In The News Today

Posted at 3:23 PM (CST) by & filed under In The News.

Dear CIGAs,

 The final word is that gold is a currency which moves in the inverse to the US dollar.

 The inflation/deflation/recession/depression argument fell on it ass in the 70s and will do so again.

The present dollar strength is geek and kneejerk reaction demand devoid of fundamental strength and is therefore not a long term bull market. A decline in the dollar will turn the spotlight on the credit worthiness of US Treasuries, impacting the growing demand for T-bills as the equity market, now without a PPT, is in trouble.

Blame the bust now spun on the advent of the new Administration.

The World Tires of Dollar Hegemony
by Craig Roberts
Nov 6

“The dollar’s rise is temporary, and its prospects are bleak. The U.S. trade deficit will lessen due to less consumer spending during recession, but it will remain the largest in the world and one that the United States cannot close by exporting more. The way the U.S. trade deficit is financed is by foreigners acquiring more dollar assets, with which their portfolios are already heavily weighted. 

“The toxic American derivatives were marketed worldwide by Wall Street. They have endangered the balance sheets and solvency of financial institutions throughout the world, including national governments, such as Iceland and Hungary. Banks and governments that invested in the troubled American financial instruments found their own debt instruments in jeopardy. The financial crisis has reversed this process. The toxic American derivatives were marketed worldwide by Wall Street. They have endangered the balance sheets and solvency of financial institutions throughout the world, including national governments, such as Iceland and Hungary. Banks and governments that invested in the troubled American financial instruments found their own debt instruments in jeopardy.”



Jim Sinclair’s Commentary 

Let the games begin. How will President Obama handle the Russian threat?

President Dmitri Medvedev orders missiles deployed in Europe as world hails Obama
November 6, 2008

President Medvedev ordered missiles to be stationed up against Nato’s borders yesterday to counter American plans to build a missile defence shield.

Speaking within hours of Barack Obama’s election, Mr Medvedev announced that Russia would base Iskander missiles in its Baltic exclave of Kaliningrad – the former German city – next to the border with Poland.

He did not say whether the short-range missiles would carry nuclear warheads.

Taking advantage of the world’s attention on the US elections, Mr Medvedev also cancelled plans to withdraw three intercontinental ballistic missile regiments from western Russia by 2010. In his first state-of-the-nation address, Mr Medvedev said the missiles would be deployed “to neutralise if necessary the antiballistic missile system in Europe”. He added that Russia was also ready to deploy its Navy off Kaliningrad and to install electronic jamming devices to interfere with the US shield, which relies on a radar station in the Czech Republic and ten interceptor missiles in Poland.

Nato’s eastern members greeted the Russian move with dismay.

A Czech Foreign Ministry spokesman described the Kremlin’s move as unfortunate. Lithuania’s President Adamkus accused his Russian counterpart of going back on his word.



Jim Sinclair’s Commentary

Obscuration, lies and misstatements continue rampantly. The impact now is momentary, however the consequences may span a decade or more.

Do not abandon ship. Obscuration is a pilot’s term for when you can’t see a damn thing.

Credit Swap Disclosure Obscures True Financial Risk (Update2)
By Shannon D. Harrington and Abigail Moses

Nov. 6 (Bloomberg) — The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

A report by the Depository Trust and Clearing Corp. doesn’t include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a “small fraction” of contracts linked to mortgage securities, according to Andrea Cicione at BNP Paribas SA in London.

New York-based DTCC’s data, released on its Web site Nov. 4, showed a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers. While designed to ease concerns about the amount of risk banks and investors amassed on borrowers from companies to homeowners, the report may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are “likely to underestimate the amount of net CDS exposure,” Cicione, who correctly forecast in January that the cost of protecting European companies from default would rise, said in an interview. “A broadening of the coverage to the entire market is what investors really need.”



Jim Sinclair’s Commentary

Nothing has changed. Libor is being used to paint a bright picture yet there is no bright picture to be seen.

Note the insurance article on gold as it tells the truth of what is.

Your $3 trillion bailout
Washington is waging war on the financial crisis. Mr. Obama: You have to see it through.
By David Goldman, staff writer
November 5, 2008: 11:54 AM ET

NEW YORK ( — Congratulations Mr. President-elect. Now get to work. It’s a little more than 10 weeks until Jan. 20, and there’s an economy in dire need of fixing.

Here’s the executive summary: The economy’s cracks started showing a year ago. Home prices plummeted and foreclosures soared. Financial institutions carrying mortgage-backed securities on their books took an enormous hit. Banks wanted to take fewer risks, so lending to businesses and consumers froze up.

Then things really broke down in September. The government took over mortgage giants Fannie Mae and Freddie Mac. The collapse of Lehman Brothers sent investors worldwide into a cold sweat.

To combat the crisis, Congress and the current administration have taken a number of steps aimed at boosting the housing market – providing critical liquidity to financial institutions and saving businesses from collapse.

Thus far, the government has pledged as much as $3 trillion for the crisis, although the ultimate cost to the federal budget won’t be known for years to come since much of that money is effectively investment.

“You’d have to go back to the New Deal to find something similar to what the government has done to stop the credit crisis,” said Jay Bryson, economist for Wachovia. “It’s because the alternative was unthinkable: If it failed, there was potential for another Great Depression.”



Jim Sinclair’s Commentary

Sympathy for this? You have to be kidding. If you knew why these funds are hitting the walls you would be surprised. I suggest “Income Smoothing Derivatives.”

London Hedge Funds Halt Redemptions
November 5, 2008

The rash of hedge funds halting redemptions continues as global markets spiral down with two more freezing their assets.

GILD Arbitrage, the first registered Baltic hedge fund, will halt redemptions and subscriptions until May 5, citing “market turbulence.'”

The fund, managed by the Tallinn, Estonia-based investment bank GILD Bankers, took the step because of “the risk of treating some investors unfairly” and because it didn’t want “to act too hastily in realizing the potential of our fund investments,” Bloomberg News reports, citing Tonno Vaehk, who oversees the fund, in an e- mailed statement.

The fund, which focuses on arbitrage, has 300 investors and total assets of about US$127 million.



Jim Sinclair’s Commentary

Today is a good day to review John’s excellent thoughts,  

John Embry: Gold’s Game-Changing Moment Could be Fast Approaching
Tuesday, October 28, 2008

In a recent Business News Network interview, Amanda Lang talks with John Embry, Chief Investment Strategist at Sprott Asset Management, about his position on precious metals (bullish) and base metals (bearish). While hesitating to make a definitive prediction in the midst of such widespread asset destruction, Embry nonetheless looks beyond the carnage to what he suggests could be the seminal event for gold-the possibility of default on physical delivery for the December futures contract. He also explains why gold has failed to rise to the occasion of the worst-case financial scenario in history. Below are some excerpts from the interview, edited for length and clarity.

Amanda Long: People say gold really should be doing better than it is now and that actually becomes a justification for not buying it. It’s not doing what it should be doing in a crisis and, therefore, I don’t want to own it.

John Embry: That is a wonderful analysis because that is exactly the mindset the guys who are driving the price down are trying to create. Gold doesn’t work so keep away from it. They’re able to control the price quite easily in the paper markets because the paper markets are so huge in comparison. “The guys” – the central banks and their bullion bank accomplices-have a lot of power and a lot of money, so they can overwhelm the other side. But what’s happening is that the physical supply is diminishing dramatically. It’s getting harder and harder to purchase gold and silver through traditional avenues. You can’t get it in coin shops to any extent. You can’t get it through your banks. The physical side is really constricted by supply. That, to me, is the reality. The paper stuff is just the illusion.

AL: Now the problem, of course, for investors is that the paper market is the one you’ve got to play and, for the most part, it affects the price. How will that be resolved?



Jim Sinclair’s Commentary

It is not the gold part of this article as much as “MUMBAI: With the credit crisis having a direct impact on funding costs and drying up of inter-bank credit lines, a few foreign banks have altogether stopped supplies of gold to Indian banks in a bid to reduce their exposure to Asian markets.”

This statement concerning inter-bank credit lines is a fib or Libor is a world class whopper.

Foreign banks cut down gold supply to India
5 Nov, 2008, 0326 hrs IST,
Ram Narsinghdev Sahgal, ET Bureau

This comes at a time when global liquidity pressures have eased considerably and local demand for the yellow metal has picked up as prices have come off the highs witnessed in the early part of October. Dealers from many banks told ET that supplies have been squeezed with banks, such as Standard Bank of South Africa, one of the main suppliers, Commerzbank and UBS, stopping supplies altogether or reducing them on a consignment basis.

“Both Commerzbank and Standard Bank have stopped supplies on a consignment basis to Indian banks since October, while UBS has reduced its exposure,” said a bullion dealer from a public sector bank.

“Apart from the cost of funds having played a part in their decision to stop or go slow on supplies, the main reason is reluctance on part of these banks to take exposure to Asian banks for fear of defaults.”

While Standard Bank refused to comment, email queries to UBS and Commerzbank failed to elicit an immediate response.

The stoppage of supplies from these banks come even as gold lease rates – the difference between Libor and gold forward offered rates fixed by six banks – have come off their highs witnessed in October and even as the London offered interbank rate (Libor) eased considerably as part of pump priming efforts in western economies.