Posts Categorized: In The News

Posted by & filed under In The News.

Jim Sinclair’s Commentary

This is madness unless you want a planetary Weimar with the only difference being whose currency hits the deck first. Fellows, it is not bad business causing derivatives problems. It is bad derivatives extending a normal business contraction into an unprecedented disaster. Aim at the cause, not at the symptoms.

G-20 Says Its Ready to Urgently Boost Growth, Stimulus Needed
By Ben Sills and Shamim Adam

Nov. 10 (Bloomberg) — The Group of 20 nations is prepared to act “urgently” to bolster growth and called on governments to cut interest rates and raise spending as the world’s leading industrialized economies battle the threat of a recession.

“We stand ready to urgently take forward work and actions agreed by our leaders to restore and maintain financial stability and support global growth,” the group said in a statement released yesterday following a meeting in Sao Paulo. “Countries must use all their policy flexibility, consistent with their circumstances, to support sustainable growth.”

Those measures include “monetary and fiscal policy,” it said.

China, the world’s largest developing economy, announced an economic stimulus package worth almost a fifth of its output to sustain domestic demand as the credit crunch drags down growth from New York to Tokyo. Officials in the U.S. and Europe already have slashed borrowing costs and boosted spending in a bid to contain the effects of the slump.

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Jim Sinclair’s Commentary

I never thought I would ever see this.

If Bloomberg is successful, you will not be able to believe how the US Federal Reserve has sold the US citizens straight down the pooper.

Bloomberg Sues Fed to Force Disclosure of Collateral (Update1)
By Mark Pittman

Nov. 7 (Bloomberg) — Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.

The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.

“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.

The Fed has lent $1.5 trillion to banks, including Citigroup Inc. and Goldman Sachs Group Inc., through programs such as its discount window, the Primary Dealer Credit Facility and the Term Securities Lending Facility. Collateral is an asset pledged to a lender in the event that a loan payment isn’t made.

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Jim Sinclair’s Commentary

25 billion will do nothing to keep automakers making autos that they cannot sell. 25 today, 50 tomorrow and 100 next week.

Emanuel Says Auto Industry Essential to U.S. Economy (Update1)
By Todd Shields

Nov. 9 (Bloomberg) — Rahm Emanuel, President-elect Barack Obama’s chief of staff, called the auto industry an “essential” part of U.S. manufacturing, while stopping short of endorsing a proposal to use some of the $700 billion financial-rescue fund to aid automakers.

“The auto industry is an essential part of our economy,” Emanuel said on ABC’s “This Week.” Lawmakers should speed up the availability of $25 billion in government loans for the development of fuel-efficient cars, he said.

In addition, there are “other authorities” the administration can use immediately and Obama “has asked his economic team to look at different options of what it takes to help bridge the auto industry so they are a part of not only a revived economy, but part of an energy policy going forward.”

Emanuel didn’t directly respond to whether Obama endorses a proposal by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to use some of the $700 billion approved to stabilize the financial services industry to aid automakers.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

Did I hear someone say that prices cannot rise in a deflationary business condition?

That is not true when the currency of that country implodes.

This will be the dollar situation as we move to “Quantitive Unsterilized Stimulation” along with fiscal stimulus to heed the needs of the voting constituency as politically expedient.

Stunned Icelanders Struggle After Economy’s Fall

“This country, as modern and sophisticated as it is geographically isolated, still seems to be in shock. But if the events of last month – the failure of Iceland’s banks; the plummeting of its currency; the first wave of layoffs; the loss of reputation abroad – felt like a bad dream, Iceland has now awakened to find that it is all coming true.

Overnight, people lost their savings. Prices are soaring. Once-crowded restaurants are almost empty. Banks are rationing foreign currency, and companies are finding it dauntingly difficult to do business abroad. Inflation is at 16 percent and rising. People have stopped traveling overseas. The local currency, the krona, was 65 to the dollar a year ago; now it is 130. Companies are slashing salaries, reducing workers’ hours and, in some instances, embarking on mass layoffs.”

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Jim Sinclair’s Commentary

As bailout financial needs and a negative TIC appear, the mechanism to take down the 35-year bull market on the 30 year Treasuries are in place.

U.S. to Borrow Record This Quarter to Finance Deficit
November 03, 2008

Nov. 3 (Bloomberg) — The U.S. Treasury more than tripled its planned debt sales for this quarter to help finance a 2009 budget deficit that bond dealers advising the department estimate may swell to almost $1 trillion.

Borrowing needs are expected to rise to $550 billion in the three months to Dec. 31, compared with the $142 billion predicted in July, the Treasury said in a statement in Washington. That follows a $530 billion record in the July-September quarter.

The worsening credit crisis and sluggish economy are straining the country’s finances and will leave the winner of tomorrow’s U.S. presidential election facing the worst budget shortfall on record next year. The Treasury is scheduled to announce in two days plans to expand debt sales to fund the gap.

“The U.S. Treasury faces an unprecedented financing need,” said Goldman Sachs analyst Ed McKelvey, echoing a similar comment last week by Anthony Ryan, the Treasury’s acting undersecretary for domestic finance.

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Jim Sinclair’s Commentary

No kidding. Our friends across the border look more like Pirate Pete and Blackbeard than brokerages.

Regulation ‘failures’ show need for new market watchdog: Flaherty
November 04, 2008

Failures of regulation have undermined Canada’s relatively stable financial system during the course of the global credit crisis and underlined the need for a new market watchdog, according to Jim Flaherty.

The Minister of Finance served notice on his provincial counterparts Monday that the Conservatives are determined to create a national securities regulator with the power to supervise obscure corners of capital markets where systemic risks can mount quickly.

The drive to tighten Ottawa’s grip on market supervision comes amid a push by European leaders for improved international co-operation after a string of bank collapses that appeared to push the global financial system to the brink of collapse.

In such capitals as Paris and London, the opaque international system of complex credit instruments is viewed as having played a critical role in spreading contagion through the banking system and compelling governments to intervene on a massive scale.

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Jim Sinclair’s Commentary

Thousands of banks need money and are therefore in trouble. Did FDIC not give a number of slightly over 100 on their watch list?

Rescue Cash Lures Thousands of Banks
November 03, 2008

WASHINGTON — Treasury and banking regulators say as many as 1,800 publicly held institutions could apply for government investments in coming weeks, out of concern that failing to do so could make them losers in a banking sector reshaped by the Treasury’s $700 billion rescue plan.

Depending upon conditions still being crafted by Treasury, thousands more private banks could apply for government capital as well, a Treasury spokeswoman said Sunday.

Only days ago, many healthy banks were saying they didn’t need taxpayer money under the Troubled Asset Relief Program. These healthy banks said they worried that taking government investments could unfairly tar them as in need of a bailout. In the past week, that perception has been reversed, due in large part to efforts by Treasury, banking lobbyists and legal advisers to sell the TARP.

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Jim Sinclair’s Commentary

No kidding!

Obama Faces `Urgent’ Task in Replacing SEC’s Cox, Lawmakers Say
November 07, 2008

Nov. 7 (Bloomberg) — President-elect Barack Obama should act quickly to name a new leader for the Securities and Exchange Commission, an agency that has drawn fire for not doing enough to regulate markets and protect investors, lawmakers said.

“The new administration will have no more urgent priority, in my view, than putting a team of capable, experienced and qualified economic leaders swiftly in place, from the Treasury secretary, to the Federal Reserve and the Securities Exchange Commission,” Senate Banking Committee Chairman Christopher Dodd said yesterday at a Washington news conference.

SEC Chairman Christopher Cox, 56, has said he will step down at the end of the Bush administration. Potential successors include William Brodsky, chief executive officer of the Chicago Board Options Exchange; Mellody Hobson, president of Ariel Capital Management; and Gary Gensler, a former Treasury Department undersecretary and partner at Goldman Sachs Group Inc., congressional aides, SEC officials and lobbyists said.

“It’s part of the economic team that President-elect Obama” should assemble “quickly,” Senator Jack Reed, a Rhode Island Democrat, said in an interview yesterday. “You want someone, obviously, who’s knowledgeable of markets and has good judgment with strong investor protection being the key,” said Reed, who leads a banking subcommittee that oversees the SEC.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

It is ok to naked short anything against anyone until it costs the Treasury money. This is the financial equivalent of “Let Them eat Cake.” Somebody is going to the guillotine for these “Fails to Deliver.” 

U.S. Treasury Opens Probe Seeking Improper Trading 
By Rebecca Christie and Vincent Del Giudice

Nov. 7 (Bloomberg) — The U.S. Treasury opened a probe to identify any improper trading in U.S. government securities by bond investors and dealers, following increases in trades that fail to settle.

The announcement today came after repeated warnings by the Treasury to bond dealers to fix settlement problems in the government securities market or face tougher regulation.

Treasury officials use such reviews, known as “large position reports,” to monitor trading and guard against market manipulation. The Treasury has conducted at least nine such reviews since 1997. 

Today’s Treasury statement asks for information on the 2 percent two-year-note maturing Sept. 30, 2010, and the 3 1/8 percent five-year note maturing Sept. 30, 2013.

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Jim Sinclair’s Commentary

Somehow I doubt this would be good for the new Administration because it speaks towards Social Fascism. Who says the government would do any better than the individual?

The Carolina Journal Exclusive does! Hmm!

Dems Target Private Retirement Accounts
Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs
By Karen McMahan
November 04, 2008

RALEIGH – Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts – including 401(k)s and IRAs – and convert them to accounts managed by the Social Security Administration.

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

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Jim Sinclair’s Commentary

I am surprised that after President Elect Obama met with the CIA and heard about Pakistan, he did not resign ahead of time. He could beat the January 2011 rush.

U.S. Missile Kills 10 in Pakistan
By PIR ZUBAIR SHAH
November 8, 2008

ISLAMABAD, Pakistan – Missiles fired from a remotely-piloted United States aircraft slammed into a village in the North Waziristan region of Pakistan along the Afghan border on Friday and killed between 10 and 13 people, according to a local intelligence official, a Pakistani reporter and two Pakistani television channels.

State television put the death toll at 10 and other news reports said the dead included eight local people and five foreigners. . The deaths were the latest fatalities in a series of American missile attacks that have drawn increasingly irate protests from Pakistan to senior American officials, including the head of the United States Central Command, Gen. David H. Petraeus, and the American ambassador here, Anne Patterson.

The Pakistani president, Asif Ali Zardari, and the prime minister, Yousaf Raza Gilani, both condemned Friday’s attack.

Since an American commando raid on Pakistani soil in early September, there have been reports of more than 15 American strikes directed at militants hiding out in the tribally-ruled Waziristan region.

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Jim Sinclair’s Commentary

Sure this was an accident, however a bunch of Kurds were seen laughing as they ran away.

Blast hits Iraq-Turkey oil pipeline in southeast, causes large spill

An explosion ripped through a pipeline carrying oil from Iraq to southern Turkey late on Wednesday, causing a large spill, the Anatolian Agency (A.A.) reported. Officials said sabotage was not the cause of the explosion.

The blast occurred in a section of the pipeline in the southeastern province of Sanliurfa in Turkey, the Anatolian Agency said, adding initial findings blamed the incident on an abrupt change of pressure in the network.

“We can not talk about sabotage. Our examinations revealed that the pipeline was broken from the inside because of pressure,” Yusuf Yavascan, governor of the southeastern province of Sanliurfa, told the A.A.

The twin pipeline, which runs from the northern Iraqi city of Kirkuk to Turkey’s Mediterranean port of Ceyhan and has a capacity to carry some 70 million tons of crude a year, was also bombed previously by the terrorist PKK organization. It carried about 40 million barrels of Iraqi oil to Ceyhan last year, according to Turkey’s state-run oil and gas company, BOTAS.

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Jim Sinclair’s Commentary

Sure the US financial system is founded in obscuration.

Credit Swap Disclosure Obscures True Financial Risk (Update3)
By Shannon D. Harrington and Abigail Moses

Nov. 6 (Bloomberg) — The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

A report by the Depository Trust and Clearing Corp. doesn’t include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a “small fraction” of contracts linked to mortgage securities, according to Andrea Cicione at BNP Paribas SA in London.

New York-based DTCC’s data, released on its Web site Nov. 4, showed a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers. While designed to ease concerns about the amount of risk banks and investors amassed on borrowers from companies to homeowners, the report may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are “likely to underestimate the amount of net CDS exposure,” Cicione, who correctly forecast in January that the cost of protecting European companies from default would rise, said in an interview. “A broadening of the coverage to the entire market is what investors really need.”

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Jim Sinclair’s Commentary

I believe that Mr. Hollan is being much too conservative.

Gold to reach $1,000 next year – and stay there: Gold Fields CEO
Gold Fields CEO, Nick Holland, reckons the gold price will hit $1,000 next year and stay there, but doesn’t look for significant appreciation above that level.
Author: Lawrence Williams
Posted: Thursday , 30 Oct 2008  

Interviewed on SAfm Radio in Johannesburg yesterday by Mineweb Editor in Chief, Alec Hogg, Gold Fields CEO, Nick Holland, gave some interesting views into his take on the gold price.  “I believe gold will go through $1000 and stay there during the course of 2009”, said Holland.

While to an extent this may be wishful thinking from someone whose company depends on gold for its income and on the gold price for its profitability, Holland’s reasons for his views are compelling.  He feels gold underperformed during the run-up in the oil price at the mid-year and that then, when oil came down in price, gold was dragged down with it without making earlier commensurate gains.  Thus gold hasn’t really performed in line with the overall situation – yet!

However Holland feels that with negative real interest rates around the world, contracting supplies and physical demand at almost record levels, the time is ripe for a re-evaluation of gold by the market.

When asked whether he felt the price would rise much beyond the $1,000 level, Holland wasn’t prepared to fuel speculative flames in this respect: “I wouldn’t say beyond $1,000” said Holland.  “Some people will say it should be much higher. I’d be very grateful with $1000 because right now the industry at $800 – or at $764 today, I think – doesn’t make any money after you take the all-in costs into account. So just to actually restore the margin and keep this industry going, we need something close to $1,000.”

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Jim Sinclair’s Commentary

The resources and reserves are in the hands of the juniors. As soon as some competition, say from Russia or China, make deals with a junior the majors cannot sit on the sidelines licking their lips.

To Anglo American, struggling rivals are acquisitions�
November 7, 2008
By Ron Derby and Antony Sguazzin

Johannesburg – Anglo American was considering acquisitions after seeing the share prices of rivals fall, chief executive Cynthia Carroll said yesterday.

Acquisitions might be preferable to developing new mines or expanding existing ones, she said in a speech at Sishen, the iron ore mine owned by the diversified mining company’s Kumba Iron Ore unit.

“We have an impressive project pipeline but the current economic environment challenges the pipeline’s viability,” Carroll said. 

“We are, therefore, in the process of actively reviewing the timing of our projects against the background of the difficulties of assessing capital and the prospect of attractive acquisition opportunities that could generate cash from day one,” she said.

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Jim Sinclair’s Commentary

The Federal Reserve AS LENDER OF LAST RESORT TO THE WORLD will bail out every country headed towards a Weimar Experience until the dollar flops. When that happens who will bail out the Fed’s Balance Sheet?

IMF approves USD 15.7 bn loan to Hungary

Washington, Nov 7 (PTI) The International Monetary Fund has approved a 15.7 billion-dollar loan for Hungary to shore up the country’s economy ravaged by financial turmoil.

Hungary becomes the second country after Ukraine to receive financial assistance from the IMF.

The multilateral lending agency would disburse 6.3 billion dollar immediately and the rest of the amount would be made available to Hungary in five installments, subject to quarterly reviews, IMF said in a statement on Thursday.

IMF said the stand-by arrangement would support the country’s longer-run economic goals by creating conditions necessary to facilitate appropriate reforms in government finances and banking sector.

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Jim Sinclair’s Commentary

The latest from Sprott Asset Management.

Cash Or Gold?

Allow us to preface this article by saying that we’ll be making no mention of the ‘manipulation’ of the price of gold. Let’s put that issue aside for now because, in the long run, it just won’t matter. We are in the midst of a financial crisis – not just any financial crisis mind you, but arguably the worst and most pervasive the world has seen in almost a century (second only to the Great Depression… thus far). In the sea of financial assets and currencies that are being decimated the world over, the one true safe haven continues to be gold.

During these times, it is understandable that the prevailing investor sentiment is fear. People are fearful of their savings, fearful of their jobs, and especially fearful of risk, having just witnessed how quickly a bear market can decimate portfolios. The other major factor currently affecting markets is deleveraging. As we all know by now, the 2002-2007 credit bubble was all about leverage. Leverage in housing and real estate. Leverage in the banking system. Leveraged hedge funds. As long as all asset classes continued to go up, then leverage was the winning formula. Although such a myopic strategy paid handsomely in the short run, the premise of the preceding sentence is, of course, false over the longer term. Thus, the winning strategy of yesteryear is now a ruinous one, leading to a vicious circle of deleveraging that is gutting the value of almost all assets. In this respect, gold is proving to be no exception. On the flip side of deleveraging is the frenetic buying of what was on the short side of the leveraged trade, namely, US dollars and Japanese yen. As currencies with low interest rates, they were borrowed to effect the leverage and are now benefiting from what is essentially short covering as leverage is unwound. This is another reason that the price of gold, in US dollar terms, is down over the past month – albeit, not nearly as much as other assets that were on the long side of the leveraged trade.

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Jim Sinclair’s Commentary

Too big to go broke? As goes GM so goes the US. The US is speeding towards technical insolvency and downgrades of US Treasury instruments.

GM Says It May Not Have Enough Cash to Operate This Year
By Jeff Green and Mike Ramsey

Nov. 7 (Bloomberg) — General Motors Corp., seeking federal aid to avoid collapse, said it used $6.9 billion in cash in the third quarter and may fall below the minimum it needs to operate before the end of this year.

GM said it will be near its minimum threshold for operating cash for the remainder of 2008 and will be “significantly short” of that level by the end of June without an improvement in market conditions, a major asset sale or access to new loans or cash support. GM has said it needs at least $11 billion in cash to pay its bills each month.

“GM is making a pretty direct plea for help,” said Pete Hastings, a fixed-income analyst at Morgan Keegan Inc. in Memphis, Tennessee. “The message is, `we’ve done all the things we can do, and we need help.’ And if we don’t get help, fill in the blank.”

Merger talks are being suspended, GM said. The company had been in discussions about a tie-up with Chrysler LLC, people familiar with the plans had said.

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Jim Sinclair’s Commentary

As goes GM so goes Ford and all other US car makers.

Ford: Massive loss, job cuts
Detroit under siege: Ford auto unit burns through $6.3 billion and cuts 2,600 hourly workers. GM to announce its results soon.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: November 7, 2008: 10:26 AM ET

NEW YORK (CNNMoney.com) — Ford Motor reported a $3 billion quarterly operating loss on Friday and said it would reduce staff and capital spending in order to preserve its dwindling cash.

Ford said it would cut salaried employment costs by 10% – reducing compensation of its white collar workers by eliminating merit pay, bonuses and the company’s matching contributions to their retirement accounts.

But even with those savings, the company said it’s likely to lay off more salaried staffers. It also said hourly staff – mostly factory workers covered by union contracts – would be reduced by an additional 2,600 through a voluntary buyout package.

The company, which earlier this year sold brands such as Jaguar and Land Rover, said it would continue to look to sell assets.

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Posted by & filed under In The News.

Dear CIGAs,

 The final word is that gold is a currency which moves in the inverse to the US dollar.

 The inflation/deflation/recession/depression argument fell on it ass in the 70s and will do so again.

The present dollar strength is geek and kneejerk reaction demand devoid of fundamental strength and is therefore not a long term bull market. A decline in the dollar will turn the spotlight on the credit worthiness of US Treasuries, impacting the growing demand for T-bills as the equity market, now without a PPT, is in trouble.

Blame the bust now spun on the advent of the new Administration.

The World Tires of Dollar Hegemony
by Craig Roberts
Nov 6
(Excerpts)

“The dollar’s rise is temporary, and its prospects are bleak. The U.S. trade deficit will lessen due to less consumer spending during recession, but it will remain the largest in the world and one that the United States cannot close by exporting more. The way the U.S. trade deficit is financed is by foreigners acquiring more dollar assets, with which their portfolios are already heavily weighted. 

“The toxic American derivatives were marketed worldwide by Wall Street. They have endangered the balance sheets and solvency of financial institutions throughout the world, including national governments, such as Iceland and Hungary. Banks and governments that invested in the troubled American financial instruments found their own debt instruments in jeopardy. The financial crisis has reversed this process. The toxic American derivatives were marketed worldwide by Wall Street. They have endangered the balance sheets and solvency of financial institutions throughout the world, including national governments, such as Iceland and Hungary. Banks and governments that invested in the troubled American financial instruments found their own debt instruments in jeopardy.”

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Jim Sinclair’s Commentary 

Let the games begin. How will President Obama handle the Russian threat?

President Dmitri Medvedev orders missiles deployed in Europe as world hails Obama
November 6, 2008

President Medvedev ordered missiles to be stationed up against Nato’s borders yesterday to counter American plans to build a missile defence shield.

Speaking within hours of Barack Obama’s election, Mr Medvedev announced that Russia would base Iskander missiles in its Baltic exclave of Kaliningrad – the former German city – next to the border with Poland.

He did not say whether the short-range missiles would carry nuclear warheads.

Taking advantage of the world’s attention on the US elections, Mr Medvedev also cancelled plans to withdraw three intercontinental ballistic missile regiments from western Russia by 2010. In his first state-of-the-nation address, Mr Medvedev said the missiles would be deployed “to neutralise if necessary the antiballistic missile system in Europe”. He added that Russia was also ready to deploy its Navy off Kaliningrad and to install electronic jamming devices to interfere with the US shield, which relies on a radar station in the Czech Republic and ten interceptor missiles in Poland.

Nato’s eastern members greeted the Russian move with dismay.

A Czech Foreign Ministry spokesman described the Kremlin’s move as unfortunate. Lithuania’s President Adamkus accused his Russian counterpart of going back on his word.

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Jim Sinclair’s Commentary

Obscuration, lies and misstatements continue rampantly. The impact now is momentary, however the consequences may span a decade or more.

Do not abandon ship. Obscuration is a pilot’s term for when you can’t see a damn thing.

Credit Swap Disclosure Obscures True Financial Risk (Update2)
By Shannon D. Harrington and Abigail Moses

Nov. 6 (Bloomberg) — The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

A report by the Depository Trust and Clearing Corp. doesn’t include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a “small fraction” of contracts linked to mortgage securities, according to Andrea Cicione at BNP Paribas SA in London.

New York-based DTCC’s data, released on its Web site Nov. 4, showed a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers. While designed to ease concerns about the amount of risk banks and investors amassed on borrowers from companies to homeowners, the report may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are “likely to underestimate the amount of net CDS exposure,” Cicione, who correctly forecast in January that the cost of protecting European companies from default would rise, said in an interview. “A broadening of the coverage to the entire market is what investors really need.”

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Jim Sinclair’s Commentary

Nothing has changed. Libor is being used to paint a bright picture yet there is no bright picture to be seen.

Note the insurance article on gold as it tells the truth of what is.

Your $3 trillion bailout
Washington is waging war on the financial crisis. Mr. Obama: You have to see it through.
By David Goldman, CNNMoney.com staff writer
November 5, 2008: 11:54 AM ET

NEW YORK (CNNMoney.com) — Congratulations Mr. President-elect. Now get to work. It’s a little more than 10 weeks until Jan. 20, and there’s an economy in dire need of fixing.

Here’s the executive summary: The economy’s cracks started showing a year ago. Home prices plummeted and foreclosures soared. Financial institutions carrying mortgage-backed securities on their books took an enormous hit. Banks wanted to take fewer risks, so lending to businesses and consumers froze up.

Then things really broke down in September. The government took over mortgage giants Fannie Mae and Freddie Mac. The collapse of Lehman Brothers sent investors worldwide into a cold sweat.

To combat the crisis, Congress and the current administration have taken a number of steps aimed at boosting the housing market – providing critical liquidity to financial institutions and saving businesses from collapse.

Thus far, the government has pledged as much as $3 trillion for the crisis, although the ultimate cost to the federal budget won’t be known for years to come since much of that money is effectively investment.

“You’d have to go back to the New Deal to find something similar to what the government has done to stop the credit crisis,” said Jay Bryson, economist for Wachovia. “It’s because the alternative was unthinkable: If it failed, there was potential for another Great Depression.”

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Jim Sinclair’s Commentary

Sympathy for this? You have to be kidding. If you knew why these funds are hitting the walls you would be surprised. I suggest “Income Smoothing Derivatives.”

London Hedge Funds Halt Redemptions
November 5, 2008

The rash of hedge funds halting redemptions continues as global markets spiral down with two more freezing their assets.

GILD Arbitrage, the first registered Baltic hedge fund, will halt redemptions and subscriptions until May 5, citing “market turbulence.'”

The fund, managed by the Tallinn, Estonia-based investment bank GILD Bankers, took the step because of “the risk of treating some investors unfairly” and because it didn’t want “to act too hastily in realizing the potential of our fund investments,” Bloomberg News reports, citing Tonno Vaehk, who oversees the fund, in an e- mailed statement.

The fund, which focuses on arbitrage, has 300 investors and total assets of about US$127 million.

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Jim Sinclair’s Commentary

Today is a good day to review John’s excellent thoughts,  

John Embry: Gold’s Game-Changing Moment Could be Fast Approaching
Tuesday, October 28, 2008

In a recent Business News Network interview, Amanda Lang talks with John Embry, Chief Investment Strategist at Sprott Asset Management, about his position on precious metals (bullish) and base metals (bearish). While hesitating to make a definitive prediction in the midst of such widespread asset destruction, Embry nonetheless looks beyond the carnage to what he suggests could be the seminal event for gold-the possibility of default on physical delivery for the December futures contract. He also explains why gold has failed to rise to the occasion of the worst-case financial scenario in history. Below are some excerpts from the interview, edited for length and clarity.

Amanda Long: People say gold really should be doing better than it is now and that actually becomes a justification for not buying it. It’s not doing what it should be doing in a crisis and, therefore, I don’t want to own it.

John Embry: That is a wonderful analysis because that is exactly the mindset the guys who are driving the price down are trying to create. Gold doesn’t work so keep away from it. They’re able to control the price quite easily in the paper markets because the paper markets are so huge in comparison. “The guys” – the central banks and their bullion bank accomplices-have a lot of power and a lot of money, so they can overwhelm the other side. But what’s happening is that the physical supply is diminishing dramatically. It’s getting harder and harder to purchase gold and silver through traditional avenues. You can’t get it in coin shops to any extent. You can’t get it through your banks. The physical side is really constricted by supply. That, to me, is the reality. The paper stuff is just the illusion.

AL: Now the problem, of course, for investors is that the paper market is the one you’ve got to play and, for the most part, it affects the price. How will that be resolved?

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Jim Sinclair’s Commentary

It is not the gold part of this article as much as “MUMBAI: With the credit crisis having a direct impact on funding costs and drying up of inter-bank credit lines, a few foreign banks have altogether stopped supplies of gold to Indian banks in a bid to reduce their exposure to Asian markets.”

This statement concerning inter-bank credit lines is a fib or Libor is a world class whopper.

Foreign banks cut down gold supply to India
5 Nov, 2008, 0326 hrs IST,
Ram Narsinghdev Sahgal, ET Bureau

This comes at a time when global liquidity pressures have eased considerably and local demand for the yellow metal has picked up as prices have come off the highs witnessed in the early part of October. Dealers from many banks told ET that supplies have been squeezed with banks, such as Standard Bank of South Africa, one of the main suppliers, Commerzbank and UBS, stopping supplies altogether or reducing them on a consignment basis.

“Both Commerzbank and Standard Bank have stopped supplies on a consignment basis to Indian banks since October, while UBS has reduced its exposure,” said a bullion dealer from a public sector bank.

“Apart from the cost of funds having played a part in their decision to stop or go slow on supplies, the main reason is reluctance on part of these banks to take exposure to Asian banks for fear of defaults.”

While Standard Bank refused to comment, email queries to UBS and Commerzbank failed to elicit an immediate response.

The stoppage of supplies from these banks come even as gold lease rates – the difference between Libor and gold forward offered rates fixed by six banks – have come off their highs witnessed in October and even as the London offered interbank rate (Libor) eased considerably as part of pump priming efforts in western economies.

More…

Posted by & filed under In The News.

Jim Sinclair’s Commentary

  1. If today does not get you wild about the Gold Bank’s unending desire to pick your pocket then you are simply numbed to the experience.
  2. The Gold Banks are losing their rich uncle so today was an act of bravado to show us. It was not oil.
  3. If you have had enough of the gold banks then push back as per yesterday’s second review of taking delivery either of the kilo or 100oz. bars.
  4. Gold is a currency that moves inverse to the US dollar, and will in the main remain so. A change in percentage moves with gold ahead of the dollar in the inverse is possible in 2009.
  5. The dollar rally has been totally technical in terms of international flows of currency that absolutely has no legs to hold it up. Harry Schultz’s call on the USDX topping at or near .88 looks quite good
  6. As far as the depth of the problems goes, it is still bottomless. The following article speaks to this.
  7. The Golden Age of the Financial Criminal, marked by flagrant violations of law and regulations, may be reined in with some spectacular trials.

A credit crater too big to fill?
As the movement of money across borders comes to a grinding halt, governments can only manage the decline. Don’t be surprised to see markets roll back to 1995 levels — or lower.
By Jon Markman

Despite a weeklong surge in stocks, it’s becoming increasingly clear that credit has suffered a catastrophic setback.

It’s as if a set of asteroids hit Manhattan, London and Tokyo, carving a massive hole in the architecture of finance. The initial buildings in the impact crater, Lehman Bros. (LEHMQ), Bear Stearns and Northern Rock, were quickly incinerated. But now the toxic rain and tsunamis that were kicked up are rolling onto the survivors in waves and cutting off their air supply.

New data from world money centers suggest the movement of money around the globe has simply ground to a halt, as institutions in the United States, Europe and Asia that are receiving taxpayer dollars from governments are socking it away to shore up their balance sheets, reserve against liabilities expected in the near future and sustain their unprofitable operations.

“Governments are not really trying to save the system anymore,” said Satyajit Das, a banking expert in Sydney, Australia. “They now realize that’s impossible. They are just trying to manage the decline.”

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Jim Sinclair’s Commentary 

Are you sure your Treasury instrument money market fund is in US Treasury instruments, or are they in OTC derivative based on Treasury instruments? I wager you the latter. The problems out there have no cure without consequences more dangerous than the problems themselves. 

“She said that scrutiny by the SEC and the Fed, and widespread investigations into short-selling practices, are driving the industry to rein in questionable practices with Treasuries.” 

Delivery failures plague Treasury market
Total hit a record $2.29 trillion as of Oct. 1
By Dan Jamieson
October 19, 2008, 6:01 AM EST

The credit crisis is causing a growing number of delivery failures with Treasury securities.

The latest data from the Federal Reserve Bank of New York showed that cumulative failures hit a record $2.29 trillion as of Oct. 1. The federal settlement period is T+1 (trade date plus one day).

The outstanding U.S. public debt is $10.3 trillion.

“Current [fail] levels are at historic levels,” said Rob Toomey, managing director of the Securities Industry and Financial Markets Association’s funding and government and agency securities divisions. “There’s been significant flight to quality” with the market turmoil, he said.

With the strong demand for Treasury securities, “some of the entities that bought Treasuries are not making them available in the [repurchase] market, which is the traditional way to get them,” Mr. Toomey said.  

Unlike some past bouts with high failure rates that involved particular bond issues, the current high fails involve all types of maturities, he said.

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Jim Sinclair’s Commentary

Someone with ethics and understanding would take exception to flushing FASB 157 down the toilet. Doing so would allow Wall Street to go back to good old lying their asses off with regards to the valuation of OTC derivatives. Schiller can look back with 20/20 vision but it is a loser looking forward. Nobody and no formula has a clue what 2011 will look like. Trashing FASB 157 will not simply set back reform, it will kill it stone cold before arrival. Nothing to the Wall Street creeps is temporary. Crime is permanent.

Mark-to-market manipulation
Commentary: Efforts to change accounting rules would set back reform
By David Weidner, MarketWatch
Last update: 12:01 a.m. EST Nov. 4, 2008

NEW YORK (MarketWatch) — Mark-to-market — or fair-value — accounting has one big problem: Some very powerful people are trying to change it.

A movement spurred by bankers including Aubrey Patterson, chief executive of Bancorpsouth Inc. (BXS) and Wall Street power brokers including Blackstone Group (BX) Chief Stephen Schwarzman are arguing for at least a temporary suspension of Financial Accounting Standards Rule 157.

Patterson and other supporters argued for the rule’s suspension in a Securities and Exchange Commission roundtable Oct. 29. Other critics of FAS 157 included Damon Silvers, AFL-CIO general counsel, and Bradley Hunkler, an insurance executive from Western & Southern Life.

Simply put, these guys want the government to stop requiring mark-to-market accounting so the financial industry can put blinders on to the deep trouble that lies on its balance sheets. Not surprisingly, the proponents of a suspension would also apparently benefit from it.

For guys like Patterson, it would mean his bank wouldn’t have to take big charges each quarter to build reserves. Bancorpsouth increased its reserves by 50% to $16.3 million to gird against loan losses at the end of the third quarter.

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Jim Sinclair’s Commentary

Recall what I told you about GE being a major entity in credit default derivatives?

In reading this article, keep firmly in mind no matter how loud the Geeks scream there is no question that bankruptcy takes nominal value to full value. The Geek BS does not work when one party to the special performance contract fails and cannot perform.

Credit Swaps Top $33 Trillion, Depository Trust Says
By Shannon D. Harrington 

Nov. 4 (Bloomberg) — Credit-default swaps totaling $33.6 trillion are outstanding on government debt, corporate bonds and asset-backed securities worldwide, the Depository Trust & Clearing Corp. said in a report that gives the broadest data yet on the unregulated market.

After canceling out overlapping trades, Italy’s government debt tops the list with $22.7 billion in contracts, the report on DTCC’sWeb site today shows. A net amount of $16.6 billion of contracts are outstanding on Spain; $12.4 billion on Deutsche Bank AG, Germany’s largest bank; and $12.1 billion on General Electric Co.’s finance arm, GE Capital Corp., the report shows.

“Publishing this data will provide greater transparency in a critical market,” Tim Ryan, the head of the Securities Industry and Financial Markets Association in Washington said in a statement today. “This is an important initiative upon which the industry will continue to build.”

Before netting, Turkey topped the list with $188.6 billion in contracts, and dropped to $7.6 billion after redundant trades were subtracted. On a gross basis, $15.4 trillion of transactions were linked to individual corporate, sovereign and asset-backed bonds, and about $14.8 trillion was tied to indexes. The New York-based DTCC estimates it sees about 90 percent of all trades.

More…

 

Jim Sinclair’s Commentary

This has to be a joke of some kind. In 2006 the cancer of OTC derivatives was growing like a locust storm at Bear Stearns.

NY Fed hires former Bear Stearns chief risk officer
Tue Nov 4, 2008 9:29am EST

NEW YORK, Nov 4 (Reuters) – The Federal Reserve Bank of New York has hired the former chief risk officer of Bear Stearns Cos, Michael Alix, to advise on bank supervision, according to a release in the Fed’s Web site.

Alix will serve as a senior advisor to William Rutledge in the Bank Supervision Group and his appointment is effective Nov. 3, according to the release dated Oct. 31

At Bear Stearns, an investment bank that collapsed in March and has become hallmark of the global credit crisis, Alix served as chief risk officer from 2006 to 2008 and global head of credit risk management from 1996 to 2006.

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 Jim Sinclair’s Commentary

The financial saviour of the planet, the US Federal Reserve, may need to be saved itself much sooner than you or they imagine. A planetary Weimar – it is possible going towards probable.

What Happens when Countries Go Bankrupt?
By SPIEGEL Staff

First it was mortgage lenders. Then large banks began to wobble. Now, entire countries, including Ukraine and Pakistan, are facing financial ruin. The International Monetary Fund is there to help, but its pockets are only so deep.

No, Alexander Lukyanchenko told reporters at a hastily convened press conference last Tuesday, there is “no reason whatsoever to spread panic.” Anyone who was caught trying to throw people out into the street, he warned, would have the authorities to deal with.

Lukyanchenko is the mayor of Donetsk, a city in eastern Ukraine with a population of a little more than one million. For generations, the residents of Donetsk have earned a living in the surrounding coalmines and steel mills, a rather profitable industry in the recent past. Donetsksta, a local steel producer, earned €1.3 billion ($1.65 billion) in revenues last year.

But last Tuesday the mayor, returning from a meeting with business leaders, had bad news: two-thousand metalworkers would have to be furloughed. Lukyanchenko doesn’t use the word furlough, instead noting that the workers will be doing “other, similar work.” But every other blast furnace has already been shut down, and one of the city’s largest holding companies is apparently gearing up for mass layoffs.

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Jim Sinclair’s Commentary

Now the fun really starts because the statute of limitations hasn’t stopped. I am bullish on public companies that specialize in building Federal prisons and bearish of Greenwich, CT mansions valued over $20,000,000.

Now That Election Is Over, Its Back To The Crisis
Danny Schechter
Posted November 4, 2008 | 06:55 PM (EST)

The election is all but over, but the debate over who is responsible for the financial crisis is just beginning to become more intense.

We know that the FBI has opened a criminal investigation of 26 companies, indicted 400 mortgage scammers and started 1400 criminal white collar cases There are 40 task forces allegedly looking into the fraud at the heart of the subrprime pyramid scheme.

But now we also know that the Bush Administration has made a the prosecution of white collar crime a lesser priority with more agents tasked to chase terror suspects than the men and women who brought our economy down.

Reported Newser:

“A short-staffed FBI is laboring to keep up with white collar crime linked to the nation’s financial crisis, the New York Times reports. FBI officials predicted millions of dollars’ in mortgage fraud years ago, but the Justice Department wanted agents focused on counter-terror. When the FBI warned of a fraud “epidemic” in 2004, only 15 of its 13,000 agents were on the case.”

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Posted by & filed under In The News.

Dear CIGAs, 

The last pillar required for a massive gold move is the 30 year USA long bond breaking below its 35 year up trend line.

The most important points: 

“America is bankrupt. American government bonds are extremely overvalued. “The world’s last bubble.” America is in debt for over 13.000 billion (13 trillion) dollar and adds a 1.000 billion dollar debt each year. According to Rogers this can not continue for long. Therefore, he went short in long-term US goverment bonds. “These bonds have peaked.” By the way: Rogers owns Dutch government bonds. “They are safe.”

“The fact that the dollar is gaining rapidly is only temporary”, Rogers says. “All hedge funds were short on the dollar and because of the appreciation of the dollar there is a short squeeze for the dollar. Managers have to close thier positions and they have to buy dollars instead.” “This is temporary, within a year you have to get rid of the dollar. Fundamentally it is a drama.” 

Jim Rogers: America is bankrupt (English version)

America is bankrupt, according to investment legend Jim Rogers. “The American government bonds are the world’s last bubble and the price of commodities has to increase.”

Charismatic
The famous and charismatic investor, guru if you will, Jim Rogers, visited ABN Amro Netherlands last Friday. RTL Z was at ABN headquarters as well and recorded a number of statements, investment tips and opinions about the world economy.

Rogers
During the seventies Jim Rogers (66) managed a successful hedge fund with George Soros. After that, he traveled and went into commodities. Click here for the wikipedia entry for Rogers. 

Last Friday Rogers went at it in front of a roomful of ABN private banking clients. We had an exclusive 15-minute interview with Rogers.

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Jim Sinclair’s Commentary

More from Pakistan. The drones did it. 

Pakistan condemns U.S. missile strikes
SAEED SHAH
November 3, 2008 at 10:39 PM EST

ISLAMABAD – Tensions increased between Pakistan and the United States Monday when President Asif Zardari and other officials roundly rebuked American military commander General David Petraeus over U.S. missile strikes inside Pakistan.

Gen. Petraeus, credited with pulling Iraq away from the brink, has now been charged with developing a strategy to rescue the war in Afghanistan. He has overall charge of the Middle East and Central Asia, including Iraq and Afghanistan, as head of U.S. Central Command, and made Pakistan his first visit to the region.

Pakistan’s co-operation is considered vital if the Taliban insurgency in Afghanistan is to be quelled, but Islamabad has been incensed by U.S. missile attacks inside its territory against suspected militants. 

Mr. Zardari told Gen. Petraeus, according to a statement issued by the President’s office, that “continuing drone attacks on our territory, which result in loss of precious lives and property, are counterproductive and difficult to explain [for] a democratically elected government. It is creating a credibility gap.” on those bombing drones.

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Jim Sinclair’s Commentary

When the lower rate is so desirable I imagine the feeling among regulators, officials and of course the obedient brown nose media is that of “who cares.”

Note there is no media coverage of the strong doubt remaining amongst rational people that Lie-bor, as a tool of the bankers, does the necessary in the best interest of those who report their cost of dollars that constitute the much watched Libor rate.

Maybe they will declare Libor at ½ percent soon.

London Interbank Offered Rate (LIBOR)

Definition:
Interest rate at which the London banks are willing to offer funds in the inter-bank market. LIBOR is the average of rates which five major London banks are willing to lend $10 million for a period of three or six months, and is the benchmark rate for setting interest rates for adjustable-rate loans and financial instruments.

Link…

 

Bankers Cast Doubt On Key Rate Amid Crisis
By CARRICK MOLLENKAMP

 LONDON — One of the most important barometers of the world’s financial health could be sending false signals.

In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable.

Libor plays a crucial role in the global financial system. Calculated every morning in London from information supplied by banks all over the world, it’s a measure of the average interest rate at which banks make short-term loans to one another.

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Lie-bor?
by Jeffrey Cane  Apr 16 2008

Questions grow about a major rate.

One of the arcane financial acronyms that has gained much prominence over the course of the credit crisis is Libor-the London interbank offered rate. It is the average interest rate when banks make short-term loans to one another.

It is one of the most important credit benchmarks, used by banks and financial institutions around the world.

Carrick Mollenkamp of the Wall Street Journal reports that there are growing suspicions that some banks may be underreporting the rates they are paying for short-term loans, undermining the accuracy of the Libor. 



His report is a startling revelation. If the Libor is viewed as unreliable, the credit crisis may be much worse than previously thought, with borrowers receiving loans tied to the index getting a cheaper rate than they should.

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Jim Sinclair’s Commentary

Brokerage full service retirement plans will be retired before you will. Gold is all that will protect your retirement.

Lehman Good-for-Retirement Notes Worth Pennies for UBS Clients
By Bradley Keoun and David Scheer

Nov. 3 (Bloomberg) — UBS AG, Switzerland’s largest bank, faces dozens of claims in the U.S. from clients who bought “100 percent principal protected notes” issued by Lehman Brothers Holdings Inc. that are now almost worthless.

Six attorneys hired to represent clients in the cases say UBS brokers touted the so-called structured notes as low-risk investments and failed to emphasize they were unsecured obligations of Lehman, which filed for bankruptcy in September. State regulators are fielding so many calls about Lehman’s notes they’re considering a task force to investigate the sales, said Rex Staples, general counsel for the North American Securities Administrators Association Inc., a group of 67 state and provincial regulators based in Washington.

“The sales pitches were that it’s good for retirement accounts, and good for the safe, fixed-income part of people’s portfolios as an alternative to owning stocks, because it’s less risky,” said Seth Lipner, a lawyer in Garden City, New York, hired by two holders of Lehman notes sold by UBS, including a 65- year-old accountant who says he lost $1.4 million in retirement savings. “Of course, it turned out to be more risky.”

Any awards for investors would add to the financial industry’s burgeoning costs for compensating individuals who bought supposedly safe investments that crumbled in the credit crunch. Banks and securities firms, including Zurich-based UBS, Citigroup Inc. and Merrill Lynch & Co., already have had to swallow more than $3.6 billion in fines and market losses on auction-rate securities they had to buy back from clients under orders from the U.S. Securities and Exchange Commission and regulators in New York, Massachusetts and other states.

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Posted by & filed under In The News.

An observation of the mercurial manipulation of the paper gold price and our need to stop whining and start pushing back:

If tonight there were 1,366 millionaires who would purchase Comex gold contracts and take delivery of that value of gold, the manipulation would end.

Note the gold Bank Hammer that hit as the Comex gang were just ending their morning naked Wicca services.

 

Jim Sinclair’s Commentary 

Who said things are far worse internationally than in the good ole USA? 

GM Oct. sales fall nearly half; Ford drops 30 pct.
Monday November 3, 2:26 pm ET
By Tom Krisher and Bree Fowler, AP Auto Writers 

GM’s US sales plunge 45 pct., Ford down 30 pct.; industry could have worst month in 25 years

DETROIT (AP) — General Motors’ October U.S. sales plunged 45 percent and Ford’s dropped 30 percent, as low consumer confidence and tight credit combined to scare customers away from showrooms. 

The results released Monday — along with a 23 percent drop at Toyota and a 25 percent decline at Honda — are strong indications that sales for the industry as a whole may perhaps be the worst in 25 years.

Detroit-based General Motors Corp. said its light trucks sales tumbled 51 percent compared with the same month last year, while demand for passenger cars fell 34 percent. 

The results were less severe at Ford Motor Co., which said its Ford, Lincoln and Mercury car sales were off 27 percent, while light truck sales for the three brands were down more than 30 percent.

More…

 

Sacked Lehman Brothers Bank Employees Blockade Head Office

Dear Friends,

This is the oxymoron of the century and a formula for a very weak dollar and hyper-inflation in the midst of ugly business conditions. All of this will become evident quite soon, probably after Christmas.

The Fed as a central bank to the world
Jacqueline Thorpe, Financial Post
Published:Sunday, November 02, 2008

Nicolas Sarkozy may be pushing for a new financial order but Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson have beaten him to it.

While the French President dreams of global economic cooperation ahead of the G20 summit in Washington, the Fed is quietly becoming central bank to the world, backed by the full might of the U.S. Treasury and a teflon-coated greenback.

Last week saw a new program added to the barrage of bailouts, backstops and stimuli announced by the United States — US$30-billion currency swap lines for Brazil, Mexico, South Korea and Singapore. This is on top of the unlimited supply of greenbacks the United States has provided to the major economies.

The United States will swap wons for greenbacks, allowing South Korean banks to fulfill local demand for U.S. dollars, which had been starved by the freeze-up in the inter-bank lending markets. Banks can then provide those greenbacks to their local customers to allow them to carry out international business.

In April, South Korea will swap its wons back, for a fee of course. David Rosenberg, chief North American economist at Merrill Lynch was quick to pick up on the irony. “The U.S. was supposedly the basket case nation with the massive deficits whose currency was destined to lose its reserve status and whose credit rating was going to get cut at some point,” he said in a note last week. “It is the U.S. that is being called upon to provide unlimited swap lines with Europe one day, and funding for emerging markets the next.”

More…

Currency Swap:

A swap that involves the exchange of one currency (e.g., US dollars) for another (e.g., Japanese yen) on a specified schedule.
www.cftc.gov/educationcenter/glossary/glossary_co.html

Jim Sinclair’s Commentary

Swaps may be dated for maturity by mutual agreement between parties. I sense that these swaps now financing the planet are from the Fed through the bouquet of perma-swaps in the form of 28 day perma-loans at the Begging Bowl Loan Window.

Jim Sinclair’s Commentary

No problem, just call the Fed and they will make good on a perma 28 day loan.

Citi says credit card losses may rise through 2009
Bank suffers $1.4 billion hit from card-backed assets in latest quarter
By Greg Morcroft, MarketWatch
Last update: 1:44 p.m. EST Nov. 2, 2008

NEW YORK (MarketWatch) — Citigroup said that it lost $1.4 billion in the third quarter from credit card securitizations and that it expects such losses will continue, possibly reaching record levels in 2009.

The result compared to a gain of $169 million from credit card securitizations in the year-earlier period.

“Credit card losses may continue to rise well into 2009, and it is possible that the company’s loss rates may exceed their historical peaks,” the banking giant said in its filing with the Securities and Exchange Commission late Friday.

Citi (C:13.77, +0.12, +0.9%) also said it added $3.9 billion to overall credit reserves, including $2.3 billion for its North American consumer business and $855 million for consumer business outside the U.S.

Citi said the additional reserve to the North American segment was mostly due to a weakening of leading credit indicators, including higher delinquencies on first mortgages, unsecured personal loans, credit cards and auto loans.

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Jim Sinclair’s Commentary

Do it soon or lose the opportunity soon.

Physical Certificates Take a Step Closer to Extinction
by Edward C. Kelleher

The Depository Trust Company, (DTC), a DTCC subsidiary, has announced it will no longer issue physical certificates for withdrawals-by-transfer (WTs) for more than 5,500 issues beginning January 1, 2009.

DTC plans to eliminate WTs of physical certificates for all issues that participate in DTCs Direct Registration System (DRS). Instead, DTC will process these WTs in DRS statement form. This change is pending approval by the Securities and Exchange Commission (SEC). (About 1,550 additional issues are eligible for, but not participating in, DRS and do not offer the investor the opportunity to receive a DRS statement.)

If permitted by an issuer, investors may take their DRS statement to their transfer agent and exchange it for a physical certificate.

DTCs DRS is a book-entry system that enables investors to register their shares electronically with the issuing company or its transfer agents. Instead of a paper certificate, investors receive a statement of their holdings. In 2008, all the major and regional exchanges in the United States mandated that DRS become a listing requirement for all issues. (DTC is the only registered clearing agency operating a DRS.)

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Jim Sinclair’s Commentary

Now that we know there is a serious situation due to the decline of gold reserves without any present relief in the inventory of the majors, please consider the following article.

Mining consolidation anticipated
Peter Koven, Financial Post
Published:Sunday, November 02, 2008

Since mining industry share prices began their historic collapse several weeks ago, investors have wondered when the inevitable consolidation will begin.

According to law firm Fasken Martineau, it is only a matter of time before it gets underway. However, this round of consolidation will look nothing like the last one, and it will not be led by the large companies like Xstrata PLC that dominated the last cycle.

In a presentation to mining industry insiders late last week, Fasken partner Greg Ho Yuen advanced the theory that the intermediate companies will be the ones that kickstart a new wave of acquisitions rather than the senior companies.

The reason is that the sudden fall in commodity prices is forcing the majors to take time to re-evaluate all of the multi-billion-dollar mine developments they were planning. The more nimble intermediate producers will be able to take advantage of the weak markets faster to buy up distressed juniors.

“Because intermediates are smaller and more focused on a few projects, their period of self-evaluation will have either been completed or can be completed very quickly,” Mr. Ho Yuen said in an interview.

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Jim Sinclair’s Commentary

Come on, the drone did it, not the US!

Pakistan Warns U.S. Against Further Airstrikes on Tribal Areas
By Candace Rondeaux
Monday, November 3, 2008; 10:40 AM

ISLAMABAD, Nov. 3 — Pakistan’s defense minister cautioned the newly appointed head of the U.S. Central Command on Monday that launching further missile strikes in the country’s troubled tribal areas could increase tensions between the two countries.

Pakistani Defense Minister Chaudhry Ahmad Mukhtar issued the blunt warning to Gen. David H. Petraeus during his first official visit to Pakistan as head of the U.S. war in neighboring Afghanistan. Mukhtar, who also called for more coordination between the U.S. and Pakistani militaries, said the recent increase in U.S.-led cross-border strikes had created “bad blood” between the two allies. On Friday, 27 people were killed in two separate U.S. airstrikes in northwest Pakistan.

The Pakistani Defense Ministry said in a statement released shortly after the meeting that frequent attacks inside Pakistan by U.S. Predator drones “could generate anti-American sentiments” and “create outrage and uproar” among Pakistanis.

Petraeus, who took charge of the wars in Afghanistan and Iraq on Friday, and U.S. Assistant Secretary of State Richard A. Boucher met with Mukhtar and Pakistan’s top military officer, Gen. Ashfaq Kayani. It was part of the first leg of a tour that is expected to include a visit soon to Afghanistan.

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Jim Sinclair’s Commentary

Look for fiscal stimulation next. How about a new Roosevelt CCC?

Worst job losses since March 2003 predicted
Jobs, manufacturing, credit data to be released
By Ruth Mantell, MarketWatch
Last update: 12:01 a.m. EDT Nov. 2, 2008

WASHINGTON (MarketWatch) — Retailers may not be so merry as this holiday shopping season gets underway.

Consumer confidence hit an all-time low in October, buried under heap after heap of dismal financial and economic news. Worried consumers aren’t going to be rushing into stores or splurging on holiday gifts.

In recent days, data have shown that U.S. consumer spending in September was down 0.4% on a year-over-year basis, the first such drop since the recession of 1991. And it turns out that the U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest rate in 28 years.

Why such worry? On top of watching their retirement savings dwindle and foreclosure notices rise, reports about mass layoffs keep rolling in. With weekly initial claims for state jobless benefits hugging the half million mark, a bottom of the labor market doesn’t appear to be in sight.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

Between 400,000 and 1,000,000 STILL cannot get access to their savings.

Don’t follow the spin, and let your guard down. This is the beginning, not the end. This could have been you!

The primary target that should be faced has not been even been aimed at. That target is called over the counter derivatives.

Part of the rescue is the use of an OTC derivative by the Federal Reserve – a swap.

Reserve Funds investors still waiting for their money
30 Oct 2008 11:53 am

This isn’t good:

At least 400,000 people, and perhaps as many as a million, can’t get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.

Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.

“Longer term, I just don’t know how we’ll deal with it,” said John Oakes, a retired engineer in Austin, Tex., who can’t tap $20,000 in a Reserve account to pay his mother’s nursing home bill. “They say we may get some money this week, but we don’t know if we’ll get 100 percent, 90 percent or 30 percent.”

Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets –invested in the Reserve US Government Fund.

“They even bragged that you could sleep at night if you invested in their funds,” Mrs. Dews said. “In the past month and a half, we don’t sleep at all.”

Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.

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Jim Sinclair’s Commentary

Gold will never entirely separate from the US dollar. The tie may loosen in favour of gold, but will never fully part. Look at the dollar supply and demand. The world needs hundreds of billions of dollars to stave off a potential Weimar situation until the USA joins that club themselves.

The world does not need the same in euros, yen or rubles; only dollars. Is the Federal Reserve the lender of last resort to the entire planet? Does that not make many of you the lenders of last resort to those who accept worthless collateral or swaps that promise to pay paper backed by nothing in exchange for freshly created electronic paper backed by nothing sometime in the distant future?

IMF needs hundreds of billions of dollars more: Brown

RIYADH (AFP) – Prime Minister Gordon Brown said the International Monetary Fund (IMF) needs “hundreds of billions of dollars” to help countries at risk of collapsing amid the world financial crisis.

Brown, who is in Saudi Arabia, told reporters Saturday during a four-day tour of Gulf states that countries which had benefited from recent high oil prices could contribute to the plan.

Brown also stressed that Britain welcomed investment from Gulf sovereign wealth funds “as long as they play by our rules and operate in a commercial manner.”

Brown, whose struggling premiership has been boosted by his leadership in the financial panic, wants the IMF’s 250 billion dollar bailout fund for affected countries to be extended to prevent “contagion” elsewhere.

He has not previously indicated the amount of cash by which he believes the IMF, which is set to bail out Hungary, Ukraine and Iceland, needs to boost its coffers.

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Jim Sinclair’s Commentary

That seems a tad wrong.

Banks to Continue Paying Dividends
Bailout Money Is for Lending, Critics Say
By Binyamin Appelbaum
Washington Post Staff Writer
Thursday, October 30, 2008; A01

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don’t serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.

Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends — or conversely, why banks that need government money are still spending so much on dividends.

“The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program,” said Sen. Charles E. Schumer (D-N.Y.), who has called for the government to require a suspension of dividend payments.

The Treasury plans to invest up to $250 billion in a wide swath of U.S. banks in return for ownership stakes, which the government will relinquish when it is repaid.

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Jim Sinclair’s Commentary

FDIC’s capital shrinks weekly bit by bit.

Alpha Bank & Trust fails, taken over
October 31, 2008 | 10:04 AM

ALPHARETTA – Regulators descended upon Alpha Bank & Trust on Old Milton Parkway like a swarm of bees Friday as it became the latest bank closed by the Ga. Department of Banking and Finance and the second in the Alpharetta area. Integrity Bank was closed Aug. 29, though technically its headquarters were in Johns Creek city limits by virtue of being east of Kimball Bridge Road.

The Federal Deposit Insurance Corporation (FDIC) was named receiver.

Depositors saw the change Monday as the bank’s two branches – one on Old Milton Parkway in Alpharetta and the other in Marietta – reopened under control of Stearns Bank, National Association of St. Cloud, Minn. That bank assumed the insured deposits of Alpha Bank & Trust in an agreement with the FDIC.

Depositors of the failed bank automatically became depositors of Stearns Bank. Deposits continue to be insured by the FDIC, so customers do not need to change banks to retain their deposit insurance coverage.

As of Sept. 30, Alpha Bank & Trust had total assets of $354.1 million and total deposits of $346.2 million. Stearns Bank did not pay the FDIC a premium for the right to assume the failed bank’s insured deposits.

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Jim Sinclair’s Commentary

New gold reserves come from the explorers, making the pressure on the juniors wholly illogical. In time this will cost the shorts.

Gold production ‘in crisis’ – AngloGold Ashanti CEO
By: Martin Creamer

Gold production was “in crisis” and a gold price of $900-to-$1 000/oz was needed to arrest the downward trend, AngloGold Ashanti CEO Mark Cutifani said on Thursday.

Cutifani said that the world had seen a decline in the production of gold across the globe in the past seven years, and that the industry could experience another decline of production at up to 5% a year for the next five years.

“The gold industry from a production perspective is in crisis,” he said.

There had been a 20% to 30% production decline in South Africa in the last five years and grades are continuing to diminish in opencast mines around the world.

That lack of production, he said, would result in gold’s fundamentals improving.

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Jim Sinclair’s Commentary

There is nowhere to hide other than gold.

Fears after run on Kuwait bank
By Andrew England
Published: October 31 2008 02:00 | Last updated: October 31 2008 02:00

The outlook for Kuwait’s banking system is shifting towards negative for the first time in a decade, Moody’s rating agency said yesterday – a sign likely to heighten concerns about potential weaknesses in the nation’s financial services.

The Moody’s report comes days after a run on Gulf Bank, Kuwait’s second-largest commercial bank, following revelations that it had incurred significant losses as a result of derivatives trading.

Standard & Poor’s revised outlooks on six Gulf banks from positive to stable, a further sign analysts are becoming more cautious.

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Jim Sinclair’s Commentary

The world needs a flood of dollars according to the IMF and the Fed means to make sure it happens. Talk about a formula for a dollar decline!

“That’s even after a boost this week from an International Monetary Fund emergency loan program for emerging markets and the U.S. Federal Reserve’s decision to pump as much as $120 billion into Brazil, Mexico, South Korea and Singapore. The Fed said yesterday that it aims to “mitigate the spread of difficulties in obtaining U.S. dollar funding.”

`Panic’ Strikes East Europe Borrowers as Banks Cut Franc Loans
By Ben Holland, Laura Cochrane and Balazs Penz

Oct. 31 (Bloomberg) — Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer in Budapest can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, euros and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe’s developing markets and local currencies plunge.

“There’s no money out there,” said Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers. “We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”

Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism. The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

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