In The News Today

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Dear CIGAs,

Fuzzy Math? Isn’t that just dandy where our auditing board is concerned.

I am glad that I am 68.

Is there a future for my grandchildren?

My answer is to leave them minerals, not cash, in order to give them some protection in an ever growing heartless and meaner world.

Big banks’ fuzzy math
JPMorgan and Wells Fargo play up an obscure measure of their profitability to show how strong they are – but surging credit losses may hint otherwise
By Colin Barr, senior writer
Last Updated: April 16, 2009: 1:23 PM ET

NEW YORK (Fortune) — Just in time for TARP repayment season, the big banks have found a new way to show off their supposedly good health.

New York-based JPMorgan Chase (JPM, Fortune 500) became the latest financial giant to beat Wall Street’s expectations Thursday, posting a first-quarter profit of $2.1 billion, or 40 cents a share.

CEO Jamie Dimon has spent the past year boasting of his bank’s "fortress balance sheet," but he shifted gears Thursday, stressing another factor that he said will see JPMorgan through the economic crisis: the underlying earnings power of its core consumer, commercial and investment banking businesses.

JPMorgan said its pretax, pre-provision earnings — reflecting the profits the firm brings in before paying Uncle Sam or taking account of current and future loan losses — were $13.5 billion in the first quarter.

The bank hasn’t previously publicized this figure, which is favored by analysts but isn’t recognized under generally accepted accounting principles, in its earnings releases. But JPMorgan isn’t the only bank trotting it out.

A week ago, for instance, Wells Fargo (WFC, Fortune 500) surprised investors by saying it expected to post a $3 billion profit in its first quarter — double Wall Street’s expectations. Just in case the message wasn’t clear, the bank also said in that release that its pretax, pre-provision earnings for the quarter were $9.2 billion.

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Jim Sinclair’s Commentary

The is the "end of the beginning" and "the beginning of the end" for Pakistan as an ally of anybody allied to the West. Still, where is the analysis of what this will mean to markets? It is nowhere to be seen.

Out on bail, radical cleric calls for Islamic law across Pakistan
BY SAEED SHAH
ISLAMABAD — A radical cleric, just freed from detention on bail, returned in triumph Thursday night to the Red Mosque in the Pakistani capital and raised the slogan of Islamic revolution before thousands of excited supporters.

Bearded men packed the mosque, long associated with extremist Islam and with links to al-Qaida, while outside on the sidewalk rows of women sat clad in all-enveloping black burkas, only their eyes showing. Many were young adults who had come from Islamic seminaries.

"We will continue our struggle until Islamic law is spread across the country, not just in Swat," Abdul Aziz, who had been chief cleric at the mosque, told the fired-up congregation. Dressed in white flowing traditional clothes, with a white turban and his long white beard, he looked a messianic figure.

Aziz was carried in on the shoulders of supporters after arriving in a motorcade from the nearby city of Rawalpindi. He had been under house arrest since 2007 over terrorism-related charges until a court granted him bail earlier this week.

Earlier this week, Pakistan’s president bowed to pressure from extremists and agreed to impose Islamic law in Swat, a valley northwest of Islamabad, in a bid to end a two-year insurgency there by Pakistani Taliban. Now with Aziz’s release, Islamists have an ideologue to rally around.

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Jim Sinclair’s Commentary

That is a hard call to make if the trading profits are really "at risk" trading profits. Are they?

JPMorgan, Goldman trading profits unlikely to last
Fri Apr 17, 2009 12:29am BST
By Elinor Comlay – Analysis

NEW YORK (Reuters) – JPMorgan Chase and Goldman Sachs Group racked up billions of dollars in trading profits in a volatile first quarter — but don’t expect these lucrative markets to last into the next quarter, or to necessarily benefit other banks, analysts say.

Goldman and JPMorgan, seen as probable long-term survivors amid the carnage that ravaged most of the industry, boosted their trading risk levels in the first three months of the year to exploit swings in asset prices.

They both expanded market share following Lehman Brothers’ demise in September and Bank of America Corp’s capture of Merrill Lynch & Co.

Citigroup Inc, another major competitor in past years and under intense scrutiny following a government rescue, will see whether its hobbled financials significantly weakened its trading business when it reports quarterly results on Friday.

But trading profits and market-share gains may not be so easy to come by in the second quarter, analysts caution, and it may be too late for other banks like Morgan Stanley — which reports next Wednesday — to catch up.

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Jim Sinclair’s Commentary

What else is shrouded?

If you would like to be terrified read about it in Webbot.

Fed Shrouding $2 Trillion in Bank Loans in ‘Secrecy,’ Suit Says 
By Mark Pittman

April 16 (Bloomberg) — U.S. taxpayers need to know the risks behind the Federal Reserve’s $2 trillion in lending to financial institutions because the public is now an “involuntary investor” in the nation’s banks, according to a court filing by Bloomberg LP.

The Fed refuses to name the borrowers, the amounts of loans or assets banks put up as collateral under 11 programs, arguing that doing so might set off a run by depositors and unsettle shareholders. Bloomberg, the New York-based company majority- owned by Mayor Michael Bloomberg, sued Nov. 7 under the Freedom of Information Act on behalf of its Bloomberg News unit. It made the new filing yesterday.

“The Board’s arguments are based on wispy speculation, lack evidentiary support and are contradicted by economic theory,” said Thomas Golden and Jared Cohen, lawyers with New York-based Willkie Farr & Gallagher LLP, in a motion asking the judge to require disclosure.

“These government actions, which have been shrouded in secrecy, are at the heart of Bloomberg’s FOIA requests,” the attorneys said.

Members of Congress also have demanded more information than President Barack Obama and former President George W. Bush have disclosed on the bailout of the U.S. financial industry. Congress approved $700 billion to bolster banks, whose losses on mortgage securities and home loans contributed to the recession.

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Just a Reminder:

Armstrong’s dates are a product of his write up "It’s Just Time." They are mathematics, not good guesses.

He sees either April 19th or June for the low in the gold market. Assuming it is June then he sees gold reaching $5000.

Don’t let the bastards get you down!

Jim Sinclair’s Commentary

This is definitely coming because it already exists.

Will public pensions be next bailout?
4/16/2009 8:53:00 AM
John Nothdurft

Along with the stock market, retirement savings, and taxpayers’ sanity, state and municipal government employee defined-benefit pension funds are reeling from the financial meltdown.

The current economic turmoil and stock market downturn have caused government employee pension funds to lose hundreds of billions of dollars. The crisis only reinforces the need for states to move their pension systems from the onerous defined-benefit obligation to a more mobile and sustainable defined-contribution model.

It’s a potentially catastrophic problem.

According to the Center for Retirement Research at Boston College, as of Dec. 16, 2008 public pensions in the United States were underfunded by nearly $1 trillion. Worst is Illinois, where the pension system has only 54 percent of the necessary funding and an unfunded liability of $54.4 billion.

Even before our current financial shakeup, more than 20 million state and local government employees’ pensions nationwide were in dire fiscal shape.

For example, in June 2007 New Jersey’s unfunded liability was already $28 billion. Since then the number has soared to more than $52 billion, with roughly 45 percent of the obligation unfunded.

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Jim Sinclair’s Commentary

Mark to market accounting is a truth machine. Here is what is properly defined as a gimmick, a falsehood machine.

Wells Fargo’s Profit Looks Too Good to Be True: Jonathan Weil
Commentary by Jonathan Weil

April 16 (Bloomberg) — Wells Fargo & Co. stunned the world last week by proclaiming it had just finished its most profitable quarter ever. This will go down as the moment when lots of investors decided it was safe again to place blind faith in a big bank’s earnings.

What sent Wells shares soaring on April 9 was a three-page press release in which the San Francisco-based bank said it expected to report first-quarter net income of about $3 billion. Wells disclosed few details of what was in that figure. And by pushing the stock up 32 percent that day to $19.61, investors sent a clear message: They didn’t care.

Dig below the surface of Wells’s numbers, though, and there are reasons to be wary. Here are four gimmicks to look out for when the company releases its first-quarter results on April 22:

Gimmick No. 1: Cookie-jar reserves.

Wells’s earnings may have gotten a boost from an accounting maneuver, since banned, that it used last year as part of its $12.5 billion purchase of Wachovia Corp. Specifically, Wells carried over a $7.5 billion loan-loss allowance from Wachovia’s balance sheet onto its own books — the effect of which I’ll explain in a moment.

First, a quick tutorial: Loan-loss allowances are the reserves lenders set up on their balance sheets in anticipation of future credit losses. The expenses that lenders record to boost their loan-loss allowances are called provisions. As loans are written off, lenders record charge-offs, reducing their allowance.

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Jim Sinclair’s Commentary

This is what OTC derivatives have done to people.

Economic survivalists take root
By Judy Keen, USA TODAY

When the economy started to squeeze the Wojtowicz family, they gave up vacation cruises, restaurant meals, new clothes and high-tech toys to become 21st-century homesteaders.

Now Patrick Wojtowicz, 36, his wife Melissa, 37, and daughter Gabrielle, 15, raise pigs and chickens for food on 40 acres near Alma, Mich. They’re planning a garden and installing a wood furnace. They disconnected the satellite TV and radio, ditched their dishwasher and a big truck and started buying clothes at resale shops.

"As long as we can keep decreasing our bills, we can keep making less money," Patrick says. "We’re not saying this is right for everybody, but it’s right for us."

Hard times are creating economic survivalists such as the Wojtowicz family who are paring expenses by becoming more self-sufficient.

Reviving "almost lost" skills and preparing for tough days make people feel more in control, says Charlotte Richert, consumer sciences educator for Oklahoma State University’s Extension Service in Tulsa County.

Karen Gulliver, MBA program chair at Argosy University in Eagan, Minn., expects the movement to grow as the sour economy forces people to reassess priorities. People are asking, "Do I really want to be 100% vulnerable with no self-sufficiency skills if something happens?" she says.

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Jim Sinclair’s Commentary

Just to keep you balanced as the media assures you of everything everywhere.

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Jim Sinclair’s Commentary

This strategy is by no means limited to South America.

The West has no plan, reacting only to immediate problems and needs.

Asia plans 100 years in advance ands works the plan. No wonder the dollar is headed South while Asia, especially China, rises consistently.

China bashers simply don’t get it.

It is patriotic to see what is and make a plan, not what isn’t and just act reactively.

Deals Help China Expand Sway in Latin America
By SIMON ROMERO and ALEXEI BARRIONUEVO
Published: April 15, 2009

CARACAS, Venezuela — As Washington tries to rebuild its strained relationships in Latin America, China is stepping in vigorously, offering countries across the region large amounts of money while they struggle with sharply slowing economies, a plunge in commodity prices and restricted access to credit.

In recent weeks, China has been negotiating deals to double a development fund in Venezuela to $12 billion, lend Ecuador at least $1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion in Chinese currency and lend Brazil’s national oil company $10 billion. The deals largely focus on China locking in natural resources like oil for years to come.

China’s trade with Latin America has grown quickly this decade, making it the region’s second largest trading partner after the United States. But the size and scope of these loans point to a deeper engagement with Latin America at a time when the Obama administration is starting to address the erosion of Washington’s influence in the hemisphere.

“This is how the balance of power shifts quietly during times of crisis,” said David Rothkopf, a former Commerce Department official in the Clinton administration. “The loans are an example of the checkbook power in the world moving to new places, with the Chinese becoming more active.”

Mr. Obama will meet with leaders from the region this weekend. They will discuss the economic crisis, including a plan to replenish the Inter-American Development Bank, a Washington-based pillar of clout that has suffered losses from the financial crisis. Leaders at the summit meeting are also expected to push Mr. Obama to further loosen the United States policy toward Cuba.

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Jim Sinclair’s Commentary

More Armstrong dated April 15th 2009

Martin Armstrong – Financial Panics = Political Change!
Wednesday, April 15, 2009

As promised, here is Mr. Armstrong’s latest.

In it he covers a wide gamut from talking about what I call the “events that tend to follow economic events,” to the concentration of capital, to debts.

But then he sets out to explain the way things should work in his well informed opinion. Restore Rule of Law, abolish the income tax as our forefathers envisioned, regulatory reform, and even changing our currency system.

He is correct that a window of opportunity is coming. His inputs are unique and deserve consideration.

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Jim Sinclair’s Commentary

Be very careful of what you plan without full knowledge.

It might just embarrass the critic.

Nassim Taleb Says Banks `Hijack Us,’ Can’t Be Trusted

Jim Sinclair’s Commentary

The level off at these numbers is not good news.

General Growth Files Biggest U.S. Property Bankruptcy (Update1)
By Daniel Taub and Brian Louis

April 16 (Bloomberg) — General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner.

The owner of Boston’s Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties.

“We intend to emerge as a leaner company,” General Growth President Thomas Nolan said in an interview today. “We want to come out as a less leveraged company. Our business model remains strong.”

General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values. Banks have reduced lending amid mortgage-related writedowns. Commercial real estate prices in the U.S. dropped 15 percent last year, according to Moody’s Investors Service. Retail sales in the U.S. unexpectedly fell in March as soaring job losses forced consumers to pull back.

The filing lists Eurohypo AG, a unit of Commerzbank AG, as General Growth’s largest unsecured creditor with claims totaling $2.59 billion under two loans. Noteholders are owed about $4 billion.

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