Posts Categorized: General Editorial

Posted by & filed under General Editorial.

Dear Extended Family,

My thanks go to CIGA Christopher for sending us the just released 2009 Report on Financial Reform by the Group Of Thirty, chaired by Volcker, for review:

 

Click here to view the report…

 

This well designed report deals with the world on the day after. It does not provide a means of addressing the present time meltdown of OTC derivatives that have no substantive means of valuation, being devoid of true markets.

The report focuses on legislation, regulation and supervision going forward, but offers no means of addressing the current conditions to right the wreckage of the world financial system or deal with the downward spiral of business conditions. Sorry.

In a nut shell, it is business as usual, not a Second Coming or the Advent of the Economic Master of the Universe as some anticipate

Respectfully,
Jim

Posted by & filed under General Editorial.

Dear Friends,

There is no chance whatsoever that we will sidestep on a global basis the sins of our financial fathers. No administration will make it correct or even better. The best case scenario is a double dip depression, but a depression is in gear and there is no clutch action to shift those gears.

Obama’s fiscal stimulation program is becoming modestly readable. He is hoping to put off major funding inflows into cement and rebar as long as possible in the hope that the monetary stimulation will have an effect, but as below you can see that monetary policy has not and will not do anything positive for the economy. The Fat Cats have all that in their pocketbooks, be it corporate or individual. It has paid off legal claims, attorney’s fees and multiple types of funds due to others.

As soon as they go easy but PR hard the fiscal stimulation fails. The knee jerk reaction will open the flood gates. Banks and financial institutions are still on the begging bowl loan and donation line. Business is just awful and unemployment is in depression territory certainly if viewed through the truth window of Shadow Statistics (www.ShadowStats.com).

The cut in the dividend of GE is simply a harbinger of more problems there. Confidence of builders is in the tank. Consumers are spent out and taken out on a stretcher. There is only one way to go when the problem at the basis of all this remains hidden and unattended to.

When Lehman was thrown under the bus, the $60 trillion plus pile of credit default derivatives imploded. That pile can NEVER have a clearinghouse and it is that pile now sitting on any business recovery of merit. Geitner, our possible new Secretary of the Treasury, fluffed off questions about regulating the OTC derivative market.

You can anticipate piles of BS daily with the media continuing to educate you with disinformation. All of this is like intoxicating the terminally ill patient in order to convince that patient that he can anticipate a long and healthy life. It may be kind but will not make the patient live one more day.

Respectfully yours,
Jim

Commercial Bank Asset Growth Rates

Dear CIGAs,

There is an old saying that you can lead a horse to water, but you cannot make him drink.

This saying certainly applies to the quantitative easing strategy currently being employed by the Fed. Once the derivatives began to collapse in the Fall of 2008, the Fed began to liquefy the banking as the buyer of last resort of bad assets. Over a period of three months, the net free reserve position of the Federal Reserve Bank have been "repaired."

The "repair", however, has had little effect on lending. In fact, since the end of Summer 2009 the growth rate of total loans which includes business, real estate and consumer loans continues to deteriorate. Even more shocking is that the cash assets growth rate has gone parabolic since the Fall of 2008. In other words, banks are hoarding cash and curtailing loans. The return of the real estate and consumer spending (bubbles) cannot happen without access to easy credit.

Times have changed.  I will post more about this on my website.  If I ever get the time…

Take care,
CIGA Eric

Click any chart to enlarge all in PDF format

LTC.ht23 - 20090121_111525 Asset Growth CBUS 1948-present - 20090121_111525

 Asset Growth CBUS 2003-present - 20090121_111525

Posted by & filed under General Editorial.

Dear CIGAs

I have spoken to 3 of the 4 warehouses that hold the COMEX precious metals. It seems that a lot of metals are being withdrawn. Each warehouse states the same bottom line – people/entities are removing metals and it’s far above what the employees would call normal.

With that in mind, we have some difficulties that fall onto the warehouses. These people are very courteous and truly want to help, but the load they have been given has slowed the process down quite a bit. I suggest to all, not to leave a message on their answering machines, but to keep calling till someone picks up the phone. Please be courteous with these people – they are working way too hard to keep up with demand.

Each warehouse has its own procedure for delivery. In order to alleviate some of the headaches for my clients, we are setting up a system where we will do all the leg work (for an additional fee of course) for them. So opening an account to take the physical along with the delivery can now be done within our system.

Our delivery fees have been inflated, so from this point forward the commissions and processing fees are $350 per 100 ounce bar. That price will get one up to the final step which is the arrangement for delivery thru each warehouse. I will give instructions to anyone or brokerage house that needs help in this delivery process.

Most of the question I’ve been getting is where should people store their gold. Should it go to a warehouse in Zurich, Switzerland, Austria? What’s the safest? In earnest, I think the safest place is in your own possession. We’re going back to old times again where you privately kept your wealth with you.

Something else came up in regards to mini gold deliveries. If one wanted to take delivery of a mini bar, they now have to buy 3 instead of one. It seems that this is really a dispute over language than anything else, but the point is being missed. The exchanges were created so that a farmer from Minnesota who has a crop of wheat could take his crop into Chicago and sell it to someone who needed it from another state and to do true hedging. The contracts have a specified size and a buy and sell would commence. In practice you are allowed to trade a mini in the gold market, but the minimum for delivery in gold is still 100 ounces in size. Because of this, I see no point in trading mini gold because of the strings attached.

The delivery process is really not that difficult, it just can be time consuming. Either way, I’m at your service and understand the procedures well enough to offer my services.

JB Slear

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Posted by & filed under General Editorial.

Dear Extended Family,

The Second Coming of Obama is a guarantee that there will be an impact of fiscal stimulation.

Expectations assist results of fiscal stimulation. The buying of cement and rebar will increase jobs and therefore impact economic statistics.

The banking system has healed the interests of the Fat Cats, but done nothing at all in terms of increasing the willingness of financial institutions to make loans.

The buying of cement and rebar will definitely impact business conditions and the statistics thereupon.

In terms of real accomplishments the predictable result of fiscal stimulation will be to transmit monetary potential inflation into real inflation.

A drop in the high level of confidence because of the main predictable result reflected by the numbers at today’s inaugural will cause a hyper-inflation that is a currency event based on the loss of confidence.

The up cycle in inflation therefore stands on a basis of loss of confidence in the new management of the new administration.

The risk of loss of confidence is heightened by the level of today’s expectations of a form of the Second Coming.

Gold is headed to $1250 on its way to $1650, after which Alf will be right. The short sellers in gold and shares thereupon should just sit tight so they can experience the loss of all time.

The problem shown in the picture below has no possibility to correct whatsoever in the either the near or long term.

Respectfully yours,
Jim

xnissan-6163 - 20090120_075451

Posted by & filed under General Editorial.

Dear Extended Family,

Please do not be confused by today’s market.

1. The new Commander and Chief to take over the onerous Presidential duties tomorrow is being welcomed by those that see President Elect Obama as a sort of "Second Coming FDR." That seems a tad overrated under present circumstances. It is not economically the best comparison.

2. The idea that the various constituent countries of the Euro have more problems than the US is media misguidance.

3. The upcoming addition of fiscal stimulus will have an effect. That effect has severe unwelcome consequences that will not be postponed. The effect will be evident before the 2nd half of 2009.

4. The planet is getting too close to a universal WEIMAR EXPERIENCE which has no historical comparison to judge by. History is about to be written.

5. Gold is the only and certain answer in this monetary abandon about to be kicked in the rear by fiscal madness.

I need a few days after the 8+ hours in the air from Joberg to Dakar and another 9 hours immediately thereafter from Dakar to JFK. That is a long time to be in one seat no matter how comfortable it is.

Respectfully yours,
Jim

Posted by & filed under General Editorial, Trader Dan Norcini.

Dear Friends,

Please review the following charts detailing the Treasury International Capital Flows data for the month of November 2008 along with some comments.

In the first chart shown, please note that the Treasury has two different methods for computing the net capital flows for each month. One uses only long term securities while a newer methodology measures both LONG term and SHORT term securities. The BLUE line is long term securities while the RED line is the plot of both long and short term securities. The BLACK line is the absolute value of the US trade balance which happens to be negative.

You will note that since July of last year (2008), when the credit crisis seemed to erupt, with the exception of only one month, notably September, foreign investors, both private and official, have been unloading long term US debt in favor of shorter dated securities. This data can be quite volatile so it is rash to make too many assumptions based off a few months activity but I would say that we are seeing what seems like the beginning of a serious trend. Demand by foreign investors for long term US debt is a measure of their willingness to continue financing US deficit spending. Should this data mark what becomes a definitive trend, that would leave only the Fed and the Treasury itself as the buyers of last resort for their own issuances.

You will also notice in subsequent charts, the move to begin with the last 2 month’s data has now been confirmed – China has become the largest holder of US Treasury debt in the world having easily eclipsed Japan which has quietly been continuing to slowly draw down its reserves of Treasuries. Who would have ever envisioned 10 years ago that the nation which is the model of free market capitalism would have become completely dependent on a Communist nation to finance its way of life.

Lastly, note that all major categories of US Debt were offloaded by foreign investors in November 2008. Bonds, Agency debt (Fannie and Freddie) along with US corporate issues were summarily dumped. The only US securities that showed net inflows were US equities.

Click here for today’s November 2008 TIC Data with commentary from Trader Dan Norcini

Posted by & filed under General Editorial.

Dear CIGAs,

When the Rappers have it figured out we are getting dangerously close to the unavoidable HYPER-INFLATION, a currency event, and to serious social unrest.

Do not play this if rap is offensive to you. This is not for the kids, please.

Posted by & filed under General Editorial.

Dear CIGAs,

After a long trip I am now safely at home and would like to share the following picture of myself in RSA with one of my African family. After catching up on some rest I will be back up to speed here on JSMineset.

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