In The News Today

Posted at 5:29 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is a link to my interview on the Summit Business News Channel. Click it to view the video.

http://www.summit.co.za/video/face2face/20090710

Views from Joberg

1. Bloomberg says that Bernanke may give his blueprint for how to withdraw the enormous monetary stimulus injected into the world economy.

Since there is NO practical means to accomplish this, I assume Bernanke’s answer will be given in Kswahili.

2. Geithner says the US government has the means to address the CIT potential collapse.

Which is a greater threat to the US economy, the bankruptcy of CIT or California?

The answer is California

3. Which is worse for the dollar, Libor over 4% or under 1%?

The answer to that is under 1% because it indicates extremely low dollar demand.

 

Jim Sinclair’s Commentary

As with most media stories, these are not exactly the facts.

Nationalization demands come from the ANC junior group of younger members.

Powerful ANC ministers refute these demands as the RSA government owns the underlying properties, leasing them to producers. You cannot nationalize yourself.

It however makes Tanzania an even more interesting place for big RSA money.

The USA is a very bad example on this subject. Has the US not just nationalized the huge automotive and financial industry? Has the US not proposed cancelling patented mineral claims and instituting large royalty participations on producing properties?

The answer is yes and yes.

Will South Africa reclaim its mines?
Recent calls to nationalise South Africa’s mines are economically illiterate – but may gather popular support
Monday 13 July 2009 13.30 BST

Nationalisation of the mines is a cry that goes echoing down South Africa’s history. For this country is built on its mines – even today, they account for a good half of exports, let alone foreign exchange, for this is perhaps the most fabulously endowed nation on the planet. Gold, diamonds, platinum, copper, coal, rhodium – you name it, South Africa’s got it.

Before 1948, the Afrikaner nationalists swore they would nationalise the mines. But once they won power, the demand dropped away. For the fact is that the mining companies have dug the world’s deepest and most sophisticated mines here. Their investment is somewhere between R1.2trn and R2trn (£100-150bn). Their expertise in engineering, organisation, marketing and the profitable management of these assets through a hundred years of wars, depressions and wild commodity price swings is awesome.

Anyone who thinks of taking all this over can be forgiven for baulking. For a start, where would one find the money to buy them? Anything less than full compensation would start a panic among the foreign investors on whom South Africa depends. And where would one find the necessary human skills to run and manage them? And the prodigious sums required to sink new shafts?

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Jim Sinclair’s Commentary

China is proud of who they are and what they have accomplished. They would prefer better treatment as the major bankers for the US consumer.

Every time some idiot talking head bashes China or accuses them of wrong doing with their currency management by a US Treasury official they become more righteously upset.

In fact, the Chinese are, simply put, "totally pissed off."

That makes me think their next move is going to shock people.

China takes steps to break sway of the mighty greenback
11:45AM Monday Jul 13, 2009
By Stephen King

Reports of the US dollar’s death have, so far, been greatly exaggerated. It is still, by far, the most liquid currency in the world. The US has the deepest and most liquid capital markets in the world, despite all its sub-prime and banking difficulties. The dollar is used on one side of the vast majority of currency trades.

If someone wants to swap out of Brazilian reals into, say, Korean won, it’s typically a two-step process n from reals into dollars and then from dollars into won. Central banks in the emerging world mostly hold their – in some cases, huge – foreign exchange reserves in the form of US dollars. It is, therefore, the international currency of choice. It remains the world’s reserve currency.

For the US, this makes life very easy. It can issue huge amounts of dollars knowing that people on the other side of the world will happily stash them away for a rainy day. That means the US can raise funds more cheaply in international capital markets than others can. US trade can be cheaply financed because the US doesn’t often have to pay of currency conversion costs. And it can happily run a large balance of payments current account deficit year-in, year-out, without any significant costs to the American people.

For the rest of the world, the dollar’s reserve currency status is a mixed blessing. While it’s useful for other countries to have access to an international medium of exchange and store of value, the dollar is ultimately under American control.

Should there be a conflict between the interests of American voters and foreign creditors, the foreign creditors will probably lose out. Today, those creditors – many of which are emerging market governments and central banks – have built up trillions of dollars of holdings of US assets. Is their money safe? If not, what should they do about it?

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Jim Sinclair’s Commentary

How comfortable are you with your "Honest Abe" gold certificates?

In this world the only depository you can have faith in is the "Vault of You!"

Missing gold could have left mint in liquid form
Experts speculate on how $15M in bullion slipped past elaborate security
BY IAN MACLEOD, THE OTTAWA CITIZENJULY 13, 2009 6:29 AM

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OTTAWA — Was gold worth $15 million stolen from the Royal Canadian Mint dissolved in liquid, rendering it invisible to metal detectors?

Two gold-refining industry sources say gold chloride dissolved in an acid solution can be unrecognizable to metal detectors like those guarding the mint’s high-security Sussex Drive refinery.

“It could be taken out in that form … in a liquid chemical form,” says one U.S. refining executive.

A similar method was used to hide two Nobel laureates’ gold medals from the Nazis when Germany occupied Denmark in 1940.

The mint dissolves gold in hydrochloric acid as part of the process to refine the precious metal to 99.99- and 99.999-per-cent purity, the finest gold in the world. The process electro-chemically disintegrates the metal into imperceptible particles of gold chloride suspended in the black-coloured acid solution.

“Being a high security facility, the mint does not discuss its various security procedures and protocols,” says Christine Aquino, mint spokeswoman. “But I can confirm that we have methods to detect such a liquid.”

The alternative, spiriting even miniscule quantities of solid gold from one of Ottawa’s most secure buildings, seems all but impossible, save for a Hollywood gold-heist plot, which seems almost as improbable.

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Jim Sinclair’s Commentary

Here is a surprise for the so-called US old China hands, and F-TV talking heads that love to bash China.

BYD the first half of sales by 176 percent year-on-year,

The first half of 2009, the shadow of the financial crisis has not been fully dispersed, the Chinese automobile market is extremely strong and has set a record in history. Statistics show that during the first half of 2009, domestic car production and sales will exceed six million, the data in 2008 year-on-year during the first half of 3.609 million representing an increase of 66.25%. Cutting-edge local Shenzhen BYD Automobile Brand for five consecutive years in the high growth of 100 percent, based on sales during the first half of 2009 once again soaring sales grow 176 percent year-on-year, higher than the industry growth rate of nearly 110% , deserved to become the first half of the fastest growing automotive brand.

Earlier this year, drawn up in 2009 BYD 400,000 sales plan sales goal, more than doubled in 2008. To the target for attack, the first half of 2009, BYD Automotive for the introduction of high-quality products and services, full use of the existing production capacity, speeding up the dealer network and improve the marketing strategy of innovation, BYD car is moving The first echelon of the Chinese market steadily towards the goal of competitors.

The first half of 2009, BYD Automobile homogeneous models were all made, and the completion of sales of 176,795 for the whole year target of 400,000 has laid a solid foundation. Among them, the performance of BYD F3 model Gongxun stability, breaking sales of 20,000 in March, they continue to sit tight in the 20,000 Club. In addition, high quality car F0 and F6 in the first half of this year car sales are also way higher, the performance is outstanding, F6 sell hundreds of cars from one month into the 5000 sales mark, selling high-class cars into the first camp, a breakthrough the ceiling of own brands. F0 steady sales growth, sales in May exceeded 7000, and gradually become F3, F6, as among the best in the sub-market sales model.

Just past May, overall sales of BYD as high as 32,633, beyond the success of FAW Toyota, Chery Automobile, Chang’an Ford and so on, to become the top ten cars sold in the seventh level. In addition, according to the National car license data show that in May the Department of BYD car models on the whole a total of 28,017 licenses beyond Chery Automobile, to become its own brand sales champion enterprises.

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Jim Sinclair’s Commentary

You really believe it will ever be paid back in many cases?

No, they go from rank speculation to rank business conditions.

Banks will ‘take years’ to pay back taxpayers’ money
Hugo Duncan
13.07.09

UK Financial Investments (UKFI), the quango in control of the Government’s stakes in British banks, today warned that it will take years for taxpayers to get their money back.

It said there was no quick fix for selling state holdings in Lloyds Banking Group and Royal Bank of Scotland (RBS), and indicated it would be a complicated and drawn out process involving any number of financial instruments.

UKFI chief executive John Kingman said that every UK household will have more than £3000 invested in shares in RBS and Lloyds. He pledged to maximise the value of those investments.

"UKFI will not interfere in the day-to-day running of the banks, but will continue to engage strongly on strategic issues which could impact value including board membership, risk management and remuneration policy," Kingman added.

The taxpayer took a 43% stake in Lloyds at an average of 121p a share and a 70% stake in RBS at an average of 51p a share to save the banks from collapse last year.

UKFI was set up by the Treasury to look after the stakes and sell at a profit – with the Government hoping the process will begin before it calls a General Election.

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Jim Sinclair’s Commentary

The Formula moves East.

A financial downward spiral without intervention at the cause point fails. That failure to intervene properly always results in the downward spiral accelerating as it attacks the real economy, therein giving birth to new momentum.

I could have prevented this and/or fixed it completely in a heartbeat before Lehman was left to fall. This is why I want you to either download these lessons or Purchase a Compendium.

There is knowledge contained within that took me more than 50 years and an apprenticeship to learn.

Between the two Compendiums there are roughly 10,000 articles. It is traditional practical knowledge of economic and markets.

Someday, somebody may actually want it and apply it.

A waste of experience offered is life wasted.

AP: 11% Drop in Texas Sales Tax Revenue
Bryan Rupp
Story Created: Jul 12, 2009 at 3:14 PM CDT

Sobering numbers on Texas’ current economic situation were released on Saturday, July 11, 2009. The Associated Press reported the state’s most recent monthly sales tax revenues dropped more than 11 percent from 2008, the latest sign that the recession is now seeping into Texas.

The $1.5 billion collected in June 2009, which reflected sales in May 2009, is off from the $1.7 billion collected in the same month in 2008.

One state budget official estimated that sales tax collections are $100 million below projections and could fall $550 million short when the fiscal year ends in September 20

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Jim Sinclair’s Commentary

How long have I been telling you this is the NA one that impacts the social order of Canada and the USA big time!

Pensions experts predict ‘horrific news’ on funds
Calls for the trustee system to be overhauled, as the retirement funds crisis deepens and Royal Mail mulls changes to its pensions scheme.
By Jonathan Sibun
Published: 6:35PM BST 12 Jul 2009

For Adam Crozier, things could be about to get a lot worse. The chief executive of Royal Mail saw 10,000 of his workers strike last week, but Britain’s top postie knows that could be just the beginning.

While postal workers are up in arms about job cuts and working conditions, their anger could soon pale into insignificance under the cloud of a far greater threat. At stake for many of them is their future financial security. The postal giant is considering whether to close the company’s retirement scheme to existing members, forcing them to join a new pension pot with less lucrative benefits.

Pension industry insiders believe such a move could spark widespread strikes at Royal Mail. More worrying for British industry, trouble will not be reserved to the postal service. Over the next few months companies are expected to highlight the scale of Britain’s pension crisis by revealing deficits on an unprecedented scale. Strikes and corporate failures could follow.

Company executives will be in the firing line, but many will choose to point the finger elsewhere. For Jane Newell, the chairman of Royal Mail’s pension trustees, and the 100,000 or so other trustees around the country, life could get very tough. Traditionally the silent power brokers of corporate Britain, pension trustees are about to find themselves dragged kicking and screaming into the limelight.

"Over the next few months we are going to see some horrific news on pension funds," says Ros Altmann, a former pensions adviser to the Government. "Around half the pension funds out there have a three-year valuation cycle that ended in March 2009. Trustees will face some awful deficit challenges as the new valuations come to light."

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Jim Sinclair’s Commentary

And now as I suggested, a market can begin. Let say the NASDAQ symbol is FLUSH!

California IOUs to be shunned by big banks after today
Bank of America and other big institutions plan to enforce a cutoff, making it harder to cash vouchers. To protect IOU holders from third-party speculators, the SEC defines the vouchers as securities.
By Tiffany Hsu
July 10, 2009

People holding California state IOUs — including taxpayers, vendors and local governments — will soon have a tougher time redeeming them, as most major banks are standing firm on a vow not to cash the vouchers after today.

Many credit unions say they will continue to redeem the IOUs for customers. But without mainstream banks as an option, recipients of the IOUs who need cash immediately could be tempted to sell them at a discount to third-party speculators, including ones popping up on the Internet.

Responding to that potential, the Securities and Exchange Commission determined Thursday that the IOUs are securities under federal law, which will generally require anyone trading them for profit to be a registered securities dealer.

The move is aimed at limiting the risk that IOU recipients could be defrauded by individuals or companies that offer to buy the scrip.

"The SEC’s action has the potential to, at least a bit, reduce the shark factor and potential for taxpayers to get defrauded," said Tom Dresslar, spokesman for State Treasurer Bill Lockyer.

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Jim Sinclair’s Commentary

The rescue of General Motors is a classic Wall Street solution. Its main accomplishments so far are:

1. Paper Shuffling.
2. Worker benefits elimination.
3. Worker elimination.
4. Factory shutdowns.
5. Debt repudiation.
6. Litigation proofing.
7. Union subjugation.
8, Introduction of the Volt, a profit-less, purpose-less entity. It is ass backwards. You do not make a regular car an electric car by sticking old questionable technology into a standard body. You call the Tesla Car Company and buy it.

Now let’s see if it can sell cars to anyone other than the US government to hold up demand.

Maybe GM’s first production run, after coming out of bankruptcy, will only be Black Suburbans.

Congressman: Michigan could hit 20% jobless thanks to Obama
@ 2:19 pm by Michael O’Brien
July 10, 2009

Michigan’s unemployment rate could hit as high as 20 percent with the Obama administrationto blame, one Michigan congressman warned Friday.

Rep. Thaddeus McCotter (R-Mich.) said that Michigan’s unemployment — already the highest in the country at 14.1 percent — could go even higher as General Motors and Chrysler continue to shed jobs after their government-financed bankruptcies.

"Sadly, we’ve seen estimates, because of the radical restructuring that the auto task force demanded, that this year, Michigan wind up over 20 percent unemployment," McCotter said during an appearance on a conservative news radio program.

The Wolverine State hasn’t yet exceeded its previous record for unemployment in modern history, when it reached 16.9 percent in November of 1982.

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Jim Sinclair’s Commentary

Here is interesting reasoning from Zoo management.

I think it might be the other way around. Keep the animals and shoot the management.

Boston zoo says it won’t have to kill its animals due to budget cuts

BOSTON, Mass. (AP) — The operators of the Franklin Park Zoo, who last week warned that some animals might have to be destroyed if state lawmakers don’t restore funding, say they won’t be euthanizing any animals as a result of state budget cuts.

Officials at Zoo New England had said in a letter to legislators last week that without more funding they’d have to shut down the Boston zoo, whose wild animals include lions and giraffes, in October and close its smaller counterpart, the Stone Zoo in Stoneham. They said as many as 200 animals might have to be destroyed because it likely would be impossible to find new homes for all of them.

In a revised statement released Saturday, Zoo New England said it meant the state would be forced to care for the animals or euthanize them.

At the Franklin Park Zoo, there are hundreds of exotic animal species from around the world in exhibits including a tropical rain forest, the Australian outback and the African savannah. The Stone Zoo features animals including reindeer, black bears, jaguars and goats.

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Jim Sinclair’s Commentary

Who ever made a sale by chasing no bids lower?

Home Sellers in U.S. Cut Prices by $27 Billion, Trulia Says
By Daniel Taub

July 10 (Bloomberg) — U.S. home sellers cut the prices of their properties by a total of $27.1 billion as the recession and rising foreclosures curtailed demand, Trulia Inc. said.

One quarter of sellers with homes on the market as of July 1 reduced their price by an average of 10 percent, the San Francisco-based real estate data provider said today. Properties listed for more than $1 million had the biggest cuts, with owners taking about 13 percent off the asking price.

Prices of existing U.S. homes dropped 17 percent in May from a year earlier, according to the most recent data from the Chicago-based National Association of Realtors. The decline helped boost purchases 2.4 percent to an annual rate of 4.77 million sales, NAR said.

“Sellers just have to discount their prices to reflect what’s going on,” Pete Flint, chief executive officer of Trulia, said in an interview. “Price reductions will stabilize the market, but I think we’re still some way off.”

The average discount on homes priced for less than $1 million was 9 percent, Trulia said.

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Jim Sinclair’s Commentary

Insurance is only as good as the entity insuring it.

Good means a strong balance sheet. This is MBIA with one difference. The FDIC via the US Treasury and Fed can simply print the paper to repay your deposit.

The rub is by doing so the paper you get will buy ever less amounts of goods and services.

MOPE says if you say it is guaranteed, the guarantee will not be called upon.

This is the road to California, financial highway 666

FDIC expands bank deposit protection
July 12, 2:59 PM

Still leery of getting back into the stock market?

The good news is that your bank holdings are protected from bank failure by the Federal Deposit Insurance Corporation (FDIC) for another four years at the increased rates. Through December 2013, the FDIC will insure savings accounts, retirement accounts, trust accounts, and certificates of deposit (CDs) up to $250,000 per account, per person. So if you set it up right, you personally could be fully insured for up to $1 million per bank; couples can be insured up to $2 million.

That’s a huge difference from last fall. Before the crisis in the financial industry, FDIC insurance per person/account maxed out at $100,000. Then news of the falling stock market and weakened banks sent people scrambling to spread their cash around…to other banks, under mattresses, and who knows where else. Trying to avoid total collapse of the industry, Congress voted for a temporary deposit coverage increase first through December 2009 and has now expanded it through 2013.

On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and certain other retirement accounts, which will remain at $250,000 per depositor.

Want to know if you’re fully covered at your bank? Go to EDIE, or the Electronic Deposit Insurance Estimator. EDIE can calculate your FDIC insurance coverage for each FDIC-insured bank where you have deposit accounts. It lets you know in a printable report for each bank whether your deposits are within or exceed coverage limits. Before you begin you’ll need all the deposit accounts you have at FDIC-insured banks, your current balances and names of all account owners and beneficiaries.

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Jim Sinclair’s Commentary

The only value input to the US dollar is MOPE (Management of Perspective Economics) developed confidence. That has 117 days to go! That does not mean it goes higher here. It goes lower here.

Lack of recovery a crisis in investor confidence
July 13, 8:32 AM

One question some people have started asking is why the economy is not showing any signs of an accelerated recovery. Since the Great Depression the US has had numerous short recessions, but the economic recovery following them was usually a strong 5-7% increase in the GDP for the year following the slump. The current recession is not displaying any signs that it will recover at that pace.

The problem has its foundation in a twist of the economy. The original slump started because of too much private debt and an over-leveraged investment sector. As the markets attempted to correct, there was a massive drop in real estate values and that drop shook the economy.

However, under normal circumstances, the economy would by now have cleared most of the over-capacity and be moving forward in recovery. Economist and New York Times columnist Paul Krugman complained that the issue is a liquidity crisis, and that the failure of banks to loan money is the issue. He is partially correct because the failure of banks to loan money and the drop in business investment created by that failure is the driving force, but his reasoning as to why is incorrect.

Our economy is going through a severe confidence crisis. Businesses are not confident in the economy, nor in the promise that the government will leave them to be profitable in the near future and it is effecting their decisions. During the downturn, many companies cutback production and services within the US in an effort to reduce capacities and inventories. Now that they have an opportunity to turn their factories back on, most are looking carefully at costs and regulations. Unfortunately for the US economy, few appear to be confident in the future of the US markets and what manufacturing they are restarting is largely overseas.

This is a significant issue and can be seen in recent stock market shifts. Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent.

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Jim Sinclair’s Commentary

From the sanctified heights of Wall Street Madness comes every new way to pick your pocket, create casino markets and basically destroy everything they touch.

In the sense of keeping you informed of the deformed thinking of the money grubbers and lack of referees in this game, please read the following, then yak.

Toxic Equity Trading Order Flow on Wall Street
The Real Force Behind the Explosion in Volume and Volatility
By Sal L. Arnuk and Joseph Saluzzi 
A Themis Trading LLC White Paper

INTRODUCTION

Retail and institutional investors have been stunned at recent stock market volatility.  The general thinking is that everything is related to the global financial crisis, starting, for the most part, in August 2007, when the Volatility Index, or VIX, started to climb.  We believe, however, that there are more fundamental reasons behind the explosion in trading volume and the speed at which stock prices and indexes are changing.  It has to do with the way electronic trading, the new for-profit exchanges and ECNs, the NYSE Hybrid and the SEC’s Regulation NMS have all come together in unexpected ways, starting, coincidently, in late summer of 2007.

This has resulted in the proliferation of a new generation of very profitable, high-speed, computerized trading firms and methods that are causing retail and institutional investors to chase artificial prices.  These high frequency traders make tiny amounts of money per share, on a huge volume of small trades, taking advantage of the fact that all listed stocks are now available for electronic trading, thanks to Reg NMS and the NYSE Hybrid.  Now that it has become so profitable, according to Traders Magazine, more such firms are starting up, funded by hedge funds and private equity (only $10 million to $100 million is needed), and the exchanges and ECNs are courting their business.

This paper will explain how these traders – namely liquidity rebate traders, predatory algorithmic traders, automated market makers, and program traders – are exploiting the new market dynamics and negatively affecting real investors.  We conclude with suggestions on what can be done to mitigate or reduce these effects.

To illustrate most situations, we will use a hypothetical institutional order to buy 10,000 shares of a stock at $20.00 that has been input into algorithmic trading systems, which most buy side traders use.  Algorithmic or “algo” trading systems chop up big orders into hundreds of smaller ones that are fed into the market as the orders are filled or in line with the volume of the stock in question.  Typically, such orders are easy to spot as they commonly show that the trader has 100 or 500 shares to sell or buy.

LIQUIDITY REBATE TRADERS

To attract volume, all market centers (the exchanges and the ECNs) now offer rebates of about ¼ penny a share to broker dealers who post orders.  It can be a buy or sell order, as long as it is offering to do something on the exchange or ECN in question.  If the order is filled, the market center pays the broker dealer a rebate and charges a larger amount to the

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