In The News Today

Posted at 6:45 PM (CST) by & filed under In The News.

Dear CIGAs,

Gold is getting ready for a ballistic move upwards. Are you hedge funds in denial?

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Jim Sinclair’s Commentary

Predictions:

1. Gold reacts as currency support for the dollar enters mid June to a slow decline (that is the official definition of a strong dollar policy, really).
2. End of 2nd week going into the beginning of the 3rd week of June Gold launches towards and this time through the neckline of the reverse head and shoulders formation.
3. Gold rises to $1224 where it hesitates.
4. The OTC derivative market takes on the dollar as short sellers into dollar support.
5. This OTC derivative currency short position builds.
6. It is the US dollar where Armstrong will get his WATERFALL.
7. The main selling takes place when Israel makes a major miscalculation.
8. Hyperinflation is always and will continue to be a currency event.
9. Hyperinflation will be a product of the upcoming massive OTC derivative short dollar raid.

Should I be correct in the gold price action going into late June, it will fit Armstrong’s criterion for a move to $5000.

Alf’s work permits an over-run of the gold price to $3500 in the major 3rd phase, indicating overruns into the major 5th.

Jim Sinclair’s Commentary

The Federal Reserve has no other option. They will continue Quantitative Easing.

The definition of Quantitative Easing is simple money printing.

Since the US will not (or cannot) consider a guarantee of Treasury Debt in gold at market related prices (lack of transferable supply) the Chinese central bank will continue their various efforts to diversify out of Treasury debt.

Those that feel the Chinese cannot diversify and think that the only way is via the open market for treasuries or dollars are so stupid it make me ill that they speak publicly.

China warns Federal Reserve over ‘printing money’
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed’s direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 9:19PM BST 24 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia’s "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed’s leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

However, he agreed that the Fed was forced to take emergency action after the financial system "literally fell apart".

More…

Jim Sinclair’s Commentary

Of course it will be settled. There is so much dirt in these type transaction that discovery, a civil suit procedure, would reveal much too much.

UBS, JPMorgan Drop Asset Seizure Appeal in Milan
By Elisa Martinuzzi and Sonia Sirletti

May 25 (Bloomberg) — UBS AG, Deutsche Bank AG, JPMorgan Chase & Co.and Depfa Bank Plc dropped an appeal against the seizure of 345 million euros ($482 million) of assets amid a probe into alleged fraud involving derivatives sold to the City of Milan, said two lawyers representing the banks.

The banks dropped the appeal at a hearing in Milan today. The prosecutor is considering a May 7 request by the securities firms to put up about 100 million euros of cash in total in exchange for having the assets returned, the lawyers said.

The police froze the banks’ stakes in Italian companies, real estate assets and current accounts. The City of Milan is suing the four banks after it lost money on derivatives it bought from the lenders in 2005. The banks earned about 101 million euros in what prosecutors call illicit profit for arranging the contracts.

“The banks probably didn’t want to run the risk of a ruling against them so early on in the case,” said Giampiero Biancolella, an attorney who’s not involved in the case. “Lawyers may be buying time to reach an agreement with Milan outside the courts.”

Officials for Deutsche Bank and Depfa declined to comment. The claims at issue will be discussed in the course of the investigation, said UBS’s lawyer Giuseppe Bana.

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Jim Sinclair’s Commentary

Let’s hear another big round of applause for the Greenwich, CT OTC derivative manufacturers and distributors who have taken to screwing the widows, orphans, homeless, frail, sick and dying.

Society must have a safety net or there is no society, just a bunch of people with little excuse for being.

Crime is going to skyrocket in California. Keep in mind the many street people are prior residents when there used to be bughouses.

Governor plans to completely eliminate welfare for families
3:58 PM | May 21, 2009

Gov. Arnold Schwarzenegger is proposing to completely eliminate the state’s welfare program for families, medical insurance for low-income children and Cal Grants cash assistance to college and university students.

The proposals to sharply scale back the assistance that California provides to its neediest  residents came in testimony by the administration this afternoon at a joint legislative budget committee hearing. It followed comments by the governor earlier today that he would be withdrawing a proposal to help balance the budget with billions of dollars of borrowing and replacing it with program reductions.

The proposals would completely reshape the state’s social service network, transforming California from one of the country’s most generous states to one of the most tightfisted. The proposals are intended to help close a budget deficit estimated at $21.3 billion.

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Jim Sinclair’s Commentary

What have I been most concerned about for over a year now, warning you time and time again?

The answer is UNFUNDED PENSION FUNDS and similar make believe payable social/business obligations workers have become dependent on.

The next two decades are going to see massive draining of the gene pool.

Look at what is hidden in the article below that is deserving of its own headline.

The Oxford-educated Mr. Fisher, an outspoken free-marketer and believer in the Schumpeterian process of "creative destruction," has been running a fervent campaign to alert Americans to the "very big hole" in unfunded pension and healthcare liabilities built up over the years by a careless political class.

"We at the Dallas Fed believe the total is over $99 trillion," he said in February.

China warns Federal Reserve over ‘printing money’
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed’s direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 9:19PM BST 24 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia’s "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed’s leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

However, he agreed that the Fed was forced to take emergency action after the financial system "literally fell apart".

More…

Jim Sinclair’s Commentary

Debt is totally out of hand and beyond control.

It is no longer just a possibility – it is now a reality. The Chinese are totally correct in demanding a guarantee.

Government debt swells as choices get harder
Carolyn Lochhead, Chronicle Washington Bureau
Sunday, May 24, 2009
(05-24) 04:00 PDT Washington

This year, the government is borrowing 50 cents of every dollar it spends. If that were just a blip caused by a historic financial crisis that necessitated a $787 billion fiscal stimulus and a $700 billion bank rescue in the space of about three months, there would be little cause for concern.

But it is not a blip. It is a relentless curve of red ink that will, within the decade, take U.S. debt levels to the record reached at the end of World War II, from 40 percent of the nation’s output now to 80 percent, and then rapidly thereafter into the realm of banana republics.

"We are accumulating a massive debt. We owe about half of that debt to foreigners, including the Chinese and others whose foreign policy is not always well aligned with ours," said Isabel Sawhill, a former Clinton administration budget official who now co-directs the Center on Children and Families at the Brookings Institution. "So we are really losing control of our economic destiny and possibly losing control of our foreign policy as well."

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North Korea Claims to Conduct 2nd Nuclear Test

By CHOE SANG-HUN

Published: May 24, 2009

SEOUL, South Korea — North Korea announced on Monday that it had successfully conducted its second nuclear test, defying international warnings and drastically raising the stakes in a global effort to get the recalcitrant Communist state to give up its nuclear weapons program.

The North’s official news agency, KCNA, said “The Democratic People’s Republic of Korea successfully conducted one more underground nuclear test on May 25 as part of the measures to bolster up its nuclear deterrent for self-defense in every way as requested by its scientists and technicians.”

The test was safely conducted “on a new higher level in terms of its explosive power and technology of its control,” the agency said. “The results of the test helped satisfactorily settle the scientific and technological problems arising in further increasing the power of nuclear weapons and steadily developing nuclear technology.”

Word of the test sent a shudder through Asian financial markets and clearly caught South Korea and the United States off guard. The news hit just as South Korea’s government and people were mourning the suicide of former President Roh Moo-hyun. And hours after the test was reported, South Korean state media reported that the North had fired a short-range missile.

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Jim Sinclair’s Commentary

The real story here is the revision of the prior month. There was no so-called Green Shoot here ever this year.

U.S. home prices fell 18.7 percent on year in March: S&P
Tue May 26, 2009 9:33am EDT

NEW YORK (Reuters) – Prices of U.S. single-family homes in March fell 18.7 percent from a year earlier, while prices in the first quarter dropped at a record pace, according to the Standard & Poor’s/Case-Shiller Home Price Indices released on Tuesday.

On a month-over-month basis, the index of 20 metropolitan areas fell 2.2 percent in March from February, S&P said in a statement.

Price drops on both a month-over-month and year-over-year basis were worse than expectations based on a Reuters survey of economists.

The composite index of 10 metropolitan areas declined 2.1 percent in March from February for a 18.6 percent year-over-year drop.

"Declines in residential real estate continued at a steady pace into March," David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, said in a statement.

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Jim Sinclair’s Commentary

2,300,000 Pakistani are homeless and foodless.

This is not what wins the hearts and minds of the populous when all they see is US equipment and Pakistanis in US combat uniforms coming over the hill blowing everything in sight to ashes.

Sustainability is the key to this action, and you can wager there will not be much of that.

Pakistan battles for Swat capital, 2.38m uprooted
By Lehaz Ali – 1 day ago

PESHAWAR, Pakistan (AFP) — Pakistan’s military said Monday it was facing "stiff resistance" as it battled to wrest Swat valley out of Taliban hands, in an offensive that has now scattered 2.38 million terrified civilians.

Military spokesman Major General Athar Abbas warned it could take up to 10 days to regain control of Swat’s capital Mingora, as the punishing assault across three rugged northwest districts entered a fifth week.

A Taliban spokesman told AFP that firebrand commander Maulana Fazlullah had asked Taliban to stop battling in the key city, but said the insurgents would continue to fight for their vision of imposing a harsh brand of Islamic law.

"Maulana Fazlullah has directed all his mujahedeen to stop resistance in Mingora and its surroundings to avoid hardships to the people and losses to the civilian population," spokesman Muslim Khan said from an undisclosed location.

But he added: "We will fight for the enforcement of sharia law till the last drop of our blood."

Ground forces have been fighting street-by-street with Taliban fighters in Mingora, the business and administrative hub of the scenic Swat region which has been ripped apart by a two-year insurgency by the Islamist extremists.

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Jim Sinclair’s Commentary

The price of gold is preparing for a ballistic move upwards.

I count this geometric up-move in price to appear in weeks, not months.

Trading here borders on a serious case of self destructive tendency.

Gold bugs at last have their perfect trinity
China has doubled its bullion reserves and left us in no doubt that it will spend more of its $40bn monthly surplus on hard assets rather than the toxic paper of Western democracies.
By Ambrose Evans-Pritchard
Last Updated: 9:36PM BST 23 May 2009

The world’s top hedge fund manager John Paulson has built a gold position of at least $5.5bn, the biggest such move since George Soros and Sir James Goldsmith bet on Newmont Mining in 1993.

Britain has become the first of the Anglo-Saxon "AAA" club to face a downgrade. As feared, the cancer of bank leverage is spreading to sovereign cores.

Gold prices tend to slide in late May and languish through the summer, because of the seasonal ups and downs of jewellery demand. The trader reflex would be to short gold at this stage after its $90 vault to $959 an ounce over the past month. They may think again this year.

Paulson & Co has bought $2.9bn in SPDR Gold Trust, the biggest of the gold exchange traded funds (ETFs), which now holds 1106 tonnes − three times the Brown-gutted reserves of the United Kingdom.

Mr Paulson has also built up a $2.3bn holding of Anglo Ashanti, Goldfields, Kinross Gold, and Market Vectors Gold Miners. The fact that he is launching a "Paulson Real Estate Recovery Fund", reversing the bet against sub-prime securities that made him rich, tells us all we need to know about his thinking. This is a liquidity-reflation play.

He may be wrong, of course. In his early fifties, he belongs to the baby-boom cohort most psychologically vulnerable to the 1970s "paradigm-error". And perhaps he has never lived in Japan.

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