In The News Today

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Jim Sinclair’s Commentary

A 1930s type rally in general equities does not need any reason to occur. It will need the uptick rule put back in place in the USA and enforced in Canada plus action must be taken against naked shorts or the rally will not have the legs of 1930’s.

Credit Union Collapse Signals Depth of Financial Crisis
Geithner’s Toxic Asset Plan Not Specifically Designed for Credit Unions
By Mary Kane 3/26/09 3:09 PM

In a sign of how widespread the nation’s financial crisis has become, even the credit unions are getting creamed.

Problems in the credit union system, once considered a largely mom-and-pop operation immune to turmoil, came to light last week, when their regulator seized two of the nation’s largest credit unions, U.S. Central Credit Union in Lenexa, Kanss, and Western Corp. Federal Credit Union in San Dimas, Calif. The two, with combined assets of $57 billion, are in trouble over the same investments in toxic mortgage backed securities that have felled global banks and led to the credit crunch. Cracks in the credit union system are showing the breadth of the crisis – and raising the possibility of another institution looking to the government for help. In a mirror of the dilemma facing the Federal Deposit Insurance Corp, the insurance fund for credit unions has been depleted by the seizure. Smaller credit unions may have to pony up big fees to replenish it – at the same time economy is hitting them hard, causing depositors to pull out their savings for living expenses. All of it is creating a liquidity squeeze that only threatens to become more severe, said Gerald Hanweck, a finance professor at George Mason University who follows the credit union industry.

“A lot of their membership is becoming unemployed,” Hanweck said. “If the recession keeps getting worse, it’s going to cause a lot of problems for them. More and more credit unions are going to fail.”

The failure of the two large corporate credit unions, which handle investments and other services for the 7,800 traditional retail credit unions, may become a turning point, proving that the industry needs more oversight, Hanweck and others said. The system includes 26 other corporate credit unions, as well as the two that were seized. Yet the credit union industry remains overseen by its own, individual regulator – the National Credit Union Administration, an independent federal agency considered by many as mostly as a cheerleader for the credit union movement, Hanweck said.

All the turmoil could mean that credit unions may become swept up in the Obama administration’s financial regulatory system overhaul, and put under closer supervision by Congress or the FDIC, in addition to requiring a government bailout or some type of federal aid.


Jim Sinclair’s Commentary

As I told you earlier tonight, here comes the wave of bulls**t on SDRs.

UN panel touts new global currency reserve system
Mar 26 04:09 PM US/Eastern

A UN panel of expert economists pressed Thursday for a new global currency reserve scheme to replace the volatile, dollar-based system and for coordinated steps by rich countries to stimulate their economies.

"A new Global Reserve System — what may be viewed as a greatly expanded SDR (Special Drawing Rights), with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, could contribute to global stability, economic strength and global equity," the panel said.

As part of several recommendations to tackle the global financial crisis, the panel also noted recovery would require all developed countries, in the short term, to take "strong, coordinated and effective actions to stimulate their economies."

And it stressed the need to "lay the basis for the long-run reforms that will be necessary if we are to have a more stable and more prosperous global economy and avoid future global crises."

The commission, led by US economist Joseph Stiglitz, a frequent critic of globalization and unbridled free markets, is primarily aimed at finding solutions for developing countries.



Jim Sinclair’s Commentary

The second longer dated Treasury auction today squeaked by so gold took some late selling by the COMEX Comics.

That is good news for gold because there is no chance that the trillion the Fed has set aside to buy US Treasuries has the capacity to offset the lack of foreign buying.

Markets are not pure math calculated on a picture in time.

The fall off of non-US buying of US Treasury instruments is a multiple of the recent $50 billion shortfall.

The Fed better be prepared to self-finance the Treasury because my dear CIGAs, a trillion isn’t what is used to be.

The new extreme "Flailing In The Breeze" plan today took the shape of the US Fed plan to issue their own debt when things get better.

When will people understand that a problem caused by debt and fancy finance cannot be cured by debt and fancy finance. Who is going to act as the Oracle of Washington to declare to the Fed that thing are better now and they can go float debt against expanded and deteriorating balance sheets? This one is an insult to any intelligent person.

Jim Sinclair’s Commentary

The picture speaks for itself.

US says warships deployed before NKorea launch
Thu Mar 26, 11:16 AM

TOKYO (AFP) – The US Navy said Thursday it had deployed two warships in waters off Japan ahead of North Korea’s planned rocket launch early next month.

Two destroyers fitted with Aegis technology to track and destroy missiles left port on Wednesday, US Navy public relations officer Charles Howard told AFP.



Jim Sinclair’s Commentary

Faber’s opinion reflects Galbraith’s interview this morning. The financial situation is grave and no spin, even of an economic bounce, will serve to make it go away. There simply is too much permanently impaired paper. Bank nationalization will occur.

Marc Faber: ‘It Will All End in Disaster’
March 24, 2009

Dr. Doom takes steps to counter his recently growing reputation as a stock market bull. Marc Faber, publisher of the Gloom, Boom and Doom Report, talks with Erik Schatzker about the prospects for equity markets and recent actions by the Fed and Treasury Department.

(Click to play in a new window)

On whether Ben Bernanke has redeemed himself and what that means for stocks:

I do not think so. On the contrary, I think what the government is doing and its economic "dream team" under Mr. Bernanke and Mr. Geithner and Mr. Summers are going to be, from a longer term point of view, rather negative.

But, you understand, we can all sit here and say it will all end in disaster.That I’m sure. But, in the meantime, we can have big moves in markets.

On the new bad assets purchase plan:

I think he’s doing the right thing from a very short term perpective. If you have cracks in your walls and just put paint on it, it will hide them and then you sell your house. But it won’t solve the problems of the cracks – it’s the next owner and these are the children of the current taxpayer who will pay for it.


Jim Sinclair’s Commentary

For your information, courtesy of CIGA JB Slear

OIG-09-035 – Management Letter for Fiscal Year 2008 Audit of the Exchange Stabilization Fund’s Financial Statements

“There appears to be no clear management oversight responsibilities and processes defined or documented to allow for effective review and supervision of financial activities.”