Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

Is this a nightmare or am I actually reading “BY NATIONALIZING GM”?

As the story broke a mini rally in the US dollar flopped.

U.S. Details Plan to Rescue G.M. Through Bankruptcy
Sunday, May 31, 2009 — 9:58 PM ET

WASHINGTON – President Obama will push General Motors into bankruptcy protection on Monday, making a risky bet that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive.

The bankruptcy, to be filed in New York, is a significant turning point for an industry that was once at the heart of the American economy. It culminates a remarkable four months of confrontation between Washington and Detroit that is expected to result in a drastic downsizing of the company.

It also places the government in uncharted territory as a business owner, as it takes a majority ownership stake in the company during its restructuring.

Reflecting the government’s extraordinary intervention in industry, aides say, Mr. Obama plans to tell the nation on Monday that he believes G.M. can be brought back from the brink of insolvency, even if the company looks almost nothing like the titan of old.

Administration officials briefed reporters on the G.M. plans Sunday night, as President Obama began to inform members of Congress. But the White House insisted that the aides who talked to reporters could not be named.

In his remarks on Monday, Mr. Obama will spell out a strategy in which a shrunken G.M. can make money even if new car sales remain at a sluggish 10 million a year in the United States and even if G.M., once the giant of the industry, drops below its current 20 percent market share in this country.

But to get there, American taxpayers will invest an additional $30 billion in the company, atop $20 billion already spent just to keep it solvent.

More…

‘Gold price to touch $1,400 in six months’
2009-05-31 22:30:00

Gold investors know all too well the psychological importance of $1,000 gold. The yellow metal’s been hovering frustratingly near that level for weeks after briefly surpassing it in February. According to John Kaiser, editor of the Kaiser Bottom-Fishing Report, “we’re getting very close.” In this exclusive interview with The Gold Report, John shares his “modest” price forecast of $1,300 – $1,400 within the next six months and presents strategies for gold companies looking to create value.

The Gold Report: John, you have said that you believe gold may go up to $1,300 to $1,400, but probably not higher. Can you give our readers an overview of how you achieved those targets?

John Kaiser: I think we’re ready for a real increase in the price of gold, which is why I am looking at more modest targets, such as $1,300 to $1,400, happening fairly quickly, probably bouncing plus or minus $200 or $300, around that level, but it’s a real price increase without a corresponding catastrophic collapse in the U.S. dollar or hyperinflation descending upon us.

TGR: What time frame are you looking at?

JK: I think we’re getting very close. We’re knocking on the door of $1,000, which is a very important psychological level. I would say in the next six months, as people realize that the banking system is still troubled and will be for a long time because an uptrend in real estate prices is not in the cards for a very long time. And, in order to make the banks solvent, the underlying collateral needs to have liquidity and a stable price.

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Jim Sinclair’s Commentary

Israel makes a major miscalculation!

Israel stages biggest-ever war drill
updated 7:37 a.m. EDT, Sun May 31, 2009

JERUSALEM (CNN) — Israel started its biggest emergency drill in the nation’s history Sunday to prepare civilians, soldiers and rescue crews for the possibility of war, the defense force said in a statement.

The five-day drill, nicknamed Turning Point 3, comes amid the nation’s rising tensions with Iran.

It will be conducted in public facilities, including schools, military bases and government offices. Students, soldiers and other civilians will practice how to gather at protected places during an emergency.

Officials said the drill will include simulated rockets, air raids and other attacks on infrastructure and essential facilities, and use of weapons on civilians.

Everyone is expected to go to a protected place at the sound of sirens, the defense force said, adding that more instructions will be broadcast on a public channel.

“It is of great importance that every civilian, institute and workplace will seriously practice in order to improve our preparedness and national resilience,” Maj. Gen. Yair Golan of the Home Front Command said in a news statement.

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Jim Sinclair’s Commentary

Just another bailout where the taxpayer is burdened beyond the ability to cope.

FDIC Fund Running Dry
By: Dirk van Dijk, CFA
May 27, 2009

We highlight JP Morgan Chase & Co., Inc. (JPM – Snapshot Report), BankUnited Financial Corp. (BKUNA – Snapshot Report), Wells Fargo & Co. (WFC – Analyst Report) and Bank of America Corp. (BAC -Snapshot Report).

As the FDIC has had to step in to take over more and more insolvent banks, the fund has dwindled to dangerously low levels. At the same time, the number of problem banks continues to grow at a rapid pace.

At the end of the first quarter there were 305 “problem institutions” with a total of $220.0 billion in assets, up from 252 institutions and $159.4 billion in assets at the end of 2008. At the end of the quarter, the Deposit insurance fund was at just $13.0 billion, or 0.27% of insured deposits, a decline of 24.7% in the quarter alone.

The first graph (from http://www.calculatedriskblog.com/) shows the steep drop in the coverage ratio. Just a year ago, the fund was equal to 1.01% of covered deposits. The current level is its lowest since the first quarter of 1993, when we were digging out from the S&L fiasco.

However, don’t worry about losing the money in your checking account if your bank goes under. Congress has already approved a $500 billion line of credit to the FDIC. Without a doubt, that line of credit is going to have to be tapped. This does emphasize the insanity of having the FDIC provide the guarantees for the PPIP [Public-Private Investment Program]. The fund simply does not have the resources available to do it. The money for the inevitable large losses that the fund will take on the program will come from that line of credit.

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Jim Sinclair’s Commentary

The Chinese use their media to speak to other governments on all kinds of matters.

This is a direct salve across the bow of Geithner’s visit to China this week.

Chinese economists deem huge holding of US bonds “risky,” split on way out
2009-05-31 15:31:57

BEIJING, May 31 (Xinhua) — On the first day of U.S. treasury secretary Timothy Geithner’s visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of U.S. bonds “risky.”

Among the 23 experts polled, 17 said they believed that U.S. equities pose great risks to China’s economy.

eithner will begin his first visit to Beijing as US treasury secretary in an attempt to assure the U.S.’ biggest creditor that its large holding of purchased US bonds is safe.

The visit also highlights Geithner’s comments made earlier this year alleging that China has manipulated its currency.

Li Wei, an expert with the Institute of Ministry of Commerce, and Tian Yun, a scholar at the China Macro Economics Institute, expressed concerns over the risks, saying that the United States may export its deepening crisis to China “by printing U.S. dollar notes uncontrollably.”

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Jim Sinclair’s Commentary

“We do not believe the sales, should they occur, will harm gold prices,” said HSBC analyst James Steel.

IMF gold sale: US Congress approval next week
Commodity Online

LONDON: The International Monetary Fund’s decisiion to sell its gold reserves could get the necessary approval from the US Congress next week.

At the G20 summit in London in April, participating countries agreed the IMF could sell 403.3 metric tons of gold as part of efforts to leverage up to $6 billion in concessional loans for low-income countries over the next few years.

In order for the sale to proceed, 85% of IMF shareholders need to approve the proposal. Since the U.S. has 17% of the votes, it has a de facto veto over the proposal, which requires Congressional approval, but IMF Managing Director Dominique Strauss-Kahn told Dow Jones Newswires this week he expects Congress will soon approve the sale.

On Friday, analysts said US Congress may approve International Monetary Fund gold sales as early as next week.

“This issue appears now fully priced into the gold market and any announcement confirming sales should not move the market – apart from perhaps a knee-jerk reaction,” said John Reade, an analyst at UBS.

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Jim Sinclair’s Commentary

Have you ever heard of a Hack License? It is not a cab medallion in New York.

Contractors Vie for Plum Work, Hacking for U.S.
By CHRISTOPHER DREW and JOHN MARKOFF
Published: May 30, 2009

MELBOURNE, Fla. — The government’s urgent push into cyberwarfare has set off a rush among the biggest military companies for billions of dollars in new defense contracts.

The exotic nature of the work, coupled with the deep recession, is enabling the companies to attract top young talent that once would have gone to Silicon Valley. And the race to develop weapons that defend against, or initiate, computer attacks has given rise to thousands of “hacker soldiers” within the Pentagon who can blend the new capabilities into the nation’s war planning.

Nearly all of the largest military companies — including Northrop Grumman, General Dynamics, Lockheed Martin and Raytheon — have major cyber contracts with the military and intelligence agencies.

The companies have been moving quickly to lock up the relatively small number of experts with the training and creativity to block the attacks and design countermeasures. They have been buying smaller firms, financing academic research and running advertisements for “cyberninjas” at a time when other industries are shedding workers.

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Jim Sinclair’s Commentary

What are these people thinking?

Bank Of America’s New Green Hotel
Posted May 28th 2009 8:02PM by Deidre Woollard

Guests visiting Bank of America’s headquarters in Charlotte, North Carolina will soon have a more luxurious place to stay. As USA Today’s Hotel CheckIn reports, the nation’s largest bank is opening up a new Ritz-Carlton hotel across the street from its corporate headquarters.

The 18-story building will have a 12,000 square-foot penthouse wellness center, a street-side BLT Steak restaurant and 147 rooms including a 2,900 square-foot Presidential Suite. It will be the first LEED-designed new hotel in Charlotte, North Carolina and is being built for LEED Gold Certification making it the first green hotel under the Ritz-Carlton umbrella. The Ritz-Carlton, Charlotte at Bank of America Center is scheduled for completion in October 2009.

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Jim Sinclair’s Commentary

1. Pakistan goes Taliban
2.Israel makes a major miscalculation.
3. Turkey is a victim.

Rebel Land: Among Turkey’s Forgotten Peoples by Christopher de Bellaigue
The Sunday Times review by Jeremy Seal

With Istanbul nominated European Capital of Culture for 2010, here’s a book that certainly rains on the Turkish parade. At once a contemporary investigation and a historical analysis, Christopher de Bellaigue’s brave and informed account of eastern Turkey’s brutalised minorities deserves a wide readership, even among those sure to find its contents unpalatable.

Ottoman cosmopolitanism largely accommodated the empire’s minorities. From the late-19th century, however, the Christian Armenians and Muslim Kurds were increasingly discomfited by rising Turkish nationalism. Accusations of genocide against the Armenians during the first world war have since been regularly levelled at the Turks, and consistently rejected by them.

De Bellaigue sets out to get his material, “gritty and unfiltered”, from the inhabitants of Varto, a benighted town near Erzurum, one that stands for “those hundreds or thousands of other small places across the rebel land, where the atrocities happened far from prying eyes”. The author brings a rare conviction to his descriptions of the town. An Alevi musician leads him across uplands deforested by the army to deny cover to Kurdish guerrillas. There are also run-ins with bureaucrats and the security forces, not least with the resentful captain of the local gendarmerie.

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Jim Sinclair’s Commentary

Expect the Pakistan government to announce total victory in Swat soon, but don’t expect either victory or sustainability.

Public support for US declining in Pakistan: Petraeus
Daily Times – Lahore,Pakistan
LAHORE: Public support for the US is declining in Pakistan due to US drone strikes, Central Command chief General David Petraeus has said. …
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Pakistan: Corpses lie exposed in retaken Swat town
The Associated Press
MINGORA, Pakistan (AP) — Corpses lay exposed in the Swat Valley’s main town on Sunday, and residents rushed to mostly empty markets in search of food a day …
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Pakistan battles Taliban; Swat offensive “near end”
Reuters – USA
The United States and the Afghan government have long been pressingPakistan to root militants out of South Waziristan and other enclaves on the Afghan …
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Pakistan gains in Swat as trouble flares elsewhere
KGAN – Cedar Rapids,IA,USA
DERA ISMAIL KHAN, Pakistan (AP) — Fighting in a northwest tribal region ofPakistan could raise the odds that the army will extend an offensive to …
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More battles in Pakistan…Palestinians clash…magiclakers final …
KXMC – Minot,ND,USA
AP DERA ISMAIL KHAN, Pakistan (AP) There’s more fighting in a northwest tribal region of Pakistan. Intelligence officials say Taliban fighters have fought a …
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Jim Sinclair’s Commentary

There will be many varied results as part of the Surge by Pakistan in Swat.

Al-Qaeda now recruiting ‘ready made’ Taliban terrorists from Pak to strike UK, other countries
May 30th, 2009

LONDON – The extent to which Al-Qaeda has dangerously penetrated into Britain can be gauged from the fact that it no longer relies on sending British-born men to Pakistan for terror training, instead it is now recruiting ‘ready made’ terrorists from among the Taliban based in Pakistan.

British investigators, who have been quizzing the 10 men arrested in the North West, believe that Al Qaeda has developed links with the Taliban which provide it trained militants who can carry out terror strikes at significant locations, The Telegraph reports.

According to the newpaper, a terrorist informant has told prosecutors that he was trained by the top Taliban commander in Pakistan, Baitullah Mehsud .

He also revealed that he was planning a series of suicide attacks in Britain, and other European countries with 11 other men.

It’s worth mentioning here that British security services had earlier disclosed that a terrorist cell was sent to Manchester from the Taliban heartland in Pakistan’s lawless tribal areas.

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Jim Sinclair’s Commentary

The following link leads to a letter on the investigation results of the Bank of America and Merrill Lynch merger.

Click here to view the PDF file…

Jim Sinclair’s Commentary

This week Secretary Geithner will most politely get an ear full of the truth. You cannot guarantee dollars (US Treasuries) with dollars.

U.S. Treasury Secretary to visit China (05/26/09)

BEIJING, May 26 (Xinhua) — U.S. Treasury Secretary Timothy Geithner will visit China from May 31 to June 2, Foreign Ministry spokesman Ma Zhaoxu told a regular press briefing Tuesday.

As a special envoy of U.S. President Barack Obama, Geithner would visit China at the invitation of Chinese Vice Premier Wang Qishan, who is a special representative of Chinese President Hu Jintao, Ma added.

“The two sides will exchange views on issues of common concern,” Ma said, adding that those issues included the international financial situation, bilateral cooperation in coping with the financial crisis and preparations for the first round of the China-U.S. Strategic and Economic Dialogue.

The new mechanism was upgraded from the Strategic Dialogue and biennial Strategic Economic Dialogue (SED), which were initiated by the two heads of state in 2005 and 2006, respectively.

The Strategic Dialogue, co-chaired by a Chinese state councilor and a U.S. deputy Secretary of State, focused on political and strategic issues in the development of bilateral ties.

The first round of the China-U.S. Strategic and Economic Dialogue will concentrate on economic and financial topics including energy, environmental protection, intellectual property rights and services.

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Posted by & filed under In The News.

What does a large new short do when DIRTY TRICKS FAIL.

1. Sell the stock as gold rises to unsettle the weaker hands
2. Work the charts, certainly at a gap close, that coincides with the most meaningful downtrend to work the day and inter-day traders.

Jim Sinclair’s Commentary

In this very interesting article three major points are made:

1. We have reviewed this which is the most important currency development in 136 years.

"In reaction to the Fed’s QE scheme, Brazil and China are working towards bypassing the US-dollar in bi-lateral trade transactions, challenging the status of the greenback as the world’s leading international currency. “We don’t need dollars,” said Brazilian President Luiz Inacio Lula da Silva. “It’s crazy that the dollar is the reference, and that you give a single country the power to print that currency.”

2. Take the word "Iran" out and consider the domino impact on markets that will be unleashed by the geopolitical Andromeda strain – Pakistan goes Taliban.

"For Iran’s neighbors in the Middle East, the atomic fireworks display in North Korea proves the West cannot afford to wait much longer, until intelligence agencies confirms Iran’s nuclear capability, because Tehran can surprise the world with an underground atomic test of its own. When that day arrives, crude oil futures could soar above $100 per barrel, lifting grains and precious metals higher for the ride."

3. QE has busted the bond market and the bust is only starting now. A break of the 30 year below 112 – 113 (which is going to happen) will result in a bear market in US Treasuries that will last at least a decade and announce the impending hyperinflation.

"However, what would happen if the QE addiction leads to a collapse in G-7 bond prices? “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” Ernest Hemingway, “Notes on the Next War: A Serious Topical Letter”, 1935."

Can North Korean Nukes Rattle Global Markets?
Posted Wednesday, 27 May 2009
By Gary Dorsch, Editor, Global Money Trends

News that North Korea’s mercurial leader Kim Jong Il authorized the detonation of a nuclear bomb on May 25th, comparable to those that obliterated Hiroshima and Nagasaki, barely caused a ripple in the global financial markets. Japanese and South Korean stocks initially fell in a knee-jerk reaction, but soon recouped most of their losses, as traders shrugged off the nuclear fallout, – figuring it was just a harmless display of Kim Jong Il’s temper tantrums that erupts once every few years.

When foreign markets failed to take Pyongyang seriously, Kim Jong Il upped the ante by firing the Musudan-Ri missile, on which N-Korea could ultimately place a nuclear warhead, with a range of 2,500-miles. Pyongyang then fired three shorter-range missiles into the Sea of Japan. But global stock markets are so intoxicated with super-cheap money injected by the G-20 central banks each day, that even nuclear bomb blasts didn’t rattle the post March 10th“green-shoots” rally.

Pyongyang vowed on May 27th, to attack South Korea if its ships participate in a US-led effort to interdict vessels carrying missiles or weapons of mass destruction. Pyongyang also declared that the truce that ended the Korean War was no longer valid. “Those who provoke North Korea will not be able to escape its unimaginable and merciless punishment,” the North’s official news agency said. Calling South Korea’s government a “group of traitors,” “our revolutionary forces will consider the interdiction of ships as a declaration of war against us.”

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Jim Sinclair’s Commentary

Plausible denial when it all goes wrong.

Fed: We Were Never Trying To Set Credit Market Rates
Joe Weisenthal – May. 29, 2009, 7:40 AM

The Fed has finally responded to the soaring mortgage rates, and the apparent failure of quantitative easing.

Their spin — courtesy of CNBC’s Steve Liesman (natch) — is that the Fed was never trying to force down mortgage rates or "set" rates. Rather, by stepping in and purchasing bonds, the Fed is merely trying to "support" the credit markets.

Frankly, we’re not sure that there’s a difference between the two statements. "Supporting" credit markets is another way of making sure that interest rates aren’t getting out of hand. And to the extent that the credit markets need that Fed support is not very promising.

Either way it seems clear. The Fed believes that depressing rates is how they’ll stabilize the housing market and the sudden spike up torpedoes that goal.

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Jim Sinclair’s Commentary

Please take note of the discussion of Taliban tactics and the most probable performance of Pakistan forces.

Pakistan Civil War News Updates — May 29, 2009
FRIDAY, MAY 29, 2009

PD*29125406

Taliban In Swat Slip Away, Live to Fight Another Day — Captain’s Quarters

One month ago at the beginning of the Pakistan offensive against the Taliban in the North West Frontier Province, the Pakistan Army claimed that the offensive would take approximately one week. We responded that the Pakistan Army, regardless of whether they had the will to conduct counterinsurgency operations, didn’t understand how to, adding that:

The Taliban would simply melt away, wait for the Pakistan Army to leave, and then re-enter the area and kill anyone who cooperated with the Army. Or if they stand and fight, the history of the Pakistan Army indicates that they will simply pull back and sign a new peace deal.

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Jim Sinclair’s Commentary

When Pandora’s Box of Quantitative Easing was opened, it could not and will not be closed!

Bond markets defy Fed as Treasury yields spike
By Ambrose Evans-Pritchard
Last Updated: 5:51AM BST 29 May 2009

The US Federal Reserve may soon be forced to launch fresh blitz of quantitative easing whatever the consequences for the US dollar, or risk seeing economic recovery snuffed out by the latest surge in long-term borrowing costs.

Yields on 10-year Treasury bonds have risen relentlessly since March when the Fed first announced its plan to buy $300bn (£188bn) of US government debt directly, a move that briefly forced rates down to nearly 2.5pc, a level thought to be the Fed’s implicit target.

Yields have jumped to 3.69pc – after spiking as high as 3.74pc on Wednesday – pushing up the standard 30-year mortgage loan to 5.08pc and lifting the borrowing cost for corporations.

"The Fed is going to have to consider doubling its purchases of Treasuries," said Ashraf Laidi, from CMC Capital Markets. "We could be nearing the end-game for the US dollar but the Fed has little choice at this point. We’re in a vicious circle where any policy aimed at supporting the US economy must be at the expense of the dollar."

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Jim Sinclair’s Commentary

The saying is "Records are made to be broken." This one will be.

Troubled Bank Loans Hit a Record High
May 30, 2009
By FLOYD NORRIS

OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation.

The report highlighted that even as the government and major banks have scrambled to deal with the impaired securities the banks own, the institutions have been plagued by an unprecedented volume of old-fashioned loans going bad.

Of the entire book of loans and leases at all banks — totaling $7.7 trillion at the end of March — 7.75 percent were showing some sign of distress, the F.D.I.C. reported. That was up from 6.9 percent at the end of 2008 and from 4.1 percent a year earlier. It also exceeded the previous high of 7.26 percent set in 1990 and 1991, during the last crisis in American banking.

The F.D.I.C. has been collecting the figures since 1984.

Virtually the only encouraging news in the report was that the banks’ loan portfolio might be worsening more slowly than it was. While the increase of 3.65 percentage points in a year is the highest ever, the quarterly rise was smaller than in the fourth quarter of last year.

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Posted by & filed under In The News.

As goes Motors, so goes the USA.
–Livermore and Seligman

Sinclair16

Faber is wrong as increasing interest rates are meaningless as a tool to stop hyperinflation which is a currency event. How in the world can Farber not understand that axiom?

U.S. Inflation to Approach Zimbabwe Level, Faber Says (Update2)
By Chen Shiyin and Bernard Lo

May 27 (Bloomberg) — The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”

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Posted by & filed under In The News.

Dear CIGAs,

The 28 year up trend line cut is right now 112 to 113 on the 30 year bond. When this very long term up trend is history the credit crisis that has never ended goes TERMINAL.

The trillions of dollars pumped into the world skeleton financial system, particularly the US financial system, is like the application of Clearasil on a zit. The zit is still there festering but it is tad more difficult to see.

One would expect a bounce or sideways move at or near here as the value is so close to the long term up trend line of the 30 year bond.

Rising U.S. bond yields may spark Credit Crisis II
Fri May 29, 2009 2:43pm EDT
By John Parry – Analysis

NEW YORK (Reuters) – The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.

Early warnings signs of this scenario include surging government bond yields, a slumping U.S. dollar, and the fading of the bear market rally in U.S. stocks.

Optimists hope that a fragile two-month rally in world stock markets, a rise in U.S. Treasury yields from record lows during the depths of the crisis in late 2008, and some less scary economic data all signal that a recovery is around the corner.

But gloomy analysts insist that thinking is delusional.

Once Credit Crisis Version 2.0 ramps up, foreign investors may punish the U.S. government for borrowing trillions of dollars too much by refusing to buy its debt until bond prices plunge to much cheaper levels.

The telling harbinger is benchmark Treasury note yields’ surge to six-month highs around 3.75 percent this week, as investors began to balk at the record U.S. government borrowing requirement this year.

The U.S. Treasury plans to sell about $2 trillion in new debt this year to fund a $1.8 trillion fiscal deficit.

Heavy selling of U.S. dollar-denominated assets could trigger a full-blown currency crisis and usher in surging inflation, forcing mortgage rates and corporate bond yields up, undermining any rebound in economic activity.

"The financial crisis is a downward spiral with two twists," said George Feiger, chief executive of Contango Capital Advisors in Berkeley, California.

First came the banking crisis and a huge contraction of credit, starting in mid-2007 which resulted in the stock market panic of 2008 which triggered the deepest U.S. recession in at least two decades.

"Once you have got a recession you have good old-fashioned credit losses," Feiger said. "The second leg is now the consequences of the massive recession and it is just now working its way out," he said.

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Posted by & filed under In The News.

Dear Friends,

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

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

The steps on the USDX us dollar are:

.8200
.7200
.6200
.5200

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

Predictions:

1. Gold reacts as currency support for the dollar enters mid June to a slow decline (that is the official definition of a strong dollar policy, really).
2. End of 2nd week going into the beginning of the 3rd week of June Gold launches towards and this time through the neckline of the reverse head and shoulders formation.
3. Gold rises to $1224 where it hesitates.
4. The OTC derivative market takes on the dollar as short sellers into dollar support.
5. This OTC derivative currency short position builds.
6. It is the US dollar where Armstrong will get his WATERFALL.
7. The main selling takes place when Israel makes a major miscalculation.
8. Hyperinflation is always and will continue to be a currency event.
9. Hyperinflation will be a product of the upcoming massive OTC derivative short dollar raid.

Should I be correct in the gold price action going into late June, it will fit Armstrong’s criterion for a move to $5000.

Alf’s work permits an over-run of the gold price to $3500 in the major 3rd phase, indicating overruns into the major 5th.

 

Jim Sinclair’s Commentary

How is this for an understatement?

U.S. ‘Problem’ Banks Rise to 15-Year High, FDIC Says
May 27th, 2009
Bloomberg

U.S. “problem” banks climbed 21 percent to the highest total in 15 years in the first quarter, and provisions set aside for loan losses weighed on industry earnings, the Federal Deposit Insurance Corp. said.

The FDIC classified 305 banks with $220 billion in assets as “problem” lenders as of March 31, an increase from 252 with the $159 billion in assets in the fourth quarter. Assets at “problem” banks were the highest since 1993, the agency said today, without naming any lenders. The FDIC said its insurance fund slumped 25 percent to the lowest level since 1993

“The banking industry still faces tremendous challenges,” FDIC Chairman Sheila Bair said today at a briefing in Washington. “Asset quality remains a major concern.”

Regulators have taken over 36 lenders this year, including BankUnited Financial Corp. in Florida on May 21 and Silverton Bank of Atlanta on May 1, which combined cost the FDIC’s deposit insurance fund $6.2 billion. Twenty-one banks collapsed in the quarter, the most since late 1992, as the pace of failures accelerated amid the worst crisis since the Great Depression.

More…

 

Jim Sinclair’s Commentary

The Pakistan government is offering USD$62,000 for the capture or killing of Taliban. Get 10 of your buddies and go get paid USD$620,000 less modest cash.

You can expect a rash of captured but more likely dead "old" Taliban fighters as the Pakistanis elect their grandfathers and elderly family friends to contribute to the common good.

This will be like in the Monty Python movie when the plague body remover roams the streets calling "Bring out your Dead.” The elderly fellow wanders out and was put in the body wagon. He complained that he was not dead. The body remover replied; "You will be soon" and hit him over the head with a club. The same is going to be rampant in Pakistan. How do you tell if a dead guy is a Taliban? You can’t water-board him. Those bodies are going to begin to roll in overflowing wagons, literally. The smell is going to be awful.

See what foreign aid can do to improve the wellbeing of the receiver. Living over there is tough.

Jim Sinclair’s Commentary

With NK Kim unilaterally having cancelled the "Korean War Armistice," going to DEFCON 2 is a reasonable and modest military reaction.

The problem is if North Korea Kim does his usual nothing then he looks more like a hot air machine.

The nuclear threat is resident in his questionable mental condition.

Have you ever seen the movie, "Team America?"

Breaking: US Army moves to DEFCON 2
Thursday, 28 May 2009

Sources close to MiNa claim the US Army has moved their alert level to Defcon 2. This was initiated by the alarming situation in North Korea. The US Army has over 35,000 troops stationed in South Korea, well within reach of North Korean convential weapons.

North Korea has the largest artillery force (can be equipped with nuclear warheads) in the world, which adds more to the already tense situation.

Earlier today, N. Korea’s leader Kim Jong issued threaths to the South Korean and US Navy ships for coming too close to North Korea’s territorial waters. The South Koreans and the Americans, may be positioning themselves for a preemptive strike.

What is DEFCON?

The defense readiness condition (DEFCON) is a measure of the activation and readiness level of the United States Armed Forces. It describes progressive postures for use between the Joint Chiefs of Staff and the commanders of unified commands. DEFCONs are matched to the situations of military severity.

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Jim Sinclair’s Commentary

Einhorn will be dead right the day Moody’s downgrades US debt and the entire company gets shipped to Gitmo.

Einhorn calls AAA rating a curse, shorts Moody’s
Chanos warns on impact of government involvement in business
By Alistair Barr, MarketWatch
May 28, 2009, 12:28 p.m. EST

SAN FRANCISCO (MarketWatch) — David Einhorn, head of hedge-fund firm Greenlight Capital, called AAA credit ratings a curse and said he is betting against rating agency Moody’s, during a speech at a closely watched investment conference on Wednesday

Einhorn said that many institutions with AAA ratings, including the U.S. government, turned that supposed benefit into a disaster by borrowing recklessly, according to a hedge-fund investor who attended the conference in New York and spoke on condition of anonymity.

Most of the companies that have run into trouble during the financial crisis were or still are AAA rated, including American International Group (AIG 1.67, +0.01, +0.60%) , Fannie Mae (FNM 0.71, -0.03, -3.80%) , Freddie Mac (FRE 0.78, -0.04, -5.44%) , MBIA (MBI 6.33, -0.17, -2.62%) , Ambac (ABK 1.23, -0.04, -3.15%) and General Electric (GE 13.11, +0.12, +0.92%) , Einhorn noted.

The leading purveyor of AAA ratings is Moody’s (MCO 26.28, -1.87, -6.64%) , so Greenlight Capital is short that company’s shares, the investor quoted Einhorn as saying.

Short sellers borrow a stock, betting its price will fall. When they return the shares to the lender at the original price, they profit from the difference.

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Jim Sinclair’s Commentary

Regarding gold, the following is a non-event, is always a non event and will continue to be a non event.

Gold is not copper.

Gold Scrap Supply Won’t Hold Back Next Rally – Mitsui

SINGAPORE (Dow Jones)–Further gains in gold prices won’t be met by a huge increase in gold scrap supply, as happened in the first quarter, Mitsui Global Precious Metals said in a report dated Wednesday.

Posted by & filed under In The News.

Jim Sinclair’s Commentary

Sinclair16

Faber is wrong as increasing interest rates are meaningless as a tool to stop hyperinflation which is a currency event. How in the world can Farber not understand that axiom?

U.S. Inflation to Approach Zimbabwe Level, Faber Says (Update2)
By Chen Shiyin and Bernard Lo

May 27 (Bloomberg) — The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”

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Dear Friends,

If you had ears to hear you will recognize that today, after four months of having promised without any delivery, the Obama Administration in his Nellis Air Force Base speech on solar energy began his first meaningful FISCAL STIMULATION (466 million, small, but a start).

Fiscal Stimulation is like a magnet to Monetary Stimulation whereby the later is pulled out into price inflation. It will occur according to the amount and cost of FISCAL programs he starts.

The magnet for hyperinflation is the US dollar below USDX .8200 and .7200 as a currency event.

Respectfully yours,
Jim

Jim Sinclair’s Commentary

This is not playing with fire. It is playing with the fate of a nation for decades to come and the lives of its citizens, all to rescue Wall Street and the OTC derivative gang.

U.S. Treasury and Federal Reserve. Federal Reserve holding over $2 trillion in the Darkest Balance Sheet in Financial History.

The U.S. Treasury and the Federal Reserve have arguably two of the least transparent balance sheets known to humankind.  This wouldn’t be such a big issue if the amount of money funneled into these organizations was small.  That is not the case.  The Federal Reserve since October of 2008 has held on its balance sheet over $2 trillion in reserve bank credit and also, Federal Reserve Holdings of U.S. Treasuries.  This of course is the biggest bait in switch in history because in exchange for U.S. Treasuries, banks can offload practically any collateral (i.e., mortgages, auto loans, credit card loans, etc).  The U.S. Treasury and Federal Reserve are creating the biggest put option in the history of the world and the American taxpayer stands to lose big.

Let us take a look at the Fed’s balance sheet:

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The Fed doubled its balance sheet in the matter of a few weeks.  It went from approximately $900 billion to $1.8 trillion in lightning speed.  And with this speed, the public unfortunately did not know what they were exactly buying into.  It is important to take a look at the Federal Reserve balance sheet broken down by category:

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Jim Sinclair’s Commentary

There will be a gang of trucks with chains looking for these ATMs.

German firm plans gold ATMs to meet growing demand
By Peter Starck FRANKFURT,

May 19 (Reuters) – Private investors should hold up to 15 percent of their wealth in physical gold, according to a German asset management company which plans to set up 500 ‘Gold-To-Go’ ATMs in Germany, Switzerland and Austria this year.

A gold-dispensing automatic teller machine (ATM) was on display at Frankfurt’s main railway station for a one-day marketing test on Tuesday.

A one-gram (0.0353 ounce) piece of gold, the size of a child’s little fingernail and about as thin, cost 31 euros ($42.25) — a 30 percent premium to the spot market price .

The flat rectangular piece, bearing the imprint of Belgian metals and speciality materials firm Umicore (Brussels) , came out of the cash-only ATM in a tin box, including a certificate of authenticity.

‘This is more than a marketing gimmick,’ said Thomas Geissler, chief executive of TG-Gold-Super-Markt.de, the company planning to set up the 500 gold ATMs at a cost of 20,000 euros apiece.

‘It is an appetizer for a strategic investment in precious metals. Gold is an asset everyone should have, between 5 and 15 percent of your liquid assets in physical gold,’ he told Reuters in an interview.

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Jim Sinclair’s Commentary

This is an inviting conclusion until the dollar goes into a freefall and hyperinflation is visible even to the Money Bunnies. Then equities for no good reason fundamentally will join gold in an up-move.

World%20GDP%20Dow%20Jones%20PPP

 

Jim Sinclair’s Commentary

China and other larger dollar holders will not stand still for this.

Exploding debt threatens America
John Taylor

Published: May 26 2009 20:48 | Last updated: May 26 2009 20:48

Standard and Poor’s decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. Let us hope they wake up.

Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years.

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Jim Sinclair’s Commentary

Regardless of the daily bankruptcy GM is on, it doesn’t mean anything now. You can be assured it is a total disaster for the US economy.

GM says bondholder offer fails; bankruptcy likely
By TOM KRISHER and DAN STRUMPF
AP Auto Writers

(AP:DETROIT) A General Motors Corp. bankruptcy filing seemed inevitable after a rebellion by its bondholders forced it to withdraw on Wednesday a plan to swap bond debt for company stock.

GM has until Monday to complete a government-ordered restructuring that includes debt reduction, labor cost cuts and plant closures. But a bankruptcy reorganization is likely after the company said its offer to exchange $27 billion in unsecured debt for 10 percent of the company’s stock had failed. GM has received $19.4 billion in federal loans.

The move came as crosstown rival Chrysler LLC headed to court Wednesday to ask bankruptcy judge for permission to sell the bulk of its assets to a group headed by Italy’s Fiat Group SpA in hopes of saving itself from liquidation. Attorneys for Chrysler maintain that the Fiat deal is the company’s only hope to avoid being sold piece by piece, but car dealers, debtholders, former employees and others are protesting.

Chrysler filed for bankruptcy protection April 30, after the government ended talks with a group of holdout debtholders. Both automakers were pulled down by overwhelming debt, high pension, health care and other labor costs relative to competitors, a global auto sales slump and a dismal U.S. housing market that pulled down demand for pickup trucks, their top-selling vehicles.

News of the failed GM bond exchange offer sent its shares down 22 cents, or 15.3 percent, to $1.22 in afternoon trading.

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Jim Sinclair’s Commentary

A state law concerning guns and martial law. Wow, things are getting dicey out there!

Proposal Stopping Confiscation Of Guns Now Law
Posted: May 23, 2009 07:15 PM

(AP) NASHVILLE, Tenn. – A person who legally possesses a gun would not have it seized during periods of martial rule under a proposal that has been signed into law by the governor.

The measure was signed by Gov. Phil Bredesen on Thursday and takes effect immediately.

Sponsors say martial rule is the same as martial law at the federal level. They say the law is necessary after law enforcement in New Orleans went door to door seizing weapons in the aftermath of Hurricane Katrina.

Republican Sen. Jack Johnson of Brentwood, one of the sponsors, has said he doesn’t expect such behavior in Tennessee, but believes legislation should be in place just in case.

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Jim Sinclair’s Commentary

The market feels Kim of North Korea is full of hot air. He may or may not be but this answers the many questions over the past few days of why gold ignores North Korea nukes and threats.

Now if you want to see real problems, review what is occurring and pay attention to the special note from Debka at the bottom.

I have always thought Debka was Massaud.

The Russians are heading to the Middle East to put a shield between Israel and Russia’s trading partner Iran.

Russian warships call at Syrian port
15:5529/01/2009

MOSCOW, January 29 (RIA Novosti) – A group of Black Sea Fleet warships has called at the Syrian port of Tartus, a Russian Navy spokesman said on Thursday.

Capt. 1st Rank Igor Dygalo said the Azov and Yamal landing ships had docked at Tartus to replenish supplies.

He previously said the two warships, which were carrying naval infantry units, would join up with other Russian warships in the Indian Ocean, including the Pyotr Veliky nuclear-powered missile cruiser, for the INDRA-2009 exercise with the Indian Navy in late January.

Russian media recently reported that Russia was planning to set up naval facilities in Yemen (Socotra), Syria (Tartus), Libya (Tripoli), Vietnam (Cam Ranh), among other countries, in the next few years as an alternative to the Sevastopol base in Ukraine’s Crimea.

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US and Russian warships line up in dispute over Georgia
Ian Traynor in Brussels

US and Russian warships took up positions in the Black Sea today in a risky war of nerves on opposing sides of the Georgia conflict.

With the Russians effectively controlling Georgia’s main naval base of Poti, Moscow also dispatched the Moskva missile cruiser and two smaller craft on "peacekeeping" duties at the port of Sukhumi on the coast of Abkhazia, the breakaway region that the Kremlin recognised as independent yesterday.

The Americans, wary of escalating an already fraught situation, cancelled the scheduled docking in Poti of the US Coast Guard vessel, the Dallas, and instead sent it to the southern Georgian-controlled port of Batumi, 200km (124 miles) from the Russian ships, where it delivered humanitarian aid.

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Russian Warships To Dock In Syria

In an effort to expand its military presence in the international arena and reestablish a naval presence in the Middle East, Russia has dispatched a naval fleet to the region, including a guided missile cruiser, two anti submarine ships and 47 fighter planes. The fleet will dock at the Syrian port of Tartus where Russia maintains a technical base. At the same port, Iranian ships are also docked.

Russian Defense Minister Anatoly Serdyukov told reporters that the expedition "is aimed at ensuring a naval presence and establishing conditions to secure Russian navigations." Serdyukov added that the fleet will conduct tactical exercises with real and simulated launches of sea and air based missiles and intends to call at a number of different ports in the region.

In the past, Russian President Vladimir Putin stressed that Russia would respond in the event Iran was attacked by a foreign power. Boosting Russia’s naval presence in the area could well be an attempt to signal to Israel and possibly America that if Iran is attacked, Russia will strike back.

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Russia’s first Persian Gulf naval presence coordinated with Tehran
DEBKAfile Exclusive Report
May 26, 2009, 6:47 PM (GMT+02:00)

Russian warships are due to call Wednesday, May 27, at the Bahrain port of Manama, seat of the US Fifth Fleet in the Persian Gulf, DEBKAfile’s military sources reveal. They will be following in the wake of the Russian vessels already docked at the Omani port of Salalah, the first to avail themselves of facilities at Gulf ports.

Their arrival is fully coordinated between the Russian and Iranian naval commands.

According to our sources, this is the first time a Russian flotilla will have taken on provisions and fuel at the same Gulf ports which hitherto serviced only the US Navy. Moscow has thus gained its first maritime foothold in the Persian Gulf.

The flotilla consists of four vessels from Russia’s Pacific Fleet: The submarine fighter Admiral Panteleyev is due at Manama Wednesday, escorted by the refueling-supply ship Izhorai, The supply-battleship Irkut and the rescue craft BM-37 are already docked in Salalah.

DEBKAfile’s military sources report that the Russians, like the Iranians, cover their stealthy advance into new waters by apparent movements for joining the international task force combating Somali pirates. While Iranian warships have taken up positions in the Gulf of Aden, the Russians are moving naval units southeast into the Persian Gulf.

Monday, May 25, the Iranian naval chief, Adm. Habibollah Sayyari, announced that six Iranian warships had been dispatched to "the international waters" of the Gulf of Aden in a "historically unprecedented move… to show its ability to confront any foreign threats." He did not bother to mention the pirates.

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Jim Sinclair’s Commentary

If banks are permitted to bid on their own Toxic Assets in the public/private lending auction, it is the same as having a shill at an auction for the purpose of creating the price desired by the bank, thereby preventing any hint of true valuation.

Of course, if you can trust the honesty of banksters, I would be wrong.

What do you think?

Regards,
Jim

 

Jim Sinclair’s Commentary

Falling off the cliff is starting to happen. This can be seen through all official and establishment estimates of the Federal Deficit going into the trash can. The Formula rolls on.

IRS tax revenue falls along with taxpayers’ income
By John Waggoner, USA TODAY

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

"These are staggering numbers," Lynch says.

Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years.

"It’s one of the drivers of the ongoing expansion of the federal budget deficit," says John Lonski, chief economist for Moody’s Investors Service. The Congressional Budget Office projects a $1.7 trillion budget deficit for fiscal year 2009.

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Jim Sinclair’s Commentary

Taxing the consumer (that is what a VAT tax is and inflationary by simple edict) is a great way to make the Formula more effective in running the Federal Budget Deficit further into the trash-can as it will cut short any incipient economic recovery.

If anyone of you believe in Green Shoots, a VAT tax is a super powerful plant killer.

What a bunch of lightweights that think higher taxes will positively affect the Federal Budget Deficit. They never really consider putting spending aside as they feel it is all necessary. DUMB! World class DUMB!

Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look
Levy Viewed as Way to Reduce Deficits, Fund Health Reform
By Lori Montgomery
Washington Post Staff Writer
Wednesday, May 27, 2009

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."

A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American — a tangible benefit that would be highly valuable to low-income families.

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Jim Sinclair’s Commentary

Yes, and it is coming in three weeks or less.

Gold May Be On Verge Of Historic Breakout
By Peter Brimelow, MarketWatch

Is this it for gold? After a good week, gold watchers of all stripes think it

may be. Again.

After Friday’s 0.8% rise to $958.50 a troy ounce, Martin Pring, decidedly not a gold bug, set the tone in his Weekly InfoMovie Report: "Gold could be on the verge of a historical breakout. Watch that $990-$1,000 area like a hawk."

Pring has always laid very heavy emphasis on the predictive power of gold shares. His analysis: "The gold-share ETF, the GDX [Market Vectors Gold Miners ETF (GDX)], has just broken out from a major base. Since the shares often lead the metal, this is a bullish factor."

Dow Theory Letters’ Richard Russell has also been interested in GDX, saying this after Friday: "Ordinarily I would only add gold items on a correction. But gold seems on a roll now, so I added GDX."

Two developments are causing the excitement about gold. From a charting point of view, gold shares are generally agreed to have broken out, meaning that gold itself could well be about to do something very important. Australia’s The Privateer (whose free U.S.-dollar 5X3 Point-and-Figure chart looks very handsome after Friday) describes the situation:

"What is being traced … is a gigantic ‘reverse’ head-and-shoulders formation. The trading range between US$900 and US$1,000 was broken early in April. Over the month of April, a tighter range between US$870-US$910 was established. Now, gold has broken back above that range. The ‘right shoulder’ on the ‘reverse’ head-and-shoulders formation is getting wider. … There are two major resistance points. The first is at US$955 … where the chart is now. The second is, of course, at US$1,000, the level reached in March 2008 and again in February 2009." See chart.

Several other commentators see the same thing.

The second bullish gold development: general economic conditions.

As the Gartman Letter noted on Wednesday: "The dollar does look vulnerable. … Pushing government steadily leftward, the Obama Administration has set up the possibility of a U.S. dollar rout. … If this persists, commodity prices generally shall rise and rise materially, and gold shall too."

Dan Norcini at the Jsmineset Web site saw things similarly on Friday.

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Jim Sinclair’s Commentary

1. Israel makes a significant miscalculation
2. Pakistan goes Taliban
3. Turkey is a Victim.

al-Sadr in Turkey
May 26, 2009 7:00 AM | Anna Mahjar-Barducci
Journalist

Moqtada al-Sadr, the most prominent Shi’ite opponent of the United States’ military presence in Iraq, paid an official visit to Turkey for talks with the Turkish leadership. This was al-Sadr’s first public appearance since 2007.

It appears that the main reason for the Turkish government inviting Al-Sadr, was to ensure his support for Ankara’s policies toward the oil rich Iraqi city of Kirkuk, which is mainly composed of Kurds, Turkomans and Arabs – though almost all its ethnic elements are Shi’ite.

No official statement was released from the meetings with Turkish officials. An unidentified Turkish official declared that the discussions had evolved over the security situation in Iraq and the Turkish-Iranian relationships. The Turkish media reported that Ankara had sent a private plane to Iran to take Al-Sadr to Turkey. To ensure his security, a close protection team from the National Security Agency (MIT) went to Iran to minimize the risks during his trip to Turkey. According to Turkish reports, Sadr met with Prime Minister Erdogan and President Abdullah Gul, along with other Turkish officials.

Al-Sadr supports Turkey’s position over the status of Kirkuk, arguing that it should belong to the central government. The Kurdish daily, Helwer Post conducted an in-depth analysis to explain Al-Sadr’s opposition to the federal structure of Iraq, and particularly the special status of Baghdad and Kirkuk and the distribution of oil wealth. The Helwer Post suggests that because Al-Sadr’s supporters are mainly concentrated in Baghdad and to some extent in Kirkuk, this limits his ability to share the wealth of oil revenues. The status of Baghdad within a loose federation restricts Al-Sadr’s group accessing the oil rich regional administrations. If Iraq emerges as a viable federation, in the near future the Al-Sadr group will be economically and politically marginalized within Baghdad. Given that Al-Sadr cannot prevent an Iraqi federation, in order to access oil revenues he must keep Kirkuk within the control of Iraq’s central government rather than under the Kurdish Regional Government. Thus, it is critical for Al-Sadr to receive support from Turkey.

The timing of these meetings is also significant. On May 3, the Turkish press reported that UN diplomats working on the status of Kirkuk for more than one year had finally drafted their report. They suggested delaying for five years the planned referendum to determine the status of Kirkuk. As expected, Kurdish leaders strongly opposed these recommendations. Iraq’s President Jalal Talabani, a Kurd himself, clearly stated that he will not negotiate on the status of Kirkuk, which is already determined through the constitution.

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Posted by & filed under In The News.

Dear CIGAs,

Gold is getting ready for a ballistic move upwards. Are you hedge funds in denial?

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Jim Sinclair’s Commentary

Predictions:

1. Gold reacts as currency support for the dollar enters mid June to a slow decline (that is the official definition of a strong dollar policy, really).
2. End of 2nd week going into the beginning of the 3rd week of June Gold launches towards and this time through the neckline of the reverse head and shoulders formation.
3. Gold rises to $1224 where it hesitates.
4. The OTC derivative market takes on the dollar as short sellers into dollar support.
5. This OTC derivative currency short position builds.
6. It is the US dollar where Armstrong will get his WATERFALL.
7. The main selling takes place when Israel makes a major miscalculation.
8. Hyperinflation is always and will continue to be a currency event.
9. Hyperinflation will be a product of the upcoming massive OTC derivative short dollar raid.

Should I be correct in the gold price action going into late June, it will fit Armstrong’s criterion for a move to $5000.

Alf’s work permits an over-run of the gold price to $3500 in the major 3rd phase, indicating overruns into the major 5th.

Jim Sinclair’s Commentary

The Federal Reserve has no other option. They will continue Quantitative Easing.

The definition of Quantitative Easing is simple money printing.

Since the US will not (or cannot) consider a guarantee of Treasury Debt in gold at market related prices (lack of transferable supply) the Chinese central bank will continue their various efforts to diversify out of Treasury debt.

Those that feel the Chinese cannot diversify and think that the only way is via the open market for treasuries or dollars are so stupid it make me ill that they speak publicly.

China warns Federal Reserve over ‘printing money’
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed’s direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 9:19PM BST 24 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia’s "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed’s leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

However, he agreed that the Fed was forced to take emergency action after the financial system "literally fell apart".

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Jim Sinclair’s Commentary

Of course it will be settled. There is so much dirt in these type transaction that discovery, a civil suit procedure, would reveal much too much.

UBS, JPMorgan Drop Asset Seizure Appeal in Milan
By Elisa Martinuzzi and Sonia Sirletti

May 25 (Bloomberg) — UBS AG, Deutsche Bank AG, JPMorgan Chase & Co.and Depfa Bank Plc dropped an appeal against the seizure of 345 million euros ($482 million) of assets amid a probe into alleged fraud involving derivatives sold to the City of Milan, said two lawyers representing the banks.

The banks dropped the appeal at a hearing in Milan today. The prosecutor is considering a May 7 request by the securities firms to put up about 100 million euros of cash in total in exchange for having the assets returned, the lawyers said.

The police froze the banks’ stakes in Italian companies, real estate assets and current accounts. The City of Milan is suing the four banks after it lost money on derivatives it bought from the lenders in 2005. The banks earned about 101 million euros in what prosecutors call illicit profit for arranging the contracts.

“The banks probably didn’t want to run the risk of a ruling against them so early on in the case,” said Giampiero Biancolella, an attorney who’s not involved in the case. “Lawyers may be buying time to reach an agreement with Milan outside the courts.”

Officials for Deutsche Bank and Depfa declined to comment. The claims at issue will be discussed in the course of the investigation, said UBS’s lawyer Giuseppe Bana.

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Jim Sinclair’s Commentary

Let’s hear another big round of applause for the Greenwich, CT OTC derivative manufacturers and distributors who have taken to screwing the widows, orphans, homeless, frail, sick and dying.

Society must have a safety net or there is no society, just a bunch of people with little excuse for being.

Crime is going to skyrocket in California. Keep in mind the many street people are prior residents when there used to be bughouses.

Governor plans to completely eliminate welfare for families
3:58 PM | May 21, 2009

Gov. Arnold Schwarzenegger is proposing to completely eliminate the state’s welfare program for families, medical insurance for low-income children and Cal Grants cash assistance to college and university students.

The proposals to sharply scale back the assistance that California provides to its neediest  residents came in testimony by the administration this afternoon at a joint legislative budget committee hearing. It followed comments by the governor earlier today that he would be withdrawing a proposal to help balance the budget with billions of dollars of borrowing and replacing it with program reductions.

The proposals would completely reshape the state’s social service network, transforming California from one of the country’s most generous states to one of the most tightfisted. The proposals are intended to help close a budget deficit estimated at $21.3 billion.

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Jim Sinclair’s Commentary

What have I been most concerned about for over a year now, warning you time and time again?

The answer is UNFUNDED PENSION FUNDS and similar make believe payable social/business obligations workers have become dependent on.

The next two decades are going to see massive draining of the gene pool.

Look at what is hidden in the article below that is deserving of its own headline.

The Oxford-educated Mr. Fisher, an outspoken free-marketer and believer in the Schumpeterian process of "creative destruction," has been running a fervent campaign to alert Americans to the "very big hole" in unfunded pension and healthcare liabilities built up over the years by a careless political class.

"We at the Dallas Fed believe the total is over $99 trillion," he said in February.

China warns Federal Reserve over ‘printing money’
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed’s direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 9:19PM BST 24 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia’s "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed’s leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

However, he agreed that the Fed was forced to take emergency action after the financial system "literally fell apart".

More…

Jim Sinclair’s Commentary

Debt is totally out of hand and beyond control.

It is no longer just a possibility – it is now a reality. The Chinese are totally correct in demanding a guarantee.

Government debt swells as choices get harder
Carolyn Lochhead, Chronicle Washington Bureau
Sunday, May 24, 2009
(05-24) 04:00 PDT Washington

This year, the government is borrowing 50 cents of every dollar it spends. If that were just a blip caused by a historic financial crisis that necessitated a $787 billion fiscal stimulus and a $700 billion bank rescue in the space of about three months, there would be little cause for concern.

But it is not a blip. It is a relentless curve of red ink that will, within the decade, take U.S. debt levels to the record reached at the end of World War II, from 40 percent of the nation’s output now to 80 percent, and then rapidly thereafter into the realm of banana republics.

"We are accumulating a massive debt. We owe about half of that debt to foreigners, including the Chinese and others whose foreign policy is not always well aligned with ours," said Isabel Sawhill, a former Clinton administration budget official who now co-directs the Center on Children and Families at the Brookings Institution. "So we are really losing control of our economic destiny and possibly losing control of our foreign policy as well."

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North Korea Claims to Conduct 2nd Nuclear Test

By CHOE SANG-HUN

Published: May 24, 2009

SEOUL, South Korea — North Korea announced on Monday that it had successfully conducted its second nuclear test, defying international warnings and drastically raising the stakes in a global effort to get the recalcitrant Communist state to give up its nuclear weapons program.

The North’s official news agency, KCNA, said “The Democratic People’s Republic of Korea successfully conducted one more underground nuclear test on May 25 as part of the measures to bolster up its nuclear deterrent for self-defense in every way as requested by its scientists and technicians.”

The test was safely conducted “on a new higher level in terms of its explosive power and technology of its control,” the agency said. “The results of the test helped satisfactorily settle the scientific and technological problems arising in further increasing the power of nuclear weapons and steadily developing nuclear technology.”

Word of the test sent a shudder through Asian financial markets and clearly caught South Korea and the United States off guard. The news hit just as South Korea’s government and people were mourning the suicide of former President Roh Moo-hyun. And hours after the test was reported, South Korean state media reported that the North had fired a short-range missile.

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Jim Sinclair’s Commentary

The real story here is the revision of the prior month. There was no so-called Green Shoot here ever this year.

U.S. home prices fell 18.7 percent on year in March: S&P
Tue May 26, 2009 9:33am EDT

NEW YORK (Reuters) – Prices of U.S. single-family homes in March fell 18.7 percent from a year earlier, while prices in the first quarter dropped at a record pace, according to the Standard & Poor’s/Case-Shiller Home Price Indices released on Tuesday.

On a month-over-month basis, the index of 20 metropolitan areas fell 2.2 percent in March from February, S&P said in a statement.

Price drops on both a month-over-month and year-over-year basis were worse than expectations based on a Reuters survey of economists.

The composite index of 10 metropolitan areas declined 2.1 percent in March from February for a 18.6 percent year-over-year drop.

"Declines in residential real estate continued at a steady pace into March," David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, said in a statement.

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Jim Sinclair’s Commentary

2,300,000 Pakistani are homeless and foodless.

This is not what wins the hearts and minds of the populous when all they see is US equipment and Pakistanis in US combat uniforms coming over the hill blowing everything in sight to ashes.

Sustainability is the key to this action, and you can wager there will not be much of that.

Pakistan battles for Swat capital, 2.38m uprooted
By Lehaz Ali – 1 day ago

PESHAWAR, Pakistan (AFP) — Pakistan’s military said Monday it was facing "stiff resistance" as it battled to wrest Swat valley out of Taliban hands, in an offensive that has now scattered 2.38 million terrified civilians.

Military spokesman Major General Athar Abbas warned it could take up to 10 days to regain control of Swat’s capital Mingora, as the punishing assault across three rugged northwest districts entered a fifth week.

A Taliban spokesman told AFP that firebrand commander Maulana Fazlullah had asked Taliban to stop battling in the key city, but said the insurgents would continue to fight for their vision of imposing a harsh brand of Islamic law.

"Maulana Fazlullah has directed all his mujahedeen to stop resistance in Mingora and its surroundings to avoid hardships to the people and losses to the civilian population," spokesman Muslim Khan said from an undisclosed location.

But he added: "We will fight for the enforcement of sharia law till the last drop of our blood."

Ground forces have been fighting street-by-street with Taliban fighters in Mingora, the business and administrative hub of the scenic Swat region which has been ripped apart by a two-year insurgency by the Islamist extremists.

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Jim Sinclair’s Commentary

The price of gold is preparing for a ballistic move upwards.

I count this geometric up-move in price to appear in weeks, not months.

Trading here borders on a serious case of self destructive tendency.

Gold bugs at last have their perfect trinity
China has doubled its bullion reserves and left us in no doubt that it will spend more of its $40bn monthly surplus on hard assets rather than the toxic paper of Western democracies.
By Ambrose Evans-Pritchard
Last Updated: 9:36PM BST 23 May 2009

The world’s top hedge fund manager John Paulson has built a gold position of at least $5.5bn, the biggest such move since George Soros and Sir James Goldsmith bet on Newmont Mining in 1993.

Britain has become the first of the Anglo-Saxon "AAA" club to face a downgrade. As feared, the cancer of bank leverage is spreading to sovereign cores.

Gold prices tend to slide in late May and languish through the summer, because of the seasonal ups and downs of jewellery demand. The trader reflex would be to short gold at this stage after its $90 vault to $959 an ounce over the past month. They may think again this year.

Paulson & Co has bought $2.9bn in SPDR Gold Trust, the biggest of the gold exchange traded funds (ETFs), which now holds 1106 tonnes − three times the Brown-gutted reserves of the United Kingdom.

Mr Paulson has also built up a $2.3bn holding of Anglo Ashanti, Goldfields, Kinross Gold, and Market Vectors Gold Miners. The fact that he is launching a "Paulson Real Estate Recovery Fund", reversing the bet against sub-prime securities that made him rich, tells us all we need to know about his thinking. This is a liquidity-reflation play.

He may be wrong, of course. In his early fifties, he belongs to the baby-boom cohort most psychologically vulnerable to the 1970s "paradigm-error". And perhaps he has never lived in Japan.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

I have not read a better encapsulation of conditions nor have I seen a better reason to get insured immediately if you are not in gold. If you are not insured, prepare to suffer the extraordinary loss of lifestyle you are accustomed to, if not your existence itself.

Let’s call our writer "CIGA Pedro the Informed."

A View From Abroad by an American in Brazil

We are witnessing the end of a very long phase in history. As a result there is a mass insecurity amongst the dominant nations of the past 300-years that is bordering on hysteria. This insecurity manifests itself in many different ways and markets are reflecting this. Gold prepares to soar, reflecting this insecurity, as gold is a barometer of fear.

Within the English-speaking world it is evident that “foreigners” are to blame. In the UK it is both the Poles and the “Pakis”. In America it is initially revealed via a general population  viewing the Kyoto Protocol as a Chinese-led trick to destroy our economy. Then it is the belief that Mexicans are “invading” and Arabs are trying to kill us all. One has to stop and ask what the root of this paranoia really is.

As the American power structure tries to prepare for “inevitable conflict” with world Islam (c.f. Huntington, Clash of Civilizations) it also tries to hide its obsequious relationship with the Saudi Royal Family, which is incestuous at best, and perhaps more symbiotic than most would want to know. The financial population cannot reconcile this anymore than they can the fact that (perhaps apart from Jim) the accurate, unblended analysis of this crisis seems to have been foreshadowed by a two people with names: Nouriel Roubini and Naseem Taleb. People remain confused by the fact that the American power structure lacks patriotism and seems to favor its own interests over the interests of the country. They lash out at everyone, including, now, their own leaders. People don’t know whether to “blame” Obama’s socialism or Bush’s self-serving capitalism. Their foreign policies seem different but the rest appears the same. Major banks appear to have more control than we thought….even while teetering on bankruptcy.

This is reflected in markets. Currencies gyrate wildly. As Jim has noted many times, anybody trying to fathom the FX markets and trade them is likely to be carried out of the pit on the proverbial trader’s stretcher with a coronary. First the Euro is finished – its break-down elucidating thoughts of its demise – but then the belief that jettisoning the PIGS (Portugal, Italy (Ireland?), Greece, Spain) might be causing it to rise. The markets are schizophrenic. They don’t know what to think. The dollar and sterling take the brunt. There are reasons for this.

This is a system headed for breakdown. The established historical order is drifting to a close, and nothing can stop it. Changes in policy are manifestations of history – alter it they cannot. Gold’s rise becomes inevitable as countries who have ruled the Imperial phase of history try and resist their diminishment in status. Markets are manipulated as they try and hold on to power, while history shifts under their feet. China and Brasil cut deals that don’t include the USA and UK…the UAE starts to view separate currency arrangements with Russia, foregoing overtures by Saudi Arabia for a Gulf wide (GCC-led) monetary regime. Riyadh’s relationship is too close to Washington. Washington is yesterday’s news. (So much for the conspiracy of Islam.)

The end of an era is upon us. That is the era of the Global hegemon. The first phase took place in Britain, the second in the Soviet Union, and the third in America. Fukayama’s theory of history’s end is immolated on its very alter. The debacle of Iraq, as well as Afghanistan stand as testimony. The dominant powers simply cannot draw borders they way  they did at San Remo in 1920 or via the Red-lines which economically created Kuwait. We seem to be unsure if we should break Iraq up, or let it be unified. Is it even our business, or has history out-run us and we have failed to acknowledge it?  As the global hegemon is characterized through the Imperial phase of history, now draws to a close, people stand confused and amazed. The rulers of the dominant nations appear ready to sell them out…and this appears as “news” to educated observers.

Nobody can be sure of any currency regime any longer. The markets gyrate wildly. As fear and insecurity mount, Gold prepares for take off.

Jim Sinclair’s Commentary

I told them this would happen, but only received a note that my personally paid for advertising on the subject of short of gold derivatives selling by producing companies was no longer welcome. This was in the London Mining Journal & Mining Monthly.

The big guys are still stuck with derivatives in the indenture of the development loans as well as on the books.

The egotistic hedge funds have no idea how stupid it is to be short of the up and comers who are "back to basics" and "royaltied."

AngloGold stumbles over hedges

The cost of betting on the gold price is now all too clear, writes Jim Jones

Back in the mid-’90s, when Anglo American’s gold division (AngloGold, as it came to be called) was more or less happy to be a South African company, management strategy was simple. The idea was to hedge about 10% to 20% of annual gold production forward for each of the coming five years. Annual revenues would be protected from a fall in the gold price and, should gold rise, the company would benefit from the rise on 80% to 90% of its output.

The company’s hedge book was then in the region of 100 tons of gold against annual production of about 200 tons.

But international expansion entered the picture. Under Bobby Godsell, AngloGold started heading out of South Africa.

By 1999 that expansion had introduced a sophistication that had lifted AngloGold’s total hedge book to 11.9 million ounces, stretching out 10 years and approaching almost twice the group’s annual production of 6.9 million ounces.

The suits running the show could congratulate themselves because, while the gold price was slipping, hedging gave the company a couple of percentage points on top of the spot gold price — 6/oz when spot gold was averaging 300/oz.

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Jim Sinclair’s Commentary

The mindset of taking your gold home is a factual criterion of gold as insurance.

It is also the first movement of a TRUTH MACHINE because much of the gold, even sold at these levels, is paper gold.

The sale is agreed to, but the seller does not have all or sometimes any of the gold granted to the buyer. Receipts are issued, sometimes even with serial numbers.

Paper gold is purchased as a hedge but only in a ratio determined by the volatility.

As gold is called for in physical form on all levels, even at the COMEX, the true price of gold will emerge.

You can be sure that Hedge Wizard Paulson owns paper gold.

DMCC vault may store region’s gold reserves
By Shashank Shekhar  on Wednesday, May 13, 2009

Much of the region’s gold that has so far been held in London may soon return.

The new vaults of DMCC will be a home to the gold allocated to the Dubai Gold Securities (DGS) Exchange Traded Funds (ETFs). The vault may also become a natural choice for storage of gold reserves by central banks in the regional market, analysts said.

While the gold allocated to DGS is kept at HSBC’s vaults in London, the gold reserves held by GCC’s central banks are held by various other vaults in London, market sources said. Gold vaults have existed in London for more than 150 years.

DMCC’s new vault became operational on April 26 this year. "We want to bring the gold held under DGS ETFs at the HSBC vaults in London to Dubai. What has been holding us back is the difference in gold specification between London and Dubai," a DMCC official told Emirates Business. Until May 11, the total number of DGS traded stood at 15,200. Each security approximately amounts to one-tenth of an ounce of gold.

Though DMCC officials have declined a direct comment on the matter, a spokesperson with the centre said that ample care has been taken to make the vault "better than the others".

Another DMCC official said that the vault will also be used to store precious metals associated with the ETFs that may be launched in Dubai later this year. At a press conference organised recently, senior DMCC officials had disclosed that they plan to launch new "precious metal ETFs" in Dubai. The ETFs will be traded at Nasdaq Dubai, the Dubai-based regional security exchange where the DGS trades.

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Jim Sinclair’s Commentary

All major US social and economic events start on the West Coast, moving quickly East. So will this according to the Formula you received here in 2006.

California faces its day of fiscal reckoning
May 22, 6:25 PM (ET)
By JULIET WILLIAMS

SACRAMENTO, Calif. (AP) – The day of reckoning that California has been warned about for years has arrived. The longest recession in generations and the defeat this week of a package of budget-balancing ballot measures are expected to lead to state spending cuts so deep and so painful that they could rewrite the social contract between California and its citizens. They could also force a fundamental rethinking of the proper role of government in the Golden State.

"The voters are getting what they asked for, but I’m not sure at the end of the day they’re going to like what they asked for," said Jim Earp, executive director of the California Alliance for Jobs, which represents the hard-hit construction industry. "I think we’ve crossed a threshold in many ways."

California is looking at a budget deficit projected at more than $24 billion when the new fiscal year starts in July. That is more than one-quarter of the state’s general fund.

This week, voters said they no longer want the Legislature to balance budgets with higher taxes, complicated transfer schemes or borrowing that pushes California’s financial problems off into the distant future. In light of that, Republican Gov. Arnold Schwarzenegger has made it clear he intends to close the gap almost entirely through drastic spending cuts.

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