Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

This is only the beginning.

I feel for the money bunnies, some of whom truly believe in the Easter Rabbit and Santa Clause. They don’t have a clue. Green shoots, rear view mirror economic statistics, Goldilocks Economy and all the trite crap run out by the PPT for media consumption to fool the public has fallen on its face.

This is a major wave in which the dollar will trade at least at USDX .7200 with gold at $1224 and $1650 as a minimum.

Sentiment wise, this is the major unwind in which respite will be brief and shallow.

This winter will be cold and hard on the US dollar.

I was invited to speak on Bloomberg today, but see no value in any disturbance to the social order.

It is enough that JSMineset shares it views with you. I am of the mind to do no further public interviews between now and 2012. Any small benefit is overshadowed by the hate it generates among people who do not recognize you have their best interests in mind. Hate is common. There is no need to go looking for these types.

Gold and general equities are not enemies in this period of Currency Event Inflation. At some point, maybe Armstrong’s low, gold and general equities will rise together, just as they did in terms of the Weimar Republic Mark.

Simply stated, dear Family, it has hit the fan.

Dollar stops being Russia’s basic reserve currency

The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said.

In accordance with the report, about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.

The dollar share had increased to 49 percent and remained so as of October 1. The euro share made up 40 percent. The rest of investments were based on the British pound, the Japanese yen and the Swiss frank.

The report also said that the reserve currency assets of the Russian Central Bank were cut by $56.6 billion. The losses mostly occurred at the end of the year, when the Central Bank was forced to conduct massive interventions to curb the run of traders who rushed to buy up foreign currencies. The currency assets of the Central Bank had grown to $537.6 billion by October 2008. Therefore, the index dropped by almost $133 billion within the recent three months.

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Jim Sinclair’s Commentary

Swallow is an understatement. Digested and discarded is more like it.

Consumerism is dead for a considerable time to come and with it the Green Shoots nonsense of the past two months.

It is the constant denial that has complicated the problem.

The cheerleaders for equities on financial TV have blood on their hands. Debt will have to be liquidated as their is no other way.

CHART OF THE DAY: Credit Card Debt Swallows American Households
Joe Weisenthal and Kamelia Angelova

Americans built up a lot of spending power over the last three decades, but it wasn’t because they started earning more money. As today’s chart starkly illustrates, credit card debt has exploded, making up for more modest gains in median household income. As you can see, for the very first time in history, credit card debt is creeping down, though it has a long way to go. And of course, this doesn’t even include home all the home equity loans Americans used in place of the ATM. (Both lines are based on non-adjusted numbers)

dailychart

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Jim Sinclair’s Commentary

Get ready, get set, go and soon!

Please consider that the Taliban have similar plans and look a lot more like Pakistan regulars. The Taliban will have the support of the Pakistan intelligence and military, maybe even more.

U.S. Has Plan to Secure Pakistan Nukes if Country Falls to Taliban

The United States has a detailed plan for infiltrating Pakistan and securing its mobile arsenal of nuclear warheads if it appears the country is about to fall under the control of the Taliban, Al Qaeda or other Islamic extremists.

American intelligence sources say the operation would be conducted by Joint Special Operations Command, the super-secret commando unit headquartered at Fort Bragg, N.C.

JSOC is the military’s chief terrorists hunting squad and has units now operating in Afghanistan on Pakistan’s western border. But a secondary mission is to secure foreign nuclear arsenals — a role for which JSOC operatives have trained in Nevada.

The mission has taken on added importance in recent months, as Islamic extremists have taken territory close to the capital of Islamabad and could destabilize Pakistan’s shaky democracy.

“We have plans to secure them ourselves if things get out of hand,” said a U.S. intelligence source who has deployed to Afghanistan. “That is a big secondary mission for JSOC in Afghanistan.”

The source said JSOC has been updating its mission plan for the day President Obama gives the order to infiltrate Pakistan.

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Jim Sinclair’s Commentary

There is no way. There is no chance.

I am getting the feeling that some of the front fellows are chosen because they really might be lightweights on practical versus academic economics.

Federal and state tax revenues are falling backwards off Mt. Everest.

Geithner Vows to Cut U.S. Deficit on Rating Concern (Update2)
By Robert Schmidt

May 22 (Bloomberg) — Treasury Secretary Timothy Geithner committed to cutting the budget deficit as concern about deteriorating U.S. creditworthiness deepened, and ascribed a sell-off in Treasuries to prospects for an economic recovery.

“It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term,” Geithner said in an interview with Bloomberg Television yesterday. He added that the target is reducing the gap to about 3 percent of gross domestic product, from a projected 12.9 percent this year.

The dollar extended declines today after Treasuries and American stocks slumped on concern the U.S. government’s debt rating may at some point be lowered. Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA grade.

Geithner, 47, also said that the rise in yields on Treasury securities this year “is a sign that things are improving” and that “there is a little less acute concern about the depth of the recession.”

The benchmark 10-year Treasury yield jumped 17 basis points to 3.36 percent yesterday and was unchanged as of 12:18 p.m. in London. The Standard & Poor’s 500 Stock Index fell 1.7 percent to 888.33 yesterday. The dollar tumbled 0.5 percent today to $1.3957 per euro after a 0.8 percent drop yesterday.

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Jim Sinclair’s Commentary

The foolish paper gold and gold share shorts will play their game but they are toast.

Gold is going to a $1224 and $1650 minimum on this phase move here and now. A ballistic up move for gold is inherent in the developing formation.

The gold share shorts have been GLIB in their selection of targets, focusing on leaders to paint the field. Now they are egotistically tied to their selection without fact checking in an objective mind set.

Dollar hits new multimonth low vs euro, pound, yen
May 22 10:42 AM US/Eastern

NEW YORK (AP) – The dollar kept falling Friday, notching fresh multimonth lows against the euro, pound and yen as a warning that Britain’s debt level may result in its credit rating being cut ricocheted into worries about the massive U.S. deficit.

The 16-nation euro rose to $1.4015 in morning trading from $1.3889 in New York late Thursday—its first time above $1.40 since Jan. 2.

The British pound rose to $1.5916 from $1.5890, peaking at $1.5945 earlier in the session, its highest point since Nov. 6.

Meanwhile, the dollar edged up to 94.51 Japanese yen from 94.23 yen—after earlier falling to 93.82, its lowest point since Feb. 23.

On Thursday, Standard & Poor’s said Britain may have its rating cut because of rising debt levels. Though the ratings agency reaffirmed the country’s actual long-term credit rating at “AAA,” it said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis.

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Jim Sinclair’s Commentary

No increase in charges has a snowball’s chance in hell of providing the funds required now or in the future, without a bailout, to provide the funds the FDIC will need. This is pure spin.

FDIC: new fee system to replenish insurance fund

(AP:WASHINGTON) Federal regulators are adopting a new system of special fees paid by U.S. financial institutions that will shift more of the burden to bigger banks to help replenish the deposit insurance fund.

The Federal Deposit Insurance Corp. is meeting to approve the new fee system. It is intended to raise $5.6 billion in the face of a cascade of bank failures that have depleted the insurance fund.

The FDIC now expects bank failures will cost the fund around $70 billion through 2013, up from a previous assessment of around $65 billion.

FDIC Chairman Sheila Bair says: “There will be some shifting of the burden (to major banks). The shift is not huge to them. We’re asking them to pay more.”

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Jim Sinclair’s Commentary

The troops have been very calm but don’t count of this as a given.

44 states lost jobs in April, led by California
May 22, 1:46 PM (ET)
By JEANNINE AVERSA

WASHINGTON (AP) – Forty-four states lost jobs in April, led by California where employers slashed 63,700 positions, as the recession took a further toll on U.S. workers.

Trailing California in over-the-month job losses were: Texas, which saw 39,500 jobs vanish; Michigan, which lost 38,400 jobs; and Ohio, where payrolls fell 25,200, according to a U.S. Labor Department report issued Friday.

The few winners included Arkansas and Montana, followed by Florida – a dose of good news for a state that’s been battered by the housing collapse.

California’s unemployment rate dipped to 11 percent last month, fifth-highest in the country. Michigan’s jobless rate was the highest at 12.9 percent, followed by Oregon at 12 percent, South Carolina at 11.5 percent and Rhode Island at 11.1 percent.

As the recession eats into sales and profits, companies have laid off workers and turned to other cost-cutting measures, such as holding down hours and freezing or trimming pay.

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Jim Sinclair’s Commentary

The best recruiting plan for insurgency is SURGES that displace 2,000,000 people using US equipment and look alike uniforms.

Think about it.

You are put on the road without food or water with your family. Your wife is afraid for her life and for the little ones. You must carry your five year olds because they simply cannot walk anymore.

You will fight against what you see as causing this.

When will the West learn.

The surge will be a major reason in the end for the loss of Pakistan to the West if in fact it ever was for the West.

AP Interview: Insurgents crossing into Pakistan
By FISNIK ABRASHI, Associated Press Writer Fisnik Abrashi, Associated Press Writer – 48 mins ago

BAGRAM AIR BASE, Afghanistan – The top U.S. general in eastern Afghanistan said Friday he saw “some very interesting movement” of insurgents across the border into Pakistan this spring, possibly to join Taliban militants battling government troops. Maj. Gen. Jeffrey Schloesser’s comments come amid concern in Washington and Islamabad that the buildup of 21,000 additional U.S. forces in Afghanistan may push Taliban militants into Pakistan, further destabilizing the border region in that country.

The Obama administration has declared eliminating militant havens in Pakistan vital to its goals of defeating al-Qaida and winning the war in Afghanistan.

Fighters have historically moved back and forth across the border to back Taliban insurgencies in both countries.

But Schloesser’s remarks in an interview with The Associated Press suggested a larger transfer into Pakistan than has been seen previously, as the fighting between Pakistan’s troops and the Taliban has intensified.

He suggested that most of the movement in the past has been from Pakistan into Afghanistan, calling the new development “an interesting movement backward.”

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Jim Sinclair’s Commentary

Here comes another round of foreclosures with the debt upside-down to the home value.

Trouble Ahead: Millions of Mortgages Will Ratchet Upward Soon
Thursday, May 21, 2009 3:00 PM
By: Julie Crawshaw and Dan Weil

Zacks Research analyst Dirk van Dijk warns that another major mortgage crisis lies ahead as huge numbers of homeowners who have been making only minimum payments on their “pick a payment” mortgages have to start paying in full.

This can cause huge jumps in the monthly payment, with increases of over 50 percent not uncommon, van Dijk says, making these the ultimate “exploding mortgages.”

The number of these recasts is relatively small right now at $1 billion per month but will grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011.

“If the equity in your house is gone and your monthly mortgage payment suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen?” van Dijk asks.

The next wave of foreclosures is going to have much higher average loan balances, so each foreclosure will hurt banks more than subprime foreclosures did.

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Jim Sinclair’s Commentary

Truth has never found friends at its inception. The messenger gets the blame when the veracity of the message is proven.

I would like to thank the famous blog, the “Motley Fool” for their support, even if some popular media sees it otherwise.

Jim Sinclair 
Take it from a Fool who knows, those proposing exposure to gold as the ultimate safe haven from currency crises are no strangers to vitriolic opposition. Jim Sinclair, a leading precious-metals expert, has been forecasting $1,650 gold since 2001. Sinclair summarized some of the perspective that readers of his blog enjoy in a Bloomberg Radio interview on Feb. 20. The interview is too packed with golden nuggets to capture in selected passages, so instead I recommend a trip to my blog to discover the treasure yourself.

At this particular moment, when sheer human nature leaves investors susceptible to unchallenged optimism, I believe that insights from these straight-talking messengers provide a critical wake-up call. In tumultuous times, the line between hopefulness and denial can grow quite thin, and Fools are reminded to remain alert.

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Jim Sinclair’s Commentary

Somebody noticed.

Gold visits old relationship with the US dollar
Allen Sykora | May 22, 2009
Article from:  Dow Jones Newswires

GOLD and the US dollar have moved back to their traditional inverse relationship lately, although some analysts say it remains to be seen how long this will last and how strong it will be.

A newly cast gold ingot is cooled in a bath of cold water at Metal-Art, in Budapest, Hungary. Picture: Bloomberg

Historically, gold tended to rise when the US dollar fell as investors turn to the metal as an alternative currency, and vice-versa. But that relationship went by the wayside for much of the last half year as both often moved inversely to the stock market, analysts said.

For instance, the US dollar index rose from a low of 77.688 on December 18 to a high of 89.624 on March 4. In the past, that might have pressured gold. But this time, June gold futures on the Comex division of the New York Mercantile Exchange rose from a December 5 low of $US748 an ounce to a February 20 high of $US1009.80.

Analysts said both gold and the US dollar often were bought as a safe haven during a tumble in equities that eventually carried the Dow Jones Industrial Average to a 12-year low in early March.

“People were using both the US dollar and gold as a store of value because they were worried about a market meltdown,” said Sean Brodrick, natural-resources analyst at Weiss Research and moneyandmarkets.com.

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Posted by & filed under In The News.

The fact that the money and power are leaving for China has escaped everyone in our leadership. They are totally blind to this. They cannot conceive that we have given up the lead to anyone, because we are so perfectly good. This is called Hubris and is a tool of the Gods to destroy any who dare to become Godlike.

cartoon-taxpayer

Dear CIGAs,

Gold is a currency. In fact gold is the ultimate currency. It cannot be expanded to meet the needs of politicians as can paper currency.

Under .8200 the wheels of hyperinflation start to turn.
Under .7200 the impact of hyperinflation is in Main Street.
Under .5200 Zimbabwe Economics reaches the USA.

Gold and the USD as trend events are attached inversely at the hip. Hedge funds have played with that relationship but cannot change it.

Central Banks have NO tools that can drain the liquidity that has been injected into the INTERNATIONAL system over the last two years. Those in Europe that have been more conservative will be less effected even thought they are now derided for their heel dragging.

Asia will rule the economic world.

DJ MARKET TALK: Comex Gold Closes Higher As Dollar Eases

1742 GMT [Dow Jones] – Comex gold recouped some of the previous day’s pullback. "Part of it is the retreating dollar we are seeing today," said Carlos Sanchez, precious-metals analyst with CPM Group. "We were heading toward $1.35 [for the euro versus the dollar], but now are slightly back above $1.36."

Also, gold managed some technical strength when it bounced right back after an overnight dip below its 10-day moving average, says Charles Nedoss, senior account manager and metals analyst with Peak Trading Group. Just ahead of gold’s close, this average stood at $921.30 an ounce. June gold settled up $5 to $926.70. Gold seemed to take its cue from the dollar since equities, which had dictated much of the metal’s direction lately, were largely flat, Nedoss adds. (ALS)

 

Jim Sinclair’s Commentary

Governments have never been able to operate or profitably influence the operation of businesses.

Few in leadership have ever operated at risk businesses, yet nationalization (their business management) in a functional sense has its tentacles now everywhere.

Once you have accepted money or a benefit from the government you have sold your soul.

There is no refund policy.

Fannie and Freddie in ‘critical’ condition
Regulator says companies still suffer from severe operational and financial weaknesses. Recruiting executives also tough.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: May 18, 2009: 4:08 PM ET

NEW YORK (CNNMoney.com) — Fannie Mae and Freddie Mac, charged with helping lead the nation out of its housing crisis, are facing "critical" financial problems, federal regulators said Monday.

The companies suffer from severe financial, operational and compliance weaknesses, the Federal Housing Finance Agency said a report to Congress detailing its annual examinations of the firms. Taken over by the government in September, Fannie and Freddie are not able to operate without federal assistance.

"With new senior management teams, each enterprise has made strides in remediating problems," the agency said. "But they still face numerous significant challenges including building and retaining staff and correcting operational and credit management weaknesses that led to conservatorship."

Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) play a vital role in the national housing market, accounting for a combined share of 73% of mortgage originations in the second half of 2008. They also serve central roles in the Obama administration’s foreclosure prevention plan.

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Jim Sinclair’s Commentary

Green shoots are shot and over for the next seven months of down leg. The point here is what do you think 2000 dealerships devolving into nothingness means in an economy? The 2000 dealerships does not include all that Ford is doing likewise without media coverage.

OTC derivatives are at fault for this and nothing else. What would have been a mild four year recession is now a multi decade disaster.

The OTC derivative dealers have all been bailed out and are as rich as cream, safe in their Greenwich, CT mansions. The OTC derivative manufacturers and distributors have become billionaires while this poor guy and a multitude like him are going straight down the drain. Take this story and times it by 2000, then think of the additional fallout the domino effect has in each town and village. Car dealerships are not small potatoes.

Housing and Autos were the drivers of the big boom of the 2000s. They are both the victims of OTC derivatives and now the downward spiral drivers of a disaster yet to be admitted to as the cause is still out there flourishing.

Nothing at all has been done to help this fellow and therefore nothing has been done to help the economy outside of more fancy paper shuffling of the Wall Street ilk mucking up everything it touches as usual.

God help us all.

Letter from a Dodge dealer
May 19, 2009

letter to the editor

My name is George C. Joseph. I am the sole owner of Sunshine Dodge-Isuzu, a family owned and operated business in Melbourne, Florida. My family bought and paid for this automobile franchise 35 years ago in 1974. I am the second generation to manage this business.

We currently employ 50+ people and before the economic slowdown we employed over 70 local people. We are active in the community and the local chamber of commerce. We deal with several dozen local vendors on a day to day basis and many more during a month.  All depend on our business for part of their livelihood.  We are financially strong with great respect in the market place and community.  We have strong local presence and stability.

I work every day the store is open, nine to ten hours a day. I know most of our customers and all our employees.  Sunshine Dodge is my life.

On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them. My new vehicle inventory consists of 125 vehicles with a financed balance of 3 million dollars. This inventory becomes impossible to sell with no factory incentives beyond June 9, 2009. Without the Dodge franchise we can no longer sell a new Dodge as "new," nor will we be able to do any warranty service work. Additionally, my Dodge parts inventory, (approximately $300,000.) is virtually worthless without the ability to perform warranty service. There is no offer from Chrysler to buy back the vehicles or parts inventory.

Our facility was recently totally renovated at Chrysler’s insistence, incurring a multi-million dollar debt in the form of a mortgage at Sun Trust Bank.

HOW IN THE UNITED STATES OF AMERICA CAN THIS HAPPEN?

THIS IS A PRIVATE BUSINESS NOT A GOVERNMENT ENTITY

This is beyond imagination! My business is being stolen from me through NO FAULT OF OUR OWN. We did NOTHING wrong.

This atrocity will most likely force my family into bankruptcy.  This will also cause our 50+ employees to be unemployed. How will they provide for their families?  This is a total economic disaster.

HOW CAN THIS HAPPEN IN A FREE MARKET ECONOMY IN THE UNITED STATES OF AMERICA?

I beseech your help, and look forward to your reply. Thank you.

Sincerely,

George C. Joseph
President & Owner
Sunshine Dodge-Isuzu

Jim Sinclair’s Commentary

FASB will certainly go to hell for this. There is no redemption for canning the mark to market requirements.

FASB tightens off-balance-sheet loan rules
05/19/2009

WASHINGTON_The board that sets U.S. accounting standards on Monday moved to end companies’ use of a device that allowed them to park hundreds of billions of dollars in loans off their balance sheets without capital cushions and has been blamed for helping stoke banks’ losses in the housing boom.

The change will tighten the use of so-called "qualifying special purpose entities" by requiring companies to report to regulators the loans contained in them and to increase their capital reserves in proportion as a cushion against potential losses.

It was the lack of disclosure and absence of capital supporting ballooning subprime mortgage loans in these special entities that aggravated the massive losses sustained by banks, regulators say.

The change by the Financial Accounting Standards Board could result in about $900 billion in assets being brought onto the balance sheets of the nation’s 19 largest banks, according to federal regulators. The information was provided by Citigroup Inc., JPMorgan Chase & Co. and 17 other institutions during the government’s recent "stress tests," an analysis designed to determine which banks would need more capital if the economy worsened.

In its quarterly regulatory filing earlier this month, Citigroup said the rule change could have "a significant impact" on its financial statements. Citigroup estimated it would result in the recognition of $165.8 billion in additional assets, including $90.5 billion in credit card loans.

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Jim Sinclair’s Commentary

I would pay a reasonable premium for this assurance.

$4bn Swiss Gold ETF: Paranoia premium or plain expensive?
By Rob Mackinlay 19 May 2009

One of Europe’s largest and fastest growing physical gold ETFs is facing an industry backlash after suggesting that its higher trading costs are justified because its product is ‘safer’, in a case that throws the spotlight on charges paid by investors for different funds holding the same underlying asset.

The performance of physical gold exchange traded funds (ETFs) should not deviate much as they all aim to track the same underlying commodity and many of the products charge the same 0.4 per cent annual management fee.

This leaves investors with a handful of factors to consider when choosing a physical gold ETF, including trading costs and security. For buy and hold investors – and the many extremely risk averse investors buying these products – security is the key. For investors looking for quick returns, the trading cost will be the decider.

Until now investors would not have seen these two issues as being in conflict. But statements by Swiss ETF provider ZKB have raised the stakes by suggesting that this is indeed the case – security versus trading costs – and the ETF industry is now embroiled in a debate over the merits of the argument.

With many physical gold ETF investors paranoid about fundamental security issues (Could owning gold be banned? Hedge fund warning) anything that eases their minds could command a premium. One of Europe’s largest and fastest growing gold-backed ETFs, the Swiss  ZKB Gold ETF, has sparked a heated debate by suggesting that its product does just this, and that it is safer than its peers.

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Jim Sinclair’s Commentary

This article is right on the money.

It is too bad, but the West defines everything according to their reality. It is unfortunate that the West’s reality has no application at all in Pakistan, Iran, Iraq and Afghanistan.

U.S. stirs a hornet’s nest in Pakistan
ERIC MARGOLIS
MAY 18, 2009

PARIS — Pakistan finally bowed to Washington’s angry demands last week by unleashing its military against rebellious Pashtun tribesmen of North-West Frontier Province (NWFP) — collectively mislabelled "Taliban" in the West.

The Obama administration had threatened to stop $2 billion US annual cash payments to bankrupt Pakistan’s political and military leadership and block $6.5 billion future aid, unless Islamabad sent its soldiers into Pakistan’s turbulent NWFP along the Afghan frontier.

The result was a bloodbath: Some 1,000 "terrorists" killed (read: mostly civilians) and 1.2 million people — most of Swat’s population — made refugees.

Pakistan’s U.S.-rented armed forces have scored a brilliant victory against their own people. Too bad they don’t do as well in wars against India. Blasting civilians, however, is much safer and more profitable.

Unable to pacify Afghanistan’s Pashtun tribes (a.k.a. Taliban), a deeply frustrated Washington has begun tearing Pakistan apart in an effort to end Pashtun resistance in both nations. CIA drone aircraft have so far killed over 700 Pakistani Pashtun. Only 6% were militants, according to Pakistan’s media, the rest civilians.

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Jim Sinclair’s Commentary

Yes, another present from our OTC derivative manufacturers and distributors as an increase in crime comes with increased unemployment and a decreased police presence.

VIOLENT CRIME WAVE JOLTS TRENDY DOWNTOWN
By JAMIE SCHRAM and MURRAY WEISS
Last updated: 9:03 am May 19, 2009

Downtown Manhattan, the city’s party mecca, has been hit by an alarming spike in vicious street violence.

Assaults in Greenwich Village lead the frightening upturn, with a whopping 43 percent increase so far this year compared with the same period in 2008.

"I’ve never seen it like this before — never, ever," said G. Simon Chafik, a female photographer who has lived in Manhattan for 15 years.

"I’m a big New Yorker. New York is one of the safest cities. [But] I’m beginning to question that."

Other hot Manhattan neighborhoods tainted by the crime wave include TriBeCa, with a nearly 17 percent jump, and Gramercy, which has seen a 24 percent increase in assaults.

The danger zones also include the East Village from East 14th Street to Houston Street and the East River to Broadway, which has seen a 27.7 percent rise, from 47 to 60 assaults.

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Jim Sinclair’s Commentary

The Devil is always hiding in the details, but a nice headline to see in the Wall Street Journal anyway.

China Gold Reserves May Back Yuan Internationalization-Report
MAY 17, 2009, 10:54 P.M. ET

SHANGHAI (Dow Jones)–China’s gold reserves may serve as backing for the yuan as Beijing promotes its use overseas, said Zheng Lianghao, managing director of the World Gold Council’s Far East division, the Shanghai Securities News reported Monday.

Zheng, who was speaking at a forum over the weekend, said increasing gold holdings would provide China with a useful hedge as the dollar faced the possibility of depreciation, according to the report.

In late April, the official Xinhua News Agency quoted Hu Xiaolian, the head of China’s foreign exchange agency, as saying China’s gold reserves had risen 454 metric tons since 2003 to 1,054 tons.

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Jim Sinclair’s Commentary

South Florida, the crime capital of the USA (outside of Washington) fires police, keeps politicians?

The Long Layoff Arm of the Law
The Broward Sheriff’s Office told 177 employees Monday that their services were no longer needed
By TODD WRIGHT
Updated 5:45 PM EDT, Mon, May 18, 2009

Times are so hard, even the lawman has had to swing a heavy ax.

The Broward Sheriff’s Office notified 177 employees on Monday that they will be laid off as part of a cost-cutting measure to meet the 2010 budget. The employees’ last day will be July 31.

The cuts include 48 current deputies currently patrolling the streets. In total, BSO is eliminating 264 positions, 77 of which were tabbed for deputies, said BSO spokesman Jim Leljedal. Some of the positions were vacant.

Broward Sheriff Al Lamberti warned county commissioners it would come to this when they asked him to cut $54 million from his budget. BSO still employees over 5,000 people, including law enforcement and fire rescue personnel, but losing so many can’t help but have a detrimental impact on service and safety.

One old saying goes, you never miss a cop until you need one. Well these cuts will put that adage to the test.

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Jim Sinclair’s Commentary

The filth coming out of pay to play is going to be topped only by the horrid condition of what is left of the asset value of pension funds not required to mark to market.

How Pension Placement Agent Exploited Political Ties
By Martin Z. Braun and Gillian Wee

May 18 (Bloomberg) — After raising more than $1 billion for Democratic candidates, Eileen Kotecki transformed herself into a marketer for hedge funds and private-equity firms, eventually racking up more than $6.5 billion in sales.

Within weeks of wrapping up the 2000 campaign, Kotecki’s own attorneys said later in a lawsuit, she had begun “seeking to exploit” an “impressive network of contacts” gained in part from “extensive experience as a political fundraiser” to sell investment services to public pension funds and endowments.

Taking advantage of political work for private gain isn’t illegal. Yet Kotecki’s career shift from former Vice President Al Gore’s chief fundraiser into the placement-agent business illustrates how it has become the province of the well- connected, including campaign operatives, out-of-office politicians, former public pension officials and even a Pro Football Hall of Fame wide receiver.

“When you look at some of who the placement agents are, you say these are people who are really not in the financial business,” said Orin Kramer, who oversees pensions as head of New Jersey’s Investment Council. “These are politically connected intermediaries, and that’s not a way it ought to operate.”

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Posted by & filed under In The News.

Dear CIGAs,

To answer questions from Cape Town, RSA today:

1. I have said for a considerable period of time that gold will trade at or above $1650 by January 14th 2011. I started saying this so far back it looked nuts.

That statement means exactly what is says. It is not hedged in any way.

2. Martin Armstrong is a market timer. Specifically, he times "SENTIMENT." Sentiment makes markets happen so his highs and lows need not be on the day (many are). They will be close.

Gold requires a lack of confidence in other alternatives such as the US dollar. Gold can be roughly attached to Armstrong’s changes in sentiment. Long term gold is attached in the inverse to Armstrong’s trends, especially under today’s unique and unprecedented circumstances.

3. Alf Field’s prediction of prices have been outstanding. Gold can do what he has outlined. My commitment to you is $1650.

Are we clear now?

Jim Sinclair’s Commentary

They are going to clean up as usual. The first low was on April 19th and the take off is in June. $1650 will be reached on or before January 14th, 2011. In all likelihood, the number will probably be much higher. The inside always knows. What more do you need to know?

Hedge Funds Making Big Bets on Gold
By Joseph Checkler
Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Hedge fund firms Paulson & Co. and Lone Pine Capital made big bets on gold during the first quarter, becoming the No. 1 and No. 2 shareholders, respectively, in the SPDR Gold Trust (GLD) exchange-traded fund, according to regulatory filings.

Paulson & Co. – run by John Paulson, who had already been beefing up his exposure to gold companies – bought 31.5 million shares of the ETF during the first quarter, according to its mandatory end-of-first-quarter holdings report with the Securities and Exchange Commission. That stake would be worth more than $2.8 billion if Paulson still holds all those shares at present.

Stephen Mandel’s Lone Pine bought 26.5 million shares of the ETF, which would be worth $2.4 billion if it still holds those shares. Lone Pine didn’t immediately return a message seeking comment.

Many hedge fund managers have been increasing their gold investments lately. More than 28% of the SPDR Gold Trust ETF’s outstanding stock was owned by hedge funds as of the end of the first quarter, according to Factset Research Systems.

The increased bets on gold come as the price of the yellow metal have remained high, above $900 an ounce. Funds also see hard assets as insurance against further turmoil in the financial system, including a decline in the value of paper currency.

Most active investing in gold has been by Paulson.

In March, Paulson paid $1.3 billion to buy Anglo American PLC’s (AAUK) remaining stake in South African miner AngloGold Ashanti Ltd. (AU). Paulson also recently introduced to investors a new share class pegged on the price of gold.

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Jim Sinclair’s Commentary

10% of credit card debt gone bad is outrageous, most certainly if the 2nd leg of the collapse in SENTIMENT is starting TODAY!

American Express to cut 4,000 jobs
Mon May 18 22:38:11 UTC 2009
By Jonathan Stempel

NEW YORK (Reuters) – American Express Co, the credit card and travel services company, on Monday said it plans to eliminate 4,000 jobs, or 6 percent of its workforce, as the weakened economy causes higher customer defaults.

The cuts are part of the New York-based company’s plan to save $800 million over the rest of 2009. They are in addition to 7,000 job cuts and an expected $1.8 billion of savings from a restructuring it announced in October.

Like many rivals, American Express has been hurt by rising delinquencies among cardholders, with the U.S. unemployment rate having risen to its highest level since 1983.

On Friday, American Express said its net charge-off rate, or debt it does not expect to be repaid, rose to 10.1 percent in April from 8.8 percent in March.

"We continue to be very cautious about the economic outlook," Chief Executive Kenneth Chenault said in a statement. He said the cost savings "will be reinvested in the business to make sure we can take competitive advantage of opportunities as the economy begins to rebound."

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Jim Sinclair’s Commentary

This is a grotesque result of Wall Street’s take over deal of Washington Inc. and total lack of any consideration for the victims of their deeds.

There are scared families out there right now. There are tears out there in fear of how the family will survive the loss of work by the wage earners.

Marriages have difficulty surviving hard downtimes in economics.

There are fixed income people out there hoping to die soon because they cannot afford to live much longer.

But up in Greenwich CT, they are high fiving over the screwing they have given the world.

Where is your rage?

Geithner’s gift to Wall Street
As the first TALF-backed deals for Ford, Honda and Harley’s debt hit the market, professional investors see an opportunity to make a killing.
By William D. Cohan, contributor
Last Updated: May 18, 2009: 10:39 AM ET

NEW YORK (Fortune) — Imagine if you were not really in the market for a house but the government came along and said that it would finance 94% of a home’s purchase price with a mortgage rate of less than 3%. Still not interested? Wait, Uncle Sam has some additional sweeteners: if you do the deal and buy the house for only 6% down, you also get the equivalent of rental income every month to the tune of at least an annualized yield of 10% of the purchase price.

But wait there’s still more: if, say, after two years, you decide you don’t want the house any longer, you can just walk away from it. No need to pay the balance of the mortgage (it won’t affect your credit rating), and you can keep the rental income received to date.

That’s essentially the deal that Treasury Secretary Timothy Geithner has offered qualified professional investors who participate in the so-called TALF (Term Asset-Backed Securities Loan Facility). Two months into the program as the first TALF- backed deals hit the market, you can see why the likes of hedge fund Fortress Investment Group are drooling over it. "I’m a big believer in the impact that TALF can and should have," Fortress CEO Wes Edens said on a May 6 investor call, adding that he expects that Fortress will be "a big participant" in the TALF program "three to six months from now."

The first few TALF deals — one for Ford Credit (the financing arm of the automaker), another for American Honda Receivables Corp., a third for the student loan company Sallie Mae and a fourth for motorcycle icon Harley Davidson — shed some light on our tax dollars at work.

"I’ve had accounts that dropped everything they were doing to take a look at this TALF financing," one Wall Street trader explained. "It was like nothing they had ever seen. It beats any financing that the private sector could ever come up with. I almost want to say it is irresponsible." For instance, Prudential Financial, Inc. (PRU, Fortune 500), the large insurer and investment manager, borrowed $786 million from the TALF as of March 31 and put up only $50 million to do so, some 6.4% of the deals.

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Jim Sinclair’s Commentary

You think it might be a better idea to consider a guarantee for China than planting foolish media articles telling them to stuff it?

There is a better chance that the dollar is going to get stuffed, and magically China and Brazil will reveal it has only a few of those things left.

Where is the international police force for illicitly manufactured financial statistics?

They might be too busy busting the West to attend others.

Brazil and China eye plan to axe dollar
By Jonathan Wheatley in São Paulo
Published: May 18 2009 18:24 | Last updated: May 18 2009 23:31

Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president.

The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency.

Mr Lula da Silva, who is visiting Beijing this week, and Hu Jintao, China’s president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month.

An official at Brazil’s central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil.

“Currency swaps are not necessarily trade related,” the official said. “The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi.”

Henrique Meirelles and Zhou Xiaochuan, governors of the two countries’ central banks, were expected to meet soon to discuss the matter, the official said.

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Jim Sinclair’s Commentary

Did you notice that Martin Armstrong suggests today is the high for green shoots? If you didn’t then go back to the "click to" chart below and get out your magnifying glasses.

Whatever happened to the promise of Fiscal Stimulation?

The answer is easy, Wall Street stole it and only Wall Street benefits from it.

"The Worst Is Yet to Come": If You’re Not Petrified, You’re Not Paying Attention
Posted May 15, 2009 09:31am EDT
by Aaron Task

The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.

"We’re in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn’t petrified, he or she is a damn fool."

Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

This outlook is based on the following main points:

* With the unemployment rate rising into double digits – and that’s not counting the millions of "underemployed" Americans – consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.
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Jim Sinclair’s Commentary

This pretty much says it all.

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Jim Sinclair’s Commentary

It starts as an investment, but becomes insurance. The policy pays off. Trading your insurance policy is not advisable.

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Jim Sinclair’s Commentary

This is today’s market, all of it from bonds to Gold and equities.

The mood of the homebuilder’s sentiments versus expectations is just ebullient.

Of course it is because the equity market rallied.

Of course the equity market rallied but it cost north of USD $10 trillion to accomplish it.

The Libor rate looks like it fell through a black hole in the floor.

Of Course it does because it cost north of $10 trillion to produce that.

Now that a Sentiment Index is reported ebullient (versus expectations of course) who needs gold?

Mr. Armstrong, you are the master of timing, what is your opinion on economic sentiment?

Click here to view today’s piece from Martin Armstrong

  armstrong.jpg

Here is a question of manners:

Many of you call me with blocked numbers on my caller ID. You are entering my privacy but I cannot see who you are. Isn’t there something a tad wrong with that?

I let those calls go into the machine for return at a later time if the caller is known to me.

China and Treasuries today:

Here is an answer to today’s many inquiries.

The Wall Street party-line has always been that since the US has stuffed China with US Treasuries, China has no choice but to shut up, suck it up and choke on them. Hey, what is a trillion today anyway?

That viewpoint is extremely short sighted. Central banks have many alternative methods to offload dollar items than looking for buyers in the Forex or US Treasury world markets. This is most certainly true for those that finance international business of their quasi government private sector

Let us not forget buying gold as one way to pay in dollars that results in diversification of reserve assets.

Treasury instruments are fungible as collateral items into whatever currency is required in trade.

When I have discussed transactions with Chinese nationals in China a meeting with a personality of or at the China Trade Bank is standard fare.

Jim Sinclair’s Commentary

The Funds will of course be diverted. About that there is no question. It is an ages old tradition.

The management retirement program is the most probable recipient of the diversion judging on past performance of the similar.

Pakistan Is Rapidly Adding Nuclear Arms, U.S. Says
By THOM SHANKER and DAVID E. SANGER
Published: May 17, 2009

WASHINGTON — Members of Congress have been told in confidential briefings that Pakistan is rapidly adding to its nuclear arsenal even while racked by insurgency, raising questions on Capitol Hill about whether billions of dollars in proposed military aid might be diverted to Pakistan’s nuclear program.

Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, confirmed the assessment of the expanded arsenal in a one-word answer to a question on Thursday in the midst of lengthy Senate testimony. Sitting beside Defense Secretary Robert M. Gates, he was asked whether he had seen evidence of an increase in the size of the Pakistani nuclear arsenal.

“Yes,” he said quickly, adding nothing, clearly cognizant of Pakistan’s sensitivity to any discussion about the country’s nuclear strategy or security.

Inside the Obama administration, some officials say, Pakistan’s drive to spend heavily on new nuclear arms has been a source of growing concern, because the country is producing more nuclear material at a time when Washington is increasingly focused on trying to assure the security of an arsenal of 80 to 100 weapons so that they will never fall into the hands of Islamic insurgents.

The administration’s effort is complicated by the fact that Pakistan is producing an unknown amount of new bomb-grade uranium and, once a series of new reactors is completed, bomb-grade plutonium for a new generation of weapons. President Obama has called for passage of a treaty that would stop all nations from producing more fissile material — the hardest part of making a nuclear weapon — but so far has said nothing in public about Pakistan’s activities.

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Jim Sinclair’s Commentary

The most important points to consider are:

1. How do you guarantee US Treasuries with US dollars? Is it at an agreed relationship to the Yuan? Does that not sound somewhat like the old takeover deals where value was set and more shares issued if the value of the acquiring company declined below certain levels over time? The other method would be gold equal to face value and the final method would be the surrender of Treasuries for gold at a set value.

2. The Ruble as a reserve currency seems somewhat strange. In fact, why would any nation want that burden? If the Ruble was to be in some form tied to a basket of commodities such as oil and gold there might be a strategy.

3. The apparent estrangement taking place between the US Administration and Israel.

China’s Stockpiles Are New Sovereign Wealth Strategy, RBC Says
By Kevin Hamlin

May 18 (Bloomberg) — China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.

“It’s part of an overall desire to decrease its exposure to dollar assets,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong, in an interview today. China fears the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause “higher inflation and a weaker dollar,” he said.

Premier Wen Jiabao has said he is “worried” about the safety of the nation’s $767.9 billion in holdings of U.S. Treasuries and called on the U.S. “to guarantee the safety of China’s assets.” Central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.

“Increased spending on commodities represents a reallocation of China’s sovereign wealth away from the accumulation of financial assets,” Jackson said in a May 15 research note.

China, the world’s biggest consumer of iron ore, boosted imports of the material to a record 57 million metric tons in April. China’s purchases of copper and copper products reached a record 399,833 metric tons last month, compared with 374,957 tons in March.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

1. Pakistan goes Taliban.
2. Israel makes a significant miscalculation
3. Turkey is a Victim
4. And 2011 is delivered to us

Obama warns Netanyahu: Don’t surprise me with Iran strike 

U.S. President Barack Obama has sent a message to Prime Minister Benjamin Netanyahu demanding that Israel not surprise the U.S. with an Israeli military operation against Iran. The message was conveyed by a senior American official who met in Israel with Netanyahu, ministers and other senior officials. Earlier, Netanyahu’s envoy visited Washington and met with National Security Adviser James Jones and with Secretary of State Hillary Clinton, and discussed the dialogue Obama has initiated with Tehran.

The message from the American envoy to the prime minister reveals U.S. concern that Israel could lose patience and act against Iran. It is important to the Americans that they not be caught off guard and find themselves facing facts on the ground at the last minute.

Obama did not wait for his White House meeting with Netanyahu, scheduled for next Monday, to deliver his message, but rather sent it ahead of time with his envoy.

It may be assumed that Obama is disturbed by the positions Netanyahu expressed before his election vis-a-vis Tehran – for example, Netanyahu’s statement that "If elected I pledge that Iran will not attain nuclear arms, and that includes whatever is necessary for this statement to be carried out." After taking office, on Holocaust Memorial Day Netanyahu said: "We will not allow Holocaust-deniers to carry out another holocaust."

Netanyahu and Defense Minister Ehud Barak do not oppose American dialogue with Tehran, but they believe it should be conducted within a limited window of time, making it clear to Iran that if it does not stop its nuclear program, severe sanctions will be imposed and other alternatives will be considered.

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Posted by & filed under In The News.

Dear CIGAs,

This morning GM sent out pink slips to 1000 dealers. That is an economic disaster for 1000 dealers. This really bad news is released as a positive accomplishment. The s**t canned dealers have no recourse as all they can sue is Bad Company GM with so little assets that it is practically litigation proof.

Chrysler has 44,000 vehicles on closed dealer’s lots.

This morning some of the 12 insurance companies that have applied for a Federal bailout (also known as TARP funds) were approved. All that means is they are really in bad financial shape. This news was also released as a good thing. Sure it is good if you like hyperinflation as TARP is one of the fodders for this development.

Is there any question out there why the Chinese want a guarantee on their Federal Treasury instruments?

 

Jim Sinclair’s Commentary

Rather than being less of a problem, Pakistan has been made more dangerous by the surge strategy.

This is exactly what extremists want. It falls perfectly into their aggressive strategy by alienating the displaced against the Pakistan Government on the basis of pain and suffering.

The West simply does not understand.

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Jim Sinclair’s Commentary

The gold link is inherent and workable in the Federal Reserve Gold Certificate Ratio, modernized and revitalized as I have presented to you. It is coming!

China stirs a pot of gold
By John Browne

This week, based on indicators of improving Chinese manufacturing activity, commodity and stock markets surged in the Pacific Rim. It appears that China’s recession-fighting policies are being judged successful. The 41% rally in Chinese stocks in 2009 from the 2008 lows dwarfs the single-digit rallies in the US and Europe. With Western economies still sluggish, eyes are turning eastward for solutions to the global economic riddle. As such, recent hints at the direction of Chinese monetary policy should be closely regarded.

At the recent Group of 20 London meetings, China called for a new international monetary order with a gold link. This was followed by the sudden disclosure that China had used part of its huge gold output to boost its own reserves by some 600 metric tons, a 75% increase in total holdings since 2003. In his first 100 days in office, President Barack Obama’s administration has injected nearly US$40 billion each day into US economy. Given the inflationary impact that such a torrent of new cash will spark, it is logical that the Chinese hedge its $1 trillion position with a more reliable store of value.

International money continues to flood towards the Chinese economic sphere, leaving the "old" industrial economies of America and Europe out in the cold. The cause is quite simple: the economies of America and China are mirror images of each other. The China-centric countries are producer-dominated and America is consumer-dominated. Over time, this dichotomy is producing massive shifts in global wealth.

For a century, American administrations have relied on the inflationary powers of paper money to finance consumer growth. The fact that the US dollar is the world’s reserve currency enabled this scheme to persist for longer than would have been tolerated otherwise. The "stimulus and bailout agenda of George W Bush and Obama is the same practice on overdrive. While driving the country further into debt, it also ensures that it will be progressively less competitive in the global economy.

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Jim Sinclair’s Commentary

Hyperinflation is national bankruptcy for restructuring under a new political system. Sounds like a plan to me.

Many would have said that the banking system could not go broke, that motors could not go broke and that insurance companies could not go broke, but they all did, are being hyper-inflated to look functional, and reorganized into a different system.

If this is the case, then why not the government as well?

Now do you see why the Chinese want guarantees?

Obama Says U.S. Long-Term Debt Load ‘Unsustainable’ (Update2)
By Roger Runningen and Hans Nichols

May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

Earlier this week, the Obama administration revised its own budget estimates and raised the projected deficit for this year to a record $1.84 trillion, up 5 percent from the February estimate. The revision for the 2010 fiscal year estimated the deficit at $1.26 trillion, up 7.4 percent from the February figure. The White House Office of Management and Budget also projected next year’s budget will end up at $3.59 trillion, compared with the $3.55 trillion it estimated previously.

Two weeks ago, the president proposed $17 billion in budget cuts, with plans to eliminate or reduce 121 federal programs. Republicans ridiculed the amount, saying that it represented one-half of 1 percent of the entire budget. They noted that Obama is seeking an $81 billion increase in other spending.

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Jim Sinclair’s Commentary

The following is a detailed and fully explanatory subscription service of the unaltered economic indicators, without which you really cannot know what is happening business-wise.

– April CPI-U Annual Deflation of 0.7% versus SGS-Alternate Estimate of 6.7% Inflation 
– Seasonal Factors Mask Rising Monthly Energy Costs 
– Peak-to-April Industrial Production Is Down a Depression-Like 16%
http://www.shadowstats.com/

Jim Sinclair’s Commentary

According the London Telegraph:
“It’s a sham. The banks are insolvent."

Geithner enriches speculators in "sham" bank bail-outs
13/05/2009 | By Ambrose Evans-Pritchard in Doha | finance

“It’s a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds.

"We’re going to see a catastrophic increase in the number of LBO’s (leveraged buyouts) going into default because they’re knee-deep in debt and no solution exists since they can’t refinance.”

“The US government has thrown 29pc of GDP at this crisis compared to 8pc in the early 1930s. The Fed’s balance sheet has risen from $900bn to $2.7 trillion to bail out the system. America has to do it because the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road,”

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Jim Sinclair’s Commentary

This is exactly what the Taliban wants to see happen. The present strategy is handing Pakistan to the Taliban gift wrapped.

Pakistan’s Taliban Fight Threatens Key Economic Zone
MAY 15, 2009, 8:20 A.M. ET
By DAVID ROMAN

Pakistan’s widening fight against the Taliban is threatening key areas for the country’s economy, potentially turning a long-running dispute into an economic and fiscal crisis.

While foreign investors have shied away from Pakistan for months due to political turmoil and security concerns, the economy has so far avoided recession in the global downturn and Karachi shares have gained this year. But with recent advances, Islamic militants can now harass Pakistan’s economic heartland, potentially causing significant damage to government finances.

This could dry up the country’s already meager tax revenues, sending Islamabad back to the International Monetary Fund and other donors for another bailout, some analysts say.

The Taliban have long been a factor in Pakistan’s lawless tribal areas bordering Afghanistan, but this area is of little economic importance. More recent moves into the North West Frontier Province, accounting for 10% of the country’s economy, are more serious.

"If the Pakistanis lose control of the NWFP, then these areas will become a mini-Afghanistan," said Kamran Bokhari, director of the Middle East and South Asia department at global intelligence company Stratfor. "Then the core of Pakistan becomes vulnerable."

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Jim Sinclair’s Commentary

Gold is global. The Crimex (COMEX) is local. Global will squash local.

Survey: Over Two-Thirds of Chinese Economists Favor Gold Over US Bonds
By CSC staff, Shanghai, Published: March 02,2009

In a survey of major Chinese economists, more than two-thirds are reportedly bearish on the prospect of China increasing its holdings of US government bonds, and believe instead the nation should putting more of its hard-earned into gold.

According to a China Business News survey of 70 Chinese economists (including one foreign economist), the exact figure is 71.4% anti-bonds and pro-gold.

The use of China’s huge foreign exchange reserve is a topic of concern and controversy. The remaining 28.6% of those polled believe China should continue to buy U.S. Treasury bonds.38.6% think that China should not continue to buy, but also should not to sell US bonds.32.8% believe that China should unload the bonds, 22.8% of whom think we should have a slight sell-off, while 10% think China should drop them like a bad habit.

All this is against a backdrop of China surpassing Japan to become America’s largest US bond holder and of the ever-widening global financial kerfuffle.

The survey also brings to light the question of whether China’s gold reserves should be increased. Recent gold futures prices broke through US$1000/ounce, making gold the most outstanding asset in the financial turmoil. One economist thinks China’s current gold reserve of 600 tons is an unnecessary load and that the opportunity should be grasped to sell off a bunch of it at a good price.

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Posted by & filed under In The News.

Dear CIGAs,

The Financial Bubble Machine is cooking like never before in history. The result is higher prices even if Miss Cleo has less clients.

Hyperinflation is a currency event. It is not the product of increased business demand for anything. Right now we are fighting the battle at .8200 on the USDX.

When this battle is lost the drama above starts.

Lose it will. If not tomorrow, then very soon.

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Jim Sinclair’s Commentary

You are going to hear the term "Legacy Assets" a lot more in the near future.

Here is the formal definition:

Q: What is legacy assets?

A: Legacy assets are those assets which are less productive (outdated) and in some cases least productive overtime, they are just on the brink of being a liability.

When assets lose considerable value they are often termed as legacy assets.

Literal meaning of the word legacy is outdated or obsolete.

The informal definition is "worthless OTC derivative junk paper."

Jim Sinclair’s Commentary

Whatever it is, wherever it is, if it fits into the matrix of the OTC derivative meltdown it is being bailed out.

This has nothing to do with altruism; it is credit default derivatives that matter.

Who is going to bail out the US dollar? Not the Chinese.

Treasury plans help for muni bond market
By Tom Braithwaite in Washington and Nicole Bullock in New York
Published: May 15 2009 00:56 | Last updated: May 15 2009 00:56

The US Treasury would provide a backstop to stricken states like California, which are struggling to raise debt, under legislation due to be introduced to Congress.

Proposals published on Thursday would see the Treasury acting as a reinsurer in the market and the Federal Reserve setting up bond purchase agreements, which were commonly provided by banks until the credit crisis.

The changes present an even greater use of federal money and oversight into new areas of the market, with billions of dollars from the $700bn troubled assets relief programme – which has been used to buy stakes in banks and car companies.

Rating agencies would also come under pressure to improve state and local governments’ credit ratings, with the Securities and Exchange Commission tasked with checking that they are not assigning too high a risk of default compared with corporate bonds.

Barney Frank, the Democratic chairman of the House Financial Services Committee, who supports legislation, said that he would hold hearings into the changes on May 21.

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Jim Sinclair’s Commentary

Wall Street’s solution to "Melt Down America" is to cause the greatest bubble burst of all time.

The final result will be hyperinflation. About that there is no question at all.

It is economic law that has been all but forgotten for years that is just about to resurface with a bang.

Easy Money Did Us In – Geithner
May 14, 2009

In an interview with Charlie Rose on Tuesday, Tim Geithner admitted the bubble was caused by Greenspan’s easy money policy. Unfortunately, Charlie didn’t ask the obvious follow-up: “Why will this time be different? Why will Bernanke’s easy money policy lead to different results?”

Rose: “Looking back, what are the mistakes and what should you have done more of? Where were your instincts right, but you didn’t go far enough?”

Geithner: “…I would say there were three types of broad errors of policy and policy both here and around the world. One was that monetary policy around the world was too loose too long. And that created this just huge boom in asset prices, money chasing risk. People trying to get a higher return. That was just overwhelmingly powerful.”

Rose: “It was too easy.”

Geithner: “It was too easy, yes….

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Jim Sinclair’s Commentary

Here is a map accurate to today. 1,300,000 people displaced. Pakistan refuses to divulged where the nukes are to US. The UN calls the displaced people a major humanitarian problem and the surge results in strengthening the Taliban recruiting program.

Pakistan conflict map

Research by the BBC Urdu’s service into the growing strength of Taleban militants in north western Pakistan shows that only 38% of the area remains under full government control.

This map of the area is a snapshot of the current situation. However, with ongoing fighting between the Pakistan armed forces and the Taleban the situation on the ground could change in the future.

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Jim Sinclair’s Commentary

When I give you a resource on a certain strength why do many of you immediately believe the person is a sage on all subjects, quoting everything they say as gospel and running to me with your unfounded fears?

Martin Armstrong is a master timer and that is all. If he was a master of all subjects he never would have had all the trouble he has had in his life.

Alf fields is a master at price levels.

Please leave it there.

There are no masters of all talents out there.

 

Jim Sinclair’s Commentary

Here are today’s Greens-hoots.

More deflation signposts

CNBC had an article on its website that ran with the following headline: "Recession Special: Lobster at Lunch-Meat Prices? Yes, Please". Consumer attitudes towards high-end cuisine are shifting rapidly towards less expensive options. Fisherman in Nova Scotia are complaining that lobster prices have been so beaten down that they are now fetching the same price as bologna at the supermarket. At one fish market in Cape Cod, lobster prices dropped nearly 50% against year-ago levels.

Loan demand falls with frugality

We have frequently noted that loan demand is playing a key role in the decline in credit. From the Wall Street Journal page A2 we would highlight "Worries About the Economy Weigh on Loan Demand." The article cites a young couple paying cash for their new car. They rationalize it by noting that, although paying upfront involves sacrifice "it means living more frugally", it also means that they live "more freely."

Keeping the supply of credit flowing

We see from the New York Times that the Senate rejected the idea of price caps (no, not for bankers) for credit cards. Voting down a proposal to cap interest rates on credit cards at 15% by 60 to 33, the Senate made it more likely that credit will remain available for consumers, in our view. After all, banks got into trouble in the first place by not adequately charging and accounting for credit risk.

Defaults surging, according to S&P

In a report that was released yesterday, S&P reported that a staggering $541.2 billion of rated debt defaulted in the first three months of this year. Across the globe, some 62 companies defaulted, the largest number since the first quarter of 2002.

Foreclosures mounting

Home foreclosures jumped for the third consecutive month. According to the latest data from RealtyTrac, foreclosures totaled 342,038 in April, which means that for every 374 households in this country, one is going into some stage of the foreclosures process. Since January, foreclosures have surged nearly 25%. As unemployment mounts, we suspect delinquencies and foreclosures will continue to rise. This added source of supply into an already depressed residential real estate market will continue to put downward pressure on home prices, in our view.

One more data point reflecting a weak economy

The Department of Transportation released its transportation services index and it dropped 2.7% in March. On a year-over-year basis, the index deteriorated to -6% in March from -5.3% in February. The index consists of a freight component (consists of for hire trucking, railroad freight services, waterway transport, pipeline and air) and a passenger component (consists of mass transit, intercity passenger rail, and passenger air).

Retail sales disappoint again

Retail sales fell 0.4% M/M in April versus consensus expectations for a flat outturn and BAS-ML (-0.8% M/M). Core sales (ex building materials, gasoline and auto dealers) were down 0.3% M/M and in March were revised down by 0.1%. We had factored in a slightly more negative decline in retail control for April, and therefore see some upside to our real consumption forecast of -2.8% Q/Q annualized in 2Q and overall GDP estimate of -4.8% Q/Q. Yesterday’s results suggest that weakness in consumer spending is here to stay, with rising unemployment, the end of the tax filing season, a higher savings rate and overall, more cautious behavior all significant headwinds. Keep in mind that tax refunds were up 15% Y/Y in April and were expected to boost results by the majority of consensus ? this money is either being channeled into savings or used to pay down debt.

Auto sales posted a surprising 0.2% increase despite a drop in unit sales from 9.8M to in March to 9.3M units in April. And while underlying gasoline prices rose to $2.10/gallon from $2.01/gallon in March, stations reported a 2.3% decline in sales given weaker demand and an offsetting seasonal factor. Excluding autos and gas stations, sales fell 0.3% on continued discounting and sluggish consumer demand. Spending at drug, building material/garden, sporting goods stores and restaurants all posted very light gains over the month, while spending in every other category fell significantly. Electronics retailers reported a 2.8% M/M decline after falling 7.8% in March as spending in this arena clearly reflects the negative weight of tighter credit and a shift away from discretionary products. Even food retailers posted a 1.0% M/M decline ? a category that has been trading negative with positive gains every other month.

Inventories cut, but still remain too high

Business inventories fell by 1.0% M/M in March for the seventh straight monthly decline. This was roughly in line with consensus (-1.1%), but a bit lighter than Banc of America Securities-Merrill Lynch expectations (-1.3%). Companies continued to play catch-up to the slowdown in domestic and foreign demand, which left many holding too much product. Indeed, while sales (down 1.6% M/M) have plummeted by 18.4% from the nearby peak, inventories have only been cut by 6.8%, leaving the inventory-to-sales ratio (I/S) at an 8-year high of 1.44 months in March. This marks only a slight improvement versus February, with persistent imbalances in each business sector, and suggests that ongoing cutbacks in production will likely be necessary to work through stocks in the months ahead. Retail inventories, the new information from this report, fell by 0.7% M/M in March, after larger declines in the prior four months. Sales fell by 1.3% M/M, boosting the I/S ratio to an uncomfortably high 1.55 months, with the most significant imbalances at building material/garden and clothing stores, as well as auto dealers. The April sales decline suggests that retailers still have more work to do and will likely have to offer ongoing promotions and discounts to lure in consumers.

Mortgage apps drop to lowest level since March

Mortgage applications fell to the lowest level since March as rising unemployment, tight credit conditions and falling property values restrain demand. Mortgage applications fell 8.6% for the week ended May 8. Since peaking on April 3, mortgage applications have fallen 28.4%. Mortgage applications for refinancing dropped 11.2%. Note that since April 3, refinancing activity has alternately increased and decreased. However, as refinancing activity is off 32.7% since April 3, the trend is clearly down. Mortgage applications for purchase increased for the second consecutive week.

Jim Sinclair’s Commentary

What is behind us cannot be fixed. What is in front of us can be fixed.

The problem is behind, and not in front. The quadrillion plus is behind us, not in front.

Obama Proposes a First Overhaul of Finance Rules
By STEPHEN LABATON and JACKIE CALMES
Published: May 13, 2009

WASHINGTON — In its first detailed effort to overhaul financial regulations, the Obama administration on Wednesday sought new authority over the complex financial instruments, known as derivatives, that were a major cause of the financial crisis and have gone largely unregulated for decades.

The administration asked Congress to move quickly on legislation that would allow federal oversight of many kinds of exotic instruments, including credit-default swaps, the insurance contracts that caused the near-collapse of theAmerican International Group.

The Treasury secretary, Timothy F. Geithner, said the measure should require swaps and other types of derivatives to be traded on exchanges or clearinghouses and backed by capital reserves, much like the capital cushions that banks must set aside in case a borrower defaults on a loan. Taken together, the rules would probably make it more expensive for issuers, dealers and buyers alike to participate in the derivatives markets.

The proposal will probably force many types of derivatives into the open, reducing the role of the so-called shadow banking system that has arisen around them.

“This financial crisis was caused in large part by significant gaps in the oversight of the markets,” Mr. Geithner said in a briefing. He said the proposal was intended to make the trading of derivatives more transparent and give regulators the ability to limit the amount of derivatives that any company can sell, or that any institution can hold.

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Jim Sinclair’s Commentary

Ratings have become a farce. The former controller general is an honest person so his opinion does not count.

US Could Lose Its AAA Rating, Says Former Comptroller General
Joe Weisenthal|May. 13, 2009, 6:41 AM

Even though the tax and revenue fundamentals of the US are awful, it’s presumed that the US can hang onto its AAA rating for awhile. For one thing, we have a great track record (which helps a bit), we have a pretty solid political system, a largely free market economy and the ultimate fallback, the ability to print up our own currency. That’s a real benefit.

But as we put more and more debt from both the private sector and the states onto the Federal balance sheet, that’s bound to add some pressure.

In an FT Op-Ed, David Walker, the former Comptroller General of the US, lays out the scenarios by which the US could lose its AAA rating.

Obviously, our rampant spending and debt guarantees are an issue, but this is the part that we found particularly insightful:

…failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us.

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Jim Sinclair’s Commentary

This is a Wall Street’s solution to Motors going broke.

You take what works and you put it in one basket with some funding so they can screw it up again.

You take many dealers and throw them in the s**t heap. In that s**t heap called "bad motors" you put all the litigation and liabilities (parts manufacturers not paid selectively) plus very few dollars so it can’t under any circumstances work.

You declare victory assuming those that object, like hedge funds, can be summarily silenced by threatening to regulate their derivatives.

Nobody runs the numbers on the near 800 dealers, sales personnel and reception fired, the broken lunch wagons and the cars for sale stored at some abandoned airport that no one sees. Many parts dealers owed money can go fly a kite unless they are connected.

This is a pure Wall Street paper shuffle at its best; a shell game with no consideration for the fallout even if there is no delay in the bankruptcy. God help us all if somebody in the bankruptcy actually demands that contracts be adhered to in legal priority of payments.

Why not add a Stress Test and declare all motor companies have passed, with the exception of Kaiser Frazier and Studebaker. That might buy a few days before the nonsense of this plan becomes clear.

The system says if you cannot pay, you default. Now that Wall Street is in charge we are all going to default via a default in the US dollar, the final result of all this avoidance of the real.

Chrysler Plans to Shut One Quarter of Its Dealers
By NICK BUNKLEY
Published: May 14, 2009

DETROIT — About a quarter of Chrysler’s dealers are receiving letters Thursday telling them that the company plans to eliminate them by June 9.

Chrysler, which filed for bankruptcy protection two weeks ago, sent letters to 789 of its 3,200 dealers, revoking their franchises with the carmaker. It also filed a list of the dealers it is cutting in bankruptcy court Thursday.

Other dealers received letters welcoming them to the new Chrysler.

“It just says whether you’re in or out,” said Anthony Viviano, who owns two Dodge dealerships in Detroit’s suburbs and is president of the Detroit Dodge dealers’ association. “Some of my fellow dealers have already called and said they’re out. They got the poison letter.”

One of Mr. Viviano’s two dealerships was on the list.

But he said some dealerships could be saved by rulings from Chrysler’s bankruptcy judge or if other dealers decide to sell their franchises.

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Jim Sinclair’s Commentary

What makes the Banksters think that society is going to remain tolerant?

"If we didn’t live in a tolerant society, the chairman and the rest of the board would be hanging by their necks with piano wire out on the road."
–AIB shareholder, Gary Keo

Top Irish banker pelted with eggs

One of Ireland’s top bankers was pelted with eggs on Wednesday as hundreds of angry shareholders attended a meeting.

Dermot Gleeson, chairman of Allied Irish, ducked to avoid the missiles after addressing an extraordinary general meeting at its Dublin HQ.

Pensioner Gary Keogh said he felt compelled to throw the eggs after Mr Gleeson tried to speak over another shareholder.

Mr Keogh, from Blackrock in south Dublin, was removed from the building.

He said he was extremely angry after losing his pension in the economic downturn.

"The whole board should be replaced by Mickey Mouse and Donald Duck," he added.

"I have no pension. My pension now is wiped out because of AIB. I cannot sell the shares because they are useless.

"If we didn’t live in a tolerant society, the chairman and the rest of the board would be hanging by their necks with piano wire out on the road."

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Jim Sinclair’s Commentary

The following is a by subscription service.

Yes, he is correct. When this bubble blows it will blow .72, .62 and maybe .52 right out of the dollar support mechanism.

The common share of the US Fed and Treasury bubble maker, the US dollar, will be the most abused entity as a result of the Wall Street fix for all problems. Fix Wall Streeters and forget the problem.

The "Bailout Bubble" — The Bubble to End All Bubbles

KINGSTON, NY, 13 May 2009 — The biggest financial bubble in history is being inflated in plain sight, said Gerald Celente, Director of The Trends Research Institute.  "This is the Mother of All Bubbles, and when it explodes," Celente warns, "it will signal the end to the boom/bust cycle that has characterized economic activity throughout the developed world."

Either unwilling or unable to call the bubble by its proper name, the media, Washington and Wall Street describe the stupendous government expenditures on rescue packages, stimulus plans, buyouts and takeovers as emergency measures needed to salvage the severely damaged economy.

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Posted by & filed under In The News.

Dear Friends,

I am again posting my Bloomberg interview because it contains the only means of maintaining the general equity rally that has taken place as I anticipated.

Regulation of OTC derivatives as announced by the White House today is good going forward, but useless looking back. It therefore window dressing and not affirmative action. My presentation contains the only method that can give legs to the recent equity rally.

I know you read this and have respect for my experience in markets even if we disagree on the end result.

Listen to what I said in that interview. Failing to take the action suggested therein risks a total economic implosion that will create intolerable tensions between the US and China over their discomfort with the condition of their US dollar investments and the policy of Quantitative Easing.

Today the wrong target was struck with a useless action.

Respectfully yours,
Jim Sinclair

Click here to listen to Jim’s Bloomberg interview…

Jim Sinclair’s Commentary

It is how the quadrillion plus notional value behind us that will affect the world, not what is in front of us that is the problem.

Obama to detail regulation plans for derivative securities
12:26 PM, May 13, 2009

The Obama administration is expected today to announce new efforts to regulate the massive market for credit-default swaps and other derivative securities.

Treasury Secretary Timothy F. Geithner plans a press briefing at 1 p.m. PDT.

The administration plans "to detail its initiative to regulate the exotic financial contracts that helped fuel the global [financial] crisis and crippled some of the biggest names on Wall Street, such as American International Group," the Washington Post reports.

From Bloomberg News:

The U.S. Treasury will tell banks to increase transparency in the over-the-counter derivatives market by making prices available on centralized computer platforms, according to people familiar with the plan.

Electronic execution of trades including interest-rate and credit-default swaps would allow users of the financial instruments to get greater price transparency and make processing trades easier. Transactions in the $684 trillion over-the-counter derivatives market are now typically conducted over the phone between banks and customers.

"Anything that will bring transparency to this market will help the market, but the dealers who broker the deals would make less money," said Paul Zubulake, a senior analyst with Boston-based Aite Group. "More transparency for the buy-side is less profit for the sell-side."

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Jim Sinclair’s Commentary

The stairs on the Golden Ladder that will be climbed are:

$900
$961
$1024
$1089
$1156
$1224

The steps on the USDX us dollar are:

.8200
.7200
.6200
.5200

The timing was April 19th and middle June to establish the launch period.

Jim Sinclair’s Commentary

You talk about rolling the dice? Any delay or glitch in the bankruptcy and the damage to employment and suppliers will be extreme.

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Jim Sinclair’s Commentary

My granddaughter and her friend in Tanzania last week:

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Uncle Joseph Kahama with his niece and nephew at his home in Tanzania last week.

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Jim Sinclair’s Commentary

– New Accounting Fraud for Monthly Federal Deficit Reporting
– Annual Retail Sales Plunge a Depression-Like 10.1%
– Monthly "Core" Retail Sales Down 0.1% versus Official 0.4% Decline

"Flash Update" by subscription service available at http://www.shadowstats.com/

Jim Sinclair’s Commentary

Hyperinflation is a currency event defined by .82, .72, .62, and .52 (as posted here) on the USDX. This is undoubtedly coming as a product of various causes but most certainly because of Quantitative Easing (printing money out of thin air).

China has demanded a guarantee of value of their huge dollar reserve position.

You can’t guarantee the dollar’s value with more dollars because by definition calling the guarantee would increase dollar supply. That would only further complicate the Chinese problem of too many dollars.

They would be better advised to buy gold directly from the USA, giving back the dollar denominated instruments while getting gold in exchange. That is the only guarantee that would have any meaning.

China will go for it in the form of a guarantee tied to dollar levels versus some measure. The USDX would do fine for this.

China fears bond crisis as it slams quantitative easing
China has given its clearest warning to date that emergency monetary stimulus by Western governments risks setting off worldwide inflation and undermining global bond markets.
By Ambrose Evans-Pritchard
Last Updated: 1:13PM BST 07 May 2009

"A policy mistake made by some major central bank may bring inflation risks to the whole world," said the People’s Central Bank in its quarterly report.

"As more and more economies are adopting unconventional monetary policies, such as quantitative easing (QE), major currencies’ devaluation risks may rise," it said. The bank fears a "big consolidation" in the bond markets, clearly anxious that interest yields will surge as western states try to exit their QE experiment.

Simon Derrick, currency chief at the Bank of New York Mellon, said the report is the latest sign that China is losing patience with the US and aims to diversify part its $1.95 trillion (£1.3 trillion) foreign reserves away from US Treasuries and other dollar securities.

"There is a significant shift taking place in China. They are concerned about the stability of the global financial system so they are not going to sell US bonds they already have. But they are still accumulating $40bn of fresh reserves each month, and they are going to be much more careful where they invest it," he said.

Hans Redeker, head of currencies at BNP Paribas, said China is switching into hard assets. "They want to buy production rights to raw materials and gain access to resources such as oil, water, and metals. They know they can’t keep buying bonds," he said

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Jim Sinclair’s Commentary

The most successful recruiting program so far in Pakistan is the Surge that can now claim adding a new 500,000 people to the already 800,000 displaced.

Pakistan military faces humanitarian crisis
updated 3:30 a.m. EDT, Wed May 13, 2009

Pakistan’s military is dealing with more than a million Pakistanis who have been displaced by fighting since last year, a military spokesman said Tuesday.

The military has set up headquarters to manage the 1.3 million internally displaced people, spokesman Gen. Athar Abbas said.

That number includes 500,000 Pakistanis who were uprooted from their homes since August, before the latest military push against Taliban militants in the country’s northeastern region, he said

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Posted by & filed under In The News.

Dear CIGAs,

The Social Security Fund has been Washington’s piggy bank for everything from pork bellies to war.

Payback time starts in 2014, but what if the pay back is just more IOUs?

Hyperinflation is the only way out for Washington’s inability to pay back the Social Security Fund debt. Hyperinflation is the only way out of most entitlements.

Sounds like a plan to me.

Medicare, Social Security Funds Worsen in Recession
By Alison Fitzgerald

May 12 (Bloomberg) — The financial health of Social Security and Medicare, the two main safety nets for American retirees and the elderly, is declining as the recession cuts payroll-tax contributions just as the baby-boom generation begins to retire.

The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said today. Spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014, the same year predicted in 2008, the trustees’ report said.

The deteriorating position of the two funds puts pressure on Congress and President Barack Obama to come up with ways to cut costs and boost revenue for both. Obama yesterday said fixing the nation’s health-care system is an “imperative for America’s economic future.”

“After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security,” Treasury Secretary Timothy Geithner said today in a statement.

The trustees’ annual report also estimated that Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago.

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Jim Sinclair’s Commentary

Should any bondholder insist on their contractual rights in court, the bankruptcy of the motor companies will be a greater catalyst for disaster than Lehman already has been.

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Jim Sinclair’s Commentary

It started with housing in California and moved East. Municipal bankruptcy will do the same. Think about all the insured guaranteed municipal bonds in which the guarantee and insurance is not worth the OTC derivative it is written on. This is chapter two of the disaster where the black hole appears. L.A. is kaput.

Mayor Villaraigosa wants council to declare emergency and calls for layoffs
1:36 PM | May 12, 2009

Citing a $529-million budget deficit, Mayor Antonio Villaraigosa urged the City Council on Tuesday to declare a fiscal emergency and called for mandatory work furloughs and layoffs targeting 1,000 city employees.

"The gravity of the fiscal emergency that we face is enormous," Villaraigosa said. "Unless we act with urgency, the city will face a cash flow crisis, raising the prospect of running out of cash between November and February. "

The mayor said the city should commence layoffs of 1,000 city employees beginning July 1 but warned that thousands more could be phased in during the upcoming fiscal year. He said the layoffs would include management as well as regular staff.

Meanwhile, the mayor said he plans to implement the work furlough plan within 30 days. He said he has invited a labor representative to discuss the impact of the plan, which would require up to 26 furlough days for civilian city employees next fiscal year.

He said he would also be working with the City Council and labor officials to develop a buyout program to permanently reduce the city’s civilian workforce.

The mayor said that the city’s budget deficit could exceed $1 billion in fiscal year 2010-2011 if it doesn’t act now.

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Fannie and Freddie Will Need Almost $100 Billion in 2010
Posted May 12, 2009 12:42pm EDT by John Carney
From The Business Insider, May 12, 2009:

The Office of Management and Budget released a report yesterday on the budgets and proposed overhauls of Fannie Mae and Freddie Mac that included the possibility of liquidating their assets. But don’t get your hopes up.

The two government run mortgage finance companies have been scandalously costly for tax-payers, costing Americans far more in bailout money than they ever saved in cheaper mortgages. The OMB says that the two companies will need at least $92.2 billion more in fiscal 2010. This is on top of the $78.2 billion in aid they’ve received since they were taken over by the government in September.

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Jim Sinclair’s Commentary

Remember the time-honored Middle Eastern battle strategy:

1. Here comes the Surge.
2. All fall down and bury your weapons.
3. Put on street clothes and join the march of 500,000 refugees.
4. After the Surge photos are over, quietly dig up your weapons, bury your street clothes and bleed the big guy to death.

The Pakistan Surge is the best recruiting plan for the Taliban. When will the West learn?

Pakistan’s Swat offensive risks wider backlash
Tue May 12, 2009 1:46pm BST
By Luke Baker – Analysis

LONDON (Reuters) – Pakistan’s heavy-handed offensive against the Taliban in northwest Pakistan is misguided and risks further destabilizing the country, western military and intelligence experts argue.

By throwing up to 15,000 troops and heavy weaponry against an estimated 5,000 Taliban in Swat, a valley northwest of Islamabad, the Pakistan army may make short-term gains, but it increases the likelihood of terror-style attacks on targets in more stable areas of eastern Pakistan in the longer-term.

While the army essentially had no choice but to go on the offensive after the Taliban broke a peace accord and the U.S. administration piled on pressure for action, the broader strategy needs overhauling, the analysts say.

"On this occasion, the Pakistan army has accepted that the breach of the Swat agreement by the Taliban did in fact represent a threat which it couldn’t overlook or fail to respond to," said Nigel Inkster, an expert on transnational threats at London’s International Institute for Strategic Studies and a former director in Britain’s secret intelligence service.

"That said, the techniques that are being deployed go against all accepted best-practice in dealing with a counter-insurgency, particularly the use of heavy fire power.

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Jim Sinclair’s Commentary

The US dollar rally may end? The rally ended exactly where Dean Harry Schultz said it would at .8900 USDX.

Mr Rogers makes much too much of IMF gold. Where was he in the 70s? IMF gold will be sucked out of the IMF by other central banks, therein allowing them to get rid of the wilting US dollar.

There is no IMF gold. It is the members of the IMF’s gold. They must agree on all aspects.

IMF gold sales are a huge crock of BS the bears make a big deal of. It sound like a silver long and gold short spread talking its own case. That is my take.

Dollar Rally Will End, Rogers Says; May Short Stocks (Update2)
By Chen Shiyin and Haslinda Amin

May 12 (Bloomberg) — The dollar’s rally is set to end in a “currency crisis,” investor Jim Rogers said, adding that he may bet on a slide in equities after nine weeks of gains.

The advance in the U.S. currency has been driven by investors covering their short sales, Rogers, 66, said in an interview with Bloomberg Television in Singapore. He may consider adding to his holdings of the yen and prefers the euro to the dollar or the pound, the investor added.

“We’re going to have a currency crisis, probably this fall or the fall of 2010,” Rogers said. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.”

The dollar has climbed against all of the so-called Group of 10 currencies except the yen over the past 12 months, according to data compiled by Bloomberg. The U.S. currency was at $1.3592 per euro today from $1.3582.

Rogers joins “Black Swan” author Nassim Nicholas Taleb in avoiding the U.S. currency. Taleb told a May 7 conference in Singapore he preferred gold and copper to the dollar and the euro as the global economy faces a “big deflation.”

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Jim Sinclair’s Commentary

This dollar is so Zombie! Once it looks in a mirror it will be under .82 for starters.

US to borrow 46 cents for every dollar spent
By ANDREW TAYLOR, Associated Press Writer
Monday, May 11, 2009

The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year’s all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.

The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama’s economic stimulus bill — as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

Just a few days ago, Obama touted an administration plan to cut $17 billion in wasteful or duplicative programs from the budget next year. The erosion in the deficit announced Monday is five times the size of those savings.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration’s plan. In 2010, it would borrow 35 cents for every dollar spent.

"The deficits … are driven in large part by the economic crisis inherited by this administration," budget director Peter Orszag wrote in a blog entry on Monday.

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Jim Sinclair’s Commentary

As Banks sell homes on foreclosure, the statistic of home sales increase. Keep this in mind, please.

Falling home prices and increasing home sales is not good news economically. It is stinking news regardless of the upcoming glee of the money bunnies or dancing, horn honking clowns.

This would be classified as a Green Shoot, another silly piece of spin.

Home Prices in U.S. Fall 14% as Banks Sell Foreclosed Houses
By Kathleen M. Howley

May 12 (Bloomberg) — The median U.S. home price dropped 14 percent in the first quarter from a year earlier as banks sold repossessed homes.

Prices fell in 134 of 152 metropolitan areas, the Chicago- based National Association of Realtors said today in a news release. The national median existing home price declined to $169,000 and distressed properties typically sold for 20 percent less than other homes on the market.

Distressed sales are increasing transactions in some markets as speculators and first-time homebuyers buy bank-owned properties. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

Total existing home sales fell 6.8 percent from a year earlier to a seasonally adjusted annual rate of 4.59 million units, the Realtors group said. Sales were down 3.2 percent from the fourth quarter. The figures include single family homes and condominiums and co-ops.

Seventeen states had sales increases from the fourth quarter and six states were higher than a year ago.

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Jim Sinclair’s Commentary

Pure creation of money out of thin air.

Fed buys $3.51 billion in Treasurys
By Deborah Levine
May 11, 2009, 11:05 a.m. EST

NEW YORK (Marketwatch) — The Federal Reserve Bank of New York bought $3.51 billion in Treasurys maturing between 2026 and 2039 on Monday. The buyback is part of the central bank’s program to keep borrowing costs lower and spur economic activity. Dealers offered $10.426 billion to be purchased. Ten-year note yields /quotes/comstock/31*!ust10y (UST10Y 3.17, -0.12, -3.50%) , which move inversely to prices, remained lower by 8 basis points to 3.21%. U.S. debt was supported by the Fed purchases and declining stock markets.

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