In The News Today

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Dear CIGAs,

Here is a full library of Martin Armstrong for those interested. His last is dated April 9th 2009

Jim Sinclair’s Commentary

The Taliban start the move inland. Pakistan is history.

So few have thought this situation out.

Taliban, Punjabi militants take insurgency to Pakistan’s heartland: Report
New York, April 14, 2009
First Published: 10:26 IST(14/4/2009)
Last Updated: 11:25 IST(14/4/2009)

As they come under US Drone attacks in the tribal areas on the Pakistan-Afghan border, Taliban militants have joined hands with Punjabi militants to push insurgency into the heartland of Pakistan, says the New York Times.

Already villages and towns in Dera Ghazi Khan district in south-western Punjab province are virtually under the control of militants, posing a new challenge to the stability of Pakistan, the paper said on Monday.

The report quoted police officials warning Islamabad that if it does not take decisive action, insurgency could spread in Punjab, leading to destabilization of Pakistan.

"I don’t think a lot of people understand the gravity of the issue…if you want to destabilize Pakistan, you have to destabilise Punjab (first)," the report quoted a senior Pakistani police official as saying.

Pakistani Punjab accounts for more than half of the country’s population. After the Swat Valley which is now under Taliban control, the report says, Islamic militants have infiltrated south-west Punjab villages and town so deeply that they have turned them "no-go zones” and imposed their version of Islam on residents.


Jim Sinclair’s Commentary

Along with the dollar went capitalism. Along with the Constitution went Democracy.

Fed’s Flood May Leave Democracy Needing Bailout: Kevin Hassett
Commentary by Kevin Hassett

April 13 (Bloomberg) — The wise men of Washington keep finding more core beliefs that we have to give up. First it was free markets. Now it’s democracy.

The financial rescue may be the least popular big-ticket government program in history. If the U.S. Treasury decides it needs more money to keep the bailout going, it is anybody’s guess whether Congress would provide it.

As a result, Treasury and the Federal Reserve have been running what feels to this lifelong student of fiscal policy like a scam.

Many economists believe that helping financial institutions turn their less liquid assets into hard cash is a key step toward returning them to good footing. The best way to achieve that in a democracy would be for Congress to appropriate the funds to acquire the assets and for Treasury to borrow the money that i t needs.

But Congress is unwilling to appropriate enough money, so Treasury and the Fed have cooked up a work-around: the Fed buys the assets instead. Since the Fed exists outside of the normal budget process, no permission from elected officials is required.


Jim Sinclair’s Commentary

It is legal to lie about the value of your assets, but let’s be real. That lie does not create CASH fast when you need it to survive.

Bank of America May Need More Capital, Wachovia Says (Update2)
By David Mildenberg

April 14 (Bloomberg) — Bank of America Corp., the largest U.S. bank, is not as well capitalized as most of its peers and has “precious little wiggle room” before it may be forced to sell new stock, according to Wachovia Capital Markets LLC.

Bank of America retains “sizeable exposures to what we would deem are worrisome assets,” including $148 billion in home equity loans and credit lines and $111.5 billion in credit- card and other revolving loans, Wachovia’s Matthew Burnell said in a report dated yesterday. He initiated coverage of Charlotte, North Carolina-based Bank of America at “underperform” with a valuation range of $7 to $8 a share.

Burnell joins Michael Mayo of Calyon Securities and Paul Miller of FBR Capital Markets among analysts who said Bank of America may need to raise capital this year because of borrower defaults. The lender raised $10 billion in October selling stock, and the U.S. government has purchased $45 billion in preferred shares to bolster the firm.

Burnell expects Bank of America to lose 13 cents per share this year, mostly because of higher credit costs in its consumer and small business banking unit. The average estimate of 21 analysts compiled by Bloomberg is a 39-cent profit in 2009.

Bank of America doesn’t comment on analyst reports, said Scott Silvestri, a spokesman.


Jim Sinclair’s Commentary

You cannot lie your way out of a credit crisis, even if it is legalized, wherein trust is missing between parties, all who know the values are cartoons.

"The Financial Accounting Standards Board (FASB) was strong-armed by Congress to relax mark-to-market accounting rules to allow banks to value illiquid securities based on expected cash flow models rather than recent prices. If these rules were not eased, write downs would be rising because the market prices of these loans continue to fall.

“Coincidence? I think not,” says economist Ed Yardeni who figures that suspension of mark-to-market padded Wells Fargo’s bottom line leading to higher than expected earnings of US$3-billion in Q1. At the very least, says Yardeni, mark-to-market allowed Wells to end toxic write-offs."

Dressing up the Banks
Posted: April 14, 2009, 10:33 AM by Jonathan Ratner
If the home team has a weak goaltender, narrow the goal posts. Relaxation of mark-to-market rules is coinciding with a profit recovery for U.S. banks in the first quarter of 2009. Despite the rally in bank stocks, papering over losses is no reason to buy banks. Investors should take profits on the quarter and await a sustained recovery in the housing market.

The Financial Accounting Standards Board (FASB) was strong-armed by Congress to relax mark-to-market accounting rules to allow banks to value illiquid securities based on expected cash flow models rather than recent prices. If these rules were not eased, write downs would be rising because the market prices of these loans continue to fall.

“Coincidence? I think not,” says economist Ed Yardeni who figures that suspension of mark-to-market padded Wells Fargo’s bottom line leading to higher than expected earnings of US$3-billion in Q1. At the very least, says Yardeni, mark-to-market allowed Wells to end toxic write-offs.

Goldman Sachs took things one step further when it reported US$1.8-billion in profits in the first quarter of 2009. The company conveniently dropped a US$1.3-billion pre-tax December loss on its books by shifting from a fiscal year ending November to a December year end, according to Barry Ritholtz of The Big Picture.

The change in valuation on bank assets from market prices to expected cash flow could eventually catch up with banks. As defaults rise the gap between these two valuation methods will converge because cash flows will fall. This is a major risk to owning banks and betting on a sustained economic recovery at this juncture




Jim Sinclair’s Commentary

You know those Rudolph Steiner free spirit types. I am certain the 3 year olds were are the heart of this not-event.

Raided school ‘knew nothing’ about power station protesters
By Theo Usherwood, Press Association
Tuesday, 14 April 2009

The school where 114 suspected protesters were arrested in connection with a plot to demonstrate at a power station said today that it knew nothing about the plans.

Police swooped on the Iona School in Sneinton Dale, Nottingham, yesterday, saying the suspects, who were meeting at the school, posed "a serious threat" to the nearby Ratcliffe-On-Soar plant.

Those arrested have now been interviewed and released on bail, a spokeswoman for Nottinghamshire Police said earlier.

Today Richard Moore, a teacher at the school, said no-one had permission to hold a meeting there.

In a statement, he said: "We are as shocked as anyone else to discover the events that had taken place on our premises.

"We had, and have, no knowledge of these activities and any access to the premises was completely unauthorised.


Jim Sinclair’s Commentary

Quantitative easing or just good old debt Monetizing yourself? I would go for both.

Treasuries Gain After Federal Reserve Buys Government Debt
By Dakin Campbell

April 13 (Bloomberg) — Treasuries rose after the Federal Reserve completed the first of three buybacks of government debt slated for this week in an effort to lower borrowing costs and revive the world’s largest economy.

Yields on 10-year notes fell the most since March 18, when policy makers announced the $300 billion program, as the central bank bought $7.37 billion in two- and three-year securities. The Fed has acquired $43.9 billion of Treasuries since beginning the purchases on March 25.

“The U.S. government is the 800-pound gorilla in the bond market,” Andrew Brenner, co-head of structured products and emerging markets in New York at MF Global Inc., the world’s largest broker of exchange-traded futures and options contracts, wrote in a note to clients. “Bond markets acted in accordance with the liquidity provided and traded up.”

The yield on the 10-year note fell seven basis points, or 0.07 percentage point, to 2.86 percent at 4:47 p.m. in New York, according to BGCantor Market Data. The price of the 2.75 percent security due February 2019 rose 18/32, or $5.63 per $1,000 face amount, to 99 2/32.

Ten-year yields have traded in a range between 2.45 percent and 3.05 percent since late January as concerns about record Treasury supply were offset by the Fed’s purchase program.


Jim Sinclair’s Commentary

Sentiment indices may have recent gotten kudos in the press, but buying is not evident. This problem is primarily financial, huge, growing and threatening more pain and suffering for the man in the street.

Stores suffer big drop in March sales
Unexpected 1.1% decline in overall sales follows two months of gains.
By Parija B. Kavilanz, senior writer
Last Updated: April 14, 2009: 9:34 AM ET

NEW YORK ( — Retail sales suffered an unexpected big decline in March which broke two straight months of improving sales, the government reported Tuesday.

The Commerce Department said total retail sales fell 1.1% last month, compared with February’s revised gain of 0.3%. Sales in February were originally reported to have dipped 0.1%.

Economists surveyed by had been expecting an increase of 0.3% in March.

Sales excluding autos and auto parts fell a surprising 0.9% compared to a revised 1% increase in the measure for February. February ex-auto sales were originally reported to have increased 0.7%.

Economists had forecast March sales, excluding auto purchases, to be unchanged from the previous month.


Jim Sinclair’s Commentary

Go Trader Dan!

Gov. Perry Backs Resolution Affirming Texas’ Sovereignty Under 10th Amendment
HCR 50 Reiterates Texas’ Rights Over Powers Not Otherwise Granted to Federal Government
April 09, 2009

AUSTIN – Gov. Rick Perry today joined state Rep. Brandon Creighton and sponsors of House Concurrent Resolution (HCR) 50 in support of states’ rights under the 10th Amendment to the U.S. Constitution.

“I believe that our federal government has become oppressive in its size, its intrusion into the lives of our citizens, and its interference with the affairs of our state,” Gov. Perry said. “That is why I am here today to express my unwavering support for efforts all across our country to reaffirm the states’ rights affirmed by the Tenth Amendment to the U.S. Constitution. I believe that returning to the letter and spirit of the U.S. Constitution and its essential 10th Amendment will free our state from undue regulations, and ultimately strengthen our Union.”

A number of recent federal proposals are not within the scope of the federal government’s constitutionally designated powers and impede the states’ right to govern themselves. HCR 50 affirms that Texas claims sovereignty under the 10th Amendment over all powers not otherwise granted to the federal government.

It also designates that all compulsory federal legislation that requires states to comply under threat of civil or criminal penalties, or that requires states to pass legislation or lose federal funding, be prohibited or repealed.

HCR 50 is authored by Representatives Brandon Creighton, Leo Berman, Bryan Hughes, Dan Gattis and Ryan Guillen.


Jim Sinclair’s Commentary

To my understanding, but please correct me if I am wrong, consumers cannot exhaust their credit card debt anymore via bankruptcy.

Bankruptcies surge despite law meant to curb them
Apr 13, 6:38 PM (ET)

RALEIGH, N.C. (AP) – The number of U.S. businesses and individuals declaring bankruptcy is rising with a vengeance amid the recession, despite a three-year-old federal law that made it much tougher for Americans to escape their debts, an Associated Press analysis found.

"There’s no end in sight," said bankruptcy lawyer Bryan Elliott of Hickory, N.C., who is working seven days a week and scheduling prospective clients a month in advance. "To be doing this well and having this much business, it is depressing. It’s not a laugh-a-minute job."

Nearly 1.2 million debtors filed for bankruptcy in the past 12 months, according to federal court records collected and analyzed by the AP. Last month, 130,831 sought bankruptcy protection – an increase of 46 percent over March 2008 and 81 percent over the same month in 2007.

Bob Lawless, a professor at the University of Illinois College of Law, said bankruptcies could reach 1.5 million this year and level off at 1.6 million next year – around the same time economists expect an economic recovery to begin.

Congress voted in 2005 to make bankruptcy more cumbersome after years of intense lobbying from the nation’s lenders, who complained that people were abusing the system. Before the move to change the law, bankruptcies were running at what was then an all-time high of about 1.6 million per year.