Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

It is not if, nor when, nor is it beckoning, but is the fact of present time. In the Fiscal sense the West is already ruined, will stay ruined and will not recover to even a part of its formal greatness. Asia is on the rise and Africa will benefit from their thirst for raw materials. What a contrast to what was only five years ago. It is amazing how greed and ego has ruined what so many sacrificed so much for. Face the facts – for the West it is over. It would be even more obvious except for the fact that the West is so proficient at military science and industry.

The Fat Cats took it all, and now the regular guys have to pay for Wall Street’s gain. The OTC derivative problem is as bad as ever and hangs over the Western world like a vampire waiting to suck blood out of any being it can get its hands on. There are more than a quadrillion reasons to be petrified. Sometimes I wish I did not understand these types of things.

Lies are so common that the sheeple themselves have lost the virtue of truth. Did you see Paulson being grilled and looking like he was about to expire with a heart attack? Did you notice he was wearing a CASIO watch probably borrowed from one of his kids? He is not wearing his gold watch so he must be a regular guy. Bernanke did not look much better.

How anyone can rationally make fun of "This is it and it is now" boggles my mind. No one can be that glib without being on somebody’s payroll. Who fights gold from $248 and still thinks they are right? Well, two guys, I guess.

Fiscal ruin of the Western world beckons
For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.
By Ambrose Evans-Pritchard
Published: 5:40PM BST 18 Jul 2009

Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc.

"Something has to give," said Professor Colm McCarthy, the report’s author. "We’re borrowing €400m (£345m) a week at a penalty interest."

No doubt Ireland has been the victim of a savagely tight monetary policy – given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base.


Jim Sinclair’s Commentary

The demands to take the brown paper wrapping off the Good Ole Boy financial giveaway is getting louder and louder.

All of a sudden Ron Paul is looking like a MODERATE, as well as vindicated.

TARP Watchdogs Criticize Treasury Over Transparency
JULY 22, 2009, 3:47 P.M. ET

WASHINGTON — The U.S. Treasury Department continues to fall flat on providing transparency of its financial-rescue efforts, leaving taxpayers with too little information on billions in investments, the three program watchdogs offered in unified criticism Wednesday.

"Treasury’s default position should always be to require more disclosure rather than less and to provide [the American taxpayers] as much information about what is being done with their money," Neil Barofsky, special inspector general for the Troubled Asset Relief Program, said in remarks before a U.S. House panel.

Mr. Barofsky was echoed by the Government Accountability Office and Prof. Elizabeth Warren, chairman of the Congressional Oversight Panel. The three are tasked with overseeing the $700 billion rescue effort and uniformly raised concerns Wednesday about the Treasury’s reluctance to open up program decisions to the light of day.

A key criticism surrounds how the Treasury plans to value billions of dollars in warrants it received from banks in return for government aid. Thomas McCool, a director of the GAO, said the Treasury has provided only "limited" information on its process for setting warrant prices.

"It has yet to provide the level of transparency…that would address questions about whether the department is getting the best price for taxpayers," Mr. McCool said.


Jim Sinclair’s Commentary

If CIT fails it will be Lehman phase two. Instead of breaking the financial world this one will break Middle America.

CIT Poses Lehman-Like Risk
By DONNA CHILDS and SAMEER BHATIA | A Dow Jones Newswires column

The implications of the capital crisis of CIT Group Inc. fill 24-hour news coverage and yet credit default swaps are near record lows and the markets appear calm, a peculiar disconnect given the events that followed Lehman Brothers’ bankruptcy. What gives?

The century-old lender narrowly avoided a bankruptcy filing this week when it obtained $3 billion in loan commitments from its bondholders. Tuesday, documents filed with the Securities and Exchange Commission laid out steps that it will take to avoid bankruptcy, though it warned that any misstep likely would lead to a Chapter 11 filing. Who has correctly gauged the risk CIT poses to institutions, markets and the economy – the media, the markets or the government?

The market judged Lehman a serious matter. In the days preceding Lehman’s bankruptcy, credit default spreads spiked. The Markit iTraxx Europe Senior Financials Credit Default Swap Index spread rose from 94 on Sept. 12 last year to 147 three days later, the date Lehman filed bankruptcy. The index spread peaked on March 6 this year, reaching 199, but it has since retreated to 114.

It appears anomalous that CDS spreads are near historic lows, despite a possible imminent collapse of an important commercial lender. So why haven’t spreads moved significantly despite the media’s scrutiny of CIT’s crisis?

The likely reason is that markets clearly understood the systemic financial risk posed by Lehman’s more than $350 billion counterparty exposure yet don’t grasp the risks posed by CIT’s exposure to the manufacturing, retail and commercial real estate sectors.


Jim Sinclair’s Commentary

Mark my words, these guarantees which the government thinks will never be called upon, will be.

Ginnie Debt May Swell to $1 Trillion on Down Payments (Update1)
By Jody Shenn

July 22 (Bloomberg) — Mortgage bonds guaranteed by U.S. agency Ginnie Mae will probably swell to $1 trillion by the end of 2010 because borrowers with low down payments or credit scores can only qualify for government-insured loans, Bank of America Corp. analysts said.

The Federal Housing Administration, which insures loans with down payments as low as 3.5 percent and has no credit-score requirements, is “the only source of funding for these leveraged borrowers,” Ankur Mehta and Ohmsatya Ravi, the New York-based analysts, wrote in a report yesterday.

Debt explicitly backed by the U.S. through Ginnie Mae, formally known as the Government National Mortgage Association, climbed to $680 billion as of June 30 from $360 billion two years earlier, asrecord home-price declines caused the collapse of the “non-agency” mortgage-bond market and tougher standards at banks, mortgage insurers and mortgage-finance companies Fannie Mae and Freddie Mac, the analysts said.

Increased reliance on the government by higher-risk borrowers may cause the U.S. losses. Senator Richard Shelby, an Alabama Republican said in January the FHA “poses a significant risk to taxpayers.”

Further Ginnie Mae growth will be fueled by more borrowers using FHA loans to buy homes or to refinance, either to tap home equity or to lower their payments, the analysts wrote. Lenders package those mortgages into bonds backed by Ginnie Mae, which offers buyers of mortgage bonds composed of loans backed by other agencies guarantees of timely principal and interest payments. FHA loans charge 1.75 percent upfront and 0.55 percent annually for home-loan insurance.


Jim Sinclair’s Commentary

Pandora’s Box of rescues has been opened. Once opened it cannot be closed again. The legislative is already active, first complaining, now trying to rescue the Chrysler and GM dealers that were dumped, and next they will be drafting legislation to give away money.

Fannie & Freddie: The most expensive bailout
Efforts to use the troubled mortgage finance firms to fix housing market problems are likely to push the taxpayer bill for Fannie & Freddie above $100 billion.
By Chris Isidore, senior writer
July 22, 2009: 3:17 PM ET

NEW YORK ( — The first big government bailout of the financial crisis — the takeover of mortgage finance giants Fannie Mae and Freddie Mac — is poised to be the most expensive and complicated to complete.

Since Congress essentially wrote a blank check to the Treasury Department in July 2008 to do what needed to be done to inject capital into the two firms, Fannie (FNM,Fortune 500) has received $34.2 billion of direct government support while Freddie (FRE, Fortune 500) has received $51.7 billion.

While that’s lower than the $117.5 billion poured into insurer AIG (AIG, Fortune 500) by the Federal Reserve and the $200 billion given to the nation’s largest banks through the Troubled Asset Relief Program, or TARP, the current cost of the Fannie and Freddie bailouts dwarfs original estimates from a year ago

When Congress was debating the bailout of Fannie and Freddie last July, the official estimate from the Congressional Budget Office was that a bailout would most likely cost taxpayers $25 billion, with only a 5% chance of the price tag reaching $100 billion between them.

In addition, both Fannie and Freddie are likely to need billions of dollars more after they report second quarter results in the coming weeks. Experts believe the cost will only continue to rise in the next year.


Jim Sinclair’s Commentary

Two entities that handle these types of funds for mining are the China Africa Fund and the China Trade Bank. Which one depends on if the Chinese are minority or majority participants in a project.

China to deploy foreign reserves
By Jamil Anderlini in Beijing
Published: July 21 2009 19:09 | Last updated: July 21 2009 19:09

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.

Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.


Jim Sinclair’s Commentary

That certainly did not take long. See yesterday’s comment on Standard and Poors rating reductions.

U.S. releases new credit rating rules to curb power
Tue Jul 21, 2009 8:42pm EDT
By Patrick Rucker

WASHINGTON (Reuters) – The Treasury Department said on Tuesday it hopes new disclosure and conflict of interest rules will curb the power of credit rating agencies that have been blamed for fueling the recent financial crisis.

The Treasury sent an 18-page draft bill to Congress that would prevent credit rating agencies from consulting for the companies they are responsible for evaluating.

Shares of Moody’s and McGraw Hill, parent of Standard & Poor’s, extended losses after the announcement.

The Securities and Exchange Commission would have new powers to regulate the industry and companies would have to disclose when they go "ratings shopping" in two other provisions of the plan.


Jim Sinclair’s Commentary

This story and the impact on the real economy is far from over. Expensive loans mean higher rates for borrowers at just the wrong time for most.

CIT to Shrink to Avoid Bankruptcy Court
Lender Outlines Plans to Avoid Chapter 11, Including Sales of Healthy Units Like Utah Bank
JULY 22, 2009

CIT Group Inc. on Tuesday mapped out more of its restructuring plan that, if successful, would likely reduce the beleaguered lender to a shadow of its former self.

Documents filed with the Securities and Exchange Commission detailed several steps the company plans to take as it seeks to stay out of bankruptcy court. But the century-old lender hedged the news with a strong caveat that a failure to complete any of the steps likely would lead to a Chapter 11 filing.

The filings showed how dire CIT’s financial position had become in the days leading up to a last-minute rescue …



Jim Sinclair’s Commentary

Even the Dark Side gets it right sometimes.


Jim Sinclair’s Commentary

Ok, it is Detroit, but watch this spread as states, municipalities, towns, and hamlets go broke.

Then watch the legislative move with rescue packages now that the Treasury and Fed has opened the door. It will not be closed and the dollar will be damned.

Detroit Schools on the Brink
Shrinking District Heads Toward Bankruptcy to Gain Control of Its Costs

DETROIT — Detroit’s public-school system, beset by massive deficits and widespread corruption, is on the brink of following local icons GM and Chrysler into bankruptcy court.

[Detroit School] Associated Press

Students of Detroit’s Guyton Elementary School ring the bell for entrance in April. Guyton is one of 29 Detroit schools slated to close.

A decision on whether to file for protection under federal bankruptcy laws will be made by the end of summer, according to Robert Bobb, Detroit Public Schools’ emergency financial manager. Such a filing would be unprecedented in the U.S. Although a few major urban school districts have come close, none has gone through with a bankruptcy, according to legal and education experts.

But in Detroit — where U.S. Education Secretary Arne Duncan dubbed the school system a "national disgrace" this spring — lawmakers and bankruptcy experts see few alternatives, given the deep financial challenges confronting the district and the state.

"Am I optimistic that they can avoid it…? I am not," says Ray Graves, a retired bankruptcy judge who has been advising Mr. Bobb in recent weeks.


Jim Sinclair’s Commentary

This started in the Bush Administration as a trickle, but looks like it might well go to 100% of the states.

There is a lot of Wall Street made whole and everything else goes to hell behind the stuffing of Washington’s supremacy.

Palin to feds: Alaska is sovereign state
Constitutional rights reasserted in growing resistance to Washington
Posted: July 20, 2009 11:08 pm Eastern
By Chelsea Schilling

Gov. Sarah Palin has signed a joint resolution declaring Alaska’s sovereignty under the Tenth Amendment to the Constitution – and now 36 other states have introduced similar resolutions as part of a growing resistance to the federal government.

Just weeks before she plans to step down from her position as Alaska governor, Palin signed House Joint Resolution 27, sponsored by state Rep. Mike Kelly on July 10, according to a Tenth Amendment Center report. The resolution "claims sovereignty for the state under the Tenth Amendment to the Constitution of the United States over all powers not otherwise enumerated and granted to the federal government by the Constitution of the United States."

Alaska’s House passed HJR 27 by a vote of 37-0, and the Senate passed it by a vote of 40-0.

According to the report, the joint resolution does not carry with it the force of law, but supporters say it is a significant move toward getting their message out to other lawmakers, the media and grassroots movements.

Alaska’s resolution states:

Be it resolved that the Alaska State Legislature hereby claims sovereignty for the state under the Tenth Amendment to the Constitution of the United States over all powers not otherwise enumerated and granted to the federal government by the Constitution of the United States.


Jim Sinclair’s Commentary

The BS earnings are coming to an end while banks face lousy business that will end many.

Wells Fargo Says Bad Loans Rise in Second Quarter; Shares Drop
By Ari Levy

July 22 (Bloomberg) — Wells Fargo & Co., the biggest U.S. home lender this year, said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. The shares dropped 5 percent in early trading.

Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the San Francisco-based bank said today in a statement. The increase was disclosed as Wells Fargo reported second-quarter net income soared 81 percent to a record $3.17 billion.

Wells Fargo added to credit reserves amid a 26-year high in unemployment and rising commercial real estate delinquencies. While the acquisition of Wachovia Corp. in January bolstered deposits and home lending, the bank must stanch losses from defaults in California and a portfolio of option adjustable-rate mortgages, ranked among the riskiest loans issued during the housing boom.

“We’re not out of the woods in terms of credit quality,” said Jennifer Thompson, an analyst at Portales Partners LLC in New York. She has a “hold” rating on Wells Fargo, because “with the company more exposed to some higher-risk markets, I’d rather wait for a better entry point,” Thompson said.

The increase in bad assets was tied to Wachovia loans, the difficulty of liquidating holdings, the cost of loan modifications and the deterioration of commercial real estate, Wells Fargo said. Nonaccrual loans jumped $5.3 billion from March 31.


Morgan Stanley Loss Misses Estimates on Debt Costs (Update1)
By Christine Harper

July 22 (Bloomberg) — Morgan Stanley reported a bigger second-quarter loss than analysts expected as costs to repay the U.S. government and charges from an improvement in the firm’s own debt overwhelmed revenue.

The loss from continuing operations was $159 million, or $1.37 a share, compared with earnings of $689 million, or 61 cents, in the same period a year earlier, the New York-based company said today in a statement. The average estimate of 19 analysts surveyed by Bloomberg was for a 54-cent loss. The results include a $2.3 billion accounting charge related to tighter credit spreads.

Chief Executive Officer John Mack raised $6.9 billion by selling stock in the quarter, paid $10 billion and an $850 million dividend to the U.S. government and took control of Citigroup Inc.’s Smith Barney brokerage division. All three of Morgan Stanley’s divisions lost money, while rising stock and bond markets fueled profits at competitors, including record earnings of $3.4 billion at Goldman Sachs Group Inc.

“If there was ever a time when these banks should exceed on the upside in terms of their results, it should be now,” said Matt McCormick, a banking-industry analyst at Bahl & Gaynor Inc. in Cincinnati, which manages $2.3 billion, before the results. “Like it or not, many people are comparing them to the banks that came out with strong results and saying, ‘Why can’t they be more like Goldman?’”

Net Income

Net income applicable to Morgan Stanley, which included a $308 million gain from discontinued operations, was $149 million in the quarter, down from $1.14 billion a year earlier.



Jim Sinclair’s Commentary

Remember when I told you the US Fed was bailing out the world by creating dollars out of electronic thin air?

Here is the Fed dancing around just that question.


Jim Sinclair’s Commentary

Good news. This would limit the problem to only one quadrillion, one thousand, one hundred forty four trillion.


US SEC, CFTC detail clampdown on OTC derivatives
Wed Jul 22, 2009 11:28am EDT
By Kevin Drawbaugh and Christopher Doering

WASHINGTON, July 22 (Reuters) – Over-the-counter derivatives markets, a "dark corner" of the U.S. financial system, would face much greater public and government scrutiny under proposals detailed by regulators on Wednesday.

As part of a broad push by the Obama administration to reshape financial regulation, the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission outlined an OTC derivatives crackdown.

In addition, Deputy Treasury Secretary Neal Wolin said in a speech that next week the Treasury will deliver draft legislation on the regulation of over-the-counter derivatives.

CFTC Chairman Gary Gensler told the House Financial Services Committee in a hearing that all derivatives dealers should face capital, margin, conduct and record-keeping rules.

He urged bankruptcy law changes to protect against derivatives dealer insolvencies and position limits for CFTC-regulated OTC derivatives that affect price discovery.


Jim Sinclair’s Commentary

What rocket scientist just figured this out? Bernanke, step up to unlimited QE or a new Chairman will be coming in.

Fed Has Become ‘Embroiled’ in Politics, Poole Says
By Vincent Del Giudice and Max Raskin

July 22 (Bloomberg) — The Federal Reserve is “embroiled” in politics and has “stretched beyond reason” its authority to make loans, said William Poole, who served as president of the St. Louis Fed from 1998 to 2008.

“ I don’t think independent can mean the Fed can do whatever it wants under any circumstance,” Poole, a senior economic adviser to Palo Alto, California-based Merk Investments LLC, said in an interview today on Bloomberg Radio. “The Fed has chosen to make loans to certain firms and not others.”

Traditionally, central banks “deal in government securities,” and control “overall liquidity” and “overall interest rates,” Poole said. The Fed is “embroiled in fundamentally political questions,” he said.

In the aftermath of last year’s credit market collapse, the Fed instituted a series of emergency lending programs. Fed policy makers decided at their meeting June 24 to maintain plans to buy as much as $1.75 trillion of Treasuries and housing debt to lower interest rates.

The central bank “has not made loans of this sort since the Great Depression,” Poole said. “The Federal Reserve has responded very aggressively to this crisis we are living through” and “has doubled its balance sheet.”


Jim Sinclair’s Commentary

The final chapter of CIT is still too played out. If CIT does not make it you can double this number on percentages.

Ch. 7 bankruptcies jump 58 percent
By Thomas Grillo
Monday, July 20, 2009 – Added 2d 1h ago

Chapter 7 bankruptcy filings in Massachusetts surged 58 percent in the second quarter from the same months last year, according a new report from The Warren Group.

“The dramatic jump in bankruptcy filings shows just how hard it has been for consumers to keep up with their bills in this tough economy,” said Timothy M. Warren Jr., CEO of The Warren Group, in a statement.

A total of 4,489 filers sought protection under Chapter 7 of the U.S. bankruptcy code from April through June, up from 2,839 during the same months in 2008. The number of filings was also 36.6 percent higher than the first quarter of 2009, when 3,285 consumers sought Chapter 7 protection.

The number of second quarter filings was higher than each of the previous five quarters. There were 7,774 filings under Chapter 7 in the first half of 2009, a nearly 36 percent increase from 5,722 last year.

A Chapter 7 bankruptcy filing is the most common option for individuals who are seeking relief from their debts and accounted for 82 percent of bankruptcy filings tracked by The Warren Group in Massachusetts during the second quarter of 2009.


Jim Sinclair’s Comment

This is very serious considering that Israel WILL make a serious miscalculation.

U.S. Could Extend "Nuclear Umbrella" Around Iran, Clinton Warns
Wednesday, July 22, 2009

U.S. Secretary of State Hillary Clinton today said her nation would consider extending nuclear protection to its Middle Eastern allies if Iran continued its disputed nuclear activities, Agence France-Presse reported (see GSN, July 21).


Jim Sinclair’s Commentary

This is what was asked when the Talking Heads interrupted the live hearings:

Ron Paul questions Ben Bernanke on definition of inflation

Posted by & filed under In The News.

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.
–Thomas Jefferson

Dear CIGAs,

I would like to close today before I fall asleep typing by posting the following. Does this sound a tad like the hopes of Good GM Inc coming out of bankruptcy?

20 years ago in Forbes
November 27, 1989

"As Roger Smith enters his last year as General Motors Chairman he maintains that the auto giant’s worst problems are behind it, that the new models beginning to emerge from GM’s design center will win back lost customers. This combined with cost cutting measures Smith has taken over the past few years, could produce tremendous profit growth."


Jim Sinclair’s Commentary

I told you before any of this happened that there was no practical solution to the meltdown of OTC derivatives. I am also telling you that there is no PRACTICAL way to withdraw even a small portion of the monstrous expansion of monetary policy. There are ways, but not practical ways.


Jim Sinclair’s Commentary

Here is the exchange between the Honorable Congressman from Florida and the Chairman of the Federal Reserve.

Jim Sinclair’s Commentary

Nothing is cured. Nothing is fixed.

Everything of size will be bailed out one way or the CIT other.

Gold is going to and through $1000 on the upcoming third try.

Why Visiting Pompeii Has Me Thinking About the Smoke Billowing Out of Our Economic Mt. Vesuvius
Arianna Huffington
Posted: July 20, 2009 07:06 PM

POMPEII — I was in Pompeii a couple of days ago. Walking around the ancient city, reading up on its history, and thinking of its people — wiped out in 79 A.D. by a volcanic eruption — has me thinking a lot about warning signs.

Warning signs fall into two categories: those that are recognized while there is still time to heed the warning, and those that are acknowledged as "warning signs" only after the fact, when it’s too late to do anything but sift through the ashes and wonder why we didn’t do something when we had the chance.

In the case of Pompeii, the warning signs included a severe earthquake in 62 A.D., continued tremors over the ensuing years, springs and wells drying up, dogs running away, and birds no longer singing. And then the most obvious warning sign of all: columns of smoke belching out of Mount Vesuvius before the volcano blew its top, burying the city and its inhabitants under 60 feet of ash and volcanic rock.


Jim Sinclair’s Commentary

S&P is looking for more regulations and maybe worse.

S&P Cuts Ratings On $5.26B In Collateralized Debt Obligations

Standard & Poor’s has cut ratings on $5.26 billion of U.S. collateralized debt obligations because of credit deterioration and recent ratings cuts on subprime residential mortgage-backed securities due to continuing weakness in housing.

The ratings agency lowered ratings on 44 tranches from 15 cash flow and hybrid CDOs. Twelve of the ratings were at the top, AAA, before the cuts.

The ratings on 30 of the downgraded tranches face a significant likelihood of further downgrades because a significant portion of their collateral assets are facing possible downgrades or have significant exposure to assets rated as highly speculative.

Eight of the 15 transactions are mezzanine structured-finance CDOs of asset-backed securities, collateralized in large part by mezzanine tranches of residential mortgage-backed securities and other structured-finance securities. Two are high-grade structured-finance CDOs of ABS, collateralized mostly by AAA- through A-rated tranches of RMBS and other structured-finance securities. The other five are CDOs of CDOs, collateralized mostly by notes from other CDOs and by tranches from RMBS and other structured-finance transactions.

S&P has been cutting its ratings on billions of dollars of Alt-A and subprime residential mortgage-backed securities deals in recent months after a revision to the amount of losses expected. The change occurred as delinquencies continue to climb and home prices keep falling.


Jim Sinclair’s Commentary

How long have I been telling you this? How about all those talking head nit-wits that say China has no alternatives?

China to deploy forex reserves
By Jamil Anderlini in Beijing
Published: July 21 2009 19:09

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.


Jim Sinclair’s Commentary

They damn well better or phase #2, the second OTC derivative meltdown, is coming.

Rep Peterson says US House bill may ban naked CDS
Tue Jul 21, 2009 7:03pm EDT
By Charles Abbott

WASHINGTON, July 21 (Reuters) – An omnibus financial reform bill in the U.S. House of Representatives would require that over-the-counter derivatives go through clearinghouses and probably ban "naked" credit default swaps, the chairman of the House Agriculture Committee said on Tuesday.

Collin Peterson said he and Financial Services Committee Chairman Barney Frank were in agreement on steps for a bill that would be the product of their panels. They share oversight of futures and equities markets.

"We will have one big bill this fall," Peterson told reporters.

The over-the-counter derivatives market, which has a global notional value of $450 trillion, is now largely unregulated. The market includes credit default swaps (CDS), the financial instruments blamed for spreading the risks of bad mortgages in the financial crisis, often with high leverage.

A naked credit default swap is a CDS for which a trader or investor does not hold the underlying asset being insured, such as a bond.

The House Financial Services Committee was scheduled to begin drafting a financial reform bill later this week.


Jim Sinclair’s Commentary

Check out Alphaville of the Financial Times.

24 Trillion Reasons to Buy Gold
July 21, 2009

It is a worst case scenario, but Neil Barofsky, the inspector general for the Troubled Asset Relief Program, has said the bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23.7 Trillion. To put this number into perspective, it is nearly double the nation’s entire economic output for a year, more than the cost of all the wars the United States has ever fought combined and the most the federal government has spent on any single effort in American history. It is about $80,000 for every U.S. citizen.

Printing and borrowing $800 billion to hand over to the banks with no strings attached never seemed like a good idea. We wrote about it back in October of 2008 in this article. And despite some 80% of Americans being against the bailouts, our elected officials decided to hand over taxpayer money to their banker buddies anyway.


A soon-to-be released report by special inspector general Neil Barofsky finds:


Jim Sinclair’s Commentary

Gold is prepping for a move on $1000 which will be its third attempt.

This time gold will, after some minor work, better the $1000 level at a time of year when it is least anticipated to happen.

Mr. Nadler, "This is it and it is now" was posted months ago at a very comfortable price of gold as compared to today.

That statement is behind us. The system is FUBAR and gold is headed to $1650, probably higher.

DJ PRECIOUS METALS: Comex Gold Edges Lower Late In Day With Euro

Gold futures moved modestly lower late Tuesday as the euro slipped to its weakest levels, but overall the metal’s session was one of consolidation.

August gold fell $1.90 to $946.90 an ounce on the Comex division of the New York Mercantile Exchange. September silver fell 14.7 cents to $13.478.

"The dollar came back up," said Leonard Kaplan, president of Prospector Asset Management. "That was the reason oil came back down. Everything was moving together. It’s really not about gold; it’s about the dollar."

The euro fell to its low for the day of $1.4163 less than half an hour before the Comex gold pit closed, compared with a high of $1.4279 and the late-Monday level of $1.4232. Thus, August gold, which had been as high as $953.80, hit its $944.30 low late in the day.

Still, gold and silver posted inside sessions in which the highs and lows were contained within Monday’s band.

Jim Sinclair’s Commentary

This deal was put together by the most government connected entities on the planet.

The MOPE that this was concocted by free enterprise free of any government interest or impetus is MOPE at its finest.

What this deal proves is no major financial entity, private or public, that impacts the USA economy significantly will be walked away from.

We will never know the inside deals and arrangements here, but one thing we know for sure is EVERYTHING OF FINANCIAL SIGNIFICANCE TO THE US ECONOMY WILL BE RESCUED AT THE EXPENSE OF THE US DOLLAR.

This is what markets are saying even through the intense direct intervention of the market MOPErs.

CIT secures $3 billion financing from bondholders
Denied federal bailout, CIT taps private rescue; confirms $3 billion financing deal
By Stevenson Jacobs and Daniel Wagner, AP Business Writers
On Monday July 20, 2009, 9:21 pm EDT

NEW YORK (AP) — Commercial lender CIT Group Inc. confirmed late Monday that it has secured a $3 billion bailout from its bondholders, averting an immediate bankruptcy filing and giving the company some breathing room to restructure its debt.

It’s a new twist in the financial crisis: A major bank on the verge of a last-minute rescue — only this time the bailout isn’t coming from the government. The deal marks the first time since the banking crisis erupted that private investors are stepping in to save a big financial firm without federal help or oversight.

The lifeline for CIT, whose clients include Dunkin’ Donuts franchises and clothing maker Eddie Bauer, aims to sustain the company long enough for it to rework its heavy debt load, which includes $7.4 billion due in the first quarter of next year. It does not guarantee CIT will avoid bankruptcy.

CIT said the rescue includes a $3 billion secured term loan with a 2.5-year maturity, which will ensure that its small and midsized business customers continue to have access to credit. Term loan proceeds of $2 billion are committed and available immediately, with an additional $1 billion expected to be committed and available within 10 days.

The short-term financing comes at a high price — an interest rate of about 10.5 percent, said a person close to the negotiations who was not authorized to discuss the matter publicly.

CIT also said it has launched a cash tender offer for its $1 billion worth of outstanding floating rate senior notes due Aug. 17, offering $825 for each $1,000 worth of notes tendered on or before July 31, and $800 for notes tendered between Aug. 1 and Aug. 17. Lenders involved in the bailout deal have agreed to tender all of their Aug. 17 notes, CIT said. The company and the steering committee of bondholders now will work on drawing up a number of debt swap offers designed to alleviate CIT’s debt burden and further shore up the company’s cash position.


Jim Sinclair’s Commentary

I am telling you that they are politely pissed!

China Politely Moves Away from Dollar: Strategist
Published: Tuesday, 21 Jul 2009 | 5:22 AM ET

China’s sovereign wealth fund has taken about 1 percent in drinks group Diageo, in a move which an analyst said is a sign the country is diversifying away from the US dollar.

"Diageo is pleased that one of the largest Chinese investment funds has taken a shareholding of approximately 1 percent in the company," a company spokesman told CNBC in a statement.

"We do no comment on individual shareholdings but we of course view each investment as a sign of confidence in Diageo " the spokesman added.

The move, only the last in a series of buying of stakes in various companies around the globe by China Investment Corp, shows that the Chinese are shifting out of holding dollars "without upsetting anybody," Peter Toogood, head of investment at Old Broad Street Research, told CNBC.

With central banks printing money, currencies don’t look like a safe bet and with deficits soaring, government bonds are not the safe haven they used to be, analysts have said. Stock markets have surged since their lows in March and voices predicting a continuation of the rally have become louder.


Jim Sinclair’s Commentary

This one is too hot, even for me. You might want to read the Chairman of Bear Sterns’ comments.

Click here to view the story…

Jim Sinclair’s Commentary

Somebody is going to hell for telling the truth.

Monty and I gave you estimates of $17 to $20 trillion. It now looks like we might be low.

CIT was clearly government sponsored.

You think hyperinflation is not coming? God and gold help us.

Bank rescue could cost $23.7 trillion, says bailout overseer
Treasury says TARP inspector general estimates are inflated in many ways

Explore related topics
By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — A package of government bailout packages could cost $23.7 trillion, according to testimony prepared by a special inspector general expected to appear on Capitol Hill this week.

At issue are the landmark $700 billion Troubled Asset Relief Program passed hurriedly last year. The costs include $6.8 trillion in government assistance offered by the Federal Reserve, Neil Barofsky, the inspector general for the Treasury’s so-called TARP, is expected to say in his apprance.

Other assistance figuring in his report is the $7.2 trillion in government funding for Fannie Mae (FNM 0.58, -.00, -0.02%) and Freddie Mac (FRE 0.60, -0.02, -3.23%) and other groups, as well as $2.3 trillion in programs provided by the Federal Deposit Insurance Corp.

"Before the American people and their representatives in Congress can meaningfully evaluate the effectiveness of TARP, not only must the TARP programs themselves be understood, but also TARP’s scope and scale must be placed into proper context with the other government programs designed to support the financial system," Barofsky says in remarks in his written testimony.


Jim Sinclair’s Commentary

These guys will never stop until gold is at Alf’s prices and the dollar is at .5200.

History will write about this period as the time when the Evil Empire of the Dark Side took over Washington.

Please read this.

Global Exposure in Financial Derivatives Surpasses One Quadrillion Dollars (Update)
July 21, 2009, 3:32PM

When I posted the lowest responsibly sourced figure for global exposure in financial derivatives, $592 trillion, published May 19, 2009 by the Bank of International Settlements, all sorts of hoodoo apologists for Obama, Geithner, Summers, and Goldman Sachs crawled out the woodwork to claim that this figure is ridiculously exaggerated, there’s really nothing to worry about, it’s just a few bucks, and so on.

All the same hoodoos unfailingly claimed that it’s stupid to consider worst-case scenarios when you calculate risk, because…

They have learned absolutely nothing from the ongoing financial meltdown which annihilated some of the oldest and largest investment banks in the world, and plunged the global economy into an almost vertical downturn.

So, since even the lowest reasonable figure for global exposure in financial derivatives attracts so much obfuscation and denial, I might as well be hanged for a sheep as a lamb, and offer up a much larger and probably more accurate estimate, which also includes the huge market in off-the-books derivatives, instead of only considering the OTC market upon which the previous calculation by the Bank of International Settlements was based, and that estimate is…

$1.4 quadrillion.


Jim Sinclair’s Commentary

This means the USA as well as GB. With OTC derivative over one quadrillion and growing we could even have financial crisis, phase 2.

Banking sector ‘to face more losses’
July 21 2009
The Herald, Scotland

Well-regarded fund manager Neil Woodford, of Invesco Perpetual, yesterday warned he sees "little reasons for confidence" in an improving economy and predicted further losses from the banking sector.

Woodford, who runs the Edinburgh Investment Trust and a total of £19bn in assets, said: "On the economy, I see little reason for confidence and I do not anticipate meaningful recovery in the next three to four years."

He added: "The consumer boom, built on easy access to credit, the housing market bubble and the excessive risk and leverage adopted by banks all grew over a number of years.

"Just as they took a long time to build, they will also take time to address. This has only just started to happen."

Woodford, head of investment at the fund manager, dismissed as "illusory" the early signs of economic recovery that helped push stock markets higher earlier this year.


Jim Sinclair’s Commentary

Bernanke, join the Team on QE or you are out and the Fed will become a cop primarily.

Dismantling the Temple
The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion.

During the past year, the Fed has flooded the streets with money–distributing trillions of dollars to banks, financial markets and commercial interests–in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.

Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really–not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.

Representative Wright Patman, the Texas populist who was a scourge of central bankers, once described the Federal Reserve as "a pretty queer duck." Congress created the Fed in 1913 with the presumption that it would be "independent" from the rest of government, aloof from regular politics and deliberately shielded from the hot breath of voters or the grasping appetites of private interests–with one powerful exception: the bankers.


Posted by & filed under In The News.

Dear CIGAs,

Here is a video on Dark Pools that will help you better understand them.

Jim Sinclair’s Commentary

The failure of CIT will impact the "Real Economy" with No bailout for the Main Street victims.

This is one hell of a way to produce a level yield curve when you have cheap government money, and take over all the businesses by the major Banksters with "No mercy for the Real Economy." This is profitable business to steal.

CIT’s imminent failure is already having an effect on some businesses. This does not bode well for the "real economy!"

CIGA Marc says, "Moore Handley was founded in 1882 and is the second largest independent distributor of hardware in the United States (non-cooperative)."

Alabama Hardware Distributor Blames CIT Woes for Its Bankruptcy
By Steven Church and William Rochelle

July 18 (Bloomberg) — A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors.

Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had difficulty getting cash from CIT, its lender.

The company has tried to negotiate with CIT, though “the federal government’s recent decision not to support CIT’s reorganization has thrown CIT into disarray and casts substantial doubt on CIT’s ability to continue to fund the Debtor’s working capital requirements,” Moore-Handley said in documents filed in U.S. Bankruptcy Court in Birmingham, Alabama.

CIT has reported $3 billion of losses in the past eight quarters and has been in talks with lenders about funding its own possible bankruptcy, according to people with knowledge of the matter. CIT may need as much as $6 billion to avoid filing for bankruptcy protection after the U.S. wouldn’t give the firm a second bailout, according to CreditSights Inc.

Curtis Ritter, CIT’s director of media relations, didn’t immediately respond to a request for comment.

The company received $2.33 billion in funds from the U.S. Treasury in December and hasn’t been given access to the Federal Deposit Insurance Corp.’s debt-guarantee program.

‘Crisis’ for Retailers


Jim Sinclair’s Commentary

A lesson in high velocity trading, or "Churning for Profit, Manipulation and Obscuration."

Jim Sinclair’s Commentary

The damage talking heads do is not limited to Financial TV. What they do not know could fill a universe. The damage they do is global.

Understanding the jihadis, by way of Sun Tzu
Sebastian Gorka, National Post Published: Friday, July 17, 2009

There are only two strategists in the eternal pantheon of great thinkers: The Prussian general Carl von Clausewitz and the mysterious Chinese military man Sun Tzu. The first warned us that the most important decision a leader can make before enjoining battle is to understand what kind of war he is embarking upon. Sun Tzu advised us that if we wish to guarantee victory, we must know two things: who we are and who the enemy is.

In regard to the Taliban and al-Qaeda, the latter question is mudded by the scores of talking heads and self-appointed military experts who have swarmed the North American media since 9/11. Far too many bandy about the terms Taliban and al-Qaeda with abandon, never taking a moment to define what they mean or to discuss the relevant links involved.

Words matter, even — or especially — when bullets are flying. And the question of who the enemy is has become all the more important since the arrival of a new U. S. administration, and especially after President Barack Obama’s Cairo speech. Whatever the strategy that replaces George W. Bush’s global war on terrorism, its architects must first define the nature of the enemy and the nature of the conflict we are in.

The Taliban are not al-Qaeda and al-Qaeda is not the Taliban. Yes, the Taliban gave safe-haven to Osama bin Laden and his organization after he was expelled from Sudan in the late-1990s. Yes, members of al-Qaeda and even bin Laden’s own family have intermarried within Taliban power-groups, including the so-called Quetta Shura. But the Taliban must be understood as a heterogeneous group of warlords with variegated pasts and disparate interests. Some are former members of the governing regime that was dislodged by U. S. special forces and the CIA after 9/11. Others are primarily narcotraffickers, while some are tribally defined and established masters of regions which have proved impossible to domesticate for centuries.

The only meaningful way in which the collective noun "Taliban" –and this is how the word should be understood –must be used, is as a descriptor for those individuals and forces which either subscribe to the fundamentalist totalitarianism that characterized Afghanistan before October 2001, or who exploit this ideology to protect vested interests since they would have too much to lose otherwise and because they have no interest in a vision of the Afghan future tied to the United States.


It’s Not An Option
By INVESTOR’S BUSINESS DAILY | Posted Wednesday, July 15, 2009 4:20 PM PT

Congress: It didn’t take long to run into an "uh-oh" moment when reading the House’s "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.

When we first saw the paragraph Tuesday, just after the 1,018-page document was released, we thought we surely must be misreading it. So we sought help from the House Ways and Means Committee.

It turns out we were right: The provision would indeed outlaw individual private coverage. Under the Orwellian header of "Protecting The Choice To Keep Current Coverage," the "Limitation On New Enrollment" section of the bill clearly states:

"Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.

So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won’t be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.

From the beginning, opponents of the public option plan have warned that if the government gets into the business of offering subsidized health insurance coverage, the private insurance market will wither. Drawn by a public option that will be 30% to 40% cheaper than their current premiums because taxpayers will be funding it, employers will gladly scrap their private plans and go with Washington’s coverage.


Posted by & filed under In The News.

Dear CIGAs,

The main characteristic of a sociopathic corporate culture is a total disregard for the rights of others. Sociopaths are also unable to conform to what society defines as a normal personality. Antisocial tendencies are a big part of the sociopath’s personality. Sociopaths feels most comfortable when the circumstances surrounding them and their associates share the same attitudes. They are distrustful and disdain those who do not agree with their reality and will turn on each other at the slightest provocation.

We Don’t Care. We Don’t Have To Care. We’re Goldman Sachs.

Goldman Sachs has openly, blatantly gone back to business as usual, knowing they will be bailed out by taxpayers if their high rolling gambles don’t work, and they don’t care who knows about it.

The reason they can be so breathtakingly arrogant, so stunningly cavalier about not giving a damn about things that any other company’s PR and government relations department would advise them against, is that they know they have the power to do anything they want to do. The Obama White House needs to take Goldman Sachs to the woodshed rhetorically, and they should have the Justice Department investigating them for anti-trust violations and all manner of stock manipulation. It is time to start squeezing the management at Goldman, and making them nervous about being broken up into pieces that are not too big to fail.

Here’s (with brief intro) Matt Taibbi, Rob Johnson, and myself taking about Goldman Sachs on what is rapidly becoming my favorite media program for discussing economic issues, GRITtv:


Jim Sinclair’s Commentary

The war between the present Administration and the Federal Reserve has to do with the level of QE or simply how many bonds the Fed will purchase from the US Treasury.

Bernanke either vigorously steps up buying of US Treasuries or the next and new Chairman will.

Bernanke either ratchets up buying of US Treasury paper by the Fed "to all and every" not otherwise subscribed to at present interest levels or the Fed will be made a toothless regulator by act of Congress.

Remember, Bush gave birth to Bernanke so therefore Bernanke becomes a present Administration team player or he is not a player at all.

Forget this independent Fed crap. It does not float in a MOPE world.

Will Bernanke make case for more asset purchases?
Fed chief may offer an expansion plan rather than an exit strategy
Jul 17, 2009, 6:10 p.m. EST
By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) — One key question ahead of Federal Reserve chairman Ben Bernanke’s testimony to Congress next week is whether he has the guts to makes the case for more, not fewer, purchases.

Although there has been much talk recently has been about an exit strategy, some economists think an expansion plan may be the order of the day.

Private and public economic forecasts are converging on the view that unemployment will remain at high levels for years.

In the words of Nouriel Roubini, chairman of RGE Monitor and professor at New York University’s Stern School of Business, the U.S. appears headed for a "shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%."

The Fed’s central forecast now sees the unemployment rate rising as high as 10.1% in 2009. It projects it will remain above 9.5% in 2010 and only falling to 8.6% in 2011.


Jim Sinclair’s Commentary

You have no idea how critical this is.

This writer understates it badly. Does the central planning committee want to launch the Lehman Brother syndrome into the real economy?

If CIT goes MOPE concerning the fat cat’s purchasing of some of CIT’s divisions this will not stop the avalanche of unemployment inherent is this poor decision.

Looking back from a 43% approval rating for the present administration will show the walk away from CIT as the catalyst. Nothing will repair this error for the present administration. This is the present Administration’s Battle at Waterloo and Obama is not Wellington.

Saving the fat cats and dumping the average guy (CIT failure) will be remembered for a millennium.

Armstrong is dead right that this is a one term Administration with the rise of a third party to victory.

Change the title below taking the word "could" out and put "WILL" in its place.

CIT failure could unleash slew of bankruptcies
Andrew S. Ross
Friday, July 17, 2009

Move along. Nothing to see here. That appears to be the view of the Obama administration as it allows CIT Group Inc. to desperately look for other financing, or slide quietly into bankruptcy, possibly as early as today.

This is not Lehman Bros. Part 2, and besides, another bailout is a political nonstarter, go the assumptions. The damage, even to those businesses that rely on CIT for regular infusions of cash, will manage, according to much of the financial punditocracy. And isn’t the administration planning to pump billions more dollars into small-business loans anyway?

Lloyd Chapman, president of the Petaluma-basedAmerican Small Business League, is not so cheery. "I fear an avalanche of bankruptcies," which may hit California hard because of the concentration of retail and import clothing businesses in the state tied to CIT, Chapman said. As to the supposed ease of replacement, many of the loans are long-term credit lines given to business owners "that had been turned down repeatedly by other lenders." The Obama administration, he added, is going to have come up with a "much bigger pot of money" than is currently on offer to replace what businesses will lose with CIT’s disappearance.

Noting that Goldman Sachs Group Inc., which reported boffo quarterly profits this week, benefited from a Federal Deposit Insurance Corp. program guaranteeing newly issued debt that was denied to CIT, Chapman added, "I’m not predicting it, but I wouldn’t be surprised if Goldman Sachs somehow benefits from this."


Jim Sinclair’s Commentary

Nothing has been solved. Nothing has been changed. This is what scares the absolute hell out of me. The major problem hasn’t even been touched. Outside of gold is there any future?

The Top 5 International Banks Are Keeping The Derivatives Beast Alive
JULY 17, 2009…3:27 PM

Time to revisit the Derivatives Beast.  It hasn’t been growing rapidly for the last year but is poised to balloon even bigger.  This is due to the near total lack of any regulation on the part of governments.  The central bankers conspiring with the top 5 banking houses are keeping this business going.  They do NOT want the derivatives market controlled.  This is a source if immense income flows for them.  They want all the risks of the derivatives markets to move effortlessly to government ledgers so the public eats any losses.  The lastest OCC derivatives report is an eye-opener.

.AIG Swaps May Take Decades to Expire Leaving a ‘Toxic Pool’ –

European banks including Societe Generale SA and BNP Paribas SA hold almost $200 billion in guarantees sold by New York-based AIG allowing the lenders to reduce the capital required for loss reserves. The firms may keep the contracts to hedge against declining assets rather than canceling them as AIG said it expects the banks to do, according to David Havens, managing director at investment bank Hexagon Securities LLC.


Jim Sinclair’s Commentary

Let’s raise this week’s bank failures to five.
Information for Temecula Valley Bank, Temecula, CA

Information for Vineyard Bank, National Association, Rancho Cucamonga, CA

Information for BANKFIRST, Sioux Falls, SD

Information for First Piedmont Bank, Winder, GA

Information for Bank of Wyoming, Thermopolis, WY

Jim Sinclair’s Commentary

The "Government Rescue" has been initiated, but for the Fat Cats who spit upon the public serfs. As the real economy rolls over and unemployment sets records, the legislative, fearful of their own tenure, will push through aid to all kinds of popular problems. This will serve to increase the Federal Budget deficit putting terminal downward pressure on the US dollar.

It is starting.

Senators Outraged About Foreclosures
Jul 17 2009, 10:25 am by Daniel Indiviglio

Yesterday, the Senate Banking Committee held a hearing to address the ongoing foreclosure problem. Both sides of the aisle tore into representatives from banks, servicers and the Obama administration. Leading the charge, Chairman Dodd (D-CT) asked:

So I’m hoping that, with stakes this high, somebody can explain to me why nothing has changed over the last two years.

Let me give it a shot.

First, I would point the Senator to yesterday’s post about servicers and re-defaults. There, he’ll find two reasons:

1. Servicers have an incredible amount of volume to deal with, as many distressed homeowners want modifications. They either haven’t had time to ramp up their staffs to process all applications, or don’t want to.

2. Many of those who have gotten modifications will re-default, because no reasonable new mortgage terms will actually result in their being able to cope with the principal balance of the mortgage.

Then, there are a few other reasons:

3. Many don’t (or shouldn’t) qualify for modifications, for the same reason as #2. They’re better off foreclosing, as they just can’t afford their mortgage under any terms a bank would accept.


Jim Sinclair’s Commentary

The proper title here is "Goldman Squabbles With Itself."

Goldman Sachs bites Uncle Sam’s hand
The investment bank is fat and happy again, but you wouldn’t know it from it squabbling with the Treasury over the warrants in the TARP deal.
By Allan Sloan, senior editor at large
July 17, 2009: 10:39 AM ET

NEW YORK (Fortune) — I’ve always thought that the guys running Goldman Sachs were really smart, not only about making money, but also about projecting a classy image to the world outside of Wall Street. Clearly, I overestimated them.

If there was ever a firm with the motivation — and the money — to be gracious to the U.S. taxpayers who kept it alive when the financial markets were imploding, it’s Goldman. It had a chance to look good and do good for taxpayers and itself and Wall Street for a relative pittance — and has blown it. Horribly.

As you have probably noticed, Goldman is getting attacked for posting record profits and setting aside a record amount for employee compensation about three seconds after it repaid its $10 billion of loans from the Troubled Asset Relief Program. Repaying those loans freed Goldman from pay restrictions on its top honchos, who seem headed for record or near-record bonuses unless things go badly for the firm in the second half of the year.

What you probably don’t know is that Goldman, flush with cash and profits, is squabbling with the Treasury about how much it should pay taxpayers to buy back the stock purchase warrants it gave the government as part of the TARP deal. Talk about tacky.

Had Goldman retained something it was once reputed to have — a sense of short-term sacrifice in return for long-term profit — it would have agreed to pay the government generously for the warrants. It could have announced that on Tuesday, along with its profits, and looked like a decent, concerned corporate citizen instead of Greedhead Central.


Jim Sinclair’s Commentary

You think they give a flying you know what?

Goldman saga not so rosy
Diane Francis, Financial Post Published: Saturday, July 18, 2009

This week the headline should have read: "Goldman Sacks America’s Taxpayers" instead of Goldman Sachs posts a US$3.88-billion quarterly profit. The Wall Street firm’s workers are licking their lips at the thought that the firm has set aside enough money to pay out billions in bonuses this year, equivalent to US$770,000 per worker.

This is pretty shocking, even by Wall Street standards, given the firm’s profits derive from direct and indirect taxpayer bailouts forked out by Mr. and Mrs. Average American Taxpayer.

Goldman this week defended itself by reiterating that it received US$10-billion in TARP bailout money last year to avert bankruptcy but has repaid that amount in full.

That is true, but that’s only a fraction of the bailout.

Goldman received an estimated three times more, or US$30-billion, in an indirect bailout funnelled through bankrupt insurer AIG International.

Washington bailed out AIG’s counterparties, to whom it owed hundreds of billions, because AIG had sold to them unbacked credit-default swaps (a form of insurance on bond values). Goldman was not only ahead of the queue in collecting its IOU but is reported to have gotten 100¢ on the dollar to boot.


Jim Sinclair’s Commentary

Simultaneous is a sign of al Qaida;

Indonesia Bombings Signal Militants’ Resilience
Published: July 17, 2009

JAKARTA, Indonesia — The nearly simultaneous suicide bomb attacks at two American hotels on Friday suggested that Islamic terrorist groups, though significantly weakened in Indonesia in recent years, still had the means to mount deadly assaults in one of the most heavily secured areas here in Indonesia’s capital.

Indonesian officials said it was too early to identify those behind the attacks at the hotels, the JW Marriott and the Ritz-Carlton, which killed eight people and wounded at least 50. But they appeared to be focusing on domestic militants, possibly individuals or splinter groups loosely tied to Jemaah Islamiyah, the Southeast Asian terrorist network linked to Al Qaeda.

The attacks were a blow to the Indonesian government, which had been credited with cracking down on Jemaah Islamiyah and for keeping Indonesia free of terrorist attacks since late 2005. The explosions took place nine days after President Susilo Bambang Yudhoyono was overwhelmingly re-elected to a second term, riding a wave of popularity for fighting corruption and restoring a measure of stability.

Mr. Yudhoyono said at a news conference that the “bombings were perpetrated by terrorist groups,” but that he could not say whether “these groups are the same ones” behind previous attacks. He said the attacks may have been linked to the electoral campaign, during which threats were made against him.

Jemaah Islamiyah led several attacks against Western-linked sites in Indonesia this decade, including one in 2003against the Marriott that was struck Friday. A bombing at anightclub in Bali killed 202 people in 2002; two years later, a car bomb at the Australian Embassy here killed 9.


Jim Sinclair’s Commentary

We are entering into stage 2 of the OTC derivative disaster as the cancerous tentacles of wrongdoing tear at the real economy.

Job losses mount among California government workers
Most Los Angeles County Superior Court operations, including those at the courthouse in Long Beach, above, were shut down Wednesday as a once-a-month unpaid furlough program took effect.
Unemployment in the state holds steady at 11.6% in June, but the outlook worsens in the public sector. The state loses 6,700 government jobs in June and continues to furlough workers and cut services.
By Marc Lifsher and Alana Semuels
July 18, 2009

California shed 66,500 jobs in June, and more losses loom as double-digit unemployment spreads to state and local governments, once reliable bastions of employment security.

June’s 11.6% unemployment rate is a post-World War II record. Professional services, construction and trade continue to top the state’s jobless categories.

But in a troubling sign, governments — a stable part of the state’s economy for a decade — have been laying off thousands of workers in recent months. And far more losses are ahead.

California lost 6,700 government jobs in June after dropping 14,200 in May. Facing huge deficits, the state continues to furlough employees, eliminate jobs and cut services. Most offices were closed Friday.

Layoff notices are piling up at thousands of public schools, where an estimated 17,500 teachers statewide have been told not to return to classrooms in the fall, when they will officially join the ranks of the unemployed.


Jim Sinclair’s Commentary

When no action is taken to confront the problem what makes you think any of the problem has gone away? I love the way Jill gets back to the real number well above a quadrillion.

Too Little, Too Late For Derivatives Oversight

As the Obama administration sets out to reform the over-the-counter (OTC) derivatives market, Wall Street is scrambling to protect its own profits and put a preemptive kibosh on any regulation that could reduce the lucrative transaction fees or expose criminal wrong-doing.

But no matter how many regulators gain oversight in the derivative markets, how successful the government is at putting in place rules to cage the beast, derivatives are a problem of breathtaking scale that cannot be cleaned up with a quick government fix.

It is currently estimated that there are $684 trillion in outstanding derivatives and another $800 trillion in "shadow" or off-balance-sheet derivatives (which are impossible to calculate because they are not reported), totaling well over $1.4 quadrillion.

This is roughly 27 times the global GDP at $55T, and 7 times aggregate global asset values (of stocks, real estate and private business) at $200T. Obviously, this total amount is not at risk, but the derivatives are based ultimately on underlying asset values or assumptions that if off by even 5%, could create a loss that well exceeds global GDP, and if off by 18% would wipe out global asset values.


Jim Sinclair’s Commentary

This Administration’s approval ratings are the glue that hold things together.

Polls: Obama approval rating falls below 60 percent
updated 3:27 p.m. EDT, Fri July 17, 2009

WASHINGTON (CNN) — An average of five national polls conducted in July indicates that President Obama’s approval rating has slipped to under 60 percent.

Fifty-seven percent of Americans surveyed approve of the job Obama’s doing as president, according to a CNN Poll of Polls compiled and released Friday, with 36 percent disapproving.

In early June, Obama’s average approval rating was 62 percent. It dropped a point to 61 percent in mid-June and stayed at that level through the rest of the month.

"Recent polls indicate that Obama’s lowest ratings — and biggest losses — come on the public’s perception of how he is handling the economy," said Keating Holland, CNN polling director.

Holland adds: "And the latest CNN/Opinion Research Corp. poll shows a double-digit drop in the number of Americans who think that the president has a clear plan for solving the country’s problems. The public may not be as willing to give Obama the benefit of the doubt after six months on the job as they did when he first took office."

So how does Obama compare to his most recent predecessors six months into a first term?


Posted by & filed under In The News.

Dear CIGAs,

Happy 12th Birthday to JB Slear’s "Radar."


Jim Sinclair’s Commentary

As the real economy begins to suffer significantly, as such are the direct implications of the potential bankruptcy of CIT, bankruptcies year to year will exceed a 50% increase.

This does not make for increased auto sales as GM comes out of paper shuffling into the real world of sales.

Bankruptcy Filings up 33 Percent over a 12-month Period: Total 12-month Total of Bankruptcy Filings 1.2 Million. In last Report, Filings up 27 Percent in one month.

Bankruptcy filings are soaring in the United States.  In the last data point, we had 134,282 bankruptcy filings for the month of March 2009.  Bankruptcy data usually lags 3 or 4 months but the trend is ominous.  For the last 12 months some 1.2 million bankruptcy filings have occurred.  Much of this is linked to the26,000,000 unemployed or underemployed Americans being unable to pay their bills or even service their debt.  What is more telling is the amount of Chapter 7 bankruptcies occurring since these are straight liquidations and not like a Chapter 13 restructuring.

Let us examine the most recent data for bankruptcies that highlight this troubling trend:


What you’ll notice is a significant spike in the March data point.  This monthly jump was enormous.  This was the largest number of quarterly bankruptcy filings since December of 2005 when many were rushing to beat the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  Yet even with the law making it harder for people to file bankruptcy, most are being forced into austerity and it is hard to squeeze anything further out of a turnip.  What this tells us is that for average Americans there is still a significantly large amount of pain in the real economy.  The unemployment rate is understated by the 9.5 percent headline number.




Jim Sinclair’s Commentary

Federal guarantees are for showcasing, not for being taken seriously. Or are they?

"For counter-parties to voluntarily terminate those contracts makes no sense,” Havens said in an interview. “There’s no question that asset values have soured on a global basis. With the faith and credit of the U.S. government backing those guarantees, why would they give that up?”

AIG’s European Derivatives May Take Decades to Expire

July 17 (Bloomberg) — American International Group Inc.’s trading partners may force the insurer to bear the risk of losses on corporate loans and mortgages for years beyond the company’s expectations, complicating U.S. efforts to stabilize the firm, analysts said.

European banks including Societe Generale SA and BNP Paribas SA hold almost $200 billion in guarantees sold by New York-based AIG allowing the lenders to reduce the capital required for loss reserves. The firms may keep the contracts to hedge against declining assets rather than canceling them as AIG said it expects the banks to do, according to David Havens, managing director at investment bank Hexagon Securities LLC.

“For counterparties to voluntarily terminate those contracts makes no sense,” Havens said in an interview. “There’s no question that asset values have soured on a global basis. With the faith and credit of the U.S. government backing those guarantees, why would they give that up?”

The falling value of holdings backed by the swaps may force AIG to post more collateral, pressuring the insurer’s liquidity and credit ratings in a repeat of the cycle that caused the firm’s near collapse in September, Citigroup Inc. analyst Joshua Shanker said last week. The insurer needed a U.S. bailout valued at $182.5 billion after handing over collateral on a different book of swaps backing U.S. subprime mortgages.

The average weighted length of the European swaps protecting residential loans is more than 25 years, while the span tied to corporate loans is about 6 years, AIG said in a regulatory filing. Contracts covering corporate loans in the Netherlands extend almost 45 years, and the swaps on mortgages in Denmark, France and Germany mature in more than 30 years.


Jim Sinclair’s Commentary

The Bank of You is all you can trust. "Morgan Stanley will pay $4.4 million to settle a class-action lawsuit with brokerage clients who bought precious metals and paid storage fees, according to a court filing"

UPDATE 1-Morgan Stanley to settle class-action lawsuit
Tue Jun 12, 2007 7:22pm BST

NEW YORK, June 12 (Reuters) – Morgan Stanley (MS.N: Quote, Profile, Research) will pay $4.4 million to settle a class-action lawsuit with brokerage clients who bought precious metals and paid storage fees, according to a court filing.

The proposed settlement, which must be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to a court filing on Monday.

The suit, filed in August 2005, alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store.

But Morgan Stanley either made no investment specifically on behalf of those clients, or it made entirely different investments of lesser value and security, according to the complaint.

"While we deny the allegations, we settled the case to avoid the cost and distraction of continued litigation," Morgan Stanley said in a statement.


Jim Sinclair’s Commentary

Apply a little logic here. Paper exchanges are making moves towards settlement in paper products while physical depositories are reaching maximum capacity. That can only mean the exchange warehouses cannot stand a physical audit and do not have the gold to cover the short interest.

The real question is if this isn’t a "Round Robin Ponzi" because logically the EFT cannot be holding significant physical gold, it is paper as well. Therefore Alchemy is real with one rub: you turn paper into gold and it turns back into paper.

Swiss banks running out of storage space for gold bullion
Worries about the economy and the success in marketing gold ETFs has seen Swiss banks finding difficulty in meeting secure storage requirements for gold bullion.
Author: Lawrence Williams
Posted:  Friday , 17 Jul 2009

In a note entitled No more space for Gold Bars, Swiss news website 20 Minuten Online reports that Swiss banks are running out of secure storage space for gold bullion held by investors and institutions.  Fears of hyperinflation, the economic downturn and the success of gold index funds (ETFs), which are supported by physical gold, has led to a run on precious metals investment – and in gold in particular, and in the necessary secure storage space in which to hold it..

One Swiss bank, earlier this year, reported that it was having to relocate some of its stored silver bullion to another site to make room for gold.  The Zurich Kantonal bank put this down to the success of its gold ETF.

The website reports another Swiss investment banker despairing "We have the need to store more gold for our clients but are finding it difficult to find secure storage facilities".  Gold storage makes high demands on security which is what is making the gold holding task more difficult.  Few banks will divulge exactly where their gold is stored for security reasons.

Another banker reported that his bank still had space but that it is beginning to run out.

Some of the problems are being handled by improving the storage systems in existing space.  As one banker commented "A 12.5 kilo gold bar only occupies about the same amount of space as a tetrapak of milk".

While the big U.S. based ETF, the SPDR Gold Trust has recently seen a relatively small decline in its gold holdings with some investors seeking better returns in the markets, the ever-cautious Swiss seem to be seeing continuing growth in locally managed ETFs.  A recent report noted that Swiss Bank, Julius Baer, for example, was still seeing a 3.3% growth in its gold ETF in the current week.  And even though the Swiss Central Bank has been selling gold via the Central Bank Gold Agreement, it still holds 38% of its foreign exchange reserves in the yellow metal.



Jim Sinclair’s Commentary

Once upon a time Canada was the center of world mineral exploration, but then came the hedge funds.

Chinese companies eyeing bargain Canadian miners for gold, coal, copper and uranium
With recent purchase of C$1.74 billion stake in Teck as an example, Chinese metals producers are said to be looking at Canada’s resource companies to tie in commodity supplies with key targets said to be gold, coal, copper and uranium.
Author: By Pav Jordan
Posted:  Monday , 13 Jul 2009

TORONTO (Reuters) – – China’s purchase of a C$1.74 billion ($1.5 billion) stake in Teck Resources (TCKb.TO: Quote) may be just the opening move from the world’s top resource consumer in a strategy to use its unique wealth advantage to become a key source of mining capital for Canadian firms.

Teck said last week it sold a 17.2 percent equity stake to state-owned China Investment Corp in a deal that allows the Canadian miner to pay down its massive debt while expanding China’s portfolio of commodity investments.

The deal underscores how deep China’s pockets are at a time when many sources of credit and financing have dried up in the global recession, even for the biggest miners.

"Most people thought China would take advantage of this dip in commodity prices and, because they’re the only ones with money, take advantage of this financial situation we are in. They have come through big time, be it oil and gas, or any commodity you can think of," David Davidson, an analyst with Paradigm Capital in Toronto, said in an interview after the Teck deal was announced.

Teck is a major producer of copper, metallurgical coal, zinc and gold, all commodities sought by China.


Jim Sinclair’s Commentary

You know this is coming!

Israeli navy in Suez Canal prepares for potential attack on Iran
Sheera Frenkel in Jerusalem
July 16, 2009

Two Israeli missile class warships have sailed through the Suez Canal ten days after a submarine capable of launching a nuclear missile strike, in preparation for a possible attack on Iran’s nuclear facilities.

The deployment into the Red Sea, confirmed by Israeli officials, was a clear signal that Israel was able to put its strike force within range of Iran at short notice. It came before long-range exercises by the Israeli air force in America later this month and the test of a missile defence shield at a US missile range in the Pacific Ocean.

Israel has strengthened ties with Arab nations who also fear a nuclear-armed Iran. In particular, relations with Egypt have grown increasingly strong this year over the “shared mutual distrust of Iran”, according to one Israeli diplomat. Israeli naval vessels would likely pass through the Suez Canal for an Iranian strike.

“This is preparation that should be taken seriously. Israel is investing time in preparing itself for the complexity of an attack on Iran. These manoeuvres are a message to Iran that Israel will follow up on its threats,” an Israeli defence official said.


Jim Sinclair’s Commentary

How is Israel going to stand this?

Iran in mass production of long-range, solid-fuel Sejil surface missiles
DEBKAfile Exclusive Report
July 13, 2009, 7:17 PM (GMT+02:00)

Iran is slowing down the manufacture of the Shehab-3 surface missile in favor of mass production of the more accurate two-stage 2,000-kilometer range Sejil II ballistic missile powered with solid fuel, which was successfully tested on May 20, DEBKAfile’s military and Iranian sources report.

More than 1,000 new Sejil IIs are projected to come off production lines in five years, at the rate of 200 a year.

Western sources say the Iranians are over-ambitious and can deliver no more than 10-15 missiles a year at present, although with a huge multi-billion dollar investment they might raise output to 30.

Liquid-fuel missiles like the Shehab take hours to prepare for firing, during which time they are exposed to oversight by US and Israel spy satellites, whereas the Sejil because it is powered by solid fuel has the huge advantage of stealth. It can only be detected by military satellites and early warning radar systems like the American FBX-T posted in the Israeli Negev after it is airborne and winging towards target.

Iran has also recruited Chinese missile experts to assist in the production of mobile launchers for the Sejil II. The combination of the solid-fuel Sejil mounted on mobile vehicles will give an Iranian missile attack the advantage of surprise, because of the difficulty of tracking and targeting them from space or the air.


Jim Sinclair’s Commentary

Now 90% of the planet’s nations call for dollar diversification. This does not speak well for marketing the ever increasing supply of US Treasury offerings and is therefore very negative for the US dollar.

Developing world calls for ‘new world order’

More than 50 heads of state from the developing world met Wednesday in Egypt to tackle the fallout from the global economic meltdown, with calls for a "new world order" to prevent a repeat of the crisis.

Cuban President Raul Castro said in a speech at the opening session of the Non-Aligned Movement summit that the financial crisis had hit developing nations the hardest.

"Every country in the world must seek just solutions to the global economic crisis," Castro told the 118-member body at the gathering in the Red Sea resort of Sharm el-Sheikh.

"We call for a new monetary and economic world order… we must restructure the world financial system to take into consideration the needs of developing countries."

Global power dynamics also need to be addressed, Libyan leader Moamer Kadhafi said, demanding a restructuring of the UN Security Council which he branded a form of terrorism "monopolized by a few countries that are permanent members."


Jim Sinclair’s Commentary

You knew this was going to happen according to my 2006 Formula.

Still seeing it happen is shocking. This is not good for the US dollar or US debt. It will happen in 1000s cities and towns before this is over.

Dumping CIT, and it is dumped, is a terrible mistake. The purchase of bits and pieces will not avoid the awful implications of this mistake.

City suspends payment of contracts
Friday, July 17, 2009

Running out of cash because of the state budget deadlock, the City of Philadelphia has stopped paying many of its bills until the impasse is resolved, City Finance Director Rob Dubow said this morning.

The city must temporarily withhold about $120 million in July and August to avoid running out of cash completely, Dubow said. Payments to contractors stopped Wednesday. Dubow, Budget Director Stephen Agostini and Treasurer Rebecca Rhynhart said that the city will pay its payroll, benefits, debt service and "emergency" contracts. The $4 million a month paid to foster parents, for instance, is considered an emergency, and other contracts will be considered on a case-by-case basis.

In a noon press conference, Mayor Nutter said the city would ask vendors to "understand where we are."

"We’re asking them to work with us through this crisis," Nutter said.

The city is suffering for a number of reasons, all related to the state budget, city officials said.

First, the city anticipated receiving nearly $100 million in state payments in July and August that are frozen until a new budget passes. Second, the city is asking the legislature to approve a 1-cent increase in the sales tax, which would generate about $9 million a month, beginning Aug. 1. Third, the city had planned, as it does every year, to take out a $275 million, short-term "tax revenue anticipation note" or TRAN, which municipalities use to provide cash to cover expenses until their tax revenues are collected.


Posted by & filed under In The News.

Sinclair6 v2

Dear CIGAs,

Today Iran refused the present US Administration’s overtures on discussions concerning the Iranian nuclear program.

Did you see Paulson testifying today on F-TV? He was red as a beet, stuttering and wearing a Casio watch.

He is the best public speaker in the financial sector, usually handsome and strong looking. Today he looked like he could have had a coronary on the spot.

Jim Sinclair’s Commentary

Here is a major economic alert.

Should CIT be allowed to go bankrupt the impact around the country on small to medium sized employers would be disastrous. This alone could cause the second phase of this disaster.

Just like the fall of Lehman Brothers that stabbed the financials directly in the heart, you have to ask yourself how much intent is involved in this total rollover of business as CIT’s failure stabs the real economy directly in the heart.

CIT Rescue Talks Collapse
Impact on Small Firms Feared if Lender Fails; Stress Test Finds Need for $4 Billion
JULY 16, 2009

Ailing business lender CIT Group Inc. said Wednesday "there is no appreciable likelihood" it will receive fresh government support in the near future, marking the first time since the collapse of Lehman Brothers that the U.S. has declined to aid a struggling financial company of significant scope and size.

What happens next will be a major test of whether the financial system and economy are sufficiently healed to absorb CIT’s problems.

The company is a source of funding for thousands of small and midsize businesses. It’s also a big player providing cash advances to clothing manufacturers and suppliers, and credit …


Jim Sinclair’s Commentary

Here is the friction between the US Administration and Dr. Bernanke, upon which Dr. Bernanke’s future and maybe the future of the Fed as the monopolistic control on US monetary policy depends.

The present administration wants unlimited QE which is the purchase by the Federal Reserve of unlimited amounts of Treasury issues.

Somebody has to buy them as the supply expands or the US recovery fails. This is what Secretary of the Treasury Geithner’s trip to the Middle East bank this week is all about. This is where China has enormous potential clout over the US Fed and Treasury should they decide to use it.

FOMC sees both growth and unemployment.

The Federal Open Market Committee released minutes yesterday from its April meeting, suggesting that the pace of contraction is slowing but economic activity will remain weak ‘for a time.’ The FOMC expects exceptionally low levels of federal funds rate for an extended period of time and is wary of buying more Treasuries. Higher unemployment is forecast in conjunction with more robust economic growth than previously expected. (Read the FOMC press release and minutes)


Jim Sinclair’s Commentary

You really think this bureaucracy is going to work well?


Jim Sinclair’s Commentary

Here is the future of the Canadian dollar on its own. After tar sands you can add minerals and 1/3 of the world’s potable water.

Deduct the fact that Canadian Banks did not go as nuts as their Southern maniac brothers did. Naysayers have no vision, not being able to see beyond their noses.

Oil sands catches break from recession
Shawn McCarthy

OTTAWA — From Thursday’s Globe and MailLast updated on Thursday, Jul. 16, 2009 06:30AM EDT

The current slowdown could prove a boon for Canadian oil sands producers, driving down construction and operating costs and giving time for the development of infrastructure needed for the industry’s growth.

Signs of a thaw are already appearing, half a year after several companies shelved their most ambitious expansion plans amid diving crude prices and a breakdown of financial markets.

Smaller oil sands companies, including Canadian Oil Sands Trust (COS.UN-T)and Petrobank Energy and Resources Ltd. (PBG-T), have been able to raise debt and equity financing to finance their operations.

And larger companies are taking advantage of the hiatus to re-engineer their projects in order to drive down costs and incorporate the latest environmental technologies.

The latest vote of confidence in the industry comes from U.S.-based rating giant Moody’s Investor Services, which six months ago cited large increases in debt and declining oil sands economics in downgrading Nexen Inc. (NXY-T)and Suncor Energy Inc. (SU-N).

In a report yesterday, Moody’s said the oil sands sector will prosper but at scaled-back and more sustainable levels. Moody’s also expects smaller, financially weaker companies to be acquisition targets, as the industry is set for further consolidation.

"The way development was going on there, at such a breakneck pace, was not sustainable," Moody’s vice-president Terry Marshall said in an interview yesterday.


Jim Sinclair’s Commentary

The US Federal Reserve as QE under a new Chairman, who else?

Who is Going to Buy U.S. Debt?
Thursday, July 16, 2009 8:59 AM
By: Julie Crawshaw

In fiscal 2009, the U.S. government must find buyers for $2.041 trillion in new debt, three times as much debt as it issued last year.

Given the current state of the economy, it seems frighteningly apparent that a threefold increase in debt purchases by foreign buyers, mutual and pension funds and other usual investors is mathematically impossible.

“There is simply not enough money in the present economy to support a tripling bond issue in the normal course of business,” Sprott Asset Management head Eric Sprott wrote in a newsletter to clients. “As the lender of last resort, the only purchaser left is the Federal Reserve.”

In 2008, the Fed was a net seller of almost $300 billion of bonds, but in the first half of this fiscal year it’s buying almost $280 billion of bonds under a policy of “quantitative easing.” That means the Fed purchases assets, including Treasury and corporate bonds, using newly created money.

“The Federal Reserve’s ‘solution’ to the debt problem is the problem,” Sprott said. “It has resulted in the Federal Reserve doubling the monetary base of the United States over the span of a mere nine months.


Jim Sinclair’s Commentary

$12 trillion is spent on bailing out Wall Street and it results in billions of dollars in earnings for these firms even though everything was done to reduce the bonanza in public view.

Of course, you screw Main Street and the common man in the process. Then you dump CIT, ushering in phase two of the disaster – the death of the real economy.

If you are a sociopath you do not care at all. I know these Wall Street guys, and Dommer was more trustworthy.

Foreclosures up despite moratorium and legislative efforts
By MarketWatch

TEL AVIV (MarketWatch) — U.S. properties in the process of foreclosure in the second quarter rose to a record quarterly level of nearly 890,000, RealtyTrac reported on Thursday.

The total is up 11% from the first quarter and 20% from the year-earlier period, the Irvine, Calif., online marketplace and research firm reported.

In June, properties in foreclosure totaled 336,000, exceeding 300,000 for a fourth month and driving the second-quarter total to the highest level since RealtyTrac began its survey in the first quarter of 2005.

As of June 30, nearly 1.53 million U.S. properties were subject to a default notice, auction-sale notice, or bank repossession, RealtyTrac reported.

Nearly 1.2% of all U.S. housing units — 1 in 84 — were subject to a foreclosure filing in the first half, RealtyTrac reported.

Despite an industrywide moratorium on foreclosures earlier this year plus legislative action and more efforts by lenders to modify the terms of mortgages, "foreclosure activity continues to increase to record levels," RealtyTrac Chief Executive James J. Saccacio said in a statement.


Jim Sinclair’s Commentary

MOPE, Management of Perspective Economics, must always imply the West runs the world. As such, no accomplishment of China can receive kudos without an upper cut.

Sometimes it might be comical if it were not for the fact media in the West has China very angry.

China grows faster amid worries

China’s economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter, thanks to the government’s big stimulus package.

The country’s quickening economic expansion comes as most nations in the West continue to experience recession.

Beijing now expects China to achieve 8% growth for 2009 as a whole, which compares with a predicted contraction of between 1% and 1.5% in the US.

However, the Chinese government warned that some economic challenges remain.

‘Numerous challenges’

The BBC’s correspondent in Shanghai, Chris Hogg, said China’s latest economic growth was largely due to the government’s 4 trillion yuan ($585bn, £390bn) economic stimulus plan unveiled last November.


Jim Sinclair’s Commentary

There is lots of media talk about this. It looks like smoke coming from an ongoing fire.

Q+A-Could Israel-Iran standoff turn violent?
Thu Jul 16, 2009 7:12am EDT

July 16 (Reuters) – Israel’s confrontation with Iran over Tehran’s nuclear programme is a major source of uncertainty in the Middle East and a complication in a wider stand-off between Iran and the West.Here is a look at where matters stand.


It’s a poker game with high stakes and a degree of bluff. Israeli leaders refuse to rule out any option. They do not believe Iran’s assurances it wants only nuclear energy. Noting re-elected Iranian President Mahmoud Ahmadinejad has said Israel should be "wiped off the map", Israel says an Iranian bomb is a threat to its very existence that it will simply not tolerate.

Last year, however, it emerged officials were making plans for how Israel might live with a nuclear Iran in a state of mutual deterrence. And an opinion poll last month showed most Israelis would not expect a nuclear Iran to attack them.

Since becoming prime minister in March, Benjamin Netanyahu has, aides say, made ending threats from Iran a defining element of what he sees as his personal role in Jewish history. A 1981 Israeli air strike that destroyed Iraq’s only nuclear reactor, as well as a strike in Syria in 2007 that remains cloaked in mystery, set historical precedents. Despite a policy of silence, few doubt Israel has nuclear weapons that could hit Iran.


Jim Sinclair’s Commentary

Wait 90 days from today when you see what dumping CIT means to the real economy. CIT’s bankruptcy will drive a dagger directly into the heart of the real economy. The entire reason for stepping aside of CIT is political. This will bring more damage to the economy than the dumping of Lehman, which brought in trillions to the financial firms.

Father forgive them for all they know is politics, just like the Sanhedrin.
Foreclosure Rate Rises 4.6 Percent in June over Prior Month
By Renae Merle
Washington Post Staff Writer
Thursday, July 16, 2009; 6:12 AM

Foreclosure filings increased again in June as the weak labor market pushed more homeowners into delinquency and government efforts to prevent foreclosure efforts struggled to gain traction, according to data from RealtyTrac released today.

The firm counted 336,173 filings nationally, which can range from default notices to bank repossessions. That is up 4.57 percent from the previous month and up 33 percent compared with the same period last year. For the second quarter, filings were up 20 percent from the comparable period last year. RealtyTrac, a private firm, says its data includes more than 90 percent of U.S. households.

"Nationwide the trajectory is remaining the same, continuing to increase," said Daren Blomquist, a RealtyTrac spokesman.

Sunbelt states like California and Nevada continued to have the most filings, while the Washington region was less impacted. Filings were down in the District and flat in Virginia last month compared to June 2008, but up in Maryland.

The monthly data reflects the challenges facing the Obama administration as it implements a sweeping program, Making Home Affordable, that is intended to arrest rising foreclosure rates.


Jim Sinclair’s Commentary

Read the prospectus. Do your homework and do it now.

Are GLD and SLV Legitimate Investment Vehicles?
July 16,

First, let me preface this article by stating that it contains my opinions and speculation based upon no concrete evidence, but primarily upon information contained within the SLV and GLD prospectuses, and secondarily upon instincts cultivated over a decade of research into gold and silver markets. While there is no smoking gun regarding some of the issues I raise in this article, there is plenty of smoke.

Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investm

ent vehicles as a proxy for physical gold and physical silver. Though all evidence against investing in these two trusts has been entirely circumstantial, plenty of red flags exist in both the GLD and SLV prospectuses that should steer any logical, rational human being that wishes to own gold and silver away from these two investment vehicles.

Conflicts of Interest

Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)?

Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs’s (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm’s own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.


Jim Sinclair’s Commentary

Supply increases as demand falls. Now you know why the Administration is going to replace Bernanke unless he steps up buying of Treasury offerings.

International Demand for Long-Term U.S. Assets Falls (Update1) 
By Vincent Del Giudice

July 16 (Bloomberg) — International demand for long-term U.S. financial assets weakened in May as Russia, Japan and Caribbean banking centers trimmed their holdings even as China stepped up its purchases.

Total net sales of long-term equities, notes and bonds were a net $19.8 billion in May, compared with buying of $11.5 billion the month before, the Treasury said today in Washington. Monthly foreign investment flows dropped $66.6 billion in May, compared with a decline of $38 billion in April.

While Treasuries have been a haven for investors during the credit crisis, emerging economic powers question the dollar’s status as the U.S. runs up record debt to fund the economic recovery. At a Group of Eight summit last week in Italy, China repeated calls for a “diversified and rational” global currency regime. Russian and Brazilian officials said the issue may come up at the wider G-20 forum in Pittsburgh in September.

“We still need the foreign capital,” David Wyss, chief economist at Standard & Poor’s in New York, said before the report. “We’re still borrowing. It’s important to see a significant inflow.”

China, the biggest foreign holder of U.S. Treasuries, increased its holdings of government notes and bonds by $38 billion to $801.5 billion. Holdings in Hong Kong also increased. Japan, the second-biggest international investor, reduced its total by $8.7 billion to $677.2 billion. Russia’s holdings fell $12.5 billion to $124.5 billion. Holdings at Caribbean banking centers also fell, declining by $9.9 billion to $194.8 billion.


Jim Sinclair’s Commentary

So it is now quite clear what the Taliban’s target is in Pakistan.

al-Qaida issues nuclear warning to Pakistan
July 16, 2009 – 5:00am

WASHINGTON – Ayman al-Zawahiri, Osama bin Laden’s right hand man, released an audio tape Wednesday telling Pakistan its nuclear weapons are at risk.

In the 9-minute audio tape, he claimed the U.S. is seeking control of Pakistan’s nuclear arsenal.

Ironically, the warning comes amid new evidence al-Qaida and the Taliban are engaged in an active search for the weapons.

A familiar uneasiness has crept over U.S. intelligence assets operating in the region, because they too have been looking for them – but with little success.

A former U.S. intelligence official says he received regular reports in recent months from "trusted agents" indicating they have been seeking to help the Pakistani government protect the weapons, but have received little or no cooperation.

However, Zawahiri’s for-your-own-good warning has run into a huge credibility problem.



Jim Sinclair’s Commentary

This article so perfectly sums up what I have been telling you. The Wall Street takeover of Washington has mucked us up so bad our grand children and their grand children will still be suffering from the madness of bailing out the Fat Cats and leaving the average to suffer the pangs of hell.

Shattering the Right vs. Left Prism Once Again: The Wall Street Journal Goes After Goldman and the Bank Bailout
Arianna Huffington
Posted: July 15, 2009 08:16 PM

Yesterday’s opinion section of the Wall Street Journal offered convincing proof that those who want a progressive financial policy and those who simply want to save capitalism are in agreement about the madness of the administration’s Wall Street policies.

There, on the editorial page of the capitalist Bible, was a piece taking repeated shots at Wall Street darling Goldman Sachs. And, over on the opposite page, a two-fisted op-ed by former hedge-fund manager Andy Kessler in which he labels the government bailout of Wall Street "a dumb move" and "a bust."

I’m planning to shrink down today’s Journal, laminate it, and hand it out anytime someone in the media starts analyzing the economy using the cobweb-covered, tried-and-untrue right vs. left framing.

You know that this way of looking at financial policy is dead and buried when Rupert Murdoch’s pride and joy is publishing takes that I could happily have written myself.

Let’s start with the editorial, "A Tale of Two Bailouts," which decries the fact that, thanks to the policies of Tim Geithner and Larry Summers, Goldman "enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong."

The piece is spiked with disdainful references to "the Goldmans of the world" and "the likes of Goldman, which apparently needs no help printing money," and takes issue with the way "we changed when we stepped in to save certain banks in the name of saving the system." It also dubs Goldman "Goldie Mac," saying: "Goldman will surely deny that its risk taking is subsidized by the taxpayer — but then so did Fannie Mae and Freddie Mac, right up to the bitter end."


Jim Sinclair’s Commentary

Politicians really do come cheap.

Big Joke: Hedge Funds Want Regulation
by andrewtna
Thu Jul 16, 2009 at 07:46:44 AM PDT

The White House sent a bill to Congress today that would finally require that hedge funds are regulated – to an extent. And now Reuters reports that hedge funds, which have forever resisted any form of meaningful regulation, really want to be regulated.

Now we know why the industry contributed nearly four times as much money to federal candidates as they did last cycle, according to the Center for Responsive Politics:


‘Cause that’s what industries do when they want more oversight….


Posted by & filed under In The News.

Dear CIGAs,

Management of Perspective Economic (MOPE) in action is demonstrated below.

The strength in gold has to do with the dollar slipping to and below USDX .7940.

The type of inflation that is on the horizon is worse than the writer below understands. It is not an economic event as this article wants you to believe. It is a currency event.

When the currency event is a Reserve Currency it is worldwide problem. That is why gold is rising. It might even be part of the reasons equities rose.

DJ FOCUS: Data Don’t Show Inflation Cycle Some Gold Bulls Expect Yet

The recent higher U.S. inflation data are not the start of the runaway price pressures that some gold bulls expect to eventually trigger another rally in the precious metals, analysts say.

The June Consumer Price Index rose 0.7% and core CPI excluding food and energy was up 0.2%, the federal government said Wednesday. Both were one-tenth of a percentage point above the consensus forecast.

This came one day after the June Producer Price Index was reported up 1.8%, well above the 1% forecast and the biggest rise since November 2007. The core PPI rate rose 0.5% after the forecast was for steady.

So is this the start of the inflation cycle that gold bulls have been banking on due to fiscal- and economic-stimulus efforts?

Jim Sinclair’s Commentary

The banks have been rescued, but the problem still sits there looking you right in the eye.

The BIS changed their method of computer valuation to value to maturity, a cartoon thereby reducing the nominal value from one quadrillion one thousand one hundred and forty four trillion to eight hundred trillion.

There is no way to list 95% of these as they have no common standards.

Other than putting twelve trillion dollars into the system to make Wall Street whole, what has been accomplished.


Mobius Says Derivatives, Stimulus to Spark New Crisis (Update2)
By Bloomberg News

July 15 (Bloomberg) — A new financial crisis will develop from a failure to effectively regulate derivatives and the extra global liquidity from stimulus spending, Templeton Asset Management Ltd.’s Mark Mobius said.

“Political pressure from investment banks and all the people that make money in derivatives” will prevent adequate regulation, said Mobius, who oversees $25 billion as executive chairman of Templeton in Singapore. “Definitely we’re going to have another crisis coming down,” he said in a phone interview from Istanbul on July 13.

The Bank for International Settlements estimates outstanding derivatives total $592 trillion, about 10 times global gross domestic product. Opaque financial products contributed to almost $1.5 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg.

The U.S. Justice Department is investigating the market for credit-default swaps, Markit Group Ltd., the data provider majority-owned by Wall Street’s largest banks, said July 13.

Mobius didn’t explain what he thought was needed for effective regulation of derivatives, which are contracts used to hedge against changes in stocks, bonds, currencies, commodities, interest rates and weather.

“Banks make so much money with these things that they don’t want transparency because the spreads are so generous when there’s no transparency,” he said.


Jim Sinclair’s Commentary

Wow, there is a bit of the pot calling the kettle black in this article.

Fed not fit for oversight job, investor group says
By Rex Nutting

AMMAN, Jordan (MarketWatch) — Several large investor groups and two top former regulators are urging the creation of an independent body to examine systemic risks in the U.S. financial sector, the Financial Times reported Wednesday. The group — led by former Securities and Exchange Commission chairmen William Donaldson and Arthur Levitt — said the Federal Reserve should not get the responsibility because it’s credibility had been "tarnished" by its easy credit policies and lax regulatory oversight, which contributed to the excessive leverage that threatens the global economy. The investor group includes senior figures from Calpers, the large Californian state pension fund, and from investment firms BlackRock and Legg Mason


Jim Sinclair’s Commentary

To open the hedge fund books is akin to opening the Anarchist’s Cookbook

Obama wants SEC to look into hedge fund books
By Ronald D. Orol

WASHINGTON (MarketWatch) – The Obama administration on Wednesday plans to send a proposal to Capitol Hill that would require hedge fund managers and private equity managers with more than $30 million in assets under management register with the Securities and Exchange Commission and open up their books to periodic examinations, according to remarks by Assistant Secretary for Financial Institutions Michael Barr on regulatory reform. The White House proposal, which is backed by the Treasury Department, will also require hedge fund managers to disclose to regulators and investors more information about the characteristics of their hedge funds. Fund managers will need to provide more details about asset size, borrowings and any off-balance sheet exposure.


Jim Sinclair’s Commentary

Sure, the Fed is at risk, and so is Dr. Bernanke.

The problem is not too much stimulation, but in the Administration’s view, who are reticent to use fiscal stimulation, and that number is not enough.

This is a war the Fed will lose.

Economists Warn Fed Independence at Risk
JULY 15, 2009, 2:25 P.M. ET

More than 175 prominent economists warned that politicians’ attacks on the Federal Reserve are putting "the independence of U.S. monetary policy…at risk," and urged Congress to back off lest it undermine the Fed’s ability to manage the economy and thwart inflation.

The 185-word petition, initiated by a band of academic economists, reflects growing unease among professors, former Fed officials and some investors that the vehemence of the criticism from Congress of the Fed’s handling of the financial crisis suggests a readiness in Congress to weaken the freedom the Fed has to move interest rates as it sees fit


Jim Sinclair’s Commentary

Of course the central planners wanted the merger. It was the easiest and fastest way out of a hole, so they got a little pushy.

BofA-Merrill tale: Paulson’s turn

Former Treasury chief Paulson heads to Capitol Hill to explain his role in controversial deal. Paulson expected to explain he wanted to save the merger.

WASHINGTON ( — Did government officials overstep their authority and force Bank of America to take over troubled Merrill Lynch at great taxpayer expense?

That’s what lawmakers plan to ask former Treasury Secretary Henry Paulson, who returns to Capitol Hill on Thursday to testify about the controversial deal struck during the height of the banking panic last fall.

Members of the House Committee on Oversight and Government Reform will do the questioning. The panel has already grilled the chiefs of Bank of America (BAC, Fortune 500) and the Federal Reserve.

Last September, Bank of America’s purchase of Merrill Lynch was trumpeted as good news — an example of the financial sector saving its own — especially when compared to the near-simultaneous bankruptcy of Lehman Brothers.

Yet, the BofA-Merrill deal later nearly collapsed and was rescued by billions of taxpayer dollars and government intervention, the full extent of which had not fully surfaced until officials started investigating earlier this year. The House Oversight hearings aim to get to the bottom of the government’s role in salvaging the deal.


Jim Sinclair’s Commentary

Here are a few comments from Joberg:

China is angry at the treatment they have received. This I guarantee you.

China is proud not only of what it has achieved, but how much of it has been kept in place while the rest of the world unwinds.

I expect some action to say enough. The US dollar smells it.

The false sideways movement of the past many weeks is losing ground.

As it does, the next place the USD will find is .7200 USDX. When the dollar goes below .7200 USDX you know what has hit the fan.

It might be a nice idea to show respect to your bankers. Respect, however, is much too much to ask of a city (Washington) privately owned by Wall Street.


Jim Sinclair’s Commentary

You are in China or you are nowhere!

The dollar is yesterday’s game. Yes, it will remain in central bank’s reserves, but in a secondary position to a basket of currency units (SSCI).

China plans global role for renminbi
By Peter Garnham 
Published: July 14 2009 20:00
China has kick-started a major plan to internationalise the renminbi and the process is likely to be faster than many expect, according to HSBC.

If successful, this could lead to nearly $2,000bn in annual trade flows, or as much as 50 per cent of China’s total, being settled in renminbi each year by 2012, compared with less than 10 per cent today.

The move follows calls by China for the world to adopt a supranational currency to replace the dollar.

“China is beginning an ambitious scheme to raise the role of the renminbi in international trade and finance and to reduce reliance on the US dollar,” said Qu Hongbin, China chief economist at HSBC.

“This will likely be a multi-year and gradual process. Yet, we believe the pace is likely to be faster than many expect.”


Jim Sinclair’s Commentary

More gossip from Joberg:

I heard that HSBC is shutting down their individual storage operation. Any conformation out there? If so, why?

The only safe storage in this world of unbridled greed is the Bank of you.

Think about this:

Step #1 – Bloomberg, "Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, July 14 (Bloomberg) — Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter."

Step #2 – Take your gold home to the Bank of you. Now you are your own central bank.


Jim Sinclair’s Commentary

Now that would be a surprise to those dedicated junior gold shorts that have not had that much joy in the last four months.

Gold stocks ready for big advance
Posted: July 14, 2009, 10:30 AM by Peter Koven

Gold equities are stuck in the middle of the summer doldrums and are pulling back from their highs. But technical analysts Ron Meisels and Olaf Sztaba of the NA Marketletter are not worried. They wrote that the bland behaviour of the stocks should not draw attention away from the larger, more bullish picture, especially since golds take extra time to build bases for future advances.

"The current consolidation [the longer the better] is part of a base-building process which usually results in a major move at a later date," they wrote in a note.

They figure that the build-up of pessimism should reach its zenith "just in time" for a year-end rally in the stocks. The first indication of such a move would be a stabilization in the majors like Barrick Gold Corp. and Newmont Mining Corp., followed by a "decisive" move above their 50-day moving averages.

"In fact, a significant number of gold stocks have been developing bullish, multi-month base-formations which, if realized, could result in noticeable up-moves," they wrote, citing Gammon Gold Inc., Alamos Gold Inc. and Royal Gold Inc. as examples.

Of course, slow periods like this are when investors get lethargic and take a "wait and see" approach. The analysts wrote that this is the wrong strategy, as weak and boring periods are often the best time to accumulate the stocks.


Jim Sinclair’s Commentary

This is cheap compared to what is maturing in the Commercial Real Estate market in the next 12 months.

Tab hits $95.7 billion so far for bailout of General Motors, Chrysler and auto parts suppliers
02:19 PM

In honor of General Motors beginning its first week as a new company, we thought you might like to see how much taxpayers are chipping in to save GM, Chrysler and auto suppliers.

The answer, in the chart, is: just shy of $100 billion…



Jim Sinclair’s Commentary

World confidence falls as unemployment grows.

116 days to go

Obama’s Stimulus Plan: Failing by Its Own Measure
By STEPHEN GANDEL Tuesday, Jul. 14, 2009

The $787 billion stimulus plan is turning out to be far less stimulating than its architects expected.

Back in early January, when Barack Obama was still President-elect, two of his chief economic advisers — leading proponents of a stimulus bill — predicted that the passage of a large economic-aid package would boost the economy and keep the unemployment rate below 8%. It hasn’t quite worked out that way. Last month, the jobless rate in the U.S. hit 9.5%, the highest level it has reached since 1983.

The two advisers who wrote the paper, Christina Romer and Jared Bernstein, went on to land key jobs in the Obama Administration. Romer is the head of Obama’s Council of Economic Advisers, and Bernstein is the chief economist and economic-policy adviser to Vice President Joe Biden. And the stimulus bill that both economists championed became law in mid-February. What has not come to pass, however, is the boom in job creation that Romer and Bernstein predicted. A little over a month ago, the Administration said the stimulus bill had created or saved 150,000 jobs. That’s a far cry from the 3 million to 4 million jobs that Romer and Bernstein foresaw back in January.

Lawrence Summers, director of the White House’s National Economic Council, said last week that the stimulus bill was on track. This past weekend, the President rejected calls for a second stimulus package, saying the current stimulus needs more time to work, since only a small fraction of the money has been spent. From the beginning, the Administration has said that much of the boost to the economy from the stimulus plan would not come until the second half of this year. Administration officials have also insisted that it’s unfair to judge the effectiveness of the stimulus by projections they made back in January since the recession has turned out to be worse than what most economists predicted even just six months ago.


Jim Sinclair’s Commentary

A by subscription service you should subscribe to:

– June Retail Sales Gain Due to Rising Inflation 
– "Core" Monthly Retail Sales Rose 0.26% versus Total 0.65% 
– PPI Inflation Surge Reflects More Than Oil Prices, 
– Annual Change Reverses Direction of 10-Month Downtrend 
– Gross Federal Debt Up More Than $2 Trillion Year-to-Year
– Inflation Accelerates (Annualized June Rate of 9.3%)

– June CPI-U Annual Deflation of 1.4% versus

– SGS-Alternate Estimate of 6.1% Inflation

– Quarterly Production and Real Retail Sales Contractions Confirm Ongoing Recession

Jim Sinclair’s Commentary

The paper gold market has been a game played by the gold banks while the physical market is low on supply.

The U.S. Mint Again Suspends Gold Coin Sales: Is It Really Out of Gold?
July 13,

I may have missed one or the other suspension of gold coin sales by the US Mint. But here we go again: Checking the online store of the US Mint I came across notices of delays and suspensions with golden Eagles and Buffalos, with waiting times ranging from ‘weeks’ and to ‘await further notice’.

The US Mint press room has entirely omitted this confirmation about the tightness of the bullion market which enjoys upward momentum thanks to the thousands of big problems the world faces.

Checking on 24kt Buffalo gold coins, the Mint saddened me with this statement:

Production of United States Mint 2009 American Buffalo Gold Proof Coins has been delayed because of the limited availability of 24-karat gold blanks. The 2009 American Buffalo One-ounce Gold Proof Coin is scheduled to go on sale in the second half of the 2009 calendar year after an acceptable inventory of 24-karat gold blanks can be acquired. The release date, once established, will be posted to the 2009 Scheduled Products Listing.

As a result of the numismatic product portfolio analysis conducted last fall, beginning in 2009, American Buffalo Gold Proof fractional coins and the four-coin set are no longer available. Additionally, the United States Mint will no longer offer American Buffalo Gold Uncirculated Coins.

The most economical way to buy gold coins, US gold eagles, is blocked as well:


U.S. Mint gold, silver coin sales ‘temporarily suspended’ – again
Sales and suspension of gold and silver coin or bullion coin sales by the U.S. Mint are becoming a regular part of doing business as overloaded refiners and mint facilities struggle to meet continuing high demand.
Author: Dorothy Kosich
Posted:  Tuesday , 14 Jul 2009


Unprecedented demand, a shortage of blanks, and restrictive policies and regulations continue to exacerbate what is almost becoming a chronic shortage of gold and silver coins authorized by the U.S. Mint.

The U.S. Mint has again "temporarily" suspended sales of almost all of its gold uncirculated and proof coins, along with nearly all of silver uncirculated coins because of the limited availability of blanks.

The mint no longer offers for sale the American Buffalo Gold Proof fractional coins and four coin sets are no longer available. Meanwhile the mint will no longer offer American Buffalo Gold Uncirculated Coins.

The 2009 American Buffalo One-ounce Gold Proof Coin is scheduled to go on sale in the second half of the 2009 calendar year after an acceptable inventory of 24-karat gold blanks can be acquired.

The U.S. Mint Online Product Catalog says production of the American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended due to the "unprecedented demand" for American Eagle Bullion Coins for which all available 22-K gold blanks are being allocated.


Jim Sinclair’s Commentary

Here we go with the Green Shoots again.

When the Money Bunnies finally give in to emotions and give up on the US economy we will have reached the bottom.

U.S. Industrial Production Falls Less Than Forecast (Update2)
By Shobhana Chandra

July 15 (Bloomberg) — Industrial production in the U.S. fell in June at the slowest pace in eight months, adding to signs the worst of the recession is over.

The 0.4 percent decrease in output at factories, mines and utilities was smaller than forecast and followed a revised 1.2 percent drop in May, Federal Reserve figures showed today in Washington. Capacity utilization, which measures the proportion of plants in use, decreased to 68 percent, the lowest level since records began in 1967.

Factories, after slashing stockpiles in the first half of the year, may get a boost from government efforts to stoke spending, including cash payments aimed at reviving demand for autos. Even so, job losses will weigh on any rebound, meaning companies such as General Motors Co. and Chrysler Group LLC, two of the three biggest U.S. automakers, may be slow to recover.

“We’ll go through a very gradual rebuild,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast the drop in output. “There’s uncertainty about the strength of demand, credit restraints are still there, and we have a weak labor market. The fundamentals point to an economy that won’t just boom off the map.”

Industrial production was forecast to fall 0.6 percent after a previously reported 1.1 percent drop in May, according to the median estimate of 73 economists surveyed by Bloomberg News. Projections ranged from a gain of 0.2 percent to a drop of 1.1 percent.


Jim Sinclair’s Commentary

An example of management of perspective economics. There is no bottom to this experience yet.

Manufacturing in New York Area Shrank at Slower Pace (Update2)
By Bob Willis

July 15 (Bloomberg) — Manufacturing in the New York region shrank this month at the slowest pace in more than a year, bolstered by the largest gain in orders since the recession began.

The Federal Reserve Bank of New York’s July general economic index climbed to minus 0.6, the highest level since April 2008, from minus 9.4 the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is contracting.

Today’s report, one of the first regional factory measures of the month, indicates that a tumble in inventories has set the stage for an end to the manufacturing rout. Even so, analysts see little momentum for a production surge as companies such as General Motors Corp. and Chrysler Group LLC struggle with the impact of rising unemployment and falling household wealth.

“This is signaling an end to the manufacturing-sector recession in this one region,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “You’re seeing evidence that manufacturing is turning” across the country.

Economists projected the Empire State index would improve to minus 5, according to the median of 53 estimates in a Bloomberg News survey. Forecasts ranged from 2 to minus 10.


Jim Sinclair’s Commentary

Who is next to declare their desire for a SSCI and diversification away from the US dollar, the Boy Scouts of America or the Daughters of the American Revolution?

The non aligned nations are meeting now as the third event, the BRICs, the G8 and now this. You will be interested in what the conference is advertised to be about. The subject of discussion is diversification of reserves away from the US dollar.

From the article:

"We demand the establishment of a new international financial and economic structure that relies on the participation of all countries. " Castro said, ahead of handing over the movement’s presidency to Egypt.

"There must be a new framework that doesn’t depend solely on the economic stability and the political decision of only one country," the Cuban leader said, apparently referring to the United States.

In Egypt, Non-Aligned nations focus on meltdown
By SARAH EL DEEB – 1 hour ago

SHARM EL-SHEIK, Egypt (AP) — Cuba’s president on Wednesday called for an international financial system that better takes into account developing countries interests, as the global recession captured the spotlight at a summit of non-aligned nations.

Raul Castro’s remarks at the opening session of the two-day Non-Aligned Movement’s meeting in this Red Sea resort were echoed by other leaders and build on earlier discussions among officials from the 118-nation grouping of mostly of African, Asian and Latin American nations.

"We demand the establishment of a new international financial and economic structure that relies on the participation of all countries," Castro said, ahead of handing over the movement’s presidency to Egypt.

"There must be a new framework that doesn’t depend solely on the economic stability and the political decision of only one country," the Cuban leader said, apparently referring to the United States.

The new system must give developing countries "preferential treatment," he said without elaborating.

As the global meltdown roiled world markets, erasing trillions in dollars in individual, corporate and government wealth, calls have mounted for greater market regulation and a shift from the use of the dollar as the main foreign reserve currency. Developing nations have argued that their growth and stability is being undercut by a crisis in which they had no part in creating.


Jim Sinclair’s Commentary

You think you this bunch would bury their earnings in respect for the pain and suffering they have caused the average man. sociopaths have no such motivation. They are rubbing their earnings in the faces of the suffering homeless.

Goldman Sachs Welfare Kings driving Ferrari’s
July 15, 10:51 AM

I am rapidly losing my patience with Wall Street’s sense of entitlement to rob us blind and our governments complicity in the theft.  A New York Times editorial today began, "Unemployment is rising, foreclosures are surging and lending is still restrained."  What the Times concluded is that things are much worse than people thought.

Some experts believe the real unemployment rate, counting those working part time who want full time work and can’t find it and those who have stopped looking because they can’t find work may be approaching 20%.  The Times concludes that if the Obama Administration is serious about helping home owners in foreclosure than we need to revisit allowing bankruptcy judges to modify loans otherwise banks have an incentive to seek foreclosure because that is more profitable to them.

One of the reasons is that  foreclosures allow banks to postpone taking a loss until the process is complete.  This  process that can take over one year.

Then there is Goldman Sachs, which represents the arrogance and sense of absolute entitlement that only Marie Antoinette could fathom.  With this economic news they announced record profits and a willingness to pay out 18 billion to employee’s in compensation.  The problem is that as Les Leopold shows on Huffington Post in an article entitled Happy Days are here again ( Here = Wall Street ), it is you and I who will actually be forking out the 18 billion or $600,000.00 per employee.

Mr Leopold notes, " Firms like Goldman’s created new fantasy finance products that eventually crashed the whole world’s economy."  To cover this they took out what amounts to insurance policies from AIG but because insurance has legal aspects and regulation,  they called these insurance policies credit default swaps which are, of course, not regulated.


Jim Sinclair’s Commentary

Think about what this disaster means to those on retirement. Now think about Wall Street firms releasing huge earning and bonuses. What is wrong with this picture as unemployment grows?

American Express halts pension payments to UK staff
US-owned firm blames downturn as it suspends contributions to employees’ stakeholder scheme for 18 months
Phillip Inman, Wednesday 15 July 2009 17.14 BST

More than 6,000 UK staff at American Express were today contemplating a meagre retirement income after their US-owned employer told them it was suspending pension contributions for the next 18 months.

The company said payments to its occupational retirement scheme were unaffordable in the current economic downturn, though the situation would be kept under review.

Until this month American Express paid a core contribution of 3% of salary into the stakeholder scheme, with a pledge to match contributions of up to 6%.

The largely non-unionised workforce has accepted the deal, which applies to July salary payments.

Stakeholder pensions are personal retirement plans created by the government as a cheap alternative to trustee-based schemes.

Employers are under no obligation to make a contribution and have no responsibility for the success of the stockmarket-invested plans. Most have gone down in value by more than 30% over the last year, following a sharp decline in share values.

The company’s staff are based mainly in Sussex at centres in Brighton and Burgess Hill, with a headquarters in London’s Belgravia.


Jim Sinclair’s Commentary

Of course gold will as it gives spiritual experiences to those who have glibly sold gold juniors short in big ways.

Gold Seen Beating Commodities, REITs, TIPS As Inflation Hedge
JULY 15, 2009, 8:00 A.M. ET

NEW YORK (Dow Jones)–Gold prices may, in some cases, perform more strongly than other traditional inflation hedges in times of rising prices, an industry group study released Wednesday said.

"If inflation does materialize, then traditional inflation-hedges like gold, commodities, real estate and inflation-linked bonds are likely to outperform other mainstream financial assets," said the report by the World Gold Council, a marketing organization funded by gold mining companies.

"Gold can be shown to enhance an investors’ risk-adjusted returns even in a low to medium inflation environment," said the report, written by Natalie Dempster, head of investment for North America, and


Jim Sinclair’s Commentary

If they are not entering one million orders in minutes, they monopolize (manipulate or pre-know) the information.

These fellows build nothing of merit and destroy everything they touch. There is no concept of building businesses that actually make products, produce food or mine something.

It looks like the Treasury is hiring out of work hedgies with grudges. Good for them.

U.S. Tightens Its Derivatives Vise

The Justice Department’s investigation into credit-default swaps is homing in on the role of Markit Group Holdings Ltd. and its ownership by a group of banks that control a large amount of pricing information in the $26 trillion market.

In recent weeks, the Justice Department’s antitrust division contacted Markit and several large banks that own the company, seeking information on the banks’ ownership of Markit and what data they provide to the company, according to people familiar with the matter.

The interest of the Justice Department reflects the growth of credit derivatives from an obscure corner of the credit markets into a world-wide business that is drawing increased scrutiny. As the market grew, Markit became the dominant provider of pricing and information.

The probe dovetails with a push by the Obama administration for more transparency in the market, which was blamed for helping deepen the credit crisis last year. Credit-default swaps are effectively insurance contracts designed to protect investors against losses on bonds or loans. The contracts are now more often used as a tool to speculate on the health of an issuer.

Investors and competitors have groused about the dominance of Markit and its owners, which comprise the top dealers in the credit-derivatives markets, including J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Credit Suisse Group. They complain that Markit has access to key pricing information that is handed to it by banks, preventing them from producing competing products. As well, Markit runs key indexes that now account for much of the trading in the market. Other companies are able to utilize banks’ credit-default swaps data for product sales.


Jim Sinclair’s Commentary

This is dollar positive? No it is not.

Trend-wise Gold is the dollar in the inverse.

The Economy Is Even Worse Than You Think
The average length of unemployment is higher than it’s been since government began tracking the data in 1948.

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:

– June’s total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

– More companies are asking employees to take unpaid leave. These people don’t count on the unemployment roll.


Jim Sinclair’s Commentary

More bad news for the US dollar.

Gulf states need dollar hedge
(Excerpts From Article)

To weather the coming storms on the international stage the Gulf countries should therefore follow three broad guidelines:

– Like the Chinese they should buy real assets and build up their own strategic industries in fields like petrochemicals, logistics or renewable energies.

– They should engage in cautious currency diversification with gold being the ultimate dollar hedge – other paper currencies have their problems too, the ratios of government debt to GDP in Italy or Japan for example are even worse than in the US. Should China offer the GCC countries a similar deal like Brazil, i.e. settling some bilateral trade in yuan, they should seriously consider it, although China has issues of its own when it comes to rule of law or investors’ rights.

– As Saudi Arabia is already a member of the G20 and has a seat on the IMF board, GCC countries should finally actively engage in a reform of the international financial system and seek more influence in a reformed IMF against provision of capital injections.

– Dr Eckart Woertz is Programme Manager, Economics, Gulf Research Centre.


Jim Sinclair’s Commentary

You will notice from this Wall Street Journal article that few US publications cut China a break.

China’s accomplishments are called risks, danger, short term or transient.

Well China is pissed. That is not good for the dollar. It may well be that this evening here in Joberg that the .7938 USDX is in anticipation of China laying a heavy one on its detractors.

China Growth Brings Risks
Beijing weighs unwinding economic stimulus, amid specter of new bubbles
JULY 16, 2009

BEIJING — China’s economy has turned around with startling rapidity in recent months, with factory output, bank lending and commodity imports all accelerating on the back of the government’s massive stimulus program. The next challenge for authorities is sustaining that growth and keeping emerging problems at bay while weaning the world’s third-largest economy off state funding.

The sustainability of this state-driven growth spurt is a critical issue for the global economy. The success of China’s massive stimulus has been a rare bright spot in the worst global downturn in a generation, with all advanced economies expected to contract this year. …


Jim Sinclair’s Commentary

You think a sociopath cares? They don’t.

This position of Spitzer’s is self-evident. Look at the Evil Empire’s earnings today while 1 in every 10 people in the USA are out of work.

What is wrong with this picture?

Spitzer Says Banks Made ‘Bloody Fortune’ on U.S. Aid (Update3)
By Laura Marcinek, Michael McKee and Deirdre Bolton

July 14 (Bloomberg) — Eliot Spitzer, the former New York governor and attorney general, said U.S. banks made a “bloody fortune” while receiving taxpayer money without a proven benefit to the wider economy.

Politicians understand the “populist rage” with excesses in the financial industry and in this case the “public is right,” Spitzer said in a Bloomberg Television interview today. “We have saved financial services, we have not created a single job. We are still bleeding jobs.”

As New York attorney general, Spitzer was known as “the sheriff of Wall Street.” He changed business practices and collected billions of dollars in settlements from financial corporations such as Merrill Lynch & Co., American International Group Inc. and Marsh & McLennan Cos. He later became governor, resigning in March 2008 after he was identified as a client of the Emperors Club VIP, a high-priced prostitution ring.

Spitzer said rules proposed by President Barack Obama’s administration are irrelevant because agencies failed to enforce existing regulations.

“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”


Jim Sinclair’s Commentary

Here is an interesting chart from CIGA Shakeel. This is what is at the heart of gold’s action. Next stop .7100 – .7200 with a modest .7600 fight


Jim Sinclair’s Commentary

here is the 30 year from CIGA Shakeel. The 112-113 is the 28 year uptrend line. Break that and the bear will be a decade.


Posted by & filed under In The News.

Dear CIGAs,

The madness continues. How many of these swaps, better known as Credit Default OTC derivatives, do you really believe are properly hedged or just ratio hedged? Ratio hedge is a nice way of saying not hedged. There is very little difference between how MBIA guaranteed against financial failure (which was a cartoon) and how these instruments work.

This is an example of how all the financial intervention simply made Wall Street whole but never focused on making the Weapons of Mass Destruction, the OTC derivative, whole. On top of that the institutions that brought this disaster to you that have now all been rescued are simply going on producing more toxic paper that will not function when called upon to.

On top of that, MOPE (management of perspective economics) says OTC derivatives are just fine by quoting these damn things as indicators of credit worthiness according to the value of the swap. Swap what? Do you really believe the other side is 100% short of the NYT or their debt? They are simply not! They at best have a ratio spread on that. Tomorrow morning if the NYT was broken the instruments would be equally broken.

New York Times Swaps May Double, Analyst Report Says

July 13 (Bloomberg) — The cost to protect against a default by New York Times Co. may almost double as the newspaper publisher fails to pull out of a “nosedive” in revenue, according to Credit Derivatives Research LLC.

Investors should buy credit-default swaps on the publisher of the New York Times and Boston Globe in a bet that its second- quarter earnings report will spark an increase in the derivatives, used to speculate on creditworthiness or to hedge against losses, analyst Byron Douglass said in a July 10 note to clients. The contracts, trading at about 580 basis points, or the equivalent of $580,000 a year for every $10 million of debt protected, may climb to 1,000 basis points, he wrote.

Times Co., looking for new revenue after a 27 percent decline in first-quarter advertising sales, said in a survey sent to print subscribers last week that it’s considering a $5 monthly fee for access to its namesake newspaper’s Web site.

“With advertising revenues falling and not showing any signs of stabilization, we find the company grasping for any sort of additional revenue to be rather distressing for its credit valuation,” wrote Douglass, who is based in Walnut Creek, California.

The “fair value” of credit swaps on Times Co., based on measures including its share price and options on the equity, suggest they should be trading at 1,000 basis points, he wrote. The contracts are down from a record 1,098 basis points on Dec. 8, according to CMA DataVision prices.

Catherine Mathis, a Times Co. spokeswoman, said in an e- mail she didn’t have an immediate comment on the analyst report.


Jim Sinclair’s Commentary

All he had to do was give the money to the poor. He would have been Robin Hood and let off on community service

New York lawyer sentenced to 20 years for financial fraud

NEW YORK, July 13 (Xinhua) — A New York lawyer was sentenced to 20 years in prison Monday for financial fraud, following arch swindler Bernard Madoff’s imprisonment of 150 years last month.

Marc Dreier, a lawyer in Manhattan, admitted he had stole more than 46 million dollars from hedge funds by selling them fake promissory notes.

Dreier’s lawyers asked the court to sentence him only 10 years in prison, however, Dreier was assumed to be sentenced to as long as 145 years in jail. His judge Jed Rakoff sentenced him 20 years in prison, which was obviously much shorter than expected.

Dreier, 59, graduated from Yale University and Harvard Law School, and then became a lawyer in Manhattan. On May 11, 2009, he pledged guilty to eight charges including money laundering, securities fraud and wire fraud.

Dreier reportedly spent a huge amount of money to maintain his luxury lifestyle. He had an ocean view luxury apartment on the Upper East Side New York. He also has several expensive cars and a 18-million-dollar yacht. His office had a large number of art collections including Picasso and Warhol’s works. The estimate value of his collections was 40 million dollars.


Jim Sinclair’s Commentary

Yes there is something to believe in – GOLD!

The very fabric of society is breaking down around us. What the hell is there left to believe in?

It’s all gone wrong. Our belief in everything has been shattered by a series of shock revelations that have shaken our core to its core. You can’t move for toppling institutions. Television, the economy, the police, the House of Commons, and, most recently, the press … all revealed to be jam-packed with liars and bastards and graspers and bullies and turds.

And we knew. We knew. But we were deep in denial, like a cuckolded partner who knows the sorry truth but tries their best to ignore it. Over the last 18 months the spotlight of truth has swung this way and that, and one institution after another was suddenly exposed as being precisely as rotten as we always thought it was. What’s that? Phone-in TV quizzes might a bit of con? The economic boom is an unsustainable fantasy? Riot police can be a little "handy"? MPs are greedy? The News of the World might have used underhand tactics to get a story? What next? Oxygen is flavourless? Cows stink at water polo? Children are overrated? We knew all this stuff. We just didn’t have the details.


Jim Sinclair’s Commentary

Prepare yourself for more of this.

FBI: Bank robber cites economy during holdup
July 14, 2009, 1:35AM

A pistol-wielding robber blamed the nation’s troubled economy for a holdup this morning at a northwest Houston bank, authorities said.

While demanding cash about 10:30 a.m. from a teller at a Compass bank branch, 12514 Tomball Parkway, the armed robber said, “I’m only doing this to eat. They’re not letting me work,“ FBI officials said.