Posts Categorized: In The News

Posted by & filed under In The News.

“…there are indications that the severest phase of the recession is over…”
— Harvard Economic Society (HES) January 18, 1930

Jim Sinclair’s Commentary

This is going to sap FDIC capital big time.

FDIC Seized Colonial Bank Branches and Deposits Going to BB&T
Montgomery, Alabama-based Colonial has two branches in Palm Coast.
By Toby Tobin

Palm Coast, FL – August 14, 2009 – In what may be the biggest bank failure of ’09, BB&T, a Winston-Salem-based regional bank (Branch Banking and Trust) will reportedly purchase Colonial BancGroup’s deposits and 355 branches under an agreement with the Federal Deposit Insurance Corp. Colonial has about $25 billion in assets and branches in Florida, Alabama, Georgia, Nevada, and Texas.

A Federal judge ordered a freeze of Colonial’s assets noting that Colonial was "on the brink of collapse and is suspected of criminal accounting irregularities…." Earlier this month, Federal agents raided an Orlando branch of Colonial BancGroup as well as the headquarters of Taylor, Bean & Whitaker Mortgage Corp (TBW). TBW has suspended its mortgage lending operations and has been barred from making or servicing federally guaranteed loans by the Department of Housing and Urban Development, Freddie Mac and Ginnie Mae.TBW had planned a $300 million equity infusion into Colonial.

Colonial has two Palm Coast area branches; one on Boulder Rock Dr in the city; the other in the Hammock.

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Jim Sinclair’s Commentary

Not in Fat Cat City, Wall Street. The distance between the haves and have nots is getting to revolutionary levels.

Pay Raises Are the Worst in 33 Years
By BARBARA KIVIAT Wednesday, Aug. 12, 2009

Feel like your company has been particularly stingy on the raises this year? You’re not imagining it. For 2009, the typical non-hourly worker will see a 1.8% bump in salary, according to a survey by the human-resources consultancy Hewitt Associates. That increase, the smallest in at least 33 years, doesn’t even keep up with inflation.

Yes, it’s true, we’re in a recession, and nearly 1 in 10 workers is unemployed. There are plenty of people willing to work for less money. But in other recent recessions salary growth hasn’t slowed this much. Going back to the early 1990s, base salaries never increased by less than 3.4% a year, according to Hewitt, which polled 1,156 large companies to get its latest data. Companies desperate to slash costs are turning to worker salaries more deliberately than they have in the past. Some 48% of companies have frozen salaries this year, compared to just 2% last year.

Numbers from the Society for Human Resource Management (SHRM) speak to the same effect for new employees. Each month the human-resources trade group surveys more than 1,000 manufacturing and service-sector companies. The number of firms reducing new-hire salaries and benefits now outstrips the number of companies increasing packages. Falling compensation for new hires is unusual too, even during a downturn, according to analysts at SHRM — smaller increases are the more typical response.

One silver lining, according to the Hewitt survey, is that performance-based compensation is on the rise. If you’ve got the numbers to prove you’re a top worker, your earnings are somewhat insulated from the broader trend. For 2009, a full 12% of corporate payrolls have been devoted to bonuses, according to Hewitt. That’s up substantially in recent years, from just 9.5% in 2004.

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Jim Sinclair’s Commentary

Monty, come to CT. I have plenty of room.

California’s Prison Crisis: Be Very Afraid
By ALISON STATEMAN / LOS ANGELES Friday, Aug. 14, 2009

The exact cause of the 11-hour riot that broke out Aug. 8 at the California Institution for Men in Chino, Calif., won’t be known until an official investigation by the California Department of Corrections and Rehabilitation (CDCR) is completed. However, to some criminal-justice experts the violence that erupted at the facility, located about 40 miles east of Los Angeles, was an inevitable consequence of a state prison system long hobbled by massive overcrowding, program cuts and understaffed facilities. And given the state’s ongoing budget woes — with $1.2 billion in cuts mandated to the prison budget — the situation is likely to only get worse.

"The overcrowding is the first issue," says Barry Krisberg, president of the National Council on Crime and Delinquency in Oakland, Calif. "You’re talking about hundreds of men moved into triple bunks in what used to be gyms and cafeterias. They’re not even cells. They’re just empty places where we’re shoving people." According to the most recent statistics from the CDCR, California’s 33 state prisons house 154,649 prisoners in facilities designed to hold just 84,271 prisoners. The Chino prison is among the worst, with 5,877 prisoners in a facility designed to hold 2,976.

Governor Arnold Schwarzenegger and state political officials have been well aware of the issue of overcrowding, and the deplorable conditions that go along with it, for some time. In 2006 Schwarzenegger declared a state of emergency because of "severe overcrowding" in California’s prisons, saying it had caused "substantial risk to the health and safety of the men and women who work inside these prisons and the inmates housed in them." In response, legislators passed AB 900, which earmarked $1.2 billion in jail-construction funding through state lease-revenue bonds. However, more than two years later, construction is still on hold as lawmakers quibble about the details. But it’s not just a lack of buildings that is the problem. Says Krisberg: "Without programs and without services, the tensions that exist to begin with are going to be greatly exacerbated. The elected officials of California have been playing Russian roulette with the lives of the guards and the inmates in these prisons."

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Posted by & filed under In The News.

Dear Friends,

The MOPErs are making a huge mistake drawing exact lines in the sand.

The work this evening to keep gold under $960 and the USDX above .7840 is so obvious that when it fails, and it must, the house falls down.

This type of action is focused on the huge and growing Federal debt issues. It reveals the panic that is descending on the Treasury.

These guys have such egomania that they really believe acting as they are this early morning is going to accomplish something.

Well it will, but it will not be what is anticipated by the MOPErs

Today was extremely busy, so I had to start JSMineset late. My incoming emails were over the 1200 mark when I started reporting to you four hours ago. They are still over 1200. The incoming messages were arriving much faster than I could read them.

It is late so please keep that in mind if you are looking for me early in the AM Friday.

You will be hearing from Trader Dan as soon as he gets his electronics working.

He has been en-route with his young family from his old digs in Texas to a new and remote ranch on the other side of the country. He practices what we preach.

Good US morning CIGAs.

It is Friday here.

Jim

Jim Sinclair’s Commentary

Have you read, starting on page 434, the pending Health Bill on the subject of END OF LIFE CARE?

The effort to save money is focused on the high cost of end of life care. The bill requires doctors to have this discussion with elderly or terminally challenged patients on the "Do Not Revive" option and Federally paid for Hospice care. That means die and do not cling to life because it costs too much.

The doctor will have to report the specific results of end of life discussions with you, the patient, to the government.

The town meetings are the second challenge by the people waking up slowly from their sleep as sheeple.

This is the first significant challenge to the aura of the present administration and impacts general confidence.

 

Jim Sinclair’s Commentary

My trust that the Tanzanian people would do the right market orientated action is clearly vindicated.

Tanzania to Table Mining Laws in October, Take Stakes in Mines
Updated: 2009-08-12 13:54

Tanzania will this October table mining laws which will allow it to take stakes in mines, Minerals & Energy Minister William Ngeleja said.

The legislation will give government power to acquire a stake of between 10 percent and 15 percent in strategic gemstone mining, Ngeleja said at a seminar on mineral resources development in Dar es Salaam today.

"This will not be something automatic; it will very much depend on the government’s decision on whether a particular gemstone is strategic in government’s view or not," he said.

Tanzania is Africa’s third-largest gold producer, after South Africa and Ghana, and holds the only known deposit of tanzanite, a precious gemstone. Barrick Gold Corp., the world’s largest producer of the metal, and third-ranking AngloGold Ashanti Ltd. are among companies with mines in the country.

A panel appointed by the nation’s president in 2007 suggested higher royalty rates and fewer tax breaks to help boost revenue from Tanzania’s mineral wealth. Mining companies want government to reconsider, saying this will lower profits.

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Jim Sinclair’s Commentary

Positive developments come daily from here.

Tanzania firm hopes to add 45,000 customers to grid
Thu Aug 13, 2009 9:36am GMT
By George Obulutsa

DAR ES SALAAM (Reuters) – A Tanzanian subsidiary of Canada’s Artumas Group Inc says it hopes to add 45,000 customers to Tanzania’s electricity grid in five years if it can secure approval and funds for the project.

The Umoja Light Company, a part of Artumas Tanzania, has been serving about 16,500 customers for the past two and a half years in Mtwara and Lindi in the southeast of the east African nation, where it generates 12 megawatts (MW) from natural gas.

Artumas Tanzania discovered a gas deposit in Mnazi Bay, but has put plans for a 300 MW power plant on hold due to the global economic crisis, which made it harder to access financing.

Umoja Light has been planning the project with the government for the last four years, but is waiting for the Energy and Water Utilities Regulatory Authority to grant it the necessary licences and approvals.

"We are hopeful that this will happen in the near future," Richard Tainton, Umoja Light’s general manager, told Reuters late on Wednesday on the sidelines of a regional infrastructure and energy conference in Dar es Salaam.

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Jim Sinclair’s Commentary

Confidence is a subtle thing.

This report by Huffington Post is the kind of thing that impacts confidence.

One chip at a time the confidence built on MOPE utilizing SPIN is failing.

This is the danger of really believing that you can build a healthy economy out of hot air.

Internal Memo Confirms Big Giveaways In White House Deal With Big Pharma
First Posted: 08-13-09 11:10 AM

A memo obtained by the Huffington Post confirms that the White House and the pharmaceutical lobby secretly agreed to precisely the sort of wide-ranging deal that both parties have been denying over the past week.

The memo, which according to a knowledgeable health care lobbyist was prepared by a person directly involved in the negotiations, lists exactly what the White House gave up, and what it got in return.

It says the White House agreed to oppose any congressional efforts to use the government’s leverage to bargain for lower drug prices or import drugs from Canada — and also agreed not to pursue Medicare rebates or shift some drugs from Medicare Part B to Medicare Part D, which would cost Big Pharma billions in reduced reimbursements.

In exchange, the Pharmaceutical Researchers and Manufacturers Association (PhRMA) agreed to cut $80 billion in projected costs to taxpayers and senior citizens over ten years. Or, as the memo says: "Commitment of up to $80 billion, but not more than $80 billion."

Representatives from both the White House and PhRMA, shown the outline, adamantly denied that it reflected reality. PhRMA senior vice president Ken Johnson said that the outline "is simply not accurate." "This memo isn’t accurate and does not reflect the agreement with the drug companies," said White House spokesman Reid Cherlin.

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Jim Sinclair’s Commentary

If you recall the interview I did with Bloomberg Radio in March, we here at JSMineset called the time for this equity rally.

Click here to listen to Jim’s Bloomberg interview…

Now RBS is right. It is getting very tired.

RBS uber-bear issues fresh alert on global stock markets
Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts
By Ambrose Evans-Pritchard, International Business Editor
Published: 8:26PM BST 12 Aug 2009

Britain’s Uber-bear is growling again. After predicting a torrid "relief rally" over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears.

"We are now in the middle of a parabolic spike up," he said in his latest confidential note to clients.

"I expect this risk rally to continue into – and maybe through – a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone’, driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets."

The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a "surge higher" in these gauges can justify current asset prices. Results that are merely "less bad" will not suffice.

He expects global stock markets to test their March lows, and probably worse. The slide could last three months. "A move to new lows is highly likely," he said.

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Jim Sinclair’s Commentary

CIGA JB Slear says: "To the people they were hired to protect; foreign and domestic."

Rep. Weiner Tries To Ban Cameras From Town Hall Event

Click here to watch the video…

Jim Sinclair’s Commentary

CIGA Rusty Bayonet says: "CNN barely reported this story this afternoon. It didn’t even make their main page on their website. No MOPE going on here, no siree."

Initial jobless claims rebound
Number of people filing first time claims for jobless benefits rose last week, but the total number of people filing ongoing claims fell.
By Ben Rooney, CNNMoney.com staff writer
Last Updated: August 13, 2009: 9:45 AM ET

NEW YORK (CNNMoney.com) — The number of Americans filing claims for first-time unemployment benefits rose last week, while the total jobless rolls decreased, the government said Thursday.

There were 558,000 initial claims filed in the week ended Aug. 8, an increase of 4,000 from an upwardly-revised 554,000 the previous week, according to the Labor Department’s weekly report.

Economists had expected initial claims to fall to 545,000, according to consensus estimates gathered by Briefing.com.

The four-week moving average of initial claims, which smoothes out volatility in the measure, was 565,000. That’s up 8,500 from the previous week’s revised average of 556,500.

Despite last week’s rebound, the number of people filing new jobless claims has eased in recent weeks. In July, the data were distorted by seasonal factors related to early plant closings in the automotive industry.

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Jim Sinclair’s Commentary

Substance is overcoming form as reality overcomes spin.

U.S. Economy: Sales Unexpectedly Decrease as Job Losses Mount
By Timothy R. Homan

Aug. 13 (Bloomberg) — Sales at U.S. retailers unexpectedly fell in July, raising the risk that consumers will keep cutting back as job losses mount and temper a recovery from the worst recession since the 1930s.

Purchases decreased 0.1 percent, the first drop in three months, as shrinking demand at department stores such as Macy’s Inc. and Wal-Mart Stores Inc. overshadowed a boost from the cash-for-clunkers automobile incentive program, Commerce Department figures showed today in Washington.

A separate government report today showed more Americans than forecast filed claims for unemployment insurance last week, underscoring the threat to spending from the continued deterioration in the job market. Treasury securities jumped and the dollar fell after the reports, and some economists lowered estimates for growth this quarter.

“Until we start seeing job growth, consumers are still going to be very cautious,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”

The gain in Treasuries sent the yield on the benchmark 10- year note down to 3.66 percent at 11:40 a.m. in New York from 3.72 percent late yesterday. The dollar dropped against the Japanese yen to 95.47 yen from 96.06 on Aug. 12. Stocks were little changed.

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Jim Sinclair’s Commentary

12 trillion has made the bankrupt OTC derivatives good to the winner but accomplished little else.

Problems remain unsolved and without practical solution. They are not years off. That is the last stab at SPIN on this.

US CREDIT-Ambac, MBIA liquidity at risk without new business
Thu Aug 13, 2009 4:13pm EDT
By Karen Brettell

NEW YORK, Aug 13 (Reuters) – Ambac Financial Group (ABK.N) and MBIA Inc (MBI.N) risk a liquidity crunch in coming years as continuing losses at their bond insurance arms deplete capital and plans to write new business remain on hold.

Bond insurers have been decimated by losses from selling hundreds of billions of dollars of protection on debt that included large exposures to deals packed with risky mortgage-backed securities.

Attempts to launch new municipal bond insurance operations have also run into snags. Ambac in June delayed plans to launch a new insurance arm after struggling to raise capital for the unit, called Everspan.

MBIA plans to write new business through a unit called National Public Financial Guarantee Corp, but it is facing litigation from a group of banks that is delaying this effort.

The banks allege the transfer of assets to the new company leaves fewer resources to pay claims in its bond insurance arm.

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Jim Sinclair’s Commentary

There is no solution or end to the need for funds now that Wall Street is bailed out. Here goes the real economy.

TARP Remains Troubled
Alexandra Zendrian, 08.13.09, 04:00 PM EDT

The Congressional Oversight Panel has concerns about the still very much present troubled assets on banks’ balance sheets.

The Troubled Asset Relief Program has being in place for 10 months. The program was originally designed to purchase troubled assets off the banks’ balance sheets; when the financial crisis became dire and the previous plan wouldn’t fly, the funds’ intention morphed into a cash injection for the banks. So in these 10 months, we still have many of the troubled assets that were previously on banks’ balance sheets but we’re $700 billion in the hole. The Congressional Oversight Panel has a problem with this.

In a recent report about the TARP funds, the panel cited the lack of transparency and available information about how many troubled assets are out there. "It is likely that an overwhelming portion of the troubled assets from last October remain on bank balance sheets today," the report says. Likely, as in "we’re not totally sure because we don’t have all the data."

This info isn’t readily available for a few reasons. One, only 19 banks were stress tested. Two, banks classify these troubled assets differently, with some banks considering an asset troubled while another doesn’t, for the same type of asset. The oversight panel anticipates asking for the Treasury Department to look into the size and scope of this problem the next time Secretary Timothy Geithner testifies before the panel, which will be in September, according to an oversight panel spokesman. The panel would also be interested in expanding the stress tests so they are applicable to smaller banks.

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Jim Sinclair’s Commentary

Now here is the perfect hedge. Buy banks, gold and gold company shares.

Paulson Buys Banks That Lost Value in Credit Crisis (Update1) 
By Saijel Kishan and Cristina Alesci

Aug. 13 (Bloomberg) — John Paulson, the hedge-fund manager whose wagers against the U.S. housing market helped him earn an estimated $2.5 billion last year, bought Bank of America Corp. and Goldman Sachs Group Inc. stock in the second quarter, while adding to stakes in gold companies.

His firm, Paulson & Co., bought 168 million shares of Charlotte, North Carolina-based Bank of America valued at $2.2 billion as of June 30, according to a filing yesterday with the U.S. Securities and Exchange Commission. It was the biggest new purchase in the second quarter for Paulson, 53, and made him the bank’s fourth-largest owner.

“It’s ironic because he was the one that made the right call shorting subprime,” said Jerome Dodson, who oversees $2.5 billion at Parnassus Investments in San Francisco. “His timing is good but he probably won’t be as successful with this purchase as he was with betting the housing market would collapse.”

Paulson, who manages about $29 billion, last year started a hedge fund, called Paulson Recovery fund, to invest in financial firms hurt by mortgage writedowns. He boosted investments in gold companies this year to help mitigate potential inflation as governments worldwide increase spending to help their economies recover from recession. Gold has gained 7.7 percent this year.

Stefan Prelog, a spokesman for New York-based Paulson, declined to comment on the filing.

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Jim Sinclair’s Commentary

Note the extreme security system with the two guards near the missile with their backs turned shooting the bull. Sure, the nukes are safe…

Pakistan’s nukes are safe. Maybe.
Thu, 08/13/2009 – 4:57pm
By Vipin Narang

clip_image001

An excellent series of recent articles on the subject by Shaun Gregory, Rolf Mowatt-Larssen (a former director of intelligence at the Department of Energy), and Brig. Gen. Feroz Hassan Khan (Ret.) assess the very grim threat of Pakistan losing control over its 60-warheads-and-growing nuclear weapons arsenal. Given the lack of publicly available data on this critical issue, such articles by extremely knowledgeable scholars and practitioners represent some of the best information we have on realistic threats to Pakistan’s nuclear arsenal.

Gregory’s article has gotten some recent attention for noting that there have worryingly been several attacks at the perimeter of bases that may house nuclear components, though U.S. intelligence officials are quick to point out that there is little reason to believe that nuclear assets were ever at risk. So whatare the primary risks to the security of Pakistan’s nuclear arsenal?

In answering this question, it is important to differentiate between the various organizations involved with Pakistan’s nuclear weapons, and where and when nuclear assets are more or less vulnerable to internal and external threats. The bigger threat is probably not the Army losing control of nuclear assets, but rather insider-outsider collusion or diversion of nuclear material from the civilian nuclear agencies during either the production phase or transfer to Army locations.

The good news is that once the Pakistani Army takes custody of nuclear assets, the threat of terrorists successfully boosting a warhead or fissile cores — either through direct attack or facilitated by insiders — is reassuringly low. The Pakistani Army has every incentive to ensure firm control over the country’s nuclear assets since, should they be lost or stolen, there would literally be hell to pay.

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Jim Sinclair’s Commentary

Foiled once, foiled twice, but attacked until a worldwide shocking change comes out of Pakistan

Pakistan nuclear thefts foiled
Arnaud de Borchgrave
Published 04:45 a.m., August 13, 2009

clip_image002Is Pakistan’s nuclear arsenal theft-proof? Former President Pervez Musharraf and his successor, Asif Ali Zardari, and their army and intelligence chiefs repeatedly have assured both the Bush and Obama administrations that their 80-odd nuclear weapons are as secure as the U.S. arsenal of some 7,000 city busters.

The Pakistanis have separated warheads from delivery systems and stored them in different secret locations throughout the second-largest Muslim country in the world (after Indonesia). The United States has given Pakistan copies of its own blueprint to ensure fool-proof, total safety. Yet Pakistan’s secret nuclear-storage sites are known to Islamist extremists and have been attacked at least three times over the last two years, according to two recent reputable reports.

The Baltimore-based Maldon Institute, whose worldwide staff consists mostly of retired intelligence officers, and the Times of India’s Washington-based foreign editor Chidanand Rajghatta both report attempted nuclear thefts that have been tracked by Shaun Gregory, a professor at Bradford University in Britain.

The first such attack against the nuclear-missile-storage facility was on Nov. 1, 2007, at Sargodha; the second, by a suicide bomber, occurred Dec. 10, 2007, against Pakistan’s nuclear air base at Kamra; and the third, Aug. 20, 2008, and most alarming, was launched by several suicide bombers who blew up key entry points to a nuclear-weapons complex at the Wah Cantonment, long believed to be one of Pakistan’s main nuclear-weapons assembly points, where warheads and launchers come together in a national emergency.

Mr. Gregory’s research paper was first published in West Point’s Counter Terrorism Center Sentinel, and elicited no attention or reaction. Renowned terrorist expert Peter Bergen, one of the very few journalists to interview al Qaeda chief Osama bin Laden before Sept. 11, 2001, reviewed Mr. Gregory’s paper and was baffled by the lack of reaction from the rest of the media.

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Jim Sinclair’s Commentary

From the unreal to the real will be a shock to those who have been hypnotized by MOPE via F-TV and their SPIN.

Bleak sales are another reality check for economy
By CHRISTOPHER S. RUGABER (AP) – 1 hour ago

WASHINGTON — A bleak report on retail sales Thursday reinforced a nagging worry of economists: Shoppers won’t spend enough to help a recovery take hold.

The figures served as a reality check for an economy that lately has appeared poised to emerge from recession and grow again. Consumer spending powers about 70 percent of economic activity.

The Cash for Clunkers rebate program helped give auto sales to their biggest jump in six months in July, but sales sank elsewhere. Gas stations, department stores, electronics outlets and furniture stores all suffered.

Overall, sales fell 0.1 percent, the Commerce Department said, after two months of modest gains. Economists had expected a 0.7 percent increase. Excluding autos, sales fell 0.6 percent, also much worse than predicted.

Unemployment, flat wages, tighter credit, fear of layoffs and to urge to save more have caused many consumers to spend less. Shrinking home equity and stock portfolios have compounded the problem.

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Jim Sinclair’s Commentary

Now here is a cost saving, mean and lousy thing to do.

Fire the politicians first before you kill the kids and cull the geezers.

California board votes to drop healthcare coverage for 60,000 children
As a result of state budget cuts, the Healthy Families program will have to begin terminating coverage for more than 60,000 children on Oct. 1. Nearly 670,000 children could be dropped by June 30.
By Patrick and McGreevy and Evan Halper
August 13, 2009 | 7:49 p.m.

Reporting from Sacramento – The announcement by state officials that California has enough cash to stop paying bills with IOUs did little to take the sting out of other budget news Thursday: Tens of thousands of poor children are about to lose their healthcare coverage.

A state board voted Thursday to begin terminating health insurance for more than 60,000 children Oct. 1 as a result of the budget amendments signed into law recently by Gov. Arnold Schwarzenegger.

Those children would be up for an annual review of their coverage next month, but instead they may be dropped from the California Healthy Families program under the action by the state Managed Risk Medical Insurance Board.

The board is scrambling to secure funding from other sources, including money set aside by voters for early childhood education, but so far it has come up short. If additional funds are not found, board officials said, the program could ultimately drop 669,296 children in the current fiscal year, which ends June 30, 2010. Currently, 921,000 people age 18 and younger are enrolled in Healthy Families.

"There are not sufficient funds for the services we are providing," said Board Chairman Cliff Allenby. "We will work to do what we can do" to find additional money.

The budget cuts made by Schwarzenegger and the Legislature left the Healthy Families program with a $194-million shortfall.

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Jim Sinclair’s Commentary

From California moving east, and from the Sun Coast moving north and west, the real economy is now rolling over hard.

The Wall Street guys may not even know there is something called the real economy. They only know casino swaps, market manipulating super fast soft ware and predatory destruction of the real.

D/FW area foreclosure filings up 32%
Dallas Business Journal

Foreclosure filings on Dallas-Fort Worth homes jumped 32 percent in the third quarter of this 2009 compared to last year, according to a new report issued by Addison-based Foreclosure Listing Service Inc.

With the filing deadline passed for September foreclosures, FLS was able to report on third-quarter and year-to-date (January through September) numbers.

In Dallas-Fort Worth, foreclosure filings were issued on 15,880 properties for the third quarter of 2009, up from 12,050 postings during the same period last year.

Three local counties—Tarrant, Collin and Denton—set new record highs in the most recent quarter, the report concluded.

Collin County foreclosures rose 33 percent to 2,138 total filings. Meanwhile, Tarrant County foreclosures jumped 40 percent to 5,252 filings and Denton County foreclosures rose 35 percent to 1,745 foreclosure filings, according to the FLS report.

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Jim Sinclair’s Commentary

Anyone that says China is dollar bound is a raving idiot. These dollars are being used for acquisition.

China May Boost Spending on Energy Acquisitions by Half in 2009
By John Duce

Aug. 14 (Bloomberg) — China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.

State-owned Yanzhou Coal Mining Co.yesterday agreed to buy Australia’s Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), a day after Sinochem Corp., China’s biggest chemicals trader, offered to buy Emerald Energy Plc for 532 million pounds ($881 million) to gain oil fields in Syria and Colombia.

China National Petroleum Corp.’s plan to buy Repsol YPF SA’s Argentine unit may push Chinese purchases of overseas commodity assets to $43 billion this year, a 48 percent increase on 2008, according to data compiled by Bloomberg.

“The Chinese don’t have enough nickel, don’t have enough oil, and they don’t have enough copper,” Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist”, said in a telephone interview yesterday. “There’s a crisis coming. They are going around the world buying up what they can. They’re preparing for a rainy day.”

Bids for resources by China, whose $2.1 trillion in currency reserves are the world’s largest, have been met with opposition in the U.S. and Australia. Neither concern over its growing influence nor the arrest of four Rio executives in Shanghai have stopped Chinese companies from buying assets abroad as the nation’s 4 trillion yuan ($585 billion) economic stimulus spurs demand.

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Jim Sinclair’s Commentary

What election today anywhere is on the level? Come on now.

Observers see pattern of fraud before Afghan vote
By JASON STRAZIUSO, Associated Press Writer – Thu Aug 13, 6:23 pm ET

KABUL – Voting observers expect fraud during next week’s Afghanpresidential election and warn that cheating will most likely take place at polling stations in remote or dangerous areas where independent monitors won’t be able to be present.

A suspiciously high number of women — far more than men — have been registered to vote in culturally conservative provinces wherePresident Hamid Karzai expects to do well, a leading election monitor said this week. An adviser to the top U.S. commander said the black market for voter registration cards is flourishing and that she could have personally bought 1,000.

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Jim Sinclair’s Commentary

Look at what Wall Street has done to main street.

Home foreclosure filings up more than 100 percent in Seattle area
By CHRIS GRYGIEL
Last updated August 12, 2009 10:24 p.m. PT

Home foreclosure filings in the greater Seattle area increased 115 percent in July compared to the same period last year, according to data released Thursday.

Filings in Washington state were up 94 percent from July of this year compared to the same month last year, according to RealtyTrac. The online service tracks foreclosure filings, which are default notices, scheduled auctions and bank repossessions. In King County, such filings were up 148 percent compared to July of last year.

Nationally foreclosure filings were up 32 percent in July of 2009 compared to last year, the tracking service said. Nevada had the nation’s highest foreclosure rate for the 31st consecutive month, with one in every 56 housing units receiving a filing last month.

Washington state ranked 13th. There were 5,370 filing notices last month (one out of every 511 housing units). Oregon’s rank was 10th nationally, with 3,605 filing notices, translating to one out of every 446 housing units.

In the Seattle-Tacoma-Bellevue metro area, there were 3,476 foreclosure filings last month. That was up almost 5 percent from June of this year.

Thursday’s report came a day after a state study that showed a $8,000 federal tax credit for first-time home buyers appears to be drawing people back into Washington’s housing market.

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Jim Sinclair’s Commentary

Bernanke either goes to infinite QE, or will be made redundant as will the Fed itself.

Political direct control of monetary policy will reside in the White House more effectively.

Rethinking the Fed Chairmanship and Weighing Who’s Right for the Job
By Steven Pearlstein
Friday, August 14, 2009

A popular parlor game among Washington insiders this summer is guessing whether Ben Bernanke will be reappointed to a second four-year term as chairman of the Federal Reserve, or whether President Obama will try to put his own stamp on the Fed by appointing his most trusted economic adviser, Larry Summers.

Before getting to the question of who will be the next Fed chairman, however, perhaps it’s worth considering what the job ought to be. Over the last two years, we’ve certainly all learned that it involves a lot more than adjusting interest rates and dissembling knowledgeably before Congress. We also saw the consequences of having left the previous chairman in the job so long that it created a cult of personality that drained the Fed of the kind of critical thinking that might have averted the recent financial crisis. If there ever was a time to reconceptualize the role of Fed chairman, now would be it.

So here are a few thoughts:

Whenever the Fed comes under serious attack, as it has recently, its reflexive response is to accuse its critics of jeopardizing the Fed’s independence. Yet if you think about it, the greatest threat to the Fed’s independence comes not from outside the institution but from a chairman and members who are so anxious to get reappointed that they begin to tilt policy to win favor with the White House or with Wall Street or take on a reluctance to criticize policies that they think harmful to the economy.

There are two easy fixes for this problem. Congress could extend the chairman’s term from four years to six but remove the possibility of reappointment. And it could end the current practice of appointing new members of the Fed’s board of governors to fill the partial, unexpired terms of governors who leave. All new governors should be appointed to their own 14-year terms, without possibility of reappointment.

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Jim Sinclair’s Commentary

Here comes the humdinger for the average guy looking forward to retirement in the USA and GB.

U.K. Companies Face Pension-Plan Deficits
BY MARIETTA CAUCHI

LONDON — Pension deficits have hit many top U.K. companies — and about 22% of the FTSE 100 firms don’t have enough cash to pay out on existing liabilities, according to research released Thursday.

The increased pressure on already stretched balance sheets is forcing many companies to consider whether to continue supporting defined-benefit schemes, KPMG said, adding many will end up pulling the provision for existing employees.

It …

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Jim Sinclair’s Commentary

In a MOPE world you can have a recovery even if there was no economy at all. They would just make up one, and start issuing bullish statistics.

A ‘Jobless’ And ‘Wageless’ Recovery?
Nouriel Roubini, 08.13.09, 12:01 AM EDT

After severe job losses in early 2009, the pace of job losses slowed starting in April, and the July numbers have brought more respite. Non-farm payroll job losses were 247,000 in July. However, the private sector lost 254,000 jobs. This is considerably better than analysts expected (around 325,000) but not good enough to claim that we are in the middle of a strong and sustainable recovery.

Looking at the recessions of the post-war period, average monthly job losses ranged between 150,000 and 260,000. Average monthly losses in this recession are still at 350,000. For the first four months of the year, the average was at 648,000. The improvement with respect to the first part of the year is clear. The improvement with respect to what we are used to seeing in recessionary periods is much less clear cut. The latest numbers are not exactly what you’d call good news, at least not in absolute terms. In relative terms, however–after skirting a near-depression–markets seem to consider 247,000 payroll losses a breath of fresh air.

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Data Source: Bureau of Labor Statistics

The increase in average weekly labor hours in July is certainly a positive sign. But it also shows that, when economic conditions begin improving, companies will increase labor hours and temporary workers and move workers from part time to full time. Only after that do they begin hiring new workers. So hiring is still a long way ahead. The decline in the unemployment rate from 9.5% in June to 9.4% in July was not due to an improvement in the employment situation but is explained by the large decline in the labor force (-422,000). Workers facing hiring freezes, fewer full-time jobs and jobs at lower wages are leaving the labor force.

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Posted by & filed under In The News.

Dear CIGAs,

So much for the dozens of news reports touting the Fed’s cancellation of this program!

Bernanke’s survival as Chairman and whatever independent power the Fed has depends on Bernanke’s use of QE to whatever degree is required to offset the shortfall of buying in the ever increasing size of the US bond offerings. Bond offerings must continue to grow because of the flop in Federal tax revenues. That drop off a cliff means an exponential growth of the US Federal Deficit as tax revenues collapse and spending rises.

I would say this is a firm indication that Bernanke wants to remain the Chair of the Fed.

The question remains that even if he does become an Administration team player, will he remain so. If the Administration distrusts him he is out anyway and the Fed becomes a policeman.

Increased QE means an increase in the supply of dollars. Consider this when a technician advises you to be bullish on the US dollar.

The price of gold is tied today tick by tick with the USD.

Fed to Extend Bond Buying Through End of October
Published: Wednesday, 12 Aug 2009 | 1:49 PM ET

The Federal Reserve said it will extend to the end of October a program to buy longer-term government securities, and it kept interest rates steady near zero as expected.

The Fed slashed interest rates to a range of between zero and 0.25 percent in December and has pumped hundreds of billions of dollars into the economy to stimulate economic activity in the worst recession in decades.

The Bank of England stunned markets last week by expanding its program of bond purchases by a much larger amount than expected, saying the recession is deeper than it had forecast.

Norway’s central bank held rates steady on Wednesday and opened the door to raising borrowing costs sooner than expected on the belief the Nordic country is faring better with the global downturn than western peers.

Economic data has shown improvements in the manufacturing sector and less weakness in housing, but consumers remain reluctant to spend.

U.S. imports rose for the first time in 11 months in June, the Commerce Department reported on Wednesday, although gains were largely due to higher oil prices and imports of consumer goods dropped to their lowest since November 2005.

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Jim Sinclair’s Commentary

The desire for dollar diversification is planetary even among those nations with a tradition of close relationships.

Consider this if a technician tells you to be long the dollar.

Bank of Israel halts daily dollar-purchase program
By SHARON WROBEL
Aug 11, 2009 10:10

The Bank of Israel on Tuesday will stop its program of buying $100 million on a daily basis but reserve the right to intervene in the foreign-currency market, the bank announced Monday.

"As already announced [last Monday], the Bank of Israel will act in the foreign-exchange market in the event of unusual movements in the exchange rate that are inconsistent with underlying economic conditions, or when conditions in the foreign-exchange market are disorderly," the central bank said in a statement. "The new operating policy of the Bank of Israel in the foreign-exchange market will provide a better response to the economy’s needs."

The central bank said it would discontinue its program of daily purchases, which began in July 2008, because the targeted level of foreign-currency reserves had been achieved. Foreign-currency reserves stood at $52 billion at the end of July; the target set by the central bank in November was between $40b. to $44b.

Following the announcement, the dollar dropped 1 percent to NIS 3.87.

The Bank of Israel said it could now buy or sell foreign currency in response to exchange-rate movements.

"The governor of the Bank of Israel’s announcement is maybe the most expected surprise seen in the capital market in a long time," Tal Avda, deputy head of investments at Clal Forex, said Monday. "History has shown that the only significant factor influencing the shekel-dollar exchange rate in the long term is the value of the greenback in the global-currency market, and [Bank of Israel] Governor Stanley Fischer knows that."

Last week, Fischer said the central bank could not beat the market in the long term and would not continue to buy foreign currency indefinitely.

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Jim Sinclair’s Commentary

The price of crude in dollar terms can and will be high as we move into 2010. It will not require a pickup in demand, even if demand is less. That is something the talking heads cannot and will not ever understand.

U.S. trade gap widens on oil prices
Posted 2009/08/12 at 8:34 am EDT

WASHINGTON, Aug. 12, 2009 (Reuters) — The U.S. trade deficit widened in June to $27.0 billion, as goods imports increased for the first time in 11 months on the back of higher oil prices, a Commerce Department report said on Wednesday.

Analyst surveyed before the report had expected the monthly trade gap to widen to around $28.5 billion. But stronger foreign demand for U.S. goods and services offset some of the impact of the oil price increase on the deficit.

Both U.S. exports and imports remained sharply below year-ago levels, before the global financial crisis began wreaking a savage toll on international trade.

The trade gap for the first six months of 2009 totaled nearly $173 billion, down more than 50 percent from the same period last year. At the current pace, the U.S. trade deficit for all of 2009 would be the lowest since $265 billion in 1999.

U.S. imports of goods and services rose 2.3 percent in June to $152.8 billion, the highest since January. Higher oil prices accounted for much of increase, and imports of consumer products fell to the lowest since November 2005.

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Jim Sinclair’s Commentary

The answer is, respectfully, NO.

Has Clinton visit helped offset China’s clout in Africa?
August 12th, 2009
Posted by: Issac Esipisu

U.S Secretary of State Hillary Clinton’s 10 day trip to Africa ends this week with many commentators viewing it at least partly as being aimed at offsetting China’s growing economic clout on the African continent.

In public, Clinton has delivered Washington’s traditional messages on the importance of fair elections and of fighting corruption and human rights abuses.

But the fact that top oil producers Angola and Nigeria are both on the tour has made clear the importance of the visit from the perspective of ensuring access to resources – an area of huge importance to China too.

China’s trade in Africa hit $107 billion in 2008 and there are now 750,000 Chinese workers living and working in Africa. Sources in both Washington, D.C. and Africa confirmed that Clinton’s subtle diplomatic strategy is to offer African leaders infrastructure assistance in exchange for oil resources and increased energy investments on the African continent.

China, meanwhile, may be marshalling reserves to help kick start African economies and fuel demand as well as to secure access to its resources.

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Jim Sinclair’s Commentary

Before you even think about going long the US dollar please thoroughly read the following article.

Yes, Virginia, There Are No Reserve Requirements (PART 2/2)
August 12, 2009

Since the 1990s, the FED has change accounting rules so even the loose ~10% fractional reserve requirement could be thwarted. We live in an era of paper tickets.

In Part 1, Fractional Reserve Banking in Pictures, we saw how the banking system creates fraudulent money by creating new money on top of old. The reserve requirement limit used in the example, 10%, is the figure usually given, which means that from a $10 deposit the banking system could generate $90 of new money. Also, the FED uses Open Market Operations to create new money by writing a check upon itself.

This article will demonstrate that reserve requirements are effectively not in existence and easily avoided by accounting tricks in the U.S. banking system. In my view, the evidence is unrefutable as the sources are from the FED and documentation from Citigroup. Although I have tried my best to keep the following simple and source my data, please feel free to comment or question and I will do my best to reply.

The first chart is from the FED’s latest Purposes and Functions from 2005 on page 51 of 146.

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Jim Sinclair’s Commentary

This is a critical development for many.

US, Swiss cement deal on secret UBS bank accounts

(AP:MIAMI) Lawyers for the U.S. government and Swiss banking giant UBS AG say they have an agreement in a case involving secret Swiss bank accounts.

The U.S. government had sought the names of some 52,000 Americans believed to be hiding nearly $15 billion in secret accounts.

The deal was announced Wednesday during a telephone conference with a judge that lasted only long enough for lawyers to say that an agreement had been reached. No details were announced.

The Swiss and U.S. governments previously announced an agreement in principle on major issues. They had hoped to present a final deal at a hearing last week, but resolving the details has taken longer.

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Jim Sinclair’s Commentary

Please think twice before you downsize you transportation, even if it is named a Smart Car.

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Jim Sinclair’s Commentary

Unfortunately the report that TRUTH IS DEAD is accurate. Not much else is.

Green Shoots Everywhere (Except They’re Actually Weeds)
August 12, 2009

The media has been working overtime to convince everyone that things are great and there are green shoots everywhere. From a half backed GDP report, which revised 1Q09 down by .9% which you then add in inflated government spending and you magically have good news, to a fully backed jobs report they have managed to turn one bear, Roubini, into a green shoot advocate.

In other news, mortgage applications plunged again this month thanks to higher interest rates, not sure what to really think about a 5.38% mortgage rate being “high,” but somehow this was spun as sales contract numbers rose, slightly. Contracts really mean nothing as they have a high, relatively high, cancellation rate and I have never based any decisions about the market over this type of data point, it is really a nothing in the big scheme of things. Now if we were talking sales then that is a different story as sales mean something. Regardless, mortgage applications dropped which should make yesterdays CNBC story about optimism in the housing market obsolete and defunct as the story was obviously spun to make things look better.

With Roubini now in the camp of the recession will end by December 31st, 2009 the bulls have declared victory and are dancing in the streets. They even got him to say that asset prices should go higher and the risk of a double dip recession is low, all of which is nonsense. After being misquoted a few times and constantly bashed by most people on CNBC it is clear that he has had enough and decided to side with the path of least resistance.

However, I have to disagree with him on equity prices. As I see it, the S&P 500 have priced in perfection and has set itself up for a big fall. However, even I admit that the inflation of the money supply is making things unpredictable as much of that money ended up in equities. Even so, I think we are in for a wild ride in the near future.

With mortgage applications down and mortgage rates up I think it is safe to assume that the residential housing market will continue to languish in the near future. That is until the Fed magically lowers rates again through quantitative easing, monetizing our debt, but I am fairly convinced that will not do much to spur sales. People are funny, when they see prices continuing to fall they tend to stop buying and wait for a bottom which creates a paradox for the real estate market as they need buyers to stop prices from falling.

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Jim Sinclair’s Commentary

Housing is a key victim of the OTC meltdown.

Prices of homes decline at an accelerating rate. Other statistics will follow suit.

This is a redo of the 1932 rally both in some biz statistics and the world equity markets.

Home Price Declines Accelerate in Second Quarter
By Kathleen M. Howley and Brian Louis

Aug. 12 (Bloomberg) — Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosuresweighed on values.

The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today. Total sales rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million from the first quarter and fell 2.9 percent from 2008’s second quarter.

Prices fell in 129 out of 155 metropolitan areas from a year ago and 39 states experienced sales increases from the first quarter, the Chicago-based realtors group said. Sales in U.S. housing market at the heart of the global recession are beginning to stabilize, said Patrick Newport, an economist for Lexington, Massachusetts-based IHS Global Insight.

“I don’t think we’re at a bottom yet in home prices,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent-up supply out there.”

Home prices are falling even as a survey of economists indicates that the U.S. economy is recovering from the worst recession since the 1930s. The economy will expand 2 percent or more in four straight quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in the monthly Bloomberg News survey.

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Jim Sinclair’s Commentary

Israel might feel threatened regardless of which way their US relationships turn. That type of thinking can easily lead to a miscalculation.

Hizbollah ‘stockpiling weapons’ as fears of new offensive grow
Hizbollah has been stocking up on arms since its war with Israel in 2006 and is now stronger than it was during the conflict.
Published: 12:37PM BST 05 Aug 2009

The militant group now has up to 40,000 rockets, according to Israeli intelligence estimates, and is training its forces to use ground-to-ground missiles capable of hitting Tel Aviv.

Brigadier-General Alon Friedman, the deputy head of the Israeli Northern Command, told The Times that the peace of the past three years could "explode at any minute".

His warning comes after a Sheikh Hassan Nasrallah, Hizbollah’s leader, said last month that if the southern suburbs of Beirut were bombed as they were in 2006, he would strike back against Tel Aviv, the largest Israeli city.

The scale of Hizbollah’s new arsenal was revealed after an explosion at an ammunition bunker in the village of Khirbet Slim, 12 miles from the Israeli border, last month.

Surveillance footage obtained by the newspaper showed Hizbollah fighters trying to salvage rockets and munitions from the site.

Alain Le Roy, the head of UN peacekeeping operations, told the Security Council that the explosion amounted to a serious violation of UN Resolution 1701, which imposed a ceasefire and arms ban after the war.

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Jim Sinclair’s Commentary

The answer is ABSOLUTELY YES!

Stocks: The latest Fed bubble
Are the government programs supporting the financial sector reinflating global stock markets even as economies stumble?
By Colin Barr, senior writer
Last Updated: August 12, 2009: 3:52 AM ET

NEW YORK (Fortune) — The Federal Reserve has spent the past year cleaning up after a housing bubble it helped create. But along the way it may have pumped up another bubble, this time in stocks.

To head off the worst downturn since the Great Depression, the central bank has slashed interest rates while funneling money to banks.

The Fed has mostly won praise for its efforts. The pace of job losses has slowed, and there has been a modest recovery in output.

At the same time, stocks have bounced back with startling speed. Since global markets hit their bottom in March, the S&P 500 has jumped 51% — even as the outlook for economic recovery remains dim.

"This is the most speculative momentum-driven equity market since the early 1930s," Gluskin Sheff economist David Rosenberg wrote in a note to clients Monday.

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Jim Sinclair’s Commentary

Now all we need is a 1/10% drop so all will be well.

U.K. Unemployment Climbs to Highest Level in 14 Years  
By Brian Swint

Aug. 12 (Bloomberg) — U.K. unemployment rose to the highest level in 14 years as companies continue to cut jobs even as the worst recession in at least a generation begins to ease.

The number of people seeking work in the three months through June rose 220,000 to 2.44 million, the most since 1995, the Office for National Statisticssaid in London today. A separate measure showing claims for jobless benefit climbed by 24,900 in July to 1.58 million. The median forecast of 24 economists in a Bloomberg News survey was for a 28,000 increase.

Mounting job cuts threaten to hinder Prime Minister Gordon Brown’s re-election campaign for a vote he must hold by June 2010. The Bank of England today said it expects unemployment to keep climbing after the recession has ended, limiting the pace of recovery. Governor Mervyn King said the bank decided last week to expand its bond-buying program to prevent a “protracted” period of inflation below the 2 percent target.

“Unemployment is unlikely actually to start falling until gross domestic product growth has returned to its trend rate of 2.5 percent or so,” said Vicky Redwood at Capital Economics Ltd. in London. “The labor market looks likely to continue weighing on household spending for some time yet.”

Overall unemployment, as measured by International Labour Organization standards, rose to 7.8 percent between April and June, the most since 1996. That compares with 9.4 percent in the U.S. in July, 9.4 percent in the euro region in June and 5.4 percent in Japan.

The employment rate fell to 72.7 percent from 73.6 percent, matching the biggest quarterly drop since 1971. The weaker job market is keeping a lid on pay. Average earnings excluding bonuses grew an annual 2.5 percent, the least since records began in 2001.

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Jim Sinclair’s Commentary

CIT must be rescued. The implications on the real economy are enormous. They cannot be allowed to be another Lehman. The domino impact of CIT is in the REAL ECONOMY

CIT Delays Filing Quarterly Report Amid Restructuring
BY KATE HAYWOOD

NEW YORK — CIT GroupInc. on Tuesday delayed filing its quarterly report with the Securities and Exchange Commission, as it continues to hammer out a restructuring plan with its bondholders.

In a regulatory filing, CIT said it couldn’t meet Monday’s deadline "without unreasonable effort and expense" during its restructuring. It said it expects to file its earnings statement by Monday.

CIT stressed that its steering committee of bondholders doesn’t intend for the company to file for bankruptcy protection but "rather will pursue restructuring efforts as part of the comprehensive restructuring plan to enhance the company’s liquidity and capital …

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

When there is no "cash for clunkers" giveaway there will be practically no car buyers. Potential buyers want a bonus to buy therefore all buy interest has been exhausted.

Interest in Cash for Clunkers sputters
In ‘Gold Rush mentality,’ demand for cars peaked in July and could fall to pre-Clunkers levels next week, report says.
By Julianne Pepitone, CNNMoney.com contributing writer
Last Updated: August 11, 2009: 2:58 PM ET

clip_image001NEW YORK (CNNMoney.com) — After sparking an initial rush to showrooms, the Cash for Clunkers program seems to be running out of fuel.

Interest in Cash for Clunkers has fallen 15% since its peak, and the number of people planning to buy cars could fall to pre-Clunkers levels by next week, an auto research group said Tuesday.

Under the Clunkers program, which launched July 27, vehicles purchased after July 1 are eligible for refund vouchers worth $3,500 to $4,500 on traded-in cars with a fuel economy rating of 18 miles per gallon or less.

The program proved wildly popular, running through its initial $1 billion in its first week and leading lawmakers to approve an additional $2 billion in funding on August 7.

But interest in the program peaked on July 29, and demand has waned, according to the report from Edmunds.com.

The report, which cited Internet shopping data, said if current trends continue auto purchase intent will fall back to pre-Cash for Clunker levels by August 20.

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Jim Sinclair’s Commentary

Problems are cascading, not contracting.

Social Security can’t wait long for a fix

I don’t expect the white papers from the Center for a Responsible Federal Budget to put more spring in my step and a song in my heart, but today’s report about Social Security’s looming fiscal problems was unusually sobering. The CRFB said that recent analyses by the Congressional Budget Office and the Social Security Trustees don’t agree on all the specifics, but they leave little doubt that the Social Security trust funds will soon begin doling out more cash than they collect from payroll taxes. By the CBO’s reckoning, that day will arrive in 2017, wiping out the trust funds by 2043. By the Trustees’ estimates (which are more pessimistic because they assume the Bush tax cuts will remain in effect), the trust funds begin to drain in 2016 and run out of money by 2037. "Despite these differences," the report says, "both reports show with near certainty that the Social Security system will add significantly to projected deficits and require considerable revenue or spending adjustments to remain solvent."

Ugh. The situation is similar in some ways to the Medicare Trust Fund, which is expected to become insolvent in 2017. The Social Security trust funds have about $2.4 trillion in reserves, which make the shortfall in revenue seem less pressing. But the shortfall will exacerbate the federal budget deficit immediately, so lawmakers won’t be able to avoid the problem for long.

Without a change in policy, the CRFB says, Social Security benefits will have to be cut by an estimated 17 percent as soon as the trust funds empty. "Averting this scenario would require the equivalent of a 3 percentage point increase in the payroll tax in 2042 – the equivalent of a little over 1 percent of GDP," the report estimates.

While the exact size of the shortfall cannot be precisely predicted, one thing is certain: Social Security cannot continue on its path in the current fiscal context. The system will need to be rebalanced through adjustments to benefits and/or revenues; and the sooner we act the more we can spread out these changes and give workers time to prepare.

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Jim Sinclair’s Commentary

No bees and no bats means no food

Honey bees disappearing may be a greater threat than global warming
August 11, 5:22 PM

A while ago there were stories making all the major news outlets about the disappearance of honey bees. No one knew why. Some were even suggesting that cell phones signals were causing it.

Not having heard more about it in a couple years, I thought perhaps scientists had come up with a solution to the mystery. I was wrong.

The other night I saw a program on PBS that made it clear that the problem is anything but solved. Colony Collapse Disorder, as it has been dubbed, is affecting 35 states in the US, as well as Europe, South America, India, and China. We’ve already lost 35% of the bees in the US, and we’re losing 8% more every year. Honey bees were being predicted to be extinct in the US by 2035 before CCD, just from loss of habitat, pesticides, and parasites. Now it’s likely to happen much sooner.

Used to be, a beekeeper would drop off his hives at an orchard or strawberry patch for free… his primary source of income was honey, with perhaps a sideline in bee pollen, bees wax and royal jelly. However, when truck farming began in earnest in the fifties, apiculture became big business. In 1960, beekeepers were charging $3 per hive. By 2004, that figure had inflated to $60. But since then, as bees have disappeared and demand for bees has risen, the figure now can be as much as $180 per hive. In 2006, American beekeepers had to import bees for the first time in 80 years. A farmer now pays more for pollination than he does for fertilizer, water, or labor. How much of that cost can he pass on to consumers before pricing himself out of business? Are you willing to pay $25 a pound for almonds? And farmers can’t quickly alter their crop yield to match market demand; they have to make decisions about what and how much to grow a year or more in advance.

Why should you care? Aside from the cost of your food spiraling up, the nutritive value will begin spiraling down. This morning, for example, I had a bowl of oatmeal with cherries, walnuts, and yogurt for breakfast. The cherries are supposed to prevent gout, walnuts are good for my brain, and the yogurt – frankly, I don’t remember what yogurt is supposed to be good for, but it tastes nasty, so it must be good for me. If bees disappear, I’ll have no cherries, no walnuts, and likely no yogurt… most of what cows eat is pollinated by bees. So, in addition to a higher tab for groceries, mankind’s health will deteriorate, raising the cost of healthcare.

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Jim Sinclair’s Commentary

Ask yourself a simple question: Is the following from this article a solid fundamental reason to be dollar bullish?

In complex times the right answer is always simple.

"The United States is functionally bankrupt.

Our collective capacity to deal with this astonishing fact is seemingly nonexistent.

Our national politics have become show business, exhibiting a complete refusal to strategically respond to this reality."

We broke the bank!
We need to rein in our overspending
By Mike Whalen | Tuesday, August 11, 2009

The United States is functionally bankrupt. Our collective capacity to deal with this astonishing fact is seemingly nonexistent. Our national politics have become show business, exhibiting a complete refusal to strategically respond to this reality.

Let’s look at the simple numbers of our national debt. Our on-the-books national debt is $11.6 trillion. But off-the-books federal debt, including Medicare and Social Security, is $107 trillion. This is not a made-up number; this is the money we should have in the bank, according to the federal government’s own accountants, to pay for our current promises to our retirees and future retirees, and this doesn’t include unfunded obligations that we have to the pensions and benefits promised to federal workers and veterans. Nor does it include huge unfunded pension and benefit obligations for other public employees at levels below the federal government.

But let’s just add the $11 trillion to the $107 trillion, and we get $118 trillion. These are big numbers but still just fifth-grade math. Now our total annual national output, or gross domestic product (GDP), is about $14.3 trillion. Total federal receipts, or income if stated in business terms, are about $2.5 trillion. This means that our debt to federal income ratio is about 47, and that ratio assumes that the federal revenues are free to retire the obligations, which they are not. We must pay for defense and a myriad of other programs. Again, in business terms, there is no free cash flow to pay these massive obligations.

Our total national private net worth, according to the Federal Reserve Board, is about $51.5 trillion. That means our federal unfunded liabilities represent 2.3 times our collective net worth. That’s pretty darn broke.

Ask any accountant, banker, or anyone remotely familiar with simple accounting knowledge if we can service this debt, and the collective answer is a resounding "no." Any business with these ratios would be a complete basket case, hopelessly bankrupt. Unlike General Motors Corp., there is no one with the wherewithal to bail out the U.S.A.

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Jim Sinclair’s Commentary

You first read it here years ago. Now read it in Forbes.

Refer back to my posting today that clearly says there is NO practical way to drain the $12 trillion injected into the OTC derivative meltdown.

Bullish on the dollar? You have to be kidding.

Fed Faces Its Zimbabwe Moment
Joshua Zumbrun, 08.11.09, 05:45 PM EDT

Is the central bank confident enough about the recovery to take the economy off life support?

WASHINGTON — When stock markets plumbed new lows in March, the Federal Reserve responded with nearly every tool in its box. It announced it would create new money to buy $1.25 trillion in mortgages and $300 billion in government debt.

That purchase of government debt looked particularly ominous. Creating new money to buy government debt is the sort of strategy that’s known to destroy economies–just ask Zimbabwe, which suffered so much hyperinflation that it destroyed its currency. The Zimbabwe central bank printed bills in the denomination of 100 trillion Zimbabwean dollars, then found they had value only as a novelty item on eBay. Eventually, Zimbabwe was forced to abandon its currency altogether.

But the difference between the U.S. Federal Reserve and the Reserve Bank of Zimbabwe (one would hope) is that the Federal Reserve will stop before it wrecks the dollar.

The first major test of the differences between Zimbabwe and the U.S. is rapidly approaching. An indication could come as soon as the Fed releases a policy statement Wednesday afternoon. The Fed is not expected to announce a major change of course (see "All Quiet On The FOMC Front"), but the present course calls for current programs to unwind.

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A Note On The Dollar:

Forex companies reaching out to the public advertise 500 to 1 leverage if you qualify. All you need to do to qualify is lie on your application form.

Today from the very early US AM to now, 5:06pm EST, the direction of the US dollar changed 21 times.

Now there is a market made up of a group of techies with no fundamental conviction trying very hard to pick each other’s pockets.

The US dollar will not survive this fall. Gold is going to $1224 and $1650.

 

Jim Sinclair’s Commentary

Our financial problems are so far from over. Difficulties with smaller banks hits home.

Now we have OVERSEERS. What exactly is an OVERSEER? Is that a seven foot tall guru? Are they in Congress? I think not.

I prefer Czars. We have lots of them. Remember what happened to the Czars?

Overseers warn: Losses could pose threat to small banks
Congressional Oversight Panel says small banks may need to raise $21 billion
By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — The largest U.S. financial institutions are better able to handle a worst-case scenario for potential losses in their whole-loan portfolios than smaller public banks, which could face serious trouble, according to a report released by a bank-bailout oversight panel Tuesday.

According to a report from the Congressional Oversight Panel, which is charged with overseeing the $700 billion Troubled Asset Relief Program, or TARP, the 18 largest financial institutions with over $600 million in assets would "be able to deal with" whole-loan portfolio losses projected in an analysis the group completed.

‘The reason it is so important to think about smaller financial institutions is because they do disproportionately more of the lending to small businesses.’

However, the report’s analysis of troubled whole loans — based on a model developed by SNL Financial — suggests they pose a threat to smaller public banks, those with $600 million to $100 billion in assets. The report also takes issue with the Treasury department’s decision to delay indefinitely a program to buy toxic whole loans from banks.

Whole loans refer to individual residential or commercial mortgages, as opposed to packaged mortgage securities, which have received much of the attention during the financial crisis.

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Jim Sinclair’s Commentary

Change "may" to "will."

Toxic assets may need more Treasury support
Tue Aug 11, 2009 8:12am EDT
By David Lawder

WASHINGTON (Reuters) – The Treasury Department should consider expanding programs to cleanse troubled assets from bank balance sheets if current efforts fail to restart markets or if economic conditions worsen, a U.S. bailout watchdog panel said on Tuesday.

The Congressional Oversight Panel said in its latest monthly report that toxic loans and securities continue to pose a threat to the financial system, particularly for smaller banks that face mounting losses on commercial real estate loans.

These banks may need similar stress tests and capital support afforded to larger institutions, the panel added.

It also advocated that stress tests for the largest 19 institutions be repeated if the economy worsens beyond the worst-case assumptions used in initial tests conducted in April.

Despite improved financial market conditions, the panel said a "continuing uncertainty is whether the troubled assets that remain on bank balance sheets can again become the trigger for instability."

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Jim Sinclair’s Commentary

What OTC derivatives and bad business does not do to financials by 2011, litigation will.

State Street says legal reserve may not be enough
Mon Aug 10, 2009 4:01pm EDT

By Svea Herbst-Bayliss

BOSTON (Reuters) – State Street Corp, one of the world’s biggest institutional investors, said on Monday it may not have set aside enough money to cover fees and penalties linked to lawsuits and investigations by regulators into risky investments.

Two years ago State Street, which manages $1.6 trillion for investors, set aside $625 million to cover costs stemming from lawsuits by clients charging that the company misrepresented its investment strategy.

At the end of June, the company, which also earns fees for keeping records for investment managers, said it had $193 million left in the reserve.

Federal and state regulators are investigating allegations that Boston-based State Street made inappropriately aggressive bets on subprime mortgages.

Disgruntled investors allege that while they thought they were buying low-risk fixed income funds, the funds may have been stocked with more aggressive instruments.

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Jim Sinclair’s Commentary

MOPE requires painting the picture. I imagine that TIC figures will show this as Caribbean demand/Central Bank source.

Fed buys $6.6 billion in Treasury’s
Aug 10, 2009, 11:09 a.m. EST
By Deborah Levine

NEW YORK (MarketWatch) — The Federal Reserve Bank of New York bought $6.594 billion in Treasurys on Monday, the first of two operations this week. Dealers submitted $22.002 billion in debt maturing between 2012 and 2013 to the Fed. The U.S. central bank is more than two-thirds of the way through the $300 billion in U.S. debt it promised in March to buy in an effort to keep borrowing costs, particularly for companies and homebuyers, affordable. When the Fed last bought from this maturity range, it purchased $6.5 billion. Two-year note yields /quotes/comstock/31*!ust2yr (UST2YR 1.23, -0.06, -4.71%) , which move in the opposite direction of prices, remained lower on the day. The yield fell 5 basis points to 1.26%

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Jim Sinclair’s Commentary

There is no PRACTICAL means to drain, therefore no PRACTICAL exit strategy from the $12+ trillion monetary injection.

All the means available, regardless of MOPE claims, will plunge the West into a more significant crisis. That would require more bailouts and monetary injections.

That is what the downward spiral is all about.

Fed Needs A Policy ‘Exit Strategy’
Oxford Analytica, 08.11.09, 06:00 AM EDT

Monetary policy shift will help U.S. avoid inflation once recovery begins.

As the recession draws to a close, the Federal Reserve is coming under pressure to outline an ‘exit strategy’ from its extraordinary monetary policy easing over the past year. The timely implementation of this shift is important if the U.S. is to avoid an inflationary spurt once the economy has fully recovered.

Market concern. The exceptionally rapid expansion of the Fed balance sheet is giving rise to market concern about the potential inflationary impact of that expansion, once the economy recovers and the financial system returns to health. At present, in the depths of a recession and at a time when the financial system remains under stress, the surge of Fed liquidity associated with the increase in its balance sheet is being hoarded by a troubled U.S. banking system and is not giving rise to an undue expansion in the broad monetary aggregates. However, it is feared that unless ‘soaked up’ in a timely and bold fashion, this increased liquidity could quickly give rise to an undue monetary expansion that might fuel a sharp spurt in inflation once growth returns.

Fed exit strategy. In recent weeks, Bernanke has sought to reassure financial markets about the long-term inflationary risks that might arise from pumping large amounts of liquidity into the economy. He has emphasized that the Fed has the necessary tools to soak up any excess liquidity once the economy starts to recover. In particular, he highlighted three potential measures:

–Gradual response to demand. The Fed can allow its balance sheet to shrink naturally as improving financial market conditions reduce the demand by financial institutions for its short-term lending facilities. Indeed, Bernanke has noted that this process has already begun. By mid-July, short-term credit extended by the Fed to financial institutions and other market participants had fallen to less than $600 billion from a peak of $1.5 trillion at the end of 2008.

–Reserve rates. The Fed can increase the interest rates it now pays banks on their reserve balances at the Fed, as it starts to increase its federal funds rate target. Since banks will generally not lend funds in money markets at a lower interest rate than the risk-free rate that they earn at the Fed, the interest rate that the Fed pays on reserves would place an effective floor under short-term rates.

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Jim Sinclair’s Commentary

This is far from comforting.

Report: Pakistan Nuclear Facilities Attacked at Least Three Times by Terrorists
Tuesday, August 11, 2009

Pakistan’s nuclear facilities have been attacked at least three times by home-grown extremists in little-reported incidents over the last two years, according to security experts, reports the Times of India.

The incidents include an attack on a nuclear missile storage facility at Sargodha on Nov. 1, 2007, and a homicide bombing at the nuclear airbase at Kamra on Dec. 10, 2007, as tracked by Shaun Gregory, director of the Pakistan Security Research Unit at the University of Bradford in the UK.

But Bradford also noted a much more considerable raid by the Pakistani Taliban on Aug. 20, 2008, when homicide bombers blew up several entry points to a main armament complex at the country’s main nuclear facility, the Wah Cantonment Ordnance Complex, according to the paper.

Pakistan insists that its nuclear weapons are secure and that there is no chance of their falling into the hands of extremists or terrorists.

But these homegrown attacks have occurred even as Pakistan has taken steps to safeguard its stockpile against potential strikes, Gregory writes in the July issue of West Point’s Combating Terrorism Center Sentinel.

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Jim Sinclair’s Commentary

Now someone is thinking correctly.

Canada’s oil patch open for Chinese business: Flaherty
Jorge Barrera,
Published: Monday, August 10, 2009

Finance Minister Jim Flaherty rolled out the welcome mat for Chinese investment in the Canadian energy sector Monday, saying this country’s foreign-investment rules pose little hindrance to the growth of a Chinese presence.

Mr. Flaherty, in Beijing to give Canadian corporate interests a boost in the region, said China is flush with U.S. dollars reserves and is looking to spend it in the "emerging energy superpower" that is Canada.

In meetings with Chinese Vice-Premier Li Keqiang and Chinese Finance Minister Xie Xuren, Mr. Flaherty said neither indicated concerns Canada’s foreign-investments regulatory framework would hinder Chinese business interests.

"They did not express any concerns," said Mr. Flaherty. "We are encouraging Chinese foreign direct investment in Canada . . . so long as there is compliance with the governance concern and other rules that we have with Investment Canada."

China has recently expressed concern over its difficulty in establishing a presence in Canada’s energy sector.

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Jim Sinclair’s Commentary

Here comes the Prechterites.

Please do not send me emails enlightening me that Mr. Prechter is bullish on the US dollar, bearish on gold and espousing deflation.

First, this is nothing new and has occurred on every gold/dollar reaction since $248 and USDX 120.

Secondly, on every gold reaction millions of flyers are mailed out by this source espousing just this opinion.

Third, JSMineset is provided daily as a service and competes with no one.

Fourth, Mr. Prechter is a by subscription service.

Fifth, I do not care.

Sixth, I will use the delete button as your message is simply to sustain your own bearish opinion, or worse yet, your fear.

 

Jim Sinclair’s Commentary

In a fascist state, corporations rule, and the military keeps the peace

Governors Object to Pentagon Disaster Proposal
Aug. 10, 2009 – 1:37 p.m.

The National Governors Association opposes a Defense Department proposal to expand the military’s authority to respond to domestic disasters.

In a letter Friday to Paul N. Stockton, assistant secretary of Defense for homeland defense and Americas’ security affairs, the governors said the proposal could lead to confusion over who’s in charge during domestic emergencies and unnecessarily duplicate response efforts.

“We are concerned that the legislative proposal you discuss in your letter would invite confusion on critical command and control issues, complicate interagency planning, establish stove-piped response efforts, and interfere with governors’ constitutional responsibilities to ensure the safety and security of their citizens,” Govs. Jim Douglas , R-Vt., and Joe Manchin III , D-W.Va., wrote on behalf of the group.

The Pentagon did not immediately respond Monday to a request for comment on the letter.

In their letter, the governors elaborate on their concerns over expanding the Pentagon’s independent authority to operate military forces in domestic incidents.

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Jim Sinclair’s Commentary

For our silver brethren.

China Encourages Silver Bullion for Investment [Video]

China has introduced its first-ever investment opportunity for silver bullion. The bars are available in 500 grams, 1 kilogram, 2 kilograms and 5 kilograms with a purity of 99.9 percent.

Jim Sinclair’s Commentary

JB Slear says there might just be hope for the Sheeple.
CNBC slides as viewers get crunched

Aggressive business network becomes a turn-off
Andrew Clark in New York
The Observer, Sunday 9 August 2009

With a steely gaze, the pin-striped CNBC television host Larry Kudlow looks meaningfully into the camera.

"We believe that free market capitalism is the best path to prosperity," he declares, reciting his trademark "creed" before enthusiastically launching into the day’s financial action.

Share prices flicker across the bottom of the screen. Traders bicker about the fundamentals of the market. A "breaking news" flash delivers US non-farm payroll numbers. Welcome to CNBC, the world’s top business television channel, which broadcasts across the globe from the nondescript suburban town of Englewood Cliffs, New Jersey.

Courting constant controversy for its evangelism of financial speculation, CNBC has never had so much attention. It devotes 16 hours of live coverage every day to the markets and has analysed every detail of the credit crunch. So why are its ratings slumping?

According to figures supplied to the Observer by Nielsen, the television tracking agency, the average number of Americans watching CNBC at any point on the 24-hour clock was 188,000 last month, a drop of 11% on last year. A more detailed breakdown leaked on the internet reveals a 28% plunge in CNBC viewers during the core business day, between 5am and 7pm.

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Jim Sinclair’s Commentary

Amidst the barrage of recovery talk, core circumstances worsen.

That is not dollar positive.

U.S. Underwater Mortgages May Reach 30%, Zillow Says
By Dan Levy

Aug. 11 (Bloomberg) — Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, Zillow.com said.

Homeowners are being hurt by price declines. The estimated median value for single-family houses slid to $186,500 in the period, a 12 percent drop from a year earlier and the 10th consecutive quarterly decrease, the Seattle-based real estate data service said in a report today.

“The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist, said in an interview. “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.”

The U.S. housing market is being hindered even as the pace of job cuts and price declines slows. Payrolls fell by 247,000 in July, after a 443,000 loss in June, the Labor Department said. Home prices in 20 major cities declined 17 percent in May from a year earlier, the smallest drop in nine months, according to the S&P/Case-Shiller index.

Home values dipped in the second quarter from a year earlier in almost 90 percent of the 161 U.S. metropolitan areas surveyed by Zillow, the company said. Twenty-three percent of mortgage holders were underwater at the end of June, Zillow said.

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Jim Sinclair’s Commentary

When push comes to shove CIT will have to rescued. It does not matter if the method is Federal arm twisting of private interest or direct QE, the consequences will be the same.

CIT delays report, warns on bankruptcy
August 11, 2009: 10:15 AM ET

NEW YORK (Reuters) – Shares of CIT Group Inc sank 20 percent Tuesday after the troubled lender delayed filing its second-quarter report with regulators and again warned it may have to file for bankruptcy.

CIT, which has been battling to restructure its debt, said in a filing with the U.S. Securities and Exchange Commission that management is focused on restructuring the company to avoid bankruptcy and it was unable to file its quarterly report by the deadline on Monday.

The 101-year-old lender, which last month secured $3 billion in emergency funding from bondholders, has launched a tender offer for $1 billion of floating-rate notes due Aug. 17.

In the filing on Tuesday, it warned that if the tender offer is not successful and if the company is unable to secure alternative financing, it may be forced into bankruptcy.

New York-based CIT last week said it had met the conditions for the offer, after it passed the 58 percent mark for the minimum tender.

CIT plans to use the proceeds from its emergency funding to complete the tender offer and make the payment on the Aug. 17 notes, according to the filing on Tuesday.

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Posted by & filed under In The News.

Dear CIGAs,

Here is California’s gift to Monty Guild.

This is why Trader Dan is in the process of moving to the country.

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Jim Sinclair’s Commentary

If you think China is hostage to the US dollar then you are a world class fool.

China Keeps Buying Energy, Bids $17B For Stake In Argentinian Oil Giant YPF
Henry Blodget
Aug. 10, 2009, 7:44 PM|
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Those trillions of dollars we’ve borrowed from China and then shipped back to China to pay for all of our stuff?  China’s using them to buy other things, like energy.

The latest move?  A $17 billion bid for a majority stake in Argentinian oil giant YPF.

Will Argentina allow the deal to happen?

We’ll see.  But if it doesn’t, you can bet China will just go buy something else.

Aries Poon, WSJ: China National Petroleum Corp. and Cnooc Ltd. have proposed paying at least US$17 billion for all of Repsol YPF SA’s stake in YPF, its Argentine unit, two people close to the talks said.

China National Petroleum Corp. and Cnooc Ltd. have proposed paying at least US$17 billion for all of  Repsol YPF SA’s stake in YPF, its Argentine unit, two people close to the talks said.

The potential deal, which could be the biggest overseas investment by China, highlights the country’s growing thirst for energy resources globally and its willingness to offer big money for access. It also underlines the ambition of CNPC to build up its presence in South America and elsewhere.

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Jim Sinclair’s Commentary

CIGA Green Hornet says he can answer the question.

Politicians always pay $66 million for a $49 million jet. These are the same people that showed fake anger when the Banksters came to congress on private jets. These are the same people who are going to run good ole GM.

Why Is Congress Paying $66 Million for a $49 Million Jet?
AUGUST 10, 2009, 1:30 PM ET

By Robert Frank

What struck me most about the Congressional private jets was the price tag.

As if loading up on private jets in an economic crisis wasn’t enough, Congress has pulled off a feat even today’s most extravagant billionaires would have a hard time matching. That is, they are paying $66 million for a jet with a sticker price of $49 million. (Read about the backlash that has started in Congress here.)

I’m talking, of course, about the G550. Congress is buying three, at $66 million a pop.

That price sounded high to me, since the G550 buyers I know paid around $45 million (at most) for their planes, and that was during the boom times. So I called Robert Baugnier, spokesman for Gulfstream. He informed me that the sticker price for a brand new, completed G550–leather interior and all–is $49 million.

Jet broker Jay Duckson of Central Business Jets tells me that because of weak demand for private jets amid the recession, he can get clients a new Gulfstream G550 for less than $43 million. “It’s like the auto dealers right now,” he said.

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Jim Sinclair’s Commentary

The OTC derivative lobby must be throwing huge money at this one.

Lehman Contract Is Test Case for Billions of Dollars of Swaps 
By Linda Sandler

Aug. 11 (Bloomberg) — A U.S. bankruptcy judge may have a controlling say in resolving a dispute in a U.K. court between Lehman Brothers Holdings Inc. and a Bank of New York Mellon Corp. unit over a swap agreement that could affect billions of dollars of similar contracts.

At issue is who under U.S. bankruptcy law gets paid first under two swap agreements related to Lehman’s so-called Dante program of credit-linked notes — Lehman or investors who bought the notes. Lehman lost under U.K. contract law. The U.K. judge left the question of U.S. bankruptcy law open as Lehman appeals his ruling.

“This issue has never been tested in court in the U.S.,” said Guy Dempsey, co-chair of the derivatives group at the law firm Latham & Watkins LLP.

Lehman, the investment bank liquidating in bankruptcy, says it is owed $70 million on the swaps and wants to get paid. BNY Corporate Trustee Services Ltd., acting for the note-holders, wants the case dismissed and cites a U.K. judge who said last month that note-holders are entitled to the payments under U.K. law now that Lehman is bankrupt.

The case, being considered in bankruptcy court in New York today, may affect many other swap agreements designed like Lehman’s, which includes an indenture and a sequence of payments, Dempsey and other experts said.

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Jim Sinclair’s Commentary

All of these deals distribute dollars in exchange for materials.

Any time you hear China is a prisoner of the US dollar you are listening to a fool.

Yanzhou close to Australian coal deal
By Peter Smith in Sydney
Published: August 10 2009 07:47 | Last updated: August 10 2009 18:37

China’s Yanzhou Coal Mining is in advanced talks to buy Felix Resources in a cash takeover that is expected to value the Australian coal mining group at about A$3.7bn (US$3.1bn).

If the deal is agreed and cleared by regulators, it would be one of China’s largest foreign takeovers and the country’s biggest Australian deal to date.

Felix on Monday requested that its shares be suspended from trading pending the outcome of “negotiations regarding a potential change of control transaction”.

The shares, which had traded at less than A$5 this year, last traded at A$16.90. However, the Chinese group was understood to have pitched its offer at about A$19 a share, a person close to the situation said.

At that level, Felix would be worth A$3.7bn.

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Jim Sinclair’s Commentary

Here is a picture showing Friday and today’s dollar market:

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Jim Sinclair’s Commentary

Bloomberg Financial TV has no idea how much damage they are doing to the USA internationally. It is not a good idea to kick your bankers in the ass daily.

They now have a talking head from ING on who simply said the economic figures issued by China are false with the implication that the West never lies.

Hell, what about the skewed unemployment figures issued in the USA on Friday?

Bloomberg has no clue that China’s success has made them economic ambassadors of the USA.

In other news the US postal service is planning to close 1000 post offices. At the same time, sales of AK-47s are booming in the US. Gun sellers are denying postal employees are buying them.

 

Jim Sinclair’s Commentary

Now that Goldman is a bank the potential change by FASB in their asset valuation auditing procedures could be a DISASTER for them.

A level 3 problem at Goldman Sachs?
August 10, 2009 — 7:49am ET | By Jim Kim

Reuters has taken a close look at Goldman Sachs’s latest 10Q and come up with something interesting: Goldman reported a second-quarter net unrealized loss of $1.4 billion on its Level 3 derivatives. "The unrealized loss is significant because it represents a reversal of what had been a positive trend at Goldman." In the just prior quarter, Goldman Sachs reported a net unrealized gain of $975 million on its Level 3 derivatives. For all of 2008, Goldman reported a net unrealized gain of $5.58 billion.

This may reflect Goldman’s bet on various distressed assets, which seemed to pay off in 2008. But if it now finds itself on the wrong side of the market, we may have a reason to be slightly more cautious on Goldman’s earnings in the second half of the year. We’ll just have to see if this turns into a trend.

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Jim Sinclair’s Commentary

If you think the ads are bad Mr. Cuomo, the dealers are faking the paperwork.

Cuomo Tells Dealers to Stop Deceptive Clunkers Ads
By Linda Sandler

Aug. 10 (Bloomberg) — New York Attorney General Andrew Cuomo today told 40 auto dealers across the state to stop issuing misleading advertisements for the Federal Car Allowance Rebate System, known as “cash for clunkers.”

The government-funded clunkers program, which seeks to boost the economy, allows dealers to credit $3,500 or $4,500 for trade-ins that may be worth less. Dealers’ ads mislead consumers into believing that their trade-in vehicle qualifies for the program when it does not or that they are eligible for a several-thousand-dollar rebate, Cuomo said in a statement today.

Letters by Cuomo order the dealers “to immediately modify promotions and advertisements to clearly explain how the program works,” he said. Included on his list were dealers for General Motors Co., Chrysler Group LLC, and Ford Motor Co. as well as foreign car companies.

In metropolitan New York, Cuomo named Plaza Hyundai Ltd., City World Toyota and City World Hyundai, while in Westchester he cited Smith Cairns Ford Inc. of White Plains and Central Avenue Chrysler Jeep Dodge.

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Jim Sinclair’s Commentary

Good for the Swiss Franc.
Good for tradition.
Good for the respect of international law.

U.S. Lets Swiss Banking Giant UBS Off the Hook
Posted: 08/10/09

Traditions die hard.

Since the founding of the Swiss Confederation in 1291, Switzerland has protected the privacy of its financial accounts. It may be the world’s most secretive banking jurisdiction, with a vaunted ability to protect its depositors from unwanted prying.

Switzerland converted this tradition to law in 1934, when it enacted its strict banking secrecy law. Revealing financial information without the client’s consent is prohibited.

For more than a year now, this tradition of bank secrecy, or financial privacy as the Swiss call it, has been under attack from one of the most powerful agencies in the world — the U.S. Internal Revenue Service. In July 2008, the IRS served a "John Doe" summons on UBS, seeking records that would identify U.S. taxpayers with accounts at UBS in Switzerland who have not reported these accounts to the IRS. UBS failed to comply with the summons.

So in February, the U.S. Department of Justice filed a petition to force the Swiss banking giant to turn over some 52,000 names of U.S. account holders the IRS suspects failed to pay taxes on earnings from those accounts, as required under U.S. law. UBS has continued to refuse to disclose the names, arguing that doing so would violate Swiss banking laws. It is a crime in Switzerland for bankers to provide information on client accounts to foreign tax authorities, and bankers who violate this law may be subject to criminal prosecution that includes the possibility of a prison sentence.

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Jim Sinclair’s Commentary

The newest economic black hole is commercial real estate.

Maguire must of had big bucks in the buildings.

Maguire to Surrender Buildings, Says No Bankruptcy
By Brian Louis and John Gittelsohn

Aug. 10 (Bloomberg) — Maguire Properties Inc., the largest office landlord in downtown Los Angeles, may relinquish control of seven Southern California buildings with $1.06 billion of debt and said it’s not planning on filing for bankruptcy.

The company told lenders “it will no longer continue to fund the cash shortfall” on the mortgages for six properties, Los Angeles-based Maguire said in a statement today. Two properties are in default and Maguire said it already surrendered one building to a lender.

“We are not considering bankruptcy,” Chief Executive Officer Nelson Rising said today on a conference call. “And we feel the course we’re on is a far better course of action.”

Maguire’s decision is a sign that landlords in Southern California’s overleveraged office market can no longer make payments and may be forced to abandon properties. Maguire has been trying to sell buildings to pay debt incurred in 2007 when it purchased properties from Blackstone Group LP. Loans against six properties were split up into commercial mortgage-backed securities and resold to investors.

“It does highlight the credit problems associated with recent vintage CMBS loans and a trend in borrower behavior to increasingly walk away,” said Barclays Capital Research analysts Aaron Bryson and Tee Yong Chew in a research note today.

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Jim Sinclair’s Commentary

Now here is a Green Shoot

Consumer, Celebrity Bankruptcies May Hit 1.4 Million  
By Linda Sandler and Andrew M. Harris

Aug. 10 (Bloomberg) — Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the American Bankruptcy Institute.

More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center.

“Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said in a statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.

Debt problems don’t stop with sub-prime borrowers. Celebrities who filed for bankruptcy in July included movie actor Stephen Baldwin, who sought protection from creditors after lenders began foreclosure procedures against his home. Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that says the former Major League Baseball All-Star owes between $10 million and $50 million.

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Jim Sinclair’s Commentary

"A society that fails to help its helpless, is worthless." –Jim Sinclair

Father of Handicapped Son Received Threats After Confrontation With Rep. Dingell

Click here to watch the video…

 

Jim Sinclair’s Commentary

This is shocking even to me. The US dollar is toast.

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Deutsche Sees 48% of All US Mortgages Underwater in 2011
By AUSTIN KILGORE 
August 6, 2009 4:18 PM CST

clip_image004Deutsche Bank (DB: 66.83 +0.97%) believes continued declines in home values will increase the number of US mortgagors with negative equity from 14m in Q109 to 25m in Q111.

According to a report Deutsche released this week, the 25m represents a projected 48% of all US mortgages. While subprime and option adjustable-rate mortgages (ARM) are the biggest source of underwater borrowers in the current market, Deutsche said a larger percentage of prime conforming and prime jumbo borrowers will join the fray.

Prime conforming and prime jumbo will make up 79% of all US mortgages and Deutsche estimates 41% of conforming and 47% of jumbo will be underwater, up from current levels of 16% and 29%, respectively.

This rapid influx of underwater borrowers will have a significant impact on default rates. In addition to future underwater borrowers being forced into default from a “life event” — unemployment, divorce, disability, etc. — Deutsche warned others may “ruthlessly” or strategically default.

Increased defaults in the middle class will suppress consumption, added Deutsche, further slowing housing recovery.

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Jim Sinclair’s Commentary

Experts say "No problem."

The Next Fannie Mae
Ginnie Mae and FHA are becoming $1 trillion subprime guarantors.
AUGUST 10, 2009, 7:15 P.M. ET

"The housing lobby, which gets rich off FHA insurance, has long blocked these due-diligence reforms, saying there’s no threat to taxpayers. That’s what they also said about Fan and Fred—$400 billion ago."

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.) Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?

Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.

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Jim Sinclair’s Commentary

All the MOPE, spin and games played in the dollar market cannot erase the negative impact of this on international dollar holders.

It is simple: The more you make, the less they will be worth.

Administration Wants To Raise $12.1 Trillion National Debt Ceiling
Posted: August 8, 2009 at 7:21 am

The Administration has a bit of a problem. The cap on the national debt, which must be approved by Congress, is $12.1 trillion. The Treasury is borrowing money so fast to fund the stimulus and budget deficits, that it will push up against the level in about two months.

With many members of Congress against the rising federal red ink, the battle lines are likely to be drawn with the stakes being how much higher the limits on federal borrowing will be allowed to go.

According to Reuters, Treasury chief Timothy Geithner sent Senate Majority Leader Harry Reid a letter saying, “It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

The Democrats almost certainly have the votes to move the cap higher, but they are giving the Republicans another chance to make the case that borrowing is out of control.

IRS receipts are still running well under the numbers put into the Budget for the current fiscal year. Businesses are not making profits at projected levels and high unemployment is cutting into payments from individuals. Even if the Administration sticks to its spending plans, the rising deficit will have to be funded by higher taxes or greater sale of national debt in the global capital markets. The largest buyer of US debt, China, has already expressed significant reservations about the capacity of America to handle its increasing need for capital without moving up interest rates and hurting its ability to handle its debt coverage.

The recession seems to be coming to the end, but high unemployment could be a negative factor in IRS collections for years.The current request to raise the debt ceiling won’t be the last.

Douglas A. McIntyre

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Jim Sinclair’s Commentary

Here is another view of Friday’s great employment numbers with links.

State unemployment rates continue to climb
August 9, 1:40 PM
Melissa Newby

The most recent numbers from the Bureau of Labor Statistics continue to paint a bleak picture for unemployment rates. According to the most recent unemployment rate press release, unemployment rates rose in 38 states. Seven states saw their unemployment rates stay steady and 5 states were lucky enough to show a decrease.

A still faltering economy leaves families struggling to make ends meet and pinching pennies however they can, from saving money on groceries and meals to finding discounts and deals on family vacations.

Some area seem especially hard hit. Ohio’s unemployment rate has nearly doubled since January 2008. Pennsylvania unemployment numbers have also risen sharply, affecting rural Pennsylvania the hardest.

How does your state rank?

Alaska – 9.5%
Arkansas – 8.4%
California – 11.6%
Colorado – 7.6%
Connecticut – 8.0%
Delaware – 8.4%
District of Columbia – 10.9%
Florida – 10.6%
Hawaii – 7.4%
Idaho – 8.4%
Indiana 10.7%
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Jim Sinclair’s Commentary

Stay the course. The pot is still boiling.

Social Security and the upcoming entitlement crisis
August 9, 2:00 PM
Michael Moore

Social Security provides benefits to roughly 60 million beneficiaries. Most people think of Social Security as a government retirement program, but there are many different facets to the complex social entitlement. The problem with Social Security is the looming bankruptcy of the entire program that will happen in thirty four years if changes aren’t made. Senior citizens depend on the monthly annuity they receive from the government as their sole income, or as a supplement to a pension or investments. Up until this point, the revenue that Social Security receives every year has outpaced the expenditures paid out annually. The Congressional Budget Office projects that as baby boomers march towards retirement, by the end of the decade, Social Security outlays will exceed revenues.

In a report entitled, CBO’s Long-Term Projections for Social Security: 2009 Update www.cbo.gov/doc.cfm, the non-partisan CBO examines the financial outlook of Social Security to the year 2083. Clearly, you don’t have to look that far into the future to realize that a significant problem exists with the funding of the program. In fact, it only takes until the year 2043 before the funds in the program will be exhausted. The CBO report states, “Thus, if the law remains unchanged, CBO projects that thirty four years from now, the Social Security Administration (SSA) will not have the legal authority to pay full benefits.”

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Jim Sinclair’s Commentary

This is the subject of the book "Boom: Visions and Insights For Creating Wealth in the 21st Century" written by myself and Frank Vogl.

Financial crisis could hasten wealth shift from West to East
10 Aug 2009, 0113 hrs IST, George Cherian, ET Now

The credit crisis may have forced Citigroup’s former chairman & CEO, Charles “Chuck” Prince, to step down from the top job at what was once the world’s largest bank by market capitalisation, but he argues that the collective belief of the financial system was that the markets were still safe just before the subprime mortgage- fuelled credit crisis brought all big banks down on their knees.

In an exclusive interview with ET NOW’s correspondent, Prince says that the new regulatory structure for banks could be very different from the past and that the scale of consolidation in the US financial system will depend on how deep the current recession will be.

Would you, with any sort of certainty, say that the worst is behind us?
Well, if your question is ‘with certainty’, then the answer is no. I don’t think that in these times with what we have seen over the past couple of years, anyone can speak with certainty about anything. But if I had to just look at the US banking system, no one can, with any certainty, say that the worst is behind us.

There is talk about credit card defaults and even prime mortgage defaults in the US. Do you believe that’s going to be a big issue, going forward?

I think that in the US, we are in the middle of a consumer-led recession. And I think that there are historical precedences for that, so that it can be mapped out a little easier than the liquidity crisis we saw in capital markets starting in 2007. I think that defaults on credit card receivables and better mortgages will track unemployment.

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Jim Sinclair’s Commentary

We old coots pose no problem. The new health bill will cull us.

A special report on aging populations
A slow-burning fuse
Jun 25th 2009

Age is creeping up on the world, and any moment now it will begin to show. The consequences will be scary, says Barbara Beck (interviewed here)

STOP thinking for a moment about deep recession, trillion-dollar rescue packages and mounting job losses. Instead, contemplate the prospect of slow growth and low productivity, rising public spending and labour shortages. These are the problems of ageing populations, and if they sound comparatively mild, think again. When the IMF earlier this month calculated the impact of the recent financial crisis, it found that the costs will indeed be huge: the fiscal balances of the G20 advanced countries are likely to deteriorate by eight percentage points of GDP in 2008-09. But the IMF also noted that in the longer term these costs will be dwarfed by age-related spending. Looking ahead to the period between now and 2050, it predicted that “for advanced countries, the fiscal burden of the crisis [will be] about 10% of the ageing-related costs” (see chart 1). The other 90% will be extra spending on pensions, health and long-term care

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Jim Sinclair’s Commentary

Of course there is no consideration for Social Security.

We are eliminating all the coots in the new health bill. No coots equals No social security or pension problems.

You can’t argue with that logic unless you are a coot like me.

Billions for bail outs, but none to save Social Security

Am I the only one who notices that our politicians in Washington can come up with billions of dollars for their pet projects or "bail out" money for car manufacturers, banks, savings and loans or any other companies that they (or their families) have stocks in? And yet they keep telling us Medicare and Social Security are on the way down the drain. If they’d kept their grubby hands out of the Social Security funds years ago, things wouldn’t be so bleak.

How can we keep promising all these countries more money to help save their countries? Just try to find out how much money we spend on foreign aid each year, see how far you get.

I tried over 20 years ago and I did get a list that only covered about 10 countries and the amounts were 5 years old because the bookkeeping wasn’t up to date.

As the kids would say, "Duh."

Please let me know if any of you can get an updated list. Good luck on that one..

Don Belanger
Waterville

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Posted by & filed under In The News.

Dear CIGAs,

When is good economic news is really BAD.

1. When the numbers are skewed from the real.
2. When the numbers are fabrications having little basis.
3. When they are designed hide the real situation.

Friday had all 3!

Unemployment falls, but only because people are giving up.
August 9, 8:28 AM
Mark Vargus

Friday the Bureau of Labor Statistics released the official unemployment numbers. Most of the initial media reports highlighted the reduction of the unemployment rate from 9.5% to 9.4%.

It sounds good, but if you check the official chart the BLS put out and is available at their website the drop is not due to people finding jobs. In fact the BLS admits that 155,000 jobs vanished from the economy in July. In fact the only reason that the unemployment figure went down was that 267,000 people who were being counted as unemployed were declared "not in the active laborforce" and the numbers of official unemployed dropped by that amount. The unemployment numbers the BLS produces basically counts the number of people unemployed and looking for work against the total number of people either looking for work or working. 81 million adults are not counted as in the labor force, and it is this group of "not in labor force" that is increasing.

Some publications did note this. The Washington Post had an article titled: In Jobless Rate Dip, a Partial Picture, where they note that the jobless rate does not show the real picture. Even former Clinton Administration Advisor Robert Reich wrote an article for Salon warning that the statistics should not be taken as a sign of recovery. He notes:

So let’s be grateful that the economy is getting worse more slowly than it was. But don’t be lured into thinking we’re ever going back to where we were. Most of the jobs that have been lost are never coming back. New ones will replace some of them, eventually, but hardly all of them.

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Jim Sinclair’s Commentary

If GM would drive a Tesla electric car they would junk the Volt immediately.

You cannot take a present GM car design and make it an electric car. First you have to make a real electric motor.

The electric Tesla does 0 to 60 MPH in 3.2 seconds!

Is General Motors backing Off Of The Chevrolet Volt Type Plug-In Hybrid?
August 8, 2009

Summary

The new Buick "two mode" hybrid is not an evolution of the Chevrolet Volt power train as this article in Popular Mechanics implies; the Buick (mild) "hybrids rather a step back for GM, and I think, an admission that all is not right with the Chevrolet Volt either in performance and range to be delivered or in marketability.

GM made a misstep listening to Rick Wagoner and Bob Lutz both say that there was no future to the full hybrid exemplified by the outstandingly successful Prius.

Analysis

Although you would think that Popular Mechanic’s writers would be familiar with the various types of hybrid power trains now in actual use or in the planning stage it is obvious from the PM article on the proposed Buick "hybrid’ that the magazine’s writers, fact checkers, and editors do not understand very much about such things at all. Or is it me?

PM has decided that a new model Buick "hybrid" is an extension of the Chevrolet Volt Plug-in Hybrid. Those of you with a memory for BS will remember that the Chevrolet Volt power train went from originally being called a plug-in hybrid, PHEV, which description is supposed to be of a battery only powered electric vehicle that can only be recharged by being plugged in to (supposedly) an ordinary household outlet (110VAC, single phase), to finally being called an extended range PHEV which will carry a small internal combustion engine the purpose of which is NOT to directly power the car through a coupling to the driveshaft or to generate electricity to directly power an electric motor coupled to (or being) the driveshaft, but only to maintain the level of charge in the onboard battery at a sufficient level to allow it to be driven to a charging point. Got that!
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Jim Sinclair’s Commentary

Rewarding the people who did this to us while punishing the police, firefighters, and teachers guarantees the death of a society.

This is totally backwards.

Massive layoffs force teachers to re-evaluate careers
By Andrea Billups
Sunday, August 9, 2009

It’s turning into a long, pink-slip summer for thousands of the nation’s teachers caught in mass layoffs as school districts struggle to control their finances during the deep recession.

While some teachers ousted in the spring have been rehired as school systems find more money, including funds from the current economic stimulus package, other teachers have been forced to move where the work is. Some have even changed careers as what once was a wide-open job market is closing its doors.

The nation’s largest teachers union, the National Education Association, has estimated that about 34,000 teaching jobs will be lost this year.

In Lake Oswego, Ore., first- and second-year teachers faced the luck of the draw as those slated for firing were chosen by lottery in an effort to be fair. The district’s human resources director said in media accounts that the sad process made her stomach hurt.

In South Florida, Broward County schools are facing shrinking enrollment and budget, and announced plans last month to lay off nearly 400 teachers, with 50 or 60 expected to be rehired.

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Jim Sinclair’s Commentary

When you reward non-production (Wall Street) and punish production (teachers, firefighters, police and blue collar workers) you will be lucky to have even a Tent City America left.

Tent City America
The Expiring Economy
By PAUL CRAIG ROBERTS

Tent cities springing up all over America are filling with the homeless unemployed from the worst economy since the 1930s. While Americans live in tents, the Obama government has embarked on a $1 billion crash program to build a mega-embassy in Islamabad, Pakistan, to rival the one the Bush government build in Baghdad, Iraq.

Hard times have now afflicted Americans for so long that even the extension of unemployment benefits from 6 months to 18 months for 24 high unemployment states, and to 46 – 72 weeks in other states, is beginning to run out. By Christmas 1.5 million Americans will have exhausted unemployment benefits while unemployment rolls continue to rise.

Amidst this worsening economic crisis, the House of Representatives just passed a $636 billion “defense” bill.

Who is the United States defending against? Americans have no enemies except those that the US government goes out of its way to create by bombing and invading countries that comprise no threat whatsoever to the US and by encircling others–Russia for example–with threatening military bases.

America’s wars are contrived affairs to serve the money laundering machine: from the taxpayers and money borrowed from foreign creditors to the armaments industry to the political contributions that ensure $636 billion “defense” bills.

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Posted by & filed under In The News.

Dear CIGAs,

Just as in the 70s, central banks are human too. They will be buyers on balance prior to 2011.

"It goes without saying that the time to buy gold and silver is now, while 99% of the world remains oblivious to the inevitable collapse of the current monetary system. Buying a “store of value” with a 5,000 year track-record behind it, using soon-to-be-worthless paper is a bargain at any price."

New Central Bank Sales Agreement Is Very Bullish for Gold
August 07, 2009

Europe’s central banks jointly announced a new sales agreement to govern the gold they annually dump onto the market. They announced a 20% lower quota – down to 400 tons per year – despite the price of gold sitting only a couple of rallies away from a new, nominal record.

The fact that these central banks are significantly reducing their gold sales despite the high price of gold can only be interpreted two ways. First, it could simply signify that these central banks have much less gold to sell, and thus will be steadily reducing their sales no matter how high the price of gold goes.

The alternative interpretation would be that despite the near-record price, Europe’s central banks expect the price of gold to go much higher – and thus don’t want to give away their gold (as was done by U.K. Prime Minister Gordon Brown).

In fact, both interpretations are correct. Even if we take the reported gold reserves of these central banks seriously (despite very good reasons to doubt those claims) Europe’s central banks hold little more than 10,000 tons of gold, with about 40% of that amount held by Germany, alone. At the previous ceiling of 500 tons per year (or 5% of Europe’s total gold holdings) Europe’s central banks would have squandered all their gold reserves in 20 years.

However, with Germany adamant that it won’t sell any of its gold, in reality the previous agreement would have exhausted all of Europe’s available gold – forever – in only about ten years. Even reducing this quota to 400 tons per year only extends the ‘life’ of this game for a couple more years.

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Jim Sinclair’s Commentary

From every viewpoint the reason for celebration on Friday was pure SPIN as a function of MOPE. The scary thing is this Administration is the truest believers in MOPE as the real thing.

Non-Farm Payrolls and Its ‘Statistical Qurks’
Friday, August 7, 2009

When deciding how credible this mornings jobs reports is, you only have to look at one number. According to the Bureau of Labor Statistics, employment in the auto industry went UP by 28,000 last month. Nobody believes this, and I mean nobody, not even the biggest government boot looking financial reporters. Even the mainstream media cautioned that this could be a ‘statistical quirk’, the polite term in the numbers industry for lying. You should assume that finding one ‘statistical quirk’ in a report is similar to finding one roach in your apartment. In both cases, there’s a lot more that you’re not seeing.

The headline number for the report was a loss of 247,000 jobs, which is bad enough as is. July was the 19th consecutive month for job losses. Since the recession has began in December 2007, the government admits that 6.7 million jobs have been lost. Goods-producing industries shed 128,000 jobs, and service-producing industries cut 119,000 jobs, including 44,000 in retail and 38,000 in professional and business services. Unemployment in retail (the largest individual private sector employer) seems to be accelerating. After the ‘robust’ auto industry gains, health care was the biggest job gainer. Government also added about 7 thousand jobs, but this information was left out of the BLS press release even though it is always reported (when information that has always been available suddenly disappears watch out).

According to the government, the unemployment rate declined to 9.4% (actually 16.3% if you include discouraged workers and involuntary temp workers). You may ask how is it possible for there to be a significant job loss and for unemployment to improve at the same time (could it be another ‘statistical quirk’)? It’s simple – 422,000 people ‘conveniently’ left the labor force. Even though the O’bama, Bernanke, and Geithner and the BLS in its press release tell us that the economy is improving, large numbers of people are giving up looking for jobs because they think there is no chance of finding one. Somehow, I don’t think both of these contradictory views are possible. One of them seems to be a lie – pardon me, I meant ‘statistical quirk’.

If you listen carefully to what Obama and Bernanke have been saying for the last several months, you will notice that ‘things are getting less worse’ is the gist of their statements. The Obama litany is: the financial meltdown has ended (which happened during the Bush administration, but he still takes credit for it), the rate of job loss is slowing, and the stock market is doing better. Bernanke also concentrates on the stock market is getting better theme (and I am sure this is not taking place without some government assistance). The recession is indeed getting ‘less worse’, although not as much as the government claims. There is also a huge gaping chasm between getting less worse and getting better. However, the government may be able to solve this problem in the future with bigger ‘statistical quirks’.

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Jim Sinclair’s Commentary

Now that Friday is bank closing day it is expected and ignored by the sheeple.

Regulators close 3 banks in Fla., Ore.; total 72

NEW YORK — Regulators on Friday shut down two banks in Florida and one in Oregon, bringing to 72 the number of federally insured banks to fail this year under the weight of the weak economy and rising loan losses.

The Federal Deposit Insurance Corp. was appointed receiver of the banks: First State Bank, of Sarasota, Fla.; Venice, Fla.-based Community National Bank of Sarasota County, and Community First Bank, of Prineville, Ore.

First State Bank had total assets of $463 million and deposits totaling $387 million. Community National Bank had $97 million in assets and $93 million in deposits. Community First Bank had $209 million in assets and $182 million in deposits.

The FDIC said Stearns Bank, of St. Cloud, Minn., agreed to assume all the deposits of both Florida banks. Stearns Bank also agreed to buy $451 million of First State Bank assets and $94 million of Community National Bank assets.

The nine branches of First State Bank will reopen Monday as Stearns Bank branches, while Community National Bank’s four branches will reopen Saturday.

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Jim Sinclair’s Commentary

Check out this video of Gerald Celente discussing how the bailout bubble is the mother of all bubbles.

Jim Sinclair’s Commentary

Suffering from insomnia? Read the health bill

Click here to read the actual text of the Health Care Reform Act of 2009

Jim Sinclair’s Commentary

China’s next major coup is excellent technology at lower than competitive prices.

China Continues Its Long, Slow Climb to the Skies
August 07, 2009
Brian Schwarz

China has taken another step forward in its mission to build its own commercial airplanes, but industry experts remain skeptical of Beijing’s long-term objective of becoming less dependent on Boeing (BA) and Airbus (EADSY.PK) – made machines.

China’s first domestically-developed regional ARJ21-700 jet successfully made a trial flight of 1,300 kilometers in July. It took the jet about two hours to fly from Shanghai to Xi’an, the capital of northwestern China’s Shaanxi Province, according to the China Economic Review.

The ARJ-21 is short for "Advanced Regional Jet for the 21st Century". The plane is also the first regional jet that China has fully developed on its own. The first ARJ-21 jets are expected to be delivered to Chinese clients late next year. The ARJ21 regional jet is able to carry 70 to 110 passengers andshaping up as China’s equivalent of the A300 from Airbus.

In the 1980s, McDonnell Douglas, which is part of Boeing, made about 30 MD-82 and a couple of MD-90 in China. Some critics claim the ARJ21 is a copy of similar models from Bombardier and Embraer built at the old MD plant in China.

The ARJ21 program is important to Beijing because helps China learn to develop a commercial aircraft to Western standards, to coordinate with many subcontractors, to establish an international marketing operation, and—crucially—to prove that it can support aircraft in service. Parts for the plane are made by 19 foreign manufacturers, including General Electric (GE), Honeywell (HON) and Parker Hannifin (PH).

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Jim Sinclair’s Commentary

Certainly. Isn’t that why you say everything the US wants you to say?

Isn’t that what is happening in Pakistan and is traditional there?

What is leadership for anyway?

Karzai Inc: Has Afghanistan’s leader turned the country into a family business?
With less than two weeks to go until the national elections, the questions hanging over the Afghan president and his family are refusing to go away.
By Alex Spillius in Washington and Ben Farmer in Kabul
Published: 7:00PM BST 07 Aug 2009

Cabinet ministers in Afghanistan were recently asked to make an "asset declaration". The president, Hamid Karzai, said that he possessed only $10,000 in cash and some jewellery. His claim prompted loud laughter among Westerners in Kabul. But the diplomatic humour masked deep concerns that Afghanistan’s leader is turning the country into a family enterprise – with a favoured few being allowed to enrich themselves to the extent that it is alienating the public and helping Taliban insurgents to garner sympathy.

As the country prepares to stage the first Afghan-led presidential election on August 20, the questions hanging over the president and his family have taken on an extra significance.

The combined wealth of the Karzais runs into many millions of dollars, and it has been built mostly since Hamid Karzai took over as president in 2001 after the Taliban’s overthrow. That was when his brothers returned from the United States, the country to which his mother and five of his siblings had fled after the Soviet Invasion in 1979.

Now, Mahmoud Karzai, 54, the second oldest of the president’s six brothers, is one of the country’s richest men, thanks to newly acquired interests in mines, a cement factory, property development, and an "exclusive sales agreement" with Toyota. Until 2001 he was a partner in a string of modest, family-owned restaurants in Baltimore, San Francisco and Boston.

The president’s younger brother, Ahmed Wali Karzai, 48, has faced accusations by Western diplomats – which he firmly denies – of being a major force in the heroin trade valued at $3.4 billion by the United Nations last year. He has also built up substantial land holdings, transportation and private security business interests in Kandahar, the country’s second city.

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Jim Sinclair’s Commentary

Come on silly, what do you think Federal Funds are for anyway?

Federal funds enriching middlemen, not homeowners
By Daniel Wagner
Associated Press

WASHINGTON – Billions of dollars the federal government is spending to help financially pressed homeowners avert foreclosure are passing through – and enriching – companies accused of preying on the people they’re supposed to help, an Associated Press investigation found

The companies, known as mortgage servicers, are middlemen who collect monthly payments from homeowners and funnel the money to the banks or investors who hold the loans. As the only link between borrowers and lenders, they’re in the best position to rework the terms of loans under the government’s $50 billion mortgage-modification program.

But the AP found that at least 30 servicers had been accused in lawsuits in recent years of harassing borrowers, imposing illegal fees, and charging for unnecessary insurance policies.

Most recently, the companies also have been criticized for not helping homeowners quickly enough, delays that lead to more fees for homeowners and profits for servicers.

The government says it has no choice but to work with the servicers because they are the only link between borrowers and the investors who indirectly own their mortgages through securities.

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Jim Sinclair’s Commentary

Friday’s market was so rigged.

Over 30,000 firms in danger of failing by end of 2010
Analysts predict that over 30,000 companies could go into liquidation before the end of next year, after official figures showed that company failures have reached their highest ever level.
By Jonathan Liew 
Published: 5:57PM BST 07 Aug 2009

There were 5,055 company failures in England and Wales in the second quarter of 2009 on a seasonally-adjusted basis, the Insolvency Service said, which equates to an increase of 2.9pc compared with the previous quarter, and a 39.1pc year-on-year rise.

An additional 1,027 companies went into administration in the period, a rise of 9.5pc year-on-year, and the number of companies going into receivership almost doubled from 177 to 345.

In all, around one in 120 active companies went into liquidation in the twelve months to June.

The consensus amongst analysts was that the outlook was likely to worsen in the short-term, even if the economy recovers.

Andrew MacCallum, managing director of Alvarez & Marsal, said: "More than 5,000 companies may have gone into liquidation in the last quarter, but we can expect to see that figure exceeded in every quarter until at least the end of 2010.

"Credit is still tight and many businesses are loaded with debt that they cannot service.

Liz Bingham of Ernst & Young said: "In the last recession the insolvency peak lagged the economic trough by over a year.

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Jim Sinclair’s Commentary

CIGA Green Hornet says:

"Here is the ultimate solution to the pension problem. Benefits to start of 112 year old, applied retroactively. No benefits assignable. We can put that as a rider on the US Health bill guaranteed to cull the gene pool."

U.K. State-Pension Retirement Age May Exceed 68, BBC Reports
By Simon Thiel

Aug. 8 (Bloomberg) — The U.K. state-pension retirement age may rise beyond a planned increase to 68 as Britons live longer and save less than in the past, the British Broadcasting Corporation reported.

David Norgrove, chairman of the Pensions Regulator, said recent government legislation will raise the state retirement age progressively to 68, the BBC said. “I think it will end up higher than that,” he told the BBC.

Millions of people will “undoubtedly” have to wait longer in the future to draw a state pension, the BBC reported, citing Norgrove.

To contact the reporter on this story: Simon Thiel in London atsthiel1@bloomberg.net.

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Jim Sinclair’s Commentary

FASB’s gift to the criminal world .

Looking behind Freddie’s numbers
August 8th, 2009

Late yesterday Freddie Mac surprised markets by reporting a profit and by not requesting additional bailout money from Treasury.  Before we celebrate, however, let’s consider a few revealing footnotes from the company’s quarterly filing.  But first, some key financial ratios.

As you can see, non-performing assets are still rising quickly.  (Click table to enlarge in new window)

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As for the filing footnotes, we see that Freddie’s profit line got a big assist from FASB’s new fair value accounting rules.  This shifted a large chunk of the company’s losses from the net profit line to the “accumulated other comprehensive income” line, artificially inflating shareholder equity.  So-called “non-credit related” impairments were recognized in earnings during Q1, but not in Q2:

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Jim Sinclair’s Commentary

These guys think bling is all gold is about. This nullifies the gold bear’s gold price hope that the IMF would injure the gold price.

World Gold Council welcomes renewal of the Central Bank Gold Agreement, reaffirming the importance of gold as a key element of global monetary reserves
Posted on August 8th, 2009

Aram Shishmanian, Chief Executive of WGC said on Friday: “The announcement is a clear endorsement of gold’s role in today’s global economic and financial architecture and a reflection of the success of the previous Central Bank Gold Agreements. The agreement to limit the sale of gold over the five year period to 2,000 t demonstrates that, at a time of continued market volatility and inflationary fears, gold’s unique investment qualities provide the necessary hedge and protection that central banks are seeking. The reduction in the annual ceiling on sales from 500 t in the current agreement to 400 t/y starting on September 27, 2009, reflects an acknowledgment of the fact that the central banks’ appetite for sales is diminishing. This is evident in the way that total sales under CBGA2 look set to fall well short of the ceiling the signatories set for themselves in 2004.”
The decision to allow room under the agreed ceiling to incorporate the IMF’s proposed sale of 403 t demonstrates a willingness to help the IMF comply with the recommendations of the Crockett Report that IMF sales should represent no net addition to the quantity of gold the market is expecting from the official sector.

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Jim Sinclair’s Commentary

Click here to see Jon Stewart from The Daily Show taking on Goldman Sachs…

 

Jim Sinclair’s Commentary

Friday’s dollar party is nonsense.

Meltdown 101: Unemployment by the Numbers
By CHRISTOPHER S. RUGABER (AP)

WASHINGTON — Employers are laying off fewer workers, the government reported Friday, but widespread cuts are still happening — only about 30 percent of industries are adding jobs or holding steady.

That’s up from 20 percent in March, at the depth of the recession, but it still means that 70 percent of the 271 industries tracked by the Labor Department are cutting jobs, according to the department’s July employment report.

"We’re still a long way from where we would be in an expansion," said Mark Vitner, senior economist at Wells Fargo Securities. "Job losses continue to be extremely broad-based."

For example, in July 2007, five months before the recession began, 50.7 percent of industries were hiring, or at least not laying people off, the department said.

Still, most of the news in the monthly report showed improvement: The unemployment rate dropped slightly to 9.4 percent, from 9.5 percent in June. And companies cut 247,000 jobs, a large number but fewer than the average of 645,000 a month from November to April.

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Jim Sinclair’s Commentary

The airwaves are still pumping out the hogwash skewed federal numbers.

Guess What? Unemployment’s Really at 16.3 Percent
John Lott
August 07, 2009

How is it possible for the unemployment rate to essentially remain unchanged when 247,000 jobs have been lost? Because the number of people who gave up and stopped looking for work rose dramatically.

The announcement today that the unemployment rate declined slightly to 9.4 percent in July while only 247,000 additional jobs were lost has been greeted as good news.  The change in the unemployment rate puts the rate at what it was in May. Yet, even a rough look at the numbers indicates that the true unemployment rate has been getting significantly worse over the last few months.

How is it possible for the unemployment rate to essentially remain unchanged when 247,000 jobs have been lost?  The reason is simple — the number of people who stopped looking for work rose dramatically.  Six hundred thirty-seven thousand additional people no longer consider themselves looking for work. This is by far the largest drop in the number of people who consider themselves in the labor force during the last year. — It is almost twice the 358,000 increase in the people who left the labor force during June and almost four times the average monthly increase of 167,333 over the last year.  Jobs are sufficiently scarce and the prospects of people finding them at wages that they are willing to work for so low that many individuals don’t think that it is worth their time to even look for a job.

Part of the drop in unemployment is also due to the fact that some people are running out of unemployment benefits and taking part-time jobs.  There is usually a big increase in the rate that people find jobs during the last few weeks that they have unemployment benefits.  In July 102,670 people saw their unemployment benefits run out. That number rose to 141,538 in August and is expected to soar to 486,049 in September.  It will keep on rising each month hitting 1.5 million in just December alone.  This past Sunday on ABC’s "This Week" Treasury Secretary Tim Geithner only promised "to look very carefully at [these lost benefits] as we get closer to the end of this year." Larry Summers, President Obama’s chief economic advisor, was similarly noncommittal when he was interviewed that same day on CBS’s "Face the Nation."

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Jim Sinclair’s Commentary

91 days to go for the doomed dollar

‘Lost Couple of Decades’ Looming for U.S. Economy:  
By David Wilson

Aug. 7 (Bloomberg) — The U.S. economy may be just as sluggish during the next 20 years as Japan’s economy was in the last 20, according to Comstock Partners, a money manager founded and run by Charles Minter.

Stimulus programs and a surging money supply aren’t likely to “solve a problem of excess debt generation that resulted from greed and living way beyond our means,” the firm wrote yesterday in an unsigned report on its Web site. “We could wind up with a lost couple of decades.”

The CHART OF THE DAY shows U.S. total debt and gross domestic product since 1952, along with the ratio between them, based on data compiled by Bloomberg. The ratio rose in the first quarter to 372 percent even as household borrowing dropped for a second straight quarter, an unprecedented streak.

The U.S. is headed for “a deleveraging period” in which the amount of so-called private debt, including consumer borrowing, collapses as government borrowing explodes, Comstock wrote.

Assuming that private borrowers pay down debt at the same pace as they did in Japan after its 1980s economic bubble burst, the savings rate will climb to about 10 percent in 2018, the report said. The estimate was made in a study by the Federal Reserve Bank of San Francisco that Comstock cited. It’s more than double the 4.6 percent rate for June.

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Jim Sinclair’s Commentary

Go China!

Iron ore price breaks US$100/t to hit new high
By Commodities Now, August 8th, 2009 at 12:28 pm

The Steel Index daily iron ore price reference price reached US$104.1 per dry metric tonne today. The price, published daily for 62% Fe content fines delivered China, and has today surged upward, increasing by 5.0% on yesterday and 9.2% over the week.

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Jim Sinclair’s Commentary

The headline should say "This Should Keep You Up At Night."

Warning: AIG collapse could trigger new crisis!!
BY DANIEL AT 7 AUGUST, 2009, 10:21 PM

AIG, once world largest insurance firm whose derivatives unit still has more than $1 trillion of exposures that need to be unwound while keeping losses under control.

Saying “derivatives are dangerous,” Warren Buffett

“Derivatives at the heart of the crisis, catastrophic losses are inevitable, financial system headed for oblivion, the new world disorder, EU doomed, Credit Default Swaps at the heart of the problem, Plunge Protection Team history, coverups for globalization failures, Bloodbath for the Yen…

The heart of the current crisis is the quadrillion plus derivative market. Roughly half of these derivatives are listed on exchanges, but the other half are on the totally unregulated, totally opaque, poorly documented and mostly naked (no reserves or collateral given to secure performance) OTC derivatives market.

….

It is only fitting that the credit-default swaps lie at the heart of the problem, which the fraudster banks now face. When you look at what has been done by these reprobates in the past, this is a most fitting fate for them. First, they had President Reagan pass an Executive Order in 1988 forming the President’s Working Group on Financial Markets so they could manipulate markets 24/7 with the PPT. That was forced by the 1987 Stock Market Crash, an event orchestrated by the Illuminati to convince everyone that we had to have an interventional team to stop such extreme market gyrations.”

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Posted by & filed under In The News.

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

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Dear CIGAs,

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

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

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Jim Sinclair’s Commentary

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

The dollar rally on fake statistics has NO legs.

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

You get the idea.

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

A step in the right direction. Now look NORTH.

SEC says brokers violated ‘naked’ short sale rule
By CHRISTOPHER S. RUGABER (AP) – 1 day ago

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

California Won’t Accept Its Own IOUs
By MARIA DINZEO

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

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

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

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

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

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Jim Sinclair’s Commentary

Here is a must watch video:

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

 

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

That is if they sell any at all.

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

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

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

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

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

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

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Jim Sinclair’s Commentary

Wall Street celebrates SKEWED figures while Detroit starves.

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

These guys do not deserve to be toads.

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

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

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

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

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

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

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Jim Sinclair’s Commentary

We can’t call our French brothers sheeple.

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

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

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

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

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

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

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