To sum up the day, there is no question that the Fed hit the panic button as the long bond fell to the 28 year up trend line. The reason the bonds came apart testing that level was the statement by Russia, China and Brazil that they wished to switch US Treasuries for IMF SDR bonds when, and if issued in size.
The Fed, in my opinion, bought the last 30 year auction, indicating to them the need to QE at a rate beyond your wildest imagination.
At the G8 yesterday it appears there was a request to attempt to reverse the Russian statement which was attempted by the Russian Finance minister. Actions however overcome statements. Russia, China and India reduced their purchases of US paper consistently in the past months of reporting.
June is historically a month of change. It appears the equity markets may have caught on to that. Gold will seek its low in this month, and the dollar its high. I suspect neither of those are far off in time or price.
Jim Sinclair’s Commentary
You ask yourself, my God, what next? You get your answer quite quickly.
The next is worse than you can imagine in your wildest dreams. Can any part of this civil suit accusation really be true?
AIG lawyer: Ex-top exec plundered retirement plan
By MADLEN READ, AP Business Writer
NEW YORK – The former top executive of American International Group Inc. plundered an AIG retirement program of billions of dollars because he was angry at being forced out of the company, a lawyer for AIG told jurors Monday at the start of a civil trial. Attorney Theodore Wells told the jury in Manhattan that former AIG Chief Executive Officer Maurice "Hank" Greenberg improperly took $4.3 billion in stock from the company in 2005, after he was ousted by the company amid investigations of accounting irregularities.
"Hank Greenberg was mad. He was angry," Wells said in U.S. District Court of the emotional state of the man who, over a 35-year-career, built AIG from a small company into the world’s largest insurance provider. He said the saga is a story of "anger, betrayal and cover-up."
Wells said that Greenberg, within weeks of being forced out in mid-2005, gave the go-ahead for tens of millions shares to be sold from a trust fund. The fund was set up decades ago to provide incentive bonuses to a select group of AIG management and highly compensated employees that they would receive upon their retirement.
Wells showed the jury several clips of Greenberg speaking on videotape about the responsibilities of the trust fund. He called it Greenberg’s "videotaped confession."
Wells asked the jury to award AIG $4.276 billion and 185 million AIG shares.
Greenberg, 84, has contended through his lawyers that he had the right to sell the shares because they were owned by Starr International, a privately held company he controlled.
Jim Sinclair’s Commentary
Get this! Net foreign sales of US Treasuries were reported as if this is nothing much. A few more months and you can kiss the US dollar goodbye regardless of the algorithms.
The closely watched figure, excluding transactions that don’t occur on an open market, recorded net purchases of $11.2 billion in long-term U.S. securities after purchases of $55.4 billion in March, according to the monthly Treasury International Capital report, known as TIC.
It will take more than unified lies to hold the bond market after the third consecutive month of TIC increasing outflow. It will take QE at an unimaginable level.
This is a horrible report.
April Net Foreign Sales Of Long-Term US Secs $8.8B
* JUNE 15, 2009, 9:00 A.M. ET
WASHINGTON (Dow Jones)–Net foreign sales of long-maturity U.S. securities totaled $8.8 billion in April, following purchases of $36.5 billion the month before, according to a U.S. Treasury Department report released Monday.
Meanwhile, the report shows that China, Japan and Russia – three large purchasers of U.S. Treasurys – all trimmed their holdings of U.S. debt.
The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year including nonmarket transactions such as stock swaps and principal repayment on asset-backed securities.
The closely watched figure, excluding transactions that don’t occur on an open market, recorded net purchases of $11.2 billion in long-term U.S. securities, after purchases of $55.4 billion in March, according to the monthly Treasury International Capital report, known as TIC.
The report’s most comprehensive category, "monthly net TIC flows," includes nonmarket flows, short-term securities and changes in banks’ dollar holdings. This measure of net foreign capital outflow was $53.2 billion in April, versus an inflow of $25.0 billion the previous month.
Jim Sinclair’s Commentary
You wanted change? Well you certainly are getting it.
I am delighted to be my age. My grandchildren will never have the opportunities that I have had. The people who brought you these problems are being put in charge of assuring it will not happen again.
Now that is a world class oxymoron.
Details Set for Remake of Financial Regulations
By DAMIAN PALETTA
WASHINGTON — President Barack Obama is expected Wednesday to propose the most sweeping reorganization of financial-market supervision since the 1930s, a revamp that would touch almost every corner of banking from how mortgages are underwritten to the way exotic financial instruments are traded.
At the center of the plan, which administration officials are referring to as a "white paper," is a move to remake powers of the Federal Reserve to oversee the biggest financial players, give the government the power to unwind and break up systemically important companies — much like the Federal Deposit Insurance Corp. does with failed banks — and create a new regulator for consumer-oriented financial products, according to people involved in the process.
The plan stops short of the complete consolidation of power that some lawmakers have advocated. For example, it will allow several agencies to continue supervising banks. It also won’t place specific limits on the size or scope of financial institutions, but it will make it much harder for large companies to be so overleveraged that they threaten the broader economy.
After Mr. Obama details his proposal, the process will quickly move to Capitol Hill, where Congress would have to pass legislation to enact the changes. Treasury Secretary Timothy Geithner is scheduled to appear before both Senate and House panels on Thursday, where he is likely to face questions and criticisms.
Lawmakers are expected to take issue with several of the plan’s more thorny issues, including how to create a system that won’t simply bail out large financial companies when they topple. Giving the Fed more clout — in light of recent criticism from lawmakers, both Republican and Democratic, of its secrecy and accumulation of power — will also be a controversial idea.
Jim Sinclair’s Commentary
Here are the remarks made by the President of Russia and a Chinese representative prior to this weekend’s G8 get together.
It is remarkable to see the reversal from raging dollar bears to full and unquestioned confidence in the dollar. The whole world has fallen into the spin trap that has brought the financial disaster we live in now to you.
You can fool fools. You do not have to fool algorithms because they are foolish anyway.
You cannot fool us.
If every government on the face of the planet practices deception, the move will not only be out of dollars, but out of paper and into gold.
Stay the course. We will navigate for you.
This month will be a turning point in Gold and the financial sector.
Medvedev: ‘Super Currency’ Should Replace Dollar
By HELENE COOPER
Published: April 2, 2009
LONDON — So much for that fresh start.
Barely 24 hours after announcing that Russia and the United States would cooperate on a variety of long-simmering issues, President Dmitri A. Medvedev of Russia reproposed a Russian idea that the United States had thought it had batted away: starting a new basket of strong regional currencies to replace the dollar as the world’s reserve currency.
In a speech before leaders here at the Group of 20 summit meeting, Mr. Medvedev said that the countries most responsible for the global economic crisis (read: the United States) are not taking their fair share of the burden for “macroeconomic policies” needed to fix the problem.
“On this basis we conclude that it would be wise to support the creation of strong regional currencies and to use them as the basis for a new reserve currency,” Mr. Medvedev said. “One could also consider partially backing this currency with gold.”
This is not the first time Russia has brought up the idea of replacing the dollar — it floated the idea two weeks ago, and a recent essay by a Chinese economic official said the same thing.
Medvedev Questions Dollar’s Role as World Currency
By Lyubov Pronina
June 5 (Bloomberg) — Russian President Dmitry Medvedev questioned the U.S. dollar’s future as a global reserve currency and said using a mix of regional currencies would make the world economy more stable. Russia may consider ruble-yuan swaps.
The dollar “is not in a spectacular position, let’s be frank, and its prospects cause various questions as do the prospects for the global currency system,” Medvedev, who today hosts an international economic forum in St. Petersburg, said in an interview published by the Moscow-based Kommersant newspaper. Regarding the global financial system, “therefore our task is to make it more mobile and at the same time more balanced.”
Medvedev is expected to reiterate his call for creating a new world currency at the forum today in his keynote address on the first lessons of the global crisis. Russia’s president has called for creating regional reserve currencies as part of the drive to address the global financial crisis. Russia’s proposals for the Group of 20 meeting in London in April included the creation of a supranational currency.
It is too early to be fully optimistic that the global financial crisis is easing, Medvedev said in the interview. The most dramatic scenarios for a collapse haven’t occurred, he said.
Can’t rely on the dollar, warns Medvedev
Reuters Posted: Sunday , Jun 07, 2009 at 0225 hrs IST
Russian president Dmitri A Medvedev, who rarely misses a chance to accuse the United States of causing the global financial crisis, told an economic forum on Friday that wobbly American financial policy had made the dollar an undesirable currency for reserves held by central banks. Russia, along with China and other nations, has floated the idea of forming a supernational currency to supplant the dollar, perhaps using the so-called special drawing rights units of the International Monetary Fund as a basis.
Given the weaknesses in the American economy, Medvedev said, relying on the dollar as extensively as is the case today could mean building a postcrisis financial system on legs of clay. Banks should look also at regional currencies, like the ruble, he said.
China Takes Aim at Dollar
By ANDREW BATSON
BEIJING — China called for the creation of a new currency to eventually replace the dollar as the world’s standard, proposing a sweeping overhaul of global finance that reflects developing nations’ growing unhappiness with the U.S. role in the world economy.
The unusual proposal, made by central bank governor Zhou Xiaochuan in an essay released Monday in Beijing, is part of China’s increasingly assertive approach to shaping the global response to the financial crisis.
David Semple of Van Eck Emerging Markets Fund outlines opportunities in China’s real-estate and retail sectors, along with greater stability in Russia. But the situation in Eastern Europe is still uncertain. Polya Lesova reports.
Mr. Zhou’s proposal comes amid preparations for a summit of the world’s industrial and developing nations, the Group of 20, in London next week. At past such meetings, developed nations have criticized China’s economic and currency policies.
China threatens ‘nuclear option’ of dollar sales
By Ambrose Evans-Pritchard
Published: 9:11AM BST 08 Aug 2007
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning – for the first time – that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China’s "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
China inoculates itself against dollar collapse
By W Joseph Stroupe
There is mounting evidence that China’s central bank is undertaking the process of divesting itself of longer-dated US Treasuries in favor of shorter-dated ones.
There is also mounting evidence that China’s increasingly energetic new campaign of capitalizing on the global crisis by making resource buys across the globe may be (1) helping its central bank to decrease exposure to the dollar, while (2) simultaneously positioning China to make much greater profit on its investment of its reserves into hard assets whose prices are now greatly beaten down, while (3) also affording it greatly increased control of strategic resources and the geopolitical clout that goes with it. This is turning out to be a win-win-win situation for China as it capitalizes upon the important opportunities afforded it by the present global crisis.
Jim Sinclair’s Commentary
Who says the G8 has not accomplished anything? Look at the coordinated SPIN.
"The US dollar’s position as the world’s reserve currency isn’t under threat. Our trust in US Treasuries is absolutely unshakable.”
–Japanese Finance Minister Kaoru Yosano – June 10, 2009
On top of those two, German Finance Minister Peer Steinbrueck was reported to “not be concerned” with the Euro’s value against the US Dollar and IMF Managing Director Dominique Strauss-Kahn “doesn’t see a weak US Dollar”.
Who said the fellows protest too much?
Here are the fundamentals: