In The News Today

Posted at 4:05 PM (CST) by & filed under In The News.

Dear CIGAs,

Remember less than six weeks ago the prevailing opinion of the talking heads was that the euro was stone dead? The wrong basis for this opinion was that Euroland was in much more trouble than the USA.

The hedgie’s raid was on against the Middle European currencies (still in force) and the prevailing opinion in the financial media is that they are dead. In dollar terms they are all going to look a lot better, especially the healthier ones.

 

Jim Sinclair’s Commentary

You and I know Putin has not been far off the mark in his recent general comments on monetary policy. These comments have not been well entertained by the US media.

Putin is spot on here.

Putin Warns Against Printing Money to Cover Deficit
By Alex Nicholson

March 19 (Bloomberg) — Russia won’t resort to printing money to cover budget deficits that Prime Minister Vladimir Putin said are likely to continue for the “next few years.”

The government should tackle the deficit “by using the reserves that have been accumulated in recent years, or if necessary by borrowing under market conditions,” Putin told the Cabinet in Moscow today, adding that Russia doesn’t yet need to borrow and won’t seek loans abroad. “Resorting to a printing press would be unwise and extremely dangerous.”

Finance Minister Alexei Kudrin said the government plans to borrow 410 billion rubles ($12.3 billion) more than it repays on the domestic market this year, which amounts to about 1 percent of gross domestic product.

Russia’s revised 2009 budget contains a deficit of 2.98 trillion rubles, or 7.4 percent of planned GDP of 40.4 trillion rubles. Kudrin said on March 14 that the deficit may exceed 8 percent of GDP. The deficit will be reduced to 3 percent of GDP in 2011, according to a draft of the government’s anti-crisis plan distributed to reporters.

The government approved the plan and the revised budget with Russia’s first deficit in a decade as it attempts to stabilize the economy with a 1.6 trillion ruble bailout modeled on plans developed by the U.S. and U.K.

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Jim Sinclair’s Commentary

Financial crimes are not victim-less. The way to correct the criminal element (suits) is to make financial crimes, in which a death is a result, a capital crime. They are capital crimes, you know!

Without buyers, Bank Medici to give up its license
Thursday, March 19, 2009

VIENNA: Bank Medici, which managed $3.2 billion in funds that were invested in the Ponzi scheme operated by Bernard L. Madoff, will return its banking license after talks with possible buyers of the bank failed, the Austrian lender said Thursday.

The bank said it would probably not be able to strike a deal soon because market conditions had cast a shadow over negotiations with investors who it had said might be interested in its banking license.

‘‘Market turbulences have heavily influenced talks to potential investors, and a transaction in the near future is unlikely,’’ Bank Medici said.

‘‘Under the current circumstances, it is not possible to build a substantial new banking business to substitute lost revenue,’’ it added. ‘‘Therefore the supervisory board decided yesterday to return the banking license.’’

Medici was the investment manager for the Herald Lux Fund and a distributor for both Herald Lux and another fund, Herald, which had a combined $2.1 billion under management before Mr. Madoff’s fraud was exposed. It was also the investment manager for the Thema International Fund, which had $1.1 billion under management.

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Jim Sinclair’s Commentary

Recall our conversation concerning the decline in the dollar from the algorithm driven dollar bear market rally being akin to a person walking into an elevator only to find no elevator car, but only an elevator shaft straight down.

China backs talks on dollar as reserve -Russian source
Thu Mar 19, 2009 11:24am EDT
By Gleb Bryanski

MOSCOW, March 19 (Reuters) – China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decisionmaking globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency)," the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund’s Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

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Jim Sinclair’s Commentary

The end is precious!

Jim Sinclair’s Commentary

Back door or front door, no matter what it is getting bailed out which will lead to hyperinflation.

It must be obvious to you now that there will be no limit to bailouts short of a new revolution in the USA.

Parts makers are surging on the stock exchange because they are broke and getting bailed out to go broke again.

It should also be obvious to you that when I sent you an email titled "This is It," it was in fact "It."

I do not send emails unless there is large interest and the content is need to know.

U.S. to Aid Auto Industry With $5 Billion for Suppliers
By BILL VLASIC
Published: March 19, 2009

DETROIT — The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The Treasury Department said the program would guarantee payments to suppliers for products shipped to ailing car companies.

The supplier fund is the first direct action taken by President Obama’s auto task force to prop up the auto industry, which has suffered big losses from the steep decline in new-vehicle sales.

“The Supplier Support Program will help stabilize a critical component of the American auto industry during the difficult period that lies ahead,” Treasury Secretary Timothy F. Geithner said in a statement.

The presidential task force is continuing to review requests for additional federal aid from General Motors and Chrysler, both of which are subsisting on government loans.

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Jim Sinclair’s Commentary

No wonder Spitzer got set up. He asked for it. He may be asking for it again as below.

This also speaks to the strategy of setting up and then knocking down the straw man to create a diversion from the real for the general public.

The Real AIG Scandal
Tuesday 17 March 2009
by: Eliot Spitzer  |  Visit article original @ Slate Magazine

It’s not the bonuses. It’s that AIG’s counterparties are getting paid back in full.

Everybody is rushing to condemn AIG’s bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG’s counterparties are justified with an appeal to the sanctity of contract. If AIG’s contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

But wait a moment, aren’t we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes – income taxes to sales taxes – to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won’t be laid off. Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? Haven’t we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn’t they have accepted a discount, and couldn’t they have agreed to certain conditions before the AIG dollars – that is, our dollars – flowed?

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Jim Sinclair’s Commentary

1. Please note that financial news services this morning are mating the word FRAUD with NAKED SHORT SELLING. The case being quoted is the raid on Lehman after Bear Stearns collapsed. If one entity goes down on this then all entities who have practiced this become targets of successful slam dunk civil litigation. The need is only to review fails to deliver, using "discovery" for the details.

2. Conversations on reinstatement of the "Up Tick Rule" in the US are picking up speed at exchange management and legislative levels. The question is will Canada enforce the rules they have or keep the only onus on the broker to ask if their client intends to make delivery. If the client says yes it all ends there. Market makers in Canada and the US are beards for naked short selling brokerage house income. I have been in this business for 50 years now. There is little I do not know about the cheaters.

3. Banks who are predicting positive earnings in the first quarter of 2009 are relying on a abrogation of the mark to market rules of FASB. Please note Monty’s excellent review of the impact of such a change posted yesterday here…

Bankers don’t give a damn about the damage they do as long as their ends are accomplished. That is the UGLY face of personal enterprise, not a form of capitalism but instead more fascism.

Respectfully yours,
Jim

 

Jim Sinclair’s Commentary

A more accurate depiction of the AIG bailout:

AIG-Robber

 

Jim Sinclair’s Commentary

A very good, simple and clear representation of the problem lacking a practical solution.

clip_image001

 

Jim Sinclair’s Commentary

Here is the reason behind the Fed action to buy Treasuries thereby monetizing in a form, itself.

Allure of US Treasuries set to fade
By Wang Xu (China Daily)
Updated: 2009-03-18 07:27

Holdings of US Treasury bonds rose in January, but the increase is the slightest since last June, indicating the country’s appetite for the securities is set to diminish as a result of the falling trade surplus and rising concern over investment security.

image The country’s reserves of US Treasuries rose by $12.2 billion to $739.6 billion by the end of January, according to the latest International Capital Report by the US Treasury Department. Although China remained the largest creditor of the US government, analysts say its future purchases would shrink.

Treasury debt holdings grew by $14.3 billion in December.

"Purchases of US Treasuries are set to decline, given the fall in the trade surplus," Erh-Cheng Hwa, chief economist of Bank of Communications, told China Daily.

China ran hefty trade surpluses in the past years and accumulated $1.95 trillion in foreign exchange reserves by the end of 2008. In an attempt to seek stable returns, most of the reserves were channeled to low-risk assets such as US Treasury bonds.

The nation’s trade surplus dropped to $4.8 billion in February, down 87.6 percent from a year earlier. Some analysts say it may decline further as the nation’s stimulus package props up demand for foreign goods while doing little to boost exports.

Sun Mingchun, economist with Nomura International, estimates that the trade surplus is likely to fall to $155 billion this year, only about half of last year.

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Jim Sinclair’s Commentary

This is nothing compared to what is coming in the midst of rotten business.

Consumer prices rise 0.4 percent in February
Consumer prices rise in Feb. by largest amount in 7 months as gasoline, clothing prices jump
Martin Crutsinger, AP Economics Writer
Wednesday March 18, 2009, 3:42 pm EDT

WASHINGTON (AP) — U.S. consumer prices rose in February by the largest amount in seven months as gasoline prices surged again and clothing costs jumped the most in nearly two decades.

But the increase appeared to ease many economists’ concerns about dangerous price movements in either direction. The recession is expected to dampen any inflation pressures for at least the rest of this year, while the slight uptick in prices over the last two months also has made the possibility of deflation more remote.

The Labor Department reported Wednesday that consumer inflation rose 0.4 percent in February, the biggest one-month jump since a 0.7 percent rise in July. Two-thirds of last month’s increase, which was slightly more than analysts expected, reflected a big jump in gasoline pump prices.

Core inflation, which excludes food and energy, rose 0.2 percent in February, also slightly higher than the 0.1 percent rise economists expected.

The Federal Reserve, meanwhile, said Wednesday it would spend up to $300 billion to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. The central bank also will spend another $750 billion on mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, bringing its total purchases of those securities to $1.25 trillion.

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Jim Sinclair’s Commentary

New $1 buying power note identified at the Treasury printing press.

Zimbabwe demands apology from USA regarding monetary policy criticisms

new dollar

 

Jim Sinclair’s Commentary

What you will not see on Bloomberg

Jim Sinclair’s Commentary

The dollar rally has fundamentally been a joke since it started.

The dollar rally was technical money flows that triggered algorithms firing illogical signals bound to bury the computer trader.

.7200 on the USDX is not a fundamentally defendable level.

.5200 to .6200 is the magnet.

By the way, $887.50 on gold wasn’t too bad either.

Dollar Rally Crumbles as Fed Ramps Up Printing Press
By Oliver Biggadike and Ye Xie

March 19 (Bloomberg) — The rally that pushed the dollar to the highest levels since 2006 is in danger of crumbling as the Federal Reserve starts buying Treasuries and ramps up its purchases of mortgage debt, adding to a flood of greenbacks.

“The implications of today’s Fed decision are unambiguous,” currency strategists at Citigroup Inc. wrote in a research report within a half hour of the Fed’s decision yesterday. The dollar “should weaken,” they said.

Fed policy makers said yesterday they plan to buy as much as $300 billion of U.S. government bonds and step up purchases of mortgage bonds, expanding the central bank’s balance sheet by as much as $1.15 trillion. The extra supply of dollars threatens to overwhelm investors just as the budget deficit swells.

The trade-weighted Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, tumbled 2.7 percent to 84.595, its biggest one-day drop since 1971. That pushed its decline to 5.6 percent since reaching 89.62 on March 4, the highest in almost four years.

It fell yesterday by the most in nine years versus the euro, to $1.3474, and traded at $1.3631 as of 12:01 p.m. in London. The dollar dropped today against Japan’s currency to a three-week low of 94.72 yen.

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Jim Sinclair’s Commentary

Hyperinflation is caused by inventing money out of thin air in significant size.

The following Times article defines yesterday’s announcement for Fed initiative action as "a tactic that amounts to creating vast new sums of money out of thin air.

Fed Plans to Inject Another $1 Trillion to Aid the Economy
By EDMUND L. ANDREWS
Published: March 18, 2009

WASHINGTON — The Federal Reserve sharply stepped up its efforts to bolster the economy on Wednesday, announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.

Having already reduced the key interest rate it controls nearly to zero, the central bank has increasingly turned to alternatives like buying securities as a way of getting more dollars into the economy, a tactic that amounts to creating vast new sums of money out of thin air. But the moves on Wednesday were its biggest yet, almost doubling all of the Fed’s measures in the last year.

The action makes the Fed a buyer of long-term government bonds rather than the short-term debt that it typically buys and sells to help control the money supply.

The idea was to encourage more economic activity by lowering interest rates, including those on home loans, and to help the financial system as it struggles under the crushing weight of bad loans and poor investments.

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Jim Sinclair’s Commentary

Looks like the Fed and Treasury want a 1930’s type rally.

Don’t feed the bears
Commentary: SEC should restore the uptick rule to calm financial markets
By Chuck Jaffe, MarketWatch
Last update: 10:40 p.m. EDT March 17, 2009

BOSTON (MarketWatch) — The government is stressing that it doesn’t want companies — especially financial firms — to collapse. Now it looks like Washington may finally offer some support by reinstating a rule that was foolishly removed after working for more than 65 years.

Forget for a moment that trading rules always sound like inside baseball because the logic behind both the rules and stock trading can be hard to follow. But if you follow the string out long enough, you will quickly figure out how one little rule change probably made your bad market ride even worse.

On Monday, a bipartisan bill was introduced in Congress that would require the Securities and Exchange Commission to reinstate the "uptick rule," which from 1938 until 2007 prevented traders from making a short sale unless the price of a stock in its most recent trade had been up from previous levels. It was the second Congressional push for the rule this year, and this time it appears the calls for action will be answered because, just last week, the SEC announced plans to revisit the rule — and to consider other short-selling regulations — on April 8.

Short shrift

A short sale is a bet against a stock, and typically involves borrowing shares, selling them, and waiting for the stock’s price to decline before buying the shares back on the open market. The borrower gets the stock back, and the short-seller keeps the difference between the higher selling price and the lower repurchase price.

The basic reason for the uptick rule is that requiring the market to have an upward move makes short sales more difficult, easing some of the downward pressure that builds when a market is in a free-fall.

Critics noted that traders and market sharpies never worried much about the uptick rule, knowing that plenty of stocks that are dropping will take a momentary pause for a quick upside trade. Moreover, short-sellers and their trading partners would sometimes create those upside trades just so they could follow suit with the short sale they really wanted to do.

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Jim Sinclair’s Commentary

The inviting conclusion to the panic tactics of the US financial leaders is that the entire mountain of OTC derivatives have rolled over as a domino impact of the Lehman collapse.

The question now is if the rating agencies will keep US debt AAA.

I would guess the rating agencies will remain a degraded, untrustworthy bunch and keep the rating.

What the Pros Say: US Is Now ‘Bankrupt’
19 Mar 2009 | 06:04 AM ET

Global stocks traded higher, as did the dollar against the euro, Thursday after the Federal Reserve’s surprise announcement it would buy $300 billion in US Treasurys in order to help the ailing economy.

But experts tell CNBC they have concerns over the Fed’s latest move and that the current national balance sheet is a disaster.

US is Already ‘Bankrupt’

Technically, the U.S. is already "bankrupt" because it has a debt that is almost four times the size of its economy, says Puru Saxena, CEO of Puru Saxena Wealth Management. He tells CNBC that the U.S. is at risk of hyperinflation.

Fed to Buy Treasurys is Not a Good Sign

Stephen Roach, chairman for Asia at Morgan Stanley does not view the Fed’s plan to buy $300 billion worth of long-dated government debt as a constructive sign for prospects going forward.

Fed’s Move Unlikely to Help Economy

The Fed pumping money into Treasurys won’t help, says Martin Weiss, president of Weiss Research. He also discusses what can be done to turn the US economy around.

The US Stuck in Zero-Rate Mode?

America is arrogant to deny their similarity to Japan’s economy, says Stephen Roach, chairman for Asia at Morgan Stanley. He tells CNBC that the US economy is in a "zero-interest rate" mode, like Japan.

Quantitative Easing & the Fed’s Balance Sheet

Thomas Lam, vice president and senior treasury economist at UOB, says the Fed’s latest moves such as to buy long-dated Treasurys will stretch its balance sheet and pump more liquidity into economy.

Tackling US Economy

Housing problems need to be tackled before the U.S. economy can pick up, according to Adam Carr, senior economist at ICAP.

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Jim Sinclair’s Commentary

You have to see the mindset of the "I deserve it all, and I deserve it NOW!"

The public is starting to get very angry at this "screw you" attitude.

That is taxpayer’s money they are squandering on a bunch of idiots that caused all the problems in the first place.

Four Fannie Mae execs to get big bonuses
updated 1:00 a.m. EDT, Thu March 19, 2009

NEW YORK (CNN) — Troubled mortgage giant Fannie Mae planned to pay four top executives retention bonuses ranging from $470,000 to $611,000, according to a February SEC filing.

Executive vice presidents Kenneth Bacon, David Hisey, Michael Williams and Thomas Lund will be receiving bonuses of close to half a million dollars each. Bacon supervises community development for the company, Hisey is its deputy chief financial officer, Williams is its COO and Lund oversees the single-family mortgage business.

By contrast, Fannie Mae CFO David Johnson received no bonus on top of his salary of $625,000, while CEO Herb Allison received no compensation or bonuses in 2008 or 2009.

A spokesman for Fannie Mae deferred comment on the bonuses to the Federal Housing Finance Agency.

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Jim Sinclair’s Commentary

This is our money all these bankster types are paying out.

Judge orders release of Merrill bonus recipient names

NEW YORK (CNN) — New York State Supreme Court Justice Bernard Fried ordered Bank of America on Wednesday to disclose information about nearly $3.6 billion in bonuses Merrill Lynch paid employees just before it was acquired by the bank.

The judge’s decision concluded weeks of back-and-forth between New York Attorney General Andrew Cuomo and Bank of America regarding the release of the information. Cuomo is leading an investigation into whether Bank of America and Merrill failed to properly disclose to shareholders details about the bonuses.

"Today’s decision in the Bank of America case is a victory for taxpayers," Cuomo said in a statement. He added, "Fried’s decision will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December. "

Bank of America spokesman Scott Silvestri said the bank would abide by the judge’s ruling.

"We will, of course, comply with the order of the court and turn over the information requested. We will continue to cooperate in the attorney general’s investigation," Silvestri said.

A petition to keep information including bonus details confidential was initially filed by Bank of America in New York state court on March 4. At the time, Bank of America spokesman Robert Stickler said, "We do this out of concern for the privacy of our employees and because we think disclosure would create a competitive disadvantage."

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Jim Sinclair’s Commentary

This is simple, predictable and unavoidable no matter how creative purchases via the Caribbean can be. This is the primary reason for the Fed committing to purchases US Treasuries, the value of which is a number certain to grow in size over time.

Quantitative Easing here is Easing of Credit Markets due to the externally falling sales by the US Treasury more than actual sales by non US entities.

Foreign debt purchases fall sharply in January
Offshore banking centers sell Treasurys; central banks sell agencies
By Laura Mandaro, MarketWatch
Last update: 3:59 p.m. EDT March 16, 2009

SAN FRANCISCO (MarketWatch) – A big jump in foreign sales of long-term U.S. securities raised concerns Monday that the U.S., in the midst of a massive debt issuance to fund its economic revival plans, may run into trouble getting other countries to finance its deficit.

Foreign purchases of long-term U.S. Treasurys, Fannie Mae (FNM) and Freddie Mac (FRE

) bonds, corporate debt and stocks — netted for acquisitions of foreign debt from U.S. residents — dropped to negative $43 billion in January from positive $34.7 billion in December, said the Treasury Department Monday.

January’s sales marked a record low, said currency strategist Michael Woolfolk, and the reasons for the plunge could spell bad news for the U.S. dollar.

"This was a truly awful report, throwing into question the funding of the U.S. current account deficit," said Woolfolk, senior currency strategist at the Bank of New York Mellon, in emailed comments.

Economists anticipate the U.S. current account gap, or the balance of trade with other countries in goods, services and investments, narrowed to a deficit of about $137.5 billion in the fourth quarter. The Commerce Department releases that report Wednesday.

Concerns that U.S. creditors could balk at buying more U.S. debt were thrown into relief last week after China, the biggest holder of U.S. government debt, said it was worried about the safety of its U.S. bonds.

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