Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

You have no idea how critical this is.

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

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

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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Jim Sinclair’s Commentary

Let’s raise this week’s bank failures to five.
Information for Temecula Valley Bank, Temecula, CA
http://www.fdic.gov/bank/individual/failed/temecula.html

Information for Vineyard Bank, National Association, Rancho Cucamonga, CA
http://www.fdic.gov/bank/individual/failed/vineyard.html

Information for BANKFIRST, Sioux Falls, SD
http://www.fdic.gov/bank/individual/failed/bankfirst.html

Information for First Piedmont Bank, Winder, GA
http://www.fdic.gov/bank/individual/failed/piedmont.html

Information for Bank of Wyoming, Thermopolis, WY
http://www.fdic.gov/bank/individual/failed/wyoming.html

Jim Sinclair’s Commentary

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

It is starting.

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

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

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

Let me give it a shot.

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

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

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

Then, there are a few other reasons:

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

You think they give a flying you know what?

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

Simultaneous is a sign of al Qaida;

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

Too Little, Too Late For Derivatives Oversight

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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Posted by & filed under In The News.

Dear CIGAs,

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

AIG’s European Derivatives May Take Decades to Expire

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

You know this is coming!

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

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

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

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

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

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Jim Sinclair’s Commentary

How is Israel going to stand this?

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

Developing world calls for ‘new world order’

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

City suspends payment of contracts
Friday, July 17, 2009

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

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

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

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

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

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

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Posted by & filed under In The News.

Sinclair6 v2

Dear CIGAs,

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

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

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

Jim Sinclair’s Commentary

Here is a major economic alert.

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

FOMC sees both growth and unemployment.

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

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Jim Sinclair’s Commentary

You really think this bureaucracy is going to work well?

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Jim Sinclair’s Commentary

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

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

Oil sands catches break from recession
Shawn McCarthy

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

Foreclosures up despite moratorium and legislative efforts
By MarketWatch

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

China grows faster amid worries

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

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

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

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

‘Numerous challenges’

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

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Jim Sinclair’s Commentary

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

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

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

COULD ISRAEL LAUNCH A NUCLEAR STRIKE AGAINST IRAN?

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

Are GLD and SLV Legitimate Investment Vehicles?
July 16,

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

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

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

Conflicts of Interest

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

Politicians really do come cheap.

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

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

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

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

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Posted by & filed under In The News.

Dear CIGAs,

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

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

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

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

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

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

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

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

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

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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Jim Sinclair’s Commentary

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

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

This is a war the Fed will lose.

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

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

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

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Jim Sinclair’s Commentary

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

BofA-Merrill tale: Paulson’s turn

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

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

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

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

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

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

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Jim Sinclair’s Commentary

Here are a few comments from Joberg:

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

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

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

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

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

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

 

Jim Sinclair’s Commentary

You are in China or you are nowhere!

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

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

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

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

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

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

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Jim Sinclair’s Commentary

More gossip from Joberg:

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

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

Think about this:

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

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

 

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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Jim Sinclair’s Commentary

World confidence falls as unemployment grows.

116 days to go

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

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

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

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

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

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Jim Sinclair’s Commentary

A by subscription service you should subscribe to:

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

– June CPI-U Annual Deflation of 1.4% versus

– SGS-Alternate Estimate of 6.1% Inflation

– Quarterly Production and Real Retail Sales Contractions Confirm Ongoing Recession

http://www.shadowstats.com/

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

RENO, NV –

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

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

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

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

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

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Jim Sinclair’s Commentary

Here we go with the Green Shoots again.

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

From the article:

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

U.S. Tightens Its Derivatives Vise
By LIZ RAPPAPORT, CARRICK MOLLENKAMP and SERENA NG

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

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

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

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

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

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Jim Sinclair’s Commentary

This is dollar positive? No it is not.

Trend-wise Gold is the dollar in the inverse.

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

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

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

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

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

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

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Jim Sinclair’s Commentary

More bad news for the US dollar.

Gulf states need dollar hedge
(Excerpts From Article)

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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Jim Sinclair’s Commentary

You think a sociopath cares? They don’t.

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

What is wrong with this picture?

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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Jim Sinclair’s Commentary

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

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Posted by & filed under In The News.

Dear CIGAs,

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

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

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

New York Times Swaps May Double, Analyst Report Says

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

New York lawyer sentenced to 20 years for financial fraud

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

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

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

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

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

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Jim Sinclair’s Commentary

Yes there is something to believe in – GOLD!

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

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

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

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Jim Sinclair’s Commentary

Prepare yourself for more of this.

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

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

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

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Posted by & filed under In The News.

Dear CIGAs,

The following is a link to my interview on the Summit Business News Channel. Click it to view the video.

http://www.summit.co.za/video/face2face/20090710

Views from Joberg

1. Bloomberg says that Bernanke may give his blueprint for how to withdraw the enormous monetary stimulus injected into the world economy.

Since there is NO practical means to accomplish this, I assume Bernanke’s answer will be given in Kswahili.

2. Geithner says the US government has the means to address the CIT potential collapse.

Which is a greater threat to the US economy, the bankruptcy of CIT or California?

The answer is California

3. Which is worse for the dollar, Libor over 4% or under 1%?

The answer to that is under 1% because it indicates extremely low dollar demand.

 

Jim Sinclair’s Commentary

As with most media stories, these are not exactly the facts.

Nationalization demands come from the ANC junior group of younger members.

Powerful ANC ministers refute these demands as the RSA government owns the underlying properties, leasing them to producers. You cannot nationalize yourself.

It however makes Tanzania an even more interesting place for big RSA money.

The USA is a very bad example on this subject. Has the US not just nationalized the huge automotive and financial industry? Has the US not proposed cancelling patented mineral claims and instituting large royalty participations on producing properties?

The answer is yes and yes.

Will South Africa reclaim its mines?
Recent calls to nationalise South Africa’s mines are economically illiterate – but may gather popular support
Monday 13 July 2009 13.30 BST

Nationalisation of the mines is a cry that goes echoing down South Africa’s history. For this country is built on its mines – even today, they account for a good half of exports, let alone foreign exchange, for this is perhaps the most fabulously endowed nation on the planet. Gold, diamonds, platinum, copper, coal, rhodium – you name it, South Africa’s got it.

Before 1948, the Afrikaner nationalists swore they would nationalise the mines. But once they won power, the demand dropped away. For the fact is that the mining companies have dug the world’s deepest and most sophisticated mines here. Their investment is somewhere between R1.2trn and R2trn (£100-150bn). Their expertise in engineering, organisation, marketing and the profitable management of these assets through a hundred years of wars, depressions and wild commodity price swings is awesome.

Anyone who thinks of taking all this over can be forgiven for baulking. For a start, where would one find the money to buy them? Anything less than full compensation would start a panic among the foreign investors on whom South Africa depends. And where would one find the necessary human skills to run and manage them? And the prodigious sums required to sink new shafts?

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Jim Sinclair’s Commentary

China is proud of who they are and what they have accomplished. They would prefer better treatment as the major bankers for the US consumer.

Every time some idiot talking head bashes China or accuses them of wrong doing with their currency management by a US Treasury official they become more righteously upset.

In fact, the Chinese are, simply put, "totally pissed off."

That makes me think their next move is going to shock people.

China takes steps to break sway of the mighty greenback
11:45AM Monday Jul 13, 2009
By Stephen King

Reports of the US dollar’s death have, so far, been greatly exaggerated. It is still, by far, the most liquid currency in the world. The US has the deepest and most liquid capital markets in the world, despite all its sub-prime and banking difficulties. The dollar is used on one side of the vast majority of currency trades.

If someone wants to swap out of Brazilian reals into, say, Korean won, it’s typically a two-step process n from reals into dollars and then from dollars into won. Central banks in the emerging world mostly hold their – in some cases, huge – foreign exchange reserves in the form of US dollars. It is, therefore, the international currency of choice. It remains the world’s reserve currency.

For the US, this makes life very easy. It can issue huge amounts of dollars knowing that people on the other side of the world will happily stash them away for a rainy day. That means the US can raise funds more cheaply in international capital markets than others can. US trade can be cheaply financed because the US doesn’t often have to pay of currency conversion costs. And it can happily run a large balance of payments current account deficit year-in, year-out, without any significant costs to the American people.

For the rest of the world, the dollar’s reserve currency status is a mixed blessing. While it’s useful for other countries to have access to an international medium of exchange and store of value, the dollar is ultimately under American control.

Should there be a conflict between the interests of American voters and foreign creditors, the foreign creditors will probably lose out. Today, those creditors – many of which are emerging market governments and central banks – have built up trillions of dollars of holdings of US assets. Is their money safe? If not, what should they do about it?

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Jim Sinclair’s Commentary

How comfortable are you with your "Honest Abe" gold certificates?

In this world the only depository you can have faith in is the "Vault of You!"

Missing gold could have left mint in liquid form
Experts speculate on how $15M in bullion slipped past elaborate security
BY IAN MACLEOD, THE OTTAWA CITIZENJULY 13, 2009 6:29 AM

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OTTAWA — Was gold worth $15 million stolen from the Royal Canadian Mint dissolved in liquid, rendering it invisible to metal detectors?

Two gold-refining industry sources say gold chloride dissolved in an acid solution can be unrecognizable to metal detectors like those guarding the mint’s high-security Sussex Drive refinery.

“It could be taken out in that form … in a liquid chemical form,” says one U.S. refining executive.

A similar method was used to hide two Nobel laureates’ gold medals from the Nazis when Germany occupied Denmark in 1940.

The mint dissolves gold in hydrochloric acid as part of the process to refine the precious metal to 99.99- and 99.999-per-cent purity, the finest gold in the world. The process electro-chemically disintegrates the metal into imperceptible particles of gold chloride suspended in the black-coloured acid solution.

“Being a high security facility, the mint does not discuss its various security procedures and protocols,” says Christine Aquino, mint spokeswoman. “But I can confirm that we have methods to detect such a liquid.”

The alternative, spiriting even miniscule quantities of solid gold from one of Ottawa’s most secure buildings, seems all but impossible, save for a Hollywood gold-heist plot, which seems almost as improbable.

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Jim Sinclair’s Commentary

Here is a surprise for the so-called US old China hands, and F-TV talking heads that love to bash China.

BYD the first half of sales by 176 percent year-on-year,

The first half of 2009, the shadow of the financial crisis has not been fully dispersed, the Chinese automobile market is extremely strong and has set a record in history. Statistics show that during the first half of 2009, domestic car production and sales will exceed six million, the data in 2008 year-on-year during the first half of 3.609 million representing an increase of 66.25%. Cutting-edge local Shenzhen BYD Automobile Brand for five consecutive years in the high growth of 100 percent, based on sales during the first half of 2009 once again soaring sales grow 176 percent year-on-year, higher than the industry growth rate of nearly 110% , deserved to become the first half of the fastest growing automotive brand.

Earlier this year, drawn up in 2009 BYD 400,000 sales plan sales goal, more than doubled in 2008. To the target for attack, the first half of 2009, BYD Automotive for the introduction of high-quality products and services, full use of the existing production capacity, speeding up the dealer network and improve the marketing strategy of innovation, BYD car is moving The first echelon of the Chinese market steadily towards the goal of competitors.

The first half of 2009, BYD Automobile homogeneous models were all made, and the completion of sales of 176,795 for the whole year target of 400,000 has laid a solid foundation. Among them, the performance of BYD F3 model Gongxun stability, breaking sales of 20,000 in March, they continue to sit tight in the 20,000 Club. In addition, high quality car F0 and F6 in the first half of this year car sales are also way higher, the performance is outstanding, F6 sell hundreds of cars from one month into the 5000 sales mark, selling high-class cars into the first camp, a breakthrough the ceiling of own brands. F0 steady sales growth, sales in May exceeded 7000, and gradually become F3, F6, as among the best in the sub-market sales model.

Just past May, overall sales of BYD as high as 32,633, beyond the success of FAW Toyota, Chery Automobile, Chang’an Ford and so on, to become the top ten cars sold in the seventh level. In addition, according to the National car license data show that in May the Department of BYD car models on the whole a total of 28,017 licenses beyond Chery Automobile, to become its own brand sales champion enterprises.

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Jim Sinclair’s Commentary

You really believe it will ever be paid back in many cases?

No, they go from rank speculation to rank business conditions.

Banks will ‘take years’ to pay back taxpayers’ money
Hugo Duncan
13.07.09

UK Financial Investments (UKFI), the quango in control of the Government’s stakes in British banks, today warned that it will take years for taxpayers to get their money back.

It said there was no quick fix for selling state holdings in Lloyds Banking Group and Royal Bank of Scotland (RBS), and indicated it would be a complicated and drawn out process involving any number of financial instruments.

UKFI chief executive John Kingman said that every UK household will have more than £3000 invested in shares in RBS and Lloyds. He pledged to maximise the value of those investments.

"UKFI will not interfere in the day-to-day running of the banks, but will continue to engage strongly on strategic issues which could impact value including board membership, risk management and remuneration policy," Kingman added.

The taxpayer took a 43% stake in Lloyds at an average of 121p a share and a 70% stake in RBS at an average of 51p a share to save the banks from collapse last year.

UKFI was set up by the Treasury to look after the stakes and sell at a profit – with the Government hoping the process will begin before it calls a General Election.

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Jim Sinclair’s Commentary

The Formula moves East.

A financial downward spiral without intervention at the cause point fails. That failure to intervene properly always results in the downward spiral accelerating as it attacks the real economy, therein giving birth to new momentum.

I could have prevented this and/or fixed it completely in a heartbeat before Lehman was left to fall. This is why I want you to either download these lessons or Purchase a Compendium.

There is knowledge contained within that took me more than 50 years and an apprenticeship to learn.

Between the two Compendiums there are roughly 10,000 articles. It is traditional practical knowledge of economic and markets.

Someday, somebody may actually want it and apply it.

A waste of experience offered is life wasted.

AP: 11% Drop in Texas Sales Tax Revenue
Bryan Rupp
Story Created: Jul 12, 2009 at 3:14 PM CDT

Sobering numbers on Texas’ current economic situation were released on Saturday, July 11, 2009. The Associated Press reported the state’s most recent monthly sales tax revenues dropped more than 11 percent from 2008, the latest sign that the recession is now seeping into Texas.

The $1.5 billion collected in June 2009, which reflected sales in May 2009, is off from the $1.7 billion collected in the same month in 2008.

One state budget official estimated that sales tax collections are $100 million below projections and could fall $550 million short when the fiscal year ends in September 20

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Jim Sinclair’s Commentary

How long have I been telling you this is the NA one that impacts the social order of Canada and the USA big time!

Pensions experts predict ‘horrific news’ on funds
Calls for the trustee system to be overhauled, as the retirement funds crisis deepens and Royal Mail mulls changes to its pensions scheme.
By Jonathan Sibun
Published: 6:35PM BST 12 Jul 2009

For Adam Crozier, things could be about to get a lot worse. The chief executive of Royal Mail saw 10,000 of his workers strike last week, but Britain’s top postie knows that could be just the beginning.

While postal workers are up in arms about job cuts and working conditions, their anger could soon pale into insignificance under the cloud of a far greater threat. At stake for many of them is their future financial security. The postal giant is considering whether to close the company’s retirement scheme to existing members, forcing them to join a new pension pot with less lucrative benefits.

Pension industry insiders believe such a move could spark widespread strikes at Royal Mail. More worrying for British industry, trouble will not be reserved to the postal service. Over the next few months companies are expected to highlight the scale of Britain’s pension crisis by revealing deficits on an unprecedented scale. Strikes and corporate failures could follow.

Company executives will be in the firing line, but many will choose to point the finger elsewhere. For Jane Newell, the chairman of Royal Mail’s pension trustees, and the 100,000 or so other trustees around the country, life could get very tough. Traditionally the silent power brokers of corporate Britain, pension trustees are about to find themselves dragged kicking and screaming into the limelight.

"Over the next few months we are going to see some horrific news on pension funds," says Ros Altmann, a former pensions adviser to the Government. "Around half the pension funds out there have a three-year valuation cycle that ended in March 2009. Trustees will face some awful deficit challenges as the new valuations come to light."

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Jim Sinclair’s Commentary

And now as I suggested, a market can begin. Let say the NASDAQ symbol is FLUSH!

California IOUs to be shunned by big banks after today
Bank of America and other big institutions plan to enforce a cutoff, making it harder to cash vouchers. To protect IOU holders from third-party speculators, the SEC defines the vouchers as securities.
By Tiffany Hsu
July 10, 2009

People holding California state IOUs — including taxpayers, vendors and local governments — will soon have a tougher time redeeming them, as most major banks are standing firm on a vow not to cash the vouchers after today.

Many credit unions say they will continue to redeem the IOUs for customers. But without mainstream banks as an option, recipients of the IOUs who need cash immediately could be tempted to sell them at a discount to third-party speculators, including ones popping up on the Internet.

Responding to that potential, the Securities and Exchange Commission determined Thursday that the IOUs are securities under federal law, which will generally require anyone trading them for profit to be a registered securities dealer.

The move is aimed at limiting the risk that IOU recipients could be defrauded by individuals or companies that offer to buy the scrip.

"The SEC’s action has the potential to, at least a bit, reduce the shark factor and potential for taxpayers to get defrauded," said Tom Dresslar, spokesman for State Treasurer Bill Lockyer.

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Jim Sinclair’s Commentary

The rescue of General Motors is a classic Wall Street solution. Its main accomplishments so far are:

1. Paper Shuffling.
2. Worker benefits elimination.
3. Worker elimination.
4. Factory shutdowns.
5. Debt repudiation.
6. Litigation proofing.
7. Union subjugation.
8, Introduction of the Volt, a profit-less, purpose-less entity. It is ass backwards. You do not make a regular car an electric car by sticking old questionable technology into a standard body. You call the Tesla Car Company and buy it.

Now let’s see if it can sell cars to anyone other than the US government to hold up demand.

Maybe GM’s first production run, after coming out of bankruptcy, will only be Black Suburbans.

Congressman: Michigan could hit 20% jobless thanks to Obama
@ 2:19 pm by Michael O’Brien
July 10, 2009

Michigan’s unemployment rate could hit as high as 20 percent with the Obama administrationto blame, one Michigan congressman warned Friday.

Rep. Thaddeus McCotter (R-Mich.) said that Michigan’s unemployment — already the highest in the country at 14.1 percent — could go even higher as General Motors and Chrysler continue to shed jobs after their government-financed bankruptcies.

"Sadly, we’ve seen estimates, because of the radical restructuring that the auto task force demanded, that this year, Michigan wind up over 20 percent unemployment," McCotter said during an appearance on a conservative news radio program.

The Wolverine State hasn’t yet exceeded its previous record for unemployment in modern history, when it reached 16.9 percent in November of 1982.

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Jim Sinclair’s Commentary

Here is interesting reasoning from Zoo management.

I think it might be the other way around. Keep the animals and shoot the management.

Boston zoo says it won’t have to kill its animals due to budget cuts

BOSTON, Mass. (AP) — The operators of the Franklin Park Zoo, who last week warned that some animals might have to be destroyed if state lawmakers don’t restore funding, say they won’t be euthanizing any animals as a result of state budget cuts.

Officials at Zoo New England had said in a letter to legislators last week that without more funding they’d have to shut down the Boston zoo, whose wild animals include lions and giraffes, in October and close its smaller counterpart, the Stone Zoo in Stoneham. They said as many as 200 animals might have to be destroyed because it likely would be impossible to find new homes for all of them.

In a revised statement released Saturday, Zoo New England said it meant the state would be forced to care for the animals or euthanize them.

At the Franklin Park Zoo, there are hundreds of exotic animal species from around the world in exhibits including a tropical rain forest, the Australian outback and the African savannah. The Stone Zoo features animals including reindeer, black bears, jaguars and goats.

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Jim Sinclair’s Commentary

Who ever made a sale by chasing no bids lower?

Home Sellers in U.S. Cut Prices by $27 Billion, Trulia Says
By Daniel Taub

July 10 (Bloomberg) — U.S. home sellers cut the prices of their properties by a total of $27.1 billion as the recession and rising foreclosures curtailed demand, Trulia Inc. said.

One quarter of sellers with homes on the market as of July 1 reduced their price by an average of 10 percent, the San Francisco-based real estate data provider said today. Properties listed for more than $1 million had the biggest cuts, with owners taking about 13 percent off the asking price.

Prices of existing U.S. homes dropped 17 percent in May from a year earlier, according to the most recent data from the Chicago-based National Association of Realtors. The decline helped boost purchases 2.4 percent to an annual rate of 4.77 million sales, NAR said.

“Sellers just have to discount their prices to reflect what’s going on,” Pete Flint, chief executive officer of Trulia, said in an interview. “Price reductions will stabilize the market, but I think we’re still some way off.”

The average discount on homes priced for less than $1 million was 9 percent, Trulia said.

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Jim Sinclair’s Commentary

Insurance is only as good as the entity insuring it.

Good means a strong balance sheet. This is MBIA with one difference. The FDIC via the US Treasury and Fed can simply print the paper to repay your deposit.

The rub is by doing so the paper you get will buy ever less amounts of goods and services.

MOPE says if you say it is guaranteed, the guarantee will not be called upon.

This is the road to California, financial highway 666

FDIC expands bank deposit protection
July 12, 2:59 PM

Still leery of getting back into the stock market?

The good news is that your bank holdings are protected from bank failure by the Federal Deposit Insurance Corporation (FDIC) for another four years at the increased rates. Through December 2013, the FDIC will insure savings accounts, retirement accounts, trust accounts, and certificates of deposit (CDs) up to $250,000 per account, per person. So if you set it up right, you personally could be fully insured for up to $1 million per bank; couples can be insured up to $2 million.

That’s a huge difference from last fall. Before the crisis in the financial industry, FDIC insurance per person/account maxed out at $100,000. Then news of the falling stock market and weakened banks sent people scrambling to spread their cash around…to other banks, under mattresses, and who knows where else. Trying to avoid total collapse of the industry, Congress voted for a temporary deposit coverage increase first through December 2009 and has now expanded it through 2013.

On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and certain other retirement accounts, which will remain at $250,000 per depositor.

Want to know if you’re fully covered at your bank? Go to EDIE, or the Electronic Deposit Insurance Estimator. EDIE can calculate your FDIC insurance coverage for each FDIC-insured bank where you have deposit accounts. It lets you know in a printable report for each bank whether your deposits are within or exceed coverage limits. Before you begin you’ll need all the deposit accounts you have at FDIC-insured banks, your current balances and names of all account owners and beneficiaries.

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Jim Sinclair’s Commentary

The only value input to the US dollar is MOPE (Management of Perspective Economics) developed confidence. That has 117 days to go! That does not mean it goes higher here. It goes lower here.

Lack of recovery a crisis in investor confidence
July 13, 8:32 AM

One question some people have started asking is why the economy is not showing any signs of an accelerated recovery. Since the Great Depression the US has had numerous short recessions, but the economic recovery following them was usually a strong 5-7% increase in the GDP for the year following the slump. The current recession is not displaying any signs that it will recover at that pace.

The problem has its foundation in a twist of the economy. The original slump started because of too much private debt and an over-leveraged investment sector. As the markets attempted to correct, there was a massive drop in real estate values and that drop shook the economy.

However, under normal circumstances, the economy would by now have cleared most of the over-capacity and be moving forward in recovery. Economist and New York Times columnist Paul Krugman complained that the issue is a liquidity crisis, and that the failure of banks to loan money is the issue. He is partially correct because the failure of banks to loan money and the drop in business investment created by that failure is the driving force, but his reasoning as to why is incorrect.

Our economy is going through a severe confidence crisis. Businesses are not confident in the economy, nor in the promise that the government will leave them to be profitable in the near future and it is effecting their decisions. During the downturn, many companies cutback production and services within the US in an effort to reduce capacities and inventories. Now that they have an opportunity to turn their factories back on, most are looking carefully at costs and regulations. Unfortunately for the US economy, few appear to be confident in the future of the US markets and what manufacturing they are restarting is largely overseas.

This is a significant issue and can be seen in recent stock market shifts. Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent.

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Jim Sinclair’s Commentary

From the sanctified heights of Wall Street Madness comes every new way to pick your pocket, create casino markets and basically destroy everything they touch.

In the sense of keeping you informed of the deformed thinking of the money grubbers and lack of referees in this game, please read the following, then yak.

Toxic Equity Trading Order Flow on Wall Street
The Real Force Behind the Explosion in Volume and Volatility
By Sal L. Arnuk and Joseph Saluzzi 
A Themis Trading LLC White Paper

INTRODUCTION

Retail and institutional investors have been stunned at recent stock market volatility.  The general thinking is that everything is related to the global financial crisis, starting, for the most part, in August 2007, when the Volatility Index, or VIX, started to climb.  We believe, however, that there are more fundamental reasons behind the explosion in trading volume and the speed at which stock prices and indexes are changing.  It has to do with the way electronic trading, the new for-profit exchanges and ECNs, the NYSE Hybrid and the SEC’s Regulation NMS have all come together in unexpected ways, starting, coincidently, in late summer of 2007.

This has resulted in the proliferation of a new generation of very profitable, high-speed, computerized trading firms and methods that are causing retail and institutional investors to chase artificial prices.  These high frequency traders make tiny amounts of money per share, on a huge volume of small trades, taking advantage of the fact that all listed stocks are now available for electronic trading, thanks to Reg NMS and the NYSE Hybrid.  Now that it has become so profitable, according to Traders Magazine, more such firms are starting up, funded by hedge funds and private equity (only $10 million to $100 million is needed), and the exchanges and ECNs are courting their business.

This paper will explain how these traders – namely liquidity rebate traders, predatory algorithmic traders, automated market makers, and program traders – are exploiting the new market dynamics and negatively affecting real investors.  We conclude with suggestions on what can be done to mitigate or reduce these effects.

To illustrate most situations, we will use a hypothetical institutional order to buy 10,000 shares of a stock at $20.00 that has been input into algorithmic trading systems, which most buy side traders use.  Algorithmic or “algo” trading systems chop up big orders into hundreds of smaller ones that are fed into the market as the orders are filled or in line with the volume of the stock in question.  Typically, such orders are easy to spot as they commonly show that the trader has 100 or 500 shares to sell or buy.

LIQUIDITY REBATE TRADERS

To attract volume, all market centers (the exchanges and the ECNs) now offer rebates of about ¼ penny a share to broker dealers who post orders.  It can be a buy or sell order, as long as it is offering to do something on the exchange or ECN in question.  If the order is filled, the market center pays the broker dealer a rebate and charges a larger amount to the

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Posted by & filed under In The News.

Dear CIGAs,

This system capable of manipulating markets has a program for commodity markets, specifically crude oil and gold.

It is strange the way things change. The COMEX and Chicago once accused me of manipulating the world’s gold markets in 1979, convening a meeting in which every chair of the board of directors was occupied. Today the Dark Side admits it has a tool to manipulate the world commodity and gold markets, upsetting international flows of capital and possibly causing bankruptcies, market panic and bubbles, but so far where are the subpoenas?

From the article:

"That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany."

Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil
Commentary by Jonathan Weil

July 9 (Bloomberg) — Never let it be said that the Justice Department can’t move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.

Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. And Sergey Aleynikov.

Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.

It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”

How could somebody do this? The precise answer isn’t obvious — we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t need a Goldman Sachs doomsday machine to manipulate markets, of course. A false rumor expertly planted using an ordinary telephone often will do just fine. In any event, the judge rejected Facciponti’s argument that Aleynikov posed a danger to the community, and ruled he could go free on $750,000 bail. He was released July 6.

Market Manipulation

All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?

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Jim Sinclair’s Commentary

MOPE at the highest level is suggesting that actions taken today to force OTC derivatives onto exchanges, making them listed derivatives, can solve the problem. Anyone who thinks this will solve even one cent of the outstanding problem is a believer of baseless fabrication that lacks merit.

The absolute majority of all outstanding derivatives which makes up the number in the article herewith posted cannot be listed because it is impossible to have a clearinghouse guarantee. The reason for this is a lack of standards. There is no way at all to value them outside of cartoon computer modeling which destroys the key element required for a clearinghouse guarantee.

This article is total MOPE BS where the high number of outstanding OTC derivatives are concerned. Only derivatives written in light of new regulations with standards can be listed.

I wish to hell I did not know all this.

Derivatives reform and the potential for a Sarbanes-Oxley effect
July 11, 12:02 PM

In Congressional testimony on Friday, Treasury Secretary Tim Geithner aired concerns that the Obama administration’s efforts to reform the nearly $600 trillion (with a “t”) over-the-counter derivatives market might spur European authorities to allow more permissive governance. This, in turn, could send traders to European markets, in an effort to evade restrictive US trading laws.

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Jim Sinclair’s Commentary

The extreme danger in doing this is that you spend your political capital now on a recovery and GM restructured future.

Since the possibility of a recovery is remote, the Fed will have increasing pressure on it to go to infinity with QE.

This is the biggest gamble this administration has taken since sworn in.

President Urges Public Patience on Economy
By ADAM NAGOURNEY and CARL HULSE
Published: July 11, 2009

WASHINGTON — President Obama is stepping up efforts to maintain public support for his agenda as rising unemployment presents him with the biggest test of his political strength since taking office.

Faced with an economic downturn that has proved deeper than the White House initially projected, Mr. Obama asked Americans on Saturday to remain patient, arguing that his $787 billion stimulus plan had saved the economy from collapse and put it on a gradual course to recovery.

“As a result of the swift and aggressive action we took in the first few months of this year, we’ve been able to pull our financial system and our economy back from the brink,” he said, deflecting calls for a new round of stimulus spending and saying that his plan was intended to work not in a few months but over two years.

Facing an array of challenges on Capitol Hill and concern about the huge budget deficit, he cast his main legislative initiatives, starting with his call for overhauling the health care system, as part of a long-term plan to rebuild the economy on a sounder foundation.

Mr. Obama returns to Washington on Sunday from a weeklong trip abroad at a time when Democrats have grown increasingly jittery about the economy and the political risks of the president’s ambitious agenda on health care, energy and climate change, financial regulation and other issues.

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Jim Sinclair’s Commentary

Surge this!

Another Insurgency Gains in Pakistan
By CARLOTTA GALL
Published: July 11, 2009

TURBAT, Pakistan — Three local political leaders were seized from a small legal office here in April, handcuffed, blindfolded and hustled into a waiting pickup truck in front of their lawyer and neighboring shopkeepers. Their bodies, riddled with bullets and badly decomposed in the scorching heat, were found in a date palm grove five days later.

Local residents are convinced that the killings were the work of the Pakistani intelligence agencies, and the deaths have provided a new spark for revolt across Baluchistan, a vast and restless province in Pakistan’s southwest where the government faces yet another insurgency.

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Jim Sinclair’s Commentary

Let’s have a round of applause for OTC derivatives, doomsday trading programs operated by the Dark Side Empire, algorithms and blameless Wall Street. Well done you sociopath Fat Cats.

More Families Are Becoming Homeless
Largest Increases in 2008 Came in Rural and Suburban Areas, Study Finds

Louis Gill doesn’t like to turn anyone away. The director of the Bakersfield Homeless Center in California has taken to laying out cots and mattresses between the shelter’s 174 registered beds to cope with the rush of homeless families brought to his doors by the financial crisis.

"Last year, we saw a 34 percent increase in homeless families and a 24 percent increase in homeless children," he said. "Why do we go beyond capacity? Because in a just society, a child should not have to sleep outside or in a car."

Gill is a frontline witness to the change in the makeup of the country’s homeless. The stereotype of a homeless person as a single man no longer applies. A resident of the Bakersfield center is far more likely to be a young mother with a "good, solid job and a mortgage that she just couldn’t pay."

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Jim Sinclair’s Commentary

What does China know that very few others and almost no one in the West knows.

Hyperinflation is a CURRENCY EVENT and when that currency is a RESERVE CURRENCY the implications are worldwide price increases no one will understand.

China June copper imports hit new record 475,999 T
Fri Jul 10, 2009 5:47am EDT

BEIJING, July 10 (Reuters) – China’s imports of unwrought copper and semi-finished copper products in June hit an all-time record for a fifth straight month of 475,999 tonnes, from May’s record 422,666 tonnes, data from the General Administration of Customs showed on Friday.

But imports of copper scrap fell to 280,000 tonnes in June versus 330,000 tonnes in May.

Imports of unwrought aluminium and semi-finished aluminium products rose to 353,218 tonnes in June versus May’s 331,740 tonnes.

China is the world’s top consumer of copper and aluminium, and the biggest producer of aluminium. (Reporting by Tom Miles; Editing by Chris Lewis) 

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Jim Sinclair’s Commentary

This is the tentacles of the cancer of OTC derivatives as they reach down into the real economy.

Each time a real economy business goes belly up out goes the employees. Each employee faces painful economic problems, cutting back on everything. The downward spiral pulls and pushes its way down and down.

Hotel foreclosures spread throughout California
Andrew S. Ross
Sunday, July 12, 2009

The "challenges" for San Francisco’s biggest business are coming thick and fast. That oft-used word at last Tuesday’s San Francisco Visitors & Convention Bureau luncheon rang loud and clear two days later when the Four Seasons Hotel on Market Street defaulted on a $90 million loan. Those who might have forgotten were reminded that Nob Hill’s famedStanford Court Hotel had gone into receivership two weeks earlier, owing $89 million after its new owners bought the place for $93 million two years ago and spent $32 million in renovations. But wait, there’s more. Says Joe D’Alessandro, the bureau’s CEO: "I would not be surprised to see at least a couple more go in the next few months."

There’s a wave of hotel defaults and foreclosures sweeping up and down California, say D’Alessandro and other industry experts. Currently, 32 hotels are in foreclosure and 174 in default statewide, according to a June 28 report by the Atlas Hospitality Group in Irvine ( www.atlashospitality.com). Listed among the more recent ones are aHawthorne Suites and a Residence Inn in Sacramento.

"The bright spot is that this is going to be the best buying opportunity since the Great Depression," said Alan Reay, the group’s founder.

Opportunity costs: That presumably is what Hong Kong’s Keck Seng Investments Ltd. saw when it agreed to buy the San Francisco W last week for $90 million. As The Chronicle’s James Temple pointed out, the price represents a 50 percent drop from peak values two years ago. The seller, Starwood Hotels & Resorts Worldwide Inc., which owns numerous hotels in the Bay Area, including the recently opened four-star Rosewood Sand Hill in Silicon Valley, said the sale is one of those the company "is pursuing to further reduce its debt levels."

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Jim Sinclair’s Commentary

Timothy F. Geithner vowed that the administration would impose tougher regulations on the largely unregulated market for financial derivatives.

"He told lawmakers that the plan would require that all “standardized” instruments be traded on a regulated exchange or through a central clearinghouse. Participants would have to disclose more information about their transactions, and they would have to meet strict new capital requirements."

Unresolved Questions After Hearing With Geithner
By EDMUND L. ANDREWS
Published: July 10, 2009

WASHINGTON — The issues were arcane and technical, but the hearing drew an extraordinary turnout: 110 members of Congress, many of whom waited three hours to ask questions for five minutes.

All eyes were on Timothy F. Geithner, the Treasury secretary, who testified Friday about the Obama administration’s proposal to regulate the multitrillion-dollar market for financial derivatives, the hedging instruments that bankrupted the American International Group in September.

But after three hours, many of the hardest questions remained unanswered.

Mr. Geithner vowed that the administration would impose tougher regulations on the freewheeling market for derivatives like credit-default swaps, which insure investors from losses on bond defaults.

He told lawmakers that the plan would require that all “standardized” instruments be traded on a regulated exchange or through a central clearinghouse. Participants would have to disclose more information about their transactions, and they would have to meet strict new capital requirements.

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Jim Sinclair’s Commentary

2002 is a while back, but recall my mention of the main gold buyers as Chung Phat and Dr. No?

Golden Yuan?

China’s increase in gold reserves has another more profound implication that most commentators haven’t realized. It’s clear to me that China has plans to replace the U.S. dollar as a reserve currency with an at least partially gold-backed yuan. I have to give Jim Sinclair credit, as he predicted the Chinese were moving to a gold-backed yuan in 2002 as part of their “long term plan of Economic Ascendancy.” He deduced that the Chinese government allowed the private ownership and sale of gold by their citizens in order to re-monetize gold. China has experienced the folly of paper money many times before and – as Mr. Sinclair puts it – “their memory is culturally infinite.” The Chinese are aware they must step in to facilitate the move back to hard money.

China is doing little to hide its intentions. Chinese officials have long complained about the excesses allowed by the dominance of the USD, and have recently called for the use of Special Drawing Rights to settle trades. In April, the Chinese completed currency swaps with many countries including Indonesia, Malaysia, South Korea and Argentina for use in bilateral trade, avoiding the USD. The BRIC countries (Brazil, Russia, India, and China) just discussed a “supranational” currency to reduce dependence on the U.S. dollar at a summit in June, and American officials were not permitted to attend.

However, to have a true reserve currency, China would need to allow full convertibility. The Chinese government would need to loosen the trading band which manages the yuan-U.S. dollar exchange rate. The yuan has gained more than 6% since the dollar peg was eliminated in July 2005, but the currency is sure to rise sharply if permitted as it’s clearly undervalued.

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Posted by & filed under In The News.

Dear CIGAs,

Mr. Sneavely drops off the unemployment list as he falls out of the safety net into pure hell as a father and householder, yet Wall Street is totally insulated.

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Jim Sinclair’s Commentary

119 days to go!

Western Media (China bashers) and Governments should really stop screwing with China. This paper dragon business is insulting the world’s (not only the US) bankers, and a super power.

Respect – where has it gone?

China demands currency reform, France backs debate
Thu Jul 9, 2009 5:53pm EDT
By Simon Rabinovitch and Matt Falloon

L’AQUILA, Italy, July 9 (Reuters) – China called on Thursday for reform of the reserve currency system at a meeting of world leaders in one of its most direct attacks on the dollar’s global dominance.

Chinese State Councillor Dai Bingguo did not specifically name the dollar at talks between the Group of Eight rich nations and G5 emerging powers, but he was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates.

France also unexpectedly called for a currency discussion and moving toward a "multimonetary" system, though Britain warned any debate should be reserved for the long term to avoid destabilizing markets in the midst of a global recession.

China’s ideas for changing the system had previously been mentioned in reports by its central bank, but had never been voiced in a speech by such a high-ranking political leader.

"We should have a better system for reserve currency issuance and regulation so that we can maintain relative stability of major reserve currencies’ exchange rates and promote a diversified and rational international reserve currency system," Dai told the summit in Italy, according to a statement read by Foreign Ministry spokesman Ma Zhaoxu.

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Jim Sinclair’s Commentary

As long as Wall Street owns Washington, Bubble Creation is the name of the Game.

Could cap-and-trade create another economic bubble?
By Eoin O’Carroll | 07.10.09

The American Clean Energy and Security Act, which squeaked through the House of Representatives by a vote of 219-212 last month and is set to be taken up by the Senate in September, proposes to create a huge new market for trading carbon emission permits and offsets. This system would create whole new classes of financial assets, which financial firms could securitize, derivatize, and speculate on.

Sound familiar? Many critics are pointing out that this new market for carbon derivatives could, without effective oversight, usher in another Wall Street free-for-all just like the one that precipitated the implosion of the global economy.

Writing in Mother Jones magazine, reporter Rachel Morris explains that this new market — which is expected to become the world’s largest derivatives market — would be based on two instruments: carbon allowances, that is, permits granted by the government to companies, allowing them to emit greenhouses gases; and carbon offsets, which allow companies to emit in excess of their allowance, provided that they invest in a project that reduces emissions somewhere else, such as a reforestation initiative in the Amazon.

Additionally, carbon emitters and financial services firms would be allowed to trade in carbon derivatives — think “offset futures” or “allowance swaps” — creating a market that Ms. Morris calls “vast, complicated, and dauntingly difficult to monitor.”

And prone to melting down, Ms. Morris warns. Just as the inability of homeowners to make good on their subprime mortgages ended up pulling the rug out from under the credit market, carbon offsets that are based on shaky greenhouse-gas mitigation projects could cause the carbon market to tank, with implications for the broader economy.

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Jim Sinclair’s Commentary

When markets are worldwide and scoundrels will use corporations, partnerships or charities to trade through, what impact can this have other than reducing volume on US exchanges? That might not actually be a bad start.

Futures regulators to move quickly on position limits
Fri Jul 10, 2009 2:30pm EDT
By Christopher Doering

WASHINGTON (Reuters) – The Commodity Futures Trading Commission will move aggressively to rein in excessive speculation in energy and commodity markets by focusing on expanding its existing authority and could have new regulations in place by late October.

Bart Chilton, one of five commissioners at the CFTC, said he could not predict what the agency will do, but he would like to see the proposed rules issued in September, then implemented by late October or November after a period of public comment.

"We’re looking at a pretty fast timeline," Chilton told Reuters in an interview. "We’re going to use our authority to the fullest extent possible. That doesn’t mean we’re going to be draconian or go too far."

In response to recent swings in oil prices, the CFTC announced this week it was considering clamping down on big market players by implementing position limits on futures contracts.

The surprise announcement marked an abrupt departure for the once-staid agency that drew criticized for its hands-off approach toward market regulation during the last two decades.

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Jim Sinclair’s Commentary

From Tech Magazine, an ode to the father of over the counter derivatives.

The next article titled the “Recipe for Disaster: The Formula That Killed Wall Street Again," might well be "The Goldman Sachs Algorithm Trading and Bullying Program."

Recipe for Disaster: The Formula That Killed Wall Street
By Felix Salmon

A year ago, it was hardly unthinkable that a math wizard like David X. Li might someday earn a Nobel Prize. After all, financial economists—even Wall Street quants—have received the Nobel in economics before, and Li’s work on measuring risk has had more impact, more quickly, than previous Nobel Prize-winning contributions to the field. Today, though, as dazed bankers, politicians, regulators, and investors survey the wreckage of the biggest financial meltdown since the Great Depression, Li is probably thankful he still has a job in finance at all. Not that his achievement should be dismissed. He took a notoriously tough nut—determining correlation, or how seemingly disparate events are related—and cracked it wide open with a simple and elegant mathematical formula, one that would become ubiquitous in finance worldwide.

For five years, Li’s formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.

Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li’s formula hadn’t expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system’s foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

David X. Li, it’s safe to say, won’t be getting that Nobel anytime soon. One result of the collapse has been the end of financial economics as something to be celebrated rather than feared. And Li’s Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.

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Jim Sinclair’s Commentary

The symbol of a new world currency – the G8 Gold coin.

The Russians gave the currency of the future to the G8 which is Gold. That is the truth, like it or not!

The subtle nature of the Russian gift to the G8 and BRIC nations has eluded all commentary and as well our esteemed leaders.

The inscription on the coin was " Unity in Diversity." This inscription in the Christian tradition can be aligned with "I am the vine and you are the fruit of the vine." It might be aligned with the mystical body of Christ of which all are considered one.

In the Gnostic tradition is would simply be the Gnostic Gospel of St. John.

In the Hindu tradition it is pure Vedantic philosophy.

Unity in Diversity can be considered in higher physics as the big bang theory, black holes or quantum mechanics theory.

The bottom line is that Unity in Diversity in hundreds of disciplines and persuasion means TRUTH. The Russians gave the currency of the future to the G8, which is gold. That is the TRUTH, like it or not!

Medvedev Shows Off Sample Coin of New ‘World Currency’ at G-8
By Lyubov Pronina

July 10 (Bloomberg) — Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.”

“Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”

The coin, which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said.

The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.”

Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency.

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Jim Sinclair’s Commentary

There is so much that has escaped programs designed to rescue Wall Street and send Main Street to hell.

Commercial Real Estate Is a ‘Time Bomb,’ Maloney Says (Update2)
By Dawn Kopecki

July 9 (Bloomberg) — The $3.5 trillion commercial real estate market is a ticking “time bomb” that may lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of 2010 and “doing nothing is not an option,” Maloney, a New York Democrat, said at a committee hearing today. This “looming crisis” may lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, and impede economic recovery, she said.

The response by banks to this “growing threat has been slow and inadequate,” said James Helsel, a partner at RSR Realtors in Harrisburg, Pennsylvania, and treasurer for the National Association of Realtors. “The lack of liquidity and banks’ reluctance to extend lending are also becoming apparent in the increasing level of delinquent properties.”

There were 5,315 commercial properties in default, foreclosure or bankruptcy at the end of June, more than twice the number at the end of last year, with hotels and retail among the most “problematic,’ Real Capital Analytics Inc. said in a report yesterday. Losses on commercial mortgage-backed securities, or CMBS, will total 9 percent to 12 percent of the market, or as much as $90 billion, said Richard Parkus, a research analyst for Deutsche Bank Securities in New York.

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Jim Sinclair’s Commentary

Of course they have, and will continue to. As you integrate even modest percentages of people in huge populations as consumers, business booms.

China tops U.S. in car sales so far this year
Jul 9, 2009, 4:38 p.m. EST
By Shawn Langlois, MarketWatch

SAN FRANCISCO (MarketWatch) – China wrestled the new-car sales crown from the U.S. through the first half of the year, topping 6 million cars and trucks at a time when the long-time global sales leader grapples with historic declines.

Vehicle sales in China jumped 36.5% in June from a year ago to mark the fourth straight month that vehicle sales have topped 1.1 million units, according to data released by the China Association of Automobile Manufacturers on Thursday.

Sales for the month reached 1.14 million units, bringing total sales for the first half of the year to 6.09 million units, a rise of 17.7% from the same months a year earlier thanks in part to generous government incentives, including tax breaks and subsidies.

"If this trend lasts for the whole year, it will put China on top for the first time ever," said Lincoln Merrihew, managing director at research firm Compete. "While the shift isn’t at all surprising, it’s happening faster than most people thought."

The U.S. showed signs of bottoming out in June, but the results were still dramatically off previous highs with consumers still dealing with the sour economy. Total new car and light trucks sales dropped 28% from a year ago, resulting in an annualized sales rate of 9.69 million, according to Autodata Corp. See full story.

Analysts forecast the U.S. market to potentially fall short of the 10 million-vehicle mark while China’s industry group is looking for sales in its country to move past 11 million cars and trucks by the end of the year.

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Jim Sinclair’s Commentary

According to our friend Armstrong, cyclically speaking, a third party may well succeed in the next election.

The Fed Must Be Stopped
Written by: Ron Paul
July 9, 2009

Our country currently finds itself in the midst of the worst economic crisis since the 1930s and, as during all economic crises, people search for the answer as to why this has happened.  Not only have large financial firms been affected, but also mainstays of American industry such as GM and Chrysler, all the way down to the Mom & Pop stores on Main Street.  The easy way out is to blame the traditional scapegoats: foreign governments, fraudulent businessmen, and greedy speculators.  But the real villain is far more sinister; the organization entrusted with maintaining a stable dollar and touted as the guarantor of economic stability – the Federal Reserve.  

In the United States, monetary policy has been the domain of the Federal Reserve since its inception in 1913.  Since that time we have had a number of cyclical recessions, each one following a boom caused by the Federal Reserve’s loose monetary policy.  The problem with the Federal Reserve is that i t interferes with market pricing functions.  Interest rates are a price just like any other and arise because of the fact that people prefer to consume in the present rather than in the future.  The extent to which people defer present consumption is reflected in interest rates, which in a free market are determined by the spontaneous interactions and decisions of millions of people.

Fed intervention to set prices throws markets and interest rates out of equilibrium.  When the Federal Reserve pushes interest rates below what the market rate would be, everyone wants to borrow money for long-term projects.  Shortages of loanable funds would occur, except that the Federal Reserve has the ability to create bank balances out of thin air.  The Fed can create a bank ledger on paper, or on a computer, establish a balance of millions or billions of dollars, and then spend these dollars out into the economy.

Loans become cheap, and the result of these lower interest rates is an economic boom which eventually manifests itself as a bubble.  Beginning in 2001, the Federal Reserve pushed interest rates to as low as one percent, which after adjusting for inflation meant that the real interest rate was negative, so businesses were actually making money by taking out loans.  This was the fuel for the housing bubble and the reason there are 19 million empty houses today.

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Jim Sinclair’s Commentary

QE is alive and well

Federal Reserve Purchases $3 Billion In Long-Term Bonds 15

(RTTNews) – The Federal Reserve continued its treasury buyback program Thursday, completing its second quantitative easing move of the week.

The New York Federal Reserve purchased $3 billion worth of securities with maturity dates ranging from July of 2010 to April of 2011. The day’s buyback saw a total of $17.1 billion in treasuries submitted for purchase. Overall, the Fed has purchased a total of $200.72 billion since the program began on March 25th.\

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Jim Sinclair’s Commentary

Here is an equation you can count on from California to New York: Restrict new hiring of police and fire fighters. Release large amounts of convicted prisoners. Increase the risks of the ordinary law abiding citizens.

Up To 10,000 Illinois Prisoners May Be Released
Gov. Pat Quinn: Release Of Inmates Could Save Taxpayers $125 Million
Jul 8, 2009 5:35 pm US/Central
Mike Flannery

CHICAGO (CBS) ― Up to 10,000 convicted criminals could soon be released early from prisons across Illinois. It’s all because of the state’s budget mess. Gov. Pat Quinn says cutting those prisoners loose could save more than $100 million. But at what cost to you?

CBS 2 Political Editor Mike Flannery reports that some people are worried. They don’t want to pay higher taxes. And they don’t want these prison reductions set for Sept. 30, either.

"Oh, my God. I don’t agree with that at all," one woman said. "They can pull money out of some other things."

The proposed prisoner release stems from plans to lay off more than 1,000 corrections workers at Stateville Prison and a half-dozen facilities downstate.

The state’s making a list of thousands of so-called non-violent inmates with less than one year left to serve who could be released early. The governor says it could save taxpayers $125 million.

But some don’t like the idea.

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Jim Sinclair’s Commentary

For your information.

INFLUENCE IS ALL IN THE BAG FOR ‘GOVERNMENT SACHS’
JOHN CRUDELE
NEW YORK POST
July 9, 2009

WHEN I last wrote about Goldman Sachs in late March the most politically-connected and luckiest firm on Wall Street was in the middle of rigging the stock market — again.

"Something smells fishy in the market. And the aroma seems to be coming from Goldman Sachs," is the way I put it in that March 28 column.

Well, a lot has changed in just the past few weeks. And I’d like to put it all together for you, and for the rest of the media should it choose to follow what is shaping up to be the most incredible financial story ever.

Back in March I noted that the rally occurring in the stock market had the indisputable fingerprints of Goldman all over it. There were numbers to back it up.

Despite the fact that regular investors seemed to be pulling their money out of the market or — at best — investing conservatively, stock prices were zooming. The reason was simple: Big investors were pouring money into equities.

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Jim Sinclair’s Commentary

You think there is a stop sign at 10% unemployment because the present Administration has admitted this double digit will be accomplished?

No end in sight to US jobless rise
By Hossein Askari and Noureddine Krichene

The unemployment rate in the United States rose to 9.5% in June 2009 from 3.6% in October 2000 and 4.1% in October 2006. Most puzzling, as indicated in the chart below, has been the obvious failure of Federal Reserve chairman Ben Bernanke’s unprecedented aggressive monetary policy to produce the quick economic recovery that he promised at each interest rate cut.

The more he cut interest rates and the more he inflated the balance sheet of the Fed, the higher unemployment has risen. Unemployment has kept on rising even though the federal funds rate has been near zero since December 2008. The unfulfilled promise of Bernanke, a proclaimed expert of the Great Depression, has been certainly disappointing. However, Bernanke and his supporters have kept crediting themselves that, without unorthodox cheap monetary policy, the unemployment rate would have been much higher.

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Jim Sinclair’s Commentary

Have you read the book, One Point Safe?

It is one of the few books to make the NY Times Best Sellers list but not go into a second printing

Swiss to destroy papers in intl nuke smuggling case
Thu Jun 25, 2009 3:03am IST
By Laura MacInnis

GENEVA, June 24 (Reuters) – Switzerland said on Wednesday it would destroy bomb designs and other sensitive documents seized from a Swiss man accused of being part of an international nuclear smuggling ring.

Thousands of papers were confiscated from Urs Tinner, who is being prosecuted for his suspected role in a trafficking network run by Pakistan’s Abdul Qadeer Khan, who in 2004 admitted to leaking nuclear secrets.

The Khan network trafficked nuclear materials, equipment and know-how to Iran, Libya and North Korea for about two decades. Its leader was released from house arrest earlier this year on the order of Pakistan’s High Court.

In a statement posted on the federal government’s website, Swiss authorities said they had agreed with the International Atomic Energy Agency (IAEA) that documents related to uranium enrichment or atomic weapon design posed a risk.

Switzerland, which is not a nuclear power, is not authorised under the global Non-Proliferation treaty to possess documents related to nuclear weaponry.

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Jim Sinclair’s Commentary

Marc says, "all the MOPE in the world can’t hide these number." The scary reality is that they must grow and grow. The dollar cannot and will not survive this onslaught of supply

Monthly Treasury Issuance Chart

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Jim Sinclair’s Commentary

It was a slow week.

Wyoming Bank Closed; 53rd Failure of 2009
By AP Saturday, Jul. 11, 2009

(AP / NEW YORK) — Regulators have shuttered Bank of Wyoming, marking the 53rd failure this year of a federally insured bank.

The Federal Deposit Insurance Corp. on Friday was appointed receiver of the failed bank, based in Thermopolis, Wyo. It had $70 million in assets and $67 million in deposits as of June 30. (See TIME’s photos of the G-20 protests)

The FDIC says Central Bank & Trust of Lander, Wyo., will assume all deposits and purchase about $55 million in assets.

The FDIC will retain the remaining assets to sell at a later date.

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Jim Sinclair’s Commentary

You have to love how prices are changed by $50.

COMEX traders predict gold at $1,600 by December

Here are 10 compelling reasons why gold is going to do well this year.

The Stimulus Effect: Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, “Many believe that the monetary stimulus efforts will cause a spike in inflation,” driving gold higher.

COMEX Traders Predict $1,600 Gold… by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be “in the money.” Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts.

“Big Money” Inflows: In 2008, NYC-based hedge fund Paulson & Co’s flagship fund returned 37%, as the world markets burned. Paulson’s bullish on gold, big time, including the Mar. 17 purchase of 39.9 million shares of AngloGold, worth $1.28 billion. Other major hedge funds are piling into gold, too, including Eton Park Capital, Green light Capital and Hayman Advisors.

China’s Doubling Down! China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up.

Demand Building across the Board: Worldwide demand for gold jumped by $29.7 billion in the first quarter, a 36% bolt, according to the World Gold Council. Demand for gold ETFs (Exchange Traded Funds) rocketed 540%… another trigger for the coming gold boom.

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Jim Sinclair’s Commentary

Why would anyone accept California IOUs? What makes you think California’s problem is short term other than MOPE?

Where is the White Knight to save a state, if the Feds do not?

Today final day before some banks won’t accept state IOUs
By Shauntel Lowe/Times-Herald staff writer
Posted: 07/10/2009 02:57:37 PM PDT

Today is the last day many major banks will accept state-issued IOUs. Bank of America and JPMorgan Chase officials have said they will not accept the IOUs, also known as registered warrants, after today.

The state has issued more than 100,000 IOUs worth nearly $400 million since July 2 after legislators failed to pass a budget before the end of the previous fiscal year.

The IOUs have gone out for taxpayer refunds and contractor and county program payments.

JPMorgan Chase, formerly Washington Mutual in California, has a "frequently asked questions" document on its Web site specifically about the IOUs at www.chase.com or www.wamu.com.

A Bank of America spokeswoman said customers have until the end of the day to deposit their IOUs. After today, the bank will work with customers on a one-on-one basis if it is a hardship to not be able to cash the IOU.

The state-issued IOUs do not mature until Oct. 2 when the state is expected to redeem them with 3.75 interest.

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Jim Sinclair’s Commentary

Wake up sheeple! Many of you are in total denial of reality.

119 days to go.

I firmly believe that the MOPE reporting on the G8, which was the G8 plus 5, has angered the Chinese.

The Chinese as spokes-nation for the BRICs seems to be getting hotter every day.

China criticises dollar
Dai Bingguo, who is standing in for the Chinese president Hu Jintao at the G8 meetings, raised questions over the dominant role of the dollar as the world’s reserve currency.
By Malcolm Moore in Shanghai
Published: 8:01AM BST 10 Jul 2009

The discussion, which took place between the leaders of five emerging economies and the G8 industrialised nations, including Barack Obama, caused concern among western leaders.

"We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system,” said Mr Dai, according to the Chinese foreign ministry.

While he did not single out the dollar, Mr Dai was clearly calling for the world to diversify its reserve currency system and stabilise exchange rates among leading currencies.

China has made a series of attacks on the dollar in recent months, and went as far as to question Hillary Clinton, the US secretary of state, about the trustworthiness of the currency on her visit to China earlier this year.

A policy paper from the governor of the People’s Bank of China also laid out an alternative to the dollar in the form of a special international reserve currency administered by the International Monetary Fund.

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