Posts Categorized: General Editorial

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.

More…

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.

More…

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.”

More…

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.

More…

Posted by & filed under General Editorial.

Dear CIGAs,

Today the Fed entered the off balance sheet credit default market and plans to buy unsecured debt instruments in order to cure the problems caused by off balance sheet credit default derivative buying in the form of non-performing failed counterparty credit default derivatives. This appropriately named toxic paper will be purchased to an infinite degree.

The Fed does the same to cure the same.

The Fed actions today declare the bailout bill a non-functioning pile of pork.  This infinite production of paper dollars will kill the dollar

Gold will trade at or above $1650.

The Dow is thumbing its nose at the infinite amount of money being dropped by rising 150 points and coming back to even.

Modern day Weimar here we come!

Jim

Posted by & filed under General Editorial.

Dear Friends,

Please understand that the Fed reacts to circumstances rather than acting before potential problems happen.

If the Fed hadn’t taken the rather strange action they took today by becoming OTC derivative dealers themselves this would have been the day the USA banking system imploded.

Watch Libor rates to signal the point of detonation.

Circumstances appear as if there were many problem Angels dancing on top of a pin that is being balanced on the nose of just those people who created the problem in the first place.

An implosion of the banking system is coming, which means a bank holiday will occur.

You now must have enough cash in hand to last a month or two.

If you have not distanced yourself from financial agents then you have a financial death wish.

If you have NOT made absolutely sure that your custodian account is a real custodial- ship you are probably in for a surprise.

I took a call yesterday from a mature lady who told me she feels her money market fund that is only in Treasuries will not pay her out. They did tell her they intend to in seven days. I asked her to call me back in eight days. How does she know that this money market fund is not in OTC derivatives based on the movement of Treasuries?

I do not want you to make that call to me.

If you can retire from your  retirement program at some reasonable discount do it NOW.

This is it and it is NOW. Gold is going to $1200 and $1650. The US dollar rally has NO fundamental legs.

Why are so many of you sitting there like a deer caught in the headlights? Protect yourself and do it TODAY!

Respectfully,
Jim

Posted by & filed under General Editorial.

Dear CIGAs,

  1. Gold is the ultimate currency when others fail as a store house of values.
  2. Gold has no liability attached to it.
  3. Gold is universally fungible.
  4. Gold is an appreciating asset on the balance sheets of central banks..
  5. Gold will trade at $1200 and $1650.
  6. Of course gold bottomed on its first break from $1033, but I only say such things once.
  7. The third try for above $1000 is being set up now.
  8. Have you protected yourself?

Your friend,
Jim

Posted by & filed under General Editorial.

Jim Sinclair’s Commentary

Read this as OTC derivatives kill more and more.

Another Fund Heavily Used by Schools Is Frozen
By JOHN HECHINGER in Boston and CRAIG KARMIN in New York

A second investment fund offered by investment adviser Commonfund froze most withdrawals this week, posing possible financial strains for the 200 colleges and schools invested in the fund.

The Commonfund Intermediate Term Fund held $1 billion in assets for the schools. Commonfund, a Wilton, Conn., investment adviser for colleges and schools, told clients they could withdraw only 30% of their money now, and said it will make the rest available “as quickly as possible,” depending on market conditions. The fund would normally give investors any part of their money the day after a withdrawal request.

Keith Luke, managing director of Commonfund, says about half of the fund was invested in mortgage- and other asset-backed securities from which investors have been fleeing. The rest was in government-agency and corporate debt that has held up better in the financial crisis. Mr. Luke said Commonfund instituted the freeze because redemption requests would have forced the fund to sell securities at “distressed prices.” He said the portfolio’s securities haven’t had defaults.

The fund returned less than 1% in the year ended June 30 and 2.7% annualized over the past five years, underperforming its benchmark Merrill Lynch 1-3 Year Treasury Index, according to Commonfund. Mr. Luke says the fund has had outflows but they “haven’t been huge.” He said he didn’t know when restrictions would be lifted but it would depend on improvements in the credit markets.

More…

Jim Sinclair’s Commentary

Gold is the final form of money. It will be chosen by all those seeking safety from paper instruments & currency over treasury instruments of bankrupt countries.

Financial Crisis: Rush for gold as savers queue for bullion
Savers have been queuing in the street to buy gold bars and coins, as they search for a safe place to invest their money.
By Harry Wallop, Consumer Affairs Editor
Last Updated: 6:26PM BST 02 Oct 2008

Traditionally, gold has been one of the safest investments during times of financial turmoil Photo: AP

London’s two leading bullion dealers, ATS Bullion and Baird & Co, have reported a rush of interest from savers, many of whom have hundreds of thousands of pounds worth of savings they want to convert into the precious metal.

At least two customers have invested the entire proceeds from selling their houses into gold, each buying up more than £500,000-worth of gold bars, according to one dealer.

Savers have been queuing in the street at ATS Bullion, whose offices are just off the Strand in London’s west end.

Sandra Conway, the company’s managing director, said: “We’ve had to turn people away. The queues have been right out of the door and it’s been really hectic at times.

More…

Jim Sinclair’s Commentary

Quietly and continually Pakistan is going pear-shaped.

US Strikes in Pakistan Tribal Areas Fuelling “Backlash” – Paper
Posted on: Saturday, 4 October 2008, 03:00 CDT

Text of editorial headlined “Fighting the militants” published by Pakistani newspaper Dawn website on 4 October

Shah Mahmood Qureshi, the foreign minister of Pakistan, has been a largely anonymous figure in the weeks since the US stepped up attacks inside FATA [Federally Administered Tribal Areas] in September. However, Mr Qureshi hit all the right notes in a speech at Princeton University this week. “I’m afraid that a relatively recent element in this already difficult war threatens to undo what we have already achieved,” the foreign minister said in a reference to US strikes inside Pakistan. When American Special Operation forces landed in a village near Angoor Adda in South Waziristan in early September, observers pointed out the disastrous potential such attacks had to alienate Pakistani public opinion — and especially the tribes whose support Pakistan requires to defeat the militants in Fata and northern Pakistan. Since that attack, the Americans have stated their respect for Pakistan’s territorial sovereignty, and launched numerous missile strikes inside Fata. US Secretary of Defence Robert Gates has even claimed that the UN charter permits America to act in “self-defence” against militants operating from Pakistani soil, if the Pakistani government is unable or unwilling to do anything about those militants.

The problem is that the Bush administration is desperate for a quick success along the Pakistan-Afghanistan border, whereas an effective anti-militancy strategy must necessarily be long-term. And an effective strategy can only be led by Pakistan itself, with some combination of tribal and state action. What Mr Qureshi was highlighting is that at present Pakistan is advancing against the militants, with clear help from local tribes. Lashkars [forces] have been organised by tribes in Bajaur, Peshawar, Khyber, Swat, Dir, Buner and Lakki Marwat, and they have had some success against the militants. Engaging the tribes in such a positive manner is a delicate affair for each tribe has its own dynamics and strategic position. Earlier this week Gen Kayani visited Bajaur Agency and met with tribal leaders; later, Salarzai tribesmen announced a full- fledged operation to clear their tehsil and neighbouring areas in Bajaur of militants.

More…

Posted by & filed under General Editorial.

Dear International Friends,

Maybe you should consider a visit to your local bank for their abbreviated Saturday hours.. What do you have to lose? That all depends on how much you have deposited there…

I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective held since 2000.

If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?

When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.

What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:

Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.

Regards,
Jim