In The News Today

Posted at 6:58 PM (CST) by & filed under In The News.

Dear CIGAs,

The hedgies and OTC derivatives have not only killed everything and everybody they have touched, they both have killed capitalism.

The US dollar will not escape their bloodstained, cursed hands.

All the money from the bailout goes into the company and then out to the counter parties to AIG OTC derivative counter parties.

The financial black hole idea is total bulls**t. All that money is in the system in a concentrated form.

When the super wealthy criminals have all the paper money then they will have one hell of a paper problem.

Today’s AIG Bailout Won’t Be Its Last (AIG)
Joe Weisenthal|Mar. 2, 2009, 8:15 AM|clip_image0017

This morning the government officially announced plans to prop up AIG with another $30 billion, deeming the potential systemic risk of a collapse to be too great. Perhaps we should stop calling this a bailout of AIG, which, after all, has seen its stock killed. It’s basically worthless. It’s the company’s counterparties that are getting bailed out each time.

Everytime AIG has reworked its deal, we’ve been sure that it wouldn’t be the last time, and again, it doesn’t look like this will be either.

As significantly, the restructuring components of the government’s assistance begin to separate the major non-core businesses of AIG, as well as strengthen the company’s finances. The long-term solution for the company, its customers, the U.S. taxpayer, and the financial system is the orderly restructuring and refocusing of the firm. This will take time and possibly further government support, if markets do not stabilize and improve.

In other words, it’s a matter of when, not if AIG’s counterparties will need to be bailed out again

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Jim Sinclair’s Commentary

This is where we are headed:

Usdollar100Marx.jpg

 

OTC derivatives:

"Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth – the soil and the labourer."
–Karl Marx

The last 8 years:

"For the bureaucrat, the world is a mere object to be manipulated by him."
–Karl Marx

The Federal Reserve bailouts today:

"In bourgeois society capital is independent and has individuality, while the living person is dependent and has no individuality."
–Karl Marx

What is to come:

"Men’s ideas are the most direct emanations of their material state."
–Karl Marx

 

Jim Sinclair’s Commentary

Contrary to present opinion, AIG is a fine insurance company. It has insured the event of hyperinflation. Hyperinflation guarantees that Alf will be correct on the price of gold.

All of this a gift from the OTC Derivative manufacturers and distributors presently counting their huge ill gotten gains.

The new way to succeed is to be politically connected while trashing your company and employees.

Regards,
Jim

 

BNY Mellon’s fx team: Ultimately, buy gold
Posted by Izabella Kaminska on Feb 26 15:16.

Bank of New York Mellon’s London-based currency strategy team (made up of Simon Derrick and Neil Mellor) presented on Wednesday a very compelling view of what to expect in the forex markets in the next year.

The short view: euro, yen weakness cometh as the dollar strengthens. The longer three to six month view – ultimate dollar weakness and a gold rally.

Now for the very macro rationale…

Looking back over the crisis BNYM explain how most fx moves since 2001 could largely have been expected as they made complete rationale sense – eg. the development of the carry-trade because of Japan’s accomodative policy etc, and a hike in global liquidity because of low rates in the US. As they explain:

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Jim Sinclair’s Commentary

On and on it goes. Hyperinflation will not be avoided.

U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan

Washington, DC – The U.S. Treasury Department and the Federal Reserve Board today announced a restructuring of the government’s assistance to AIG in order to stabilize this systemically important company in a manner that best protects the US taxpayer. Specifically, the government’s restructuring is designed to enhance the company’s capital and liquidity in order to facilitate the orderly completion of the company’s global divestiture program.

The company continues to face significant challenges, driven by the rapid deterioration in certain financial markets in the last two months of the year and continued turbulence in the markets generally.  The additional resources will help stabilize the company, and in doing so help to stabilize the financial system.

As significantly, the restructuring components of the government’s assistance begin to separate the major non-core businesses of AIG, as well as strengthen the company’s finances. The long-term solution for the company, its customers, the U.S. taxpayer, and the financial system is the orderly restructuring and refocusing of the firm.  This will take time and possibly further government support, if markets do not stabilize and improve.

Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high.  AIG provides insurance protection to more than 100,000 entities, including small businesses, municipalities, 401(k) plans, and Fortune 500 companies who together employ over 100 million Americans. AIG has over 30 million policyholders in the U.S. and is a major source of retirement insurance for, among others, teachers and non-profit organizations.  The company also is a significant counterparty to a number of major financial institutions.

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Jim Sinclair’s Commentary

Harvard is getting killed in OTC derivatives. Harvard has the greatest influence on the Obama Administration.

Does that give you a hint of what we are in for.

Failing at Harvard: Ivy Cash King Tumbles
Harvard University Pays the Price for Exotic Bets
By BERNARD CONDON and NATHAN VARDI 
Forbes.com
March 1, 2009

Stocks were tumbling last fall as the new school year began, but at Harvard University, it was as if the boom had never ended.

Workers were digging across the river from Harvard’s Cambridge, Mass., home, the start of a grand expansion that was to eventually almost double the size of the university. Budgets were plump, and students from middle class families were getting big tuition breaks under an ambitious new financial aid program.

The lavish spending was made possible by the earnings from Harvard’s $36.9 billion endowment, the world’s largest. That pot was supposed to be good for $1.4 billion in annual earnings.

Behind the scenes, though, a different story was unfolding.

In a glassed-walled conference room overlooking downtown Boston, traders at Harvard Management Co., the subsidiary that invests the school’s money, were fielding questions from their new boss, Jane Mendillo, about exotic financial instruments that were suddenly backfiring.

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Jim Sinclair’s Commentary

Here is a question that carries with it a logically inviting conclusion.

If one Gold ETF claims not to be an OTC derivative Gold ETF that means that others are OTC derivative Gold exchange traded funds.

Be careful "HOW" and "WITH WHAT VEHICLE" you protect yourself.

Allocated Gold Only for Dubai ETF
By: Peter Cooper, Arabian Money
Posted Monday, 2 March 2009

The Nasdaq Dubai and World Gold Council launched its long awaited gold exchange traded fund today, which is both Shariah compliant for Islamic investors and 100 per cent backed by physical gold.

‘This is not a derivative product because it is 100 per cent backed by allocated gold held in London vaults by HSBC, and audited both by traditional and shariah auditors,’ CEO of the WGC Aram Shishmanian told ArabianMoney.Net.

Allocated gold

He said it was important to understand the difference between unallocated and allocated gold. ‘The Dubai ETF has allocated gold, so there is no third party between the metal and its owner. The ETF certificate is an entitlement to one-tenth of an ounce of gold.’

Trading under the ticker symbol GOLD, the new ETF is the first new launch on the Nasdaq Dubai this year, and the one-time 60 basis point charge is exactly the same as other existing ETFs.

Will this make the Dubai ETF sufficiently different to attract regional investors who already have the exchanges of the world at their finger tips?

‘We have launched a series of ETFs around the world and have always found that a regional product stimulates new demand,’ said Simon Village, executive director of Dubai Commodities Asset Management.

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Jim Sinclair’s Commentary

Lacker calls for the US Treasury to bail out the Fed. Independence is NOT the issue. The Fed balance sheet is the issue.

Lacker knows what markets do not. The condition of the Federal Reserve Balance sheet is an open invitation to hyperinflation.

Hyperinflation is always associated with slow growth.

Fed’s Lacker Says Mistake to Rely on Slowing Growth
By Craig Torres and Anthony Massucci

May 23 (Bloomberg) — Federal Reserve Bank of Richmond President Jeffrey Lacker said it would be a mistake to rely on a slowing economy rather than central bank policy to curb inflation.

“It is central banks, not the labor market, that drive inflation down,” Lacker said in a speech to the Money Marketeers of New York University yesterday. “Clear communications accompanied by consistent actions could bring about a relatively prompt and low-cost reduction in inflation.”

Lacker, who alone voted to lift interest rates in the last four meetings of 2006, said after the speech he was “comfortable” for now that the Fed’s benchmark rate of 5.25 percent will achieve the bank’s aims.

His doubt that slower growth will cause inflation to recede clashes with the outlook of policy makers such as San Francisco Fed President Janet Yellen. Lacker has repeatedly warned of the danger that inflation expectations will drift higher the longer that price gains exceed officials’ comfort zone.

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Fed’s Lacker:Fed credit programs risk independence
By Alister Bull

ARLINGTON, VA March 2 (Reuters) – Emergency credit market support from the Federal Reserve has sidestepped Congress and could expose the U.S. central bank to political pressure that hurts its independence, a top Fed policy-maker said on Monday.

‘Using the Fed’s balance sheet is at times the path of least resistance, because it allows government lending to circumvent the congressional approval process,’ Richmond Federal Reserve Bank President Jeffrey Lacker said.

‘This risks entangling the Fed in attempts to influence credit allocation, thereby exposing monetary policy to political pressure,’ he told the National Association for Business Economics during a luncheon speech.

Lacker, a voting member of the Fed’s policy-setting committee this year, dissented at its meeting in January to protest against targeted credit easing programs that have pumped hundreds of billions of dollars into financial markets, which have been locked up in panic over bank losses.

He objected to the intrusion of the Fed into private sector lending decisions, and would have preferred the U.S. central bank ease credit conditions via the purchase of U.S. Treasury securities.

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Fed’s Lacker: Opposes Fed policy for picking winners, losers

WASHINGTON (MarketWatch) – Jeffrey Lacker, the president of the Richmond Federal Reserve Bank , said Monday that one reason he is opposed to the Fed’s new credit easing policy because it is picking winners and losers in the market. "While some market segments benefit from reduced funding costs, others may actually see their costs rise as credit is diverted to those markets that have been targeted for support," Lacker said in a speech to business economists. Lacker dissented from the Fed’s last policy statement in late January. Lacker wants the Fed to expand its monetary base but only though purchases of Treasurys because they are a more "neutral" asset class that would not impact other markets. Lacker said that there may be sound market basis that some credit channels are "frozen," suggesting that targeting credit programs are not needed.

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CIGA Marc’s Commentary

The US dollar or Gold? For me the choice is simple!  Particularly thanks to Mr. Sinclair.

Emerging economies eye gold reserves as dlr fears rise
Mon Mar 2, 2009 9:11am EST
By John Irish and Luke Pachymuthu

DUBAI, March 2 (Reuters) – Major emerging economies are seeking to raise their central banks’ gold reserve holdings as fears of a sharp depreciation in the U.S. dollar mount, senior industry officials said on Monday.

Investors have been piling into gold as a safe haven as the the world’s worst financial crisis since the 1930s depression sent global stock markets crashing.

"In this recession it is India and China which are going to grow at a slow rate, but they are growing," said Aram Shishmanian, chief executive officer of the World Gold Council.

"And they will naturally be looking to gold as part of their reserve asset management strategy, and=2 0I see them buying."

China, the biggest foreign holder of dollar denominated treasury securities with some $681.9 billion or about 12 percent of treasury papers outstanding, could reverse that by paring its dollar holdings.

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