Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

Keep your eye on the ball.

The Problem is not broken entities. That is a symptom. The basis of the problem is OTC derivatives. That is the foundation that is never addressed. If you treat symptoms without handling the cause the result is more symptoms. Because the aim of remedial actions is improper, there is little chance of a fix, only an ebb and flow in a downward spiral that lacks real intervention.

In competitive shooting it pays to aim, which is the same when attempting to right an economic crisis.

Even the Fed buying these failed special performance contracts mucks up the Fed’s balance sheet without solving the problem. It simply shifts the problem to where more serious trouble could occur, and that is in the credit rating of US Treasuries.

You can say that unless the real target is aimed at, the problem will persist. The problem now however is it is too late. There is no way to net the derivatives as many are written totally naked such as the majority of older credit default derivatives. The ability to net all OTC derivatives died as dislocations began in the ability of the final asset to maintain its value. Credit default derivatives were created on an actuarial type analysis and of course that went boom.

Jim Sinclair’s Commentary

There is no question that Pakistan tightened up its China connection to offset the US. In the final analysis this offsets nothing but complicates everything.

China reiterates support for Pakistan
* Beijing to give Islamabad soft loan, encourage investment by top business corporations

BEIJING: China will stand by Pakistan in all circumstances to safeguard the country’s sovereignty and territorial integrity, while maintaining the existing bonds of their strategic partnership.

This assurance was conveyed to Prime Minister Yousuf Raza Gilani by Chinese leaders during Gilani’s visit to Beijing that concluded on Saturday, Pakistan’s Ambassador to China Masood Khan said.

Gilani, during his interaction with Chinese Prime Minister Wen Jiabao and Chinese People’s Political Consultative Conference Chairman Jia Qingling, was assured that China would continue to help Pakistan meet new challenges in the wake of terrorism and a financial crisis.

China is supportive of Pakistan’s stand on counterterrorism, normalisation of its relations with India and its role as a frontline state to wipe out terrorism, Khan said.

Loan: China assured Pakistan that it would help the country overcome its financial difficulties. Besides giving direct financial help in terms of a soft loan, Chinese leadership will encourage its top-level business corporations to investment more in Pakistan.

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Jim Sinclair’s Commentary

It will be critical how the new president, whoever he, is handles these situations. You can be sure that he will be tested severely by his adversaries in his first six months of office.

US special forces launch rare attack inside Syria
Oct 26 05:54 PM US/Eastern
By ALBERT AJI

DAMASCUS, Syria (AP) – U.S. military helicopters launched an extremely rare attack Sunday on Syrian territory close to the border with Iraq, killing eight people in a strike the government in Damascus condemned as “serious aggression.”

A U.S. military official said the raid by special forces targeted the foreign fighter network that travels through Syria into Iraq. The Americans have been unable to shut the network down in the area because Syria was out of the military’s reach.

“We are taking matters into our own hands,” the official told The Associated Press on condition of anonymity because of the political sensitivity of cross-border raids.

The attack came just days after the commander of U.S. forces in western Iraq said American troops were redoubling efforts to secure the Syrian border, which he called an “uncontrolled” gateway for fighters entering Iraq.

A Syrian government statement said the helicopters attacked the Sukkariyeh Farm near the town of Abu Kamal, five miles inside the Syrian border. Four helicopters attacked a civilian building under construction shortly before sundown and fired on workers inside, the statement said.

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Jim Sinclair’s Commentary

Why shouldn’t a fertilizer manufacturer buy into the US banking industry?

Bank in Southwest Florida being sold to distant buyers
Published: Monday, October 27, 2008 at 1:00 a.m.
Last Modified: Thursday, October 23, 2008 at 8:20 p.m.

Investors from Brazil plan to buy the struggling Riverside Bank of the Gulf Coast for $23 million.

Cape Coral-based Riverside, which has offices in Nokomis and Venice, needed a capital infusion, said Chairman Elmer Tabor. The buyers were looking to get into the U.S. banking business, he said.

It was cheaper for them to buy an existing bank than to spend at least $30 million to start and grow a new one, Taber said.

“From my point of view, it really is a match made in heaven,” he said. “By infusing capital in the bank, it gets you in a position to get back on your growth plan.”

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Jim Sinclair’s Commentary

Here is some good advice when your holdings are in Honest Money in a fake world. This picture was taken of Trader Dan during the rainy season in Houston.

Jim Sinclair’s Commentary

File this relationship in your memory as it will be a topic in the future.

Pakistani PM leaves for Turkey on 5-day official visit
www.chinaview.cn
2008-10-27 19:39:59

ISLAMABAD, Oct. 27 (Xinhua) — Pakistani Prime Minister Syed Yousaf Raza Gillani Monday left for Turkey on a five-day official visit, according to official Associated Press of Pakistan (APP).

Gillani is scheduled to hold bilateral talks with the Turkish leadership in a bid to woo investors and to lobby for the Friends of Pakistan initiative to help the country overcome its financial problems.

“Turkey is our good friend and our relations are not only between the governments, but reach out deep at the people to people level,” he told reporters before boarding his special aircraft for Ankara at the Chaklala Air Base here.

Gillani said he looked forward to the Friends of Pakistan initiative to help the country steer out of the economic crisis it was currently facing.

“Pakistan is an important country and is at the forefront in fighting extremism and terrorism, while spreading the message of peace for the entire world, ” he said.

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Jim Sinclair’s Commentary

Pakistan is more than a simple threat, it is a key element in determining our future. Now watch developments concerning Turkey. The difference is that Turkey will play the victim on the world stage in the upcoming unwind of the entire Middle East.

ANALYSIS-Afghan-Pakistan threat worse for next US president
Mon Oct 27, 2008 1:28pm EDT
By David Morgan

“More disturbing still, analysts say, Pakistan is now facing an existential threat from Islamist militants at a time when the nuclear-armed nation and its new civilian government are engulfed in extraordinarily difficult economic problems.”
WASHINGTON, Oct 27 (Reuters) – The next U.S. president stands to inherit a potentially more dangerous challenge in Afghanistan and Pakistan than the situation that led to the Sept. 11 attacks in 2001.

The situation is so serious that analysts say the incoming administration will need to move quickly on a broad new initiative to address the Pashtun region, which both countries share, with a mix of military pressure and economic aid.

“It will be extremely important to have an effective new strategy right out of the box. They cannot wait for a lengthy transition,” said J. Alexander Thier of the U.S. Institute of Peace, a congressionally funded Washington think tank.

The two U.S. presidential nominees, Democrat Barack Obama and Republican John McCain, have pledged to make Afghanistan a top priority if elected to the White House on Nov. 4.

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Jim Sinclair’s Commentary

This is just a drop in today’s financial disaster bucket.

US to inject $125bln into major banks this week: Treasury
Monday, October 27 12:59 pm

Nine major US banks will receive 125 billion dollars in capital injections this week from the US government, a Treasury official said Monday.

Assistant Treasury Secretary David Nason told CNBC television that “We executed the agreements for the nine institutions late last night so the money will go out the door for these institutions early this week.”

The nine will get half of the 250 billion dollars to be invested by the government in the banks as part of a massive rescue of the financial system.

The nine banks are Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of New York Mellon, State Street and Merrill Lynch, soon to be taken over by Bank of America.

The remaining 125 billion dollars will go to smaller banks and lenders which agree to the capital for equity program, which includes mandated limits on executive compensation.

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Jim Sinclair’s Commentary

Surprise, surprise!

Smaller US banks fear predators armed with bail-out money
Andrew Clark in New York
Monday October 27 2008 16.53 GMT

America’s smaller banks are claiming they could be vulnerable to government-funded predatory takeovers as their larger rivals enjoy huge cash injections from a $250bn (£157bn) Treasury bail-out.

The list of US banks signing up for government capital swelled to at least 19 today as middle-ranking names including State Street, Capital One and SunTrust announced they were issuing shares to the Treasury in return for about $17bn.

But critics have questioned whether the funds will be put to good use. Lending remains sparse on the high street and there are fears that the recipients will simply hoard the money – or use it to buy smaller players.

Camden Fine, the chief executive of the Independent Community Bankers of America, said it was unfortunate that the US treasury had imposed few conditions on the way the money was used, other than a stipulation that dividend payouts to shareholders must not rise.

“When you have taxpayers’ money used by larger banks to purchase otherwise healthy banks, that just promotes the kind of consolidation that got us into this mess in the first place,” said Fine.

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Look who pays for the bailout
Meet the Henrys (high earners, not rich yet). They make $250,000-plus and get taxed to high heaven. And they’re about to get socked again.
By Shawn Tully with Joan Caplin
Last Updated: October 27, 2008: 12:37 PM ET

(Fortune magazine) — Bill Kwon is the embodiment of the American dream. His father – who was arrested by North Korean Communists in the early 1950s for championing democracy – brought the family from Seoul to Illinois when he was a baby. Bill worked himself ragged pursuing every opportunity America’s heartland offered, never leaving Peoria.

Just out of college, he was earning a six-figure salary at a telecom company and sleeping in his parents’ basement. Now he’s a wealth advisor earning $375,000 at Morgan Stanley (MS, Fortune 500), with a five-bedroom brick home, a minivan, a son in private school, and three younger kids to follow. “My dad never made more than $25,000 a year,” says the burly, outgoing Kwon, 39. “When I was a kid, this was the top neighborhood in Peoria. I never thought I could live here.”

For all his blessings, Kwon gets really steamed when politicians and pundits claim that he and other Americans in his income group aren’t shouldering their “fair share” in taxes and should pay more. Nor does he appreciate being branded as “rich” when it’s far from certain he’ll ever build the kind of lavish nest egg the truly wealthy enjoy, especially after the current market meltdown. “I’m not a trust-fund baby,” says Kwon. “Raising taxes for people at my income level is like being punished for success, for working hard.” Kwon’s total tax bill is already more than $100,000, and the bite is taking an ever-rising share of his raises and bonuses, not to mention his wife’s income as a photographer. Kwon fears that America risks killing the incentive for people like him by shrinking the rewards for logging extra hours or starting a business, diminishing the dream that brought his father from Korea.

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Posted by & filed under In The News.

Dear CIGAs,

Here is someone that understands when paper currency fails, the nationality of that currency increases their transactions in a flight to defend themselves. This can be seen recently in the runs on grocery stores in Iceland. That explodes the velocity of money upwards and delivers hyperinflation right in the middle of a recession and/or depression. It is happening right now, just look far North.

See the closing statement in my Formula that was first presented in its entirety in 2006. It addresses this predictable piece of nonsense that you cannot have hyperinflation in a full-fledged depression. This is total balderdash!

GEAB N28 is available! Global systemic crisis Alert – Summer 2009: The US government defaults on its debt
– Public announcement GEAB N28 (October 16, 2008) –

In this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD-denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a « new Dollar » to remedy the problem of default and of induced massive capital drain from the US. The process will result from the following five factors studied in detail further in this GEAB:

  • The recent upward trend of the US Dollar is a direct and temporary consequence of the collapse of stock markets
  • Thanks to its recent « political baptism », the Euro becomes a credible « safe haven » value and therefore provides a « crisis » alternative to the US dollar
  • The US public debt is now swelling uncontrollably
  • The ongoing collapse of US real economy prevents from finding an alternative solution to the country’s defaulting
  • « Strong inflation or hyper-inflation in the US in 2009? », that is the only question.

Studying the case of Iceland can give an idea of the upcoming stages of the crisis. That is what our team has been doing ever since the beginning of 2006. This country indeed provides a good illustration of what the US and the UK should be expecting. It can be considered – and that is what most Icelandic people do today – that the collapse of Iceland’s financial system came from the fact that it was disproportionate to the size of the country’s economy.

Financially speaking, Iceland thought of itself as UK (1), in the same way as, financially speaking, UK thought of itself as the US and the US thought of themselves as the entire world. It is therefore quite useful to study the case of Iceland (2) in order to understand the course of events that London and Washington will follow in the next 12 months (3).

What we see today is a double historical phenomenon:

. on the one hand, since September 2008 (as anticipated in the February 2008 edition of the GEAB – N°22), the whole planet has become aware that a global systemic crisis is unfolding, characterised by the collapse of the US financial system and its contagion to the rest of the world.

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Jim Sinclair’s Commentary

Today it was the Federal Reserve providing funds to the US Treasury which in turn provided the funds to the Exchange Stabilization Fund. The ESF then used the funds to buy key Dow stocks when the US Equity Index open was limit down at minus 550 points. The Exchange Stabilization Fund is legally able to do that.

The article would better titled the “US Treasury Invests in Everything.” That is money into the system, just like buying bonds. The difference is the money goes to the many, not the few.

Treasury Investing in Regional Banks
By Zachary A. Goldfarb, David Cho and Binyamin Appelbaum
Washington Post Staff Writer
Friday, October 24, 2008; 1:15 PM

The Treasury Department plans to announce as early as this afternoon that as many as 22 regional banks — including Capital One of McLean and PNC bank of Pittsburgh — have accepted billions in capital injections from the government that are designed to spur lending and to drive consolidation in the banking industry, according to industry sources.

Separately, Treasury is working on ways to get some of the $700 billion in rescue money granted to it by Congress to insurance companies that are a critical backstop to a wide range of deals, bond issues and leasing arrangements, an industry source said. Treasury officials said that many insurance companies are eligible for government investment because they are regulated as thrift holding companies by the Office of Thrift Supervision.

Concerns about insurers grew this week when Metro and other transit agencies faced demands to pay billions of dollars to their banks as years-old financing deals unraveled. The deals were guaranteed by insurer American International Group, which was taken over by the government last month after it nearly collapsed, and now officials are concerned that other insurers, which report financial results next week, are facing similar problems.

Other banks receiving government money include Regions Bancorp, KeyBank of Cleveland and possibly BB&T, which has a major presence in the Washington area, sources said, speaking on condition of anonymity because the announcement has not been made public. PNC already announced this morning that it would use the Treasury funds to help it buy struggling Midwest bank National City.

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

Jim Sinclair’s Commentary

A small warning: Libor was caught fabricating its data on April 16th 2008. Who knows what lies behind the Libor door when a big lie would be very appreciated by the honest population of Wall Street.

“This game of “smoke and mirrors” took a big blow today with an article that you probably didn’t hear about today. CNBC “bubble-land” TV wouldn’t dare bring this to your attention. The WSJ and Bloomberg reported today that the Libor rate is being misquoted by banks. The Libor is set on the marketplace based on what the banks tell them they paid to borrow. This rate is not set by regulators. The Libor rate is set on trust.

So the banks are lying and saying they are paying a lower rate when they really paid a higher lending rate.

The British Bankers’ Association will speed up the review of the process by which money-market rates are set daily amid concern that some contributors are providing misleading quotes.

The global credit squeeze has raised concern lenders have been manipulating the so-called fixing process to prevent their borrowing costs from escalating, the Bank for International Settlements said in March. Participants have complained about whether banks are submitting accurate information, said Angela Knight, chief executive of the London-based BBA.”
–April 16, 2008

The Libor Lies: Smoke and Mirror Games Continue
Bloomberg
Wednesday, April 16, 2008

Well it was rally time today as the market continues to try to convince itself that the worst is behind us.

I find Wall St. fascinating because so much of it is a game of psychology. Dr. Robert Shiller from Yale describes financial bubbles as mainly being a psychological event. Bubbles tend to start with excitement and profits, are fueled by manias, and then crash in a panic. In between the cycles you will see moments of denial as the people who got in too late refuse to accept that they were the last sucker at the top. Today’s housing market and tech are good examples of this.

I view the stock market right now as being more psychological in how it reacts to news versus your old school technical market. There was a time in the markets where earnings were what mattered and markets were much more predictable as a result.

Today we have a much different market. You have financial TV news networks influencing investment decisions with 100 talking heads that have 100 different opinions. Today’s market also has a much larger pool of short sellers which can make the market move more violently up or down. Finally and most importantly in today’s market you have the the “financial innovation” of Wall St.

This new environment makes things very confusing for the average investor because there is so much information to digest. Its gotten to the point where its almost impossible for any investor(including myself) to predict where we are heading on a short term basis. However, in the long term, fundamentals ALWAYS come back to the market and stocks are then priced appropriately to earnings. Nasdaq 5000 ring a bell?

IMO, Financial innovation’s have become the most dangerous change in the financial markets because it made the stock market more vague or “shady”. Wall St.’s existance is based on trust and confidence. Without trust you would have no financial system. Would you give your money to a bank that you didn’t trust would pay you back?

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