Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

In case you missed it China announced a few days ago that they have made the decision to increase strategic energy supplies. That means here and at the general market range. This has to tell you something about their serious concern for the level of the dollar as hyperinflation is a currency event, not an economic supply/demand event.

Jim Sinclair’s Commentary

A fast, clean, painless GM bankruptcy. That is the equivalent of the Great Depression of a jumbo shrimp.

Perils ahead in GM bankruptcy include liquidation, pension shortfall

We’ve got a new D-Day in the historic General Motors Corp. bankruptcy: If the automaker’s good assets cannot be sold to a "New GM" by July 10, CEO Fritz Henderson told a bankruptcy judge in New York today, the company will be forced to begin liquidation proceedings.

Leave it to Henderson, nothing if not direct, to cut to the heart of GM’s existential predicament. Is it yet another riff on the "shock-and-awe" strategy popularized last fall, which posited that a collapse of GM into bankruptcy or worse would prove cataclysmic for the national economy and, certainly, the Midwest. Yes, it is.

And, to a point, it’s probably true — emphasis on the "to a point" part. Team Obama may be intent on getting a speedy resolution to this silly little thing called the largest industrial bankruptcy in American history. And its Treasury Department has a penchant, at least in the Detroit Auto space, for setting tight deadlines and meeting them. But I’m not at all convinced the boss and his minions would let the General collapse into a heap of cut-rate auctions if the judge drags his feet.

Too much to lose. Too much political capital investment, even by the president. Too much danger to organized labor, the staying power of GM’s pension fund and auto communities in the Heartland. Indeed, an emerging fear — emerging, at least, in the public consciousness — is the likelihood that GM is burning its pension fund on buy-outs and early retirements at a faster rate than anticipated, as the New York Times details in an important story story posted late today. The danger is that pension obligations will run ahead of GM’s ability to pay them, meaning U.S. taxpayers would foot the difference through the entity known as the Pension Benefit Guaranty Corp.

"GM basically raided the pension plan, by having a lot of these severance benefits paid through it," Douglas J. Elliott, a fellow with the Brookings Institution who specializes in financial institutions and policy, told The Times. Active workers "could find that they don’t get their full pensions when they retire, because the plan has had to be terminated because of the payments to current retirees. There are definitely these intergenerational transfer issues with underfunded pensions."

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Jim Sinclair’s Commentary

I am not sure that Mr. Leahy is familiar with India’s tradition of having their wives wear the bank.

Certainly the new India and the make believe world of Bollywood is a large group of speculators ripe for the picking.

In general the chance of mobilizing the majority of Indian gold is well below zero.

India gold dealers tap domestic stocks
By Joe Leahy in Mumbai
Published: June 29 2009 18:52 | Last updated: June 29 2009 18:52

Indians are set to begin trading on Tuesday on the country’s new gold bullion market in a move likely to mobilise the thousands of tonnes of the precious metal that people keep hidden under their beds as savings.

The National Spot Exchange, controlled by Financial Technologies, the Indian market company, will begin offering contracts for domestic gold bullion, ranging in size from 8g to 1kg.

“Though India has a huge household stock of around 20,000 to 25,000 tonnes of gold, there was no single market available where this could be sold,” said Anjani Sinha, managing director and chief executive of the National Spot Exchange.

Indians have saved in gold for millennia. The country is the world’s largest consumer of the metal, importing nearly 800 tonnes a year, or 20 per cent of global demand.

But while there is a modern market for the import of bullion, once it enters India, there is no transparent exchange for its resale and conversion back into bullion.

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Posted by & filed under In The News.

Dear CIGAs,

JB Slear asks what is in your garage?

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Jim Sinclair’s Commentary

There are green shoots here. I know it. Just a minute now, I will find them.

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Jim Sinclair’s Commentary

States are bracing for shutdowns. Other states are right behind California.

The Formula of 2006 is so far on the money, yet few will yet accept the final outcome as it pertains to the US dollar.

Despite the Formula being correct so far, many still doubt its position on the US dollar and gold.

States brace for shutdowns
Time is running out for the legislatures in Arizona, California, Indiana, Mississippi and Pennsylvania to solve budget gaps.
By P.J. Huffstutter and
Nicholas Riccardi 
June 30, 2009

Reporting from Indianapolis and Denver — The last time Indiana missed its deadline for passing a budget and had to shut down the government was during the Civil War.

But on Monday, as lawmakers raced to hammer out an agreement over school funding, state agencies began preparing 31,000 workers to be temporarily out of a job. Republican Gov. Mitch Daniels has warned residents that most of the state’s services — including its parks, the Bureau of Motor Vehicles and state-regulated casinos — would be shuttered unless a budget is passed today.

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Jim Sinclair’s Commentary

Five on the 26th. Is that not a one week record?

Five More Banks Closed by Regulators
Total Failures so Far: 50 Banks and Credit Unions in 2009
June 29, 2009 – Linda McGlasson, Managing Editor

Five more banks were closed by banking regulators on June 26, bringing the total number of bank/credit union failures to 50 for 2009. Two banks in Georgia, one in Minnesota and two in California were shut down. Four were bought by other banks. The total assets of the five banks were just over $1 billion.

These five come on the heels of three banks closed on June 19.

The Federal Deposit Insurance Corporation (FDIC) paid out the insured deposits of Community Bank of West Georgia, Villa Rica, GA. The bank was closed by the Georgia Department of Banking and Finance. The failed bank had assets of $199.4 million and deposits of $182.5 million. The customers of the failed bank receiving direct deposits have been transferred to United Community Bank, Blairsville, GA. The estimated cost of the failure to the FDIC’s Deposit Insurance Fund will be $85 million. Community Bank of West Georgia is the eighth Georgia bank to fail this year.

The second Georgia bank to fail was Neighborhood Community Bank, Newnan, GA. The Georgia Department of Banking and Finance closed the bank and appointed the FDIC receiver. The FDIC in turn sold the failed bank’s deposits to CharterBank, West Point, GA. The four offices of Neighborhood Community Bank are now branches of CharterBank. The failed bank had $221.6 million in assets and deposits of $191.3 million. CharterBank agreed to purchase $209.6 million of assets. The bank and FDIC are in a loss-share agreement on $178.5 million of the failed bank’s assets. The FDIC DIF cost will be $66.7 million. Neighborhood Community Bank was the ninth bank in Georgia to fail in 2009.

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Jim Sinclair’s Commentary

This is a reasonable question asked by a rationale source.

Did leak from a laboratory cause swine flu pandemic?
By Steve Connor, Science Editor
June 30, 2009

Same strain of influenza was released by accident three decades ago

It has swept across the world killing at least 300 people and infecting thousands more. Yet the swine flu pandemic might not have happened had it not been for the accidental release of the same strain of influenza virus from a research laboratory in the late 1970s, according to a new study.

Scientists investigating the genetic make-up of flu viruses have concluded there is a high probability that the H1N1 strain of influenza "A" behind the current pandemic might never have been re-introduced into the human population were it not for an accidental leak from a laboratory working on the same strain in 1977.

Yesterday, the Department of Health announced a further surge in the number of cases in Britain with another 1,604 confirmed over the weekend, and the death of a nine-year-old girl in Birmingham with underlying medical complications; the third death in Britain from swine flu-related problems.

Almost 6,000 Britons have now been infected with the influenza "A" (H1N1) strain of swine flu. But two medical researchers believe that this strain of the virus had been extinct in the human population for more than 20 years until it was unwittingly reintroduced by scientists working in a research lab somewhere in the world, leading to a pandemic in 1977 that began in Russia and China.

"Careful study of the genetic origin of the [1977] virus showed that it was closely related to a 1950 strain, but dissimilar to influenza ‘A’ (H1N1) strains from both 1947 and 1957. This finding suggested that the 1977 outbreak strain had been preserved since 1950. The re-emergence was probably an accidental release from a laboratory source," according to the study published in The New England Journal of Medicine.

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Jim Sinclair’s Commentary

These things are not dollar positive.

U.S. housing misery poised to enter new phase
Fri Jun 26, 2009 1:25pm EDT
By Herbert Lash – Analysis

NEW YORK (Reuters) – Signs that home prices may have bottomed have stirred hope on Wall Street that the economy is on the mend, yet tight credit and a new foreclosure wave cast doubt on any looming housing revival.

Sales of previously owned U.S. homes rose for a second straight month in May, realty data on Tuesday showed, while the U.S. government and Federal Reserve have designed a number of programs to alleviate a battered housing market.

However, the chief economist of the National Association of Realtors warned of the danger of a "delayed" recovery in housing, with prices down 32 percent nationwide from their peak three years ago.

Big risk factors that could spur more foreclosures include expectations of rising unemployment and the forecast resetting of interest rates on 2.8 million subprime and Alt-A mortgages in the next two years.

Delinquency rates on mortgage payments typically rise in tandem with unemployment, which is expected to top 10 percent after hitting a 25-year high of 9.4 percent in May. And when mortgages interest rates reset, they are typically at higher rates that can cause monthly payments to balloon.

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Jim Sinclair’s Commentary

Dark pool exchanges may be enfranchising blindness. We shall see.

The New York Stock Exchange LLC (“NYSE”) will be decommissioning the requirement to report program trading activity via the Daily Program Trading Report (“DPTR”), which was previously approved by the Securities and Exchange Commission (the “Commission”).1 The last trade date for which member organizations will be required to file the DPTR with the Exchange will be July 10, 2009 and therefore the last required date to submit the DPTR will be July 14, 2009.

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Jim Sinclair’s Commentary

Read CDS risks as more OTC derivative liabilities.

UPDATE 1-AIG adds risk factor, may recognize more CDS losses
Mon Jun 29, 2009 6:32pm EDT

NEW YORK, June 29 (Reuters) – American International Group Inc (AIG.N) revised its 2008 annual report to add a new risk factor that shows it may recognize valuation losses on a credit default swap (CDS) portfolio held by its troubled financial products unit.

At issue is a super senior CDS portfolio held by AIG Financial Products with a notional value of $192.6 billion as of March 31, 2009.

The company said in a regulatory filing that it might have to incur further losses on the portfolio if credit markets continue to deteriorate.

The fair value of the derivative liability for CDS transactions was $393 million at March 31, 2009, the company said. (Reporting by Vikram S. Subhedar; Editing by Tim Dobbyn)

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Jim Sinclair’s Commentary

This is a reasonable question asked by a rationale source.

Did leak from a laboratory cause swine flu pandemic?
By Steve Connor, Science Editor
June 30, 2009

Same strain of influenza was released by accident three decades ago

It has swept across the world killing at least 300 people and infecting thousands more. Yet the swine flu pandemic might not have happened had it not been for the accidental release of the same strain of influenza virus from a research laboratory in the late 1970s, according to a new study.

Scientists investigating the genetic make-up of flu viruses have concluded there is a high probability that the H1N1 strain of influenza "A" behind the current pandemic might never have been re-introduced into the human population were it not for an accidental leak from a laboratory working on the same strain in 1977.

Yesterday, the Department of Health announced a further surge in the number of cases in Britain with another 1,604 confirmed over the weekend, and the death of a nine-year-old girl in Birmingham with underlying medical complications; the third death in Britain from swine flu-related problems.

Almost 6,000 Britons have now been infected with the influenza "A" (H1N1) strain of swine flu. But two medical researchers believe that this strain of the virus had been extinct in the human population for more than 20 years until it was unwittingly reintroduced by scientists working in a research lab somewhere in the world, leading to a pandemic in 1977 that began in Russia and China.

"Careful study of the genetic origin of the [1977] virus showed that it was closely related to a 1950 strain, but dissimilar to influenza ‘A’ (H1N1) strains from both 1947 and 1957. This finding suggested that the 1977 outbreak strain had been preserved since 1950. The re-emergence was probably an accidental release from a laboratory source," according to the study published in The New England Journal of Medicine.

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Jim Sinclair’s Commentary

From China’s view please note the time of your morning gold was sold off from plus $6. The dollar put on a sideways movement with a plus 15/100 spike. The paper traders are doing everything possible to prevent the inevitable. They will fail.

 

Jim Sinclair’s Commentary

Too big to fail and too small to care seems to be an international malady. The overt creation of paper currency will result in gold to going to Alf and Armstrong’s numbers, rendering my now 9 year projection of $1650 too conservative.

Japan Bails Out Struggling Chip Maker with $1.7 Billion Package
By HIROKO TABUCHI
July 1, 2009

TOKYO — In its first major industry bailout since the start of the global financial crisis, Japan said Tuesday that it had put together a package of $1.7 billion in public and private money to shore up a troubled chip maker, Elpida Memory.

By using public money to prop up Elpida, Japan hopes to salvage its only major maker of dynamic random access memory chips, or DRAM, considered vital to its electronics industry. The aid package also protects the nearly 6,000 workers at Elpida, which suffered record losses last year as the demand for semiconductors fell sharply.

But in using taxpayers’ money, the government also risks keeping feeble companies on life support, which ultimately could hurt Japan’s competitiveness, analysts said. Japan has set aside 2 trillion yen, or $21 billion, in public funds to aid companies hurt in the economic slowdown.

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Jim Sinclair’s Commentary

The party line delivered by the PR Lady was that this was only an accounting glitch. How many other depositories suffer from this incapacity to keep up with demand for delivery?

Please be careful.

Mint’s $15.3 M golden dilemma: Was there a heist?
By Philip Ling , Canwest News Service
June 29, 2009

Gold coins that will be melted down at the Royal Canadian Mint in Ottawa. The Mintsays it can’t account for approximately $15.3 million in precious metals that seems to have vanished from its inventory in the 2008 fiscal year, according to a third party review conducted by Deloitte and Touche.

OTTAWA — The distinct possibility that precious metals may have been stolen from the Royal Canadian Mint is "inexcusable," the federal minister responsible for the Crown corporation said Monday.

The findings of a long-awaited external audit, released earlier in the day, concluded that $15.3 million in missing gold is not the result of accounting or bookkeeping errors, raising even more questions about the whereabouts of the metals from what has been touted as one of the most secure facilities in Canada.

"The mint’s still unexplained loss of precious metals is inexcusable," Transport Minister John Baird and Minister of State for Transport Rob Merrifield, whose department is responsible for the mint, said in a joint release. "The mint will be held accountable."

The Royal Canadian Mint says the precious metals seem to have vanished from its inventory in the 2008 fiscal year, according to the third-party review conducted by Deloitte & Touche LLP.

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Jim Sinclair’s Commentary

Just when you think it is hard for things to get worse, a new problem surfaces.

UN official warns ‘missing link’ in global financial system growing more critical
Saturday, June 27, 2009
Edith M. Lederer

UNITED NATIONS: The UN trade chief said Thursday there is a "missing link" in the international financial system that is becoming more critical as the global economic crisis drags on: What happens when a country is bankrupt and can’t pay its debts? Supachai Panitchpakdi told a UN financial summit he is trying to help 90 poor countries with vulnerable economies, many with debts beyond 100 percent of the value of their overall economy, as measured by the gross domestic product.

Developing countries at the three-day conference, which ends Friday, have been pleading for more money to shore up ailing economies hard-hit by a crisis they didn’t cause.

Prime Minister Stephenson King of St. Lucia, one of 10 world leaders at the summit, urged the international community for a "significantly larger amount of grant funding" in the next two years, saying: "We simply cannot afford the stranglehold of additional debt." He said there is no international court to deal with the bankruptcy of a country so every nation would have to rely on its own national rules and regulations.

Panitchpakdi, secretary general of the UN conference on Trade and Development, cited Chapter 11 of the United States Bankruptcy Code, which permits all businesses to reorganize under US bankruptcy laws, as a possible model – a view echoed by Martin Khor, executive director of the South Center, a Geneva-based research organization with 50 developing countries as members.

"We are afraid that many developing countries will be plunged into a new debt crisis which would be very unfortunate," Khor said, noting that the World Bank recently said 40 countries are facing serious debt problems as a result of the global economic meltdown.

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Jim Sinclair’s Commentary

The pace of building here, although down from the Olympics, is still humming along. The mood of the people is the antithesis of the US.

China will drive commodities super-cycle: Scotiabank
John Morrissy, Financial Post  Published: Monday, June 29, 2009

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OTTAWA – Canada’s key commodities have reversed their dramatic declines and are headed for years of renewed strength as the Chinese "dragon" rekindles an Asian-led super-cycle in basic materials, says Scotiabank commodities expert Patricia Mohr.

Driven by record levels of imports into China, Scotiabank’s commodity-price index climbed 2.2% in May from April, the month in which the 45% slide from July 2008 peaks came to an end, according to Ms. Mohr.

"China’s dragon has breathed life back into commodity prices," Ms. Mohr said.

Moreover, China’s economy is prospering despite weakness in the G7 countries that constitute the Western world’s industrial powers, she said.

"If you look at what has happened in terms of China’s industrial activity in the past three months (up 8.9% year-over-year in May alone) it obviously has at least partly decoupled from the G7."

Though the notion of decoupling, in which Asian economies prosper irrespective of Western growth, fell out of favour in last year’s sell-off, as did a commodities "super-cycle," extending over many years and caused by a structural change in the world’s economy, Ms. Mohr is convinced they will be the prevailing trends for years to come.

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Jim Sinclair’s Commentary

This is what preparation for a major dollar decline looks like.

China Plans to Start Yuan Settlement With Asean Soon (Update3)

June 30 (Bloomberg) — China may soon allow companies in its southern provinces of Yunnan and Guangxi to use yuan to settle cross-border trade with Southeast Asia to reduce foreign- exchange risks, a government official said.

The scheme will protect exporters from swings in currencies and help promote trade with the 10-nation Association of Southeast Asian Nations, Nong Rong, vice secretary general at the China-ASEAN Expo, said today. The trade fair, sponsored by China and Asean countries, has been held annually since 2004 in the city of Nanning, capital of Guangxi province.

“Preparation work for the pilot programs are progressing smoothly,” Nong, also deputy head of the Guangxi government bureau organizing such exhibitions, told reporters in Nanning. “Some companies that were deterred by foreign-exchange risk may now seek to expand overseas as the risks have been reduced.”

China, the world’s third-biggest economy, is seeking to make it easier for companies to do business in yuan and to expand trade with so-called Golden Triangle nations after the global recession choked sales to the U.S. and Europe. Chinese officials, including President Hu Jintao, have called for reducing its dependence on the dollar and the creation of a new global reserve currency.

The People’s Bank of China has agreed to provide 650 billion yuan ($95 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through so-called currency- swaps. Yesterday, the central bank signed an agreement with Hong Kong to allow the settlement of cross-border trade in yuan.

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Jim Sinclair’s Commentary

The probability of an Israeli attack on Iran grows as the US moves away from Israel. Take away the umbrella effect and self preservation can cause rash actions.

Israel Prepares F-15 Jets for Long Range Attack
by Gil Ronen

(IsraelNN.com) The Israel Air Force’s F-15 fleet is undergoing an upgrade, with systems that make it better equipped for complex long distance attack scenarios. The systems are being installed in both the F-15 and the F-15I — a model of the F-15 that was developed by its U.S. manufacturer specifically for the IAF.

According to IDF journal BaMachaneh, the F-15I model is currently being fitted with two new systems – one called “Barad Pelada” (“Steel Hail”), and another named Lightning.

The Barad Pelada advanced weapons system has been operational in the IAF’s F-16s for almost four years, but had to be modified in order to fit the F-15.

Barad Pelada is an advanced Israeli armament that operates like a smart bomb. “The system is unique in that it is able to plan the bombing in an accurate way by identifying the target from above,” a knowledgeable source in the IAF explained. “After the identification, the system carries out guidance to the target and only then is impact made.”

The Lightning advanced attack system has also been in use in the IAF’s other jets. Until now, the F-15I jets had to rely on the older Inbar system, which used to be fitted in all of the IAF’s jets but was gradually phased out.

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Jim Sinclair’s Commentary

Talk only? Shame on those pin heads that call themselves talking heads.

This is serious. This is real. This is the death of the US dollar.

128 days to go.

China Allows Trade Settlement in Yuan in Hong Kong (Update2)
By Nipa Piboontanasawat and Bob Chen

June 29 (Bloomberg) — China approved use of yuan to settle cross-border trade with Hong Kong, part of a drive to broaden the use of the currency and reduce reliance on the U.S. dollar.

Hong Kong Monetary Authority Chief Executive Joseph Yam said he hopes the first transactions will start next month after signing an agreement with People’s Bank of China Governor Zhou Xiaochuan at the city’s airport today. Zhou said the program would reduce foreign-exchange risks and transaction costs.

China is promoting greater use of the yuan in international trade and finance after Premier Wen Jiabao in March expressed concern that a weakening dollar will cause losses on holdings of U.S. assets. The greenback slumped on June 26 in New York after the People’s Bank of China renewed its call for a new global reserve currency to replace the greenback.

“It’s an important step to make the yuan an international currency,” said Fang Ming, an analyst in Beijing at Bank of China Ltd., the nation’s biggest foreign currency trader. “In the long-term, the world reserve currency system will consist of several major currencies, including the yuan and the euro, instead of just the U.S. dollar.”

The Dollar Index that measures the currency’s performance against six trading partners rose 0.4 percent today, after dropping 0.7 percent on June 26. Zhou told reporters in Basel yesterday that the nation won’t alter the composition of its $1.95 trillion in foreign-currency reserves suddenly. U.S. President Barack Obama needs the support of China as his government tries to spend its way out of a recession.

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Jim Sinclair’s Commentary

From China, allow me to assure you that the following is not talk. It is a call for action. 128 days left to go.

Beijing Formalizes Call for New Reserve Currency
JUNE 29, 2009

BEIJING — China’s central bank reiterated its call for the creation of a new international currency that could replace currencies such as the dollar in countries’ official reserves.

In its annual report on financial stability, issued Friday, the People’s Bank of China said the country will push reform of the international currency system to make it more diversified and reasonable. While it didn’t specifically target the U.S. currency, it said it aims to reduce over-reliance on the current reserve currencies, of which the dollar is the biggest.

"To avoid the shortcomings of sovereign credit currencies acting as reserve currencies, we need to create an… international reserve currency that can maintain the long-term stability of its value," the PBOC said.

The report, a lengthy document that addressed a broad range of issues, reiterated a proposal made by PBOC governor Zhou Xiaochuan in March to use Special Drawing Rights, the synthetic currency developed by the IMF, as a super-sovereign reserve currency. That proposal, made just before the G20 summit in London earlier this year, appeared in an essay authored by Mr. Zhou and posted on the PBOC’s Web site.

The call for a new global reserve currency was among a host of factors exerting pressure on the dollar Friday. The U.S. currency fell during New York trading against the U.K. pound, Australian dollar, yen, Swiss franc and euro.

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Jim Sinclair’s Commentary

Eradicate the poppy plantation and you eradicate the Afghan farmer, the economy and the Afghan political middle management.

They will not like the West ruining their primary cash crop without replacing it with something of equal value. How about Banga?

US says Afghan poppy eradication ‘failure’
Sun, 28 Jun 2009 23:38:38 GMT

The United States admits that its efforts in eradicating opium poppy production in Afghanistan have proven to be of no avail.

Washington’s special envoy to Pakistan and Afghanistan, Richard Holbrooke said on Sunday that the current measures taken against poppy growers had been "a failure".

"The Western policies against the opium crop, the poppy crop, have been a failure. They did not result in any damage to the Taliban, but they put farmers out of work," Holbrooke said at a G8 meeting in Italy.

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Jim Sinclair’s Commentary

129 dollars on the wall, 129 dollars on the wall, take away 129 and then watch the dollar fall?

No you do not have to wait 129 days as all economic processes start slow only to do their thing in a very short amount of time.

UPDATE 1-BIS-China, Brazil working on trade FX deal-cenbanks
Sun Jun 28, 2009 1:37pm EDT

BASEL, Switzerland, June 28 (Reuters) – China and Brazil are working on a currency arrangement to allow exporters and importers to settle deals in their local currencies, bypassing the U.S. dollar, the countries’ central banks said on Sunday.

China’s central bank governor Zhou Xiaochuan and Brazil’s Central Bank President Henrique Meirelles discussed the bilateral deal in a meeting at the Bank for International Settlements on Saturday.

"It is agreed in principle," a spokeswoman for the Brazilian central bank told Reuters. "They will start to study this."

No details were available on the size of the arrangement or the timeline for finalising details.

Zhou said a further step was for Brazilian President Luiz Inacio Lula da Silva and Chinese President Hu Jintao to discuss the arrangement, which he said would not necessarily involve a currency swap like those China has in place with other countries.

"What we are discussing is that Brazil’s president Mr Lula and our president Mr Hu talk about the possibility and gradual development to use our local currency for some trade settlement and … investment, that’s the major thing," he told reporters.

"It’s not necessarily to use a currency swap."

The People’s Bank of China has arranged six bilateral currency swaps, totalling 650 billion yuan ($95.12 billion), since December with countries including Malaysia, Argentina and Hong Kong.

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Jim Sinclair’s Commentary

Do you really want to pay $5 a gallon for low test gasoline? Well here is a way to.

Remember this – the wing nuts that structured this bill are now running your banks and financial concerns, auto companies and God only knows what else.

We have a government new car Czar and maybe soon a $4500 auto clunker Czar.

Obama Opposes Trade Sanctions in Climate Bill
By JOHN M. BRODER
Published: June 28, 2009

WASHINGTON — President Obama on Sunday praised the energy bill passed by the House late last week as an “extraordinary first step,” but he spoke out against a provision that would impose trade penalties on countries that do not accept limits on global warming pollution.

“At a time when the economy worldwide is still deep in recession and we’ve seen a significant drop in global trade,” Mr. Obama said, “I think we have to be very careful about sending any protectionist signals out there.”

He added, “I think there may be other ways of doing it than with a tariff approach.”

The passage of the House bill on Friday night was an important, if tentative, victory for the president, becoming the first time either chamber of Congress had approved a mandatory ceiling on the gases linked to global warming.

Mr. Obama, hoping to build momentum in the Senate after the narrow victory in the House, delayed the start of a Sunday golf game to speak to a small group of reporters in the Oval Office.

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Jim Sinclair’s Commentary

In case you missed it, this is worth a re-read. The rent-an-army Surge was pure Wag the Dog, Pakistan style.

Taliban to return to carry on its fight as Pak Army’s offensive lacks credibility: NYT
2009-06-28 13:20:00

The Pakistan Army has been boasting of success against the Taliban and other extremists, and claims that it has flushed the insurgents out, besides killing scores of them during its offensive in the Swat and Malakand Divisions, but a closer look at the region where the military operation purportedly resulted in death of several militants presents a different picture, casting serious questions over the Army’s claims.

While the military has been claiming being engaged in a stiff battle with the Taliban, no such signs are visible in the region, which clearly suggests that the insurgents have just melted into the local population here, only to remerge and fight another day, The New York Times reports.

Analysts also believe that amid the claims of the military of sanitizing scores of militants, it has failed to provide any proof of it, which raises serious doubts.

The military operation which has rendered over three million people homeless in the region, and has won strong support from the United States, has amazingly failed to destroy the Taliban’s leadership.

The military has also failed to kill or capture even one top Taliban commander, experts pointed out.

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Jim Sinclair’s Commentary

By 2012 Banksters will be an endanger species.

High-Flying Banker Boumeester Found Dead
12:41pm UK, Monday June 29, 2009

A Dutch financier who went missing after leaving his job at troubled banking group ABN Amro has been found dead with gunshot wounds.

Fears grew for the safety of high-flying banker Huibert Boumeester when he missed a business appointment. He had not been seen for a week.

Police said two of his shotguns had also disappeared from his homes in London and Scotland.

The body of the 49-year-old former chief financial officer at ABN Amro was found in woodland in Winkfield near Ascot, Berkshire, on Sunday morning.

A Thames Valley Police spokesman said they could not confirm the identity of the dead man, but added: "He is believed to have died from gunshot wounds.

"At the moment it is being treated as an unexplained death. A definite cause of death has not been established."

Mr Boumeester joined ABN Amro, the 2007 takeover of which plunged the Royal Bank of Scotland into record losses, in 1987

He worked his way up to the post of chief financial officer before leaving early last year.

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Posted by & filed under In The News.

Three weeks to go:

1. California Labor Unions hold tight and will not cooperate with the needs of funding.
2. California legislators refuse to raise significant taxes.
3. The Obama Administration holds tight in saying they will not bail out California.

In three weeks California will be out of money with the inflow nowhere near the needs.

Then what? A bailout or no bailout?

New York State is not far behind California as well as other states.

Remember Jim’s Formula of 2006 that many laughed at and even more argued with.

Don’t forget to file for your TARP cut of the taxpayer’s pie. If a Rum manufacturer can get theirs, why shouldn’t you get yours? If Captain Morgan Rum  can pull it off then why not us?

Jim Sinclair’s Commentary

The most popular question I receive on a daily basis is to comment on the gold to silver ratio.

Here is my answer and promise to you:

As pressure to deliver gold hits the COMEX exchange in the last quarter of 2009 with titanic force, the ratio trades will totally explode, killing the gold to silver spread traders.

With gold to silver ratios you are not buying insurance, you are a gambleholic buying decimation.

Jim Sinclair’s Commentary

From the article:

“Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.

Why not? One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.

Another possibility is that the bar indicated on the warehouse receipt does not actually exist. The implications of that are rather dire.”

Where’s The Gold?

The Comex is the name for the largest gold futures market in the world, traditionally centered in New York City. Although the market recently became part of the Chicago Mercantile Exchange, it has retained its old nickname. Also, the depositories which hold the actual bars of gold used to settle the futures contracts remain in New York City.

A gold depository must be the most boring business on earth. They charge a small monthly fee to store 100oz. standardized bars of gold in an insured vault. It is an industrial-sized version of a safe deposit box.

The owner of a 100oz. bar owns a specific chunk of gold. It has a manufacturer, a serial number, and an exact weight measured to the 1/100th of an ounce. A written depository receipt — similar to an old-fashioned paper share certificate — shows the exact date the bar entered the depository, and the entire chain of ownership since that date; they often change hands without leaving the depository. You can request to withdraw the bar from the depository, and you should receive exactly the bar indicated.

Interest in precious metals as an investment has been heating up, and some fund managers have begun to take very large positions. Demand for Comex gold bars has been increasing — especially as they are significantly cheaper per ounce than alternatives like 1oz. bullion coins or the kilogram bars popular in Europe.

Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.

Why not? One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.

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CIGA Eric’s Commentary

Spin vs. Reality: Management of Perception Economics

May incomes surge, but savings outpace spending
Households push savings rate to 15-year high as May incomes rise by largest amount in year
By Martin Crutsinger, AP Economics Writer
On Friday June 26, 2009, 1:48 pm EDT

WASHINGTON (AP) — Households pushed their savings rate to the highest level in more than 15 years in May as a big boost in incomes from the government’s stimulus program was devoted more to bolstering nest eggs than increased spending.

The higher savings rate is healthy in the long term, economists said. But without vigorous consumer spending, the government may have to do more to revive the economy, possibly through further tax breaks and spending.

The Commerce Department said Friday that consumer spending rose 0.3 percent in May, in line with expectations. But incomes jumped 1.4 percent, the biggest gain in a year and easily outpacing the 0.3 percent increase that economists expected.

The savings rate, which was hovering near zero in early 2008, surged to 6.9 percent, the highest level since December 1993.

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Economists React: ‘Short-Lived’ Boost to Income, Spending
By Phil Izzo

Economists and others weigh in on the jump in personal income and spending.

Wage and salary income, which is key for consumer spending, fell… While lower taxes and one time checks from the government are obviously a net positive for the consumer, they tend to have a short-lived effect on spending growth as they only affect the rate of change in disposable income when they are implemented or shortly thereafter. Of more importance to ongoing spending growth is the rate of growth in wages and salaries and other continuing sources of income flow. –Joshua Shapiro, MFR Inc.

The lion’s share (94.3%) of the increase in income came from one-time increases of $250 per eligible recipient of social security, supplemental security, veterans benefits, and railroad retirement benefits. The $13.1 billion of these transfers boosted May income by about $158 billion (annualized). These transfers are not recurring so incomes will fall by a like amount in June. Spending from this actual $13.1 billion is likely to be spread out over several months or even years if recipients use the proceeds to increase saving or reduce debt. The key fundamental driver of spending — wage and salary income — fell 0.1% after a slightly smaller advance in April. –Nomura Global Economics

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Jim Sinclair’s Commentary

For those that profess all is well and getting better, have a look at this.

Now here is a lot of improvement! (Click chart to enlarge)

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Jim Sinclair’s Commentary

MOPE (management of perspective economics) can fool any fool, but the result here is a lower dollar without recovery. Once confidence is broken by markets, it cannot be put back together with more of what broke it.

Fading of the Dollar’s Dominance

The days of calling the dollar almighty may be numbered.

Since World War II, when the dollar eclipsed the British pound as the king of world currencies, the United States has reaped the rewards of its monetary strength. The greenback’s sense of indestructibility allowed the U.S. government to borrow cheaply and gave rise to an era of rich American globetrotters toting the world’s most easily convertible form of cash.

But the financial crisis that started in the United States is dramatically intensifying the debate over the future of the dollar, and whether it can, or should, remain at the top of the financial food chain. Although a meaningful shift away from the dollar is likely to take years or more, some analysts believe that the debate is now reaching a tipping point.

Last week, the leaders of Brazil, Russia, India and China — whose governments are some of the world’s largest dollar holders — jointly declared the need for a “more diversified international monetary system,” sparking a drop in the greenback on world markets. In recent months, China in particular has led a campaign for a new world monetary order, arguing that the financial crisis has exposed profound vulnerabilities in the U.S. economy and financial system. Those flaws, critics argue, show it is simply too risky for the world’s central banks to rely largely on the dollar for their global reserves.

At the same time, Beijing has taken unprecedented steps to increase the international role of its own currency, the yuan, to a level commensurate with China’s relatively new status as a major economic power. In the coming weeks, the International Monetary Fund — the institution charged with the monitoring and stability of the global economy — will issue a vast amount of currency-like assets known as Special Drawing Rights, which some analysts see as a long-term substitute for the hordes of dollar reserves being held by central banks around the world. Some now envision that the dollar will fall from its recent levels of 60 to 65 percent of international reserves to less than 50 percent a decade from now.

A diminishing of the dollar’s global role has far-reaching implications for the United States. The value of the dollar versus other major currencies could markedly drop as it slips from supremacy, making millions of Americans overseas feel poorer while potentially fueling a new golden era for U.S. exporters as American goods become more cost-competitive. The U.S. government may also be forced to pay higher rates to investors when selling, for instance, Treasury bonds to raise cash — making it far more costly in the future to cover the kind of massive stimulus spending the government is now undertaking.

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Jim Sinclair’s Commentary

It was only a matter of time.

Terrorists recruit for cyberwar, official says
Islamic extremists increasingly using the Internet as outreach tool
updated 5:58 p.m. ET, Thurs., June 18, 2009

WASHINGTON – Terrorist groups that have long used the Internet to spread propaganda are increasingly tapping the Web to teach Islamic extremists how to be hackers, recruit techies for cyberwarfare and raise money through online fraud, U.S. officials say.

A senior defense official said intelligence reports indicate extremist groups are seeking computer experts, including those capable of breaching government or other sensitive network systems.

The official, who spoke on condition of anonymity to discuss sensitive information, said the extent and success of those recruiting efforts are unclear.

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Jim Sinclair’s Commentary

Here is the new GM Volt car, not exactly emission free and somewhat methane powered, but definitely greenish.

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By comparison to the GM Volt shown above, below is transportation in Greenwich, CT today. The two people pictured are OTC credit default derivative dealers on their way to work, financed by TARP. Palm trees were imported, and paid for by Madoff clients.

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Jim Sinclair’s Commentary

Hey, in today’s financial condition what difference would a few trillion (true number) make?

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Jim Sinclair’s Commentary

COT: Fight it they will. Fail they will.

The following is quite gold positive. Reducing dependence on the dollar is quite dollar negative. The MOPE is the Chinese can’t do anything because they have so many treasuries, but that is SPIN at its best.

Financial TV actually MOPEs about it saying it is all talk and no substance.

U.S. Stocks, Dollar Decline on China Calls for World Currency
By Elizabeth Stanton

June 26 (Bloomberg) — U.S. stocks and the dollar dropped after China’s central bank reiterated a call for a “super sovereign currency,” while energy shares retreated with oil and agricultural shares slumped.

Exxon Mobil Corp. and Tesoro Corp. fell as crude oil futures lost 1.3 percent to $69.34 a barrel. Monsanto Co., the biggest seed maker, dropped after Potash Corp. of Saskatchewan cut its second-quarter profit forecast. The dollar slumped 0.7 percent against six trading partners as China sought to replace it as the global reserve currency. Micron Technology Inc. fell after posting a wider-than-estimated loss because of an industry glut that drove memory-chip prices below the cost of production.

The Standard & Poor’s 500 Index decreased 0.5 percent to 915.44 at 10:10 a.m. Futures on the index expiring in September had risen as much as 0.4 percent after the Commerce Department said at 8:30 a.m. that Americans’ incomes increased the most in a year last month. The Dow Jones Industrial Average fell 50.26 points, or 0.6 percent, to 8,422.14.

“There will be diversification among global central banks,” said Beat Siegenthaler, chief emerging markets strategist at TD Securities Ltd. in London. The comments from China “tend to remind traders of that, but there’s still a question about the time horizon.”

China, the biggest foreign owner of U.S. Treasuries, cut its holdings of government notes and bonds by $4.4 billion to $763.5 billion in April, according to data released on June 15 in Washington. People’s Bank of China Governor Zhou Xiaochuan in March urged the IMF to expand the functions of its unit of account and move toward an international reserve currency to reduce dependence on the dollar.

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Jim Sinclair’s Commentary

So are US banks after the false FASB first quarter.

British banks highly vulnerable to future shocks, Bank of England warns
Britain’s banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said.
By Edmund Conway
Published: 5:56AM BST 26 Jun 2009

In a warning to bankers and consumers after months that have seen large jumps in share prices and hopes that the banking system is recovering, the Bank used its Financial Stability Report to emphasise that the UK remains highly vulnerable to potential shocks.

With the Government poised to deliver its White Paper on financial regulation next week, the Bank also cautioned that life for financial institutions was about to change forever, with big banks facing a whole spectrum of new restraints on their size, structure, business plans and lending.

The report, published today, said: “While pressures on the major global banks have stabilised over the past few months, their balance sheets remain impaired. Banks’ leverage remains high, with the possibility of further impairment of assets placing continued pressure on profitability and capital ratios. Future revenue generation will need to balance the desire to deleverage with the need to generate new business at profitable spreads.

“At the same time, the major UK banks maintain a high and rising customer funding gap. The withdrawal of overseas funding and competition for domestic deposits has added to these funding pressures.”

The report revealed that the funding gap – the shortfall between what banks have in deposits and what they lend out to customers – has further widened in the past year to more than £800bn. The increase underlines the scale of adjustment that they will have to undergo before life returns to relative normality. The report also pointed out that the amount banks have in liquid assets remains low, while the leverage ratios remain high, saying: “As long as these balance sheet vulnerabilities persist, there is a risk to the banking system from further adverse economic or financial sector developments, which could in turn affect lending and economic recovery.”

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Jim Sinclair’s Commentary

Naughty CITI.

Citigroup Ordered to Suspend Some Operations in Japan (Update2)
By Shingo Kawamoto and Takahiko Hyuga

June 26 (Bloomberg) — Citigroup Inc. was ordered by Japan’s financial regulator to suspend marketing of banking services to individuals for a month, after failing to put in place adequate internal controls to prevent money laundering.

The Financial Services Agency told Citibank Japan Ltd. to halt retail banking sales from July 15 to Aug. 14, except in cases where the company is approached by customers, the regulator said in a statement in Tokyo today. It also ordered the bank to improve governance and control systems.

The regulator found Citigroup had “fundamental problems” with its compliance, including systems to detect and monitor suspicious transactions. The New York-based bank failed to implement an improvement plan it submitted after it was forced to close its private banking business in Japan in 2004 for a similar failure, the watchdog said.

Citibank Japan didn’t update a database used to screen suspicious transactions since 2004, and management officials “lack an understanding of the rules applied in Japan, such as laws and regulations, and an awareness of improvement,” the regulator said in its statement.

Citigroup will comply with the regulator’s order and will submit an improvement plan by July 31, the company said in a statement. The order won’t have any impact on business with institutional clients, the bank said.

“We apologize deeply and take the situation seriously,” the company said in the statement.

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Jim Sinclair’s Commentary

MOPE (management of perceptions economics) strikes again!

BofA got 2nd top U.S. regulatory grade-documents
Reuters, Thursday June 25 2009
By Jonathan Stempel

NEW YORK, June 25 (Reuters) – Bank of America Corp, which got a $45 billion government bailout and was ordered to raise $33.9 billion more capital, was awarded the second-highest rating by U.S. banking regulators for overall financial health, documents released on Thursday show.

Regulators assign confidential ratings that assess banks’ capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risk. They are known as “Camels” ratings based on the first letters of the six factors, and go on a scale of 1 to 5, where 1 is highest.

Bank of America and its Bank of America NA banking unit were awarded “2” composite ratings, according to documents released by the House of Representatives Committee on Oversight and Government Reform.

One of the documents showing the ratings is dated May 29, three weeks after regulators ordered the Charlotte, North Carolina-based bank to raise $33.9 billion following a “stress test” of its ability to weather a deep recession. Bank of America said on Thursday it has more than built that buffer.

“They have a lower Camels rating than we would like to see given their size,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. “It suggests that regulators are taking a dim view of the bank’s risk controls and management capability. That’s pretty scary.”

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Jim Sinclair’s Commentary

Generally this type of news is blacked out to prevent disturbing the social order.

I am surprised by the LA times.

H1N1 ‘swine’ flu has infected an estimated 1 million in U.S.
The virus is also spreading rapidly through the Southern Hemisphere. A French company announces large-scale production of a vaccine.
By Thomas H. Maugh II
3:54 PM PDT, June 25, 2009

At least 1 million Americans have now contracted the novel H1N1 influenza, according to mathematical models prepared by the Centers for Disease Control and Prevention, while data from the field indicates that the virus is continuing to spread even though the normal flu season is over and that an increasing proportion of victims are being hospitalized.

Meanwhile, the virus is continuing its rapid spread through the Southern Hemisphere, infecting increasing numbers of people and at least one pig.

Nearly 28,000 laboratory-confirmed U.S. cases of the virus, also known as swine flu, have been reported to the CDC, almost half of the more than 56,000 cases globally reported to the World Health Organization.

But Lyn Finelli, a flu surveillance official with CDC, told a vaccine advisory committee meeting in Atlanta today that standard models of viral spread indicate that many times that number have been infected. Although 1 million seems like a high number, between 15 million and 60 million Americans are infected by the influenza virus during a normal flu season.

At least 3,065 of those infected in this country have been hospitalized and 127 have died. The very young are most likely to be infected, Finelli said, but older patients seem to suffer more. The average age of swine flu victims is 12, the average age of hospitalized patients is 20 and the average age of those who have died is 37, she said.

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Posted by & filed under In The News.

Dear CIGAs,

You are going to see a great deal more of this.

Do you honestly know how bad things are going to get?

Do you really accept that the US dollar is going to take a historical percentage of value hammering in the final quarter of 2009?

Do you recognize that as pressure to deliver gold hits the COMEX exchange with titanic force, the ratio traders will totally explode and kill the spread traders?

Do you have any idea how long it is going to be before real green shoots become crops?

Do you know that certain medicines are already in short supply for economic reasons?

There is only a small minority out there that really understands. There is no need for bank holidays as long as QE and TARP type programs are grown to meet the growing demand.

I have long told you that our financial leaders will burn the barn down before letting nature take its course. The barn is the US dollar.

Look out the window and stop listening to MOPE.

Please give food, not money.

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In the 1930s insurance companies did this to pay claims. These California IOU claims will probably trade at 25% of face value. They will trade in today’s world of paper shufflers.

California set to issue IOUs as fiscal crisis weighs
By Dan Whitcomb and Ciara Linnane Dan Whitcomb And Ciara Linnane
Wed Jun 24, 10:00 pm ET

LOS ANGELES/NEW YORK (Reuters) – California’s controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can’t quickly solve a $24 billion budget deficit, and the state’s treasurer plans to tap a reserve fund to meet debt service costs.

The measures came as a budget crisis deepened in the most populous U.S. state and the gridlocked legislature failed to pass a proposed $11 billion in cuts.

"Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Controller John Chiang said in a statement announcing that he would be forced to use IOUs to pay the state’s bills beginning on July 2.

"The state’s $2.8 billion cash shortage in July grows to $6.5 billion in September and after that we see a double digit freefall," Chiang said. "Unfortunately, the state’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses."

State Treasurer Bill Lockyer, meanwhile, is planning to draw on reserves for economic recovery sales tax bonds, according to a spokesman.

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Jim Sinclair’s Commentary

In Addis Ababa, Ethiopia, mothers are telling their kids to eat all their food because children are starving in America.

US cities may have to be bulldozed in order to survive
Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline.
By Tom Leonard in Flint, Michigan
Published: 6:30PM BST 12 Jun 2009

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.

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The Saga of Make Believe Bank Profits

There was lots of talk today about Bank of America’s second quarter loss.

The reality is that the first quarter profits by the financial group was all a gift from FASB which allowed the financial group to value their worthless derivative paper at whatever their computer models said.

The profits were attributed to their trading department as that camouflaged mark-ups on previously marked down OTC derivatives now taken in as profit.

This magical accounting exercise profits will now depend on business activity and recognition of loan losses plus credit card lay downs.

This quarter, the third quarter, substance will begin to overcome form (accounting fabrications blessed by FASB). This will make it much harder to keep the party going via management of perception economics.

MOPE, Management of Perception Economics, is outlined in the book, "Die Zeit Ohne Beispiel."

Bank of America Heads for Quarterly Loss, Citi Says (Update1)
By David Mildenberg

June 25 (Bloomberg) — Bank of America Corp. will post a second-quarter loss as it builds reserves to cushion defaults on credit cards and consumer loans, Citigroup Inc. analyst Keith Horowitz said.

Mounting losses on consumer credit will erase a $5 billion gain from the sale of China Construction Bank Corp. shares, bringing the quarter’s loss to 11 cents a share, Horowitz said in the report dated yesterday. The bank is also facing an $875 million charge from the Federal Deposit Insurance Corp. to help bolster the agency’s fund and $2 billion of writedowns tied to the Merrill Lynch & Co. unit.

Citigroup’s estimate contradicts the consensus among the 22 analysts surveyed by Bloomberg, which predicts a profit of 8 cents a share for Bank of America. While Horowitz cut his price target on the stock by $2 to $18 a share, he affirmed his “buy” rating, saying that the need to build reserves may be peaking at the Charlotte, North Carolina-based lender.

Bank of America “will emerge from this cycle faster than peers,” Horowitz wrote. “We remain confident that even with expected credit deterioration” in the quarter, “there is more than adequate capital cushion to absorb embedded credit losses.”

The bank fell 11 cents to $12.24 at 11:48 a.m. in New York Stock Exchange composite trading. The shares have dropped 13 percent this year.

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Jim Sinclair’s Commentary

If the Fed increases QE all this will go away. If they do not, by legislative action, the Fed will fade away. Watch!

Lawmaker accuses Fed of "cover-up" in BofA deal
Wed Jun 24, 2009 7:03pm EDT
By Kim Dixon

WASHINGTON (Reuters) – The Federal Reserve sought to hide its involvement in Bank of America Corp’s (BAC.N) acquisition of Merrill Lynch as Merrill’s financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday.

The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters.

Bernanke has in the past denied any inappropriate pressure on Bank of America. Fed spokeswoman Michelle Smith on Wednesday referred to a letter Bernanke sent Representative Dennis Kucinich on April 30 and later testimony in which he offered an "unconditional assertion" that he did not ask Bank of America CEO Ken Lewis to withhold information regarding Merrill.

"The Federal Reserve acted with the highest integrity throughout its discussions with Bank of America," Bernanke wrote to the Ohio Democrat, who chairs a subcommittee on the Oversight panel.

The Democrat who heads the committee, Edolphus Towns of New York, has called Bernanke to testify on Thursday. "I am not going to prejudge these issues. We are not even close to finishing the Bank of America-Merrill Lynch investigation at this point," Towns said in a statement.

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Jim Sinclair’s Commentary

This information is worth paying for:

– GDP Revisions Little More Than Statistical Noise but Watch Out for July 31st Benchmark Revisions
– Annual Plunge in Durable Goods Orders Continued
– Worst of the Downturn Still is Ahead
By subscription: http://www.shadowstats.com/

Posted by & filed under In The News.

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Jim Sinclair’s Commentary

Although the inviting conclusion is the little guy is screaming for attention, his elevator does not go to the top floor.

N. Korea threatens US; world anticipates missile
By HYUNG-JIN KIM, Associated Press Writer

SEOUL, South Korea – North Korea threatened Wednesday to wipe the United States off the map as Washington and its allies watched for signs the regime will launch a series of missiles in the coming days.

Off China’s coast, a U.S. destroyer was tailing a North Korean ship suspected of transporting illicit weapons to Myanmar in what could be the first test of U.N. sanctions passed to punish the nation for an underground nuclear test last month.

The Kang Nam left the North Korean port of Nampo a week ago with the USS John S. McCain close behind. The ship, accused of transporting banned goods in the past, is believed bound for Myanmar, according to South Korean and U.S. officials.

The new U.N. Security Council resolution requires member states to seek permission to inspect suspicious cargo. North Korea has said it would consider interception a declaration of war and on Wednesday accused the U.S. of seeking to provoke another Korean War.

"If the U.S. imperialists start another war, the army and people of Korea will … wipe out the aggressors on the globe once and for all," the official Korean Central News Agency said.

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Jim Sinclair’s Commentary

What genius came up with this idea? Maybe checking the value of Fannie and Freddie first might be a good idea.

Fannie, Freddie asked to relax condo loan rules: report
Mon Jun 22, 2009 10:48am EDT

(Reuters) – Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.

In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.

In a letter to the CEO’s of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.

The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added.

In an interview with the paper, Weiner said the rules have "had a real chill on the ability to get these condos sold," at a time when prices of condos have fallen enough to attract potential buyers.

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Jim Sinclair’s Commentary

Interesting glitch in the statistics.

Failure to foreclose is an unwillingness to recognize loses on the part of the lender.

Not paying mortgage, yet stuck with keys
Backlog of seriously delinquent mortgages imperils recovery
By Renae Merle
updated 9:17 p.m. MT, Tues., June 23, 2009

A growing number of American homeowners are falling into financial limbo: They’re badly behind on payments, but their banks have not yet foreclosed.

The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation’s housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.

"It just means foreclosure rates are going to keep rising," said Patrick Newport, an economist for IHS Global Insight.

Rising mortgage delinquencies were at the root of the recession, and many economists say an economic recovery will be difficult until the housing market recovers and home prices stabilize.

And even though a delayed foreclosure can be a blessing for some troubled homeowners, for others, it simply prolongs the financial distress, leaving them on the hook for the condition of the property. Even if they move out, they cannot move on.

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Jim Sinclair’s Commentary

The economic enemy of my economic enemy is my economic friend. A new cold economic war wrinkle.

Russia, Venezuela sign $4 bln joint bank deal

MOSCOW (AFP) — Russia and Venezuela signed a deal Tuesday to set up a new bank with starting capital of four billion dollars (2.9 billion euros) to fund joint projects as Moscow ramps up its role in South America.

The agreement was signed at Russian Prime Minister Vladimir Putin’s residence near Moscow by the deputy finance ministers of the two countries.

"We are moving to a high level of political and economic co-operation," Putin said as he greeted Venezuela’s Vice President Ramon Carrizalez, who told Putin there was now a "strategic" partnership between their two countries.

The bank will be 51-percent owned by Russia through the state-controlled lenders VTB and Gazprombank, with the rest going to various Venezuelan partners, Russian Deputy Finance Minister Dmitry Pankin told reporters.

The new bank is due to be created by the end of 2009, Pankin said.

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Posted by & filed under General Editorial, In The News.

"The lie can be maintained only for such time as the State can shield the people from the political, economic and or military consequences of the lie.

It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State."

–Joseph Goebbels, of the perception modification school of economic thought

Jim Sinclair’s Commentary

A look back at the FT Alphaville Blog on QE:

Today’s Fed announcement on GSE purchases launches explicit QE that kills two birds with one stone. QE offsets the current deflationary impact of financial system distress and directing these purchases towards GSE debt and MBS may help reduce mortgage rates, a key goal to stabilizing the housing market. While QE may offset current deflationary risks, longer term these measures must be temporary to avoid creating their own problems of inflation and dollar devaluation, a risk highlighted by today’s USD decline and increase in gold…

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Jim Sinclair’s Commentary

The evening news is so whitewashed and irrelevant that people are finally waking up to what a waste of time watching it is.

New All-Time Lows for Both CBS & ABC Evening Newscasts
Tuesday, Jun 23

Breaking: TVNewser has learned the CBS Evening News has once again set an all-time low last week with 4.89 million Total Viewers and 1.42 million A25-54 viewers. But it was also the lowest (since records began in the 1991-’92 season) for ABC’s World News with Charles Gibson. The Gibson program drew 6.42 million Total Viewers and 1.77 million A25-54 viewers.

Both CBS’s Katie Couric and ABC’s Charlie Gibson were off last week.

More details to come…

> Update: Insiders tell us at least one network is looking into the continued impact of the digital TV transition which occurred June 12.

> Update (2): NBC averaged 7.75m Total Viewers Mon-Wed but on Thursday and Friday gave their program a different Nielsen code — "Nitely News." (The correct spelling is "Nightly News"). This is despite the fact that the network had regular coverage on those days. We’re trying to determine if the U.S. Open Golf Championship had something to do with the coding change. Had Thursday and Friday been included, the average would have been lower. On Friday "Nightly" averaged 6.29m Total Viewers.

> Update (3): An NBC insider tells us, even though the broadcast had full national coverage, the U.S. Open tends to affect viewership so the Thursday and Friday shows were not in the average. NBC says this is normal procedure.

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Posted by & filed under In The News.

Dear CIGAs,

The US dollar has topped all of its bear market rallies by up-slanting head and shoulder formations. It looks like it has done it again.

A low in June according to Armstrong is more meaningful than any other direction or time combination, indicating the high probability of the gold price trading at $5000. Alf holds out the possibility that an overrun in this leg takes gold to $3500. The reverse head and shoulders formation inverse to the US dollar reads $1270. I anticipate $1224 and $1650.

Click chart to enlarge in PDF format

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Jim Sinclair’s Commentary

Green Shoots have turned out to be just more spin and BS. The greater mirage has been the US dollar rally on orchestrated hot air post G8.

IMF says dollar adjustment might be needed

06.22.09, 06:39 AM EDT

PARIS, June 22 (Reuters) – An increase in exports is needed for a sustained recovery in the United States and this may require an adjustment in the value of the U.S. dollar, IMF chief economist Olivier Blanchard said on Monday.

‘For the US, it is absolutely no question that a sustained recovery has to come from a large increase in exports, that may not be very easy to do. This may require fairly substantial adjustments in the dollar,’ he told a conference.

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Jim Sinclair’s Commentary

Israel will do whatever they deem necessary for their survival.

Jewish Leader: Obama May Be ‘Most Hostile President to Israel’
Monday, June 22, 2009 11:53 AM
By: Ronald Kessler

President Barack Obama’s refusal to take a stand on protests in Iran stands in sharp contrast to demands he has made on Israel, Morton Klein, president of the Zionist Organization of America, says in a Newsmax interview.

“I think he should take a strong stand to support the protesters in Iran who want to transform that society into one that promotes democracy and human rights,” Klein says. ”But while meddling in Israel’s affairs and making specific demands, he explicitly states he refuses to meddle in Iran’s policies and has said almost nothing.”

Klein says leaders of Jewish organizations are rethinking their support of Obama in light of his attitude toward Israel.

“There are many leaders in the organized Jewish world who have privately discussed this issue with me, and say they are deeply concerned about Obama’s actions and policies toward Israel, and now they’re rethinking their support for Obama during the campaign and the election,” says Klein, whose organization of 30,000 members is the oldest pro-Israel group in the country.

Based on the president’s speech in Cairo on June 4 and many of his foreign policy appointments, Klein thinks Obama “may become the most hostile president to Israel ever.”

Obama’s speech was “inimical to Israel and supportive of the stream of false Palestinian Arab claims concerning Israel,” Klein says. “He is relentlessly pressuring Israel while applying virtually almost no pressure on the Palestinian Authority to fulfill its written obligations.”

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