In The News Today

Posted at 10:09 PM (CST) by & filed under In The News.

Dear CIGAs,

You are going to see a great deal more of this.

Do you honestly know how bad things are going to get?

Do you really accept that the US dollar is going to take a historical percentage of value hammering in the final quarter of 2009?

Do you recognize that as pressure to deliver gold hits the COMEX exchange with titanic force, the ratio traders will totally explode and kill the spread traders?

Do you have any idea how long it is going to be before real green shoots become crops?

Do you know that certain medicines are already in short supply for economic reasons?

There is only a small minority out there that really understands. There is no need for bank holidays as long as QE and TARP type programs are grown to meet the growing demand.

I have long told you that our financial leaders will burn the barn down before letting nature take its course. The barn is the US dollar.

Look out the window and stop listening to MOPE.

Please give food, not money.


In the 1930s insurance companies did this to pay claims. These California IOU claims will probably trade at 25% of face value. They will trade in today’s world of paper shufflers.

California set to issue IOUs as fiscal crisis weighs
By Dan Whitcomb and Ciara Linnane Dan Whitcomb And Ciara Linnane
Wed Jun 24, 10:00 pm ET

LOS ANGELES/NEW YORK (Reuters) – California’s controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can’t quickly solve a $24 billion budget deficit, and the state’s treasurer plans to tap a reserve fund to meet debt service costs.

The measures came as a budget crisis deepened in the most populous U.S. state and the gridlocked legislature failed to pass a proposed $11 billion in cuts.

"Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Controller John Chiang said in a statement announcing that he would be forced to use IOUs to pay the state’s bills beginning on July 2.

"The state’s $2.8 billion cash shortage in July grows to $6.5 billion in September and after that we see a double digit freefall," Chiang said. "Unfortunately, the state’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses."

State Treasurer Bill Lockyer, meanwhile, is planning to draw on reserves for economic recovery sales tax bonds, according to a spokesman.


Jim Sinclair’s Commentary

In Addis Ababa, Ethiopia, mothers are telling their kids to eat all their food because children are starving in America.

US cities may have to be bulldozed in order to survive
Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline.
By Tom Leonard in Flint, Michigan
Published: 6:30PM BST 12 Jun 2009

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.


The Saga of Make Believe Bank Profits

There was lots of talk today about Bank of America’s second quarter loss.

The reality is that the first quarter profits by the financial group was all a gift from FASB which allowed the financial group to value their worthless derivative paper at whatever their computer models said.

The profits were attributed to their trading department as that camouflaged mark-ups on previously marked down OTC derivatives now taken in as profit.

This magical accounting exercise profits will now depend on business activity and recognition of loan losses plus credit card lay downs.

This quarter, the third quarter, substance will begin to overcome form (accounting fabrications blessed by FASB). This will make it much harder to keep the party going via management of perception economics.

MOPE, Management of Perception Economics, is outlined in the book, "Die Zeit Ohne Beispiel."

Bank of America Heads for Quarterly Loss, Citi Says (Update1)
By David Mildenberg

June 25 (Bloomberg) — Bank of America Corp. will post a second-quarter loss as it builds reserves to cushion defaults on credit cards and consumer loans, Citigroup Inc. analyst Keith Horowitz said.

Mounting losses on consumer credit will erase a $5 billion gain from the sale of China Construction Bank Corp. shares, bringing the quarter’s loss to 11 cents a share, Horowitz said in the report dated yesterday. The bank is also facing an $875 million charge from the Federal Deposit Insurance Corp. to help bolster the agency’s fund and $2 billion of writedowns tied to the Merrill Lynch & Co. unit.

Citigroup’s estimate contradicts the consensus among the 22 analysts surveyed by Bloomberg, which predicts a profit of 8 cents a share for Bank of America. While Horowitz cut his price target on the stock by $2 to $18 a share, he affirmed his “buy” rating, saying that the need to build reserves may be peaking at the Charlotte, North Carolina-based lender.

Bank of America “will emerge from this cycle faster than peers,” Horowitz wrote. “We remain confident that even with expected credit deterioration” in the quarter, “there is more than adequate capital cushion to absorb embedded credit losses.”

The bank fell 11 cents to $12.24 at 11:48 a.m. in New York Stock Exchange composite trading. The shares have dropped 13 percent this year.


Jim Sinclair’s Commentary

If the Fed increases QE all this will go away. If they do not, by legislative action, the Fed will fade away. Watch!

Lawmaker accuses Fed of "cover-up" in BofA deal
Wed Jun 24, 2009 7:03pm EDT
By Kim Dixon

WASHINGTON (Reuters) – The Federal Reserve sought to hide its involvement in Bank of America Corp’s (BAC.N) acquisition of Merrill Lynch as Merrill’s financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday.

The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters.

Bernanke has in the past denied any inappropriate pressure on Bank of America. Fed spokeswoman Michelle Smith on Wednesday referred to a letter Bernanke sent Representative Dennis Kucinich on April 30 and later testimony in which he offered an "unconditional assertion" that he did not ask Bank of America CEO Ken Lewis to withhold information regarding Merrill.

"The Federal Reserve acted with the highest integrity throughout its discussions with Bank of America," Bernanke wrote to the Ohio Democrat, who chairs a subcommittee on the Oversight panel.

The Democrat who heads the committee, Edolphus Towns of New York, has called Bernanke to testify on Thursday. "I am not going to prejudge these issues. We are not even close to finishing the Bank of America-Merrill Lynch investigation at this point," Towns said in a statement.


Jim Sinclair’s Commentary

This information is worth paying for:

– GDP Revisions Little More Than Statistical Noise but Watch Out for July 31st Benchmark Revisions
– Annual Plunge in Durable Goods Orders Continued
– Worst of the Downturn Still is Ahead
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