In The News Today

Posted at 6:32 PM (CST) by & filed under In The News.

Dear CIGAs,

The way to handle a crisis is simple: Lie about the details and size.

I spent the day in NYC at meeting on corporate affairs. We were sitting in a well appointed board room attended by twelve articulate, informed, mature, experienced investors and traders of the markets.

One of the attendees asked if anyone knew what the number was on the CDS triggered by the ISDA. The question was met with laughter as another attendee suggested somewhere between $3.5billion and $37 trillion.

It appears the newest method of overcoming a crisis is simply to consider it diminutive. You have to hand it to the economic propagandists. The Greek default was fluffed off as nothing much to be concerned about according to the CDS figures. The problem is logic says the number is a fabrication and there is much more to come out of Greece as that is not the only bond issue upon which payments are required.

CIGA Frank X sent me the following note as the most recent explanation of the numbers.

The brightest mind at our meeting today cautioned "There is much more to come out of Greece."

Mr. Sinclair:

If the following is accurate, we may have our answer regarding payments on credit default swaps. "The ISDA has called a credit event ON BONDS THAT DID NOT VOLUNTARILY SIGN UP for a 70% plus haircut."  I believe I saw there was an 86% "voluntary" participation rate in the deal.  This would suggest "our friends" would only be liable for 14% of the CDS’s issued.  We all know there has to be a very larger loophole.

Your friend,

Gold action was not bad in light of the "no crisis" crisis of sovereign debt default. $1700 now is acceptable. Let’s see if gold re-enters the 1700s as more people realize that this crisis was buried in the details.

I intend to be in New York City tomorrow for three more meetings and maybe Tanzania next week.



Jim Sinclair’s Commentary

The following comment from Credit Suisse differs somewhat from MSM reports on the Chinese economy

Raw material demand holding up

The first tranche of Chinese trade data for the month of February was released over the weekend. This included figures for imports of iron ore, steel, copper, aluminum scrap, crude oil, refined oil products and soybeans. Given that distortions from the lunar new year still linger, we focus on the average of January and February, which suggest that[1][1]:

·         Despite continued anecdotes of physical weakness, commodity imports have remained very strong.  In part this no doubt reflects opportunistic restocking.  But it also suggests that reports of weakness have been exaggerated.

·         Crude oil imports have been very strong so far in 2012 (Exhibit 2).

·         Copper imports remained firm in February.

·         Chinese iron ore imports have softened marginally over recent months, although in part this may be due to the weather-related disruptions to shipments from Australia in January (Exhibit 1).

·         Soybean imports, averaged over January and February, also returned towards the high levels seen in Q4 2011.


Jim Sinclair’s Commentary

Here is another guarantee of "QE to Infinity."

US Budget Deficits – A picture of a coming crisis.



Jim Sinclair’s Commentary

Our friends up north have distinguished themselves by default. Not being risk takers by nature, the OTC derivative madness only stung them slightly. That plus little history of not invading other nations and it might just be right.

Charts That Count: Will Canada be the Only Investment Grade G7 Issuer by 2040?
Written by Agcapita
Monday, 12 March 2012 08:49

According to research by SocGen, by 2040 Canada will be the only G7 country with investment grade sovereign debt. By as early as 2030 the US, France, Italy and Japan will all lose investment grade status.  To put this into perspective this means that in less than 2 decades the debt of countries currently representing approximately 50% of global GDP will be ineligible for investment by the smallest municipal pension fund. 

Japan is actually expected to lose investment grade status in less than 10 years and looking at the charts below this should not come as a surprise when it happens. BTW – Japan by itself represents almost 10% of global GDP.

Clearly some profound changes are coming to the sovereign debt markets and most importantly to the idea of the "risk free" rates of return that can be found there. As one wag recently described it, sovereign debt no longer represents "risk free return" but rather "return free risk".


Jim Sinclair’s Commentary

Before new challenges explore you? I am 71 and the days of the week I don’t like are Saturday and Sunday.

I understand he is 46. He is tad young for retirement.

CME Group CEO to retire at end of 2012
CHICAGO, March 12 | Mon Mar 12, 2012 4:35pm EDT

(Reuters) – CME Group Inc said its chief executive officer Craig Donohue will step down at year end, when his contract expires.

He will be replaced by current president Phupinder Gill, the exchange operator said. Executive Chairman Terrence Duffy will take on the additional role of president, the company said.

Donohue has run the CME since 2004, steering the owner of the Chicago Mercantile Exchange through the acquisitions of its two largest rivals — the Chicago Board of Trade and the New York Mercantile Exchange — and a global expansion that saw the establishment of a London-based clearinghouse.

Donohue, who has worked at CME for 23 years, called his decision "bittersweet," and added that he is "ready to explore new challenges."


Jim Sinclair’s Commentary

Today US business is measured by what you stole minus the fine you paid.

You can be sure the boys did well on this bamboozle.

Department of Justice
Office of Public Affairs
Monday, March 12, 2012

$25 Billion Mortgage Servicing Agreement Filed in Federal Court

View the court documents.

WASHINGTON – The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.

The federal government and state attorneys general filed in U.S. District Court in the District of Columbia proposed consent judgments with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., to resolve violations of state and federal law.    

The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.

The consent judgments provide the details of the servicers’ financial obligations under the agreement, which include payments to foreclosed borrowers and more than $20 billion in consumer relief; new standards the servicers will be required to implement regarding mortgage loan servicing and foreclosure practices; and the oversight and enforcement authorities of the independent settlement monitor, Joseph A. Smith Jr.

The consent judgments require the servicers to collectively dedicate $20 billion toward various forms of financial relief to homeowners, including: reducing the principal on loans for borrowers who are delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth; refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth; forbearance of principal for unemployed borrowers; anti-blight provisions; short sales; transitional assistance; and benefits for service members.


Jim Sinclair’s Commentary

Do you think Rubin knows about the hard fall in utilization of US dollars as the international settlement currency?

Rubin Says He Has Too Many Dollars 13 Years After Departing U.S. Treasury
By Nina Mehta
Friday, March 9, 2012

NEW YORK — Robert Rubin, who as U.S. Treasury secretary in the 1990s promoted a stronger dollar, said he has too much of his personal investments in the currency.

A "disproportionate amount" of his assets is in cash and he "should be more allocated away from the dollar," Rubin, 73, said yesterday in a speech at the TradeTech conference in New York. He said he also was "greatly overweighted" in private equity and had investments in hedge funds.

Rubin, who served in President Bill Clinton’s administration between holding senior jobs at Goldman Sachs Group Inc. and Citigroup Inc., had a so-called strong-dollar policy as Treasury secretary that successors followed. He said yesterday that his support for Federal Reserve quantitative easing has waned since the initial round, known as QE1.


Jim Sinclair’s Commentary

A Porter Stansbury & Company comment on the continuing drop of international dollar utilization.

This is the Kahuna for a Reserve Currency by Default.

New Proof the U.S. Dollar is No Longer "King"
By Dr. Steve Sjuggerud
Monday, March 12, 2012

We just got a glimpse of the "End of America" over the weekend… from the place you’d least expect: Iceland.

Iceland might seem the least likely place to signal just about anything in the global financial system… When it comes to international finance, Iceland is barely a flea on an elephant. (Its economy is 1/5000th of the world’s economy.)

But I see something Iceland is doing as a warning sign about the future of the U.S. dollar and the end of the "dollar standard" – what my colleague Porter Stansberry calls the "End of America.


Jim Sinclair’s Commentary

From a trickle to a torrent. Be patient.

UPDATE 4-Harrisburg, Pa. to skip two debt payments
Sat Mar 10, 2012 1:54am EST
By Hilary Russ

(Reuters) – Pennsylvania’s distressed capital city, Harrisburg, will skip $5.3 million of debt payments due next week, the first time the city has defaulted on its general obligation bonds, to ensure there is enough cash to fund vital services.

Pennsylvania’s capital of 50,000 people is mired in $326 million of debt due to the expensive retrofits and repairs of its troubled trash incinerator.

"Although this default on general obligation bonds is unfortunate, I don’t think it’s going to hold up the process for proceeding under the recovery plan," Receiver David Unkovic said.

The state tapped Unkovic to serve as receiver, and he devised a recovery plan that includes the proposed sale or lease of the city’s major assets, including parking garages and the incinerator itself.

Commonwealth Court President Judge Bonnie Leadbetter on Friday approved the plan, noting that it may change with more investigation from the receiver.

Holders of the affected bonds and notes do have some protection because principal and interest payments are insured by Ambac Assurance Corp., Unkovic said.