In The News Today

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This is not a tip sheet, but a text book covering hundreds of years of market experience from us all. The Compendium is the largest text book ever on coins and currency. The fireside chats are periodic reviews. Your actions are the test and your results are the marks.

Look how rarely we speak publicly.

Our method is to teach using daily markets as the text book and Dan’s charts as a technical analysis manual. Monty teaches general economics as it impacts the topics of his broad international emerging market view.

Please use the tools we offer you.

John Adams, on the importance of a financial education:

"All the perplexities, confusion and distress in America arise not from the defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation."


Jim Sinclair’s Commentary

How the hell is MOPE going to do this when it is MOPE that killed us all to some degree in the first place?

U.S. must restore faith in monetary system
By George Gurley
July 5, 2009

Money is the root of all evil. But, according to Niall Ferguson in “The Ascent of Money,” it’s also the “root of most progress.” Woolgatherers from Rousseau to Marx have dreamed of a society that operated without money. Yet, money and its offspring — credit and debt — have been “as important as any technological innovation in the rise of civilization,” writes Ferguson.

Money in some form has been around since the beginning of time. Shells, beads, stone discs, cattle, gold and silver have performed its roles. But money got really interesting when someone figured out that paper backed by gold could serve as a medium of exchange. A unit of gold held in reserve could be multiplied by issuing units of paper money. It was a kind of magic, which dramatically stimulated economic activity and increased wealth. As long as people had faith that they could redeem their paper for gold, the magic worked.

At some point, however, the magicians created too much money. Excess liquidity drove prices up. Fear overcame euphoria. One day the gong of doom sounded and everyone wanted to exchange paper money for gold. But there wasn’t enough gold in the vaults to cover all the paper money afloat. A moment of epiphany arrived: The paper was worthless. The bubble burst. The financial system collapsed.

We’re living in a modern version of this eternally recurring tale. There are many competing explanations for the current economic meltdown. The web of mistakes and culprits was complex. But the ultimate cause was expansive monetary policy. Low interest rates and excess money supply inflated the bubble, driving up the price of real estate and oil, tempting investors to take outrageous risks and stoking the deadly sin, Greed. This should have been no surprise. Loose monetary policy makes booms and busts inevitable. Now, the government’s colossal bailout and stimulus schemes promise to inflate another bubble — while we’re still recovering from the last.


Jim Sinclair’s Commentary

Hasn’t MOPE blasted out everywhere that discussion of SSCI (Super Sovereign Currency Index) is not a point of interest to the G8 but only to the plus 5? They have been suggesting it is hardly a subject of discussion for the G8 with the implications that the BRICs are not really serious about it.

The Westerners, dollar market wise, have been feeding on this garbage disinformation.

Russia’s Putin to discuss reserve currencies with US Obama in Moscow
3 Jul, 10:39 PM

Russia’s Prime Minister Vladimir Putin may discuss reserve currencies with US President Barack Obama at a breakfast in Moscow next week, Putin’s spokesman said on Thursday.

Putin, who developed a good personal rapport with Obama’s predecessor George W. Bush despite Russia-US relations hitting post-Cold War lows, will have one-and-a-half hour long meeting with Obama during the US president’s first visit to Russia.

"It would be logical to suggest that an exchange of opinions regarding the global economic crisis will take place, in this context the issue of reserve currencies can be raised," said Dmitry Peskov. The meeting’s agenda is still being made final.

The government has been careful to maintain that the key meetings Obama will have will be with President Dmitry Medvedev while Putin, still seen as Russia’s most influential politician, will keep a low profile.

"Mechanisms of cooperation may be discussed at the meeting of the heads of state," Peskov said, when asked if Russia and the US could create an intergovernmental commission for day-to-day cooperation.


Jim Sinclair’s Commentary

Yes, going forward on brand new paper. Looking back at the mountain of nuclear OTC derivative crap, it means nothing.

The present, absolute majority of outstanding OTC derivatives have no standards. No standards means no clearinghouse possible. No clearinghouse possible means they cannot be listed because they cannot be properly valued each day.

These facts make this great news below not news at all. Say hello to MOPE once again.

Clearing key to making derivatives safer: EU
Fri Jul 3, 6:22 am ET

BRUSSELS (Reuters) – Derivatives pose risks on financial markets that central clearing of contracts would mitigate, the European Commission said on Friday, outlining plans that fall short of more radical U.S. steps.

EU Internal Market Commissioner, Charlie McCreevy, opened an investigation into the sector last October, a month after the collapse of Lehman Brothers, a bank heavily involved in the global $600 trillion off-exchange derivatives market.

McCreevy published his findings and policy proposals on Friday which said standardization of contracts — a process already underway — is also needed, as well as the creation of a central data depository to store records of trades.

The plans stop short of more radical steps envisaged by the United States which seek to go beyond centrally clearing over-the-counter trades to shift trading onto exchanges or trading platforms where possible.

"In this respect the Commission will further assess the pros and cons of channeling of further trade flow through transparent and efficient trading venues and the appropriate level of transparency — price, transaction, position — for the variety of derivative markets trading venues," the Commission’s policy document said.


Jim Sinclair’s Commentary

Where minerals can be purchased you will find the Chinese. The industry only thinks "sell to them" and never asks why the Chinese are so ready to buy or tries to join forces.

The answer is simple. If you intend to move away from the dollar you have reasons. When you consider those reason you know a currency event due to QE is on the horizon. You also know what that means to the price of all raw materials, so you buy them first.

All the dopey extractive industry management, like the ones below, see is the Chinese solution to their illiquidity problems brought on in every case without exception by the idiot short of final product derivatives they entered into. Most thought these contracts were FREE money. Free? Like hell it is.

Do not get me wrong. Not every Chinese is a genius either. Dumbo lives everywhere.

The slowest of them all seems to be the ex-patriot Chinese that has lived in the West too long and really believes he now knows it all.

Teck to sell 17 pct stake to China for C$1.7 bln
Fri Jul 3, 2009 10:02am EDT
By Cameron French

TORONTO, July 3 (Reuters) – Canada’s Teck Resources (TCKb.TO) will sell a 17.2 percent equity stake to state-owned China Investment Corp through a private placement that will raise C$1.74 billion ($1.5 billion) and help the miner pay down debt, it said on Friday.

Teck, a top producer of zinc, copper, and metallurgical coal, will sell 101.3 million shares at C$17.21 each, a 7 percent discount to Thursday’s closing price of C$18.50 on the Toronto Stock Exchange.

Despite the discount, Teck’s shares rose 3.2 percent, or 60 Canadian cents to C$19.10 just after markets opened, the biggest gain among base metals miners in Toronto.

The deal, which will give CIC a 6.7 percent voting stake in the company, comes as Chinese companies have been taking advantage of depressed resource prices buy stakes in producers and lock in access to commodities, particularly oil.

However, the deal does not involve an offtake agreement, and Teck said that CIC, a sovereign wealth fund, has said it is acquiring the shares "for investment purposes as a long-term passive financial investor" and has agreed to hold the stock for at least a year after the deal closes in mid-July.


Jim Sinclair’s Commentary

Here is the most recent advertisement for stocking up the political personality retirement fund account.

If you think Swat residents will see five cents on the dollar of this you are nuts.

Pakistan desperately short of money to resettle Swat residents

PESHAWAR, Pakistan — Major Western countries, after applauding Pakistan’s military crackdown on Islamic extremists in the Swat valley in the country’s northwest, haven’t pledged the money needed to resettle the population now that the fighting is mostly over, and humanitarian organizations fear that 2 million people will be sent back home before it’s safe to go.

Unless the United States and other allies provide the required money to reconstruct Swat, Pakistan risks losing the "hearts and minds" of those who had to flee the operation that fought the Islamic extremists who’d overrun the region. Islamabad doesn’t have the money, Pakistani officials said.

The rehabilitation cost is estimated at $2.5 billion, according to Lt. Gen. Nadeem Ahmed, the head of the military’s special unit set up to look after the internally displaced.

The national government is expected to announce shortly that the Swat refugees will begin returning later this month. So far, however, the government in Islamabad has promised only $300 million to the North West Frontier Province, mostly to beef up police in Swat.

Ahmed said he was optimistic that the international community would provide money once Pakistan presented its "game plan" for rehabilitating Swat.


Jim Sinclair’s Commentary

Winning the hearts and minds of those folks we are liberating is the key.

U.S. Faces Resentment in Afghan Region
Published: July 2, 2009

LASHKAR GAH, Afghanistan — The mood of the Afghan people has tipped into a popular revolt in some parts of southern Afghanistan, presenting incoming American forces with an even harder job than expected in reversing military losses to the Taliban and winning over the population.

Villagers in some districts have taken up arms against foreign troops to protect their homes or in anger after losing relatives in airstrikes, several community representatives interviewed said. Others have been moved to join the insurgents out of poverty or simply because the Taliban’s influence is so pervasive here

On Thursday morning, 4,000 American Marines began a major offensive to try to take back the region from the strongest Taliban insurgency in the country. The Marines are part of a larger deployment of additional troops being ordered by the new American commander in Afghanistan, Gen. Stanley A. McChrystal, to concentrate not just on killing Taliban fighters but on protecting the population.

Yet Taliban control of the countryside is so extensive in provinces like Kandahar and Helmand that winning districts back will involve tough fighting and may ignite further tensions, residents and local officials warn. The government has no presence in 5 of Helmand’s 13 districts, and in several others, like Nawa, it holds only the district town, where troops and officials live virtually under siege.


Jim Sinclair’s Commentary

An Israeli submarine, one would assume nuclear capable, sailed the Suez yesterday in a clear signal to Iran of it easy reach.

The further the US withdraws from Israel, the greener the olive branch the US offers to those that deny the state of Israel and the closer Israel comes to Iran.

Being in close striking distance for Israel and Iran opens the possibility of an accident that would trigger the unthinkable.

Jim Sinclair’s Commentary

A settlement here, a settlement there.

A submarine here, a few long range F-16s there, a few deep penetration bunker busters shipped during the Bush Administration there.

A capture of some of the Gaza gang on the high seas.

A major miscalculation, and the geopolitical Formula given to you, most unfortunately, will be correct.
Gaza aid boat passengers still in Israeli custody
By Aron Heller, 38 mins ago

JERUSALEM – Most members of a group of foreign peace activists seized at sea by the Israeli navy remained in custody Friday, three days after their failed attempt to run Israel’s blockade of the Gaza Strip, relatives and supporters said.

In the latest attempt by activists to break a crippling two-year blockade of Gaza, a group called the Free Gaza Movement sent the ship loaded with humanitarian supplies and 21 activists and crew from Cyprus.

The Israeli navy intercepted the ship Tuesday after it ignored repeated messages saying it would not be allowed to enter Gaza waters and ordering it to turn back.

Among those still being held Friday were former U.S. Representative Cynthia McKinney and Nobel Peace Prize laureate Mairead Corrigan Maguire, said Sandra Law, mother of detained British activist Alex Harrison.

Law, speaking to The Associated Press from her London home, said her daughter was being held together with other women from the group at Ramle jail, near Ben-Gurion airport. She said she spoke briefly to her daughter on Friday.


Jim Sinclair’s Commentary

The process has begun. It will not be MOPE’d away.

India Joins Russia, China in Questioning U.S. Dollar Dominance
By Mark Deen and Isabelle Mas

July 3 (Bloomberg) — Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

“The major part of Indian reserves are in dollars — that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview today in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations — the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia — at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the G-8 summit.

As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing today, highlighting the nation’s concerns about a global financial system dominated by the dollar.

Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.