In The News Today

Posted at 9:37 PM (CST) by & filed under In The News.

Dear CIGAs,

Fred has lost his sight and ability to walk without arthritis pain, but as a good CIGA he will get the best of care.

He arrives at the office ready to do his arrival (woof) alert work.


Jim Sinclair’s Commentary

What do you think the implication of Milan’s actions would be, if sustained, on the Federal Reserve’s Balance Sheet? Not one penny of taxpayer’s funds have been lost by the Fed purchases. Do you really think so? How about the impact on cartoon valuations at the BIS?

Milan is treating this as alleged FRAUD of the instruments themselves. If it sticks, the OTC derivative instrument’s entire tower of babel, spin and fabrications falls on itself.

This is the most severe test these financial OTC derivative WMDs have faced yet.

Milan Police Seize UBS, JPMorgan, Deutsche Bank Funds
By Elisa Martinuzzi

April 28 (Bloomberg) — Milan’s financial police seized 476 million euros ($620 million) of assets belonging to UBS AG, Deutsche Bank AG, JPMorgan Chase & Co. and Depfa Bank Plc amid a probe into alleged fraud linked to the sale of derivatives.

The police froze the banks’ stakes in Italian companies, real estate assets and accounts, the financial police said in a statement today. The assets seized yesterday also include those of an ex-municipality official and a consultant, the police said.

The City of Milan is suing the four banks after it lost money on derivatives it bought from the lenders in 2005. The securities swapped a fixed rate of interest on 1.7 billion euros of bonds for a variable rate that was losing the city 298 million euros as of June. Milan is among about 600 Italian municipalities that took out 1,000 derivatives contracts worth 35.5 billion euros in all, the Treasury said.

“Milan is an important case because it can be used as an example by others,” said Alfonso Scarano, who is heading a study into the trades by AIAF, a group representing Italian financial analysts. “This is a unique time for borrowers to shed light on their potential losses and renegotiate contracts” to take advantage of interest rates that have fallen to record lows. AIAF will next week testify before the Italian Senate’s inquiry into the cities’ use of derivatives contracts.

Officials at all four banks declined to comment. In January, JPMorgan filed a lawsuit against the city in London. The bank is seeking to have dispute heard in the U.K., according to two people familiar with the claims.


Jim Sinclair’s Commentary

Two important but brief notes:

1. With China having just emerged as a major gold holding central bank from practically no gold at all, the inviting question is if the Central Bank of China still holds mega dollar instruments. I suspect not, at least by the value of the gold as bought, but maybe much more.

The Chinese are determined to follow their financial plan to be the most powerful economic entity on the planet. They will not permit the dollar to alter this.

The Chinese know exactly where the dollar is headed. Yes they also know where the price of gold is going as well.

2. When is enough, enough? When will people say no, this is enough, stop. Today evil is a virtue, and virtue is stupid according to modern thinking, acting and reporting. When will those that deal in this evil push the wrong person too hard? Maybe it has already happened.

One such person is CIGA Marie. She has dug in, had enough and is doing something quite significant about it. Her actions have such a dynamic potential to level the evildoers that you will have to ask her what it is.

Marie McDonnell
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analysts

Jim Sinclair’s Commentary


This is indicative of what is coming in a crash of Federal Income Revenues that leads to a ballistic rise in the Federal Budget Deficit. This has significant implications for the US dolalr and thence for gold, believe it or not!

UPDATE 1-NYC personal income tax revenues plunge in April
Mon Apr 27, 2009 8:19pm BST
By Joan Gralla

NEW YORK, April 27 (Reuters) – New York City’s net personal income tax revenues plunged 51 percent in the first 24 days of April, compared with the same period a year ago, the city comptroller’s office said on Monday.

New York City’s economy has been hurt by the devastation of Wall Street, its largest hometown industry, following the collapse last September of Lehman Brothers Holdings and a series of bank mergers amid the credit crisis. In the month of March alone, for instance, Wall Street shed 3,100 employees, according to the state’s Department of Labor. For more, see [ID:nN16285952]

U.S. states and cities, just like the federal government, usually see tax revenues surge in April because the month includes the April 15th annual tax deadline.

New York City often pays out more in refunds than it collects in taxes during April.


Jim Sinclair’s Commentary

The following was sent in by CIGA JB Slear:

"Since late 2006 342 major U.S. lending operations have "imploded""

Nesbitt Burns Investors Guide to Avian Flu Pandemic Aug2005.pdf

BMO Nesbitt Burns Research published An Investor’s Guide to Avian Flu in August 2005. The authors, Sherry Cooper, PhD and Donald Coxe provide one of the first carefully thought out assessment of the effect a pandemic would have on financial investments. What distinguishes their report was its being based upon a scenario for the pandemic that allowed for the authors to use economic modeling to make economic projections for the macroeconomy that could then be assessed from a sector-by-sector viewpoint.

From Page 30 of the report:
Flight to safety in financial markets would be a knee-jerk reaction. Initially gold, the U.S. dollar and U.S. Treasuries would benefit. Gold prices would rise and remain high for sometime, despite potential jewelry liquidation. We saw gold prices pop immediately after 9/11, and declined only after the immediate crisis abated. People would be concerned that the Treasury market would subsequently be vulnerable to massive selling by Asian central banks whose holdings, particularly in China and Japan, are enormous. These sales might arise as government coffers are drained in these regions and more money is needed for assistance and prevention. Interest rates, however, would ultimately fall sharply, as in the Depression, as deflationary forces take hold, economic activity would slow and credit demand would plummet. Credit risk premia would rise sharply, taking the spread between corporate and government bonds up meaningfully. Many who are now over-extended with debt would lose their homes and their businesses. The surging supply of houses and rental properties (as tenants and homeowners die or can no longer afford them) would burst the housing bubble.

Link to full report…

Jim Sinclair’s Commentary

An interesting article for a day when Gold is being disregarded because people foolishly associate hyperinflation with booming business conditions – a total error without economic, currency or historical support.

But hey, let’s not allow facts to get in the way of a good story.

How Does $9000 Gold Sound?
by: Marc Chandler April 26, 2009

In recent days the Canadian and Swedish central banks have joined the majority of other G10 central banks by indicating that they too may engage in quantitative easing now that the interest rates have been reduced to 25 and 50 basis points respectively. The ECB is wrestling with ways to extend its own form of quantitative easing and an announcement is likely at its next meeting on May 7th.

While some observers have focused on the potential debasement of the US dollar by the aggressive monetary and fiscal policies of both the Bush and Obama Administrations, many investors are worried about the viability of the whole universe of paper money.

As Gillian Tett, award-winning journalist at the Financial Times, put it earlier this month, there has been a four-decade long experiment with fiat currencies not backed by gold or silver. This crisis is so profound that increasingly it appears to have shaken confidence in the experiment. At the same time, the crisis looks to have widened the range of possibilities.

The Special Drawing Rights that the Chinese and others have suggested to eventually replace the dollar does not get beyond paper money. The SDR is a basket of fiat currencies. It is not and cannot be a serious alternative to the US dollar.

Consider that 44% of an SDR is the dollar. The IMF’s figures show that roughly two-thirds of the world’s reserves are in dollars. If countries’ reserves were allocated according to the SDR, the dollar’s share of reserves would fall by about a third. While the euro would pick up some slack the big winners would be the yen and sterling, whose share of the SDR is 11% a piece, two to three times larger than their reserve allocation.


Jim Sinclair’s Commentary

Look where we are going. This is not the stuff of strong currencies and freedom.

U.S. Tries to Broker Sale Of Chrysler’s Loan Arm
Takeover by GMAC Is Meeting Resistance
By David Cho, Binyamin Appelbaum and Peter Whoriskey
Washington Post Staff Writers
Tuesday, April 28, 2009

The Treasury Department is racing to engineer the sale of Chrysler’s financing arm in a move the administration deems vital to saving the troubled automaker, but other federal agencies have not given their support, sources familiar with the matter said.

The Obama administration wants the nation’s largest auto-financing company, GMAC, to buy Chrysler Financial, which is the primary source of lending for Chrysler dealerships and car buyers, industry officials said. But GMAC needs a new round of backing to buy its longtime rival, sources said.

Treasury officials have not yet obtained the agreement of the Federal Deposit Insurance Corp. and the Federal Reserve, sources said. The FDIC, created to backstop the banking industry, is balking out of concern that its resources would be drained in support of an auto manufacturer. And the Fed, which regulates banks, would need to grant a waiver from a long-standing rule that separates banking and commerce.


GM’s New Road Map: Partial Nationalization
Automaker to Shed Brands and Workers; Future Hinges on Deal With Bondholders
By Steven Mufson
Washington Post Staff Writer 
Tuesday, April 28, 2009

Once a symbol of capitalist might and U.S. industrial prowess, General Motors would be half owned by the Treasury under a new sweeping plan that would also shut down GM’s Pontiac operations, lay off 21,000 workers and impose harsh terms on the company’s bondholders.

The partial nationalization proposal ? a last-ditch effort developed by GM and the Obama administration’s auto task force to keep the leading U.S. carmaker out of bankruptcy ? raised hackles in Congress and ratcheted up the game of brinksmanship with the company’s bondholders, who have until May 8 to accept or to try to negotiate better terms.

If the bondholders reject the terms, GM would probably declare bankruptcy, chief executive Fritz Henderson said, potentially raising uncertainties for suppliers, workers and customers. That possibility loomed large Monday after bondholders called the offer "neither reasonable nor adequate."

If the plan goes forward, it would mean a leaner and less indebted GM, formally controlled by the federal government. As it is, the government has been playing a large role at the company, asking for the resignation of the previous chief executive, G. Richard Wagoner Jr., and ordering that the company’s board be reconstituted. The move would represent one of the largest ownership stakes the U.S. government has ever taken in an American manufacturer.



Jim Sinclair’s Commentary

The following is a small note that was buried deep in copy released late yesterday:

"Although it’s called swine flu, this new strain is not infecting pigs and has never been seen in pigs. The threat is person to person transmission."

Vials of swine flu virus explode on train
April 28, 2009 – 9:50 AM

Vials of innocuous swine flu virus have exploded on an intercity train, prompting police to stop passengers before they arrived in Lausanne.

A laboratory technician from a Geneva hospital had been transporting the vials on Monday evening from a veterinary institute in Zurich. The Federal Health Office had called for the development of a diagnostic test for the illness that has killed as many as 150 people worldwide.

Near Fribourg the technician heard a muffled pop. Built-up gas from dry ice surrounding the vials had caused the package to explode.

The carriage in which the technician was travelling held 61 passengers at the time. The Federal Railways did not learn of the incident until 40 minutes later after the train had already passed through Fribourg. Police then stopped the train near Lausanne, inspected passengers and wrote down their names as a precaution.


Jim Sinclair’s Commentary

Surprise, surprise!

Bank of America, Citigroup may need more capital
Apr 28, 8:05 AM (ET)

WASHINGTON (AP) – Bank of America Corp. (BAC) (BAC) and Citigroup Inc. (C) (C), which have each received $45 billion in government bailout funds, have been told by regulators that "stress test" results show they may need to raise additional capital, The Wall Street Journal said Tuesday.

Charlotte, N.C.-based Bank of America is looking at a shortfall in the billions of dollars, the paper said, citing people familiar with the situation. Both banks plan to rebut the preliminary findings, according to the paper, with Bank of America expected to respond Tuesday ahead of its shareholder meeting Wednesday.

Citigroup declined to comment; Bank of America officials weren’t immediately available to comment.

As executives of the nation’s largest banks review their stress-test results, even the top performers are lobbying regulators to raise their scores before the numbers are finalized Friday.

Fed officials told reporters Friday that all 19 banks that took its "stress tests" will be required to keep an extra buffer of capital reserves beyond what is required now in case losses continue to mount. That would mean some banks will likely have to raise additional cash. But the Fed stressed in a statement that a bank’s need for more capital reserves to meet the requirements should not be considered a measure of the "current solvency or viability of the firm."


Jim Sinclair’s Commentary

There are mixed opinions at the ECB regarding gold. Now the question is what is the real level of US Treasuries held by China?

ECB’s Wellink welcomes China gold purchases
AFX UK Focus) 2009-04-28 10:50

AMSTERDAM, April 28 (Reuters) – European Central Bank Governing Council member Nout Wellink welcomed China’s move to buy gold, but said the ECB plans to renew a central bank agreement that limits its gold sales to the open market.

China revealed on Friday it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

"That China has bought gold doesn’t surprise me," Wellink said on Tuesday. "This is a positive development and I appreciate the move."

Asked whether the ECB had been approached for sales of gold to China, Wellink said the ECB plans to renew for a five-year period its commitment to the Central Bank Gold Agreement (CBGA), under which European central banks agree to limit their gold sales onto the open market.

(Reporting by Reed Stevenson, writing by Aaron Gray-Block)