In The News Today

Posted at 8:03 PM (CST) by & filed under In The News.

Dear CIGAs,

For those who understand, when under attack emulate the courage, dedication, determination and willpower of Jean de La Valette.

Then you welcome the great opportunity to perform for those who depend on you.

Jim Sinclair’s Commentary

The FASB boost spoken about today’s financials was an earnings impact of $500 million that would show up in trading profits as a result of mark ups of OTC derivatives permanently and temporarily impaired (whatever that means).

Jim Sinclair’s Commentary

This is an interlude, not a bottom. Please keep your guard up.

Bernanke Says Crisis Damage Likely to Be Long-Lasting
By Craig Torres

April 17 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the collapse of U.S. lending will probably cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores.

“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be,” the Fed chairman said today in a speech at the central bank’s community affairs conference in Washington. “The damage from this turn in the credit cycle — in terms of lost wealth, lost homes, and blemished credit histories — is likely to be long-lasting.”

The U.S. central bank has cut the benchmark lending rate to as low as zero and taken unprecedented steps to stem the credit crisis through direct support of consumer finance and mortgage lending. The Fed plans to purchase as much as $1.25 trillion in agency mortgage-backed securities this year to support the housing market and is providing financing for securities backed by loans to consumers and small businesses.

Bernanke and the Federal Reserve Board approved rules last July to toughen restrictions on mortgages, banning high-cost loans to borrowers with no verified income or assets and curbing penalties for repaying a loan early. The action came after members of Congress and other regulators urged the Fed to use its authority to prevent abusive lending.

‘Onerous’ Restrictions

“We should not attempt to impose restrictions on credit providers so onerous that they prevent the development of new products and services in the future,” Bernanke said. Regulations should ensure “innovations are sufficiently transparent and understandable to allow consumer choice to drive good market outcomes.”


Jim Sinclair’s Commentary

I am sure you heeded warnings here concerning your credit union.

Economic heat encroaching, credit unions seek U.S. help
By Mike Freeman (Contact) Union-Tribune Staff Writer
2:00 a.m. April 17, 2009

Through much of the ongoing financial crisis, credit unions have sidestepped the turmoil swamping the banking industry by sticking to their knitting of making mortgage, auto, consumer and some business loans at good rates to members.

Credit union trade groups like to call the industry a “movement” rather than a business. They can’t raise funds selling stock. They grow capital by keeping the earnings from the loans they make. They’re loath to take on too much risk.

“They’re set up as cooperatives, so they don’t have the pressure from shareholders for returns like you might have with a bank,” said David Ely, a banking professor at San Diego State University. “There is a mission to serve their members and do right by them in setting loan rates and deposit rates.”

But as the recession has deepened and layoffs have mounted, even conservative credit unions have been unable to emerge unscathed.

Amid stiff economic head winds from the housing collapse and mounting job losses that have buffeted financial institutions nationwide, only three of the 11 largest credit unions in San Diego County – Mission Federal, Pacific Marine and San Diego County Credit Union – made money in 2008.


Jim Sinclair’s Commentary

Please consider what this means in the big picture.

It is totally ignored in market terms.

I believe that Pakistan’s transition to a Taliban State has the potential to be the market driver from 2010-2012.

Warning that Pakistan is in danger of collapse within months
Paul McGeough
April 13, 2009

PAKISTAN could collapse within months, one of the more influential counter-insurgency voices in Washington says.

The warning comes as the US scrambles to redeploy its military forces and diplomats in an attempt to stem rising violence and anarchy in Afghanistan and Pakistan.

“We have to face the fact that if Pakistan collapses it will dwarf anything we have seen so far in whatever we’re calling the war on terror now,” said David Kilcullen, a former Australian Army officer who was a specialist adviser for the Bush administration and is now a consultant to the Obama White House.

“You just can’t say that you’re not going to worry about al-Qaeda taking control of Pakistan and its nukes,” he said.

As the US implements a new strategy in Central Asia so comprehensive that some analysts now dub the cross-border conflict “Obama’s war”, Dr Kilcullen said time was running out for international efforts to pull both countries back from the brink.


Pakistan in danger of fracturing into Islamist fiefdom’: report
Updated at: 1240 PST,  Friday, April 17, 2009
WASHINGTON: With extremist elements gaining ground every passing day, Pakistan is in an imminent danger of disintegrating into a fiefdom controlled by Islamist warlords, having “disastrous” implications, a media report has said.

“It’s a disaster in the making on the scale of the Iranian revolution,” an unnamed intelligence official with long experience in Pakistan was quoted as saying by the newspaper.

There is little hope to prevent nuclear-armed Pakistan from disintegrating into a fiefdom controlled by Islamist warlords and terrorists, who would then pose a far greater threat to the US than those in Afghanistan, intelligence officials keeping a close watch on the situation in the region, told the paper.

They said Pakistan’s government is in the danger of being overrun by Islamic militants and the development of such a situation could be dangerous not only for the US but also for the entire region.

“Pakistan has 173 million people and 100 nuclear weapons, an army which is bigger than American army, and the headquarters of al-Qaida sitting in two-thirds of the country which the government does not control,” David Kilcullen, a counterinsurgency consultant to the Obama administration was quoted as saying.


Taliban Exploit Class Rifts in Pakistan
Published: April 16, 2009


Naveed Ali/Associated Press
Around 3,000 people gathered for a rally in the Swat Valley of Pakistan on April 10 in support of the bill paving way for the implementation of Islamic law there.

PESHAWAR, Pakistan — The Taliban have advanced deeper into Pakistan by engineering a class revolt that exploits profound fissures between a small group of wealthy landlords and their landless tenants, according to government officials and analysts here.

The strategy cleared a path to power for the Taliban in the Swat Valley, where the government allowed Islamic law to be imposed this week, and it carries broad dangers for the rest of Pakistan, particularly the militants’ main goal, the populous heartland of Punjab Province.

In Swat, accounts from those who have fled now make clear that the Taliban seized control by pushing out about four dozen landlords who held the most power.

To do so, the militants organized peasants into armed gangs that became their shock troops, the residents, government officials and analysts said.

The approach allowed the Taliban to offer economic spoils to people frustrated with lax and corrupt government even as the militants imposed a strict form of Islam through terror and intimidation.


Jim Sinclair’s Commentary

Retirement fund for the present Pakistani government.

Donors pledge $5bn for Pakistan

International donors have pledged more than $5bn (£3bn) to help stabilise Pakistan, at an aid conference co-hosted by Japan and the World Bank.

Nearly 30 countries and international organisations met in Tokyo to offer financial support to enable Pakistan to fight off Islamic extremism.

The United States and Japan each pledged $1bn (£671m).

In return, President Asif Ali Zardari said Pakistan would do its utmost to defeat militants in its border areas.

Pakistan’s stability is being threatened by al-Qaeda and Taleban forces in the lawless northwestern areas neighbouring Afghanistan.


Jim Sinclair’s Commentary

Where have these experts been for the past four years?

Experts predict Pakistan’s collapse
McClatchy Newspapers

WASHINGTON | A growing number of U.S. intelligence, defense and diplomatic officials have concluded that there’s little hope of preventing nuclear-armed Pakistan from disintegrating into fiefdoms controlled by Islamist warlords and terrorists.

“It’s a disaster in the making on the scale of the Iranian revolution,” said a U.S. intelligence official with long experience in Pakistan who requested anonymity.

Pakistan’s fragmentation into warlord-run fiefdoms that host al-Qaida and other terrorist groups would have grave implications for the security of its nuclear arsenal; for the U.S.-led effort to pacify Afghanistan; and for the security of India, the nearby oil-rich Persian Gulf and Central Asia, the U.S. and its allies.

“Pakistan has 173 million people and 100 nuclear weapons, an army which is bigger than the American Army, and the headquarters of al-Qaida sitting in two-thirds of the country which the government does not control,” said David Kilcullen, a counterinsurgency consultant to the Obama administration.

“Pakistan isn’t Afghanistan, a backward, isolated, landlocked place that outsiders get interested in about once a century,” agreed the U.S. intelligence official. “It’s a developed state.”


Jim Sinclair’s Commentary

Going forward derivatives can be written to trade on exchanges. Going backward no derivative, because there is no standards, can be listed on any exchange.

CDS dealer trade volumes steady vs year ago-Markit
04.17.09, 11:49 AM EDT
Thomson Reuters

LONDON, April 17 (Reuters) – Dealers in credit derivatives averaged about the same number of trades in March as they did a year ago, Markit data showed, even after months of upheaval forced some dealers and investors out of the market.

Average monthly credit defaults swap (CDS) transactions per dealer amounted to more than 25,000 in March 2009, versus slightly less than 25,000 in March 2008, according to graphs in a quarterly report published by Markit on its Web site on Friday.

The number of dealers, however, decreased to 16 from 18 in 2008 after Bear Stearns and Lehman Brothers(LEHMQ) went out of business. The adjusted volume, therefore, would be 12 percent lower in 2009 than the amounts shown on the charts, or around 22,000 deals per dealer.

The unadjusted figure reached a peak in November 2008 at around 30,000 transactions, which after being adjusted would be between 26,000 and 27,000, or about equal to a previous record in August 2007.

Meanwhile, the backlog in CDS trade confirmations aged over 30 days fell to a new low of between 0.1 and 0.2 business days outstanding in March, the chart showed.

That is down sharply from 1 business day in March 2008.