In The News Today

Posted at 3:59 PM (CST) by & filed under In The News.

Dear CIGAs,

We have to give credit to Martin Armstrong. April 19th certainly did have merit as a cycle point. Now let us see what June provides. Use Alf for "Price" and "Martin" for Time.

Jim Sinclair’s Commentary

As goes Motors (GM) so goes the USA

U.S. Is Said to Prepare Bankruptcy Filing for Chrysler
By MICHELINE MAYNARD and MICHAEL J. de la MERCED
Published: April 23, 2009

DETROIT — The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

Officials at Chrysler and the Treasury were not immediately available for comment.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall. Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing.

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

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Jim Sinclair’s Commentary

Gold is a lifeline to more than just finances

The Power of Gold
April 23, 2009

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

–John Maynard Keynes

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Jim Sinclair’s Commentary

The Stress Test will report exactly what it is structured to report.

Banks May Need $1 Trillion After U.S. Tests, KBW Says
By Andrew Frye

April 23 (Bloomberg) — U.S. banks may need another $1 trillion in capital to cushion losses as unemployment rises and borrowers fall behind on payments, KBW Inc. analysts led by Frederick Cannon said today.

The estimate is based on the analysts’ own “stress test” of the strength of top U.S. lenders, Cannon wrote. The government is also evaluating the ability of banks to withstand a deepening recession. Bank of America Corp., the largest U.S. lender by assets, may be forced by the government to accept additional aid by converting preferred shares into common stock, Cannon said.

Bankers may get their first look tomorrow at results of the tests, which are being conducted on 19 of the biggest U.S. financial companies. The examinations will compel lenders to raise more capital by selling shares, converting government stakes to common stock or by seeking more taxpayer funds, according to a person familiar with the matter.

Investors and analyst have been debating which lenders will need the help without knowing exactly how the institutions will be judged. The Federal Reserve is scheduled to release the methods used to calculate the exams tomorrow.

Bank of America will likely pass the test, Cannon said. Still, the Charlotte, North Carolina-based bank may be forced by the government to convert $15 billion to $20 billion of preferred shares into common to bolster the balance sheet, he said.

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Jim Sinclair’s Commentary

The Secretary of State of the USA has called the Pakistan situation; "A Mortal Threat to the World." Think about that. Even Iraq did not earn that title before the pre-emptive strike took place.

A Mortal Threat to the World… Ruminate on that for a few moments and then ask yourself what a "Mortal Threat to the World" means to markets when it is a fact that has been accomplished, which it will be on or before January 11th 2010.

Militants burn NATO fuel tankers in Pakistan
By MUNIR AHMAD – 12 hours ago

ISLAMABAD (AP) — Dozens of militants armed with guns and gasoline bombs attacked a truck terminal in northwestern Pakistan on Thursday and burned five tanker trucks carrying fuel to NATO troops in Afghanistan, police said.

NATO and U.S. commanders are seeking alternative transport routes into landlocked Afghanistan amid mounting assaults on the critical main supply line through Pakistan.

Militants attacked the truck depot near the city of Peshawar before dawn, hurling gasoline bombs which set fire to the five tankers, said Abdul Khan, a local police official.

Security guards fled and the assailants made their escape before police arrived, Khan said. Several truckers drove their vehicles out of the terminal to save them from the flames, which were later doused by firefighters, he said.

NATO and the U.S. military insist that their losses on the transport route remain minimal and have had no impact on their expanding operations in Afghanistan. Most of the fuel for U.S. troops in Afghanistan comes from Central Asia.

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Jim Sinclair’s Commentary

Somebody just discovered the long term direction of gold production is down!

DJ Gold Mine Output May Decline In 09 On Base Metal Closures-WGC

LONDON (Dow Jones)–Global gold mine production may decline further in 2009 with production lost due to industrial mine closures, the World Gold Council said Thursday.

Gold mine production could fall by up to 10% in 2009 as a result of cuts in industrial metal mines, WGC managing director Marcus Grubb told an audience at an ETF securities seminar in London.

Many industrial metal producers also produce gold as a by-product. Due to declining demand as a result of the global economic crisis, many mines have closed operations or scaled back output and that has cut gold produced at those mines, Grubb said.

Furthermore, output problems in South Africa continue due to power shortages, he said. South Africa used to be the largest gold producer, but now China is the largest producer.

"Because the decline in mine production has not been offset by an increase in other elements of supply, total gold supply continues to decline," the World Gold Council said. "This situation seems unlikely to change anytime soon."

Jim Sinclair’s Commentary

Today in Pakistan:

Taliban Advance: Is Pakistan Nearing Collapse?
By ARYN BAKER/ISLAMABAD
Thursday, Apr. 23, 2009

The move by Taliban-backed militants into the Buner district of northwestern Pakistan, closer than ever to Pakistan’s capital of Islamabad, have prompted concerns both within the country and abroad that the nuclear-armed nation of 165 million is on the verge of inexorable collapse.

On Wednesday a local Taliban militia crossed from the Swat Valley — where a February cease-fire allowed the implementation of strict Islamic, or Shari’a, law — into the neighboring Buner district, which is just a few hours drive from Islamabad (65 miles, separated by a mountain range, as the crow flies).

Residents streaming from Buner, home to nearly a million people, told local newspapers that armed militants are patrolling the streets. Pakistani television stations aired footage of Taliban soldiers looting government offices and capturing vehicles belonging to aid organizations and development projects. The police, say residents, are nowhere to be seen. The shrine of a local Muslim saint, venerated across the country, was closed. The Taliban, which adheres to a stricter version of Islam than is practiced in most of Pakistan, hold that worship at such shrines goes against the teachings of Islam.

Meanwhile courts throughout the Malakand division, of which Swat and Buner are a part, have closed in deference to the new agreement calling for the implementation Shari’a, law. "If the Taliban continue to move at this pace they will soon be knocking at the doors of Islamabad," Maulana Fazlur Rehman, head of one of the country’s Islamic political parties, warned in Parliament Wednesday. Rehman said the Margalla Hills, a small mountain range north of the capital that separates it from Buner, appears to be "the only hurdle in their march toward the federal capital," The only solution, he said, was for the entire nation to accept Shari’a law in order to deprive the Taliban of their principal cause.

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Pak, Afghan Biggest Threat For Israel: Israeli F.M.
4/23/2009 5:39 AM  ET

(RTTNews) -  The threat perception of Iran’s nuclear program to Israel has been relegated to the second position with Pakistan and Afghanistan being identified as the biggest threat to the Jewish nation, according to the new Israeli foreign minister.

In his first interview to a Russian daily after taking charge, Israel’s hardliner Foreign Minister Avigdor Lieberman has said that since he began warning against the nuclear threat from Iran, nuclear threats have become more prevalent. However, he said, a more serious problem has developed in Pakistan and Afghanistan.

With an unstable nuclear-armed Pakistan faced with a potential Taliban takeover and Afghanistan facing a resurgent Taliban and Al-Qaida, the combination formed a contiguous area of radicalism ruled in the spirit of Bin Laden, he said.

"I do not think that this makes anyone in China, Russia or the United States happy… these countries (Pakistan and Afghanistan) are a threat not only to Israel, but also to the global order as a whole," he added.

Iran was not Israel’s greatest strategic threat, rather Afghanistan and Pakistan were, he emphasized, while stating that the strategic threat coming from Iraq was ranked as the third most important issue of concern for his country.

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Jim Sinclair’s Commentary

The following cartoon is from the 1934 Chicago Tribune. Sound familiar?

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Jim Sinclair’s Commentary

Transparency and credibility are ingredients of confidence that the value of currencies have always stood upon. No one puts credence in the statement of the Central Management Committee of government, but degrees of credibility still count.

Wall Street Journal: Bank of America CEO Lewis testifies to NY AG that Bernanke, Paulson wanted Merrill losses kept quiet

WSJ: BofA CEO says was told to be quiet on Merrill
WSJ: BofA CEO Lewis testifies to NY AG that Bernanke, Paulson wanted Merrill losses kept quiet
Thursday April 23, 2009, 10:33 am EDT

NEW YORK (AP) — Bank of America Chief Executive Kenneth Lewis told the New York attorney general he believed former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke wanted him to keep quiet about the worsening terms of the bank’s acquisition of Merrill Lynch, according to testimony reviewed by The Wall Street Journal.

The New York AG’s office plans to release the testimony on Thursday to federal regulators and overseers of bailout funds and banks, the newspaper reported after reviewing a transcript.

"We believe we acted legally and appropriately with regard to the Merrill Lynch transaction," Bank of America spokesman Scott Silvestri told The Associated Press Thursday.

He declined further comment about the report.

Lewis testified in February to New York Attorney General Andrew Cuomo’s office, which has been trying to determine if Merrill and Charlotte, N.C.-based Bank of America failed to provide adequate disclosures to shareholders about the more than $15 billion in losses Merrill incurred in the 2008 fourth quarter and hefty bonus payments. Had they had that information, BofA shareholders might have voted down the deal.

The Journal said in Thursday’s edition that Lewis doesn’t say in the transcript that he was told specifically to remain silent about Merrill’s burgeoning losses. But the paper quotes Lewis as testifying that disclosing that information "wasn’t up to me," and that he was warned by Paulson and Bernanke that failing to complete Merrill’s takeover would "impose a big risk to the financial system."

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Jim Sinclair’s Commentary

This article has drawn significant interest.

The range I see for the price of gold is exactly:

1. $1521
2. $1600
3. $1681
4. $1764

The time for this occurrence is on or before January 14th 1011.

Gold price could hit $1,500
The aggressive monetary policy of central banks around the world is playing havoc with the structure of the bullion market, creating a chronic shortage of gold that may soon push the metal to fresh records above $1,500 an ounce.
By Ambrose Evans-Pritchard
Last Updated: 12:11PM BST 20 Apr 2009

Charles Gibson, a gold expert at Edison Investment Research, argues in a new report that negative real interest rates (below inflation) in the US and beyond has upset the "leasing" machinery in the gold industry and led to a sustained market squeeze.

This is what occurred in the late 1970s, driving gold prices to $850 and ounce – roughly $1,560 in today’s terms. Gold finished last week at $870.

Mr Gibson said the powerful dynamic could lead to a second leg of this gold bull market, even though the metal has already enjoyed a torrid run over the last eight years.

In normal times, gold mining companies sell – or "hedge" – a chunk of their output in advance through bullion banks. These banks cover their positions by leasing gold from central banks. This bread-and-butter trade created excess supply of 500 tonnes each year until the start of this decade.

Low real interest rates have caused the process to reverse, creating a shortfall of about 500 tonnes. The process accelerates as rates turn negative, leading to a scramble by market players to find physical gold.

There are already reports that gold bars are becoming scarce, partly due to fears that futures contracts and other forms of paper gold may not prove reliable if there is a serious break-down in the global financial system. Pure metal — whether Krugerrands, Maple Leaf coins, or the "five tael biscuit" favoured by the Chinese – entail no counterparty risk.

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Jim Sinclair’s Commentary

Hyperinflation is a currency event, not an economic event. It is coming without any doubt.

Harvard’s Feldstein Sees U.S. Inflation Danger After 2010
By Vincent Del Giudice and Thomas R. Keene

April 23 (Bloomberg) — Harvard University economics Professor Martin Feldstein said inflation will emerge as a threat to the economy after a sustained recovery develops next year.

“In the next few years inflation is going to be the bigger problem” than deflation, or widespread declines in consumer prices, Feldstein said in an interview with Bloomberg Radio. He also said “we’re not going to see a sustained turnaround in the economy until next year.”

Feldstein, a former head of the National Bureau of Economic Research and adviser to President Ronald Reagan, warned that the Federal Reserve will have a challenge in heading off inflation because of how it’s conducted monetary policy during the crisis.

Instead of expanding the central bank’s balance sheet by purchasing easy-to-sell Treasuries, the Fed has snapped up mortgage securities that are likely to be tougher to use as a tool to soak up cash, Feldstein said.

In an earlier interview with Bloomberg Television, Feldstein said he didn’t anticipate a lending boom from banks judged to have passed U.S. regulators’ stress tests on their balance sheets. Results from the reviews are scheduled for release May 4.

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Jim Sinclair’s Commentary

This blog has credentials. The questions are reasonable.

Questions (and few answers) after Freddie CFO suicide
Posted by: Stephanie Ditta
April 22nd, 2009

David Kellermann, acting chief financial officer of troubled U.S. mortgage giant Freddie Mac, was found dead in his suburban Virginia home after apparently committing suicide.

Kellermann, 41, was named Freddie Mac’s acting CFO last September after the Treasury Department seized the company, and its sibling mortgage agency Fannie Mae, as the agencies faced deep losses on a crashing U.S. housing market that was rapidly engulfing other financial institutions.

The death of Freddie’s acting finance chief follows several high-profile suicides that have been linked to the global financial collapse. German billionaire businessman Adolf Merckle threw himself in front of a train in January after heavy losses on the stock market. In December, Frenchman Thierry Magon de la Villehuchet, 65, co-founder of money manager Access International, was found dead in a New York office building, reportedly distraught over losing up to $1.4 billion in client money to Bernard Madoff’s fraud.

Unanswered questions

In March, Freddie Mac said that it was cooperating with the Securities and Exchange Commission in an investigation and that employees have been interviewed by investigators.

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