Posts Categorized: General Editorial

Posted by & filed under General Editorial.

Jim Sinclair’s Commentary

When this goes off crude will trade $100 higher within 60 days.

Pakistani politicians divided over action on terror
Parliament session split as extremists denounce Nato
Soaring poverty feared to increase suicide attacks

A deep rift over anti-terror policy has opened up within Pakistan’s political class, as extremist violence and an economic crisis push the country to the verge of collapse. A special session of parliament called by the government to forge a political consensus on the “war on terror” has backfired spectacularly as parties, including some in the ruling coalition, denounced the alliance with Washington and Nato rather than backing the army to take on the Pakistani Taliban.

A party in the coalition government, the religious Jamiat-Ulama-I-Islam party, has even demanded that, as parliamentarians had received a presentation from the army, Pakistan’s Taliban movement should also be allowed to address them. It comes as the political and economic situation worsens, with intensified suicide bomb attacks and an alarming depletion in Pakistan’s foreign exchange reserves. The country is seeking an emergency $10bn bailout from the international community, while a severe shortage of electricity is crippling business and punishing households.

Critics of the government, which is led by controversial president Asif Ali Zardari, complain that there is a paralysis of decision-making and policy. A leaked US top secret National Intelligence Estimate on Pakistan concludes that the country is “on the edge”. A US official was quoted summing up the assessment as “no money, no energy, no government”.

Yesterday a US missile strike inside Pakistan’s tribal border area with Afghanistan killed up to six suspected militants, and a suicide attack on a police station in the north-west killed three officers and wounded 15.

More…

Jim Sinclair’s Commentary

Follow the USA, the non-existent and overruled FASB and the SEC and you just can make up any price you want.

EU calls for clear plan on valuing derivatives
The Associated Press
Published: October 17, 2008

BRUSSELS, Belgium: European Union regulators called Friday for a clear plan on valuing some of the shadowy high-risk credit derivative investments estimated at around US$600 trillion (444 trillion) that are now a key issue in easing the global financialcrisis.

Billions of euros (dollars) have been wiped off banks’ balance sheets in recent months on fears that some complex investments may be based on assets that are nearly worthless such as housing loans that may not be paid back when a recession puts people out ofwork.

The market for derivatives boomed over the last decade as investors sought new ways to parcel out risk, with many jumping on a gravy train that few really understood. Billionaire investor Warren Buffett has been vocal in avoiding them, dubbing them “financial weapons of massdestruction.”

EU financial services chief Charlie McCreevy called on national supervisors and the financial industry to agree on the real risks credit derivatives pose and how they can be limited to prevent further lossesunraveling.

“I would like to have, by the end of this year, concrete proposals as to how the risks from credit derivatives can be mitigated,” he said in astatement.

More…

Jim Sinclair’s Commentary

Maybe the FBI should just arrest all the OTC derivative manufacturers.

Lehman Is Focus of Three U.S. Grand Jury Probes; 12 Subpoenas
By Linda Sandler and Christopher Scinta

Oct. 17 (Bloomberg) — Lehman Brothers Holdings Inc., which last month filed the largest bankruptcy in history, is the subject of three federal criminal probes and at least 12 subpoenas, according to a lawyer for the failed bank.

“We are facing three grand jury investigations,” said lead Lehman bankruptcy lawyer Harvey Miller yesterday in Manhattan federal court. The probes, launched by the New York U.S. attorneys in Brooklyn and Manhattan as well as in Newark, New Jersey, are focusing in part on Lehman’s role in the $330 billion auction rate securities market and possible crimes associated with the New York-based bank’s $6 billion June stock issue, according to a person familiar with the case.

The New York Post reported today that Lehman Chief Executive Officer Richard Fuld is among the 12 subpoenaed, without saying where it got the information. Miller declined to immediately comment on whether Fuld was among those subpoenaed.

Investigators have subpoenaed Ernst & Young LLP, Lehman’s auditor; U.K.-based bank Barclays Plc, which bought Lehman’s North American brokerage; and the New Jersey Division of Investments, which runs a pension fund that lost $115.6 million on a $180 million investment in the June stock sale, according to people familiar with the case. It’s not clear whether these subpoenas are part of the 12 noted by Miller.

Yusill Scribner, a spokeswoman for U.S. Attorney Michael Garcia in Manhattan, declined to comment. Fuld’s lawyer, Patricia Hynes of London-based Allen & Overy, didn’t immediately return a call or e-mail seeking comment.

More…

Posted by & filed under General Editorial, JSMineset Editor.

Dear Friends,

Since Editor Dan and I have to ration our time, we will from today on only be able to return calls, faxes and emails to those people who have taken a positive step to show corporate confidence in me.

These people we owe our time to and these people will get it.

Thank you for understanding our situation,

Jim and Editor Dan

Posted by & filed under General Editorial.

Dear CIGAs,

The eloquent and highly perceptive Ambrose Evans Pritchard informs readers to the problem Jim has long stated. Derivatives were always going to be the big problem.

The world at large is slowly beginning to awaken to what Jim Sinclair has been saying for a long time.

Respectfully yours,
Monty Guild.
www.GuildInvestment.com

Fears of Lehman’s CDS derivatives haunt markets
It is a full week after bankers gathered in New York to start sorting out the derivatives mess left by the bankruptcy of Lehman Brothers. We still do not know who is on the hook for some $360bn of default insurance, or how much they will have to pay.
By Ambrose Evans-Pritchard
Last Updated: 12:18AM BST 17 Oct 2008

Lehman Brothers former chief executive Dick Fuld has faced heavy criticism

Ominous talk of big names and big sums continues to haunt global markets, thwarting efforts by the US and European authorities to unlock inter-bank lending. Traders have noted with acute interest that insurer AIG – now nationalised – says it will need another $38bn from the US government, on top of the $85bn bail-out it has already received. AIG is the world’s biggest underwriter of credit protection.

Those on the wrong side of these Lehman debt contracts – known as credit default swaps (CDS) – must come up with the money by Tuesday, the next D-Day in the ever-fraught calendar of the credit markets. There has been a deafening silence so far.

There is no easy way of finding out who they are, so every bank and insurer is suspect. The $55,000bn CDS market is “completely lacking in transparency and completely unregulated” in the words of Chris Cox, the chairman of the US Securities and Exchange Commission.

The settlement auction on Lehman CDS contracts last week was in itself a bombshell. Creditors retrieved just nine cents on the dollar from the Lehman wreckage. As Naked Capitalism put it, the bank had “vaporised”. The biggest players at the auction were Goldman Sachs and Deutsche Bank but they were almost certainly transacting for clients.

The insurers of the debt — a third are hedge funds — will have to pay 91pc of the $400bn in contracts.

More…

Monty,

What good is knowing all of this when our esteemed financial leaders pulled the plug on Lehman, a very major OTC Derivative creator.

I do not for a minute think I know more than Paulson and Bernanke.

The SEC overrules FASB, who in fact earlier this week allowed the gang to lie, allowing those cartoon values come back onto balance sheets. Now we are at square one. What just sold for .0875 cents by Lehman can be valued at whatever your in house demonic thief geek says is value to maturity, even though there is no way to know what market conditions will be at maturity. Why not say $90 or more on the .0875 OTC bag of crap just sold by Lehman?

Think about this!

Your friend,
Jim

Posted by & filed under General Editorial.

Dear CIGAs,

Why is there even an FASB?

They are a bunch of bean counters that like two plus twp to be four. The earth cries out to its maker as the evil is too much to bear.

The common man is a slave.

The middle class is regulated.

The super rich have no regulation, law or feeling of responsibility except to themselves.

The damage they do will be vented on their children, but they do not give a damn.

Financial Sodom and Gomorrah:

“And the Lord said, Because the cry of Sodom and Gomorrah is great, and because their sin is very grievous;

I will go down now, and see whether they have done altogether according to the cry of it, which is come unto me; and if not, I will know.

— Genesis 18: 20-21 (KJV)”

Sometimes men just push too far.

That time the evildoers are the denizens of Sodom, a city on the plains of Jordan near the Dead Sea.

This time the evil doers are OTC derivative manufacturers and the false/misleading valuation of worthless asset-less so called assets.

Somehow I do not believe the cocky evil doers will walk away with their winnings, their health and live happily ever after in Greenwich CT and Toronto.

SEC allows change that may delay bank write-downs
Thu Oct 16, 2008 3:54pm EDT

NEW YORK/WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission has agreed to a request from banks that could allow them to delay writedowns on certain securities that have dropped in value due to thecredit crisis.

In a letter late on Tuesday, the chief accountant of the SEC told Financial Accounting Standards Board (FASB) Chairman Robert Herz, that banks, at least temporarily, could treat so-called perpetual preferred securities more like debt securities when assessing them for impairments.

In explaining the decision, SEC Chief Accountant Conrad Hewitt said such securities were “hybrid” securities with equity and debt-like characteristics that presented a particular challenge to banks.

In the letter, Hewitt said the SEC “would not object” to banks treating perpetual preferred securities as debt until FASB provides clearer guidance on how to address impairment charges for these securities.

A FASB spokesman was not immediately available to comment.

More…

Jim Sinclair’s Commentary

When one party in a special performance contract fails financially the OTC derivative moves from notional value to full value. I don’t believe there are 200 experts that know their ass from their elbow on how to settle this mess.

Lehman Looks to Unwind Derivatives Trades
LEHMAN bankruptcy attorneys sorting thru 1.5 mil derivatives trades involving 8,000 counter-parties.

Lehman Brothers Holdings Inc.’s legal and financial advisers said Thursday they plan to hire about 200 professionals to help settle the more than 1 million derivatives trades the investment bank entered into before it collapsed last month.

Lehman attorney Harvey Miller said at a court hearing that advisers are working around the clock to understand Lehman’s transactions in the wake of the “chaos” that resulted from its Sept. 15 bankruptcy filing, the largest ever in U.S. history.

Much of their work will focus on wading through about 1.5 million derivatives trades involving 8,000 counterparties. Lehman’s chief restructuring officer Bryan Marsal of turnaround firm Alvarez & Marsal said about 210 financial professionals will be hired to unwind those trades.

Mr. Miller credited Mr. Marsal for his work so far, saying he has “brought order to thi s chaos.” Alvarez & Marsal has 144 employees working on the Lehman matter along with 165 Lehman employees still working at the bank.

More…

Will Bailouts Risk Hyperinflation?
By CNBC.com | 13 Oct 2008 | 06:07 AM ET

Government bailouts of the financial system will destroy the dollar, euro and sterling because of hyperinflation, Martin Hennecke, senior manager of private clients at Tyche told CNBC. But Todd Everts, president & CEO of Wall Street Global, disagreed.

“The privatization of the banks is the first step down the road to hyperinflation,” Hennecke said Monday. “Maybe we are not seeing the Zimbabwe-style (hyperinflation), but inflation is a major major risk and investors should look at this very carefully.”

Standard and Poor’s projected in 2005, well before the current crisis hit, that all the major Western governments would be heading towards default on their sovereign bonds, Hennecke said.

But the dollar’s value is set to decrease over time, argued Everts, after hearing Hennecke’s case.

More…

Posted by & filed under General Editorial.

Dear Jim,

I was reading your latest article and was very alarmed – I have been up most of the night in regards to these 3 comments and would greatly appreciate your thoughts.

I am currently totally invested in bullion 65 % gold and 35% silver.

Can you please help with these 3 ideas …

  • Silver will demonstrate the fact that it is more an industrial metal than a precious
  • Silver is not a currency because it is simply too HEAVY to settle debts or to be universally fungible.
  • Silver performs best when there is reasonable industrial demand and distrust of currency. When this happens rounding up the gang and their money will have a lot to do with which party is elected.

Also are saying that silver is unlikely to recover from this point in time and not likely to track gold at at least 90-100 to 1 ratio? THIS WOULD BE A MAJOR CONCERN FOR MANY INVESTORS AND I THINK IT WOULD BE VERY HELPFUL FOR US ALL

Thank you so much – I do realize your time is valuable.

Many kind Regards
CIGA Brad

Dear Brad,

Silver will perform with gold.

My concern is that after $1200 in gold, silver may not keep pace with gold due to its industrial demand component.

That is 100% consistent with what I have said for years.

What I said is absolutely true, but you give it too much of a bearish interpretation.

I never in any way made a bearish prediction for silver.

I said be realistic as markets move up as what I told you, in my opinion, is correct.

All the best,
Jim

Jim,

It just keeps getting worse…

…averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day

God Save Us,
CIGA Rick in Missouri

Banks borrow record $437.5 billion per day from Fed
Thu Oct 16, 5:14 PM ET

NEW YORK (Reuters) – Financial institutions ran to their lender of last resort for record amounts of cash in the latest week, under extreme pressure from the worst global financial crisis in a generation, Federal Reserve data showed on Thursday.

Banks and dealers’ overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day.

Some analysts are concerned that banks’ dependence on Fed lending might become long term and difficult to change.

“The banking system is going to become addicted to this very cheap money. Unwinding it will be very difficult,” said Howard Simons, strategist with Bianco Research in Chicago.

More…

Dear Rick,

See you in Weimar.

Regards,
Jim

Posted by & filed under General Editorial.

Dear Friends,

1. As we approach elections everything possible is being done to keep equities from total implosion.

2. As we approach elections everything possible is being done to keep the hollow US dollar firm

3. As we approach elections everything possible is being done to keep gold under control to assist in keeping the dollar firm.

4. Gold is NOT a commodity. It is a currency.

5. There is an appearance of involuntary liquidation in gold as hedge and gold funds are pressed by redemptions and needs for capital to pay off investors.

6. Gold never changes. Things change in price comparison to gold, so therefore you can jump up and down on the barometer but that will not change the circumstances it is reading.

7. The means of keeping all things in check is to demoralize those whose positions oppose the goal while showing some sunshine to those who wish to keep their positions.

8. Nobody on earth can prevent the CONSEQUENCES of Chairman Bernanke and Secretary of the Treasury Paulson’s attempt to offset the unavoidable CONSEQUENCES of the same actions taken by the central bank and treasury of the 1930s.

9. The different monetary action now in the degree applied will have their own and different CONSEQUENCES in the degree of economic impact.

10. The dichotomy between the bullion supply/demand picture and the easy to manipulate paper gold market continues. Pedro says: “A “friend” of mine was in Zurich yesterday. Aside from the fact that there were no gold coins available in one of the major centers of the world gold trade, it was also noted that there are no longer any large safe deposit boxes available at Credit Suisse Banhofstrasse.”

11. Here is where we are headed to some degree, regardless of the manipulation of markets to paint charts at an unprecedented level.

A Tale from Weimar Germany
by Roland Watson

Most readers will be familiar with the great hyperinflation of Weimar Germany. Indeed, it is often held up as the icon of what can go drastically wrong when government throws off all restraint in regards to the production of fiat money. I do not need to labour the point much as to how billions and then trillions of marks were literally not worth the paper they were printed on and how workers had to be paid by the hour lest their wages rapidly lost purchasing power in the brief time between being paid and spending that same money.

As ever, gold and silver proved to be safe havens from the ravages of inflation. Indeed, anything other than the mark seemed to a good place to park one’s wealth. In those days, that could be anything from bedpans to US dollars to precious metals. However, depending on one’s accumulated wealth, gold and silver were amongst the top assets in terms of holding and transporting wealth. Despite this, one set of figures and one notable week in the life of Weimar Germany demonstrated that one particular form of wealth proved to be in particularly heavy demand

Comments are invited by emailing the author at newerainvestor@yahoo.co.uk.

12. Don’t let the unprecedented bullying of all markets to meet political expediency draw your attention off the ball.

There are defined CONSEQUENCES to the new approach taken by the top expert of the 1929 to 1940 depression. The error is that these actions will have CONSEQUENCES different from 1930 and they will be more devastating than one can ever imagine.

Monetary inflation, “the unlimited creation of fiat money,” will cause massive price inflation regards of the level of business activity

PROTECT YOURSELF!

Posted by & filed under General Editorial.

Dear Friends,

There is one simple but extremely dangerous error being made by the man who is the world’s greatest expert on the time period and economics of the Great Depression, Dr. Bernanke, Chairman of the Federal Reserve.

The Chairman is an expert on the history and consequences of that period. He is being guided by this deep knowledge, yet is totally oblivious to the consequences of the alternative actions he is taking to not make the same errors as the 30s. This is all in his attempt to prevent his president from going down in history along with other failed economic leaders.

The unprecedented creation of infinite dollars for the purpose of flooding the world’s entire financial system is causing the birth an inflation of types unknown in a modern economy.

The test case for the CONSEQUENCES of present united central bank actions is the history of the Weimar Republic, but this time it is on a planetary basis.

CONSEQUENCES cannot be avoided by any means. They are economic equal and opposing forces. That is simple fact.

In an attempt to avoid what the Chairman see as consequences of incorrect central bank action in the 1929 – 1933 period, he is creating new and infinitely more dangerous, longer lasting, society changing, politically provocative new sets of unexpected economic CONSEQUENCES.

The only number that might compare to the nominal value of all OTC derivatives is a count of all the individual plankton in all the oceans of the world and then only maybe.

The world will never be the same because of the greed of these 29 year olds and the old goat bosses who sat at the long desk of the board of directors while looking the other way.

Upcoming events:

As a result of “This is it and It is NOW”:

  1. US exchanges will be closed. There is a chance all world exchanges will close down. Only gold and currencies which are planetary markets will continue to trade.
  2. Retirement programs will not pay off.
  3. Medicare and Medicaid will at best buy you a bandage or pay for 1/4 of a visit to a free clinic.
  4. Social security, due to the massive upcoming inflation, will provide no security for any society.
  5. Money Market Funds will not pay off.
  6. A CD is a gift, but not to you.
  7. Unified central bank action has a short life.
  8. Central banks will soon revert to the strategy of everyone for themselves.
  9. 401Ks not self directed are headed for the toilet forever.
  10. Exchange Traded Funds will not return the assets upon which it is based to you.
  11. Sliver will demonstrate the fact that it is more industrial a metal than precious.
  12. Silver is not a currency because it is simply too HEAVY to settle debts or to be universally fungible.
  13. Silver performs best when there is reasonable industrial demand and distrust of currency. When this happens rounding up the gang and their money will have a lot to do with which party is elected.
  14. Credit card companies are going to have to be bailed out.
  15. GE Capital is a nuclear capable entity that has the capacity to take down the good old toaster and refrigerator manufacturer – SIGMA ZERO.
  16. GE Capital is a huge OTC derivative dealer but somehow I do not recall that fact being discussed.
  17. Gold is the only Honest Money because it has no liability attached to it.
  18. Gold coins are the best way to own gold for the average investor.
  19. When you select a junior gold, I would look for the highest quality, most bashed, highest short positioned, with real assets and real people devoid of pussy management. The situation is best if it is based in another country than the country you live in while doing business in a third and trading in multiple areas. The benefit is obvious.
  20. Nobody ever did or will ever trade items as insurance. That is a form of madness.
  21. At $1650 I will take my leave, having been with you to the point I promised.
  22. The only place you will find me then is at my place of business on the ground or the web.

There is no question that gold will trade at or above $1650 by January 14th, 2011.