Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

Tore up $38.6 TRILLION in overlapping contracts?

That sound like an interesting financial transaction.

I think we need a tad more explanation of this massive disappearing act.

Credit Swaps Market Cut to $38 Trillion, ISDA Says
2009-04-22 07:59:13.968 GMT
By Katrina Nicholas and Abigail Moses

April 22 (Bloomberg) — Credit-default swap dealers cut the volume of outstanding trades to $38.6 trillion last year as they tore up overlapping contracts amid pressure from regulators to scale down the privately negotiated market and reduce risk.

Outstanding contracts fell 38 percent in 2008, the New York-based International Swaps and Derivatives Association said in a survey released in Beijing today. It’s the first annual decline, after the market increased 100-fold over the previous seven years as investors used the derivatives to protect against bond losses and speculate on creditworthiness.

Traders have been rushing to cancel redundant trades as federal authorities seek to impose regulations on the market for the first time since it was created a decade ago. After the collapse of Bear Stearns Cos. last year, 17 banks that handled about 90 percent of trading in default swaps agreed to initiatives including trade compression to help reduce day-to- day payments, bank staff paperwork and potential for error.

“In the current environment, firms are intensely focused on shrinking their balance sheets and allocating capital most productively,” said ISDA Chief Executive Robert Pickel, whose group represents dealers that control trading.

More than 2,000 banks, hedge funds and asset managers trading credit-default swaps agreed to a “Big Bang Protocol” this month that aims to improve transparency and confidence in credit-default swaps. It changes the way the swaps are traded so that it’s easier to eliminate offsetting trades and move them through a clearinghouse.

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Jim Sinclair’s Commentary

Prestidigitation increases home values in the last reporting month.

Stock rallies are breaking out of short term down trends.

Wall Street expresses surprise and glee.

Bottoms seen by AOs.

Housing bubble smackdown: Huge “shadow inventory” portends a bigger crash ahead

Mike Whitney
Wednesday, April 22, 2009

In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before–nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It’s a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 “DISAPPEARED HOMES?”

Here’s a excerpt from the SF Gate explaining the mystery:

“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

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Jim Sinclair’s Commentary

Keep an eye on this development.

If you catch one mouse in your house, how many do you have inside the walls?

Turkey: Police arrest Al-Qaeda suspects in raids

Istanbul, 21 April (AKI) – Turkish police on Tuesday arrested at least a dozen suspected members of Al-Qaeda in simultaneous raids across four provinces, Turkish media reported.

While the exact number of suspects was still to be confirmed, at least 12 suspects were arrested in raids in the southeastern provinces of Gaziantep and Sanliurfa, the central province of Konya and southern city of Adana, said Turkish daily Hurriyet.

Earlier this month, seven people were arrested on charges of links to the extremist network following simultaneous operations in the western province of Eskisehir.

A Turkish newspaper reported in March that Ankara had received US intelligence that Al-Qaeda militants could be plotting attacks on foreign targets in Turkey.

A Turkish Al-Qaeda cell was held responsible for truck bomb attacks against two synagogues, the British consulate and a British bank in Istanbul in 2003.

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Jim Sinclair’s Commentary

Whatever needs bailouts will be bailed out. Eventually the dollar will, by severe depreciation, bailout the bailout debt. REALLY!

‘Deeper’ recession ahead says IMF
By Steve Schifferes
Economics reporter, BBC News

The global economy is set to decline by 1.3% in 2009, in the first global recession since World War II, the International Monetary Fund (IMF) says.

In January, the IMF had predicted world output would increase by 0.5% in 2009.

It now projects that the UK will see its economy shrink by 4.1% in 2009, and by a further 0.4% in 2010.

But other major economies are predicted to shrink even more, with Germany declining by 5.6%, Japan by 6.2%, and Italy by 4.4% in 2009.

The prospects for the advanced economies are not much brighter in 2010, with an overall forecast of zero growth.

The IMF says this represents “by far the deepest post-World War II recession” with an actual decline in output in countries making up 75% of the world economy.

Currently, output is falling by an “unprecedented” 7.5% annual rate in the rich countries in the last quarter of 2008, and the IMF expects the same rate of decline in the first quarter of this year.

Only a recovery in developing and emerging market countries will propel the world economy back into positive growth in 2010, albeit at a relatively weak level of 1.9%.

The prospects for world trade are even gloomier, with the IMF now forecasting world trade volumes to decline by 11% in 2009, and barely grow at all in 2010.

After 60 years as the engine of world growth, the sharp fall in trade is now hitting many of the leading exporting nations, particularly in Asia.

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Posted by & filed under In The News.

Dear CIGAs,

As goes Motors, so goes the USA.

GM to close down 1,700 dealerships by June 1st
tryme submitted on 4/16/2009 Official AutoSpies Timestamp: 7:06:28 AM

GM has accelerated its restructuring as the impending June 1 deadline approaches along with Chapter 11 speculations.http://tenzing.fmpub.net/?t=z&n=227&fleur_de_sel=1414059436523748

The carmaker has informed its dealers that it will expedite the close down of about 1,700 dealerships, an insider has said. At present, there are around 200 dealers that were shut down in this year’s first quarter.

Although the closure of such large numbers of dealers was not confirmed by GM officially, a spokesman did confirm GM-dealers meetings. The insider refused to comment on what happened behind the closed doors of the meeting. General Motors is counting on either the demise or sale of Saturn and Hummer. If GM succeeds in getting rid of these liabilities, the dealerships for these brands will also follow. GM can get rid half of the 1,700 dealerships it intends to close from the Saturn and Hummer brands alone. This will mean that there will be no buy-outs for the respective dealers together with those which GM will deem to be underperformers, whose franchise will ends by the first of June. Dealership closures will take place, whether GM goes bankrupt or not. One of the suggestions offered for the survival of the dealers is for them to acquire Saturn.

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Jim Sinclair’s Commentary

This weekend I assured you that “Pay to Play” was key to the majority of pension fund money now decimated by the players.

The failure of pension funds and the misdeeds to get the money under management is going to drive pensioners and all those that planned some day to retire right out of their minds.

In State Pension Inquiry, a Scandal Snowballs
By DANNY HAKIM and MARY WILLIAMS WALSH
Published: April 17, 2009

The inquiry into corruption at the New York State pension fund started simply enough. Alan G. Hevesi, the former comptroller, was accused of using state workers as chauffeurs for his ailing wife.

But by the time Mr. Hevesi resigned his office in late 2006, investigators for the Albany County district attorney’s office were examining a more troubling problem: allegations that Mr. Hevesi’s associates had sold access to the state’s $122 billion pension fund, using one of the world’s largest pools of assets to reward friends, pay back political favors and reap millions of dollars in cash rewards for themselves.

“We knew this was not going to be a case we could handle ourselves in Albany County,” recalled P. David Soares, the Albany County district attorney.

In 2007, Attorney General Andrew M. Cuomo’s office and then the Securities and Exchange Commission took over the inquiry, which has ballooned into a sprawling investigation involving some of the most prominent players in New York’s political and financial worlds.

Hundreds of investment firms have been subpoenaed. Three people have been criminally charged and another has pleaded guilty to a felony. And the scandal has grabbed the attention of Wall Street, as members of the investment establishment’s top tier now face scrutiny.

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Jim Sinclair’s Commentary

Maybe you can fool some of the people some of the time and that time has worn itself out. To call mark to market a gimmick was a top in foolishness.

Criticism of U.S. accounting changes mounts
IASB said the rationale for watering down fair value is “crazy”
Duncan Mavin
Published: Monday, April 20, 2009

Wall Street lobbyists and U.S. politicians are damaging the credibility of corporate reporting and hurting the interests of investors around the world by pulling-back on fair value accounting, a top international accountant said.

The comments from Tom Jones, vice-chair of the International Accounting Standards Board, come after U.S. standard-setters unilaterally decided to dilute the controversial accounting rule earlier this month.

In an interview with the Financial Post, Mr. Jones warned of “a loss of credibility” and said the rationale for watering down fair value is “crazy.” He also cited concerns about political interference that could undermine the independence of accounting rule setters, a fear that was echoed by other senior accountants Monday.

In early April, the U.S. Financial Accounting Standards Board pledged to backtrack on fair value accounting under intense pressure from Wall Street and demands from Congress. U.S. lawmakers had even threatened to take the matter into their own hands rather than leave it to the accountants. The resulting FASB rule changes released on Friday allow banks to use judgment rather than market prices, to value financial instruments.

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Posted by & filed under In The News.

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Dear CIGAs,

1. The real number is in excess of US $1.4 quadrillion notional value. The method of valuation was changed to hold to maturity, a cartoon.

2. Notional value becomes full value upon bankruptcy.

3. It is already melting down.

4. The chances of this happening soon are reasonably good as the real why of this ongoing disaster is coming into focus.

Derivatives: A $700+ Trillion Bubble Waiting to Burst
April 19, 2009
J. S. Kim

In the past three years, while banks all over the world and Wall Street were imploding, while some $40-$50 trillion of capital was being destroyed in global stock markets, one financial market kept growing. That market is the financial derivatives market.

According to the Bank for International Settlements [BIS], the global Over the Counter [OTC] derivatives market has grown almost 65% from $414.8 trillion in December, 2006 to $683.7 trillion in June of 2008. On the BIS’s own website, there are no updated figures for the notional derivatives market since June 2008, so we can likely assume, with some margin of safety, that this market has now grown to more than $700 trillion. Comparatively speaking, the total market cap of all major global stock markets is approximately $30 trillion.

Before I discuss how financial products could grow more than 65% during a time period when financial companies were imploding all over the world, let’s review the definition of a derivative, because this will explain how this market of financial products keeps becoming more valuable at a time when the value of many capital assets are sinking like a rock in an ocean.

According to Wikipedia:

Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying value on which a derivative is based can be an asset (e.g., commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest rates, exchange rates, stock market indices, consumer price index [CPI] — see inflation derivatives), weather conditions, or other items. Credit derivatives are based on loans, bonds or other forms of credit. The main types of derivatives are forwards, futures, options, and swaps.

Because the value of a derivative is contingent on the value of the underlying, the notional value of derivatives is recorded off the balance sheet of an institution, although the market value of derivatives is recorded on the balance sheet. Over-the-counter [OTC] derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds…Because OTC derivatives are not traded on an exchange, there is no central counterparty. Therefore, they are subject to counterparty risk, like an ordinary contract, since each counterparty relies on the other to perform.

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Jim Sinclair’s Commentary

This period in history will be titled “The Death of the Dollar.”

With that the power of Asia rises.

China seeks oversight of reserve currency issuers
China sovereign wealth fund plans more investments in Europe: report
By Lisa Twaronite, MarketWatch
Last update: 5:28 p.m. EDT April 18, 2009

SAN FRANCISCO (MarketWatch) — Chinese Premier Wen Jiabao called for more surveillance of countries that issue major reserve currencies, according to published reports Saturday.

Wen did not specify the United States in his remarks at the Boao Forum for Asia in China’s Hainan Province. But Chinese officials have recently expressed their concern about their country’s investments in dollar-denominated assets.

“We should advance reform of the international financial system, increase the representation and voice of emerging markets and developing countries, strengthen surveillance of the macro-economic policies of major reserve currency issuing economies, and develop a more diversified international monetary system,” Wen said, according to China’s official Xinhua news agency.

Wen told the conference that China’s economy was faring “better than expected.” China said last week that its economy grew at an annual rate of 6.1% in the first quarter, a slowdown from 6.8% in the fourth quarter of 2008.

Wen said China would seek to expand currency swap agreements that are seen as a step toward eventually making the yuan more of a global reserve asset.

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Jim Sinclair’s Commentary

Bloomberg’s revealing of the tenuous position of the $USD is attention catching.

The Money Bunnies would faint stone cold if that came from Bloomberg TV.

There is no way dollar support will survive 2009. It simply will NOT!

China wants control over the economic monetary acts of a reserve currency nation (posted for you today). This is a direct dollar challenge if you have the experience to hear.

Washington in general could be dense and egotistic enough not to know what is coming down the pike.

“Geithner’s climb-down from the manipulator charge is about pragmatism. He is aware of the fragility of international support for the dollar.”

Geithner’s Biggest Problem Is Dollar, Not China: William Pesek
Commentary by William Pesek

April 17 (Bloomberg) — It’s a bit rich for U.S. politicians to berate Treasury Secretary Timothy Geithner for not labeling China as a currency manipulator.

Perhaps Senator Lindsey Graham, a South Carolina Republican, hasn’t seen a newspaper in the last 12 months. With near-zero interest rates, the likely issuance of trillions of dollars of government debt and massive taxpayer-funded bailouts, the U.S. will soon make China look like a manipulation piker.

Memo to Graham and his ilk: Your economy has lost any moral high ground as it drags the world down with it. That will be even truer as the dollar eventually pays the price for ultra- loose monetary and fiscal policies. And it will.

Sure, China manipulates the yuan. Everyone knows that, including Geithner; he said so during his January confirmation hearing. It’s also widely recognized that a stable yuan is propping up the U.S. financial system. Its $2 trillion of reserves are a direct result of China manipulating the yuan.

Geithner’s climb-down from the manipulator charge is about pragmatism. He is aware of the fragility of international support for the dollar.

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Jim Sinclair’s Commentary

Of all our international problems this is the most serious.

It holds the potential of upsetting the social order as every worker depends on their retirement funds, many of whom have been taken down by the OTC derivative massacre.

Having read the warning letters required to be sent to the pension fund contributors, I can assure you they do not bare the facts.

Potential pensioners are clueless.

Are pensions just a waste of money? In a word: yes
The Observer, Sunday 19 April 2009

Having paid into a private pension for the last 10 years, my answer to your question (Are pensions a waste of money?, Cash, last week) is yes.

The value of my fund is about 30% less than the amount I’ve paid in over the years. I’m also paying into an occupational pension, though only because my employer adds 6%, but, like the private pension, this has plummeted in value.

Forget about the tax-free capital gains claimed by Tom McPhail – the stockmarket has gone nowhere for 10 years. Only the prospect of dividends has given any hope to pension savers. But Gordon Brown has been taxing these since 1997.

Only fund managers make money out of pensions. They take annual fees regardless of performance. This also means you have to keep paying into a pension just to stand still – stop and its value falls each year thanks to charges.

Phil Gooch, by email

Are pensions a waste of money? In my opinion, they are. The big advantage for a man, let’s call him Mr B, investing in an Isa instead is that it is then his money to do with as he pleases. If Mr B dies at 80 there could be money remaining that could be left to his partner or children.

It is possible to take a quarter of a pension pot as a lump sum , but the rest has to be given away to strangers in a pension company. If you pay tax at 40%, do not wish to leave an inheritance, and plan to retire early, then maybe a pension is for you. But not for me.

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Jim Sinclair’s Commentary

If you think this is unusual then you never heard the term, “Pay to Play,” common in the financial industry.

As pension funds financially implode watch the fall out of “Pay to Play.”

In State Pension Inquiry, a Scandal Snowballs
By DANNY HAKIM and MARY WILLIAMS WALSH
Published: April 17, 2009

The inquiry into corruption at the New York State pension fund started simply enough. Alan G. Hevesi, the former comptroller, was accused of using state workers as chauffeurs for his ailing wife.

But by the time Mr. Hevesi resigned his office in late 2006, investigators for the Albany County district attorney’s office were examining a more troubling problem: allegations that Mr. Hevesi’s associates had sold access to the state’s $122 billion pension fund, using one of the world’s largest pools of assets to reward friends, pay back political favors and reap millions of dollars in cash rewards for themselves.

“We knew this was not going to be a case we could handle ourselves in Albany County,” recalled P. David Soares, the Albany County district attorney.

In 2007, Attorney General Andrew M. Cuomo’s office and then the Securities and Exchange Commission took over the inquiry, which has ballooned into a sprawling investigation involving some of the most prominent players in New York’s political and financial worlds.

Hundreds of investment firms have been subpoenaed. Three people have been criminally charged and another has pleaded guilty to a felony. And the scandal has grabbed the attention of Wall Street, as members of the investment establishment’s top tier now face scrutiny.

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Jim Sinclair’s Commentary

We spoke of Jim’s Formula as a key to the dollar.

Here is your confirmation that the 2006 Formula did give you an outline of what lays ahead, how it would occur and how it would eventually take the dollar down.

The Formula will play out as the most significant of all criterion for this chapter that history will define as “The Death of the Dollar.”

Just think if someone had listened to my warnings from 2000 to the present on OTC derivatives.

Just think if people had given the Formula the credit it deserves.

Even now evil spirited people would rather deride than be advised.

They could still have gotten pig rich without destroying the world in the process.

The destruction has been done. Now even Taleb cannot help them.

You can protect yourself. You must protect yourself from perpetual spin.

Study the lessons below, please.

GEAB N°34 is available! Summer 2009: The international monetary system’s breakdown is underway

In this issue of the GEAB, our researchers anticipate the different forms a US default will take at the end of summer 2009, a US default which can no longer be concealed concealable from this April (most taxes are collected in April in the US) onward (10). The perspective of a US default this summer is becoming clearer as public debt is now completely out of control with skyrocketing expenses (+41%) and collapsing tax revenues (-28%), as LEAP/E2020 anticipated more than a year ago. In March 2009 alone, the federal deficit has nearly reached USD 200-billion (way above the most pessimistic forecasts), i.e. a little less than half of the deficit recorded for the entire year 2008 (a record high year) (11). The same trend can be observed at every level of the country’s public organization: federal state, federated states (12), counties, towns (13), everywhere tax revenues are vanishing, suffocating the whole country with spiraling debts that no one can control anymore (not even Washington).

The next stage of the crisis will result from a Chinese dream. Indeed, what on earth can China be dreaming of, caught – if we listen to Washington – in the “dollar trap” of its 1,400-billion worth of USD-denominated debt (1)? If we believe US leaders and their scores of media experts, China is only dreaming of remaining a prisoner, and even of intensifying the severity of its prison conditions by buying always more US T-Bonds and Dollars (2).

In fact, everyone knows what prisoners dream of? They dream of escaping of course, of getting out of prison. LEAP/E2020 has therefore no doubt that Beijing is now (3) constantly striving to find the means of disposing of, as early as possible, the mountain of « toxic » assets which US Treasuries and Dollars have become, keeping the wealth of 1,300 billion Chinese citizens (4) prisoner. In this issue of the GEAB (N°34), our team describes the “tunnels and galleries” Beijing has secretively begun to dig in the global financial and economic system in order to escape the « dollar trap » by the end of summer 2009. Once the US has defaulted on its debt, it will be time for the « everyman for himself » rule to prevail in the international system, in line with the final statement of the London G20 Summit which reads as a « chronicle of a geopolitical dislocation », as explained by LEAP/E2020 in this issue of the Global Europe Anticipation Bulletin.

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Jim Sinclair’s Commentary

This is coming fast and NOW!

Markets are in total denial.

Pakistan in great danger, says Musharraf

Islamabad: The former Pakistani President, Pervez Musharraf, said on Sunday “The country is in great danger,” and added that the people should not get bogged down by minor issues and focus on bigger challenges.

“Pervez Musharraf said that the country was in great danger and advised all to shun looking into the past,” the News International reported.

Before leaving for Saudi Arabia, General (retired) Musharraf urged upon the nation to focus on the current myriad challenges. The people, instead of bogging down in minor issues, should think about the future of Pakistan, Pakistan News quoted him as saying.

Talking to mediapersons at Islamabad airport, General Musharraf said the people playing with the Lal Masjid issue were enemies of the country.

“Only 94 persons were killed in Lal Masjid, who were terrorists. If any action is initiated against me, I will respond to it,” he said.

More…

Islamist Leader in Pakistan Reveals Troubling Plans
By Pamela Constable
Washington Post Foreign Service
Sunday, April 19, 2009; 4:52 PM

ISLAMABAD, April 19 — A potentially troubling era dawned Sunday in Pakistan’s Swat Valley, where a top Islamist militant leader, emboldened by a peace agreement with the federal government, laid out an ambitious plan to bring a “complete Islamic system” to the surrounding northwest region and the entire country.

Speaking to thousands of followers in an address aired live from Swat on national news channels, cleric Sufi Mohammed bluntly defied the constitution and federal judiciary, saying he would not allow any appeals to state courts under the Islamic Sharia law system that will now prevail there as a result of the peace accord signed by the president Tuesday.

“The Koran says that supporting an infidel system is a great sin,” Mohammed said, referring to Pakistan’s modern democratic institutions. He declared that in Swat, home to 1.5 million people, all “un-Islamic laws and customs will be abolished,” and he suggested that the official imprimatur on the agreement would now pave the way for Sharia to be installed in other areas.

Mohammed’s dramatic speech echoed a rousing sermon in Islamabad Friday by another radical cleric, Maulana Abdul Aziz, who appeared at the Red Mosque in the capital after nearly two years in detention and urged several thousand chanting followers to launch a crusade for Sharia law nationwide.

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Jim Sinclair’s Commentary

This is the World’s biggest problem and a major point of upset for markets.

It has gone hot and is getting critical. Money cannot stop this.

Diplomacy equates to money and cannot stop this.

Fears for Pakistan grow as Taliban make gains
Sun Apr 19, 2009 8:38am BST
By Robert Birsel – Analysis

ISLAMABAD (Reuters) – Pakistan has repeatedly vowed action to stop militants but analysts say denial and dithering and a seething resentment of the United States among the Pakistani people have stymied effective policy.

Escalating violence by militants and the consolidation of their grip in some places, and infiltration into others, have raised fears about the spread of Taliban influence.

Nuclear-armed Pakistan falling under the sway of al Qaeda-linked militants is a nightmare scenario for the United States and Pakistan’s neighbors, and would doom U.S. efforts to stabilize Afghanistan.

“There’s a great sense of angst, a sense of unraveling,” said Adil Najam, professor of international relations at Boston University.

“It seems that everyone has lost control, including the military, of where things are going. I don’t think they’ve given up the fight, it’s just they don’t seem to know what they can do,” he said.

President Asif Ali Zardari secured more than $5 billion in aid last Friday after telling allies and aid donors in Tokyo he would step up the fight against militants.

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Posted by & filed under In The News.

Dear CIGAs,

For those who understand, when under attack emulate the courage, dedication, determination and willpower of Jean de La Valette.

Then you welcome the great opportunity to perform for those who depend on you.

Jim Sinclair’s Commentary

The FASB boost spoken about today’s financials was an earnings impact of $500 million that would show up in trading profits as a result of mark ups of OTC derivatives permanently and temporarily impaired (whatever that means).

Jim Sinclair’s Commentary

This is an interlude, not a bottom. Please keep your guard up.

Bernanke Says Crisis Damage Likely to Be Long-Lasting
By Craig Torres

April 17 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the collapse of U.S. lending will probably cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores.

“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be,” the Fed chairman said today in a speech at the central bank’s community affairs conference in Washington. “The damage from this turn in the credit cycle — in terms of lost wealth, lost homes, and blemished credit histories — is likely to be long-lasting.”

The U.S. central bank has cut the benchmark lending rate to as low as zero and taken unprecedented steps to stem the credit crisis through direct support of consumer finance and mortgage lending. The Fed plans to purchase as much as $1.25 trillion in agency mortgage-backed securities this year to support the housing market and is providing financing for securities backed by loans to consumers and small businesses.

Bernanke and the Federal Reserve Board approved rules last July to toughen restrictions on mortgages, banning high-cost loans to borrowers with no verified income or assets and curbing penalties for repaying a loan early. The action came after members of Congress and other regulators urged the Fed to use its authority to prevent abusive lending.

‘Onerous’ Restrictions

“We should not attempt to impose restrictions on credit providers so onerous that they prevent the development of new products and services in the future,” Bernanke said. Regulations should ensure “innovations are sufficiently transparent and understandable to allow consumer choice to drive good market outcomes.”

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Jim Sinclair’s Commentary

I am sure you heeded warnings here concerning your credit union.

Economic heat encroaching, credit unions seek U.S. help
By Mike Freeman (Contact) Union-Tribune Staff Writer
2:00 a.m. April 17, 2009

Through much of the ongoing financial crisis, credit unions have sidestepped the turmoil swamping the banking industry by sticking to their knitting of making mortgage, auto, consumer and some business loans at good rates to members.

Credit union trade groups like to call the industry a “movement” rather than a business. They can’t raise funds selling stock. They grow capital by keeping the earnings from the loans they make. They’re loath to take on too much risk.

“They’re set up as cooperatives, so they don’t have the pressure from shareholders for returns like you might have with a bank,” said David Ely, a banking professor at San Diego State University. “There is a mission to serve their members and do right by them in setting loan rates and deposit rates.”

But as the recession has deepened and layoffs have mounted, even conservative credit unions have been unable to emerge unscathed.

Amid stiff economic head winds from the housing collapse and mounting job losses that have buffeted financial institutions nationwide, only three of the 11 largest credit unions in San Diego County – Mission Federal, Pacific Marine and San Diego County Credit Union – made money in 2008.

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Jim Sinclair’s Commentary

Please consider what this means in the big picture.

It is totally ignored in market terms.

I believe that Pakistan’s transition to a Taliban State has the potential to be the market driver from 2010-2012.

Warning that Pakistan is in danger of collapse within months
Paul McGeough
April 13, 2009

PAKISTAN could collapse within months, one of the more influential counter-insurgency voices in Washington says.

The warning comes as the US scrambles to redeploy its military forces and diplomats in an attempt to stem rising violence and anarchy in Afghanistan and Pakistan.

“We have to face the fact that if Pakistan collapses it will dwarf anything we have seen so far in whatever we’re calling the war on terror now,” said David Kilcullen, a former Australian Army officer who was a specialist adviser for the Bush administration and is now a consultant to the Obama White House.

“You just can’t say that you’re not going to worry about al-Qaeda taking control of Pakistan and its nukes,” he said.

As the US implements a new strategy in Central Asia so comprehensive that some analysts now dub the cross-border conflict “Obama’s war”, Dr Kilcullen said time was running out for international efforts to pull both countries back from the brink.

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Pakistan in danger of fracturing into Islamist fiefdom’: report
Updated at: 1240 PST,  Friday, April 17, 2009
WASHINGTON: With extremist elements gaining ground every passing day, Pakistan is in an imminent danger of disintegrating into a fiefdom controlled by Islamist warlords, having “disastrous” implications, a media report has said.

“It’s a disaster in the making on the scale of the Iranian revolution,” an unnamed intelligence official with long experience in Pakistan was quoted as saying by the newspaper.

There is little hope to prevent nuclear-armed Pakistan from disintegrating into a fiefdom controlled by Islamist warlords and terrorists, who would then pose a far greater threat to the US than those in Afghanistan, intelligence officials keeping a close watch on the situation in the region, told the paper.

They said Pakistan’s government is in the danger of being overrun by Islamic militants and the development of such a situation could be dangerous not only for the US but also for the entire region.

“Pakistan has 173 million people and 100 nuclear weapons, an army which is bigger than American army, and the headquarters of al-Qaida sitting in two-thirds of the country which the government does not control,” David Kilcullen, a counterinsurgency consultant to the Obama administration was quoted as saying.

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Taliban Exploit Class Rifts in Pakistan
By JANE PERLEZ and PIR ZUBAIR SHAH
Published: April 16, 2009

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Naveed Ali/Associated Press
Around 3,000 people gathered for a rally in the Swat Valley of Pakistan on April 10 in support of the bill paving way for the implementation of Islamic law there.

PESHAWAR, Pakistan — The Taliban have advanced deeper into Pakistan by engineering a class revolt that exploits profound fissures between a small group of wealthy landlords and their landless tenants, according to government officials and analysts here.

The strategy cleared a path to power for the Taliban in the Swat Valley, where the government allowed Islamic law to be imposed this week, and it carries broad dangers for the rest of Pakistan, particularly the militants’ main goal, the populous heartland of Punjab Province.

In Swat, accounts from those who have fled now make clear that the Taliban seized control by pushing out about four dozen landlords who held the most power.

To do so, the militants organized peasants into armed gangs that became their shock troops, the residents, government officials and analysts said.

The approach allowed the Taliban to offer economic spoils to people frustrated with lax and corrupt government even as the militants imposed a strict form of Islam through terror and intimidation.

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Jim Sinclair’s Commentary

Retirement fund for the present Pakistani government.

Donors pledge $5bn for Pakistan

International donors have pledged more than $5bn (£3bn) to help stabilise Pakistan, at an aid conference co-hosted by Japan and the World Bank.

Nearly 30 countries and international organisations met in Tokyo to offer financial support to enable Pakistan to fight off Islamic extremism.

The United States and Japan each pledged $1bn (£671m).

In return, President Asif Ali Zardari said Pakistan would do its utmost to defeat militants in its border areas.

Pakistan’s stability is being threatened by al-Qaeda and Taleban forces in the lawless northwestern areas neighbouring Afghanistan.

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Jim Sinclair’s Commentary

Where have these experts been for the past four years?

Experts predict Pakistan’s collapse
By JONATHAN S. LANDAY
McClatchy Newspapers

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.

“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.

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 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.”

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Jim Sinclair’s Commentary

Going forward derivatives can be written to trade on exchanges. Going backward no derivative, because there is no standards, can be listed on any exchange.

CDS dealer trade volumes steady vs year ago-Markit
04.17.09, 11:49 AM EDT
Thomson Reuters

LONDON, April 17 (Reuters) – Dealers in credit derivatives averaged about the same number of trades in March as they did a year ago, Markit data showed, even after months of upheaval forced some dealers and investors out of the market.

Average monthly credit defaults swap (CDS) transactions per dealer amounted to more than 25,000 in March 2009, versus slightly less than 25,000 in March 2008, according to graphs in a quarterly report published by Markit on its Web site on Friday.

The number of dealers, however, decreased to 16 from 18 in 2008 after Bear Stearns and Lehman Brothers(LEHMQ) went out of business. The adjusted volume, therefore, would be 12 percent lower in 2009 than the amounts shown on the charts, or around 22,000 deals per dealer.

The unadjusted figure reached a peak in November 2008 at around 30,000 transactions, which after being adjusted would be between 26,000 and 27,000, or about equal to a previous record in August 2007.

Meanwhile, the backlog in CDS trade confirmations aged over 30 days fell to a new low of between 0.1 and 0.2 business days outstanding in March, the chart showed.

That is down sharply from 1 business day in March 2008.

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Posted by & filed under In The News.

Dear CIGAs,

Fuzzy Math? Isn’t that just dandy where our auditing board is concerned.

I am glad that I am 68.

Is there a future for my grandchildren?

My answer is to leave them minerals, not cash, in order to give them some protection in an ever growing heartless and meaner world.

Big banks’ fuzzy math
JPMorgan and Wells Fargo play up an obscure measure of their profitability to show how strong they are – but surging credit losses may hint otherwise
By Colin Barr, senior writer
Last Updated: April 16, 2009: 1:23 PM ET

NEW YORK (Fortune) — Just in time for TARP repayment season, the big banks have found a new way to show off their supposedly good health.

New York-based JPMorgan Chase (JPM, Fortune 500) became the latest financial giant to beat Wall Street’s expectations Thursday, posting a first-quarter profit of $2.1 billion, or 40 cents a share.

CEO Jamie Dimon has spent the past year boasting of his bank’s "fortress balance sheet," but he shifted gears Thursday, stressing another factor that he said will see JPMorgan through the economic crisis: the underlying earnings power of its core consumer, commercial and investment banking businesses.

JPMorgan said its pretax, pre-provision earnings — reflecting the profits the firm brings in before paying Uncle Sam or taking account of current and future loan losses — were $13.5 billion in the first quarter.

The bank hasn’t previously publicized this figure, which is favored by analysts but isn’t recognized under generally accepted accounting principles, in its earnings releases. But JPMorgan isn’t the only bank trotting it out.

A week ago, for instance, Wells Fargo (WFC, Fortune 500) surprised investors by saying it expected to post a $3 billion profit in its first quarter — double Wall Street’s expectations. Just in case the message wasn’t clear, the bank also said in that release that its pretax, pre-provision earnings for the quarter were $9.2 billion.

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Jim Sinclair’s Commentary

The is the "end of the beginning" and "the beginning of the end" for Pakistan as an ally of anybody allied to the West. Still, where is the analysis of what this will mean to markets? It is nowhere to be seen.

Out on bail, radical cleric calls for Islamic law across Pakistan
BY SAEED SHAH
ISLAMABAD — A radical cleric, just freed from detention on bail, returned in triumph Thursday night to the Red Mosque in the Pakistani capital and raised the slogan of Islamic revolution before thousands of excited supporters.

Bearded men packed the mosque, long associated with extremist Islam and with links to al-Qaida, while outside on the sidewalk rows of women sat clad in all-enveloping black burkas, only their eyes showing. Many were young adults who had come from Islamic seminaries.

"We will continue our struggle until Islamic law is spread across the country, not just in Swat," Abdul Aziz, who had been chief cleric at the mosque, told the fired-up congregation. Dressed in white flowing traditional clothes, with a white turban and his long white beard, he looked a messianic figure.

Aziz was carried in on the shoulders of supporters after arriving in a motorcade from the nearby city of Rawalpindi. He had been under house arrest since 2007 over terrorism-related charges until a court granted him bail earlier this week.

Earlier this week, Pakistan’s president bowed to pressure from extremists and agreed to impose Islamic law in Swat, a valley northwest of Islamabad, in a bid to end a two-year insurgency there by Pakistani Taliban. Now with Aziz’s release, Islamists have an ideologue to rally around.

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Jim Sinclair’s Commentary

That is a hard call to make if the trading profits are really "at risk" trading profits. Are they?

JPMorgan, Goldman trading profits unlikely to last
Fri Apr 17, 2009 12:29am BST
By Elinor Comlay – Analysis

NEW YORK (Reuters) – JPMorgan Chase and Goldman Sachs Group racked up billions of dollars in trading profits in a volatile first quarter — but don’t expect these lucrative markets to last into the next quarter, or to necessarily benefit other banks, analysts say.

Goldman and JPMorgan, seen as probable long-term survivors amid the carnage that ravaged most of the industry, boosted their trading risk levels in the first three months of the year to exploit swings in asset prices.

They both expanded market share following Lehman Brothers’ demise in September and Bank of America Corp’s capture of Merrill Lynch & Co.

Citigroup Inc, another major competitor in past years and under intense scrutiny following a government rescue, will see whether its hobbled financials significantly weakened its trading business when it reports quarterly results on Friday.

But trading profits and market-share gains may not be so easy to come by in the second quarter, analysts caution, and it may be too late for other banks like Morgan Stanley — which reports next Wednesday — to catch up.

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Jim Sinclair’s Commentary

What else is shrouded?

If you would like to be terrified read about it in Webbot.

Fed Shrouding $2 Trillion in Bank Loans in ‘Secrecy,’ Suit Says 
By Mark Pittman

April 16 (Bloomberg) — U.S. taxpayers need to know the risks behind the Federal Reserve’s $2 trillion in lending to financial institutions because the public is now an “involuntary investor” in the nation’s banks, according to a court filing by Bloomberg LP.

The Fed refuses to name the borrowers, the amounts of loans or assets banks put up as collateral under 11 programs, arguing that doing so might set off a run by depositors and unsettle shareholders. Bloomberg, the New York-based company majority- owned by Mayor Michael Bloomberg, sued Nov. 7 under the Freedom of Information Act on behalf of its Bloomberg News unit. It made the new filing yesterday.

“The Board’s arguments are based on wispy speculation, lack evidentiary support and are contradicted by economic theory,” said Thomas Golden and Jared Cohen, lawyers with New York-based Willkie Farr & Gallagher LLP, in a motion asking the judge to require disclosure.

“These government actions, which have been shrouded in secrecy, are at the heart of Bloomberg’s FOIA requests,” the attorneys said.

Members of Congress also have demanded more information than President Barack Obama and former President George W. Bush have disclosed on the bailout of the U.S. financial industry. Congress approved $700 billion to bolster banks, whose losses on mortgage securities and home loans contributed to the recession.

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Just a Reminder:

Armstrong’s dates are a product of his write up "It’s Just Time." They are mathematics, not good guesses.

He sees either April 19th or June for the low in the gold market. Assuming it is June then he sees gold reaching $5000.

Don’t let the bastards get you down!

Jim Sinclair’s Commentary

This is definitely coming because it already exists.

Will public pensions be next bailout?
4/16/2009 8:53:00 AM
John Nothdurft

Along with the stock market, retirement savings, and taxpayers’ sanity, state and municipal government employee defined-benefit pension funds are reeling from the financial meltdown.

The current economic turmoil and stock market downturn have caused government employee pension funds to lose hundreds of billions of dollars. The crisis only reinforces the need for states to move their pension systems from the onerous defined-benefit obligation to a more mobile and sustainable defined-contribution model.

It’s a potentially catastrophic problem.

According to the Center for Retirement Research at Boston College, as of Dec. 16, 2008 public pensions in the United States were underfunded by nearly $1 trillion. Worst is Illinois, where the pension system has only 54 percent of the necessary funding and an unfunded liability of $54.4 billion.

Even before our current financial shakeup, more than 20 million state and local government employees’ pensions nationwide were in dire fiscal shape.

For example, in June 2007 New Jersey’s unfunded liability was already $28 billion. Since then the number has soared to more than $52 billion, with roughly 45 percent of the obligation unfunded.

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Jim Sinclair’s Commentary

Mark to market accounting is a truth machine. Here is what is properly defined as a gimmick, a falsehood machine.

Wells Fargo’s Profit Looks Too Good to Be True: Jonathan Weil
Commentary by Jonathan Weil

April 16 (Bloomberg) — Wells Fargo & Co. stunned the world last week by proclaiming it had just finished its most profitable quarter ever. This will go down as the moment when lots of investors decided it was safe again to place blind faith in a big bank’s earnings.

What sent Wells shares soaring on April 9 was a three-page press release in which the San Francisco-based bank said it expected to report first-quarter net income of about $3 billion. Wells disclosed few details of what was in that figure. And by pushing the stock up 32 percent that day to $19.61, investors sent a clear message: They didn’t care.

Dig below the surface of Wells’s numbers, though, and there are reasons to be wary. Here are four gimmicks to look out for when the company releases its first-quarter results on April 22:

Gimmick No. 1: Cookie-jar reserves.

Wells’s earnings may have gotten a boost from an accounting maneuver, since banned, that it used last year as part of its $12.5 billion purchase of Wachovia Corp. Specifically, Wells carried over a $7.5 billion loan-loss allowance from Wachovia’s balance sheet onto its own books — the effect of which I’ll explain in a moment.

First, a quick tutorial: Loan-loss allowances are the reserves lenders set up on their balance sheets in anticipation of future credit losses. The expenses that lenders record to boost their loan-loss allowances are called provisions. As loans are written off, lenders record charge-offs, reducing their allowance.

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Jim Sinclair’s Commentary

This is what OTC derivatives have done to people.

Economic survivalists take root
By Judy Keen, USA TODAY

When the economy started to squeeze the Wojtowicz family, they gave up vacation cruises, restaurant meals, new clothes and high-tech toys to become 21st-century homesteaders.

Now Patrick Wojtowicz, 36, his wife Melissa, 37, and daughter Gabrielle, 15, raise pigs and chickens for food on 40 acres near Alma, Mich. They’re planning a garden and installing a wood furnace. They disconnected the satellite TV and radio, ditched their dishwasher and a big truck and started buying clothes at resale shops.

"As long as we can keep decreasing our bills, we can keep making less money," Patrick says. "We’re not saying this is right for everybody, but it’s right for us."

Hard times are creating economic survivalists such as the Wojtowicz family who are paring expenses by becoming more self-sufficient.

Reviving "almost lost" skills and preparing for tough days make people feel more in control, says Charlotte Richert, consumer sciences educator for Oklahoma State University’s Extension Service in Tulsa County.

Karen Gulliver, MBA program chair at Argosy University in Eagan, Minn., expects the movement to grow as the sour economy forces people to reassess priorities. People are asking, "Do I really want to be 100% vulnerable with no self-sufficiency skills if something happens?" she says.

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Jim Sinclair’s Commentary

Just to keep you balanced as the media assures you of everything everywhere.

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Jim Sinclair’s Commentary

This strategy is by no means limited to South America.

The West has no plan, reacting only to immediate problems and needs.

Asia plans 100 years in advance ands works the plan. No wonder the dollar is headed South while Asia, especially China, rises consistently.

China bashers simply don’t get it.

It is patriotic to see what is and make a plan, not what isn’t and just act reactively.

Deals Help China Expand Sway in Latin America
By SIMON ROMERO and ALEXEI BARRIONUEVO
Published: April 15, 2009

CARACAS, Venezuela — As Washington tries to rebuild its strained relationships in Latin America, China is stepping in vigorously, offering countries across the region large amounts of money while they struggle with sharply slowing economies, a plunge in commodity prices and restricted access to credit.

In recent weeks, China has been negotiating deals to double a development fund in Venezuela to $12 billion, lend Ecuador at least $1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion in Chinese currency and lend Brazil’s national oil company $10 billion. The deals largely focus on China locking in natural resources like oil for years to come.

China’s trade with Latin America has grown quickly this decade, making it the region’s second largest trading partner after the United States. But the size and scope of these loans point to a deeper engagement with Latin America at a time when the Obama administration is starting to address the erosion of Washington’s influence in the hemisphere.

“This is how the balance of power shifts quietly during times of crisis,” said David Rothkopf, a former Commerce Department official in the Clinton administration. “The loans are an example of the checkbook power in the world moving to new places, with the Chinese becoming more active.”

Mr. Obama will meet with leaders from the region this weekend. They will discuss the economic crisis, including a plan to replenish the Inter-American Development Bank, a Washington-based pillar of clout that has suffered losses from the financial crisis. Leaders at the summit meeting are also expected to push Mr. Obama to further loosen the United States policy toward Cuba.

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Jim Sinclair’s Commentary

More Armstrong dated April 15th 2009

Martin Armstrong – Financial Panics = Political Change!
Wednesday, April 15, 2009

As promised, here is Mr. Armstrong’s latest.

In it he covers a wide gamut from talking about what I call the “events that tend to follow economic events,” to the concentration of capital, to debts.

But then he sets out to explain the way things should work in his well informed opinion. Restore Rule of Law, abolish the income tax as our forefathers envisioned, regulatory reform, and even changing our currency system.

He is correct that a window of opportunity is coming. His inputs are unique and deserve consideration.

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Jim Sinclair’s Commentary

Be very careful of what you plan without full knowledge.

It might just embarrass the critic.

Nassim Taleb Says Banks `Hijack Us,’ Can’t Be Trusted

Jim Sinclair’s Commentary

The level off at these numbers is not good news.

General Growth Files Biggest U.S. Property Bankruptcy (Update1)
By Daniel Taub and Brian Louis

April 16 (Bloomberg) — General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner.

The owner of Boston’s Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties.

“We intend to emerge as a leaner company,” General Growth President Thomas Nolan said in an interview today. “We want to come out as a less leveraged company. Our business model remains strong.”

General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values. Banks have reduced lending amid mortgage-related writedowns. Commercial real estate prices in the U.S. dropped 15 percent last year, according to Moody’s Investors Service. Retail sales in the U.S. unexpectedly fell in March as soaring job losses forced consumers to pull back.

The filing lists Eurohypo AG, a unit of Commerzbank AG, as General Growth’s largest unsecured creditor with claims totaling $2.59 billion under two loans. Noteholders are owed about $4 billion.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

Ok, who did it? That was supposed to be our Easter Weekend!

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Jim Sinclair’s Commentary

This has to give the geriatric frat boys a big laugh at the NYC suburbia country clubs.

GM bonds: Big trouble for small investors
Nearly $6 billion of GM’s unsecured debt is held by individual investors like Harley VanDeloo. A GM bankruptcy could mean a ‘significant’ loss to his income.
By Chris Isidore, CNNMoney.com senior writerApril 15, 2009: 3:38 AM ET

NEW YORK (CNNMoney.com) — Harley VanDeloo, a 69-year old retiree in Thousand Oaks, Calif., has resigned himself to losing an important piece of his retirement income: interest payments from $25,000 worth of General Motors bonds.

The bonds were due to pay VanDeloo about $1,000 twice a year, an important supplement to his social security benefits that he said are his main source of income.

"It’s not going to kill us, but it’s significant," he said about the loss of income.

VanDeloo, a self-described car enthusiast who says his GM van is the best car he’s ever owned, bought the bonds at a 20% discount just over a year ago. He believed GM (GM,Fortune 500) was on the verge of a turnaround and that the bonds were relatively safe despite having already been downgraded to junk bond status by the rating agencies.

He said he didn’t care about the bonds’ prices. He was attracted instead to the better than 8% yield the bonds paid. "They were due to be paying off well after I’m gone," he said about the debt, which matures in 2033.

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Jim Sinclair’s Commentary

Jim’s 2006 Formula functions:

Select a city.
It is omnipresent.
It cannot be reversed by Tarp, or any acronym.
Your town and city are experiencing just this, no matter where you live.

Prepared text of Villaraigosa’s State of the City speech
Tuesday, 14 April 2009
Fellow Angelenos:

These are no ordinary times in the City of Los Angeles, or for that matter, any place where people depend on the global economy.

Here in L.A., the recession is taking a terrible toll.  230,000 Angelenos now standing on unemployment lines.  The jobless rate simmering at 12% and rising. The mortgage crisis has now forced 21,000 of our families to box up their belongings and vacate their homes, many experiencing for the first time in their lives the humiliating pain — the frustration — that comes in having to put your hand out and rely on the help of strangers to survive.

We have thousands of business owners struggling to make payroll.  Trade flows and ship traffic are idling at the port.  And the recession has done lasting damage to one of our most vital civic institutions: our great newspapers.

Needless to say, the recession has hit government particularly hard.

The need for our services is up.  Revenue to pay for them is down. Here in L.A., we face a $530-million  deficit this year alone.

The situation at the state level — where the system seems hardwired for failure — is even more extreme.  That’s why it is absolutely critical that we lock arms and approve the bipartisan budget stabilization package on May 19 to prevent us from destroying the very services that Californians depend on.

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Jim Sinclair’s Commentary

Consider what Pakistan means to markets as a major domino about to fall.

Pakistan grants bail to detained hard-line cleric
By ZARAR KHAN – 8 hours ago

ISLAMABAD (AP) — Pakistan’s Supreme Court ordered the release on bail Monday of a hard-line cleric who had been detained since shortly before soldiers stormed his mosque in 2007, killing scores of people and energizing the country’s Islamist insurgency.

Maulana Abdul Aziz was granted bail while the court considers the charges against him in relation to the siege of the Red Mosque in the capital, Islamabad, his lawyer Shaukat Siddiqui told reporters outside the court. Prosecutors were not available for comment.

Aziz was arrested as he tried to sneak out of the mosque dressed in an all-covering burqa worn by some Muslim women.

Several days later, security forces stormed the mosque and adjoining buildings after scores of heavily armed militants inside refused to surrender. The government says 102 people, including 11 security personnel, were killed in the standoff.

Aziz is facing a raft of charges ranging from abetting terrorists to illegally occupying a building.

Pakistan has a history of failing to successfully prosecute militants, many of whom are believed to have once had links with the country’s armed forces.

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Jim Sinclair’s Commentary

Note how concerned the youngsters are. Even if this is a professional act it is a great act and deserves a reward.

It is definitely getting very bad…

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(Female cats are drama queens)

Jim Sinclair’s Commentary

It is absolutely amazing that Nassim Taleb did not get the hook on financial TV this morning.

He ripped into every plan and every person of note from the Treasury, Federal Reserve and right up to the Fat Cats.

The look on the interviewer’s face was a marvel to behold. He says nothing has changed. Nothing is strengthening. The weaknesses are still there and there is no effective plan or people to change that.

I understand he is a professor of Risk Engineering so I wonder what he teaches when you listen to his views.

Professor Taleb, I am open to invitation to a lecture and promise to sit quietly and attentively. I will gladly pay for a ticket if it is public.

Please listen to this man if you have not heard him interviewed.

Black Swan Author Nassim Taleb Joins Arianna on CNBC’s Squawk Box

 

Nassim Nicholas Taleb, author of The Black Swan, joined Arianna on Squawk Box to discuss the financial meltdown, mark-to-market accounting and ways to build a more robust economic system.

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Ten principles for a Black Swan-proof world
By Nassim Nicholas Taleb
Published: April 7 2009 20:02 | Last updated: April 7 2009 20:02

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess.

Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without

disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging”

products, and from gullible regulators who listen to economic theorists.

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