Posts Categorized: In The News

In The News Today

Posted June 10th, 2009 by Jim Sinclair & filed under In The News.

Dear CIGAs,

Here is a lesson that I learned from my Father, Bertram J. Seligman:

"The weak succumb, the strong survive."

There are a lot of people out there that know the truth, but due to a terminal lack of courage do not deserve to, nor will, survive.

Jim Sinclair’s Commentary

Do not join the madness, because that is all it is.

Buying the dollar because the Russians don’t want them ignores the basic fact that everything is as screwed up as it was two months ago. This is the way the algorithms have turned everything into a casino which is the root of the problem.

Do not join the madness because that is all it is.

Roubini: Those Are Yellow Weeds, Not Green Shoots
June 9, 2009, 9:40 AM ET
By WSJ Staff

The still-pessimistic Nouriel Roubini offers *nine* reasons for pessimism:

* First, employment is still falling sharply in the U.S. and other economies. This will be bad news for consumption and the size of bank losses.

* Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not really started, because private losses and debts of households, financial institutions, and even corporations are not being reduced, but rather socialized and put on government balance sheets. Lack of deleveraging will limit the ability of banks to lend, households to spend, and firms to invest.

* Third, in countries running current-account deficits, consumers need to cut spending and save much more for many years. Shopped out, savings-less, and debt-burdened consumers have been hit by a wealth shock (falling home prices and stock markets), rising debt-service ratios, and falling incomes and employment.

* Fourth, the financial system — despite the policy backstop — is severely damaged. So the credit crunch will not ease quickly.

* Fifth, weak profitability, owing to high debts and default risk, low economic — and thus revenue — growth, and persistent deflationary pressure on companies’ margins, will continue to constrain firms’ willingness to produce, hire workers, and invest.

Jim Sinclair’s Commentary

The only things that are dollar positive is that the USDX as an index is small enough to manipulate, and the Commercials are still not yet in position for what is coming in gold.

There is an axiom that states the more leveraged market always leads the less leveraged market. That axiom means an index will lead cash but stand behind the listed derivative market, which in turn stands behind the swap market for currencies.

The means of manipulating almost everything is via the index trading supported by the ETF activity.

The dollar has NO future outside of blind algorithms, spin and index manipulation. NONE.

Gold is the inverse of the dollar and that is all you really need to know. This action taking place is productive to the future of gold if you truly understand what is afoot.

The following is one more piece of evidence of the contraction of demand for dollars as QE is an ever-flowing fountain of dollar supply via electronic creation.

Do not think it is a static picture in time, but instead look at it as values in motion.

The motion in dollar demand is down as the headline below adds Russia now to China’s approach. A swap of Treasuries for baskets is good for diversification, if the IMF is willing, as you move out of dollar denominated into basket denominated. What is being missed is this Chinese and Russian transaction with the IMF indicates diversification interest will continue. The spin doctors and general public will see this as a onetime offset and therefore not market indicative, but in fact it is a major move in momentum and downward confidence factor.

Stand back from the minute to minute, day to day action that unseats you from your insurance and trust that fundamentals will trash the algorithms in time. If that was NOT true, we would not be in the trouble we are in NOW.

Russia May Swap Some U.S. Treasuries for IMF Debt
By Alex Nicholson

June 10 (Bloomberg) — Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds.

Treasuries fell after Alexei Ulyukayev, first deputy chairman of Bank Rossii, said some reserves may be moved into International Monetary Fund debt. The yield on the 10-year note rose six basis points, or 0.06 percentage point, to 3.92 percent as of 8:27 a.m. in New York, according to BGCantor Market Data.

Finance Minister Kudrin said on May 26 Russia will buy $10 billion of IMF bonds from the reserves and China may buy as much as $50 billion, IMF Managing Director Dominique Strauss-Kahn said yesterday. Some investors are wary of U.S. assets because the budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.

“The bigger picture is people are worried there are too many Treasuries, and that no one is even making a pretense of getting the fiscal deficit under control,” said Francis Beddington, co-founder of Insparo Asset Management, which oversees about $140 million in London. By Andre Soliani and Telma Marotto

Brazil will use part of its reserves to provide $10 billion in financing to the IMF, Finance Minister Guido Mantega said in Brasilia today.

Jim Sinclair’s Commentary

The plot thickens as the amount lost grows. Let get that nice PR lady from the Canadian Mint to tell us how safe it is and how good it is to get robbed because they will learn something.

This is as nuts as the algorithms running after the dollar because the Russians don’t want them.

Royal Canadian Mint ordered to call in RCMP over missing gold
Last Updated: Tuesday, June 9, 2009 | 5:11 PM ET

The federal government has told the Royal Canadian Mint to call in the RCMP to help find its missing gold and silver.

Rob Merrifield, minister responsible for the mint, told the House of Commons Tuesday he has instructed the agency to seek assistance from the Mounties.

The Toronto Star reported Tuesday that auditors are trying to track precious metals, believed to be gold, worth in the "double digits" of millions.

The mint won’t say how much might be missing, but auditors are already probing a discrepancy between the value of the precious metals on the mint’s books and the stockpile on hand at its Ottawa headquarters.

Mint spokeswoman Christine Aquino said last week the discrepancy could be anything from a heist to sloppy record-keeping.

Jim Sinclair’s Commentary

Dollar positive? You have to be kidding. Green-shoots? You have to be kidding.

U.S. Commercial Mortgage Defaults May Rise to 17-Year High
By Hui-yong Yu

June 9 (Bloomberg) — The default rate on commercial mortgages held by U.S. banks may rise to the highest in 17 years in the fourth quarter as debt for refinancing remains scarce and the recession drags down rents.

The rate is likely to reach 4.1 percent by year-end, Real Estate Econometrics LLC, a New York-based property research firm, said in a report today.

“The dramatic decline in real economic activity and labor markets since last September has undercut property fundamentals,” wrote Sam Chandan, chief economist of Real Estate Econometrics. The decline puts an increasing number of loans “at risk,” he said.

The projection implies defaults on about $44.3 billion of commercial mortgages, based on the $1.08 trillion of such loans held by U.S. banks in the first quarter, according to Chandan and Bloomberg calculations. Commercial defaults already are at a 15-year high after climbing to 2.3 percent in the first quarter, or $3 billion, from 1.6 percent at the end of 2008, according to the firm’s analysis of Federal Deposit Insurance Corp. data.

A default occurs when a loan is 90 or more days past due. A loan is considered delinquent when it’s 30 to 89 days late.

Jim Sinclair’s Commentary

The article is quite correct but try and tell Wall Street that the false appearance of the health of the financial sector does not equate to making the consumer more when they are tapped out in every way.

Wall Street equates what is in their pocket as the one and only truth. Fill it and all is well regardless of human suffering and industry bankruptcies.

Black HoleTruly terrifying data about the real state of the U.S. economy.
By Eliot Spitzer Posted Wednesday, June 3, 2009, at 7:23 AM ET

I have an unfortunate sense that the "green shoots" in the economy that everyone is talking about are nothing but dandelions. Sure, forcing $1 trillion of taxpayer money—in direct capital, guarantees, and diminished cost of borrowing—into the banking sector has permitted the major banks to claim solvency for the moment. Yet we should not forget that this solvency has come not through a much needed deleveraging of the banking sector but rather from a massive transfer of the obligations of private banks to the public, with the debt accruing to future generations. And overall loan quality at U.S. banks is still the worst in 25 years and deteriorating at the fastest pace ever.

It’s a terrible mistake to confuse the momentary solvency of the financial sector and the long-term health of our economy.

While we have addressed the credit collapse, we have not begun to tackle the far more daunting, and more significant, structural problems in the economy. Instead of focusing on the green shoots, let’s examine the macro data that will determine our national prosperity in the next generation. These data are terrifying.

Start with the job front. Long term, nothing is more fundamental than good jobs to creating the middle-class wealth that must drive the economy. The creation of true middle-class jobs was the great success of our economy from 1950s through the mid-1990s. Consider the job data, in aggregate and by sector, from the past decade. (All data are from the U.S. Department of Labor, Bureau of Labor Statistics.)

Jim Sinclair’s Commentary

This is not great business activity as it is lousy dollar indicative.

Regardless, a disdain for the dollar reflected as supply in the entire long end of the Treasury market cannot be interpreted as dollar positive unless you spend your life upside down.

As such the long bond taking out the 28 year uptrend line at 112 to 113 on the continuous is the final establishment of the last Pillar of the next and major move in GOLD.

A confirmed top in the long bond followed by a breakdown from such a long up trend means years of dollar weakness is in front of us. Thinking this is dollar positive borders on nuts.

Treasuries Fall After Auction, Russian Threat to Cut Holdings
By Dakin Campbell and Dan Kruger

June 10 (Bloomberg) — Treasuries fell, pushing 10-year yields to the highest level since November, as the government sold $19 billion of the securities and Russia said it may switch some of its reserves from U.S. debt.

Thirty-year bond yields reached the most in a year after a Russian central bank official said the nation may buy International Monetary Fund bonds. Today’s auction is the second of three sales this week that will raise $65 billion, part of the U.S.’s record borrowing program.

“It’s the same situation of overwhelming supply versus spotty demand,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., a brokerage for institutional investors, before the auction. “The trend is still against the market.”

The yield on the 10-year note rose 13 basis points, or 0.13 percentage point, to 3.98 percent at 1:03 a.m. in New York, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 declined 1, or $10 per $1,000 face amount, to 93.

The 30-year bond yield touched 4.77 percent, the highest in a year. The government is scheduled to sell $11 billion of the securities tomorrow.

Jim Sinclair’s Commentary

No pain, no gain! Brazil chimes in saying "Hey, me too! I don’t like the dollar either because it is certainly going down in value."

Let see if the idiots, spinmeisters, and algorithms consider that dollar positive. It looks like a trend to me, but not an uptrend in the dollar.

Today demonstrated the enormous amount of madness and number of cowards that populate the casino today.

The dollar rise today was a total joke and will be promptly be proved as madness.

No guts, no glory, no survival

Russia, Brazil Plan to Buy $20 Billion IMF Bonds
By Alex Nicholson and Andre Soliani

June 10 (Bloomberg) — Russia and Brazil, seeking to reduce their dependence on the dollar, announced plans to buy $20 billion of bonds from the International Monetary Fund and diversify foreign-currency reserves.

Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds. Brazil’s Finance Minister Guido Mantega said his country will purchase $10 billion of debt sold by the IMF, China will buy $50 billion and India may announce similar funding.

Treasury yields climbed this year and the dollar fell in part on concern that foreign central banks would reduce holdings of U.S. financial assets just as America sells a record amount of debt to finance a growing budget deficit and pull the economy from the deepest recession since the 1930s. Treasuries fell today, six days before officials from the so-called BRIC nations meet in Yekaterinburg, Russia, where they plan to discuss the status of the dollar as the world’s reserve currency.

“The bigger picture is people are worried there are too many Treasuries, and that no one is even making a pretense of getting the fiscal deficit under control,” said Francis Beddington, co-founder of Insparo Asset Management, which oversees about $140 million in London.

The U.S. budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.

In The News Today

Posted June 8th, 2009 by Jim Sinclair & filed under In The News.

Dear CIGAs,

Later in the day it was reported that Mr. Krugman, who is now being referred as an economist rather than what he is, a sharp columnist, was quoted as saying that the recession would in hindsight be seen to have ended this coming summer.

If you were to listen to exactly what he said you can see that his London address was construed to meet the needs of financial media SPIN and in no way was outstandingly bullish.

Today’s bad news is simple to see if you take away the good news that is commonly fabricated in economic politically driven statistical analysis.

Today’s good news is a tragedy like the bankruptcy of GM and Chrysler because the alternative is considered catastrophic. The human suffering does not even enter the equation.

Jim Sinclair’s Commentary

This is the present situation. You can’t blame Israel for questioning where it now stands.

Jim Sinclair’s Commentary

Although judging from all that has transpired in terms of tromping on law and court precedents, one would assume the Administration is all over the Supreme Court tonight.

Having said that I am interested in how you can deduce that the stay is only miniscule in time from the following quote:

"Ginsburg said in an order that the sale is “stayed pending further order,” indicating that the delay may only be temporary."

The only reason one could conclude the timeframe is "very short" is because it is NOT a permanent order. That is called SPIN.

Chysler sale on hold, but for how long?
Supreme Court Justice Ginsburg grants delay in controversial Fiat deal

NEW YORK – Chrysler’s five weeks of breakneck-speed bankruptcy proceedings came to a screeching — but possibly temporary — halt Monday, when a Supreme Court justice delayed its sale of assets to Italy’s Fiat.

The move could derail the government’s ambitious plan for the U.S. automaker to blaze a path to profitability without the burden of many of its debts.

Justice Ruth Bader Ginsburg issued a stay just a week before Chrysler says the government-backed sale must go through. After June 15, Fiat could walk away from the deal and leave the struggling U.S. automaker with little option but to liquidate.

It was unclear late Monday just how long the stay would last, or if the high court planned to take up the case.

Chrysler said it had no comment until it receives further information from the court.

Jim Sinclair’s Commentary

How about the USA goes massively short the US dollar versus the Yuan?

That sounds stupid enough for the issuer to be considered by Washington.

Top Chinese banker Guo Shuqing calls for wider use of yuan
The head of China’s second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency.
By Malcolm Moore in Shanghai
Published: 5:38AM BST 08 Jun 2009

Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars.

Mr Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency.

It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely.

"I think the US government and the World Bank can consider the issuing of renminbi bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m).

HSBC and Standard Chartered have both said they are preparing to issue bonds denominated in yuan.

Jim Sinclair’s Commentary

Less demand for dollars with increasing supply is not what bull markets are made of.

IMF Says New Reserve Currency to Replace Dollar Is Possible
By Alexander Nicholson

June 6 (Bloomberg) — The International Monetary Fund said it’s possible to take the “revolutionary” step of creating a new global reserve currency to replace the dollar over time.

The IMF’s so-called special drawing rights could be used as the basis for a new currency, First Deputy Managing Director John Lipsky told a panel discussing reserve currencies at the St. Petersburg International Economic Forum today.

“There are many, many attractions in the long run to such an outcome,” Lipsky told a panel discussing reserve currencies at the St. Petersburg International Economic Forum today. “But this is not a quick, short or easy decision,” he said, adding that it would be “quite revolutionary.”

The SDRs would have to be delinked from other currencies and issued by an international organization with equivalent authority to a central bank in order to become liquid enough to be used as a reserve, he said.

As much as 70 percent of the world’s currency reserves are held in dollars, according to the IMF, leading to calls for nations to diversify their cashpiles to avoid excessive exposure to the U.S. economy as it quadruples its budget deficit in a bid to counter the worst recession since the Great Depression.

Jim Sinclair’s Commentary

Are these Government constituted court proceedings supposed to trample over the rights of the private party and contract law?

To take the position that any holder of bonds is not entitled to their rights because they were bought on the cheap threatens basic tenets upon which business is done.

Such an excuse for bad policy forgets the horror of the seller of those bonds who sold them cheap, could have held them and legally demanded their voice to be heard. It is their rights that are also being trampled on when any bond holder is forced to roll over by government pressure.

Now here is a surprise.

Supreme Court Delays Sale of Chrysler to Fiat
By MICHAEL J. de la MERCED
Published: June 8, 2009

The United States Supreme Court agreed Monday afternoon to delay the sale of most of Chrysler’s assets to Fiat pending further consideration of an appeal by three Indiana state funds, in a move that injects a new element of uncertainty over the carmaker’s bankruptcy case.

Justice Ruth Bader Ginsburg, who handles emergency matters arising from the United States Appeals Court for the Second Circuit, in a one-sentence order, said the orders of the bankruptcy judge allowing the sale “are stayed pending further order of the undersigned or of the court.”

The action indicates that the delay may be temporary, but for now the stay will keep Chrysler and Fiat from completing the transaction.

The stay prevented Chrysler and Fiat from completing the transaction immediately.

Lawyers for the three Indiana funds, which represent teachers and police officers, filed their appeal to Justice Ginsburg late Saturday night, after the Second Circuit reaffirmed a lower court’s approval of the sale. The appeals court then delayed the closing of the deal until 4 p.m. Monday or until the Supreme Court declined to issue its own delay.

The Indiana funds have sought greater compensation for their portion of Chrysler’s $6.9 billion in secured debt. They have also argued that the Obama administration illegally used federal bailout money earmarked for financial institutions to help Chrysler.

Jim Sinclair’s Commentary

Of course. Are we not watching one right now?

Royal Dutch Shell chief warns of future oil price spikes if investment continues to slacken
By Associated Press
1:23 AM PDT, June 8, 2009

KUALA LUMPUR, Malaysia (AP) — Oil prices will spike in the future without investment in the sector to meet demand once the global economy recovers, said Royal Dutch Shell Chief Executive Jeroen van der Veer on Monday.

Despite the current economic crisis, he said demand was projected to double by 2050 as the world population grows from 6 billion to 9 billion by that time. He said oil corporations should invest now in technology and develop new sources to reap benefits when the recovery comes.

"The oil and gas industry cannot supply all this additional demand … this means the next price spike is in the making," he told more than 1,000 delegates at a two-day oil and gas conference here.

"We think it is a good philosophy to be a high investor (now) and benefit from the lower construction prices," he said, without elaborating.

After soaring to $147 a barrel last July, oil prices plunged to as low as $32 late last year, which delayed or halted new oil exploration and refining projects. Since then, crude oil has climbed to the high $60s a barrel amid hopes of economic recovery and production cuts by OPEC.

Jim Sinclair’s Commentary

Think about Dark Pools and the veracity of the information as to read what marking up junk is hiding.

Bank Profits From Accounting Rules Masking Looming Loan Losses
By Yalman Onaran

June 5 (Bloomberg) — Big banks in the U.S. say they’re on the mend. The five largest were profitable in the first quarter, rebounding from record losses for the industry in the fourth quarter. Share prices have jumped, with the KBW Bank Index doubling since March 6.

Treasury Secretary Timothy Geithner, after “stress testing” 19 banks on their ability to withstand a worsening economy, declared in early May that Americans can be confident in the banks’ stability and resilience. Wells Fargo & Co. and Morgan Stanley were among banks raising $43 billion in new capital since then through share sales.

“With our capital and assets, stressed as they have been, we can go back to focusing all our attention on managing our business and restoring value,” Citigroup Inc. Chief Executive Officer Vikram Pandit said after Geithner’s examinations were completed.

The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.

The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.

Jim Sinclair’s Commentary

The culling of the gene pool. If you wish to reduce health care costs why not just reduce the geezers?

600,000 Seniors About To Lose Their Homes
Monday, June 8, 2009 11:32 AM
By: Julie Crawshaw

More than 600,000 seniors are delinquent in their mortgage payments or already in foreclosure, USA Today reports.

Unlike younger people, many are on fixed incomes and lack the money or job opportunities to catch up on payments when they fall behind.

"I’ve got a lot of seniors who have just been nailed," mortgage specialist Dean Wegner told the newspaper.

"They’re upside down (owing more on their mortgage than their homes are worth), they can’t refinance and they’re on a fixed income."

Conventional wisdom holds that most seniors have paid off their mortgages or have significant equity in their homes. But the reality is, hundreds of thousands of older homeowners are suffering in the housing crisis.

A recent report from AARP showed that 25.5 million seniors ages 50 and older have a mortgage — and that older Americans with subprime first mortgages are nearly 17 times more likely to be in foreclosure than Americans of the same age with prime loans.

Jim Sinclair’s Commentary

Israel will do whatever Israel feels necessary to survive.

The thought that a lack of US backing will overcome Israel’s fear of annihilation is to think as a Westerner and politician.

To assume you can make friends with or even simply neutralize fundamental Islam as a non-Muslim is nuts.

One of the long standing flashpoints for 2012 has always been that Israel would make a significant miscalculation.

West Bank Settlements and the Future of U.S.-Israeli Relations
June 8, 2009 | 1814 GMT
By George Friedman

Amid the rhetoric of U.S. President Barack Obama’s speech June 4 in Cairo, there was one substantial indication of change, not in the U.S. relationship to the Islamic world but in the U.S. relationship to Israel. This shift actually emerged prior to the speech, and the speech merely touched on it. But it is not a minor change and it must not be underestimated. It has every opportunity of growing into a major breach between Israel and the United States.

The immediate issue concerns Israeli settlements on the West Bank. The United States has long expressed opposition to increasing settlements but has not moved much beyond rhetoric. Certainly the continued expansion and development of new settlements on the West Bank did not cause prior administrations to shift their policies toward Israel. And while the Israelis have occasionally modified their policies, they have continued to build settlements. The basic understanding between the two sides has been that the United States would oppose settlements formally but that this would not evolve into a fundamental disagreement.

The United States has clearly decided to change the game. Obama has said that, “The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.” Israeli Prime Minister Benjamin Netanyahu has agreed to stop building new settlements, but not to halt what he called the “natural growth” of existing settlements.

In The News Today

Posted June 7th, 2009 by Jim Sinclair & filed under In The News.

Dear CIGAs,

Check out the top twelve indicators that the economy is bad:

12. CEO’s are now playing miniature golf.
11. I got a pre-declined credit card in the mail.
10. I went to buy a toaster oven and they gave me a bank.
9. Hotwheels and Matchbox car companies are now trading higher than GM in the stock market.
8. Obama met with small businesses – GE, Pfizer, Chrysler, Citigroup and GM, to discuss the Stimulus Package.
7. McDonalds is selling the 1/4 ouncer.
6. People in Beverly Hills fired their nannies and are learning their children’s names.
5. The most highly-paid job is now jury duty.
4. People in Africa are donating money to Americans. Mothers in Ethiopia are telling their kids, “finish your plate; do you know how many kids are starving inAmerica?”
3. Motel Six won’t leave the lights on.
2. The Mafia is laying off judges.

And my most favorite indicator of all.
1. If the bank returns your check marked as “insufficient funds,” you have to call them and ask if they meant you or them.

Jim Sinclair’s Commentary

You think buyers are kicking back?

The government in financial matters has not recently asked if you want whatever you are told to buy.

Silverton to be closed by FDIC rather than sold
Lita Epstein
Jun 5th 2009 at 10:00AM

The FDIC found buyers for Atlanta’s failed bankers’ bank, Silverton, but none of Silverton’s suitors wanted to pay enough for it. After analyzing the offers, the FDIC decided it would be less costly to shut the bank down than to accept the bids received.

Bidders included the Carlyle Group with a consortium of private equity investors, including Lightyear Capital, Harvest Partners and Colony Capital. “We have to do what is least costly to our insurance fund and to shut it down for good was less costly than the bids we received,” a spokesman for the FDIC told the Financial Times.

This would not have been the first time a private investment group bought one of the failed banks. Last month, Carlyle, with three other private-equity firms, bought the banking operations of Florida’s BankUnited from federal regulators. Regulatory hurdles and restrictions do make these deals more difficult to finalize. U.S. regulators have not yet decided whether or not it’s a good idea to allow private equity groups to buy banks.

Silverton was easier to shut down because it was a bankers’ bank with about 1,400 small banks in 44 states as customers. When the FDIC took over Silverton it set up a “bridge bank” to service the other small banks and gradually assisted these small banks with setting up operations through another of the bankers’ banks. Bankers’ banks serve as the middle man between community banks and the Federal Reserve.

The failure of Silverton is expected to cost the FDIC $1.3 billion. Silverton had $3.3 billion in deposits at the time it failed and $4.1 billion in assets.

Jim Sinclair’s Commentary

What is the Fed worried about? Could it be Ron Paul’s, “Edit the Fed,” bill, HR1207?

Fed Intends to Hire Lobbyist in Campaign to Buttress Its Image
By Robert Schmidt

June 5 (Bloomberg) — The Federal Reserve intends to hire a veteran lobbyist as it seeks to counter skepticism in Congress about the central bank’s growing power over the U.S. financial system, people familiar with the matter said.

Linda Robertson currently handles government, community and public affairs at Johns Hopkins University in Baltimore, and headed the Washington lobbying office of Enron Corp., the energy trading company that collapsed in 2002 after an accounting scandal. She was also an adviser to all three of the Clinton administration’s Treasury secretaries.

Robertson would help the Fed manage relations with lawmakers seeking greater oversight of a central bank that has used emergency powers to prevent Wall Street’s demise. While she wasn’t tied to Enron’s fraud, her association with the firm may raise questions, analysts said.

“Some members of Congress think there are votes in attacking the Fed” after it “unnecessarily and unwisely entangled monetary policy with fiscal policy,” said former St. Louis Fed President William Poole. “The Fed is going to have a tricky time of unwinding what has been done” and will need to “keep in touch with members of Congress more thoroughly,” said Poole, now senior fellow with the Cato Institute in Washington.

Robertson served under Treasury Secretaries Lawrence Summers, Robert Rubin and Lloyd Bentsen. She didn’t return calls seeking comment.

Jim Sinclair’s Commentary

You cozy up and look at the immediate result.

Remember #1 is that Israel makes a major miscalculation.

Saudi FM to U.S.: Cut off aid if Israel doesn’t end occupation
By Haaretz Service

The United States should cut off its aid to Israel if the country does not end its occupation of Arab land, Saudi Arabia’s foreign minister told Newsweek in comments published Friday.

In response to a question on whether the U.S. should carry out the move, Prince Saud al-Faisal said: “Why not? If you give aid to someone and they indiscriminately occupy other people’s lands, you bear some responsibility.”

The interview with the foreign minister, which is for the magazine’s June 15 issue, was published a day after Obama vowed in a speech in Cairo Thursday to personally pursue a two-state solution to the Palestinian-Israeli conflict.

Faisal added: “The United States has the means to persuade the Israelis to work for a peaceful settlement. It needs to tell them that if it is going to continue to help them, they must be reasonable and make reasonable concessions.”

He went on to say that that the normalization of ties between Israel and the Arab world can only come after Israel leaves occupied land.

Jim Sinclair’s Commentary

Metals always grow as currency implodes!

Russian ruble to go palladium
05.06.2009

Boris Gryzlov, the speaker of the Russian Parliament, the State Duma, said that the participants of the Economic Forum in St. Petersburg would discuss a possibility of making ruble coins from precious metals.

“We could offer the world the Russian ruble made of palladium. It would be a very strong currency. One may recollect the golden ruble, which Russia had during the tsarist times. It was a freely convertible currency and was circulating very well,” Gryzlov told reporters Thursday.

The President of the Association of Russian Banks, Garegin Tosunyan said that the coins made of precious and semi-precious metals would obviously be in demand on the market. “It has little to do with convertibility, but it would be quite normal as a measure against inflation and devaluation. Why not?” he said.

State Duma deputy Anatoly Aksakov believes that such a measure would not be effective.

“Such coins will become a numismatic rarity, a must-have for private collectors. Golden ten-ruble coins used to play a positive role in domestic and international settlements indeed, although it was the period of hyperinflation. The Russian economy should be modernized to make the ruble attractive.

Jim Sinclair’s Commentary

It is getting really expensive these days to rent an army.

Let’s hope our future is not the same as Crosus’s, the renter of two Roman legions. For the historians out there, he lost his head by renting those legions.

Pakistan asks U.S. debt forgiveness
Published: June 6, 2009 at 7:33 AM

ISLAMABAD, Pakistan, June 6 (UPI) — A meeting between U.S. envoy Richard Holbrooke and Pakistani Prime Minister Yousuf Raza Gilani included a plea for debt forgiveness, officials said.

Gilani asked Holbrooke during their Friday meeting to help Islamabad’s struggle against Taliban militants by writing off $1.35 billion it owes to the United States, Pakistan’s English language newspaper Dawn reported.

Holbrooke told Gilani he would look into the matter, Minister of State for Finance and Economic Affairs Hina Khar told Dawn.

Also during the meeting, Gilani reportedly urged the White House to persuade Congress to put requests for substantial increases in military aid to Pakistan on a fast track while it battles Taliban militants in the North West Frontier Province.

Dawn said Gilani acknowledged that the United States had funneled $300 million in humanitarian aid to Islamabad in its efforts to help millions of refugees in Swat and other war-torn northwestern districts.

Jim Sinclair’s Commentary

Here is the King of anti-Gold religionists in government.

In Britain, a desperate prime minister hangs on
Gordon Brown is burdened by ongoing economic crisis and expenses scandal
By Kevin Sullivan
updated 3:11 a.m. PT, Sun., June 7, 2009

LONDON – Two years ago, Gordon Brown entered 10 Downing Street for the first time as prime minister and promised, without a smile, to “try my utmost.”

The brainy, stone-faced Scot was the perfect tonic for a British public jaded after a decade of his flashy predecessor, Tony Blair. Within a week, Brown’s popularity ratings had soared to 77 percent.

Now a battered Brown finds himself desperately clinging to his job, facing a fed-up public, a rebellious party and, if things get much worse, the prospect of being one of the shortest-serving prime ministers in modern British history.

Jim Sinclair’s Commentary

Gerald Celente has made accurate forecasts to a degree that if I was 180 degrees opposed to his view, I would reconsider mine.

The salient point for you is his opinion of the dollar and gold.

Here is one more resource for you.

Exclusive Interview with Future Prediction Expert Gerald Celente
by Terry Easton
06/05/2009

It’s the end of the world as the Greater Depression hits after 2010’s failed “W-recovery”

Human Events had the opportunity to interview forecaster extraordinaire Gerald Celente, President of Trends Research Institute, several days ago — and the future he predicts looks bleak indeed. In fact, as Mr. Celente sees it, the Great Depression will seem like a mild recession as what waits for us in 2011 hits with the force of a Katrina financial hurricane.

In case you’re wondering who Mr. Celente is (if this is still possible), he’s appeared — along with his predictions — on Oprah, CNBC, Reuters, NBC, PBS, BBC, the Glenn Beck Show — the list goes on an on. His Trends Report has been successfully predicting the major future trends impacting our lives for 3 decades, including calling the dot com crash back in the 1990’s.

Mr. Celente’s forecast on our impending future is based on his study of history. He says we are bent on destroying our currency, bankrupting our government, and unleashing a violent citizen-against-citizen eruption as the economy collapses into chaos and marshal law fascism.

Quite a claim. And God help us if he is right — again.

Jim Sinclair’s Commentary

The entire excuse for the short squeeze dollar rally was another imaginary Green Shoot, “the Employment Report,” that Commercials use to squeeze the dollar up. That report is FALSELY interpreted.

Temp work covers up the depth of unemployment. Adding in discouraged, part-time employees almost doubles the national rate.

Temp work helps mask joblessness among Americans
updated 12:48 p.m. ET, Sun., June 7, 2009
Associated Press Writer Frank Bass

TOWNSHEND, Vt. – For weeks, Greg Noel roamed the spine of the Green Mountains with a handheld GPS unit, walking dirt roads and chatting with people as he helped create a map of every housing unit in the United States.

Work was good: The sun was out, the snow was gone and the blackflies hadn’t begun to hatch. But now that work is over and Noel, 60, and more than 60,000 other Americans hired in April to help with the 2010 census are out of work once more.

It’s a familiar predicament in today’s economy, in which some 2 million people searching for full-time work have had to settle for less, and unemployment is much higher than the official rate when all the Americans who gave up looking for jobs are counted, too.

Because of the surge of hiring for the census, April unemployment only rose to 8.9 percent – a much slower increase than had been feared. Figures out today show unemployment now stands at 9.4 percent.

But consider these numbers:

The 9.4 percent May unemployment rate is based on 14.5 million Americans out of work. But that number doesn’t include discouraged workers, people who gave up looking for work after four weeks. Add those 792,000 people, and the unemployment rate is 9.8 percent.

Jim Sinclair’s Commentary

“We’re one of the most secure facilities in Canada,” Christine Aquino, mint spokeswoman, said Thursday. “Doing business with the mint is still safe, and this review will likely give us some suggestions on how to improve our processes.”

Doesn’t this article say they can’t find a good amount of the gold and they think it is an inside job?

Where did they find this spokeswoman, on financial TV?

Mint looks for gold, freezes worker bonuses
BY IAN MCLEOD, OTTAWA CITIZEN
JUNE 4, 2009

OTTAWA — The Royal Canadian Mint is withholding employee bonus pay as special auditors enter a fourth month hunting for unaccounted gold that insiders say could be worth as much as several million dollars.

The Ottawa Citizen reported Wednesday that external auditors are investigating an “unreconciled difference” between the 2008 financial accounting of the mint’s precious-metals holdings and the physical stockpile of gold, silver and palladium at its Ottawa headquarters. The mystery raises possibilities from sloppy bookkeeping to a gold heist.

Stealing gold or other metals would be a considerable feat, one that would have to evade state-of-the-art security technology.

“We’re one of the most secure facilities in Canada,” Christine Aquino, mint spokeswoman, said Thursday. “Doing business with the mint is still safe, and this review will likely give us some suggestions on how to improve our processes.”

The mint has delayed asking federal Auditor General Sheila Fraser to sign off on the Crown corporation’s consolidated financial statements for 2008, as required by law, and senior government and mint officials have been secretive about the probe.

Jim Sinclair’s Commentary

First China/Brazil and now China/Russia. The dollar rally is going to run into real problems.

The set up is perfect. The 2nd week of June is coming up with a target for the big lift off in the 3rd. $1650 is a minimum for this phase. Alf thinks an overrun could be double that $1650.

Good luck to the Goons. Their window of opportunity, if the Goons have one, is in the next 2 weeks ONLY.

Russia, China should dump dollar in trade – Medvedev
Fri Jun 5, 2009 3:07pm IST

MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

“I think that we can think about such positions, for example the rouble against yuan,” Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

In The News Today

Posted June 5th, 2009 by Jim Sinclair & filed under In The News.

Dear CIGAs,

I made this wager when Gold was at $248, and all I got was a Forbes article because they were looking for some dumb bell then that liked gold in order to make fun of him/her. Click here to view the Forbes article… That’s a nice way to get a career article in Forbes.

Robertson is right, so we are right, as the rates he looks for come compliments of a currency event that delivers hyperinflation. He just has to be sure the other side or sides of his OTC derivative puts up margin on a daily basis or he could be 100% right and not get paid one penny.

Please don’t send 10,000 emails and faxes asking "if the interest rate goes up will that not make for a strong dollar and weak gold" because it has been answered almost every day for the past several years. No it will not because in the midst of lousy business a currency event creates hyperinflation thereby producing the rate of interest over the top.

Julian Robertson Bets the Farm on Inflation
June 04,

Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes’ billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the ‘Tiger Cubs.’ And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.

For those unfamiliar with Robertson, we’d highly recommend checking out the profile/biography we just wrote on him. In that piece, we have outlined exactly why you should follow him (and the Tiger Cubs for that matter too). As we detailed in his profile, Robertson has a unique investment methodology. He takes a macro approach, finds a smart idea, researches it exhaustively, and places a big bet. And, when he feels he is more than correct, he will ‘bet the farm.’ And, it looks like we have identified Robertson’s next play where he has and will continue to ‘bet the farm.’

Julian’s Big Bet

While this is not a new position for Robertson, his constant confidence behind the play has inspired us to look at it more closely. Today, we are going to highlight Julian Robertson’s steepener swap play. In layman’s terms, he is betting on inflation. Taken from eFinancialNews, "Steepeners are a type of interest rate swap, where one party agrees to pay the other a fixed rate in exchange for a floating rate, which is derived from the difference between long and short term rates. Many of these products also use high leverage, where the difference between the two rates is multiplied by up to 50 times to produce a higher return."

He thinks rates could hit 7% easily and could go as high as 18%. We agree with him on this play and we first published our very basic rationale behind shorting US Treasuries back in October of last year. The main point we’re focused on is the wager that inflation is in our future. If such an outcome came to fruition, yields on long-term Treasuries would rise. When the yields increase, bond prices will drop, thus benefiting the short position. While the vehicles noted in this article are all slightly different in construction and purpose, they all broadly wager on the same outcome: inflation. Julian’s talked about this play in numerous forms, and we actually first heard about his ‘curve steepener’ play in January 2008 in Forbes. That piece highlighted how Robertson was "long the price of two-year Treasuries and short the price of the ten-year Treasury – betting that the difference, or curve, in the yield between the two will increase." Such a play is negative on the US economy and Robertson executed it because he felt the Federal Reserve would continue to flood the economy with money. And, he has been right.

Jim Sinclair’s Commentary

Vanity Fair’s article calls it a Beach Bummer.

I am sure we all feel very sorry for the OTC derivative mavens that have been thrown onto hard times. Now they will have to both winter and summer in Greenwich CT.

BEACH BUMMER
The Hamptons Stress Test
As summer begins, what better way to measure Wall Street’s health than a real-estate tour of the Hamptons? For every mansion on the sales or rental market, there’s a story—sometimes involving Bernie Madoff—and brokers are shell-shocked. The author surveys the deals, no-deals, lawsuits, divorces, and teardowns that characterize this strange, dark season.
By MICHAEL SHNAYERSONJuly 2009

It was the deal of the season—the deal, that is, that epitomized this dark, down, fraud-ridden year—in the once extravagant, now somber Hamptons.

John Veronis, a founding partner of Veronis Suhler Stevenson, the media-based private-equity firm that bears his name, thought he had a buyer last summer for his 10,000-square-foot oceanfront home, on Meadow Lane in Southampton’s prized estate section. Just how much he and his wife, Lauren, had been motivated to sell by the spec house going up beside them is unclear, since the Veronises declined to speak to Vanity Fair.

Jim Sinclair’s Commentary

The new inflation alarm at the vigilant New York Federal Reserve Bank:

WV FIRE ALARM

Jim Sinclair’s Commentary

Stand firm and stay the course.

Yellen speaks of substantial shocks to come. If you assume that the algorithms were triggered and went wild today based on the green shoot demand for the dollar early on, what do you think SUBSTANTIAL SHOCKS will do to the algorithms?

Stand firm and stay the course.

Yellen Says Fed Must Brace for ‘Substantial Shocks’
By Vivien Lou Chen and Scott Lanman

June 5 (Bloomberg) — Federal Reserve Bank of San Francisco President Janet Yellen said that policy makers need to be prepared for “substantial shocks” and that rising Treasury yields may be a “disconcerting” signal of inflation fears.

“Recent experience raises the possibility that the Great Moderation is behind us, so we must be prepared for substantial shocks,” Yellen said today during a panel discussion hosted by the Fed Board of Governors in Washington. “Great Moderation” is a term used to describe the comparative economic stability seen in the U.S. and other major industrial countries, except Japan, since the mid-1980s.

Yellen’s comments on yields go beyond remarks made two days ago by Fed Chairman Ben S. Bernanke, who said in congressional testimony that the increases may reflect rising optimism about the economy and concerns about large federal deficits. Policy makers next meet June 23-24 in Washington and may consider whether to increase their planned purchases of $1.45 trillion of housing-related debt and $300 billion of long-term Treasuries.

Responding to audience questions, Yellen said that if she “had to write down a number” for the ideal long-term inflation goal, it would be 2 percent. That number is the preference of most Fed policy makers, she said, adding she would like to see more formal evaluation and research on the issue. She said she previously favored a 1.5 percent inflation rate.

“It’s a subject in which I have an open mind,” Yellen said.

Treasuries Tumbled

Treasuries tumbled today, driving two-year yields to an eight-month high, as traders began speculating the U.S. central bank will raise interest rates later this year.

Jim Sinclair’s Commentary

This article focuses on the reality of ETF gold and silver with no bone to pick. That makes it required reading for all of us involved in the metals markets. Further, it is published by a Financial Times sponsored entity, which is another positive.

Will a ‘Silver Bullet’ Finally Kill the Metal Manipulators?
June 04,

In my previous commentary, “Silver market fundamentals DISTORTED by bullion-ETFs", I pointed out how (so-called) “bullion-ETFs" were (with rare exceptions) merely a tool of the manipulators – with two primary purposes.

First of all, bullion-ETFs soak-up billions of investor-dollars each year, which would otherwise be invested in real bullion, or in the shares of precious metals miners. Naturally, this has helped to depress the price of silver, andseverely depress the price of silver miners – since almost all of the diverted investor-dollars were diverted from the miners, and not bullion, itself. I also showed how these fraudulent investment vehicles have been used to artificially inflate the supposed inventory-levels of silver stockpiles.

Specifically, at a time when actual silver inventories are at their lowest level in centuries, the (supposed) amount of “bullion” these funds claim to hold hassinglehandedly resulted in “official” inventory levels tripling in just three years – after plunging by 90%.

Today’s market price is based upon these phony “inventories” despite the fact that the bullion-banks who claim to hold all this silver are neversubjected to audits, to determine that they are not only holding enough silver to cover their custodial agreements with the “bullion-ETFs" – but are alsoholding sufficient silver to cover the MUCH larger “short” positions of these Manipulators (see “Silver Manipulation the worst in history – Ted Butler”).

Unless and until there is such a full and complete audit, the only rational assumption for investors is this supposed “tripling”of inventories is totally illusory, which also means that the “bullion” that is claimed to be held by these bullion-ETFs is also illusory.

Jim Sinclair’s Commentary

The question is timing.

Yes, it is possible for equities to perform like that in currency event driven hyperinflation.

What a delightful event to see the illegal (not legal – for them we have respect) goons ground into their own dirt, filth and fowl existences.

What do you think such an event would mean to gold equities as they follow the gold price, and get no opposition?

Jim Rogers On CNBC- I Have No Shorts
June 5, 2009

For the majority of his career, Jim Rogers has had both long and short positions. As of this interview, this is one of the few times Jim Rogers does not have a short position. Among the reasons for Jim not having any shorts is a possible currency crisis and thus should avoid shorting the market. The last time Jim had no shorts was the market crash of 1987. Among other things Jim Rogers continues to be “wildly” bullish on China, “wildly” bullish on commodities. Specifically, Jim likes Silver over Gold, Natural Gas and Cotton.

“I’m afraid they’re printing so much money that stocks could go to 20,000 or 30,000″ -Jim Rogers

– May Jobs Loss Was About 538,000 Net of Biases versus 345,000 Official Decline
– Birth-Death Model Upside Bias Increased by 27%
– Annual Payroll Decline Deepened to 4.0% / SGS-Alternate Unemployment at 20.5%

From the following subscription service you should subscribe to:

http://www.shadowstats.com

Jim Sinclair’s Commentary

Extremely well said.

No country has ever abolished poverty by printing paper
by Egon von Greyerz
June 4, 2009

We have consistently warned investors that the USA and many other countries including the UK will have a hyperinflationary depression in coming years. In this Newsletter we discuss why hyperinflation will happen. We also look at why government debt will grow exponentially in the next few years and discuss who is going to repay the additional $30-50 trillion that the world is likely to print since this crisis started?

Hyperinflationary Scenario Confirmed

We are primarily discussing the USA in this Newsletter, but most of the discussion also applies to the UK and many more countries.

Our three most important indicators are now confirming that the hyperinflationary avalanche is set in motion. The three indicators are: US Dollar US, Treasury Bonds, and Gold. In our January 5, 2009 Newsletter we stated “the big surprise in the coming year will be long rates going up and bond markets falling rapidly”. We also said: “We expect the dollar fall to accelerate during 2009 against most currencies”. And finally we said back in January that gold is our favourite investment for 2009. So it should be no surprise to our readers that the US Treasury 30 year bond is falling rapidly (interest rates going up), that the US dollar has resumed its down trend and that gold is on its way to new highs.

The three indicators – US Dollar,T Bonds, and gold are all variations on a theme. The theme is clear, namely that the USA is on its way to bankruptcy and that the rest of the world is no longer prepared to finance pieces of paper that have no value and can only be repaid by printing more of the same worthless paper. As George Bernard Shaw said:

“YOU HAVE TO CHOOSE BETWEEN TRUSTING THE NATURAL STABILITY OF GOLD AND THE NATURAL STABILITY AND HONESTY OF THE MEMBERS OF THE GOVERNMENT. AND WITH DUE RESPECT FOR THESE GENTLEMEN, I ADVISE YOU AS LONG AS THE CAPITALIST SYSTEM LASTS, TO VOTE FOR GOLD”

We agree with Shaw – How can you trust a government that first creates the biggest financial bubble in history and then, as proof of their total idiocy, attempts to solve the problem by massively increasing the size of the bubble!

Jim Sinclair’s Commentary

Here is today’s bullish news on the dollar so you know it is a short squeeze in La La Land.

U.S. employers cut 345,000 jobs; jobless rate jumped to 9.4 percent

WASHINGTON – With companies in no mood to hire, the unemployment rate jumped to 9.4 percent in May, the highest in more than 25 years. But the pace of layoffs eased, with employers cutting 345,000 jobs, the fewest since September.

The much smaller-than-expected reduction in payroll jobs, reported by the Labor Department on Friday, adds to evidence that the recession is loosening its hold on the country. It marked the fourth straight month that the pace of layoffs slowed.

Still, the increase in the nation’s unemployment rate from 8.9 percent in April underscores the difficulties that America’s 14.5 million unemployed are having in finding new jobs. Economists had expected the rate to hit 9.2 percent last month.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.4 percent in May, the highest on records dating to 1994.

Even with layoffs slowing, companies will be reluctant to hire until they feel certain that economic conditions are improving and that any recovery will last.

Jim Sinclair’s Commentary

Another prime example of why anyone who fears IMF gold sales are also terrified of things going bump in the night.

REFILE-UPDATE 1-China ready to buy up to $50 bn IMF bonds-Lipsky
Fri Jun 5, 2009 6:45am EDT
(Refiles to correct title of IMF’s Lipsky in first paragraph)
(Adds background, quotes)

ST PETERSBURG, Russia, June 5 (Reuters) – China will invest up to $50 billion in new International Monetary Fund bonds, the IMF’s first deputy managing director John Lipsky told Reuters financial television on Friday.

"The Chinese authorities have indicated that … (they) would be interested in investing up to $50 billion dollars in these bonds when they are ready and we hope that other countries will follow suit," Lipsky said on the sidelines of the St Petersburg Economic Forum.

Russia has already said it is interested in buying up to $10 billion of the bonds, which will form part of the extra $500 billion in capital the IMF is seeking to raise to help it support countries through the worst global economic slowdown since the great depression [ID:nL5330603].

China is the world’s biggest holder of gold and forex reserves, followed by Japan and Russia.

Lipsky said proposals for the bond issuance will soon be submitted to the IMF’s executive board, which should also receive the proposals for the issue of new Special Drawing Rights (SDRs) next month.

Jim Sinclair’s Commentary

Who out there is so naive as to think that these banks actually made all those billions trading in the first quarter?

That was the end of the mark to market rule followed by upward revaluation of the toxic asset portfolios booked as trading profits.

Destroyers and Paper Shufflers are all that is out there.

The street knows it, financial TV knows it, the dancing clown knows it and they all love it. You see how foul, amoral and soul-less these demons are.

They are so bad they are not even welcomed by King Ravana in Lanka.

Bank Profits From Accounting Rules Masking Looming Loan Losses
6-05-09
By Yalman Onaran

June 5 (Bloomberg) — Big banks in the U.S. say they’re on the mend. The five largest were profitable in the first quarter, rebounding from record losses for the industry in the fourth quarter. Share prices have jumped, with the KBW Bank Index doubling since March 6.

Treasury Secretary Timothy Geithner, after “stress testing” 19 banks on their ability to withstand a worsening economy, declared in early May that Americans can be confident in the banks’ stability and resilience. Wells Fargo & Co. and Morgan Stanley were among banks raising $43 billion in new capital since then through share sales.

“With our capital and assets, stressed as they have been, we can go back to focusing all our attention on managing our business and restoring value,” Citigroup Inc. Chief Executive Officer Vikram Pandit said after Geithner’s examinations were completed.

The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.

The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.

Jim Sinclair’s Commentary

And now a few words by the former Chairman uttered before the sins and greed of La La Land got to him!

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process… It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard."

–Alan Greenspan in a 1967 speech

Jim Sinclair’s Commentary

All of these initiatives and discussions have but one agenda, and that is the death of the US dollar.

Japan’s shadow finance minister wants single Asian currency

The man who hopes to be Japan’s next finance minister envisions an Asia united by a single currency, saying the dollar may no longer reign supreme in future.

The opposition’s "shadow finance minister" Masaharu Nakagawa also says he hopes to reshape the world’s number two economy into a kinder, gentler place if his Democratic Party of Japan (DPJ) wins elections this year.

"You can’t invigorate society only through… the law of the jungle where the strong become stronger," he told AFP. "The same player would always win if there were no handicaps in golf."

Japan’s conservative Prime Minister Taro Aso must call elections by September, when the DPJ hopes to topple his Liberal Democratic Party, which has been in power for almost all of the past half century.

In an interview with AFP, Nakagawa outlined some of the changes he would like to make if he becomes finance minister in Asia’s largest economy, which is now in the throes of its worst post-World War II recession.

Jim Sinclair’s Commentary

According to Fox News.

All pronouncements from upon high have high consequences:

Obama Overture to Hamas Suggests Inevitability of Terror Group’s Dominance Among Palestinians

In an apparent policy shift, President Obama on Thursday invited Hamas — a designated terror organization — to "play a role" in the future of the Palestinian people.

During his speech to the Muslim world in Cairo on Thursday, the U.S. president bluntly recognized the group, which has called for the destruction of Israel, in a two-sentence passage that was part of a broader discussion about the terms for peace between the Israelis and the Palestinians.

"Hamas does have support among some Palestinians, but they also have to recognize they have responsibilities. To play a role in fulfilling Palestinian aspirations, to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, recognize Israel’s right to exist," Obama said.

The president then called on Israel to end settlement construction and for both sides to embrace a two-state solution. He reiterated that the U.S. bond with Israel is "unbreakable."

Some observers said they were struck by the firm tone Obama took with both sides in addressing the generations-old conflict and particularly with his recognition of Hamas, which may signal to the group that it is seen as an inevitable part of the Palestinian future.

Jim Sinclair’s Commentary

It is high stakes poker that our leaders play.

It should be quite apparent now what "Israel makes a significant miscalculation," means.

Obama shifts tone toward Islamic parties

President Obama hinted Thursday that the United States would for the first time accept the results of Middle East elections won by Islamist parties.

In contrast to the Bush administration, which boycotted groups such as Hamas and Hezbollah even after they performed well in elections, Mr. Obama said, "America respects the right of all peaceful and law-abiding voices to be heard around the world, even if we disagree with them. And we will welcome all elected, peaceful governments — provided they govern with respect for all their people."

Those words carry particular significance because on June 7 Lebanon is expected to hold an election where Hezbollah, an Iran-backed group, could win a plurality of votes.

It was also a message to the Egyptian Muslim Brotherhood, whose members running as independents won 88 seats — 20 percent of the Egyptian national assembly — in 2005 despite widespread cheating on behalf of the government.

Several members of the group were in the audience at Cairo University as the president spoke. Egypt holds new parliamentary elections next year.

Jim Sinclair’s Commentary

First, China/Brazil and now China/Russia. The dollar rally is going to run into real problems.

The set up is perfect: The 2nd week of June coming up with a target for the big lift off in the 3rd.

$1650 is a minimum for this phase. Alf thinks an overrun could be double that.

Good luck to the Goons. Their window of opportunity, if the Goons have one, is in the next 2 weeks ONLY.

Russia, China should dump dollar in trade – Medvedev
Fri Jun 5, 2009 3:07pm IST

MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

"I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

In The News Today

Posted June 4th, 2009 by Jim Sinclair & filed under In The News.

Dear CIGAs,

A major criteria for the most significant move in gold, called a Golden Pillar, is the demise of the long bond. This is why you must understand that hyperinflation is a product of a currency event that occurs in the midst of the worst of business conditions. The event is locked in and loaded by quantitative easing.

The first window in time for this event is the early 4th quarter of 2009. When it starts it runs quite quickly. Within 12 to 18 month from the initial rumblings hyperinflation consumes the currency.

The first rumblings are here and now below .8200 on the USDX. Below .7200 and you will be looking back at $1224 as gold runs towards $1650.

This is definitely on its way.

The commercial interests are still not ready for this. For the commercial interest to either miss this move or be buried by it is a reach. It could happen, but is unlikely to happen without a fight. We will be watching closely to call it for you.

In truth the best possible action would be for gold to decline from some level into the third week of this month and then launch forward. However, to those utilizing gold to insure their standard of living and life it makes no difference at all. The reason for that is gold is going to $1650 and then on to Alf’s numbers.

The goons are now making fools out of themselves in gold equities. The gold share hit yesterday was GRANDSTANDING in an attempt to shake out stock for a cover.It is apparent to me that the shorts are getting very itchy to cover. That is what dirty tricks are all and only about.

I really can’t understand why anyone wants to trade here or try to market time here. It is so obvious to the trained eye that the train is pulling out of the station for biggest move so far in gold. Stop trying to time everything to the minute. You want a full position – do it and do it now.

U.S. mortgage rates surge to highest level since December
Thu Jun 4, 2009 4:04pm EDT
By Julie Haviv

NEW YORK (Reuters) – U.S. mortgage rates surged to their highest in almost six months in the latest week, despite government efforts to keep rates at low levels that will help the hard-hit housing market begin to recover.

Interest rates on U.S. 30-year fixed-rate mortgages soared to 5.29 percent for the week ending June 4, up from 4.91 percent in the previous week, according to a survey released on Thursday by home funding company Freddie Mac.

The higher rates reflected an increase in yields on U.S. government bonds, which act as a benchmark for the mortgage market.

"Any additional rate increases will significantly hurt the home purchase and refinance markets, which will really hurt the economic recovery," said Alan Rosenbaum, president of Guardhill Financial, a New York City-based mortgage banker and brokerage company.

The last time rates exceeded current levels was the week ended December 11, 2008, when the 30-year rate was at 5.47 percent. The latest week marked the biggest jump since a 0.42 percentage point rise in the week ended October 30, 2008, when rates hit 6.46 percent.

Jim Sinclair’s Commentary

Another bank headed for trouble?

clip_image002

Jim Sinclair’s Commentary

Green shoot or only fertilizer?

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Jim Sinclair’s Commentary

In the 4th quarter of this year China will in be competition with the entire world to consume all the production for the next few years and more.

The Chinese are smart – they will not be waiting for the 4th quarter.

By the 4th quarter of 2009 the full sized lady will have sung. You can count on that.

China to consume 40% of global gold production
2009-06-04 16:00:00
By Karim Rahemtulla

The economic fundamentals for gold are favorable. Production of gold from South Africa, United States, Australia and Canada, has dwindled every year over this past decade.

These countries, which combined to produce two thirds of the global gold through the 1980’s, now produce less than half of the gold mined today. In 2006, South Africa, the world’s largest producer of gold, hit its lowest production level of gold in 84 years.

Meanwhile, physical demand for gold has been going through the roof. Much of the recent explosion in demand can be attributed to retail investors in India, China and other parts of Asia where the appetite for gold as investments is soaring.

India, for example, is experiencing an 80% growth in gold investment following a loosening of trade and market restrictions.

And let’s not forget China.

China, which has the fastest-growing economy in modern history, is undergoing major changes in the way they handle gold.

China, home to 1.3 billion people, private gold ownership has been outlawed for generations. But in 2002, the Shanghai Gold Exchange opened and started free trade in gold for the first time in the nation’s history.

Jim Sinclair’s Commentary

A strange thing happened on the way to the State of the Union. Expenses went sky high and revenues dropped into a black hole.

It looks like the Formula was all people had to know in 2006, but then who wants the truth when there is such large rewards for liars, goons and all around SOBs.

Benefit spending soars to new high

By Dennis Cauchon, USA TODAY

The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans’ income is now coming in the form of a federal or state check or voucher.

Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That’s the highest percentage since the government began compiling records in 1929.

In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008.

The recession caused about half of the increase, according to the report. Unemployment insurance nearly tripled in the past year. The other half is the result of policies enacted during President George W. Bush’s first term.

Following the 2001 recession — when costs normally decline — social spending soared to pay for the Medicare drug benefit, expanded health care for children and greater use of food stamps.

The safety net is working, advocates say.

Jim Sinclair’s Commentary

It is time for the kids to stand aside. They need beer money while the older applicants need to put food on the family table. Yes, it is that bad.

This is what the OTC derivative manufacturers and distributors have contributed to society.

Older workers muscling out teens for summer jobs
By Tony Pugh | McClatchy Newspapers

WASHINGTON — After three years of braving Alaska’s minus 50-degree winter temperatures and round-the-clock summer sunshine, architect Victoria Schmitz is taking a break. She’s going to summer camp for two months outside Boulder, Colo.

Schmitz, 34, won’t spend her time horseback riding, hiking or canoeing in the scenic foothills of the Rocky Mountains, however. She’ll be working from 6 a.m. to 7:30 p.m. serving meals to adolescent boys as an assistant cook in the camp kitchen.

Her summer foray into food service isn’t by choice. It was the only job she could find, as so many companies have halted or postponed construction projects because of the recession.

"I’m the lunch lady. Hoagies and grinders and navy beans," Schmitz said, in a sly reference to the old Adam Sandler-Chris Farley skit from "Saturday Night Live."

Across the country, the job shortage has created a buyers’ market for traditional summer employers who can now pick from an abundance of laid-off and older workers, such as Schmitz, whose experience, reliability and hunger make them more attractive as short-term seasonal hires.

Jim Sinclair’s Commentary

Regardless of the chatter of the talking heads, this overvalued dollar is going to seek .72, .62 and .52. This winter is going to be extremely difficult for the US dollar. I am sure that before December the dollar will be pummelled

U.S. dollar ‘seriously overvalued’: study
Wed Jun 3, 2009 8:07pm EDT

WASHINGTON (Reuters) – The U.S. dollar is "seriously overvalued," mostly against the Chinese renminbi and some other Asian currencies, according to a new study published on Wednesday.

The Peterson Institute for International Economics, a Washington-based think tank, said the majority of the 29 currencies it studied need to appreciate against the dollar, with a large rise especially needed by the Chinese currency.

"The principal counterpart to the overvalued dollar is the undervaluation of the Chinese renminbi, which would have needed to appreciate about 21 percent on a weighted average basis and about 40 percent against the dollar to achieve equilibrium," said the study by economists William Cline and John Williamson.

Investor flight to the dollar safe haven since last year has pushed the U.S. currency up by about 10 percent, which on top of an estimated overvaluation of about 7 percent a year ago made for an overvaluation of about 17 percent by March this year, the study said.

But the dollar slid to its low in 2009 on June 1 against the euro and a basket of currencies amid optimism the prospect of a global economic recovery boosted riskier assets.

Jim Sinclair’s Commentary

The biggest gamble Washington has taken is the fast (maybe) GM and Chrysler bankruptcy. The auto downsized giants are counting on car sales at a no less than 9-10 million units rate after bankruptcy.

A failure for these sales to occur will be so public that no matter of SPIN will cancel the disappointment. You can count on the government buying of vehicles to be jammed into the first 6 to 8 weeks, but that will be it. All of the indices that have given the largest support to the green shoot BS are those whose foundations are subjective and interview based.

The USA will be right behind GB as per the following article;

The Bank of England’s medicine is not working
Posted By: Edmund Conway at Jun 2, 2009 at 16:33:57

Anyone who really believes the credit crisis is over; that the bull market is back and that we are effectively back to the races may be in for a shock. Yes, an unprecedented amount of monetary and fiscal medicine has been thrown at the economy. Yes, economic growth may have passed its nadir. But real signs of recovery? No, the medicine is not working yet. Starting with quantitative easing.

QE – the process in which the Bank of England effectively prints money and pumps it directly into the economy – was always going to be a tough one to pull off. The Japanese tried it in the 1990s and any evidence of success is hardly conclusive. And the earliest signs from the UK’s own experience are hardly any more encouraging.

Today the Bank of England released its mammoth monthly monetary and financial stats book and a dig beneath the numbers uncovers some rather alarming facts about the QE programme and its efficacy. The first is that the so-called leakage of the cash overseas (we first reported on this last month) is gathering pace.

Simply put, the way the Bank had intended to get the money into the economy is as follows: it would like to buy as many gilts (government bonds) as possible off UK pension funds and non-bank investors. With this cash then burning a hole in their pockets, not to mention bumping up banks’ deposit accounts, the investors should go out and spend it on equities and corporate debt. The credit crunch should then abate and, voila, you’ve got your economic recovery.

Bernanke Speaks:

"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Bernanke said in testimony to lawmakers today. "Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance."

So I guess he means we will have neither

The Chairman took my breath away when he said that the unemployed could use the time to bone up on their skills so that they would be able to take new jobs when they are offered. Mr. Chairman, please descend from your rarefied strata. Statements like that might make the unemployed go wild.

Following this an African American congress women asked the Chairman how he thought consumers would increase buying when they were unemployed. Instantly she was flushed as the financial TV station went to a commercial.

The Colbert Show should replace financial TV

Jim Sinclair’s Commentary

We are awaiting Pakistan’s announcement that the Surge has defeated the Taliban and that displacing more than 2,500,000 refuges was a successful operation.

U.S. experts: Pakistan on course to become Islamist state
Tuesday, Jun. 02, 2009
Jonathan S. Landay – McClatchy Newspapers

"It’s a disaster in the making on the scale of the Iranian revolution," said a U.S. intelligence official with long experience in Pakistan who requested anonymity because he wasn’t authorized to speak publicly.

WASHINGTON — A growing number of U.S. intelligence, defense and diplomatic officials have concluded that there’s little hope of preventing nuclear-armed Pakistan from disintegrating into fiefdoms controlled by Islamist warlords and terrorists, posing a greater threat to the U.S. than Afghanistan’s terrorist haven did before 9/11.

"It’s a disaster in the making on the scale of the Iranian revolution," said a U.S. intelligence official with long experience in Pakistan who requested anonymity because he wasn’t authorized to speak publicly.

Pakistan’s fragmentation into warlord-run fiefdoms that host al Qaida and other terrorist groups would have grave implications for the security of its nuclear arsenal; for the U.S.-led effort to pacify Afghanistan; and for the security of India, the nearby oil-rich Persian Gulf and Central Asia, the U.S. and its allies.

"Pakistan has 173 million people and 100 nuclear weapons, an army which is bigger than the American army, and the headquarters of al Qaida sitting in two-thirds of the country which the government does not control," said David Kilcullen, a retired Australian army officer, a former State Department adviser and a counterinsurgency consultant to the Obama administration.

"Pakistan isn’t Afghanistan, a backward, isolated, landlocked place that outsiders get interested in about once a century," agreed the U.S. intelligence official. "It’s a developed state . . . (with) a major Indian Ocean port and ties to the outside world, especially the (Persian) Gulf, that Afghanistan and the Taliban never had."

Jim Sinclair’s Commentary

The rally in the US dollar yesterday is comical. The only real demand out there is in defense of the Brazilian currency wherein the Brazil Real is being bought because of Brazil / China ousting the dollar in trade in that pivotal place.

Gold would be perfect if it did not break out to above $1000 for a short few weeks. Then Alf, here we come.

Gross Says Diversify From Dollar as Deficits Surge (Update4)
By Dakin Campbell

June 3 (Bloomberg) — Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits.

Treasury Secretary Timothy Geithner’s plan to bring the budget back into balance won’t be successful as consumers shrink spending and the U.S. growth rate slows, Gross said in a Bloomberg Radio interview today. The budget deficit will be narrowed to “roughly” 3 percent of GDP from a projected 12.9 percent this year, Geithner said June 1.

“I think he’ll fail at pulling a balanced rabbit out of a hat,” Gross said from Pimco’s headquarters in Newport Beach, California. “They are talking about — once the economy in the U.S. renormalizes — the move back toward balance or much less of a deficit. I suspect that will be hard to do.”

Higher savings rates and an increase in the cost to service the national debt will drag on the U.S. economy, likely meaning “trillion-dollar deficits are here to stay,” Gross wrote in his June investment outlook posted today on the firm’s Web site.

Gross, manager of the world’s biggest bond fund, said on May 21 the U.S. will “eventually” lose its AAA credit rating after Standard & Poor’s lowered its outlook on the U.K.’s AAA to “negative” from “stable” amid an escalating ratio of debt- to-gross domestic product. While U.S. marketable debt is at about 45 percent of GDP, annual deficits of 10 percent will push the amount to 100 percent within five years, a level that rating companies and markets view as a “point of no return,” he wrote.

In The News Today

Posted June 3rd, 2009 by Jim Sinclair & filed under In The News.

Jim Sinclair’s Commentary

This article speaks for itself.

The Big Collapse Could Be Very Near
SUNDAY, MAY 31, 2009

The Federal Reserve appears to be increasingly nervous about the long term bond market. This is serious. How panicked are they? After leaking a story on Friday, they are back at it on Sunday.

The Federal Reserve leaked to CNBC’s Steve Liesman on Friday that they weren’t targeting long rates. Why such a leak? Probably because the Fed did not want to appear impotent in controlling the long rate. So they put out the word through Liesman that they weren’t targetting the long rate. Can you imagine what would happen to the markets if it sensed long rates were beyond the control of the Fed?

The Fed can of course print money to buy up every Treasury bond in existence, but the inflationary ramifications would be Zimbabwe like, and crush the dollar on international currency markets. Are we near the phase where all hell breaks loose? I have never even answered,maybe, to this question before. It’s always been, "no." Now it’s maybe.

What really has me spooked is another article out this afternoon (on a Sunday) that Drudge has even picked up. It’s a Reuters story by Alister Bull. The headline: Federal Reserve puzzled by yield curve steepening.

Translation, the Fed doesn’t know what is going on, but they are really scared.

Jim Sinclair’s Commentary

There is no stopping the runaway locomotive heading directly at the US dollar.

Now starts the parting of the ways between regions over who or why the disaster is upon us.

Germany Blasts ‘Powers of the Fed’
By JOELLEN PERRY
JUNE 3, 2009

German Chancellor Angela Merkel, in a rare public rebuke of central banks, suggested the European Central Bank and its counterparts in the U.S. and Britain have gone too far in fighting the financial crisis and may be laying the groundwork for another financial blowup.

"I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line," Ms. Merkel said in a speech in Berlin. "We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years’ time."

Ms. Merkel also said the ECB "bowed somewhat to international pressure" when it said last month it plans to buy €60 billion ($85 billion) in corporate bonds — a move that is modest in comparison to asset-buying by its counterparts, the U.S. Federal Reserve and Bank of England. Details are to be unveiled by the ECB’s president, Jean-Claude Trichet, Thursday.

The public criticism is unusual — and not only because German politicians rarely talk harshly about central banks in public. When politicians around the world do criticize their central banks, they almost always gripe that they are too tightfisted.

The conservative German leader’s comments came as Europe’s statistical agency reported that unemployment in the 16 countries that share the euro rose to 9.2% in April — the highest level since September 1999 and still below the 11.5% that the European Commission forecasts for 2010.

Jim Sinclair’s Commentary

Of course it will. There is oil there.

Opinion: Global Warming Could Pose A Threat to NATO
Published yesterday by Christopher Szabo

According to news reports, those most affected by global warming live in the 50 least developed countries, but this could change. Recent moves by Russia could call into question the NATO alliance’s naval defenses in the Arctic Circle region.

A new Russian military force, especially developed for arctic conditions, is past the planning stages, according to Jane’s Defence. The force, once deployed, would be equipped with: “Special ammunition, ammunition and transport” for the freezing Arctic conditions.

In the wake of the first ice-free month of the Northwest Passage in September, 2007, and Russian claims to most of the High North region, based on it’s claim to the Lomonosov Shelf, which Russia regards as being part of its own exclusive economic zone of 200 nautical miles, the creation of the new military force seems somewhat sinister.

Unlike the Antarctic, the Arctic has no treaty banning commercial exploitation of its resources and not only Russia, but also the U.S., Canada, Denmark, Norway, Sweden, Iceland and Finland have laid claims to the region.

While NATO officials and analysts have stressed the peaceful nature of Russia’s new force, comparing it with Russian cooperation with the West in the Mediterranean and fighting pirates off Somalia, Russian behaviour has not always been that of a good neighbour, especially in areas it considers to be part of its exclusive sphere of influence, such as the former Soviet Union republics. Russia has brutally crushed a Chechen separatist movement as well as fighting a brief war against the former Soviet Republic of Georgia last November.

In The News Today

Posted June 2nd, 2009 by Jim Sinclair & filed under In The News.

Dear Friends,

Here is an interesting question for us to ponder.

It does not take a brain surgeon to figure out that there has been the largest theft in human history in the past two years.

What is it that makes the perps firmly believe that they can do this in blatantly obvious ways and totally get away with it? I do not accept political contacts as the legislative is a loose cannon in such a case.

What is it that gives them such comfort?

Why was it so important to do in their minds that doing it almost publicly gives them no concern?

This tells me to be prepared for a substantive world changing occurrence within the time frame we have been discussing as positive for gold on the maximum momentum basis. That time is between now and 2012.

Are you prepared?

Regards,
Jim

Jim Sinclair’s Commentary

Don’t let the numbing spin and off the scale development with equities put you in an exposed mode. The dollar is dead – that is becoming quite clear.

The ramification of the demise of the dollar this year are severe. The sheeple are sleeping, dope smoking, snorting or doing something else to disengaged their brains.

Gold is going to $1650 then on to Alf’s numbers. The dollar is going to .52 and maybe lower on the USDX. The long bonds are going to Hades. The IMF is going to be the world Federal Reserve.

There will be a SDR tied to gold as I have suggested, in the form of a basket of mainly non-dollar currencies that will be the one world currency.

The agenda of those that seek the above is unfolding. Democracy will become an underground movement. About all this there is no question.

Are you prepared?

Dollar Declines as Nations Mull Reserve Currency Alternatives
By Oliver Biggadike and Chris Fournier

June 2 (Bloomberg) — The dollar weakened beyond $1.43 against the euro for the first time in 2009 on bets record U.S. borrowing will undermine the greenback, prompting nations to consider alternatives to the world’s main reserve currency.

The euro gained for a fourth day versus the dollar as the Russian government said emerging-market leaders may discuss the idea of a supranational currency. The pound rose to the highest level since October and the Canadian dollar traded near an eight-month high on speculation signs of a recovery in U.S. and U.K. housing will spur higher-yield demand.

“There’s been a lot of talk out of Russia about a new global currency, and that’s contributing toward this latest bout of dollar weakness,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s largest currency trader. “These latest comments are just adding to the general dollar weakness we’ve seen recently.”

The dollar slid 1.1 percent to $1.4317 per euro at 4:21 p.m. in New York, from $1.4159 yesterday. It touched $1.4331, the weakest level since Dec. 29. The dollar depreciated 1.1 percent to 95.54 yen, from 96.59. The euro traded at 136.77 yen, compared with 136.78.

Sterling rose as much as 0.9 percent to $1.6596, the highest level since Oct. 30, while the Canadian dollar advanced 1.2 percent to C$1.0806, near the strongest level since Oct. 3.

Jim Sinclair’s Commentary

Didn’t the media inform us yesterday that China was CONFIDENT concerning US debt? This does not read like a confident bull on either the US dollar or US debt.

China’s Yu Tells U.S. Not to Be Complacent About Debt (Update1)

June 2 (Bloomberg) — China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”

Yu said he is scheduled to meet Geithner today at the Grand Hyatt Hotel in Beijing.

China is the biggest foreign holder of U.S. Treasuries with $768 billion at the end of the first quarter. Premier Wen Jiabao in March called for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.

“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”

Jim Sinclair’s Commentary

Let’s have a round of applause for those OTC derivative dealers that are giving many a vacation experience called "Hutment at the Horwith Station."

Be assured it will be an experience that millions of US citizens will never forget.

Are you prepared?
Uncle Dave Macon explains the origin of our financial plight:

Jim Sinclair’s Commentary

It always starts on the West Coast, but certainly moves into all states in one degree or the other.

Schwarzenegger says day of reckoning is here
Sacramento Business Journal – by Kathy Robertson Staff writer

The state wallet is empty. The bank closed. Credit has dried up, Gov. Arnold Schwarzenegger told lawmakers in a special Tuesday morning address at the Capitol.

“California’s day of reckoning is here,” he said. With no action, the state will run out of cash in 14 days. Three months after the state budget was approved, California faces a $24 billion deficit.

Schwarzenegger has already proposed massive cuts to education, health care and prisons. Now he’s looking for structural reform to make government more efficient and stretch taxpayer dollars.

He’s asked the State Board of Education, for example, to make textbooks available in digital formats — a move that could save millions.

In 2004, the governor talked about blowing up boxes and consolidating agencies, but the initiatives never gained traction.

Jim Sinclair’s Commentary

I would suggest the key comment in the Dow Jones story below is the lack of new reserves which inherently says how important the juniors are.

"We are simply not finding any new reserves anywhere in the world," Jacobsz said at a New York Society of Security Analysts metals and mining conference. Further, deposits where gold can be relatively easily extracted are being tapped out, he said.

DJ Inflation, Economy, Waning Supply To Support Gold – Producers

NEW YORK (Dow Jones)–Declining supply and investor demand driven by economic uncertainty and future inflation are likely to keep gold prices high, mining company officials said Tuesday. "Our view is that the gold market is in probably one of its most promising phases," said Willie Jacobsz, head of investor relations with Gold Fields Ltd. (GFI).

He cited economic uncertainty around the world, future inflation and "a very real decline in global mine supply" as cause for his company’s optimism on the gold price.

"We are simply not finding any new reserves anywhere in the world," Jacobsz said at a New York Society of Security Analysts metals and mining conference. Further, deposits where gold can be relatively easily extracted are being tapped out, he said.

Meanwhile, investors have been snapping up the metal as a currency, uncertainty and inflation hedge.

"The current rally in the gold price is driven by investment demand," Jacobsz said. "We don’t see sentiment changing very soon."

Gold prices will remain strong as long as investors keep flocking to the metal, said Victor Flores, senior mining analyst with HSBC.

"There has been a great deal of interest in gold from investors," Flores said. "As long as gold ETF [exchange-traded fund] demand remains robust, you will see gold [prices] hold up." Although deflationary pressures are strong at the moment, higher inflation and weaker currencies will probably assert themselves down the road as results of government stimulus efforts to fight the economic downturn, Flores said.

"At the moment we are fighting deflation," Flores said. "What’s really lurking around the corner is inflation."

Investors historically have bought gold as a hedge against inflation because they see it holding its value more strongly than other assets amid rising prices. It is also bought as a safe-haven in times of political and economic uncertainty.

"Gold is the only asset class that withstood the current economic downturn," said William Biggar, president and chief executive of North American Palladium Ltd. (PAL), which last month completed the acquisition of Cadiscor Resources Inc. and its gold mine in Quebec.

"Our growth strategy is focused on precious metals and acquiring quality gold assets," Biggar said.

-By Matt Whittaker, Dow Jones Newswires; 201-938-5959;
matt.whittaker@dowjones.com

Jim Sinclair’s Commentary

As a multi-rated pilot I can assure you that none of us wish to speak with the FAA, declare an emergency, or worst of all, tell them about anything flying near us that is not another aircraft with a clearly visible tail number.

The hassle is beyond your wildest imagination, yet this commercial pilot opted to file a report knowing what it means.

He must firmly believe that the aircraft was shot at with the intention of taking him down.

What would the police find if a hand held surface to air was used by a trained person?

Liberty Co., FAA to discuss report of object near plane
By MIKE GLENN Copyright 2009 HOUSTON CHRONICLE
June 1, 2009, 11:38PM

Liberty County Sheriff’s officials are expected to meet with the FAA on Tuesday to discuss what a Continental Express pilot reported as a “missile or rocket” flying near his airplane.

A pilot reported to the Federal Aviation Administration that at about 8:15 p.m. Friday, an object passed within 150 feet beneath the aircraft, sheriff’s officials said.

The aircraft was near the southern edge of the county, flying at about 13,000 feet, officials said.

“The pilot, from what we understand, was former military. He was able to get the coordinates down real quick,” said Cpl. Hugh Bishop with the Liberty County Sheriff’s Department.

Sheriff’s deputies searched Friday night for signs of evidence where a missile might have been launched or landed.

“We couldn’t find anything,” Bishop said.

In The News Today

Posted June 1st, 2009 by Jim Sinclair & filed under In The News.

Dear CIGAs,

I don’t often ask you to review two postings. Today I have to.

Who knows best what Communism looks like than former and maybe present Communists?

Secondly, the letter posted yesterday written by Andrew Cuomo, AG of New York State, is revealing of the calibre of financial leadership we have. Today is the day the US officially enters into a Communist state, if not by edict then certainly in practice.

God help us all!

American capitalism gone with a whimper
Stanislav Mishin
From PRAVDA.ru June 1, 2009

It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.

True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.

Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.

First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather then the classics. Americans know more about their favorite TV dramas then the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blind the foolish.

Jim Sinclair’s Commentary

The key point to China’s increase in gold holdings is that the world was informed not over six years, but practically speaking, in one day.

What does that mean for the dollar when young Chinese students are smart enough, if not a tad rude, to laugh when the Secretary of the US Treasury informs them that the dollar is safe?

Why is China Buying Gold?
Jun 1st, 2009 | By Byron King

Remember the old expression, “I wouldn’t do that for all the tea in China.” People used to associate China with tea. Well, now it’s time to associate China with gold, and a lot of it. Because the Chinese recently announced that they control over 33.89 million ounces of gold for monetary purposes. That’s an increase of 75% in Chinese gold holdings over the past six years.

This kiloton of Chinese gold makes the Middle Kingdom the world’s sixth largest holder of the yellow metal. The U.S. — courtesy of President Roosevelt’s gold confiscation in 1933 – tops this list of the world’s largest gold holders, followed by Germany, the IMF, France and Italy.

How did the Chinese accumulate so much gold? China purchased it over the past six years through its State Administration of Foreign Exchange (SAFE). SAFE is quite distinct from the People’s Bank of China (PBOC). The SAFE purchases meant that the gold did not appear as part of China’s officially reported monetary reserve figures.

The Chinese gold purchases, evidently, were part of a slow and steady buying program between 2003 and the present. It makes you wonder what the Chinese were thinking back in 2003. I happen to know, courtesy of an acquaintance at the Naval War College, that the Chinese were quietly forecasting that the U.S. would destroy its dollar by going to war in Iraq.

Jim Sinclair’s Commentary

Factor the following in to the absolute truth that if when GM and Chrysler come out of bankruptcy, post 60 day car sales MUST BE RISING or the s**t will hit the fan big time for whatever is then left of the US dollar.

Subprime meltdown over; now comes the bad news

So much has been made of the subprime mortgage meltdown that you would think it was almost totally responsible for the economic collapse, and that once the subprime problem was fixed then the worst would be over.

Unfortunately nothing could be further from the truth, despite hitting new highs in foreclosure listing. Instead it was the first round of a three part collapse, and we are on the edge of the second round.

I will demonstrate with a fantastic series of charts below, most of them were created by the T2 Partners.

Round One

First, let’s take a look at the subprime and overall housing market.

As you can see, the huge wave of subprime mortgages resettings from "teaser" rates to market rates has virtually ended.

Jim Sinclair’s Commentary

Northwestern Mutual is generally known as a responsible company. No doubt like other insurers it probably lost a fair amount on dodgy fixed income in the past few years.

Note his comment on downside potential in stocks vs. gold.

Northwestern Mutual Makes First Gold Buy in 152 Years
By Andrew Frye

June 1 (Bloomberg) — Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in 152 years to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped 30 cents to $980 at 11:47 a.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder owned Northwestern Mutual, based in Milwaukee, ranks thirds by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

Jim Sinclair’s Commentary

Today investors have rewarded failure by goosing equities over 200 points. Bankruptcy is failure no matter how it is spun. The new means of bankruptcy in screwing the bond holders therefore has to be considered as having punished production.

There has never been nor ever will be a society that can survive in leadership with that approach.

The entire mass of money bunny glee assumes that car sales will be no less than holding the 10,000,000 level after bankruptcy.

I am sure all government buying of vehicles will take place the month after GM and Chrysler come out of bankruptcy.

If car buying craters after that, as President Obama said today – what is good for GM is good for the USA. The other side of that is what kills the Second Coming of GM and Chrysler will tank the US dollar as the common share of the USA.

This is going to be a cold, hard winter.

U.S. Auto Sales Likely Tumbled 35% on Chrysler, Jobs (Update1)
By Alex Ortolani and Doron Levin

June 1 (Bloomberg) — Chrysler LLC, idling plants and shutting dealerships in bankruptcy, probably helped shrink the U.S. auto market by 35 percent in May as the industry endured its worst start to a year since at least 1976.

The seasonally adjusted sales rate tumbled to 9.2 million last month from 14.2 million a year earlier, based on 7 analysts surveyed by Bloomberg. Chrysler may have fallen 51 percent and General Motors Corp., which filed for bankruptcy today, may have fallen 37 percent, according to 5 analysts.

May sales at that rate would mark a fifth straight month at fewer than 10 million units, the deepest slump in 33 years of Bloomberg data. U.S. joblessness at the highest since 1983, Chrysler’s Chapter 11 case and GM’s slide toward court protection all likely helped keep buyers out of showrooms.

“It’s still a rough road out there,” said Jeff Schuster, an automotive sales analyst with J.D. Power & Associates in Troy, Michigan. “There’re still a lot of issues with the economy and a lot of uncertainty in consumers’ minds.”

GM, the biggest U.S. automaker, and No. 3 Chrysler began receiving emergency federal loans in December while they worked to restructure outside of court.

Jim Sinclair’s Commentary

Even the kids in China understand the future of the US dollar.

Geithner gets laughed at by Chinese students when saying $ assets are safe
June 1, 2009
Tom Bawden

Geithner tells China its dollar assets are safe

Mr Geithner, in China on his first visit as US Treasury Secretary, reiterated that US would cut its huge fiscal deficits

Timothy Geithner moved today to reassure the Chinese Government that its huge holdings of dollar assets were safe as he reaffirmed his faith in a strong US currency.

Mr Geithner, in China on his first visit as US Treasury Secretary, sought to allay concerns that Washington’s growing budget deficit would fan inflation which, in turn, would undermine the dollar and US bonds.

“Chinese assets are very safe,” Mr Geithner said, answering a question after his opening address at Peking University this morning.

His answer was greeted with laughter by the students, who question the wisdom of China spending huge amounts of money on US bonds instead of improving domestic living standards.

China is the biggest foreign owner of US Treasury bonds, holding $768 billion (£468 billion) at the end of March.

Jim Sinclair’s Commentary

Just because they busted their bank with unregulated paper isn’t a good enough reason for regulation of their affairs in their opinion.

Even in Crisis, Banks Dig In for Fight Against Rules
By GRETCHEN MORGENSON and DON VAN NATTA Jr.
June 1, 2009

As the financial crisis entered one of its darkest phases in October, a handful of the nation’s largest banks began holding daily telephone sessions. Murmurs were already emanating from Washington about the need for a wide-ranging regulatory overhaul, and Wall Street executives girded for a fight.

Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives — the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster.

The nine biggest participants in the derivatives market — including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America — created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money.

To oversee the consortium’s push, lobbying records show, the banks hired a longtime Washington power broker who previously helped fend off derivatives regulation: Edward J. Rosen, a partner at the law firm Cleary Gottlieb Steen & Hamilton. A confidential memo Mr. Rosen drafted and shared with the Treasury Department and leaders on Capitol Hill has, politicians and market participants say, played a pivotal role in shaping the debate over derivatives regulation.

Today, just as the bankers anticipated, a battle over derivatives has been joined, in what promises to be a replay of a confrontation in Washington that Wall Street won a decade ago. Since then, derivatives trading has become one of the most profitable businesses for the nation’s big banks.

Jim Sinclair’s Commentary

It is comforting to know that time tested experience honed in the running of major enterprise is the qualified hand that now molds the USA’s business future as a nation.

Any guess at his fraternity association at Yale?

The 31-Year-Old in Charge of Dismantling G.M.
By DAVID E. SANGER
Published: May 31, 2009

WASHINGTON — It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing — “he’s got this beard that appears and disappears,” says Steven Rattner, one of the leaders of President Obama’s automotive task force — Mr. Deese was thrown into the auto industry’s maelstrom as soon the election-night parties ended.

“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”

Jim Sinclair’s Commentary

A never ending story. Remember the Russian experience here and what it did to the USSR?

17,000 US troops in Afghanistan by mid-July
Sun, 31 May 2009 20:39:35 GMT

The bulk of the extra 17,000 US troops will be deployed in Afghanistan by mid-July as Washington strives to tighten its grip on the region.

"10,000 marines are beginning to arrive now and will continue to arrive for the next month and a half or so and they will be principally located in Helmand but also in Farah," Colonel Greg Julian, spokesman for US forces told Reuters on Sunday.

He added that some 7,000 US army troops along with "additional helicopters" will also be deployed to the mainly "rural areas" of southern Kandahar province by the set date.

Julian said that a further 4,000 troops will also be sent to the south and west of the war-torn country by August, mainly to train Afghan security forces.

Despite the growing presence of foreign troops in the southern Helmand province and the western Farah district, the area is considered as a haven for insurgents, where many NATO alliance troops deployed in the country, have met their deaths.

Jim Sinclair’s Commentary

Destabilization? There are 2,500,000 Pakistanis homeless and on the march. What do you call that?

Pakistan ‘fears destabilizing’ US policies
Fri, 29 May 2009 07:09:53 GMT

The Islamabad government is worried that the US President Barack Obama’s move to boost its military presence in Afghanistan could further destabilize Pakistan.

Pakistan’s Dawn News revealed on Friday that Civilians and military officials in Islamabad believe that an increase of 21,000 US troops in Afghanistan could further destabilize Pakistan by pushing more militants across the border.

Sources said increased US military activity may also spark an influx of refugees from insurgency-hit southern Afghanistan into border areas of Pakistan.

Meanwhile, US Central Command chief Gen David Petraeus paid a secret visit to Islamabad during this week to allay Pakistan’s concerns that the troops build-up in the war-ravaged Afghanistan would add to its woes, according to the report.

"Gen Petraeus told his interlocutors that the US had very few options other than to increase the number of troops in Afghanistan and that all possible efforts would be made to minimize its fallout on Pakistan," a diplomatic source told Dawn.