollar bailout fund for affected countries to be extended to prevent “contagion” elsewhere.

He has not previously indicated the amount of cash by which he believes the IMF, which is set to bail out Hungary, Ukraine and Iceland, needs to boost its coffers.

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Jim Sinclair’s Commentary

That seems a tad wrong.

Banks to Continue Paying Dividends
Bailout Money Is for Lending, Critics Say
By Binyamin Appelbaum
Washington Post Staff Writer
Thursday, October 30, 2008; A01

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don’t serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.

Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends — or conversely, why banks that need government money are still spending so much on dividends.

“The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program,” said Sen. Charles E. Schumer (D-N.Y.), who has called for the government to require a suspension of dividend payments.

The Treasury plans to invest up to $250 billion in a wide swath of U.S. banks in return for ownership stakes, which the government will relinquish when it is repaid.

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Jim Sinclair’s Commentary

FDIC’s capital shrinks weekly bit by bit.

Alpha Bank & Trust fails, taken over
October 31, 2008 | 10:04 AM

ALPHARETTA – Regulators descended upon Alpha Bank & Trust on Old Milton Parkway like a swarm of bees Friday as it became the latest bank closed by the Ga. Department of Banking and Finance and the second in the Alpharetta area. Integrity Bank was closed Aug. 29, though technically its headquarters were in Johns Creek city limits by virtue of being east of Kimball Bridge Road.

The Federal Deposit Insurance Corporation (FDIC) was named receiver.

Depositors saw the change Monday as the bank’s two branches – one on Old Milton Parkway in Alpharetta and the other in Marietta – reopened under control of Stearns Bank, National Association of St. Cloud, Minn. That bank assumed the insured deposits of Alpha Bank & Trust in an agreement with the FDIC.

Depositors of the failed bank automatically became depositors of Stearns Bank. Deposits continue to be insured by the FDIC, so customers do not need to change banks to retain their deposit insurance coverage.

As of Sept. 30, Alpha Bank & Trust had total assets of $354.1 million and total deposits of $346.2 million. Stearns Bank did not pay the FDIC a premium for the right to assume the failed bank’s insured deposits.

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Jim Sinclair’s Commentary

New gold reserves come from the explorers, making the pressure on the juniors wholly illogical. In time this will cost the shorts.

Gold production ‘in crisis’ – AngloGold Ashanti CEO
By: Martin Creamer

Gold production was “in crisis” and a gold price of $900-to-$1 000/oz was needed to arrest the downward trend, AngloGold Ashanti CEO Mark Cutifani said on Thursday.

Cutifani said that the world had seen a decline in the production of gold across the globe in the past seven years, and that the industry could experience another decline of production at up to 5% a year for the next five years.

“The gold industry from a production perspective is in crisis,” he said.

There had been a 20% to 30% production decline in South Africa in the last five years and grades are continuing to diminish in opencast mines around the world.

That lack of production, he said, would result in gold’s fundamentals improving.

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Jim Sinclair’s Commentary

There is nowhere to hide other than gold.

Fears after run on Kuwait bank
By Andrew England
Published: October 31 2008 02:00 | Last updated: October 31 2008 02:00

The outlook for Kuwait’s banking system is shifting towards negative for the first time in a decade, Moody’s rating agency said yesterday – a sign likely to heighten concerns about potential weaknesses in the nation’s financial services.

The Moody’s report comes days after a run on Gulf Bank, Kuwait’s second-largest commercial bank, following revelations that it had incurred significant losses as a result of derivatives trading.

Standard & Poor’s revised outlooks on six Gulf banks from positive to stable, a further sign analysts are becoming more cautious.

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Jim Sinclair’s Commentary

The world needs a flood of dollars according to the IMF and the Fed means to make sure it happens. Talk about a formula for a dollar decline!

“That’s even after a boost this week from an International Monetary Fund emergency loan program for emerging markets and the U.S. Federal Reserve’s decision to pump as much as $120 billion into Brazil, Mexico, South Korea and Singapore. The Fed said yesterday that it aims to “mitigate the spread of difficulties in obtaining U.S. dollar funding.”

`Panic’ Strikes East Europe Borrowers as Banks Cut Franc Loans
By Ben Holland, Laura Cochrane and Balazs Penz

Oct. 31 (Bloomberg) — Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer in Budapest can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, euros and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe’s developing markets and local currencies plunge.

“There’s no money out there,” said Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers. “We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”

Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism. The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

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