In The News Today

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Jim Sinclair’s Commentary

Alf’s 3rd wave is beginning.

Gold refiner responds to demand for gold bars
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Tuesday, 19th May 2009 (87 views)

Gold refiner and producer Argor-Heraeus has switched its focus to gold bars in order to meet rising demand.

The company, based in Ticino, Switzerland, is responding to increased investment in solid gold as a result of the global economic crisis by manufacturing a larger number of bars, AFP reports.

Argor-Heraeus chief executive Erhard Oberli told the news source that he had "never seen anything like" the current levels of demand since he started working in Ticino around 20 years ago.

He added that gold has been "out of fashion in Europe" in recent years, but that has "changed totally", with bars seen as a "safe haven" by investors who have lost confidence in financial markets.

Delivery times for gold bars have risen from ten days to around two months and the firm is moving production activity from its semi-finished products arm to increase supply.

Speaking to Reuters recently, president of the RPG Foundation DH Pai Panandiker predicted that gold supplies will "shrink" as mines mature, making the precious metal an ideal choice for long-term investment.



Jim Sinclair’s Commentary

In terms of disturbance to the social order, there is no more serious a problem than the brushed aside, aided in avoidance, increasingly default prone pension programs in terms of what they are worth versus the normal climbing commitments to pay out.

Bailouts are sure to come as it is quite evident, assuming you can add one and one with the result of two, that the agency has no financial capacity to cover the problem even though they make bald faced claims otherwise.

A guaranty is only worth what the guarantor is worth. Should that lesson not be evident now?

You have to love this entity taking the 5th.

I wager you I could give them better advice then what they got from the Wall Street firms at 1/10th of what they paid.

Shortfall Triples at U.S. Pension Guaranty Agency
MAY 21, 2009

The federal agency that backstops corporate pension plans reported that its deficit tripled in the last six months, to $33.5 billion. Despite the shortfall, the agency said it has enough assets to pay benefits for many years, even if the holder of one of the largest retirement programs, General Motors Corp., were to file for bankruptcy.

The news came as the Pension Benefit Guaranty Corp.’s former director invoked the Fifth Amendment in response to lawmakers’ questions about possible mismanagement under the Bush administration. The PBGC’s inspector general last week issued a report saying that the former director had violated prohibitions on contacting bidders that were seeking investment contracts.

The former director, Charles Millard, has denied allegations that he had inappropriate contacts with several Wall Street firms that won contracts to advise the agency, and said his actions were approved by agency counsel. But his attorney, Stanley Brand, said in a statement that it was best if Mr. Millard didn’t testify at a Senate hearing Wednesday, in what he described as a "biased and hostile environment."

The PBGC deficit stood at $11 billion, compared with its long-term obligations, as of Sept. 30. The agency attributed the deterioration of its finances since then to the assumption of pension-plan obligations from insolvent companies, as well as investment losses and the current low interest-rate environment.

The PBGC also warned that distressed companies are likely to terminate more pension plans, leading the agency to take on more of those obligations.



Jim Sinclair’s Commentary

If S&P lowers their "make believe" credit rating on Great Britain’s debt, the S&P will have to do likewise on US debt in time.

I am sure that Gitmo will still be there so these executives of S&P will have a fine view of the Caribbean from their new airy chicken coup homes. Swimming lessons will be provided on a water board. The group will be lead nude by dog collar and leashed to the swim lessons by that nice lady in all those old pictures.

Who knows, they might like it.

Britain’s debt outlook lowered to negative
Britain’s debt outlook lowered to negative from stable by Standard & Poor’s

LONDON (AP) — Britain faces the unsettling possibility of seeing its debt rating downgraded, after credit ratings firm Standard & Poor’s said Thursday it has revised the country’s outlook to negative from stable.

Though the ratings agency reaffirmed the country’s long-term triple-A credit rating — reserved for the least risky bond issuers — it said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis.

The outlook revision does not trigger a formal re-evaluation of Britain’s rating — unlike being put on credit watch — but does mean that policy makers have to be aware that a downgrade may happen if public finances do not improve.

The pound slumped by over 2 U.S. cents to just below $1.56 after the news, but recovered most of its ground to trade around $1.57.

Meanwhile the FTSE share index fell nearly 140 points, or around 2.8 percent, though like other markets around the world it was facing selling pressure after the U.S. Federal Reserve warned that the U.S. economy would shrink by more than anticipated this year.


Jim Sinclair’s Commentary

Sorry, he is wrong. The day of reckoning for the US dollar has already come and gone.

I promise you an arctic freeze for the dollar this winter. It will be cold and ugly!

Day of reckoning looms for the U.S. dollar
Alia McMullen, Financial Post  Published: Wednesday, May 20, 2009

The U.S. dollar’s day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks – debt and inflation – are brought under a harsher spotlight.

Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway.

"We long warned about the day of reckoning for the dollar emerging at the next economic recovery," Mr. Laidi said in a note.

Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation.

The U.S. dollar slid against most major currencies Wednesday, hitting a five-month low of US$1.3775 against the euro and pushing the Canadian dollar up US1.21¢ to a seven-month high of US87.69¢.


Jim Sinclair’s Commentary

Goodbye Standard and Poors.

May 21st, 2009 by Egon von Greyerz

We have told investors that the rating of US and UK sovereign debt is a farce and that they both will be downgraded.

Today the UK is on its way to joining the PIGS countries as Standard and Poor’s lower the UK’s AAA outlook from “stable to negative”. The PIGS countries are the hopelessly weak European countries (Portugal, Ireland, Greece and Spain) which have all been downgraded this year. The UK government deficit is estimated to reach £175 billion in 2009 (it will probably be a lot higher). This represents 12.4% of GDP.  Total UK government debt is forecast to reach £800 billion or 57% of GDP.

In our February Newsletter, “The Bankrupt saving the Bankrupt”, we took the UK economy as an example of the bankrupt state of the world economy. Therefore, it should be no surprise to our readers that the UK will be the next country to be downgraded.  So it is not the slightest bit unexpected that the UK is joining the poorest of the major European countries.

The implications of the UK downgrade are much more serious than that. In our May newsletter, “It ain’t over ’til the fat lady sings”, we stated that the US AAA rating is a farce. The US government deficit is forecast at $1.8 trillion for 2009. That is 13% of GDP. US government debt will reach at least $13 trillion, and probably a lot more, this year. That is almost 100% of GDP! So the US figures are much worse than the UK figures. It is only a mater of time before US debt is downgraded. But downgrading it to AA is just the beginning since US government paper is junk and the US government bankrupt.

Take our word, US government debt will be downgraded very soon. Either the market will force the downgrade by dumping the US dollar and US government debt or Standard and Poor’s will wake up do the inevitable deed. But a downgrade of the debt of the  world’s reserve currency has such serious ramifications for the world economy that S&P’s will drag their heels and probably wait until the market forces them.

We have forewarned  our investors and readers about these events for quite some time.  In our Commentary last week, “Goodbye Dollar – Hello Gold“, we stated “….that the era of the dollar as a reserve currency is coming to an end soon and that the strongest and safest currency is gold”.