Posts Categorized: General Editorial

Posted by & filed under General Editorial.

Dear Friends,

Stay the course or jump directly into the fire! That’s the soundest advice I can give you in this highly volatile market period. I told you that you would see volatility in gold beyond your wildest imagination. That statement usually went along with my warning that by margining anything gold you were putting yourself in great financial risk.

Today has to seal the veracity of that advice. Now get a hold of yourself. There is absolutely no way governments can make a problem of this size go away over a weekend. Those that question me on this issue are the same ones that laughed in 2000 when I said the growth of OTC derivatives was going to break the world. I told the lead director of Bear Stearns at the time that OTC derivatives were going to break his firm but the profits from them was simply too intoxicating for anyone to listen. Now I am asking you to listen.

Whatever is done to resolve this global financial crisis is going to inject incomprehensible amounts of new money into the global financial system.

Academics see the world as a ‘Picture In Time.” That means they are static thinkers who can’t perceive motion. Visionaries like Harry, Monty, Trader Dan & Tony are “Dynamic Thinkers.” At present, some academics are promoting the dumbest line I have ever heard. They say that all this new money going into the system is not monetary inflation because it is simply replacing all the money lost and therefore is a wash. That is part of the thinking pattern I am talking about and it’s dead wrong.

Dynamic thinkers know that the outflow of these losses has existed from the time of transaction and therefore prior to truer valuation as mandated by Financial Accounting Standards Board (FASB).

The day the FASB mandated truer value had existed for years but was not recognized as such because it was generally accounted for off balance sheet. Just because financial institutions tried to hide their losses, those capital depletions were already a growing cancer inside their organizations.

You can be certain that a repetition of Germany’s Weimar crisis is coming soon. There is nothing that can be done to make matters better – even if done by governments unilaterally in a unified action. In fact, such action will only serve to make matters worse.

The larger the financial action, the deeper the financial fall. The G7 still thinks they run the world. That should tell you something about the degree of what they can do.

Gold is honest money that will push all crappy paper out of its way. Why do you think so much intervention took place in gold in US market hours today?

All I can tell you is to stay the course or jump directly into the fire! If the heat in the kitchen is too hot for you, there is nothing I can do for you.

Regards,
Jim Sinclair

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Jim Sinclair’s Commentary

Merrill got 20 cents on the dollar. Lehman got less than 10 cents.

Only numb-nuts can fluff that off.

Attorneys are in a bull market among the financial specialists.

What the OTC derivatives did not suck out of financial firms litigation will.

Lehman debt auction gives clue to potential losses
Friday October 10, 3:20 pm ET
By Stephen Bernard, AP Business Writer

Pricing for Lehman debt provides guidance on potential bank losses tied to credit swaps

NEW YORK (AP) — Sellers of insurance on bonds issued by bankrupt Lehman Brothers Holdings Inc. are now likely to face demands that they pay out more than 91 cents on the dollar to buyers of those insurance contracts.

That’s the upshot of an unusual auction process Friday that established the price for defaulted Lehman debt, and in turn potential claims payouts on insurance protecting that debt, known as credit default swaps.

Certainly, some firms will take a hit because of the pricing, potentially amounting to billions of dollars in combined losses. In the Lehman auction, participants included most major financial firms from around the world. But it’s too early to tell which companies will be on the hook or for how much.

“Where this is helpful is this is the first real-world situation where we see how market participants handle settling CDS,” said Barry Silbert, chief executive of SecondMarket Inc., a marketplace for trading illiquid assets.

In a best-case scenario, Silbert said, financial firms who sold CDS contracts would make their payouts in the coming weeks, have enough capital to cover all the positions, and take their losses and move on. In a worst-case scenario, sellers of the swaps would not have the cash to make the payments and would have to liquidate their assets to cover their positions.

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Jim Sinclair’s Commentary

Today is paper gold. Here is what is real gold.

Germans Stockpiling Gold Amid Market Panic

German gold dealers have stopped taking new orders for the precious metal as demand has skyrocketed. Gold is seen as a safe investment during the market turmoil.

In uncertain economic times, Germans are dumping stocks and shares to take refuge in precious metal, accoring to a Wednesday article in a Berlin newspaper.

German gold dealers report running low on stocks of gold bars and coins.

Heiko Ganss, head of the Berlin branch of gold merchant Pro Aurum, told the Berliner Zeitung newspaper that most gold traders were refusing new orders, as they couldn’t meet the current demand.

“Demand is running well above our capacity to supply,” he was quoted saying, saying retail banks in Germany were also unable to meet demand.

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Jim Sinclair’s Commentary

As goes Motors so goes the USA.

GM, Ford May Face Bankruptcy on Slowdown, S&P Says (Update3)
By Jeff Green and Marco Bertacche

Oct. 10 (Bloomberg) — General Motors Corp., Ford Motor Co. and Chrysler LLC may be forced into bankruptcy by slowing economies and dwindling U.S. auto sales, Standard & Poor’s analyst Robert Schulz said.

“Macro factors could overwhelm them at some point” even as the three biggest U.S. automakers vow to stick with their turnaround plans, Schulz, S&P’s lead automotive credit analyst, said today in a Bloomberg Television interview in New York. The companies said they have no plans for a bankruptcy filing.

His assessment underscored the pressure on GM, Ford and Chrysler as the worsening global credit crisis makes it harder for buyers to get loans and dealers to finance their operations. S&P said yesterday it may further trim credit ratings for GM and Ford on forecasts for 2009 auto demand falling to the lowest level since 1992.

With all three companies working to boost cash, any bankruptcy filing would be a last resort, not a “strategic” decision, Schulz said.

“We don’t see that as something they would choose,” he said. Schulz said the “trigger” for a forced restructuring under bankruptcy protection would be based on the automakers’ ability to preserve liquidity as sales decline. Industrywide U.S. sales slid 27 percent last month, the most in 17 years.

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Dear Friends,

Gold is about to VAULT UP.

I am reliably informed that the paper versus bullion gold war is lost by paper gold at a $930 close.

Gold will vault to slightly under $1000 then get pushed back, but not much at all. Directly after that we are off to $1200.

A Bank Holiday is moving from possible to PROBABLE.

  • Have you fully protected yourself?
  • Have you distanced yourself as much as possible away from financial agents holding your assets?
  • Have you gotten  paper certificates for your shares or became a direct registration book entry at the transfer agent?
  • Have you protected your retirement accounts the same way as your shares above but in the name of the retirement account and the trust holding them?
  • Have you closed your Money Market fund accounts regardless of what assurances your bankers offer?
  • Have you withdrawn from your Credit Union?
  • Have you exited your corporate retirement fund?
  • Do you have significant gold and related shares investments?

It is getting UGLY out there as each day an attempt to postpone a bank holiday fails. Almost every other day lately financial leaders of the world have announced new plans that were “the final answer” to the super-glued credit market. All these plans have had no effect. The Dow fell like a rock off a cliff.

This says all efforts have failed.

Libor Holds Central Banks Hostage as Credit Freezes (Update2)
By Gavin Finch and Ben Sills

Oct. 9 (Bloomberg) — Danilo Coronacion oversees 15 percent of global coconut oil production at CIIF Oil Mills Group in the Philippines. These days, he spends a lot of time worrying about events half a world away in London. The name of his pain? Libor.

CIIF has more than $60 million of debt, or 70 percent of its working capital, linked to London interbank offered rates that have soared since Lehman Brothers Holdings Inc. collapsed on Sept. 15. The cost of borrowing in dollars for three-months in London jumped 23 basis points today to 4.75 percent, the highest level since December.

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Central Banks Fail to Alleviate `Logjam’ in Libor: Chart of Day
By Mark Gilbert and Gavin Finch

Oct. 9 (Bloomberg) — Central-bank efforts to drive down money-market borrowing costs with coordinated interest-rate cuts are failing, according to Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets in Edinburgh.

“Central banks have pulled out all the stops and there’s no sign whatsoever that money-market strains are easing,” Stamenkovic said. “The logjam is going to remain in place for some time to come. Three-month rates and beyond are actually deteriorating.”

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U.S. Stocks Tumble, Sending Dow Below 9,000; GM, Insurers Slide
By Lynn Thomasson

Oct. 9 (Bloomberg) — U.S. stocks slid and the Dow Jones Industrial Average fell below 9,000 for the first time since 2003 as higher borrowing costs and slower consumer spending spurred concern carmakers, insurers and energy companies will be the next victims of the credit crisis.

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Dear CIGAs,

Today’s gold news is the shutting down of gold coin production by most International mints. They quote this as a reaction to the extreme demand for gold coins. They also stated that by not issuing gold coins it will bring the price of gold down. That is ridiculous reasoning as small gold demand will simply shift to other forms of gold such as 1 kilo bars with known refiner stamps and serial numbers. Who knows, maybe they will even make Dinar coins.

Friday night Paulson is scheduled to speak and the President is meeting with central banks of the group of seven over the weekend. New interests in gold see that as a reason to sell.

Gold will trade at $1200 and $1650.

This is the round number dance after hitting in a single spike one area of resistance.

Posted by & filed under General Editorial.

Jim Sinclair’s Commentary

This means a massive loss of confidence in more paper assets.

U.S. Mutual Fund Withdrawals a Record as Investors Choose Banks
By Sree Vidya Bhaktavatsalam

Oct. 9 (Bloomberg) — Investors pulled a record $72 billion from U.S.-managed stock and bond mutual funds in September, seeking the safety of government-insured bank deposits as the financial crisis worsened.

Shareholders took $43.5 billion from stock funds last month and $28.8 billion from bond funds, according to data compiled by TrimTabs Investment Research in Sausalito, California. The exodus continued in the first week of October, with an additional $49.3 billion of outflows.

“People are scared,” Conrad Gann, TrimTabs’ chief operating officer, said in an interview. “This market is different from what we’ve seen before.”

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Jim Sinclair’s Commentary

This is no more than a rehash of previous statements

U.S. Treasury May Buy Stakes in Banks Within Weeks (Update1)
By Robert Schmidt and Rebecca Christie

Oct. 9 (Bloomberg) — The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession.

Treasury Secretary Henry Paulson and top aides are still considering options on how the purchases would work, including having the government acquire preferred stock, two officials informed of the matter said.

The move would be a shift in emphasis in Paulson’s original intention for the $700 billion bailout package passed by Congress last week. While the Treasury still aims to buy troubled mortgage-backed securities from financial institutions, a direct capital injection would offer more immediate relief.

“The Treasury is no longer looking for one silver bullet,” said Steve Bartlett, president of the Financial Services Roundtable, which represents 100 of the biggest firms in the industry. “They have to proceed on all fronts.”

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Jim Sinclair’s Commentary

This is once again OTC derivatives of yet another form. At this time these are financial planetary killers

Iceland Takes Over Kaupthing as Biggest Banks Fail (Update5)
By Tasneem Brogger

Oct. 9 (Bloomberg) — Iceland’s government seized control of Kaupthing Bank hf, the nation’s biggest bank, completing the takeover of a financial industry that collapsed under the weight of foreign debt.

Iceland is guaranteeing Kaupthing’s domestic deposits and helping manage the banks to provide a “functioning domestic banking system,” the country’s Financial Supervisory

Glitnir Bank hf, Landsbanki Island hf and Kaupthing are unable to finance about $61 billion of debt, 12 times the size of the economy, according to data compiled by Bloomberg. Their collapse has affected 420,000 British and Dutch customers, and frozen assets held by universities, hospitals, councils and even London’s police force. The government is seeking a loan from Russia and may ask for aid from the International Monetary Fund to help guarantee deposits.

“This looks like a total collapse,” said Thomas Haugaard Jensen, an economist at Svenska Handelsbanken AB in Copenhagen. “It’ll take several years before the economy can start to return to growth.”

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Jim Sinclair’s Commentary

Do you think the brothers are happy under $90? Keep in mind that when, not if, Pakistan implodes crude will rise $100 from wherever it is trading within 60 days.

OPEC to Meet Nov. 18, `Likely’ to Cut Oil Production (Update3)
By Grant Smith and Ayesha Daya

Oct. 9 (Bloomberg) — OPEC is “very likely” to cut oil production at its extraordinary meeting in Vienna on Nov. 18 because prices have fallen “dramatically,” the group’s President Chakib Khelil said today.

The Organization of Petroleum Exporting Countries announced the meeting today after the global financial crisis sent crude prices below $90 a barrel.

“The Organization is concerned about the deteriorating economic conditions with contagion risks,” OPEC’s Vienna-based secretariat today said in an e-mailed statement. The gathering will “discuss the global financial crisis, the world economic situation and the impacts on the oil market.”

Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah and Shokri Ghanem, chairman of Libya’s National Oil Corp., had earlier told Bloomberg that they backed such a summit next month. OPEC had been scheduled to next meet on Dec. 17 in Algeria.

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Jim Sinclair’s Commentary

This is looking forward and therefore rather meaningless to the present situation.

You can be absolutely sure the exchanges doing this will get themselves into big trouble if they don’t bankrupt the clearing house and the exchange. I am eager to see what financial responsibility will be taken to guarantee these new WMFDs. You cannot accurately value CRAP even if Geeks say they can.

Citadel, CME add platform for swaps
By James P. Miller | Chicago Tribune reporter
October 8, 2008

Chicago Mercantile Exchange parent CME Group Inc. and hedge-fund operator Citadel Investment Group LLC on Tuesday disclosed plans to create an electronic platform to trade the complex financial instruments known as credit-default swaps.

The platform would compete with a format being put together by a Chicago-based consortium of investment banks and swaps brokers, known as Clearing Corp.

The plans are designed to bring new standards and transparency to the credit-default swaps sector, which ran into difficulties because it has been largely unregulated.

Originally designed as a safe and simple form of bond-default insurance, swaps morphed into a speculative derivative product that investors used to make highly leveraged bets on companies. Parties to such agreements agreed to insure the other side of the swap against loss if the debt issuer defaulted, but because they considered the prospect of a default unlikely, many agreed to assume potential obligations far greater than their own worth.

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Jim Sinclair’s Commentary

Normally you would take this as cold war rhetoric, however since the USA manufactures more OTC derivatives by a factor of 100 and therein bankrupting the planet, it might just be taken seriously.

Russia supplies a lot of gas and energy to Euroland. When Pakistan implodes that is going to be a huge factor.

Russian president Dmitry Medvedev calls for Europe to freeze out US
The Russian president, Dmitry Medvedev, has called on European leaders to create a new world order that minimises the role of the US.
By Adrian Blomfield in Moscow
Last Updated: 6:33PM BST 08 Oct 2008

Confident that a spat with Europe prompted by Russia’s invasion of Georgia in August was over, Mr Medvedev arrived in the French spa town of Evian determined to woo his fellow leaders into creating an anti-US front.

Gone was the kind of war time rhetoric that saw Mr Medvedev lash out at the West and characterise his Georgian counterpart Mikheil Saakashvili as a “lunatic”. Instead Mr Medvedev spoke of a Russia that was “absolutely not interested in confrontation”.

Yet there was little doubt that Mr Medvedev was playing the divide-and-rule tactics of his predecessor Vladimir Putin by seeking to pit the United States against its European allies.

In a speech delivered to European leaders at a conference hosted by President Nicolas Sarkozy of France to discuss the international financial crisis, Mr Medvedev sought to show that the United States was at the root of all the world’s problems.

He blamed Washington’s “economic egotism” for the world’s financial woes and then accused the Bush administration of taking Europe to the brink of a new cold war by pursuing a deliberately divisive foreign policy. He also maintained that the United States was once again trying to return to a policy of containing Russia.

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Jim Sinclair’s Commentary

Westerners still don’t understand that when in the East you cannot oblige, you simply speak obligingly and then do whatever you want to.

North Korea reported ready to fire more missiles
Thursday, October 9 07:18 am

SEOUL (Reuters) – North Korea has deployed more than 10 missiles on its west coast for what appears to be an imminent launch, a South Korean newspaper said on Thursday, two days after the North fired two short-range missiles into the Yellow Sea.

It would be an unprecedented test if the North fired all of the surface-to-ship and ship-to-ship missiles, but intelligence sources quoted by the Chosun Ilbo paper said they thought the North may launch five to seven of them.

The North has forbidden ships to sail in an area in the Yellow Sea until October 15 in preparation for the launch, an intelligence source told the paper.

The North fired two missiles on Tuesday in routine military drills, South Korea’s defence minister said on Wednesday.

“If the North fires a large number of missiles, it would be difficult to see it as routine exercise,” the source was quoted as saying.

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Jim Sinclair’s Commentary

Anyone need some fertilizer for fall planting?

Lehman Brothers CDS Credit Event Auction
10th October 2008

On Friday 10th October 2008, the auction to settle the credit derivative trades for the Lehman Brothers Holdings Inc. is to be held.

The results will be published here on the day of the auction. Initial results are due to be published at 10:30 NY Time and final results at 14:00 NY Time.

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Jim Sinclair’s Commentary

These are the fellows that screwed it up.

How does the screwor fix the dilapidated screwed?

World finance chiefs heading for Washington for crunch talks
Oct 9 02:01 AM US/Eastern

Finance chiefs from the world’s richest nations are set to meet in Washington for a crucial but uncertain meeting at a time of unprecedented fear about the global financial system.

The Group of Seven meeting will bring together finance ministers and central bankers on Friday from the United States, Germany, Japan, France, Britain, Italy and Canada for some collective-thinking on the credit crunch and crashing stocks.

They are to be joined by counterparts from emerging markets including Brazil, Russia, India and China for an impromptu gathering of the expanded so-called G20 group.

The United States finds itself in a rare position of weakness, facing many allies that have been highly critical of its economic policy and regulatory system blamed for the problems.

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Jim Sinclair’s Commentary

I wonder if this fellow owns any junior metal shares…

Cops: Stamford Man Threatened Bank Over Financial Losses
Last Edited: Wednesday, 08 Oct 2008, 5:49 PM EDT
Created: Wednesday, 08 Oct 2008, 5:49 PM EDT

MyFoxNY.com  —  Cops say the Wall Street crisis has had a disturbing affect on one disgruntled investor. Police charged a 60-year-old man with threatening to blow up a bank branch in Stamford. Authorities say he was angry about his investment losses, so he walked into a branch and said he would kill everyone inside

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Jim Sinclair’s Commentary

Concerning the shortage of the hard stuff, that is real. The paper gold market demonstrates that by the violence now on the buy side as well as the sell side.

Bullion will take out paper.

Gold, silver in short supply for those getting out of stocks
By Doug Page
Staff Writer
Wednesday, October 08, 2008

DAYTON – If you are thinking of diversifying your portfolio to include gold and silver, you may have to stand in line.

Richard Hana of Belmont Coin said his shop ran out of pure gold and silver coins two weeks ago.

“We people come looking for gold or silver, we take their name and when something comes in, we call them,” Hana said Wednesday, Oct. 8. “In a sense, it is already sold before it comes in the door.”

Hana said business is up 300 percent to 400 percent, particularly in the past weeks.

“People are scrambling to buy gold and silver,” said Ed Fritz of Centerville Coin & Jewelry Connection.

“There is huge shortage worldwide. People are pulling money out of economy, which has created a huge demand,” said Fritz, who has been in the business for 40 years.

Gold was selling around $910 a troy ounce by midday and silver at $11.70.

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Posted by & filed under General Editorial.

Dear Friends,

The Big Gun was rolled out today. The equity market had steadied from its recent drastic action and Paulson picked up the baton and ran with it. He is considered to be the best public speaker of the Money Men.

The Bloomberg ladies were in total glee as the market was up about 125 points. As Paulson said that not all financial failures would be bailed out (now a major fib) the equity gang lost their instructions. In the blink of an eye what was up 125 points was then down almost 200.

I imagine being a good public speaker does not carry much weight in a situation that can be described as “OUT OF CONTROL.”

If the Washington gang really does not want the financial calamity now in progress, statements that suggest another major financial entity could go bankrupt without a bailout should be avoided. If all powerful Money Man persists in bringing up thoughts of Lehman’s Chapter 11, the equity market will have no bottom. Letting Lehman go after instituting bailouts of others is the event that has given way to this “Out of Control” condition.

Out of Control means just what it says. If things were under control the equity market would not have given a Brooklyn Cheer to the President of the USA and the Chairman of the Federal Reserve and there would not have been an unprecedented drop of interest rates today.

Bank holidays are on the way.

Every major retirement fund is stone broke.

Most money management entities are full of treasury OTC derivatives, not treasury instruments, and are therefore also broke.

The local banks are in the web of the Money Center banks and are therefore in trouble they do not even know about yet.

The paperwork behind OTC mortgages is a total disaster, adding more mess to an already major financial planetary killer.

I am sorry to say that there is no way to make this process go away. The downward spiral will make its way to the bottom.

Gold will be the tool that finally stops the plague in the form of the Federal Reserve Gold Certificate Ratio, revitalized and modernized, but not until the public is in such a condition that it cries out to God to stop the carnage. That will happen sometime before January 14th 2011.

Protect yourself, this is out of control!

Respectfully yours,
Jim

Click here for today’s action in SPDR (GLD) Holdings, Gold in Various Currencies, the Dow/Gold Ratio, Royal Gold and Gold Corp with commentary from Trader Dan Norcini

Posted by & filed under General Editorial.

Dear CIGAs,

Here is intervention #5 which happens to also be bomb #5

Fed, major central banks slash rates
More moves expected in effort to stabilize financial system
By William L. Watts, MarketWatch
Last update: 10:11 a.m. EDT Oct. 8, 2008

WASHINGTON (MarketWatch) — The U.S. Federal Reserve and other major central banks moved in concert Wednesday to slash key interest rates as part of an ongoing effort to quell financial turmoil that has threatened to flatten the international economy

In moves announced simultaneously before the opening of U.S. markets, the Fed cut its key lending rate by half a percentage point, to 1.5%.

The European Central Bank trimmed its key rate to 3.75% from 4.25%, and the Bank of England cut its benchmark rate to 4.5% from 5%. The Bank of Japan sat out the move but issued a statement backing the action.

The Bank of Canada, the Swiss National Bank and the Swedish Riksbank cut rates as well.
The move was hailed by economists, but did little to provide lasting support for tumbling equity markets. European indexes rebounded strongly but soon returned to the downside. U.S. stock index futures spiked higher, but then dove back into negative territory.

More…

Libor rises and the credit market continues to be super glued.

Equity selling is violently oversold but rallies have no legs.

The US dollar rally has no fundamental legs.

The problems in the US exceed economic problems anywhere.

Great Britain is simply another state of the USA, at least in this administration.

Euroland has problems but they will continue to lie and hide.

If you do not have cash on hand, gold in the mayo jar, distance between you and your financial agents, paper certificates or direct registration book entry you are simply a financial disaster waiting to happen.

The Big Boy of the Money Guys, Paulson, is following up on the President and Chairman of the Fed. Let’s see if he gets the same or different market treatment.

Gold is going to $1200 and $1650.

The US dollar will trade at .72, .62, and .52.

The SEC has put the onus on US brokers involved in the Jitney practice to see that short sales are properly delivered in 3 days. Massive amounts of subpoenas have gone out to enable a review of this practice. Subpoenas have also gone out to funds internationally via their US jitney brokers to review their position and pattern recognition between various entities. The sun is rising on the shadows. Those that hide in the dark to injure for profit cannot exist in the light.

Posted by & filed under General Editorial.

Control |kənˈtrōl|

noun
1 the power to influence or direct people’s behavior or the course of events : the whole operation is under the control of a production manager | the situation was slipping out of her control.
• the ability to manage a machine or other moving object : he lost control of his car | improve your ball control.
• the restriction of an activity, tendency, or phenomenon : pest control.
• the power to restrain something, esp. one’s own emotions or actions : give children time to get control of their emotions.
• (often controls) a means of limiting or regulating something : growing controls on local spending.
• a switch or other device by which a machine is regulated : the volume control.
• the place where a particular item is verified : passport control.
• the base from which a system or activity is directed : communications could be established with central control | mission control.
• Bridge a high card that will prevent opponents from establishing a particular suit.
• Computing short for control key .

Things are out of control.

The draconian action taken by the Federal Reserve today was their entry into locked credit markets that are defined by the Libor Rate and Rate on Commercial Paper. This action prevented the triggering of a total implosion of all markets, with the exception of gold, the currency of ultimate final refuge.

“Out of Control” can be defined as a day the Dow crashes 500 points when the Chairman of the Federal Reserve and the President of the United States spoke on national TV, right on the heels of the much touted Bailout Bill, combined with the entrance of the Fed into the OTC derivative business with no binding limits set on the high side of this initiative.

This is a downward spiral in which now four major interventions have failed.

The only case study in History is the Weimar experience. You cannot compare this to the credit lockup of Livermore and JP Morgan times. Arguments against that point are hollow.

What I find inexplicable is that the “Uptick Rule for Short Selling” has not been reinstated. That rule is more powerful than even banning short selling. These people are not STUPID so one can only assume this “Out of Control” situation is not a surprise.

Do not be surprised by additional intervention failures, gold taking out $1000 on the 3rd try, three consecutive TIC reports failing to support the Trade Deficit, a Federal budget deficit of unprecedented proportions, a dollar trading at .72, .62 and .52 and gold trading at and above $1650.

I told you in the middle of the recent dismal state of mind many gold investors were in that I never felt better about gold. That may have sounded nuts to some of you.

I now say that I have never felt more confident about gold and silver juniors with good property, good management and money in the bank.

Jim Sinclair’s Commentary

Here is an example of the struggle between paper gold and the bullion gold market. This means violence beyond your wildest expectations with FINANCIAL FAILURES ON BOTH SIDES.

Bullion lending by central banks all but dries up
By Javier Blas in London , Financial Times, 7 Oct 2008

Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.

The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association.

Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven years.

Traders said the jump reflects the fact that central banks – mostly European – have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis.

“A number of central banks have been cutting back on their gold lending,” said Tom Kendall, a precious metals strategist at Mitsubishi in London.

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Jim Sinclair’s Commentary

The US dollar cannot stage any kind of a bull market with this type of supply out there.

Fed to buy massive amounts of short-term debt
Tuesday October 7, 10:33 am ET
By Jeannine Aversa, AP Economics Writer

Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt

WASHINGTON (AP) — The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy.

The Federal Reserve, invoking Depression-era emergency powers, will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

In more normal times, about $100 billion of these short-term IOUs were outstanding at any given time, sold by companies to buyers that included money market mutual funds, pension funds and other investors. But this market has virtually dried up as investors have become too jittery to buy paper for longer than overnight or a couple days.
That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week.

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Jim Sinclair’s Commentary

If regulators don’t care to apply their regulations, maybe God will.

Bonfire of the hedgies
Only the strongest will survive as the global crisis lashes the funds sector
Kate Walsh

In happier times, the bronzes in the window of WH Patterson’s gallery in London’s Mayfair would have been quickly snapped up. Their titles – Lioness Attacking, Lioness Stalking and Cheetah I and II – would have appealed to the hedge-fund managers who work in the area and fancy themselves as financial-market predators.

To them, the asking price of £10,000-plus would have been little more than small change; but those days have gone and the hunters are rapidly becoming the hunted.

A handful of managers in London and New York were forced last week to liquidate funds, including the flagship funds at MKM Longboat and Powe Capital, as investors demanded their money back. It is only the beginning.

Experts are predicting a 30% reduction in the hedge-fund industry – there are roughly 10,000 funds worldwide, and the industry is worth approximately $2 trillion. One broker said: “Small firms are bleeding. Assets are being sold off, investors are redeeming money and the managers are scuttling off to work somewhere else.”

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Jim Sinclair’s Commentary

Please note this extremely important set of facts.

Notice the words EQUITY LOST FOREVER and tell me what value to maturity means. I believe that it means nonsense, and the newest attempt at spinning worth-less to worth-full which will remain worth-less FOREVER.

The largest fabrication is that the worthless paper now being bought to an infinite amount by US taxpayers will someday return to significant value. They simply will not.

US Real Estate: From Goldmine To Money Pit – Mortgage Backed Securities and Derivatives are Flawed and Failing
by Kenn spacefield

The mortgage debt problem is simple really, it has been a total mis-appropriation of equity. The equity lost on flat screen TV’s, boats, new cars, vacations, and other living expenses; is equity lost forever. This loss of equity spent on consumer goods and expenses is a pyramid scheme of hyper-capitalism that is flawed and failing. Equity not spent on the property the equity comes from, is equity lost forever, a mis-appropriation of funds, and inappropriate; it is a failing economic model.

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