Posts Categorized: In The News

Posted by & filed under In The News.

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.”
–Abraham Lincoln



Dear CIGAs,

Here is a great summation from my former partner and ace trader Yra Harris:

"Cash for Clunkers – a classic case of inter-temporal dislocation."


Jim Sinclair’s Commentary

And who exactly will the broke state turn to? The Federal Government who then will turn to the fading international bond market or plain old QE?

The dollar rally on fake statistics has NO legs.

Cities Turn to State for Pension Relief
Posted Thursday, August 6, 2009 ; 06:00 AM

CHARLESTON  — City officials from around the state say their communities can no longer afford to cover the benefits of retired police officers and firefighters, so they are asking the state Legislature for help.

Specifically, they want state lawmakers to redirect a portion of state surcharges on insurance premiums to helping cities cover their retirement pension obligations. They also want to enroll new hires in new pension plans that help them save money.

If nothing changes, cities such as Huntington could have fewer police officers and firefighters on the streets as they are forced to cut back staffs because of increasing pension obligations. The city’s last six police and fire department retirees will likely draw $1.5 million each in pension benefits over the course of their retirements, even though each person made less than $900,000 during his or her career, according to Deputy Mayor Tom Bell said.

“What happened here is we just can’t afford to dedicate that amount of money” to pensions, Bell said.

Huntington is in the worst shape, but other cities around the state also are struggling to cover their pensions.

Collectively, city governments are facing $700 million in unfunded liability thanks to what officials say are the generous benefits paid out of the firefighters and police officers.

The West Virginia Municipal League, which represents the state’s cities, wants state lawmakers to meet in special session either in August or September to consider municipal pension reforms.


Jim Sinclair’s Commentary

If you are not in China and Africa in the next 25 years, you are nowhere.

China, others shove U.S. in scramble for Africa
Thu Aug 6, 2009 7:30am EDT

JOHANNESBURG (Reuters) – A presidential visit followed by U.S. Secretary of State Hillary Clinton’s African tour cannot conceal a stark reality: China has overtaken the United States as Africa’s top trading partner.

That is one of the main problems facing Clinton on a seven-nation jaunt meant variously to spread Washington’s good governance message and shore up relationships with its key oil suppliers on the continent.

U.S. officials are keen to trumpet a 28 percent jump in 2008 in trade with sub-Saharan Africa to $104 billion, even if the increase is attributable mainly to the high price of oil, which accounts for more than 80 percent of U.S. imports from Africa.

However, there is another statistic that says more about the direction of development on the poorest continent: this decade’s tenfold increase in trade with China to $107 billion last year, narrowly eclipsing the United States.

The financial and then economic crisis that has pushed U.S. and European economies into recession and forced their companies to crimp overseas expansion is only likely to accelerate the trend, analysts say, despite the regional goodwill toward U.S. President Barack Obama, whose father was Kenyan.


Jim Sinclair’s Commentary

Greed isn’t good. It is one of the seven most vile of passions.

View on Bonuses for bankers: Amid financial meltdown, Wall St. pay party goes on

To curb obscene compensation, give shareholders more say on pay.

Last year, you may recall, was a debacle for Wall Street. Financial firms suffered staggering mortgage-related losses and had to be rescued by the federal government.

Amid the wreckage, you might think the banks would have been ashamed to pay any bonuses. You’d be wrong.

As New York Attorney General Andrew Cuomo reported last week, nine major financial institutionsthat collectively received $175 billion in bailout money paid $33 billion in bonuses in 2008.

Citigroup, which lost $27.7 billion and received $45 billion in bailout money, paid $5.3 billion in bonuses, including 738 that were more than $1 million. Merrill Lynch, which lost $27.6 billion and had to be absorbed into Bank of America, paid $3.6 billion in bonuses, including 696 of more than $1 million.

You get the idea.

What this shows is that the people who work at these institutions do not see bonuses as part of the business, as a reward for a job well done. To them, bonuses are the business.

Financial firms pay huge bonuses when they reap fat profits. They pay them when they experience horrendous losses. They pay them because they promised them. They pay them to prevent a brain drain.


Jim Sinclair’s Commentary

"Now consider who would want to take the risk of a country’s debt when there is no manufacturing within its border" – CIGA JB Slear

"The amazing thing is that the business in OTC derivatives is the devil brew that caused this meltdown. It is growing because default swaps are credit default OTC derivatives. These WMDs are quoted daily as if they were secure instruments." –Jim Sinclair

Russia Beats California as Default Swaps Favor BRICs (Update1)
By Laura Cochrane

Aug. 7 (Bloomberg) — Investor demand for emerging-market bonds is driving the cost of insuring against debt defaults below industrialized governments for the first time.

Credit-default swap prices from Turkey to Indonesia are falling as bonds rise amid signs that their economies are recovering faster than developed nations. As the U.S. and U.K. borrow record amounts to fund bank bailouts and stimulus, Brazil, Russia, India and China have $3 trillion in reserves, up 19 percent from January 2008 and now 43 percent of the worldwide total, data compiled by Bloomberg show.

The annual cost of protecting holdings in Turkey’s bonds fell by half to $200,000 per $10 million for five years, or 200 basis points, sinking below New York City swaps for two weeks starting July 22, Bloomberg data show. Indonesia debt insurance dropped below Michigan the next day. Brazil swaps just had their biggest four-month slide ever. For China, protection is near the cheapest in a year. Eleven years after Russia defaulted, investors want less to insure its debt than California’s.

“This would have been impossible to imagine a year ago,” said Dmitry Sentchoukov, an emerging-market credit strategist at Dresdner Kleinwort in London. “Now it’s clear emerging economies are going to outperform the Group of Seven in growth, and that makes investors comfortable with the idea that developing countries can be priced richer than developed.”


Jim Sinclair’s Commentary

A step in the right direction. Now look NORTH.

SEC says brokers violated ‘naked’ short sale rule

WASHINGTON — The Securities and Exchange Commission for the first time has enforced new rules intended to limit a practice known as "naked" short-selling.

The SEC said Wednesday that two traders and their firms have agreed to settle charges that they violated the rules without admitting or denying guilt.

The rules were put in place last year at the height of the financial crisis, and the SEC made them permanent last month.

The agency says New York-based Stephen Hazan and Hazan Capital Management LLC have agreed to pay $3 million to settle the charges, while Chicago-based TJM Proprietary Trading LLC agreed to a penalty of $541,000.

The two firms were charged with circumventing a rule that requires brokers to promptly produce shares in "naked" short-selling transactions.


Jim Sinclair’s Commentary

I have no argument with the headline. Remember that there are consequences.

Stimulus cannot stop. The dollar is toast in the final quarter of 2009.

Top adviser says stimulus is preventing economy’s free fall
By Ed Henry

WASHINGTON (CNN) — White House economic adviser Christina Romer declared the president’s stimulus plan "absolutely" is working to slow the economy’s decline, though she still held open the possibility of a second stimulus package a few months down the road.


Jim Sinclair’s Commentary

When will it end? Not in the next three years.

Fannie Mae needs another $10.7B in federal aid
The mortgage insurer narrowed its quarterly loss to $14.8 billion, but it is still leaning on the Treasury Department to survive
By Tami Luhby, senior writer
August 6, 2009: 6:41 PM ET

NEW YORK ( — Fannie Mae, the government-controlled mortgage insurer, said Thursday that it needs another $10.7 billion from the Treasury Department to stay afloat.

The new infusion means the troubled company has drawn a total of $45.9 billion of its $200 billion lifeline this year. Fannie Mae and its sister firm, Freddie Mac (FRE, Fortune 500), were taken over by the federal government last September amid the global financial meltdown.

In one hopeful sign, Fannie Mae (FNM, Fortune 500) narrowed its quarterly loss to $14.8 billion, or $2.67 per diluted share, down from $23.2 billion, or $4.09 per share, in the previous quarter. The company lost $2.3 billion, or $2.54 per share, in the second quarter last year.

Credit losses from the housing crisis are still to blame for Fannie Mae’s dour results. The company racked up $18.8 billion in credit-related expenses during the latest quarter. However, the company reduced its provision for credit losses to $18.2 billion, from $20.3 billion in the first quarter, because of a slowdown in the increase of estimated defaults and losses per default.

The value of non-performing loans on its books increased to $171 billion as of June 30, compared with $144.9 billion on March 31 and $119.2 billion on December 31.



Jim Sinclair’s Commentary

Town meetings are starting to carry more than just political risk. What we need is Ethan Allan and the Green Mountain Boys.

Rowdy protesters overrun health care meetings
Joe Garofoli, Chronicle Staff Writer
Thursday, August 6, 2009

(08-05) 20:25 PDT — House Speaker Nancy Pelosi sent her chamber home for the summer recess with a list of talking points to respond to constituents’ questions about pending health care legislation.

But those traditionally sleepy town hall meetings have become rowdy shout-fests across the nation, including Northern California, with opponents hanging members in effigy and mocking them with Nazi and devil imagery in an effort to derail discussions of health care.

They’re organized in part by conservative think tanks like FreedomWorks, which offers tips on how to disrupt a meeting ("Watch for an opportunity to yell out and challenge the Rep’s statements early," says one) and helped in some cases by anti-tax "Tea Party" sympathizers.

More than 500 people packed a Napa town hall hosted this week by Rep. Mike Thompson, D-St. Helena, some shouting down panelists by yelling "This is America!" and "What’s wrong with profit?"

Three Aug. 15 East Bay town halls scheduled by Rep. Pete Stark, D-Fremont, one of the health care legislation co-authors, are the targets of one Tea Party group calling for a "counterprotest."


Jim Sinclair’s Commentary

You think California is under any impression that their problems will be solved by "Cash for Clunkers"?

California Won’t Accept Its Own IOUs

SAN FRANCISCO (CN) – Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors’ federal class action claims the state is trying to balance its budget on their backs.

Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California "paid" her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called "sale" of the uniforms.

The class consists mostly of small business owners, many of whom rely on income from government contracts to keep afloat. They say California has used them as "suckers" as it looks for a way to bankroll its operations while avoiding its own financial obligations.

"Instead of seeking funds through proper channels, the State has created a nightmare," the class says. "Many of these businesses will not survive if they are required to wait until October 2009 to have these forced IOUs redeemed by the State."

The class claims the state is violating the Fifth and Fourteenth Amendments. It demands that California be ordered to honor its own IOUs, plus interest. They are represented by William Audet.


Jim Sinclair’s Commentary

Here is a must watch video:

AARP Town Hall Meeting on Health Care – Dallas
August 4, 2009


Jim Sinclair’s Commentary

What is all the uproar about? You voted for change and you got it!

Upcoming town hall meeting will be by phone
Castor heartened by reaction to town hall tumult

TAMPA – U.S. Rep. Kathy Castor, the focus of tumultuous reaction at a town hall meeting Thursday night, said in an interview this morning that the event has strengthened her conviction to support health care reform.

"It has strengthened my resolve to stand up for families and seniors," Castor said. "Floridians are bearing a great burden in health care costs, more than almost any other state."

"A healthy debate is good, but the rude behavior is not helpful," she said. "I think it backfires. The response we’re receiving today is pretty overwhelming to speak up for families and bring down the cost of health care."

Castor said her office is receiving "hundreds" of calls and e-mails in support of her stand.

Asked about whether she considers the protests at the event Thursday night to be a genuine expression of grassroots opposition or, as some Democrats have charged, manufactured by opponents, Castor didn’t respond directly.


Jim Sinclair’s Commentary

That is if they sell any at all.

European central banks: Annual gold sales capped at 400 tons
Posted : Fri, 07 Aug 2009 10:35:40 GMT

Geneva – European central banks have extended a cap on gold sales for another five years but changed the ceiling to 400 tons per year, a joint statement announced. The previous agreement, which allowed for 100 more tons a year, was set to end on September 27. The new one would be reviewed in five-years time.

In all, 19 central banks, including the European CentralBank, signed the agreement. The other banks include those of: Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Portugal, Slovenia,Slovakia, Malta , the Netherlands, Austria, Finland, Sweden and Switzerland.

The statement also recognized the International Monetary Fund’s plan to sell off gold.

"The signatories recognise the intention of the IMF to sell 403 tons of gold and noted that such sales can be accommodated within the above ceiling," the statement said.

The Swiss National Bank said in an accompanying message that it had no plans for any further gold sales in the foreseeable future.


Jim Sinclair’s Commentary

Wall Street celebrates SKEWED figures while Detroit starves.

If there is anything to Karma the sick rat population is going to grow for eons.

These guys do not deserve to be toads.

Hunger hits Detroit’s middle class
Food has long been an issue in this city without a major supermarket. Now demand for assistance is rising, affecting a whole new set of people.
By Steve Hargreaves, staff writer
Last Updated: August 7, 2009: 12:38 PM ET

DETROIT ( — On a side street in an old industrial neighborhood, a delivery man stacks a dolly of goods outside a store. Ten feet away stands another man clad in military fatigues, combat boots and what appears to be a flak jacket. He looks straight out of Baghdad. But this isn’t Iraq. It’s southeast Detroit, and he’s there to guard the groceries.

"No pictures, put the camera down," he yells. My companion and I, on a tour of how people in this city are using urban farms to grow their own food, speed off.

In this recession-racked town, the lack of food is a serious problem. It’s a theme that comes up again and again in conversations in Detroit. There isn’t a single major chainsupermarket in the city, forcing residents to buy food from corner stores. Often less healthy and more expensive food.

As the area’s economy worsens –unemployment was over 16% in July — food stamp applications and pantry visits have surged.

Detroiters have responded to this crisis. Huge amounts of vacant land has led to a resurgence in urban farming. Volunteers at local food pantries have also increased.


Jim Sinclair’s Commentary

We can’t call our French brothers sheeple.

Molex shuts French factory after workers clash with US manager
2:56 PM CDT, August 6, 2009

TOULOUSE — Lisle-based Molex Inc. temporarily closed a car parts factory Thursday after a manager was assaulted allegedly by the plant’s employees.

Executives at Lisle-based Molex cited security reasons for the closure of their factory in Villemur-sur-Tarn, near the southern city of Toulouse, and lodged a police complaint against four workers over the incident. Molex Chief Executive Martin Slark also accused French police of failing to respond to calls for assistance when manager Eric Doesburg and two security guards were allegedly attacked late Tuesday.

Doesburg, based in the U.S., was in France for talks on the fate of the 283 workers when the plant shuts down for good in October and production is relocated to the U.S.

About 40 workers allegedly kicked and punched Doesburg following a meeting of the factory’s works council to discuss layoffs, but a union official said the manager "did not receive any blows, just eggs."

According to Bloomberg News, the plant’s employees, who have been on strike over Molex’s plans to close the unit, returned to work Thursday. Industry Minister Christian Estrosi welcomed the decision to resume work in an e-mailed statement and called for further talks between management and unions, Bloomberg reported.


Posted by & filed under In The News.

Dear CIGAs,

Click the following link to hear my August 5th interview on Goldseek Radio:


Jim Sinclair’s Commentary

This is a conservative estimate. We have heard from authoritative sources numbers as high as 1000.

US Sen Bunning: FDIC’s Bair Said Up To 500 More Banks Could Fail

WASHINGTON -(Dow Jones)- Federal Deposit Insurance Corp. Chairman Sheila Bair believes up to 500 more banks could fail, a U.S. senator said Bair told him in a recent meeting.

“She told us that unless something dramatic happens, we could lose up to 500 more banks,” Sen. Jim Bunning, R-Ky., said Thursday at a hearing of the Senate Banking Committee on the foreclosure crisis.

Bunning said Bair made the remarks in a recent meeting.

“That means that people who make mortgages in local places …. people that could really help in a foreclosure will not be there,” Bunning said.


Jim Sinclair’s Commentary

“This is cheating, this is stealing your money, this is the reason you should be holding your assets away from all 3rd parties. At least until they get “truth” as a religion…”—CIGA JB Slear

Traders Profit With Computers Set at High Speed
July 24, 2009, 4:10 am

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets, writes Charles Duhigg in The New York Times.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage.


Jim Sinclair’s Commentary

MOPE for the war between politically directed monetary policy and FOMC direct monetary policy accelerates.

This is fact!

Surprise shrinkage in service sector quells notion of rapid recovery
By David M. Dickson THE WASHINGTON TIMES | Thursday, August 6, 2009

The service sector, which makes up nearly 90 percent of the U.S. economy, unexpectedly contracted at a faster rate in July than in June, indicating that economic activity continued to decline last month despite a raft of revised forecasts that now project a stronger recovery will begin during the third quarter.

The Institute for Supply Management (ISM) reported Wednesday that its non-manufacturing index declined to 46.4 last month from 47 in June. It was the first decrease since March. Readings below 50 indicate contraction, while readings above 50 represent expansion.

The report revealed that business activity, employment, order backlogs and new orders, including those for export, all shrank more in July than the previous month.

“The majority of respondents’ comments reflect a sense of uncertainty and cautiousness about business conditions,” said Anthony Nieves, the chairman of the ISM committee that produces the non-manufacturing index.

“The bottom line here is that the path from recession to recovery should not be expected to be smooth, and occasional setbacks should not be a surprise,” said Brian Bethune, chief U.S. financial economist for IHS Global Insight. Describing the “pull back” in the services industry as “somewhat disturbing,” Mr. Bethune said,


Jim Sinclair’s Commentary

I have the deepest respect for Dean Harry, but would normally not believe the potential for what dear Harry proposes.

However, with the present war between politically directed monetary policy and FOMC directed monetary policy I have to suggest serious consideration of the following.

There certainly is no harm to be done by doing what Dean Harry suggests.

Harry Schultz newsletter

Conclusion: Stand by for a possible bank run & bank holiday on Aug 26th, after the news breaks on the 25th. (FDIC 2nd Qtr. Report)

This is in line with the HSL prediction of a US bank holiday in Aug/Sept.

If you live in the US, get 3 to 6 months household expense money out of banks now.

Jim Sinclair’s Commentary

I would say that this group would see the comparison as a compliment.

Goldman’s damaged reputation leaves it with the ‘Gekko’ look
By Greg Farrell in New York
Published: August 3 2009 03:00 | Last updated: August 3 2009 03:00

Goldman Sachs’ reputation among both the general public and financially sophisticated Americans has been damaged by the events of the past year, according to research conducted for the Financial Times.

In a survey of 17,000 Americans, Brand Asset Consulting found that Goldman’s stature – as measured by several gauges of brand strength – had suffered in 2008 and 2009.

“Goldman Sachs still has that Gordon Gekko look to it among the general public,” said Anne Rivers, who oversaw the survey, referring to the villain of the 1987 film Wall Street .

Goldman’s long-time rival, Morgan Stanley, also suffered a decline in stature in the survey. But respondents liked and respected Morgan Stanley more than Goldman, a reversal of respondents’ sentiment in 2006.

Yet among those familiar with the two businesses, Goldman still led Morgan Stanley in a category known as “energised differentiation”, a measure that translates into pricing power, Ms Rivers said.


Jim Sinclair’s Commentary

We have made all the winners of the OTC derivatives whole but not the banks or institutions that manufacture them.

Banks still getting sicker
The economy may have turned, but banks will be cleaning up after their lending mistakes for years. Several big banks may already be doomed to fail.
By Colin Barr, senior writer
August 5, 2009: 2:17 PM ET

NEW YORK (Fortune) — The economy may have pulled out of its plunge, but you’d never know by a look at many big banks.

Even after a rousing market rally that spurred new capital into giant institutions such as Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), numerous large banks around the country are still struggling with deteriorating finances.

Two dozen banks with at least $5 billion in assets get the lowest one-star rating on’s safety and soundness test, which is based on an assessment of regulatory filings for the quarter ended March 31.

More than half of those banks are ranked “troubled” or worse by research firm Bauer Financial, using the same data. Three of these banks, with a total of $45 billion in assets, have made public statements indicating they could soon collapse.

“There are some big ones in fairly dire straits,” said Karen Dorway, director of research at Coral Gables, Fla.-based Bauer. “If you see some of these fail, it could add to the stress on local economies.”


Jim Sinclair’s Commentary

Here is the war between politically managed monetary policy and FOMC managed monetary policy that has been going on now at a serious level for four months. This is the formula for the end of the Fed as primary manager of monetary policy and Chairman Bernanke with it.

We will read the resolution in the long bond market by early November 2009.

Fed Set to End Purchases, Two Former Governors Say (Update1)
By Steve Matthews and Scott Lanman

Aug. 5 (Bloomberg) — The Federal Reserve is set to halt its purchases of up to $300 billion in U.S. Treasuries in mid- September as scheduled, and will probably announce the decision next week, two former central bank governors said.

“They’re clearly not going to extend that program given the improvement in financial markets that’s going on,” said Lyle Gramley, senior economic adviser with New York-based Soleil Securities Corp. and a former governor.

Plans to buy as much as $1.25 trillion of mortgage-backed securities and $200 billion of federal agency debt expire at the end of the year, so the decision on whether to extend them may be delayed, former Fed Governor Laurence Meyer said in a report.

The Fed lowered its main interest rate almost to zero in December, switching to asset purchases and credit programs as the main policy tools. The Federal Open Market Committee kept the asset purchase plan unchanged in June, and will consider the program at an Aug. 11-12 meeting in Washington.

The FOMC “is unlikely to extend the life of these programs, unless, of course, either the economy or the financial markets take a significant turn for the worse,” Meyer, vice chairman of St. Louis-based Macroeconomic Advisers LLC, wrote in a report released yesterday. “We therefore expect the FOMC to announce at its upcoming meeting that it will allow the Treasury purchase program to expire in mid-September.”


Jim Sinclair’s Commentary

OTC derivatives have proven themselves to be real weapons of mass destruction. These paper crimes are far from victimless.

I as a voice in gold, as a businessman and as a CEO have grave responsibility to those people who have placed their trust in me. I carry this responsibility with me every moment of every day.

No matter how highly placed a sociopath is they simply do not give a flying you know what.

Unclaimed dead stack up in Wayne County morgue
Charlie LeDuff / The Detroit News

Detroit — Poor Grandpa.

His corpse lies at the bottom of a pile of other bodies unclaimed at the Wayne County morgue. But Grandpa — whose name has been withheld to avoid embarrassing his family — is a special case. He has been in the cooler for the past two years as his kinfolk — too broke to bury him — wait for a ship to come in.

“There is destitution,” says Dr. Carl J. Schmidt, the chief medical examiner of this, the nation’s poorest big city. “But when you’re so destitute that nobody has claimed you, that’s a whole different level of being destitute.”

Peering into the small glass window of the cooler door, Schmidt counts 52 unclaimed bodies stacked like cordwood — in some cases four to a shelf; always two to a gurney.

Generally, the economic well-being of a municipality is measured by unemployment rates and quarterly earnings reports. But Schmidt’s cooler may say as much about metropolitan Detroit’s financial health as any statistics released by the Federal Reserve.

“It really is a sign of how bad things have gotten,” says Schmidt, 52, a 16-year veteran of the Detroit death scene. “Some people really have to make a choice of putting food on the table or burying their loved ones. It is very sad really. In all of my years here, I have never seen it this bad.”


Jim Sinclair’s Commentary

The damage Wall Street has done is planetary and unforgivable.

US food stamp list tops 34 million for first time
08.06.09, 11:26 AM EDT

WASHINGTON (Reuters) – For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression

Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available.

It was the sixth month in a row that enrollment set a record. Every state recorded a gain in participation from April. Florida had the largest increase at 4.2 percent.

Food stamp enrollment is highest during times of economic stress. The U.S. unemployment rate of 9.5 percent is the highest in 26 years.

Average benefit was $133.65 in May per person. The economic stimulus package enacted earlier this year included a temporary increase in food stamp benefits of $80 a month for a family of four.


Jim Sinclair’s Commentary

GM is going to produce the new Smart Electric Lambo car?

The Smamborghini!


Jim Sinclair’s Commentary

What is with these guys? They are using our money to for bonuses.

They were recently broke, had to be rescued, and took government money. That is fact. Just follow the money.

Outrage: Merrill’s record 3.8 billions bonuses and $27.6 billion loss in 2008!!!
BY DANIEL AT 6 AUGUST, 2009, 2:40 AM

“…The judge also said the agreement “in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly” from public funds advanced to Bank of America as part of its bail out.

An SEC spokesman declined immediate comment.

Bank of America, along with Citicorp Inc. and insurance giant American International Group, is among the largest recipients of government aid. It has received $45 billion from the federal $700 billion bank rescue program.

Merrill ended up paying $3.6 billion in bonuses in 2008, the SEC said, even though it lost $27.6 billion that year, a record for the firm. The bonuses amount to nearly 12 percent of the $50 billion that Bank of America paid for Merrill.”

Soon we will have a bonuses crisis! Bonus system in wall street is definitely corrupted.


Jim Sinclair’s Commentary

I will give you three guesses to figure out who is long.

Commodity Shortage Likely in 2010, Goldman Sachs Says
By Chanyaporn Chanjaroen

Aug. 6 (Bloomberg) — A commodity shortage is likely next year as output of metals and agricultural products potentially rises too slowly to match revived demand, Goldman Sachs Group Inc. said.

Supply of cotton, soybeans, copper and zinc will be dictated by China, New York-based analysts Anthony Carpet, Laura Conigliaro and Robert Boroujerdi said in a report dated yesterday. The country consumes about a quarter to a third of world production of those raw materials and relies on supplies from abroad, they said.

“We expect a redux of 2008, when severe supply constraints forced the rationing of demand through sharply higher prices to keep markets balanced,” the analysts said.

The Reuters/Jefferies CRB Index of 19 commodities has added 17 percent this year, driven by energy and metals prices. Limits on production growth and swelling demand in developing nations will keep driving prices higher and probably curb usage in industrialized countries like the U.S., Goldman Sachs said.

Stronger demand from China, the world’s most populous nation, helped to lift copper and soybeans to records last year before commodity prices collapsed in the second half. Larger Chinese imports have helped copper to almost double in 2009 in London trading.


Jim Sinclair’s Commentary

Short squeezes can occur on technicalities.

Can you image what a short cover will look like in some of the junior gold shares when a major event occurs, not just a technicality?

Analyst says short squeeze likely driving AIG gain
Aug 5, 2009, 2:15 p.m. EST
By Greg Morcroft

NEW YORK (MarketWatch) — Investors who were short shares of American International Group   (AIG  22.77, +0.24, +1.07%) before a recent 20-for-1 reverse stock split are scrambling Wednesday to buy scarce shares to cover, driving the stock up more than 50%, according to Miller Tabak analyst Peter Bookvar. Bookvar said he’s seeing a similar situation with shares of Georgia Gulf Corp (GGC  28.36, -0.94, -3.21%) , which also recently did a large reverse split. “GGC is another stock that had this big reverse stock split, and its stock went from $7 to $36 in five trading days. It’s another example of where the float has dramatically shrunk, and now there’s a massive short squeeze going on,” Bookvar said. “There is certainly no news to account for it (AIG’s stock move), he added.


Posted by & filed under In The News.

The problem with socialism is that you eventually run out of other people’s money.
–Margaret Thatcher


Dear CIGAs,

Here are some tidbits for today:

1. 33 camps are shut down in Maine, some with up to 100 campers with H1N1 in isolation.

Please prepare yourself with actions like extra food supplies to cover the flu season simply because you may not wish to go to the market if CDC predictions prove to be even 50% correct.

2. Dubai’s Gold trade is up 12%:

Dubai Gold Trade +12% In 1H 2009 At $14.69 Billion – DMCC

DUBAI (Zawya Dow Jones)–The Dubai Multi Commodities Centre, or DMCC, said Wednesday that the value of gold traded in the first half was $14.69 billion, a 12% jump from $13.07 billion a year earlier.

"No doubt the market witnessed some volatility in gold prices and was compounded by lower retail sales of gold jewelry, however, the overall investment appeal of gold remained strong throughout the first half of this year," said David Rutledge, chief executive officer at DMCC, in an emailed statement.

In the first six months of the year, a total of 300 tons of gold was imported into Dubai, up 13% from 265 tons in the same period of 2008. Gold exports from Dubai reached 213 tons, a 19% increase from 179 tons in 2008.

The gold price averaged $922 per ounce in the first half of the year, up from $910 per ounce during the same period in 2008, the DMCC said.


Jim Sinclair’s Commentary

Here is another casualty of the OTC derivative manufactures and distributors who have reaped huge profits for their contribution to society.

Pension black hole at FTSE 100 companies hits record £96bn
The pension fund shortfall of Britain’s biggest companies has more than doubled to a record £96bn in a year, a report said on Wednesday.
Published: 5:54AM BST 05 Aug 2009

Actuaries Lane Clark & Peacock (LCP) said the financial crisis had helped send the combined deficit of FTSE 100 companies’ pension schemes soaring from £41bn a year ago. It was £12bn two years previously.

The current £96bn funding gap, calculated from data last month, is the largest recorded shortfall recorded under the international accounting rules currently used for Footsie pension funds, the firm added.

LCP said the plunging values would pile more pressure on companies to stop offering defined benefit pension schemes for employees.

Just three FTSE 100 companies – Cadbury, Diageo and Tesco – said they offered defined benefits to new employees, the report said.

The report also calculated the FTSE 100 share index would need to rise from its current level of 4,600 to more than 7,000 to wipe out the deficits.

LCP partner Bob Scott said the deficits had ballooned since March this year as historically low interest rates hit bond yields, which are a major source of pension scheme funding.

He said: "The collapse of Lehman Brothers in September 2008 had a significant impact on the UK pension schemes of FTSE 100 companies.



Jim Sinclair’s Commentary

The Green Hornet sent us this. I would post his quote but the sensors would go wild.

Think about what is said here. It is outrageous even to conceive of.

About half of U.S. mortgages seen underwater by 2011
Wed Aug 5, 2009 5:12pm EDT
By Al Yoon

NEW YORK (Reuters) – The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties’ value, up from 29 percent, it said.

"The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13 percent of the total market.


Jim Sinclair’s Commentary

I think I told you that we were in this leg. $1224 is a better number.

Why Gold Could Hit $1,300 This Year
August 04,

Gold may be nearing its next major leg up.

No investment ever goes straight up or straight down. During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. However, during that time, there was a period of 18 months in which gold fell nearly 50% (see the chart below).


As you can see, from mid-1971 to December 1974, gold rose 471%. It then fell 50%, from December ’74 to August ’76. After that, it began its next leg up, exploding 750% higher from August ’76 to January 1980.

Now, in its current bull market (2001 to March 2008), gold rose over 300% from $250 to a little over $1,000. And just like in the mid-70s, it began showing signs of weakness after its first big rally up to $1,014 in March ’08. At one point, it even fell to $700, a 30% retraction.

Granted, it wasn’t a full 50% retraction like the one that occurred from 1974-76. But we are experiencing a financial crisis. And gold is the most common catastrophe insurance.

If we were to go by the historic pattern of the gold market in the ‘70s, gold should experience upwards resistance for 19 months after its first peak today. Gold’s recent peak was $1,014 in March ’08 (roughly 17 months ago).

If this bull market parallels the last one, then gold should renew its upward momentum in a very serious way starting in October 2009. And this next leg up should be a major one (the biggest gains came during the second rally in gold’s bull market in the ‘70s).


Jim Sinclair’s Commentary

IMF gold sales are NO FACTOR for the bear side in 2009-2011, just as they were NO FACTOR in the 70s for the bear side.

Central Bank net gold sales show huge drop in first half 2009
A report by GFMS for Societe Generale suggests the volume of Central Bank gold sales this year is likely to be among the lowest on record.
Author: Lawrence Williams
Posted:  Tuesday , 04 Aug 2009

LONDON – In a report released Monday, precious metals consultancy GFMS, for Societe Generale, looked at the recent rate and volume of gold sales from official sources and concluded that in the first half of the current year the net sales volume was a relatively minuscule 39 tonnes – down a massive 73% year on year.  Indeed in the second quarter, GFMS estimates that banks were net buyers of gold after being net sellers in the first quarter.

In effect, the majority of these sales came from within the Central Bank Gold Agreement, with its signatories selling some 92 tonnes, but this was offset by net purchases from Central Banks and institutions in other countries which turned out to be net buyers of around 56 tonnes.  There were also a few tonnes of sales from banks outside the CBGA.  GFMS notes that all these figures may be subject to alteration due to the lag that often exists between Central Bank activity in the gold market taking place and it being identified.

The biggest sellers of gold in the period included France which had announced some time back that it would sell 600 tonnes over the life of the five-year CBGA, which ends on September 26th.  France sold some 44 tonnes in the first five months of the year and it is likely, says GFMS, that it would also have sold a little more in June.  With a total of 576 tonnes of sales over nearly 5 years under the Agreement up until May that left only a further 24 tonnes to sell June to September.

The second biggest seller was the European Central Bank with 35.5 tonnes.

There are a few Central Banks which still have gold to sell under announced gold sales programmes, but these in total amount to very little, and GFMS reckons that in the second half of 2009 Central Bank sales will remain fairly low at around 100 tonnes which would mean that net official sector sales in 2009 overall, at some 140 tonnes, would be at the lowest level since 1994’s trough of 130 tonnes.


Jim Sinclair’s Commentary

What in the world makes the writer think this is limited to Australia or even focused there?

China looking for choice pickings among Australian Junior miners
The loss of face over Chinalco’s tie up with Rio hasn’t curbed the country’s enthusiasm for Australians.
Author: Joseph Chaney and James Regan
Posted:  Wednesday , 05 Aug 2009

KALGOORLIE, Australia, (Reuters) – Who ever said China’s loss of face over Chinalco’s collapsed $19.5 billion Rio Tinto (RIO.AX) tie-up bid would curb the country’s hunger for Australian natural resources?

Chinese state-owned and privately-held metals firms are actively on the prowl for acquisition and financing deals with Australia’s small and medium-capped miners of base metals and iron ore, analysts and bankers say.

"I reckon there’s still a few in the cards, there’s still more to do — particularly in steel-related products," said James Wilson, an analyst at DJ Carmichael.

"You can’t shut the door on these guys because they are related to the long-term health of the mining industry here," Wilson said, adding that Chinese companies account for a huge proportion of Australian mining firm’s customers.

"It’s a symbiotic relationship these days."

China’s hunger for Australian assets is far from satisfied, two regional investment banking sources told Reuters, even though most of the distressed deals have already been completed earlier this year in the immediate wake of the global financial crisis.


Jim Sinclair`s Commentary

Get ready for Pa. IOUs.

Pennsylvania gets stop-gap budget, Philly left out
Wed Aug 5, 2009 1:39pm EDT
By Jon Hurdle

HARRISBURG, Pennsylvania (Reuters) — Pennsylvania Governor Ed Rendell on Wednesday signed an $11 billion "stop-gap" budget for fiscal 2010 that lets state employees and vendors get paid, but requires lawmakers to resume negotiations on education and other major state spending.

Senate Majority Leader Dominic Pileggi, a Republican, reiterated that budget negotiations should take precedence over a bill that would allow Philadelphia to deal with its own financial crisis by raising the city’s sales tax and deferring pension payments.

"The budget needs to come first," Pileggi said.

Philadelphia Mayor Michael Nutter, who was in Harrisburg again on Wednesday seeking support for the measures, warned he will have to lay off around 3,000 workers and close some city agencies — unless the measures are approved by August 15.

Rendell, the Democratic governor, vetoed $12.9 billion worth of spending line items in a budget bill that was first approved by the Republican-controlled Senate in early May. He urged legislators to return to the bargaining table more than a month after missing the July 1 budget deadline.

"We have work to do and we must get back to doing it post-haste," Rendell said at a news conference.


Jim Sinclair`s Commentary

Briefs (referring to brain power).

OTC derivatives buried GMAC.

GMAC turns to Fed for money. Battered lender GMAC reported that its Q2 loss widened to $3.9B, with revenues falling 22% to $1.03B and loan loss provisions rising 50% from the year before to $1.16B. GMAC also confirmed it’s in discussions with the Federal Reserve over $5.6B in new capital it needs to raise by November to satisfy the government’s stress test requirements. Since the government has already invested $12.5B in GMAC, the lender is unlikely to find external investors willing to help with capital raising.

Jim Sinclair`s Commentary

And here are the new GM bosses.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

The "Cash for Clunkers" program has been a "great success", at least according to the government, and the auto industry. Within days of its kickoff, all $1 billion allocated to the program has been used up by Americans who have eagerly lined up to trade their clunkers for new vehicles.

Some refreshingly honest reporting has come from, a car buying site that is telling the truth, in spite of benefiting from an increase in business and site traffic, due to the program. According to Edmunds, about 200,000 old low mileage cars would normally be traded in, every 3 months, in exchange for more efficient higher mileage cars, without this program.

The highest rebate is $4,500, and the lowest is $3,500. If everyone qualified for $4,500 per vehicle, about 222,000 vehicles would have just taken advantage of the government’s money. At $3,500, 286,000 vehicles will have been sold.


Jim Sinclair`s Commentary

Russia today. Each news item is involved with the other regardless of claims to the contrary.

US ‘continues’ to supply Georgia with arms
Wed, 05 Aug 2009 11:32:24 GMT
Amid escalating tension between Moscow and Tbilisi, a top Russian official says the United States continues to supply Georgia with weapons.

Two Russian subs seen patrolling off US coast
Wed, 05 Aug 2009 04:48:38 GMT
Two Russian nuclear attack submarines have been patrolling off the eastern coast of the United States in a rare move that has alarmed the Pentagon.

US, Russian presidents discuss South Ossetia
Wed, 05 Aug 2009 01:18:53 GMT
Rising tensions between Russia and Georgia have prompted the Russian president to hold talks with his US counterpart over the worsening situation.

As Russia puts troops on alert, Georgia warns of war
Tue, 04 Aug 2009 15:27:40 GMT
Russia says troops in independence-seeking South Ossetia are on increased combat readiness on the de facto border with Georgia, amid rising tension between the sides of last year’s war.

Jim Sinclair`s Commentary

94 days to go.

When China prepares its « Great Escape » from the dollar-trap for the end of summer 2009

LEAP/E2020 believes that the next stage of the crisis will result from a Chinese dream. Indeed, what on earth can China be dreaming of, caught – if we listen to Washington – in the “dollar trap” of its USD 1,400-billion worth of USD-denominated assets? If we believe US leaders and their scores of media experts, China is only dreaming of remaining a prisoner, and even intensifying the severity of its prison conditions by always buying more US Treasuries and Dollars.

In fact, everyone knows what prisoners dream of. They dream of escaping of course, of getting away from prison. Therefore, LEAP/E2020 has no doubt that Beijing is constantly striving to find the means of disposing, as quickly as possible, of the mountain of « toxic » assets which US T-Bonds and Dollars have become, keeping the wealth of 1,300 billion Chinese citizens prisoner.

In any good escape story, the prisoners do not spend their time making announcements that they are preparing to get away. In fact, on the contrary, they tend to avoid arousing their guards’ vigilance. According to our team, the Chinese declaration of March 24th asking for the replacement of the US dollar by an international reserve currency was both a “testing of the waters” and a warning: a direct poll to make an assessment of the forces at work (within the G20 in particular) when it comes to moving to a post-Dollar era (1), and a constructive and destructive (depending of the reaction to the previous idea) warning sent to the various global players. A responsible player (and Beijing is one) must send discreet signals to the other players likely to follow or help “planning the job”. The preparation (2) and implementation of a « Great Escape » (3) requires the collaboration of several partners and no one who would have been willing to co-operate must end up in trouble because he was not informed (4).


Jim Sinclair`s Commentary

The USDX is going to .7285, will have a small rally and then move on to .6200.

No end in sight for bank bailouts
Even as the industry recovers, winding down last year’s rescue programs and new ones put in place by the Obama administration may be easier said than done.
By David Ellis, staff writer
Last Updated: August 5, 2009: 4:24 AM ET

NEW YORK ( — After rescuing the nation’s banking system from utter disaster last fall, Washington now faces an arguably much trickier task: putting the bailout genie back in the bottle.

Several initiatives are on course to expire later this year, putting regulators and the White House in the difficult position of having to decide whether the nation’s banking industry is strong enough to go it alone.

"They would love to get out of the middle of all this stuff if they could," said John Douglas, a former general counsel at the Federal Deposit Insurance Corp, who now heads the banking regulatory practice at law firm Davis Polk & Wardwell. "The question really is whether the financial system and capital system is vibrant enough to exit without a government backstop."

So far, most of the signs from the banking industry lately have been somewhat encouraging.

The credit markets seem to be returning to normal. The London Interbank Offered Rate — or Libor — a widely relied upon measure of bank-to-bank lending rates, is now well below the record high it hit after Lehman Brothers filed for bankruptcy last fall.


Jim Sinclair`s Commentary

The Green Hornet says this is definitely a major bull market!

Consumer Bankruptcy Filings Most Since October 2005 (Update1)
By Andrew M. Harris

Aug. 4 (Bloomberg) — Consumer bankruptcy filings in the U.S. rose to the highest level since October 2005, the American Bankruptcy Institute said in a statement.

More than 126,000 new cases were filed by consumers last month, the nonpartisan research group said today, citing figures furnished to it by the National Bankruptcy Research Center. That was an 8.7 percent rise from June and a 34 percent increase from July 2008.

“Today’s bankruptcy filing number reflects the sustained and growing financial stress on U.S. households,” ABI Executive Director Samuel Gerdano said in the statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.

Congress, in October 2005, enacted the Bankruptcy Abuse Prevention and Consumer Protection Act, a legislative reform package intended to make it harder for consumers to get court orders wiping out their uncollateralized debt.

The act required debt counseling and a means test for would-be filers.

More than a quarter of the filings last month were by consumers seeking to reduce their debt under the U.S. Bankruptcy Code’s Chapter 13 provisions. Filers also have the option to seek liquidation of debt under Chapter 7.


Jim Sinclair`s Commentary

Monty, is Connecticut looking good?

Judges Order California to Reduce State Prisoner Population
By Joel Zand on August 4, 2009 4:58 PM

A panel of three federal judges ordered the State of California to reduce its inmate population because of prison overcrowding, resulting in the release of approximately 43,000 prisoners during the next two years so that the state’s prisons can operate at 137.5% of their design capacity.

In a 184-page opinion, the panel ordered California to provide an inmate reduction plan within 45 days to carry out the court’s directive "in no more than two years."


Posted by & filed under In The News.

Jim Sinclair’s Commentary

I have been asked what this means.

The inviting conclusion is that Ron Paul is finally being recognized because of his foresight and willingness to express his vision. That is partially true, but there is a strong chance that Ron Paul’s opinion is being used as a tool of the MOPErs to establish the subject in the general media.

The many other articles on the same subject as Ron Paul, such as below, would not appear.

The only conclusion you can come to is the king makers of the present administration are at odds with the king makers who are responsible for the process that brought Bernanke into the Federal Reserve Chairmanship.

End the Fed? A not-so-crazy idea.
Congressman Ron Paul’s bill may never pass, but history suggests the US economy would be better off without the Federal Reserve.
By George Selgin
from the August 3, 2009 edition

ATHENS, GA. – Since it was introduced in February, Representative Ron Paul’s "Audit the Fed" bill (H.R. 1207) has gained 282 congressional cosponsors. If adopted, the bill would allow the Government Accountability Office to review, not only the Federal Reserve’s balance sheet, but its recent monetary policy deliberations and transactions.

Fed Chairman Ben Bernanke opposes the plan, saying it would undermine the Fed’s hallowed independence.

But Mr. Paul, a noted libertarian who ran for president last year, also wants to keep the Fed out of Congress’s clutches – by scrapping it altogether. That’s the goal of his follow-up Federal Reserve Board Abolition Act (H.R. 833). Although that measure has yet to gain a single cosponsor, it has plenty of grass-roots support, and Paul hopes that members of Congress will jump on the bandwagon once their eyes are opened by a no-holds-barred audit.

Wacky stuff? Well, if not having a ghost of a chance is enough to make a bill bonkers, Paul’s measure probably qualifies. But that doesn’t mean you’ve got to be crazy to believe that the US economy would be better off without the Fed.

The Fed’s apologists suggest otherwise, of course. They note that the US spent nearly half the years between 1854 to 1913 in recession, as opposed to just 21 percent of the time since the Fed’s establishment in 1913. Who would want to go back to those bad old days?

But consider: the US economy has actually grown less rapidly since 1914 than it did before. And inflation has been much worse, despite both the Civil War, which featured the nation’s worst inflation, and the Great Depression, which featured its severest deflation!

What’s more, the frequent downturns before 1914 were due, not to the lack of a central bank, but to foolish government regulations. Topping the list were bans on branch banking, initiated by state governments and then incorporated into federal banking law. The bans propped up thousands of undercapitalized and under-diversified banks – banks unfit to survive major local shocks, let alone macroeconomics ones. They also caused bank notes – competitively supplied counterparts of today’s Federal Reserve notes – to trade at discounts whenever they traveled far from the solitary offices of banks that issued them.


Jim Sinclair’s Commentary

This is true.

.7285 is the magnet now pulling on the USDX. That is just one of the lower limits the USDX will visit.

The Greenback Is Broken

The U.S. dollar index is at 11-month lows and shows no signs of turning around.

THE U.S. DOLLAR INDEX, which tracks the dollar against other major currencies, fell below its important June low of 78.33 late last week. On Monday morning, it was trading at an 11-month low.

The bear trend from March continues with no meaningful support in sight.

Roughly two years ago, when the dollar was in its previous bear market run, the dollar index had moved under a multidecade support level at 80 (see Chart 1). At the time, the subprime-mortgage crisis was just unfolding.

Chart 1


After reaching a low near 71, the dollar spent several months moving sideways until July 2008. Although still several weeks before the stock market started its slow motion crash in September, fear had gripped the world’s financial markets. Stocks and corporate bonds were spiraling lower.


Jim Sinclair’s Commentary

Just as "Cash for Clunkers" is an organizational disaster, so is every other government program, even if well meant.

Now think about nationalization of the auto and other industries and the mess that will certainly become. Upcoming is the pension industry, the securities insurance entity and eventually the majority of mortgage backed SIVs still floating around the planet.

Mortgage aid program helping fraction of borrowers

WASHINGTON — The government’s $50 billion program to ease the foreclosure crisis is helping only a tiny fraction of struggling homeowners.

As of July, only 9 percent of eligible borrowers had seen their mortgage payments reduced. And a progress report on the plan Tuesday showed that 10 lenders had not changed a single loan.

Both Bank of America Corp. and Wells Fargo & Co. — which have received billions in federal bailout money — were below average. BofA, which did not immediately comment, modified 4 percent of eligible loans, and Wells Fargo 6 percent. And Wachovia Corp., which was taken over by Wells Fargo last December, modified just 2 percent.

"We know we’ve fallen short of our customer service goals in some cases," Mike Heid, co-president of Wells Fargo’s mortgage unit, said in a statement. The company aims to sign up most borrowers for the Obama plan with one phone call and plans to send customers a trial offer within two days.

Foreclosures, meanwhile, continue to rise. About 1.5 million households received at least one foreclosure-related notice in the first half of this year, according to RealtyTrac Inc.


Jim Sinclair’s Commentary

Most SIV based mortgages aren’t worth the paper they are written on.

About four years back the New York Federal Reserve Bank called a special meeting where the gruesome 8 major derivative granting banks were called in ostensibly to correct back office problems and procedures. In English that meant that the explosion in securities investment vehicles, especially at that time mortgage based had gone totally FUBAR. Now locating who is the proper lender with the proper paperwork is nearly impossible. If anyone being foreclosed on would fight back they would win. Show me the loan document is what you demand. Now consider the problems that mortgage backed SIVs have, making most of them worthless for more reasons than just their convoluted OTC derivative nature.

JULY 14, 2009

In a stunning victory for borrowers, a New Jersey court has dismissed a foreclosure action filed against the borrowers by Deutsche Bank Trust Company America as alleged trustee for a securitized mortgage loan trust after Deutsche Bank willfully, and despite the entry of three (3) separate court orders, refused to produce documents demanded by the borrowers which included documents setting forth the identity of the true owner and holder of the Note and mortgage, the complete chain of title to ownership of the note and mortgage, payment application histories, and documents as to the securitized mortgage loan trust. The Court had given Deutsche Bank multiple opportunities and extensions of time to produce the documents, but Deutsche Bank continually refused to produce any of the documents requested, resulting in the dismissal of Deutsche Bank’s foreclosure action. The Court also ruled that Deutsche Bank is not permitted to re-file any foreclosure action until it is prepared to produce ALL of the subject discovery.

FDN attorney Jeff Barnes, Esq. represented the borrowers, assisted by local New Jersey counsel.

W. J. Barnes, P.A. has numerous other cases pending where similar discovery requests have been sent to Deutsche Bank, none of which have been complied with to date. As such, additional requests for sanctions, including dismissal, are expected to be filed in these cases.

Deutsche Bank was also the subject of a recent ruling in a case in New York where the Court denied Deutsche Bank’s Motion for Summary Judgment, finding that a purported assignment from MERS to Deutsche Bank was defective and that Deutsche Bank, with an invalid assignment of the mortgage and note from MERS, lacked standing to foreclose. Significant in the ruling was the court’s observation and question as to why, 142 days after the borrower was claimed to be in default, that MERS would assign a “toxic” loan to Deutsche Bank. The court also required a satisfactory explanation, by sworn Affidavit, from an officer of the securitized trust as to why, in the middle of “our national subprime mortgage financial crisis”, Deutsche Bank would purchase from MERS, as alleged “nominee”, a nonperforming loan. The court further inquired as to whether Deutsche Bank violated a corporate fiduciary duty to the note holders of the securitized mortgage loan trust with the purchase of a loan that had defaulted 142 days prior to its assignment from MERS to the trust.


Jim Sinclair’s Commentary

I have given you 18 reasons why.

Read Trader Dan below.

Gold gearing up (again) to break $1,000?
Commentary: After Friday’s rebound, gold bugs are watching for a breakthrough
By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) — For the umpteenth time, gold bugs think gold may be poised to break $1,000.

The last week of July definitely lacked summer somnolence in the gold market.

A brutal $14.40 sell-off on Tuesday caused chartists great distress. But gold held. And then on Friday it staged an even more powerful recovery, rising some $20, closing at $954.50 and repairing the week’s technical damage.

Dan Norcini at JSMineset commented: "I must say that today’s sharp climb higher is very impressive from a technical perspective, as it pushed gold back above all of the major moving averages on the WEEKLY chart. It is evident from the ferocity of today’s climb that a good many guys got caught flatfooted on the short side and were violently squeezed out." (See Web site.)

Friday turned the Australian service The Privateer’s celebrated $US 5×3 point and figure chart up. (Chart available free here.)

As with other types of gold chart, it now raises the enticing possibility of an immense inverse head-and-shoulders pattern — bullish implication: maybe $1,300.

MarketVane’s Bullish Consensus for gold stood at 80% on Friday night: high, but it had phases in the mid eighties twice this year, and often spends time in the mid nineties in a strong gold run.

The Hulbert Gold Newsletter Sentiment Index is at 16.8%, about the mid-point of its range.

Two elements are encouraging the bugs to wonder if this could be the start of the Big One — the push above $1,000.


Posted by & filed under In The News.

Jim Sinclair’s Commentary

Among the Brotherhood of Country Captains, this type of development is not taken well. It only accelerates the desire to spend and spend to placate a public.

Brown must step down this summer, says Labour donor
PM who ‘seems to slip on every banana skin’ should give new leader time to settle in before next election
By Jane Merrick, Political Editor
Sunday, 2 August 2009

A Labour donor and leading constituency chairman last night called on Gordon Brown to stand down as leader and enable an "orderly transition" to a new leader to fight the next election.

Peter Carpenter, a member of the party’s Thousand Club, said the Prime Minister needed to use his summer holiday to "come to the conclusion that he is part of the problem rather than part of the solution".

Mr Carpenter, who has donated more than £33,000 to the party since the last election and is also chairman of Putney Labour Party, cast doubt on Labour’s ability to raise funds with Mr Brown at the helm. He described the Prime Minister as a poor communicator who "seems to slip on every banana skin that’s about".

The move suggests that, besides the complaints by "usual suspect" MPs after the Norwich North by-election last month, there is a growing revolt among Labour grassroots and the donor community.

There were other constituency chairmen and donors who felt the same way and would speak out in the run up to Labour’s party conference in Brighton next month, Mr Carpenter said.



Jim Sinclair’s Commentary

You can see the subject we have been placing before you is being perceived by others.

You better check. If you can exit give it consideration.

Pay attention to your pension because you may lose it
August 01, 2009
Thomas Walkom

The drive to dismantle the welfare state has a new target. Governments have already gutted unemployment insurance and social assistance. Out-of-date labour laws make it tough to organize unions in the new, decentralized, service-based economy. Now, thanks in large part to the dynamics of the recession, pensions are under attack.

Curiously, the war against pensions has received less attention than it should. People understand taxes, and usually complain when they rise. They also understand the notion of wages, and raise a similar stink when they go down.

But pensions appear to baffle most of us. They shouldn’t. Pensions and other retirement benefits are simply deferred wages – money you earn now and sock away (or have someone else sock away for you) so that you’ll have something to live on when you’re too old, tired, sick or unwanted to work.

Even before this recession hit, it was clear that pensions were under the gun. Good retirement benefits, like good wages, interfere with what economists call labour market flexibility – that is, the willingness of workers to take low-wage jobs.

Put simply, 65-year-olds who can get by on the pension income they earned earlier in their careers may not be willing to work as Wal-Mart greeters.


Posted by & filed under In The News.

Jim Sinclair’s Commentary

Here is a wise statement that those who feel they can trade for insurance should deeply consider:

“We don’t want to rely too much on celebrity spokespeople,” Mr. Chow said. “Celebrities come and go. Their popularity, notoriety, fame can be nebulous.

Gold, on the other hand, is solid — and eternal. “In hard times,” he said, “people cling to it.”

A Hong Kong Gold Merchant Seeks Fortune in China
Published: July 31, 2009

HONG KONG — When Chow Sang Sang opened its third jewelry megastore in Hong Kong in April, it was not a quiet affair. The 464-square-meter space was packed with publicists, fashion models, art installations, drummers and a diamond necklace priced at 5.7 million Hong Kong dollars.

Vincent Chow, the grandson of the company’s founder and now its general manager, was at the 5,000-square-foot store to oversee the proceedings — and to take a hand at banging on the drums himself.

But although Mr. Chow, 62, is overseeing a rapid expansion in the family jewelry business, he is staying firmly focused on the commodity that made his family’s fortune.

“We started as goldsmiths,” Mr. Chow said in a recent interview. “Today, gold still makes up half of our sales.”

Chow Sang Sang was founded in 1934 in Guangzhou, China. In 1948 — when masses of refugees and companies fled political turmoil on the Mainland — Mr. Chow’s father and two uncles re-established the family business in Hong Kong, then a British colony.

In 1973, the jeweler went public on the Hong Kong exchange. Today, Chow Sang Sang has more than 190 stores in Hong Kong, Taiwan, Macao and China, and it had revenue of 9.88 billion dollars, or $1.27 billion, in 2008.



Jim Sinclair’s Commentary

The Fed knows how to take care of its own!

Wall Street profits from trades with Fed
By Henny Sender in New York
Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”


Jim Sinclair’s Commentary

Your funds are guaranteed by the FDIC. The only problem with that is FDIC is nearly broke and will have to be bailed out by the US Treasury.

The problem with the Treasury bailing them out is that dollars created out of thin air have never in history held their buying power. Therefore you get paid off in newly printed confetti money.




Jim Sinclair’s Commentary

Dr. Bob says "The collapse of Guaranty Bank would be biggest failure of ’09." Do you think the FDIC is ready for this?

Big Texas bank on verge of failure
Guaranty Bank, which counts Carl Icahn as one if its backers, is teetering on the edge of insolvency. But it may not be easy for regulators to find a buyer.
By Colin Barr, senior writer
Last Updated: July 31, 2009: 1:53 PM ET

NEW YORK (Fortune) — Guaranty Bank is hardly a household name. But the Austin, Texas-based thrift’s looming failure is shaping up as a big headache for bank supervisors — not to mention a black eye for Carl Icahn and others in the smart money set.

Guaranty (GFG) could be soon seized by the government in what would be the biggest bank failure in a year that has already had 64 of them. Last week, the bank warned investors to expect a federal takeover after regulators forced a writedown of its risky mortgage investments and a bid to raise new capital failed

Guaranty has $13.4 billion in assets and operates 160 branches in Texas and California — two of the three best banking markets in the nation, thanks to their size and population growth.

But the bank’s capital problems and its smallish, scattered network of branches could detract from Guaranty’s appeal, making it tough for regulators to find a buyer quickly — or without substantial federal subsidies.

"This may not be closed as quickly as you think, since it will require bids and rebids," said Miami banking consultant Ken Thomas.


Jim Sinclair’s Commentary

A very active Friday!

Regulators shut down banks in five states

WASHINGTON -Regulators on Friday shut down banks in Florida, New Jersey, Ohio, Oklahoma and Illinois, boosting to 69 the number of federally insured banks to fail this year amid the pressures of the weak economy and mounting loan defaults.

The Federal Deposit Insurance Corp. was appointed receiver of the five banks.

The agency shut down Integrity Bank of Jupiter, Fla., with $119 million in assets and $102 million in deposits, and First BankAmericano, based in Elizabeth, N.J., with $166 million in assets and $157 million in deposits.

Also closed were Peoples Community Bank, West Chester, Ohio, with $705.8 million in assets and $598.2 million in deposits; First State Bank of Altus, in Altus, Okla., with $103.4 million in assets and $98.2 million in deposits; and Mutual Bank of Harvey, Ill., with $1.6 billion in assets and $1.6 billion in deposits.

Mutual Bank was the largest of the five. It was closed Friday by the Illinois Department of Financial Professional Regulation’s division of banking, which appointed the FDIC as receiver. United Central Bank of Garland, Texas, is assuming the deposits and essentially all of the assets. In addition, the FDIC and First United Central Bank entered into a loss-sharing agreement covering $1.3 billion of the assets of Mutual Bank. Its 12 branches will reopen Saturday as offices of United Central Bank.

First State Bank of Altus was closed by the Oklahoma State Banking Department, which appointed the FDIC as receiver. Herring Bank, based in Amarillo, Texas, is assuming the deposits and about $64.4 million of the assets of First State Bank of Altus and the FDIC will retain the remaining assets for eventual sale. The failed bank’s branches will reopen Saturday as offices of Herring Bank.


Jim Sinclair’s Commentary

Massive rescue and bailout of the FDIC is moving towards the front burner.

FDIC Loan Report and Plan C: Nearly Half of the $7.7 trillion in Loans Outstanding at FDIC Insured Banks are in the form of Commercial Real Estate. USPS Contracting CRE Space. Drop in Restaurant Traffic.

The commercial real estate debacle is heating up.  Although the market is cheering the better than expected drop in second quarter GDP, much of the reason for a less than spectacular fall came from the “G” in the equation, government spending.  By the way, we revised Q1 GDP lower to -6.4 percent but not much interest was given to that minor detail.  Who is to say we do not revise the advanced estimate for Q2 lower?  Either way, the GDP release tells us that commercial real estate is on precipice of implosion.  Is it any wonder that the U.S. Treasury is secretly working on a preemptive bailout program called Plan C gearing up taxpayers dollars for another toxic mortgage industry that has $3 trillion in loans?  The failure of 2008’s residential mortgage bailout should tell you that bailing out CRE loans is a losing cause especially for taxpayers.

The problem for commercial real estate is the shrinking demand from consumers who have now found a new form of forced austerity.  With 26,000,000 Americans unemployed or underemployed the demand for armies of strip malls is no longer a pressing issue.  Sure, we can offer gimmicks like cash for clunkers but where is this money coming from?  Most people realize that conspicuous consumption by consumers, Wall Street, and the government led us here and our solution is more conspicuous consumption?


Jim Sinclair’s Commentary

More than net income is not only an insult to the public who bailed them out, but is a crime against stockholders.

NY AG: Banks Paid Bonuses That Were Substantially Greater Than The Banks’ Net Income
By Meg Marco, 2:22 PM on Fri Jul 31 2009

New York Attorney General Andrew Cuomo’s report on the bonus structures of the banking industry is out and — oh my— it’s damning. The AG says that 3 banks, Goldman Sachs, Morgan Stanley, and JP. Morgan Chase, paid out bonuses that " were substantially greater than the banks’ net income."

The report says that combined, these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 billion. Why did this happen? Because, according to Cuomo, when times were good the bankers rewarded themselves based on performance. When the economy started to sour — they decoupled the bonus structure from reality and kept rewarding themselves.

From the report:

As one would expect, in describing their compensation programs, most banks emphasize the importance of tying pay to performance. Indeed, one senior bank executive noted recently that individual compensation should not be set without taking into strong consideration the performance of the business unit and the overall firm. As this executive put it, "employees should share in the upside when overall performance is strong and they should all share in the downside when overall performance is weak."

But despite such claims, one thing is clear from this investigation to date: there is no clear rhyme or reason to the way banks compensate and reward their employees. In many ways, the past three years have provided a virtual laboratory in which to test the hypothesis that compensation in the financial industry was performance-based.


Jim Sinclair’s Commentary

Dump the politicians and keep police, firemen and education.

Where is your rage?

More Cuts for Colleges Are Likely Even After States Pass Budgets
July 27, 2009
By Eric Kelderman

A few weeks after wrapping up their budgets for the new fiscal year, lawmakers in some states already expect a new round of spending cuts, including to higher education, as tax revenues continue to fall.

Estimates of states’ revenue shortfalls have grown worse since the spring, reaching a total of nearly $143-billion when most states began the 2010 fiscal year, on July 1, according to a survey by the National Conference of State Legislatures. But at least 11 states are already expecting to make midyear cuts, totaling more than $22-billion, according to the Center on Budget and Policy Priorities, an advocacy group.


California Budget Deal Cuts $2.8 Billion Higher Ed, Saves Financial Aid
by Peter Galuszka 
Jul 27, 2009, 01:38

After marathon sessions including all-nighters, the California Legislature has passed a budget deal that will bring new gloom to higher education by slashing funding for public colleges by $2.8 billion and school districts and community colleges by $5.7 billion.

The cuts are part of a deal worked out by Gov. Arnold Schwarzenegger to plug a $26 billion hole in the state’s $92 billion general fund budget by slicing funds for education, prisons, transportation and localities. The Legislature ended up approving cuts of $24 billion after rejecting Schwarzenegger’s calls for a $2 billion reserve fund.

Although public higher education is being whipsawed again by the cuts, the damage seems not as great as once feared since the state’s student financing arm will not be touched.

The University of California and California State University systems are expected to see cuts of about $2.8 billion on top of a cut of $548 million approved earlier. The 100-campus community college system and other school districts will see further funding cuts of $5.7 billion. This would be in addition to the $8 billion in cuts for schools and community colleges proposed earlier this year.


130,000 Illinois college students denied financial aid
State, short of money, cut off help months early
July 30, 2009

The state will deny the financial aid applications of an estimated 130,000 students — the most in Illinois history.

They were denied because they applied for state aid after May 15, a cutoff months earlier than in years past, thanks to Springfield’s budget woes.

Hardest hit? Students at community colleges and returning adult students, because they tend to apply for aid later.

What’s more, under the state budget compromise reached earlier this month, which slashed funding for the state’s Monetary Award Program in half, no student at any Illinois school will receive aid for the second half of the 2009-2010 school year.


Posted by & filed under In The News.

Jim Sinclair’s Commentary

Prolonged aid to the unemployed is running out as 5000 employees of major Wall Street brokerage firms receive bonuses of at least $1,000,000.

This is the madness of which serious social problems take foundation, as they should!

Prolonged Aid to Unemployed Is Running Out
Published: Sunday, August 2, 2009 at 5:13 a.m. 
Last Modified: Sunday, August 2, 2009 at 5:13 a.m.

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

Because of emergency extensions already enacted by Congress, laid-off workers in nearly half the states can collect benefits for up to 79 weeks, the longest period since the unemployment insurance program was created in the 1930s. But unemployment in this recession has proved to be especially tenacious, and a wave of job-seekers is using up even this prolonged aid.

Tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year, according to new projections by the National Employment Law Project, a private research group.

Unemployment insurance is now a lifeline for nine million Americans, with payments averaging just over $300 per week, varying by state and work history. While many recipients find new jobs before exhausting their benefits, large numbers in the current recession have been unable to find work for a year or more.

Calls are rising for Congress to pass yet another extension this fall, possibly adding 13 more weeks of coverage in states with especially high unemployment. As of June, the national unemployment rate was 9.5 percent, reaching 15.2 percent in Michigan. Even if the recession begins to ease, economists say, jobs will remain scarce for some time to come.



Jim Sinclair’s Commentary

Irresponsibility is the hallmark of the past three generations of Wall Street and government.

How is your Pension fund doing? Have you checked lately?

California’s Pension Problem: Shockingly Irresponsible
August 02, 2009

The next time a California government worker starts talking about furlough days and pay cuts, remind them about their pensions and lifetime medical benefits. Or, just give them a link to this Judy Lin article from Friday:

California has at least $63 billion in unfunded pension liabilities, an amount equal to roughly two-thirds of all annual general fund spending…

Government workers and their union representatives often say the more generous pensions offset lower pay.

But the latest U.S. Census survey, from 2007, shows the average annual salary of California state government employees was $53,958, compared with $40,991 for the average private-sector worker.

"The pension benefits for public employees in California are extravagant and they are going to bankrupt cities and counties, along with the state," said Keith Richman, a former state assemblyman who said he plans to launch an initiative campaign to change state employee pension benefits.

I predicted California’s pension problem back in December 2007:

Someone must pay for all of these employees and their pensions, sabbaticals, and health care. Teachers’ unions usually ask for more money, but the California State Teachers Retirement System is already worth around $125 billion. It has around 750,000 members and is the third largest public retirement fund in the country. Yet, after health care, education reform remains crucial, and the CTA continues to ask for more money.


Posted by & filed under In The News.

“Protecting yourself and your family is not an action for the faint of heart or downright dedicated cowards.
–Jim Sinclair

“The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it.”
–Thucydides, 471 B.C.

Jim Sinclair’s Commentary

The financial industry, those just bailed out by us through a debt which must be paid by our children and grandchildren, gave 5000 employees a bonus of at least $1 million EACH.

The average man is depicted below.

This illustration has occurred in one out of every 10 citizens, but those 1 out of 10 have not found any work.

Where is your rage?


Jim Sinclair’s Commentary

Greenshoots will go down in glib market statement history with the Plateau of Prosperity, the Goldilocks market and Rear View Mirror statistics

Industrial Capacity Use Hits Record Low
Thomas L. Gallagher | Jun 16, 2009 3:00PM GMT

Falling production idles nearly a third of nation’s factories, mines, utilities

Use of industrial capacity fell to its lowest point ever in May as output of factories, mines and utilities slipped another 1.1 percent from April and fell 13.4 percent below last May’s level.

The nation’s industries used only 68.3 percent of available capacity, according to a monthly report from the Federal Reserve. Prior to the current recession, the lowest rate since the Fed started this series of records in 1967 was 70.9 percent in December 1982. Since February this year, the rate of capacity utilization has been below that mark.

Industrial production decreased 1.1 percent in May after having fallen a downward-revised 0.7 percent in April. The average decrease in industrial production during the first three months of the year was 1.6 percent, said the Fed.

Manufacturing output moved down 1 percent in May with broad-based declines across industries. Factory production was more than 15 percent below its year-earlier level. The factory operating rate decreased 0.6 percentage point to a historical low of 65 percent in May; prior to this recession, the low for this series, which begins in 1948, was 68.6 percent in December 1982. The production of durable goods fell 1.8 percent with declines in most categories. The largest decreases were in motor vehicles and parts and in machinery.

The output of mines dropped 2.1 percent, and the output of utilities fell 1.4 percent. At 95.8 percent of its 2002 average, overall industrial output in May was 13.4 percent below its year-earlier level.


Jim Sinclair’s Commentary

Is this Paris or the USA?

Maybe people have had enough. Maybe the Sheeple are becoming people again.

I suggest a town meeting in Middle America for banks and financial institutions.

Town halls gone wild
Alex Isenstadt Alex Isenstadt – Fri Jul 31, 5:30 am ET

Screaming constituents, protesters dragged out by the cops, congressmen fearful for their safety — welcome to the new town-hall-style meeting, the

once-staid forum that is rapidly turning into a house of horrors for members of Congress.

On the eve of the August recess, members are reporting meetings that have gone terribly awry, marked by angry, sign-carrying mobs and disruptive behavior. In at least one case, a congressman has stopped holding town hall events because the situation has spiraled so far out of control.

“I had felt they would be pointless,” Rep. Tim Bishop (D-N.Y.) told POLITICO, referring to his recent decision to temporarily suspend the events in his Long Island district. “There is no point in meeting with my constituents and [to] listen to them and have them listen to you if what is basically an unruly mob prevents you from having an intelligent conversation.”

In Bishop’s case, his decision came on the heels of a June 22 event he held in Setauket, N.Y., in which protesters dominated the meeting by shouting criticisms at the congressman for his positions on energy policy, health care and the bailout of the auto industry.

Within an hour of the disruption, police were called in to escort the 59-year-old Democrat — who has held more than 100 town hall meetings since he was elected in 2002 — to his car safely.


Jim Sinclair’s Commentary

Of course it would leave open the most dangerous instruments, making the biggest money for the Banksters.

Derivatives Plan Leaves Open ‘Naked’ Swaps Issue (Update2)
By Dawn Kopecki and Robert Schmidt

July 30 (Bloomberg) — A new U.S. regulatory regime being pushed by Representatives Barney Frank and Collin Peterson for the $592 trillion over-the-counter derivatives market leaves open for debate whether to ban so-called naked trading.

The legislative proposal, which would push most derivatives onto an exchange or clearinghouse, fails to resolve the issue of outlawing credit-default swaps where the buyer doesn’t own the underlying asset. A three-page summary of the plan also shows lawmakers haven’t agreed on disclosure rules and trading limits, or how to divide oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

“None of the remaining areas are deal breakers,” Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said at a news conference in Washington today touting the plan. He said “we are very close,” and a bill may pass Congress by the end of the year.

At a minimum, hedge funds and other companies using credit- default swaps would have to report to regulators any short positions related to those contracts, according to the proposal. The bill, which may change as it works its way through committees and the House floor, includes most of what the Obama administration has been pitching to rein in the derivatives market, including clearinghouses and margin requirements.

“We clearly want to err on the side of too much regulation rather than too little, given what we’ve been through,” Peterson, a Minnesota Democrat and chairman of the House Agriculture Committee, said at the news conference.


Jim Sinclair’s Commentary

“The Board agreed to propose that all financial instruments will be presented on the balance sheet at fair value with changes in value recognized in net income or other comprehensive income with an optional exception for own debt in certain circumstances, which will be measured at amortized cost.”

For the financial industry that exists on legal (FASB now) fabricated balance sheets, this is akin to Raid on a bug!

FASB is the Financial Accounting Standards Board

Mark-To-Market Is Back — With A Vengeance!
Jul 31 2009, 1:15 pm by Daniel Indiviglio

Attention: This may be the single most important piece of news regarding the financial industry you will read this week. Maybe for the whole month. Maybe for the whole year. Okay I’ll stop being melodramatic and get right to it. The Financial Accounting Standards Board (FASB) is in the process of making banks very unhappy. In a complete reversal from their revised policy released in April, it is considering vastly tightening mark-to-market requirements to include virtually all securities on a bank’s balance sheet. Yes, it even wants the very, very illiquid stuff marked-to-market.

To understand a bit more about what how assets are valued, this entry I wrote a while back may help. Mark-to-market is an accounting concept requiring that banks mark the value of the assets on their balance sheets up or down depending on how their values change in the market. Right now, very illiquid assets do not have to be marked-to-market, so instead can be valued by the bank using internal assumptions.

Here’s a blurb from FASB’s July 15th board meeting:

The Board agreed to propose that all financial instruments will be presented on the balance sheet at fair value with changes in value recognized in net income or other comprehensive income with an optional exception for own debt in certain circumstances, which will be measured at amortized cost.

Why almost no one is reporting on this shocks me, because it’s a huge deal. FASB is suggesting that all financial instruments — the good, the bad and the ugly — must be valued on a bank’s balance sheet at their market value. Illiquid CDOs, property holdings, credit derivatives and anything else you can think of will all now be marked, mostly down, to what they would trade for in the market. Currently, banks can classify the most illiquid stuff on their balance sheet as “held for investment” or “held to maturity” and use whatever value they believe the assets are worth based on internal assumptions.


Jim Sinclair’s Commentary

The Formula will continue its downward spiral until meaningful intervention occurs.

The key word here is “MEANINGFUL,” which must focus on the REAL PROBLEM.

There isn’t a snowball’s chance in hell this will happen.

U.S. foreclosures spreading to regions formerly spared
By Alan J. Heavens
Fri, Jul. 31, 2009

The U.S. foreclosure crisis is spreading, and areas that previously appeared immune are now seeing the numbers rise, according to a report yesterday from RealtyTrac Inc., of Irvine, Calif., which tracks filings nationwide.

Some high-foreclosure states (California and the Midwest) saw their numbers drop. But states relatively untouched in the past (Oregon, Idaho, Utah, and South Carolina) experienced increases in foreclosure filings, which RealtyTrac chief executive officer James J. Saccacio suggested may be more directly related to growing unemployment than fallout from subprime and adjustable-rate loans.

Nationally, one in every 84 homes had a foreclosure notice filed against it in the first six months of the year, RealtyTrac said. In the Philadelphia region, it was one in every 168 houses.

The Philadelphia metropolitan area, into which RealtyTrac tucks Wilmington, remained well below national averages for the first half of 2009, ranking 121st of 203 metro areas monitored.

Foreclosure filings in the region were down about 6 percent from the same period a year earlier, and were almost 8 percent lower than in the last six months of 2008.


Jim Sinclair’s Commentary

How many of you are insured by AIG?

AIG Is Even Worse Off Than You Think
John Carney Jul. 31, 2009, 9:25 AM

Remember the fairy tale about AIG being an otherwise healthy insurance company that just got a little crazy selling credit default swaps? Well, it’s time to put that one to rest.

The New York Times has reviewed state regulatory filings and discovered that “AIG’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect.”

“More ominously, many of A.I.G.’s insurance companies have reduced their own exposure by sending their risks to other companies, often under the same A.I.G. umbrella,” the NYT reports.

Regulators have been turning a blind eye to this sort of thing because they are worried about putting the taxpayer investment in AIG at risk.

Read that again: we invested billions in AIG and now we can’t properly regulate it without putting that investment at risk. It’s a brand new type of regulatory capture. Great work, team.


Jim Sinclair’s Commentary


We all could learn a lesson this time from the French

What recession? Nine U.S. banks pay $32.6b bonus

New York (PTI): They survived the financial turmoil with taxpayers’ money, still nine leading U.S. banks shelled out more than $32 billion in bonus to their employees last year, with crisis-ridden Citigroup alone paying $5.3 billion.

Detailing the bonus payments made by the TARP-funded financial institutions in 2008, the latest report from the Office of the New York Attorney General has said that there “is no clear rhyme or reason to the way banks compensate and reward their employees.”

The U.S. government had pumped in billions of dollars into the banks through the Troubled Asset Relief Program (TARP) to help them tide over the worst financial crisis in decades.

The nine banks together paid $32.6 billion in bonus while they received $175 billion worth funds from the U.S.

The ‘Bank Bonus Report’ by Attorney General Andrew M. Cuomo said that even though Citigroup and Merrill Lynch incurred massive losses in 2008, together they paid nearly $9 billion in bonus to the employees.

The Citigroup, led by Indian-origin Vikram Pandit, gave away bonus worth $5.3 billion while Merrill Lynch shelled out $3.6 billion.


Jim Sinclair’s Commentary

Face facts, regardless of emotions, provincialism or xenophobia.

China flexes muscles at WTO in disputes
Fri Jul 31, 2009 11:44am EDT
By Jonathan Lynn

GENEVA, July 31 (Reuters) – China flexed its muscles on the international trade stage on Friday, launching its first dispute against the European Union and setting litigation at the World Trade Organisation in train in a row with the United States.

The moves showed a growing willingness by China, which only joined the WTO in 2001, to use the global trade watchdog’s procedures to advance its own interests.

In practice that means that China — one of the most frequent targets of trade measures from both developed and developing countries — is increasingly appearing as plaintiff.

“I think it is a very important step for China to adapt itself to professionalism with WTO rules,” a trade official at the Ministry of Commerce said in Beijing.

“As a new WTO member with only seven years, China needs to learn and this is a learning step,” he said, commenting on the move against the European Union.