In The News Today

Posted at 4:24 PM (CST) by & filed under In The News.

Dear CIGAs,

This is only the beginning.

I feel for the money bunnies, some of whom truly believe in the Easter Rabbit and Santa Clause. They don’t have a clue. Green shoots, rear view mirror economic statistics, Goldilocks Economy and all the trite crap run out by the PPT for media consumption to fool the public has fallen on its face.

This is a major wave in which the dollar will trade at least at USDX .7200 with gold at $1224 and $1650 as a minimum.

Sentiment wise, this is the major unwind in which respite will be brief and shallow.

This winter will be cold and hard on the US dollar.

I was invited to speak on Bloomberg today, but see no value in any disturbance to the social order.

It is enough that JSMineset shares it views with you. I am of the mind to do no further public interviews between now and 2012. Any small benefit is overshadowed by the hate it generates among people who do not recognize you have their best interests in mind. Hate is common. There is no need to go looking for these types.

Gold and general equities are not enemies in this period of Currency Event Inflation. At some point, maybe Armstrong’s low, gold and general equities will rise together, just as they did in terms of the Weimar Republic Mark.

Simply stated, dear Family, it has hit the fan.

Dollar stops being Russia’s basic reserve currency

The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said.

In accordance with the report, about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.

The dollar share had increased to 49 percent and remained so as of October 1. The euro share made up 40 percent. The rest of investments were based on the British pound, the Japanese yen and the Swiss frank.

The report also said that the reserve currency assets of the Russian Central Bank were cut by $56.6 billion. The losses mostly occurred at the end of the year, when the Central Bank was forced to conduct massive interventions to curb the run of traders who rushed to buy up foreign currencies. The currency assets of the Central Bank had grown to $537.6 billion by October 2008. Therefore, the index dropped by almost $133 billion within the recent three months.

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Jim Sinclair’s Commentary

Swallow is an understatement. Digested and discarded is more like it.

Consumerism is dead for a considerable time to come and with it the Green Shoots nonsense of the past two months.

It is the constant denial that has complicated the problem.

The cheerleaders for equities on financial TV have blood on their hands. Debt will have to be liquidated as their is no other way.

CHART OF THE DAY: Credit Card Debt Swallows American Households
Joe Weisenthal and Kamelia Angelova

Americans built up a lot of spending power over the last three decades, but it wasn’t because they started earning more money. As today’s chart starkly illustrates, credit card debt has exploded, making up for more modest gains in median household income. As you can see, for the very first time in history, credit card debt is creeping down, though it has a long way to go. And of course, this doesn’t even include home all the home equity loans Americans used in place of the ATM. (Both lines are based on non-adjusted numbers)

dailychart

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Jim Sinclair’s Commentary

Get ready, get set, go and soon!

Please consider that the Taliban have similar plans and look a lot more like Pakistan regulars. The Taliban will have the support of the Pakistan intelligence and military, maybe even more.

U.S. Has Plan to Secure Pakistan Nukes if Country Falls to Taliban

The United States has a detailed plan for infiltrating Pakistan and securing its mobile arsenal of nuclear warheads if it appears the country is about to fall under the control of the Taliban, Al Qaeda or other Islamic extremists.

American intelligence sources say the operation would be conducted by Joint Special Operations Command, the super-secret commando unit headquartered at Fort Bragg, N.C.

JSOC is the military’s chief terrorists hunting squad and has units now operating in Afghanistan on Pakistan’s western border. But a secondary mission is to secure foreign nuclear arsenals — a role for which JSOC operatives have trained in Nevada.

The mission has taken on added importance in recent months, as Islamic extremists have taken territory close to the capital of Islamabad and could destabilize Pakistan’s shaky democracy.

“We have plans to secure them ourselves if things get out of hand,” said a U.S. intelligence source who has deployed to Afghanistan. “That is a big secondary mission for JSOC in Afghanistan.”

The source said JSOC has been updating its mission plan for the day President Obama gives the order to infiltrate Pakistan.

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Jim Sinclair’s Commentary

There is no way. There is no chance.

I am getting the feeling that some of the front fellows are chosen because they really might be lightweights on practical versus academic economics.

Federal and state tax revenues are falling backwards off Mt. Everest.

Geithner Vows to Cut U.S. Deficit on Rating Concern (Update2)
By Robert Schmidt

May 22 (Bloomberg) — Treasury Secretary Timothy Geithner committed to cutting the budget deficit as concern about deteriorating U.S. creditworthiness deepened, and ascribed a sell-off in Treasuries to prospects for an economic recovery.

“It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term,” Geithner said in an interview with Bloomberg Television yesterday. He added that the target is reducing the gap to about 3 percent of gross domestic product, from a projected 12.9 percent this year.

The dollar extended declines today after Treasuries and American stocks slumped on concern the U.S. government’s debt rating may at some point be lowered. Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA grade.

Geithner, 47, also said that the rise in yields on Treasury securities this year “is a sign that things are improving” and that “there is a little less acute concern about the depth of the recession.”

The benchmark 10-year Treasury yield jumped 17 basis points to 3.36 percent yesterday and was unchanged as of 12:18 p.m. in London. The Standard & Poor’s 500 Stock Index fell 1.7 percent to 888.33 yesterday. The dollar tumbled 0.5 percent today to $1.3957 per euro after a 0.8 percent drop yesterday.

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Jim Sinclair’s Commentary

The foolish paper gold and gold share shorts will play their game but they are toast.

Gold is going to a $1224 and $1650 minimum on this phase move here and now. A ballistic up move for gold is inherent in the developing formation.

The gold share shorts have been GLIB in their selection of targets, focusing on leaders to paint the field. Now they are egotistically tied to their selection without fact checking in an objective mind set.

Dollar hits new multimonth low vs euro, pound, yen
May 22 10:42 AM US/Eastern

NEW YORK (AP) – The dollar kept falling Friday, notching fresh multimonth lows against the euro, pound and yen as a warning that Britain’s debt level may result in its credit rating being cut ricocheted into worries about the massive U.S. deficit.

The 16-nation euro rose to $1.4015 in morning trading from $1.3889 in New York late Thursday—its first time above $1.40 since Jan. 2.

The British pound rose to $1.5916 from $1.5890, peaking at $1.5945 earlier in the session, its highest point since Nov. 6.

Meanwhile, the dollar edged up to 94.51 Japanese yen from 94.23 yen—after earlier falling to 93.82, its lowest point since Feb. 23.

On Thursday, Standard & Poor’s said Britain may have its rating cut because of rising debt levels. Though the ratings agency reaffirmed the country’s actual long-term credit rating at “AAA,” it said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis.

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Jim Sinclair’s Commentary

No increase in charges has a snowball’s chance in hell of providing the funds required now or in the future, without a bailout, to provide the funds the FDIC will need. This is pure spin.

FDIC: new fee system to replenish insurance fund

(AP:WASHINGTON) Federal regulators are adopting a new system of special fees paid by U.S. financial institutions that will shift more of the burden to bigger banks to help replenish the deposit insurance fund.

The Federal Deposit Insurance Corp. is meeting to approve the new fee system. It is intended to raise $5.6 billion in the face of a cascade of bank failures that have depleted the insurance fund.

The FDIC now expects bank failures will cost the fund around $70 billion through 2013, up from a previous assessment of around $65 billion.

FDIC Chairman Sheila Bair says: “There will be some shifting of the burden (to major banks). The shift is not huge to them. We’re asking them to pay more.”

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Jim Sinclair’s Commentary

The troops have been very calm but don’t count of this as a given.

44 states lost jobs in April, led by California
May 22, 1:46 PM (ET)
By JEANNINE AVERSA

WASHINGTON (AP) – Forty-four states lost jobs in April, led by California where employers slashed 63,700 positions, as the recession took a further toll on U.S. workers.

Trailing California in over-the-month job losses were: Texas, which saw 39,500 jobs vanish; Michigan, which lost 38,400 jobs; and Ohio, where payrolls fell 25,200, according to a U.S. Labor Department report issued Friday.

The few winners included Arkansas and Montana, followed by Florida – a dose of good news for a state that’s been battered by the housing collapse.

California’s unemployment rate dipped to 11 percent last month, fifth-highest in the country. Michigan’s jobless rate was the highest at 12.9 percent, followed by Oregon at 12 percent, South Carolina at 11.5 percent and Rhode Island at 11.1 percent.

As the recession eats into sales and profits, companies have laid off workers and turned to other cost-cutting measures, such as holding down hours and freezing or trimming pay.

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Jim Sinclair’s Commentary

The best recruiting plan for insurgency is SURGES that displace 2,000,000 people using US equipment and look alike uniforms.

Think about it.

You are put on the road without food or water with your family. Your wife is afraid for her life and for the little ones. You must carry your five year olds because they simply cannot walk anymore.

You will fight against what you see as causing this.

When will the West learn.

The surge will be a major reason in the end for the loss of Pakistan to the West if in fact it ever was for the West.

AP Interview: Insurgents crossing into Pakistan
By FISNIK ABRASHI, Associated Press Writer Fisnik Abrashi, Associated Press Writer – 48 mins ago

BAGRAM AIR BASE, Afghanistan – The top U.S. general in eastern Afghanistan said Friday he saw “some very interesting movement” of insurgents across the border into Pakistan this spring, possibly to join Taliban militants battling government troops. Maj. Gen. Jeffrey Schloesser’s comments come amid concern in Washington and Islamabad that the buildup of 21,000 additional U.S. forces in Afghanistan may push Taliban militants into Pakistan, further destabilizing the border region in that country.

The Obama administration has declared eliminating militant havens in Pakistan vital to its goals of defeating al-Qaida and winning the war in Afghanistan.

Fighters have historically moved back and forth across the border to back Taliban insurgencies in both countries.

But Schloesser’s remarks in an interview with The Associated Press suggested a larger transfer into Pakistan than has been seen previously, as the fighting between Pakistan’s troops and the Taliban has intensified.

He suggested that most of the movement in the past has been from Pakistan into Afghanistan, calling the new development “an interesting movement backward.”

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Jim Sinclair’s Commentary

Here comes another round of foreclosures with the debt upside-down to the home value.

Trouble Ahead: Millions of Mortgages Will Ratchet Upward Soon
Thursday, May 21, 2009 3:00 PM
By: Julie Crawshaw and Dan Weil

Zacks Research analyst Dirk van Dijk warns that another major mortgage crisis lies ahead as huge numbers of homeowners who have been making only minimum payments on their “pick a payment” mortgages have to start paying in full.

This can cause huge jumps in the monthly payment, with increases of over 50 percent not uncommon, van Dijk says, making these the ultimate “exploding mortgages.”

The number of these recasts is relatively small right now at $1 billion per month but will grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011.

“If the equity in your house is gone and your monthly mortgage payment suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen?” van Dijk asks.

The next wave of foreclosures is going to have much higher average loan balances, so each foreclosure will hurt banks more than subprime foreclosures did.

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Jim Sinclair’s Commentary

Truth has never found friends at its inception. The messenger gets the blame when the veracity of the message is proven.

I would like to thank the famous blog, the “Motley Fool” for their support, even if some popular media sees it otherwise.

Jim Sinclair 
Take it from a Fool who knows, those proposing exposure to gold as the ultimate safe haven from currency crises are no strangers to vitriolic opposition. Jim Sinclair, a leading precious-metals expert, has been forecasting $1,650 gold since 2001. Sinclair summarized some of the perspective that readers of his blog enjoy in a Bloomberg Radio interview on Feb. 20. The interview is too packed with golden nuggets to capture in selected passages, so instead I recommend a trip to my blog to discover the treasure yourself.

At this particular moment, when sheer human nature leaves investors susceptible to unchallenged optimism, I believe that insights from these straight-talking messengers provide a critical wake-up call. In tumultuous times, the line between hopefulness and denial can grow quite thin, and Fools are reminded to remain alert.

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Jim Sinclair’s Commentary

Somebody noticed.

Gold visits old relationship with the US dollar
Allen Sykora | May 22, 2009
Article from:  Dow Jones Newswires

GOLD and the US dollar have moved back to their traditional inverse relationship lately, although some analysts say it remains to be seen how long this will last and how strong it will be.

A newly cast gold ingot is cooled in a bath of cold water at Metal-Art, in Budapest, Hungary. Picture: Bloomberg

Historically, gold tended to rise when the US dollar fell as investors turn to the metal as an alternative currency, and vice-versa. But that relationship went by the wayside for much of the last half year as both often moved inversely to the stock market, analysts said.

For instance, the US dollar index rose from a low of 77.688 on December 18 to a high of 89.624 on March 4. In the past, that might have pressured gold. But this time, June gold futures on the Comex division of the New York Mercantile Exchange rose from a December 5 low of $US748 an ounce to a February 20 high of $US1009.80.

Analysts said both gold and the US dollar often were bought as a safe haven during a tumble in equities that eventually carried the Dow Jones Industrial Average to a 12-year low in early March.

“People were using both the US dollar and gold as a store of value because they were worried about a market meltdown,” said Sean Brodrick, natural-resources analyst at Weiss Research and moneyandmarkets.com.

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