Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

Here is a full library of Martin Armstrong for those interested. His last is dated April 9th 2009

Jim Sinclair’s Commentary

The Taliban start the move inland. Pakistan is history.

So few have thought this situation out.

Taliban, Punjabi militants take insurgency to Pakistan’s heartland: Report
New York, April 14, 2009
First Published: 10:26 IST(14/4/2009)
Last Updated: 11:25 IST(14/4/2009)

As they come under US Drone attacks in the tribal areas on the Pakistan-Afghan border, Taliban militants have joined hands with Punjabi militants to push insurgency into the heartland of Pakistan, says the New York Times.

Already villages and towns in Dera Ghazi Khan district in south-western Punjab province are virtually under the control of militants, posing a new challenge to the stability of Pakistan, the paper said on Monday.

The report quoted police officials warning Islamabad that if it does not take decisive action, insurgency could spread in Punjab, leading to destabilization of Pakistan.

"I don’t think a lot of people understand the gravity of the issue…if you want to destabilize Pakistan, you have to destabilise Punjab (first)," the report quoted a senior Pakistani police official as saying.

Pakistani Punjab accounts for more than half of the country’s population. After the Swat Valley which is now under Taliban control, the report says, Islamic militants have infiltrated south-west Punjab villages and town so deeply that they have turned them "no-go zones” and imposed their version of Islam on residents.


Jim Sinclair’s Commentary

Along with the dollar went capitalism. Along with the Constitution went Democracy.

Fed’s Flood May Leave Democracy Needing Bailout: Kevin Hassett
Commentary by Kevin Hassett

April 13 (Bloomberg) — The wise men of Washington keep finding more core beliefs that we have to give up. First it was free markets. Now it’s democracy.

The financial rescue may be the least popular big-ticket government program in history. If the U.S. Treasury decides it needs more money to keep the bailout going, it is anybody’s guess whether Congress would provide it.

As a result, Treasury and the Federal Reserve have been running what feels to this lifelong student of fiscal policy like a scam.

Many economists believe that helping financial institutions turn their less liquid assets into hard cash is a key step toward returning them to good footing. The best way to achieve that in a democracy would be for Congress to appropriate the funds to acquire the assets and for Treasury to borrow the money that i t needs.

But Congress is unwilling to appropriate enough money, so Treasury and the Fed have cooked up a work-around: the Fed buys the assets instead. Since the Fed exists outside of the normal budget process, no permission from elected officials is required.


Jim Sinclair’s Commentary

It is legal to lie about the value of your assets, but let’s be real. That lie does not create CASH fast when you need it to survive.

Bank of America May Need More Capital, Wachovia Says (Update2)
By David Mildenberg

April 14 (Bloomberg) — Bank of America Corp., the largest U.S. bank, is not as well capitalized as most of its peers and has “precious little wiggle room” before it may be forced to sell new stock, according to Wachovia Capital Markets LLC.

Bank of America retains “sizeable exposures to what we would deem are worrisome assets,” including $148 billion in home equity loans and credit lines and $111.5 billion in credit- card and other revolving loans, Wachovia’s Matthew Burnell said in a report dated yesterday. He initiated coverage of Charlotte, North Carolina-based Bank of America at “underperform” with a valuation range of $7 to $8 a share.

Burnell joins Michael Mayo of Calyon Securities and Paul Miller of FBR Capital Markets among analysts who said Bank of America may need to raise capital this year because of borrower defaults. The lender raised $10 billion in October selling stock, and the U.S. government has purchased $45 billion in preferred shares to bolster the firm.

Burnell expects Bank of America to lose 13 cents per share this year, mostly because of higher credit costs in its consumer and small business banking unit. The average estimate of 21 analysts compiled by Bloomberg is a 39-cent profit in 2009.

Bank of America doesn’t comment on analyst reports, said Scott Silvestri, a spokesman.


Jim Sinclair’s Commentary

You cannot lie your way out of a credit crisis, even if it is legalized, wherein trust is missing between parties, all who know the values are cartoons.

"The Financial Accounting Standards Board (FASB) was strong-armed by Congress to relax mark-to-market accounting rules to allow banks to value illiquid securities based on expected cash flow models rather than recent prices. If these rules were not eased, write downs would be rising because the market prices of these loans continue to fall.

“Coincidence? I think not,” says economist Ed Yardeni who figures that suspension of mark-to-market padded Wells Fargo’s bottom line leading to higher than expected earnings of US$3-billion in Q1. At the very least, says Yardeni, mark-to-market allowed Wells to end toxic write-offs."

Dressing up the Banks
Posted: April 14, 2009, 10:33 AM by Jonathan Ratner
If the home team has a weak goaltender, narrow the goal posts. Relaxation of mark-to-market rules is coinciding with a profit recovery for U.S. banks in the first quarter of 2009. Despite the rally in bank stocks, papering over losses is no reason to buy banks. Investors should take profits on the quarter and await a sustained recovery in the housing market.

The Financial Accounting Standards Board (FASB) was strong-armed by Congress to relax mark-to-market accounting rules to allow banks to value illiquid securities based on expected cash flow models rather than recent prices. If these rules were not eased, write downs would be rising because the market prices of these loans continue to fall.

“Coincidence? I think not,” says economist Ed Yardeni who figures that suspension of mark-to-market padded Wells Fargo’s bottom line leading to higher than expected earnings of US$3-billion in Q1. At the very least, says Yardeni, mark-to-market allowed Wells to end toxic write-offs.

Goldman Sachs took things one step further when it reported US$1.8-billion in profits in the first quarter of 2009. The company conveniently dropped a US$1.3-billion pre-tax December loss on its books by shifting from a fiscal year ending November to a December year end, according to Barry Ritholtz of The Big Picture.

The change in valuation on bank assets from market prices to expected cash flow could eventually catch up with banks. As defaults rise the gap between these two valuation methods will converge because cash flows will fall. This is a major risk to owning banks and betting on a sustained economic recovery at this juncture




Jim Sinclair’s Commentary

You know those Rudolph Steiner free spirit types. I am certain the 3 year olds were are the heart of this not-event.

Raided school ‘knew nothing’ about power station protesters
By Theo Usherwood, Press Association
Tuesday, 14 April 2009

The school where 114 suspected protesters were arrested in connection with a plot to demonstrate at a power station said today that it knew nothing about the plans.

Police swooped on the Iona School in Sneinton Dale, Nottingham, yesterday, saying the suspects, who were meeting at the school, posed "a serious threat" to the nearby Ratcliffe-On-Soar plant.

Those arrested have now been interviewed and released on bail, a spokeswoman for Nottinghamshire Police said earlier.

Today Richard Moore, a teacher at the school, said no-one had permission to hold a meeting there.

In a statement, he said: "We are as shocked as anyone else to discover the events that had taken place on our premises.

"We had, and have, no knowledge of these activities and any access to the premises was completely unauthorised.


Jim Sinclair’s Commentary

Quantitative easing or just good old debt Monetizing yourself? I would go for both.

Treasuries Gain After Federal Reserve Buys Government Debt
By Dakin Campbell

April 13 (Bloomberg) — Treasuries rose after the Federal Reserve completed the first of three buybacks of government debt slated for this week in an effort to lower borrowing costs and revive the world’s largest economy.

Yields on 10-year notes fell the most since March 18, when policy makers announced the $300 billion program, as the central bank bought $7.37 billion in two- and three-year securities. The Fed has acquired $43.9 billion of Treasuries since beginning the purchases on March 25.

“The U.S. government is the 800-pound gorilla in the bond market,” Andrew Brenner, co-head of structured products and emerging markets in New York at MF Global Inc., the world’s largest broker of exchange-traded futures and options contracts, wrote in a note to clients. “Bond markets acted in accordance with the liquidity provided and traded up.”

The yield on the 10-year note fell seven basis points, or 0.07 percentage point, to 2.86 percent at 4:47 p.m. in New York, according to BGCantor Market Data. The price of the 2.75 percent security due February 2019 rose 18/32, or $5.63 per $1,000 face amount, to 99 2/32.

Ten-year yields have traded in a range between 2.45 percent and 3.05 percent since late January as concerns about record Treasury supply were offset by the Fed’s purchase program.


Jim Sinclair’s Commentary

Sentiment indices may have recent gotten kudos in the press, but buying is not evident. This problem is primarily financial, huge, growing and threatening more pain and suffering for the man in the street.

Stores suffer big drop in March sales
Unexpected 1.1% decline in overall sales follows two months of gains.
By Parija B. Kavilanz, senior writer
Last Updated: April 14, 2009: 9:34 AM ET

NEW YORK ( — Retail sales suffered an unexpected big decline in March which broke two straight months of improving sales, the government reported Tuesday.

The Commerce Department said total retail sales fell 1.1% last month, compared with February’s revised gain of 0.3%. Sales in February were originally reported to have dipped 0.1%.

Economists surveyed by had been expecting an increase of 0.3% in March.

Sales excluding autos and auto parts fell a surprising 0.9% compared to a revised 1% increase in the measure for February. February ex-auto sales were originally reported to have increased 0.7%.

Economists had forecast March sales, excluding auto purchases, to be unchanged from the previous month.


Jim Sinclair’s Commentary

Go Trader Dan!

Gov. Perry Backs Resolution Affirming Texas’ Sovereignty Under 10th Amendment
HCR 50 Reiterates Texas’ Rights Over Powers Not Otherwise Granted to Federal Government
April 09, 2009

AUSTIN – Gov. Rick Perry today joined state Rep. Brandon Creighton and sponsors of House Concurrent Resolution (HCR) 50 in support of states’ rights under the 10th Amendment to the U.S. Constitution.

“I believe that our federal government has become oppressive in its size, its intrusion into the lives of our citizens, and its interference with the affairs of our state,” Gov. Perry said. “That is why I am here today to express my unwavering support for efforts all across our country to reaffirm the states’ rights affirmed by the Tenth Amendment to the U.S. Constitution. I believe that returning to the letter and spirit of the U.S. Constitution and its essential 10th Amendment will free our state from undue regulations, and ultimately strengthen our Union.”

A number of recent federal proposals are not within the scope of the federal government’s constitutionally designated powers and impede the states’ right to govern themselves. HCR 50 affirms that Texas claims sovereignty under the 10th Amendment over all powers not otherwise granted to the federal government.

It also designates that all compulsory federal legislation that requires states to comply under threat of civil or criminal penalties, or that requires states to pass legislation or lose federal funding, be prohibited or repealed.

HCR 50 is authored by Representatives Brandon Creighton, Leo Berman, Bryan Hughes, Dan Gattis and Ryan Guillen.


Jim Sinclair’s Commentary

To my understanding, but please correct me if I am wrong, consumers cannot exhaust their credit card debt anymore via bankruptcy.

Bankruptcies surge despite law meant to curb them
Apr 13, 6:38 PM (ET)

RALEIGH, N.C. (AP) – The number of U.S. businesses and individuals declaring bankruptcy is rising with a vengeance amid the recession, despite a three-year-old federal law that made it much tougher for Americans to escape their debts, an Associated Press analysis found.

"There’s no end in sight," said bankruptcy lawyer Bryan Elliott of Hickory, N.C., who is working seven days a week and scheduling prospective clients a month in advance. "To be doing this well and having this much business, it is depressing. It’s not a laugh-a-minute job."

Nearly 1.2 million debtors filed for bankruptcy in the past 12 months, according to federal court records collected and analyzed by the AP. Last month, 130,831 sought bankruptcy protection – an increase of 46 percent over March 2008 and 81 percent over the same month in 2007.

Bob Lawless, a professor at the University of Illinois College of Law, said bankruptcies could reach 1.5 million this year and level off at 1.6 million next year – around the same time economists expect an economic recovery to begin.

Congress voted in 2005 to make bankruptcy more cumbersome after years of intense lobbying from the nation’s lenders, who complained that people were abusing the system. Before the move to change the law, bankruptcies were running at what was then an all-time high of about 1.6 million per year.


Posted by & filed under In The News.

Jim Sinclair’s Commentary

As goes Motors so goes the USA.

GM stock hit by bankruptcy report

US carmaker General Motors has seen its shares fall sharply after a report that the US government wants the firm to start bankruptcy proceedings by 1 June.

The New York Times said the Treasury Department wants a court-led reorganisation, but the firm wants to reorganise without going to court.

Shares in the firm were 16% lower at $1.71 in afternoon trade in New York.

On 30 March, the US government gave GM 60 days to develop a new restructuring plan and gain further state aid.

‘Fast track’

The White House has already given the firm $13.4bn (£9bn) in public money to prevent it from collapsing, but any additional aid requires the firm to meet tougher rules.


Jim Sinclair’s Commentary

Oh my God, Mark to Market is called a gimmick!

1. an ingenious or novel device, scheme, or stratagem, esp. one designed to attract attention or increase appeal.
2. a concealed, usually devious aspect or feature of something, as a plan or deal: An offer that good must have a gimmick in it somewhere.

Steve: FASB Retreats

Steve Forbes, 04.13.09, 06:00 AM EDT

Investors cheered as the accounting gimmick known as mark-to-market was softened by the Financial Accounting Standards Board.

Investors cheered as the accounting gimmick known as mark-to-market was softened by the Financial Accounting Standards Board. And not a moment too soon, as these rules were destroying our financial system. We can allow ourselves a moment of thanks that common sense prevailed for once. But there is still much work to be done.

Enacted to prevent another Enron, mark-to-market never made sense during our current crisis. It forced banks to write assets down to market prices, even if they hadn’t sold them or even if there was no market. During a deep recession, this proved a disaster. Can you imagine writing down a home you hadn’t sold? It would bankrupt you, the way mark-to-market nearly bankrupted us all.

The reforms, though, should have been more sweeping. Recalcitrant regulators could still mitigate much of the good. To get things really moving, our government now needs to fix our atrocious tax code. Individuals and businesses spend 7.6 billion hours a year filing their taxes, at a cost of $193 billion. It’s immoral to squander so much time and money. Barack Obama could sideline Republicans by instituting a flat tax, but this is likely too progressive for this president.

Another needed action is to tie the dollar back to gold. All these new spending programs will be paid for with inflationary dollars, creating a new risk for down the road. Alexander Hamilton understood that tying the greenback to gold created economic progress and a lawful society. And it did so for almost 200 years. We need vision like that again, or any current rallies could prove short-lived.


Jim Sinclair’s Commentary

Amateurs or professional. He is right because there is no practical means of draining the unprecedented injection of monetary stimulus.

Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923
April 12, 2009

I am an amateur economist. But, one doesn’t need years of schooling to be a better "economist" than Ben Bernanke. One merely needs to take the blinders off and release common sense. A broad background in law, economics and history helps, but it is not absolutely necessary. Economics is the study of human nature as it applies to money. So, it is precisely those who are narrowly educated, like some professional economists who don’t study enough history, take an intensely academic viewpoint on things, and who don’t understand fundamental human nature, who get things wrong. A narrowness of outlook and training may be blinding people like Ben Bernanke from reality, but, if they are operating knowingly and intentionally, as some claim, the situation is even more frightening.

Unfortunately, Ben Bernanke has been wrong on almost all his predictions concerning the course of this crisis. That has been true since the beginning. Where, then, can we obtain the confidence that he knows what he is doing, or, frankly, that he knows more than we do, as he should? Many wrong-headed people seem to believe that we must throw away common sense and listen to him, and the others who think like him, even though we have been consistently correct, over the past 4 years, and he has been consistently wrong. The American people understandably have little confidence in the Washington crowd. Is this surprising in light of the events? What assurance is there that they know how to address this situation, when they first failed to regulate the financial madness, and, then, afterward, were completely wrong on almost all economic projections, one after another?

One must reach the inevitable conclusion that neither Bernanke, nor his comrades, such as Timothy Geithner, actually "know" what they are doing. Instead, that crowd in Washington DC, think that if they throw money around, it will land somewhere, and help things. They are wrong. But, to partly achieve this goal, they have forced changes in accounting standards, legalizing misrepresentation of bank bookkeeping, and removed "mark to market" standards, replacing those standards with a system of "mark to fantasy" that is remarkably similar to that which previously existed and caused this crisis. "Mark to fantasy" accounting, now the order of the day once again, will allow insolvent banks to present the false appearance of big profits this quarter, even as they are really on the brink of failing. The end result will be more economic imbalances, as investors unknowingly misallocate their investment dollars to buy into the fraud.

In truth, there is only one way to save the zombie banks, and it is not through faked-up accounting books. The only way is to inflate their obligations away, while increasing the value of their assets at the expense of the rest of us. That appears to be the plan, if there is any plan. But, if Ben Bernanke and that crowd do know what they are doing, the most nefarious heist against the American people, as well as other innocent folks all over the world, is being planned. The upcoming massive inflation is going to be a stealth tax upon millions of innocent people, all for the benefit of a few still wealthy bank executives, who made huge mistakes, and should be forced to pay for those mistakes themselves. I will give Ben Bernanke and Timothy Geithner the benefit of the doubt and conclude, until presented with more evidence, that they simply don’t know what they are doing.


Jim Sinclair’s Commentary

Here is a small example of how inflation begins to work itself through an economy as tax revenues start to seriously contract. Watch when tax revenues fall off the cliff.

Cities Turn to Fees to Fill Budget Gaps
April 11, 2009

After her sport utility vehicle sideswiped a van in early February, Shirley Kimel was amazed at how quickly a handful of police officers and firefighters in Winter Haven, Fla., showed up. But a real shock came a week later, when a letter arrived from the city billing her $316 for the cost of responding to the accident.

“I remember thinking, ‘What the heck is this?’ ” says Ms. Kimel, 67, an office manager at a furniture store. “I always thought this sort of thing was covered by my taxes.”

It used to be. But last July, Winter Haven became one of a few dozen cities in the country to start charging “accident response fees.” The idea is to shift the expense of tending to and cleaning up crashes directly to at-fault drivers. Either they, or their insurers, are expected to pay.

Such cash-per-crash ordinances tend to infuriate motorists, and they often generate bad press, but a lot of cities are finding them hard to resist. With the economy flailing and budgets strained, state and local governments are being creative about ways to raise money. And the go-to idea is to invent a fee — or simply raise one.

Ohio’s governor has proposed a budget with more than 150 new or increased fees, including a fivefold increase in the cost to renew a livestock license, as well as larger sums to register a car, order a birth certificate or dump trash in a landfill. Other fees take aim at landlords, cigarette sellers and hospitals, to name a few.


Jim Sinclair’s Commentary

Look at the new news for the West!

West Warned on Nuclear Terrorist Threat From Pakistan
April 12, 2009 by national

The next few months will be crucial in defusing a global terrorist threat that would be even deadlier than the conflicts in Afghanistan and Iraq, a leading Washington counter-terrorism expert warns.

David Kilcullen — a former Australian army lieutenant colonel who helped devise the US troop surge that revitalised the American campaign in Iraq — fears Pakistan is at risk of falling under al-Qaeda control.

If that were to happen, the terrorist group could end up controlling what Dr Kilcullen calls “Talibanistan”. “Pakistan is what keeps me awake at night,” said Dr Kilcullen, who was a specialist adviser for the Bush administration and is now a consultant to the Obama White House.

“Pakistan has 173 million people and 100 nuclear weapons, an army which is bigger than the American army, and the headquarters of al-Qaeda sitting in two-thirds of the country which the Government does not control.”

Compounding that threat, the Pakistani security establishment ignored direction from the elected Government in Islamabad as waves of extremist violence spread across the whole country — not just in the tribal wilds of the Afghan border region.

“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,” Dr Kilcullen told The Age during an interview at his Washington office. Late last month, when US President Barack Obama unveiled his new policy on Afghanistan and Pakistan, he warned that al-Qaeda would fill the vacuum if Afghanistan collapsed, and that the terror group was already rooted in Pakistan, plotting more attacks on the US.


Posted by & filed under In The News.

Jim Sinclair’s Commentary

You need to maintain a sense of humor under all circumstances. You will have to agree with me that the following article is timely.

SEC Faults Its Handling Of Tips on Short Sales — Too Few Complaints Resolved, Report Says
Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, March 19, 2009; Page D01

"Only 123 of 5,000 naked short-selling tips were forwarded for further investigation, and none led to enforcement, the report said".

The SEC’s enforcement division disagreed with most of the report’s findings.  "There is hardly unanimity in the investment community or financial media on either the prevalence, or the dangers of, ‘naked’ short selling," it wrote.  The division added, "The people closest to the trading, with the deepest u nderstanding of and access to the data, did not see and refer any of the large-scale, damaging ‘naked’ short sale abuse."

Obviously under former SEC Chairman Christopher Cox, illegal naked short selling (FTD’s) was part of generally accepted SEC procedures.  "none led to enforcement"

However, under new leadership the SEC sounds like they may want to send a message to the FTD er’s. Time will tell.

New SEC Chairman Mary Schapiro is working to revamp the agency’s system for collecting tips and pursuing investigations.


Jim Sinclair’s Commentary

Just in case you have not focused on it, the gross obligations of the US Government in February 09 passed the ENTIRE World GDP. That is fact, but hey, in today’s world it seems who cares, it is only paper. We can always make more and more paper, maybe.

Federal obligations exceed world GDP
Does $65.5 trillion terrify anyone yet?
Posted: February 13, 2009 11:35 pm Eastern
By Jerome R. Corsi
© 2009 WorldNetDaily

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.



Jim Sinclair’s Commentary

Please consider the implication to markets and inflation when, not if Pakistan implodes into Taliban hands.

Troops patrol streets in southwest Pakistan
QUETTA, Pakistan (AFP) — Paramilitary troops patrolled the streets Sunday to deter any violence as the Pakistani city of Quetta came to a standstill for a …
See all stories on this topic

Pakistan militants torch Afghan supplies
Reuters – USA
PESHAWAR, Pakistan (Reuters) – Taliban militants set fire on Sunday to 10 container trucks carrying supplies to Western forces in Afghanistan in a pre-dawn …
See all stories on this topic

Baluch militants kill six mine workers in Pakistan
Reuters – USA
By Gul Yousafzai QUETTA, Pakistan (Reuters) – Separatist militants in Pakistan’sBaluchistan province have claimed responsibility for killing six coal-mine …
See all stories on this topic

Posted by & filed under In The News.

Jim Sinclair’s Commentary

When you consider the USA invented, manufactured and exported over the counter derivatives, a financial device that has thrown the entire world into a depression, it is hard to assume that other will take the first move in an economic war.

That being said, the Pentagon is getting ready for the incoming.

It might be said that the OTC DERIVATIVE INVENTION, MANUFACTURE AND EXPORTATION IS AN ECONOMIC WAR CRIME. It has killed more people in its own way that the two nukes that were used in the Second World War.

Pentagon preps for economic warfare
On Apr 10, 2009, at 4:46 PM,
By: Eamon Javers 
April 9, 2009 04:18 AM EST

The Pentagon sponsored a first-of-its-kind war game last month focused not on bullets and bombs — but on how hostile nations might seek to cripple the U.S. economy, a scenario made all the more real by the global financial crisis.

The two-day event near Ft. Meade, Maryland, had all the earmarks of a regular war game. Participants sat along a20V-shaped set of desks beneath an enormous wall of video monitors displaying economic data, according to the accounts of three participants.

“It felt a little bit like Dr. Strangelove,” one person who was at the previously undisclosed exercise told POLITICO.

But instead of military brass plotting America’s defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS – all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world’s leading economies.

Their efforts were carefully observed and recorded by uniformed military officers and members of the U.S. intelligence community.



Jim Sinclair’s Commentary

Today’s comment on the recently reported improvement in consumer sentiment seems a bit misleading.

Nordstrom March same-store sales down 13.5%


Kohl’s same-store sales down 4.3%


Abercrombie & Fitch March same-store sales down 34%


Wal-Mart Sales Are Short of Retail Metrics Estimate (Update4)
By Chris Burritt

April 9 (Bloomberg) — Wal-Mart Stores Inc., the world’s largest retailer, reported comparable-store sales in March that rose less than some analysts estimated, pushing the shares down the most in three months in New York trading.

Revenue from U.S. stores open at least a year advanced 1.4 percent in the five weeks ended April 3, the Bentonville, Arkansas-based company said today in a statement. That missed the 3.2 percent average estimate compiled by Retail Metrics Inc., a Swampscott, Massachusetts-based consulting firm. In February, same-store sales gained 5.1 percent.

"They didn’t come close to beating the comp-stores expectations," Howard Davidowitz, chairman of New York-based retail consulting and investment banking firm Davidowitz & Associates Inc. in New York, said today in a telephone interview. "They’re not immune to this huge downturn in the economy."

The highest U.S. unemployment since 1983 forced consumers to restrain spending. Lower prices on groceries and household items and $4 prescriptions helped Wal-Mart lure more consumers, the retailer said. They spent less per transaction compared with the year-ago period, which included Easter purchases, it said. Easter is April 12 this year. In 2008, it was March 23.


Jim Sinclair’s Commentary

All is far from dandy out there.

If the equity market rally fails to give time for repair, it can be blamed DIRECTLY on the delay of 90 days before implementation of the uptick rule.

The Earnings Bomb Inside GE Capital (GE)
Henry Blodget|Apr. 9, 2009, 10:54 AM

GE (GE) gave a presentation a few weeks ago designed to calm investors’ fears that the company’s huge financial services division, GE Capital, is just another Bear Stearns with a friendly logo.  The presentation helped, and GE’s stock has recovered some of its horrific losses.  As of this morning, it’s back above $11 (down from $40+ 18 months ago).

Some investors, however, are not convinced.  The inimitable Steve Eisman of FrontPoint Partners, for example, who was immortalized last year in Michael Lewis’s article about the end of Wall Street, detailed his thoughts about GE at Jim Grant’s annual conference a few days ago.

An investor in attendance was kind enough to forward Steve’s slides, and we’ve excerpted some of them below.  Here’s his bottom line:

GE Capital is currently hiding $40-$45 billion of embedded losses in the GE Capital portfolio.  This $40-$45 billion of losses, if rinsed through the income statement all at once, would wipe the company out.  In fact, if GE weren’t able to fund itself with the "heroin injection" of the government’s commercial paper program, it would already be bankrupt.

So is GE toast?

No. Unlike banks, GE is not required to mark its assets to market, so Eisman thinks the company will just hobble along for years as the bad news gradually works its way through its income statement (the very definition of a zombie bank).  The losses will hammer GE’s earnings, though.  Especially as the performance of the industrial business deteriorates.


Jim Sinclair’s Commentary

This is a little part of a much larger plan: Chinese domination of world economies.

Yuan trade settlement to start in five Chinese cities

Five major trading cities have got the nod from the central government to use the yuan in overseas trade settlement – seen as one more step in China’s recent moves to expand the use of its currency globally.

Shanghai and four cities in the Pearl River Delta – Guangzhou, Shenzhen, Dongguan and Zhuhai – have been designated for the purpose, said a State Council meeting chaired by Premier Wen Jiabao yesterday. The Pearl River Delta boasts the country’s largest cluster of export-oriented manufacturing operations.

The move is aimed at reducing the risk from exchange rate fluctuations and giving impetus to declining overseas trade, according to a statement posted on the government website.

Analysts said the experimental use of the yuan in trade settlement also reflects policymakers’ rising concern over the shaky prospects of the US currency, of which China has large reserves from previous trade growth, and their willingness to gradually expand the yuan’s use globally.

"The trial is the latest move toward making the yuan an international currency," Huang Weiping, professor of economics at Renmin University of China, said. "The prospect of a weaker US dollar is making the transition more imperative for China."


Posted by & filed under In The News.

Dear CIGAs,

It is much easier to just announce that you have successfully re-inflated the world economy to the cheers and applause of all the G20 media, participants and their media.


Jim Sinclair’s Commentary

No comment.

Fed Said to Order Banks to Stay Mum on ‘Stress Test’ Results
By Bradley Keoun and Scott Lanman

April 10 (Bloomberg) — The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc.and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.

“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

Regulators are using the tests to determine whether the 19 biggest banks have enough capital to cover loan losses during the next two years if the economy shrinks, unemployment surges and housing prices keep declining. The tests are a linchpin of the plan Treasury Secretary Timothy Geithner announced in February to bolster confidence in the nation’s banks and restore financial-market stability.

Geithner has likened the stress tests to those used by doctors to evaluate a patient’s health. They’re designed to mesh with the administration’s effort to remove distressed mortgage assets from banks’ balance sheets. The Fed is overseeing the administration of the tests, people briefed on the matter say.


Jim Sinclair’s Commentary

Physical demand increases sharply while physical supply falls, yet the COMEX Fake Paper Gold market runs the price as it pleases.

South Africa Mining Output Falls by Most in a Decade
By Carli Lourens

April 9 (Bloomberg) — Mining production in South Africa, the world’s biggest producer of platinum, fell by the most in more than a decade in February after metal and diamond prices declined.

Output dropped 12.8 percent in February from the same month a year ago, Statistics South Africa said on its Web site today.

Metal prices tumbled from records last year as the recession curbed demand and discouraged production. Platinum, mainly produced in South Africa, declined 40 percent in the past year, prompting producers including Lonmin Plc to suspend mines.

Gold output advanced 2.7 percent, the Pretoria-based agency said. The price of the metal climbed to $993 an ounce in February, close to its $1,032.70 record last year.

The value of total mineral sales slid 2.2 percent to 17.1 billion rand ($1.9 billion) in January.


Posted by & filed under In The News.

Dear CIGAs,

To properly understand what this means, there are various items for you to consider:

The prime implications of the Trade Balance deals with a comparison to the Treasury International Capital Flows as both are measures of capital inflow or outflow. That balance deals with the willingness of non US entities to finance the demands of the USA. The Trade Balance deals with the mechanics of international trade as a positive inflow of capital in terms of export earnings or out flow as a product of import dependency.

The Trade Balance is heavily dependent on the level of economic activity of the country it represents.

Therefore presentation of the Trade Balance without comparison to the Treasury International Capital Flows renders the statistic immaterial. Both are immaterial when expressed independently of each other.

The bottom line of the comparison is that the trend is now forcing the US Treasury in on the internal US credit markets to finance the present needs for the 12.7 trillion bailouts as well as the shortfall on the US budget deficit.

The above is a lesson in "how to" that you might consider noting for future reference or bookmarking on the compendium.

U.S. Trade Deficit Plunges to Nine-Year Low as Imports Slump
By Timothy R. Homan

April 9 (Bloomberg) — The U.S. trade deficit tumbled in February to the lowest level in nine years as collapsing demand from consumers and companies reverberated around the globe.

The gap shrank to $26 billion, less than anticipated, from a revised $36.2 billion in January, the Commerce Department said today in Washington. Imports plunged for a seventh consecutive month, leading to declines in the deficits with Japan and China, while exports climbed from a two-year low.

The report showed some U.S. trading partners may not bypass the recession unscathed as American demand for Asian cars, toys and electronics plunged. The improvement in exports, the first since July, is likely to be short-lived as economies shrink worldwide.

“It’s an indication of the extent to which we’ve been passing on some of our demand decline to the rest of the world,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “That is why we’ve seen such disastrous declines in growth numbers in Asia. They have been relying on U.S. spending, and U.S. spending just isn’t there any more.”

Separate figures from the Labor Department today showed the cost of goods imported into the U.S. in March rose less than forecast as companies in China and Japan cut prices to stem the slump in overseas sales. Other figures from Labor showed the number of Americans filing first-time claims for unemployment insurance exceeded 600,000 for a 10th consecutive week.



Jim Sinclair’s Commentary

From Stratfor. Pakistan is a bloody mess. It is the most critical and dangerous area in the world right now.

Pakistan: Islamabad Denies ISI Chief Snub
April 7, 2009 | 2154 GMT

U.S. special envoy for Afghanistan and Pakistan Richard Holbrooke (L) and Pakistani Foreign Minister Shah Mehmood Qureshi in Islamabad on April 7 Pakistani military spokesman Maj. Gen. Athar Abbas on April 7 denied reports that Lt. Gen. Ahmed Shuja Pasha, head of Pakistan’s Inter-Services Intelligence (ISI) spy agency, declined to meet U.S. special envoy to Afghanistan and Pakistan Richard Holbrooke and Joint Chiefs of Staff Chairman Adm. Mike Mullen, who were visiting Islamabad. Abbas, who is director-general of the Inter-Services Public Relations directorate, said the ISI chief was in fact present in the meetings Mullen and Holbrooke had with Pakistani military chief Gen. Ashfaq Kayani. The denial came about half an hour after Pakistani news channels broadcast reports that the ISI chief had snubbed the two senior U.S. officials.

The two reports may appear contradictory, but STRATFOR has learned that the top U.S. military commander and Washington’s point man on the Afghanistan/Pakistan region had requested a separate meeting with the ISI chief, which was not granted. The ISI likely released this story to the media in such a way that it created the impression (and sensation) that the ISI chief refused to meet with senior U.S. officials. Since the rise of a democratically elected government in Islamabad in March 2008, U.S. officials representing the State Department and the Pentagon frequently travel to Pakistan and meet with a wide range of civilian and military officials, including the ISI chief, as authority is now divided between the government and the security establishment. Thus, Holbrooke and Mullen’s request was not out of the ordinary.

Pakistan, which faces a raging jihadist insurgency, is upset over growing U.S. criticism of its army-intelligence complex and increasing unilateral American airstrikes in the country’s northwest. Islamabad is trying to craft a unified national security and foreign policy that takes into account all the stakeholders (legislature, executive, judiciary and military/intelligence establishment) as a means of enhancing its bargaining power with Washington. As a result, it is trying to limit one-on-one contact between Washington and the various Pakistani institutions, especially the ISI — which in this case meant having a group meeting with both the army and intelligence chiefs instead of separate meetings. That said, Islamabad did want to relay its anger to Washington over U.S. criticism of the ISI. This would explain why Kayani demanded April 7 that negative propaganda against his country’s foreign intelligence service end, and it is a reason for preventing a separate meeting between Pasha and the Mullen-Holbrooke team.


Jim Sinclair’s Commentary

This place can blow any day, any time. No one other than our gang has any idea of what this means and the start of the most disruptive market event ever when consider over time.

Pakistan: Possible Militant Strikes on Karachi
April 8, 2009 | 2156 GMT

Militants of Tehreek-e-Taliban Pakistan in the Pakistani tribal district of Mohmand Agency on July 21, 2008 TARIQ MAHMOOD/AFP/Getty Images Militants of Tehrik-i-Taliban Pakistan in Mohmand Agency in July 2008 Summary

Karachi police chief Waseem Ahmed said April 8 that police had arrested 5 militants belonging to Lashkar-e-Jhangvi (LJ) who reportedly were planning attacks on seven government buildings in Karachi, British newspaper the Telegraph reported. The targets included the home of the interior minister, police headquarters, Shiite religious centers and suppliers cooperating with NATO forces. LJ is a jihadist group based in Punjab province allied with Tehrik-i-Taliban Pakistan. Jihadists have struck in Karachi before, but a campaign against Karachi by the Tehrik-i-Taliban Pakistan (TTP) would create a serious confrontation for the city’s ruling party, the Muttahida Qaumi Movement, a group that is itself known to engage in significant violence.


On April 8, Karachi police chief Waseem Ahmed said police had arrested five militants who were part of militant group Lashkar-e-Jhangvi (LJ) and were planning to attack government offices (including the police station), intelligence agencies, mosques, suppliers who ship goods to Western forces in Afghanistan and counterterrorism personnel. These arrests are only the latest sign that Karachi’s ruling party, the Muttahida Qaumi Movement (MQM), is nervous about the jihadist threat to its city. LJ is a jihadist group based in Punjab province and allied with Tehrik-i-Taliban Pakistan (TTP), which is led by Baitullah Mehsud.

The TTP has shown an ability to strike beyond its traditional territory in the North-West Frontier Province (NWFP) and Federally Administered Tribal Area (FATA) by expanding to virtually all of Pakistan’s major metropolitan areas with attacks in Islamabad, Lahore, Rawalpindi and Peshawar in recent months. Most recently, a group of 10 militants under Mehsud raided a police training facility just east of Lahore in Manawan in Punjab province. The TTP also has shown an interest in attacking Karachi, such as when Mehsud threatened in August 2008 to launch attack on MQM offices and other targets in Karachi if the party leader, Altaf Hussain, did not forfeit his rule there. Mehsud’s spokesman added that the time “was ripe for the Taliban to gain control of the city.”


Riots in Pakistan After Dissidents Found Dead
Thursday, April 09, 2009

QUETTA, Pakistan —  Rioting has broken out in southwestern Pakistan after police said they found the bodies of three missing political dissidents.

Police say one officer has been shot dead in southwestern Pakistan during the rioting.

Ghulam Ali Lashari, a senior police official, said the officer was fatally wounded when protesters opened fire in Khuzdar, a town in Pakistan’s restive Baluchistan province.

Television footage showed police swinging batons to disperse protesters who set fire to a bus in the city of Quetta, the capital of Baluchistan province.

Police official Khalid Masood says the mutilated bodies of three ethnic Baluch nationalist leaders were found before dawn on Thursday in another part of the province.


Jim Sinclair’s Commentary

You see why slowly but surely some of the maverick strongholds are becoming establishment types.

Moody’s Downgrades Berkshire
April 9, 2009

In these economic times, even Warren E. Buffett can’t qualify for the best credit rating.

Moody’s Investors Service on Wednesday stripped away the triple-A rating of Berkshire Hathaway, the conglomerate and investment vehicle run by Mr. Buffett, citing the economic pressures on the firm.

The news is yet another sign that, despite all of Mr. Buffett’s investing prowess and business savvy, even the man that investors regard as the Oracle of Omaha cannot avoid the tremors coursing through the markets.

The ratings downgrades affect Berkshire as a whole as well as a wide swath of its insurance subsidiaries, including its flagship National Indemnity, as well as other units like the auto insurer Geico and the municipal bond insurer Berkshire Hathaway Assurance.

“Today’s rating actions reflect the impact on Berkshire’s key businesses of the severe decline in equity markets over the past year as well as the protracted economic recession,” Bruce Ballentine, Moody’s lead analyst for Berkshire, said in a statement.


Posted by & filed under In The News.

Dear CIGAs,


Sir Richard Russel names Gold the "Ultimate Cash"

Click here to view the article…

Jim Sinclair’s Commentary

The key element of gold future strength ($1650) is the fact that all the financial needs of any entity that threatens the social order internationally will be met with bailout funds devoid of limits.

GM Pensions May Be ‘Garbage’ With $16 Billion at Risk
By Holly Rosenkrantz

April 8 (Bloomberg) — Den Black, a retired General Motors Corp. engineering executive, says he’s worried and angry. The government-supported automaker is going bankrupt, he says, and he’s sure some of his retirement pay will go down with it.

“This is going to wreck us,” said Black, 62, speaking of GM retirees. “These pledges from our companies are now garbage.”

As the biggest U.S. automaker teeters near bankruptcy, workers and retirees like Black are bracing for what may be $16 billion in pension losses if the Pension Benefit Guaranty Corp. has to take over the plans, according to the agency. As many as half of GM’s 670,000 pension-plan participants might see their benefits trimmed if that happened, an actuary familiar with the company’s retirement programs estimates.

The possibility that GM might dump its pension obligations is likely to intensify debate over the treatment of executives of companies that receive U.S. aid. GM Chief Executive Officer Rick Wagoner, ousted by the Obama administration last month, may receive $20.2 million in pensions, according to a regulatory filing.


Fed Saw Downside Risks Predominating at March Meeting

April 8 (Bloomberg) — Federal Reserve officials feared the U.S. economy might fall into a self-reinforcing cycle of rising unemployment and slumping business and consumer spending, making credit tighter in a weak financial system, minutes of the Federal Reserve’s March meeting show.

“Participants expressed concern about downside risks to an outlook for activity that was already weak,” minutes of the March 17-18 meeting released in Washington said. “Credit conditions remained very tight, and financial markets remained fragile and unsettled, with pressures on financial institutions generally intensifying.”

The outlook prompted the Federal Open Market Committee in a unanimous vote to boost its open-market purchases of bonds by $1.15 trillion, continuing its unprecedented increase in money supplied to the economy. The U.S. central bank has used its own balance sheet to provide financing for markets in commercial paper, asset-backed securities and mortgage bonds, markets it deems critical for financial stability and economic recovery.e


Jim Sinclair’s Commentary

It is not whether or not Bernanke’s plans succeed, it is the consequences of the monetary and in time fiscal actions taken that are the granite foundation of the gold price at $1650 or higher.

There is no practical solution that will permit the draining of the degree of liquidity already injected into the international monetary system. This concept is in place already, not even considering the additional funds that will be required over the next two years.

Monetary inflation is always followed by price inflation entirely independent of consideration of the level of business activity.

The two hyperinflations in the USA, the Continental and the Confederate Dollar, as well as all historically same/similar situations were currency events, not economic events. All occurred in recessionary to depression business conditions. The most recent example of this concept is the Zimbabwe dollar.

This is fact but brings no respect to the proponent that says nothing changes. It simply wears different attire.

Bernanke’s Deflation Preventing Scorecard

In case no one is keeping track, Bernanke has now fired every bullet from his 2002 “helicopter drop” speech Deflation: Making Sure "It" Doesn’t Happen Here. Bernanke’s Scorecard Here is Bernanke’s roadmap, and a “point-by-point” list from that speech.

1. Reduce nominal interest rate to zero. Check. That didn’t work…

2. Increase the number of dollars in circulation, or credibly threaten to do so. Check. That didn’t work…

3. Expand the scale of asset purchases or, possibly, expand the menu of assets it buys. Check & check. That didn’t work..

4. Make low-interest-rate loans to banks. Check. That didn’t work…

5. Cooperate with fiscal authorities to inject more money. Check. That didn’t work..

6. Lower rates further out along the Treasury term structure. Check. That didn’t work…

7. Commit to holding the overnight rate at zero for some specified period. Check. That didn’t work…

8. Begin announcing explicit ceilings for yields on longer-maturity Treasury debt (bonds maturing within the next two years); enforce interest-rate ceilings by committing to make unlimited purchases of securities at prices consistent with the targeted yields. Check, and check. That didn’t work..

. 9. If that proves insufficient, cap yields of Treasury securities at still longer maturities, say three to six years. Check (they’re buying out to 7 years right now.) That didn’t work…

10. Use its existing authority to operate in the markets for agency debt. Check (in fact, they “own” the agency debt market!) That didn’t work…

11. Influence yields on privately issued securities. (Note: the Fed used to be restricted in doing that, but not anymore.) Check. That didn’t work…

12. Offer fixed-term loans to banks at low or zero interest, with a wide range of private assets deemed eligible as collateral (…Well, I’m still waiting for them to accept bellybutton lint & Beanie Babies, but I’m sure my patience will be rewarded. Besides their “mark-to-maturity” offers will be more than enticing!) Anyway… Check. That didn’t work…

13. Buy foreign government debt (and although Ben didn’t specifically mention it, let’s not forget those dollar swaps with foreign nations.) Check. That didn’t work…


Jim Sinclair’s Commentary

This is unusual in fighting between the Treasury and the FDIC over the substance of the upcoming Bank Stress Tests. The following are hard words: "It’s a sham," one source told The Post, describing the test as an "open-book, take-home exam" that doesn’t actually work."

Last updated: 11:13 am April 8, 2009

The stress tests the government are about to conduct on some of the nation’s largest banks is being blasted by insiders at Sheila Bair’s Federal Deposit Insurance Corp., who say it’s a pointless exercise that’s more sizzle than steak.

The FDIC’s basic beef with the stress test is that it is not a credible way to assess how much additional cash beaten-down banks will need to weather what many Wall Street experts predict will be more losses in the coming months.

The tests are conducted by the Treasury Department and the Federal Reserve on the nation’s 19 biggest banks, including behemoths Citigroup, Bank of America and JPMorgan Chase.

"It’s a sham," one source told The Post, describing the test as an "open-book, take-home exam" that doesn’t actually work.


Jim Sinclair’s Commentary

Many of you have bought the case that the Euro zone has financial problems infinitely more serious than those of the USA. Few are focused on the simple supply of dollars hiding behind the scene awaiting their appearance on the Forex market even in a depression.

The dollar is in the process of declining in use and increasing in supply. I see this generational in nature.

Is the Almighty Dollar Doomed?

"There is also the possibility that the dollar, after its recent show of strength, will again weaken in value against other major currencies, eroding its attractiveness as a reserve currency. Confidence in the health of the U.S. economy, and therefore the U.S. dollar, could plunge because of continued large U.S. current-account deficits, an unstable banking sector and a recession-busting, expansionist monetary policy. The budget deficit, which the Congressional Budget Office estimates will reach $1.8 trillion this fiscal year, or 13% of GDP, is reaching heights not seen since World War II. (See the top 10 worst business deals of 2008.)"

I got an unexpected lesson in the power of the U.S. dollar during a visit to Tashkent, the dreary capital of Uzbekistan, several years back. While heading into town from the airport, my babbling taxi driver kept one hand (barely) on the steering wheel while his other shoved a stack of local currency, the som, into my face. He insistently urged me to trade the money for dollars. After checking in at the grim Hotel Uzbekistan, a nattily clad porter showed me and my wife to a room, fiddled with a broken TV set, and then reached into his jacket pockets for large bricks of som. He, too, persistently begged me for greenbacks. In Uzbekistan, the dollar ruled.


Jim Sinclair’s Commentary

The demand for physical gold grows and grows, as the COMEX paper gold supply commands price. That is simply wrong. The only correction is taking delivery out of the COMEX warehouse on a continuous basis.

Going for gold: How the world’s mints are coining it
By Sarah Marsh in Vienna and Jan Harvey in London

The world’s mints are coining it as unprecedented numbers of savers search for safer investments

A few years ago his visits to the mint, founded more than 800 years ago, might have seemed eccentric. No longer. From the Russian Georgy Pobedonosets to the American Eagle, gold coin production is being cranked up in mints around the world to satisfy customers believing the assets may be immune to the global financial crisis.

Russia’s state-controlled Sberbank says it has never seen such strong demand for investment coins. In Australia, the Perth Mint had to suspend new orders for gold coins because it could not keep pace with overseas demand. And, in America, the US Mint says sales of its one-ounce American Eagle gold bullion coins rocketed by more than 400 per cent to 710,000 ounces in 2008. "The demand for gold and silver," said US Mint spokeswoman Carla Coolman, "has been unprecedented."

Austria’s Philharmonic, named after the Vienna Philharmonic Orchestra, was the world’s best-selling gold coin in the last quarter and sales soared 544 per cent in the first two months of 2009. "There is no sign of demand abating," Austrian Mint’s marketing director Kerry Tattersall said. Sales this year are expected to exceed 2008’s record levels. "At present, production is struggling to keep up with demand."

Hans Dieter Rauch, who sells both collectors’ and investors’ coins in his boutique on Graben, one of Vienna’s most exclusive shopping streets, said revenues rose 300 per cent last year. "It’s the man in the street, not particularly rich people but normal citizens like you and me," said Mr Rauch, 65, monitoring the fluctuating price of gold on a screen in his back room.


Jim Sinclair’s Commentary

Public and private, pension fund failure is the stuff that social unrest is made of.

Investment losses hit public sector pensions
By Deborah Brewster in New York
Published: April 7 2009 19:59 | Last updated: April 7 2009 19:59

The crisis facing pension plans for US state and municipal employees is deepening as investment losses deplete the resources of retirement funds for teachers, police officers, firefighters and other local government workers.

The largest state and municipal pension plans lost 9 per cent of their value of more than $2,000bn in the first two months of this year, according to data from Northern Trust. That followed a loss of 30 per cent in 2008, equal to about $900bn. Smaller funds, which underperform the larger ones, lost more, experts say. The losses have left retirement plans about 50 per cent funded – that is, they have only half the money needed to cover commitments to 22m current and former workers, experts say. State governments typically put the funding figures closer to 60-70 per cent, although most experts use different calculations.

“There is a massive national underfunding problem,” said Orin Kramer, chairman of the New Jersey pension fund. ”

Unlike company pension plans, state and municipal retirement funds have no federal guarantee fund. This has led to predictions of benefit cuts and possible federal intervention.

“The federal government will get involved, without question,” said Phillip Silitschanu, analyst at Aite Group, a consultancy. “They could provide federal loans, or demand cutbacks as a condition of stimulus money, or there could be a federalisation of some of these pensions.”


Jim Sinclair’s Commentary

We all know this.

Gold ‘will exceed $1000’, bullion dealer predicts
Johannesburg – Gold prices could “easily re-attain the $1000-mark and may well push up towards and perhaps even through the $1100 barrier in the coming months”, precious metals consultancy GFMS predicted yesterday.

“The price may have pulled back a fair bit from the February highs, but that was largely just the market‘s reaction to jewelry demand crumbling and scrap booming,” said GFMS executive chairman Philip Klapwijk.

“It‘s far from game over for investors, and it will be that crowd which sets the price alight,” Klapwijk said.

Releasing its latest review on the gold market, Gold Survey 2009, GFMS singled out the fiscal and monetary policies currently being enacted, especially by the US administration, as the root cause of gold‘s potential.

GFMS also expects central banks to be reluctant to raise interest rates while the prospects for economic growth are shaky and says that the solidity of the US dollar has to be called into question, chiefly as a result of doubts over others‘ desire or ability to continue financing an explosion in US government debt.

“Strength in investment will certainly be needed to overcome weakness in the fundamentals.


Jim Sinclair’s Commentary

Yes, a more transparent world, modestly delayed.

UPDATE 1-US to delay bank test results for earnings-source
Tue Apr 7, 2009 1:09pm EDT

WASHINGTON, April 7 (Reuters) – The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury’s discussions said on Tuesday.

The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.

The government is testing how the largest banks would fare under more adverse economic conditions than are expected in an attempt to assess the firms’ capital needs. The tests are due to be completed by the end of April, but Treasury has said they may be finished before then.


Jim Sinclair’s Commentary

You can be sure there will be many more trips to the bailout well.

Fed’s Fisher says U.S. economy grim
Wed Apr 8, 2009 4:25am EDT
By Leika Kihara

TOKYO, April 8 (Reuters) – The U.S. economy is grim, and the Federal Reserve is "duty bound to apply every tool" to clean up the financial system and clear a path for a return to sustainable growth, Richard Fisher, president of the Dallas Fed, said on Wednesday.

But he said monetary policy alone would not be enough to resuscitate the economy, adding fiscal stimulus was critical in providing a spark for U.S. growth.

"Monetary policy accommodative techniques are necessary but insufficient to the task," Fisher told a symposium hosted by a private think tank in Tokyo.

"The trick to fiscal policy is to provide the spark, to provide the right incentives, get the small and medium-sized firms create jobs again, create dynamism in the economy without planting the seeds of inflation."

Fisher, who is not a voting member on the Fed’s policy-setting committee this year, said the U.S. economy probably shrank in the just-ended first quarter of 2009 at a rate similar to the 6.3 percent annual decline posted in the fourth quarter of 2008. He gave no timeline for a potential recovery.


Jim Sinclair’s Commentary

Keep this in mind as you listen to the party line.

Financial Crisis ‘Far From Over,’ Panel Says
Govt. May Spend More than $4 Trillion but Economy Faces ‘Prolonged Weakness,’ Oversight Panel Reports
ABC NEWS Business Unit
April 7, 2009

Though some economic measures are improving, the financial crisis "is far from over" and "appears to be taking root in the larger economy."

This, despite the government’s commitment to spend trillions of taxpayer dollars on a massive bailout of the financial system.

These were the findings released in a report today by the Congressional Oversight Panel, the body charged with overseeing the government’s Troubled Asset Relief Program, the $700 billion plan aimed at bailing out the country’s financial sector.

"We still have a long way to go. A very long way," Elizabeth Warren, the Harvard Law School professor who chairs the panel, said in an interview today with Bloomberg News.

The panel reported that the government has spent, lent or set aside more than $4 trillion through the Troubled Asset Relief Program, the Federal Reserve and the Federal Deposit Insurance Corporation.

Today, the "credit markets no longer face an acute systemic crisis in confidence that threatens the functioning of the economy," the report said.


Jim Sinclair’s Commentary

Take a sharp pencil to any of this and another conclusion surfaces. The FDIC will be granted whatever funds are required. The implication here speaks only to more printing of money but that is what quantitative easing is all about. Nothing is going to fail to meet the needs created by the ongoing real implosion, the recognition of the worthless OTTIs, other than temporary impaired assets that have been permanently impaired from day one of this disaster.

FDIC’s Insurance Commitments 34% Higher Than Reported
April 6, 2009 – 4:00 am

[Reader note: I thought it useful to add commentary around the FDIC data. Those that would prefer to skip straight to it, see the chart and read paragraphs 4-9].

Conventional wisdom says that financial companies are having trouble borrowing because credit markets are broken. This is dangerously wrong. The credit market itself is fine. It’s balance sheets that are broken. They have so little equity relative to their assets, there’s no cushion to protect creditors from losses.  With few good borrowers available and with the price of credit being capped by government, naturally creditors have little inclination to lend.  Washington’s solution is to “guarantee” all manner of risky investments, to use the public’s balance sheet to absorb trillions of dollars worth of private sector losses.  We’re told this will “restore confidence” in borrower balance sheets, leading to increased lending.  But this policy is dangerously misguided and may very well lead to economic Armageddon.

In point of fact, our fractional reserve financial system is just a gigantic Ponzi scheme.  It can only survive as long as it expands, which is to say, as long as new debt is flushed through the system to finance old debt.  But like all Ponzi schemes, the larger it grows the more unstable it becomes.  Eventually, it collapses of its own weight.

With this in mind, government should be concerned with paying down debt, not expanding it.  Deficit-financed bailouts and stimulus only increase the size of the Ponzi.  The bigger it grows, the harder it will crash.

My thoughts came back to this recently when I looked at FDIC’s 12/31/08 balance sheet.  Note at the bottom of that link the estimate for total insured deposits: from Q3 to Q4 it increased only a smidge, to $4.8 trillion from $4.6 trillion.


Posted by & filed under In The News.

Dear CIGAs,

The geopolitical potential prior to January 14th, 2011 has been described here as:

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

This article reveals the real G20 accomplishments and outlines Turkey’s present place of honor in the USA.

Obama’s Strategy and the Summits
By George Friedman
April 6, 2009

The weeklong extravaganza of G-20, NATO, EU, U.S. and Turkey meetings has almost ended. The spin emerging from the meetings, echoed in most of the media, sought to portray the meetings as a success and as reflecting a re-emergence of trans-Atlantic unity.

The reality, however, is that the meetings ended in apparent unity because the United States accepted European unwillingness to compromise on key issues. U.S. President Barack Obama wanted the week to appear successful, and therefore backed off on key issues; the Europeans did the same. Moreover, Obama appears to have set a process in motion that bypasses Europe to focus on his last stop: Turkey.

Berlin, Washington and the G-20

Let’s begin with the G-20 meeting, which focused on the global financial crisis. As we said last year, there were many European positions, but the United States was reacting to Germany’s. Not only is Germany the largest economy in Europe, it is the largest exporter in the world. Any agreement that did not include Germany would be useless, whereas an agreement excluding the rest of Europe but including Germany would still be useful.

Two fundamental issues divided the United States and Germany. The first was whether Germany would match or come close to the U.S. stimulus package. The United States wanted Germany to stimulate its own domestic demand. Obama feared that if the United States put a stimulus plan into place, Germany would use increased demand in the U.S. market to expand its exports. The United States would wind up with massive deficits while the Germans took advantage of U.S. spending, thus letting Berlin enjoy the best of both worlds. Washington felt it had to stimulate its economy, and that this would inevitably benefit the rest of the world. But Washington wanted burden sharing. Berlin, quite rationally, did not. Even before the meetings, the United States dropped the demand — Germany was not going to cooperate.

The second issue was the financing of the bailout of the Central European banking system, heavily controlled by eurozone banks and part of the EU financial system. The Germans did not want an EU effort to bail out the banks. They wanted the International Monetary Fund (IMF) to bail out a substantial part of the EU financial system instead. The reason was simple: The IMF receives loans from the United States, as well as China and Japan, meaning the Europeans would be joined by others in underwriting the bailout. The United States has signaled it would be willing to contribute $100 billion to the IMF, of which a substantial portion would go to Central Europe. (Of the current loans given by the IMF, roughly 80 percent have gone to the struggling economies in Central Europe.) The United States therefore essentially has agreed to the German position.

Later at the NATO meeting, the Europeans — including Germany — declined to send substantial forces to Afghanistan. Instead, they designated a token force of 5,000, most of whom are scheduled to be in Afghanistan only until the August elections there, and few of whom actually would be engaged in combat operations. This is far below what Obama had been hoping for when he began his presidency.

Agreement was reached on collaboration in detecting international tax fraud and on further collaboration in managing the international crisis, however. But what that means remains extremely vague — as it was meant to be, since there was no consensus on what was to be done. In fact, the actual guidelines will still have to be hashed out at the G-20 finance ministers’ meeting in Scotland in November. Intriguingly, after insisting on the creation of a global regulatory regime — and with the vague U.S. assent — the European Union failed to agree on European regulations. In a meeting in Prague on April 4, the United Kingdom rejected the regulatory regime being proposed by Germany and France, saying it would leave the British banking system at a disadvantage.

Overall, the G-20 and the NATO meetings did not produce significant breakthroughs. Rather than pushing hard on issues or trading concessions — such as accepting Germany’s unwillingness to increase its stimulus package in return for more troops in Afghanistan — the United States failed to press or bargain. It preferred to appear as part of a consensus rather than appear isolated. The United States systematically avoided any appearance of disagreement.



Jim Sinclair’s Commentary

The Times of India is one of the most respected publications internationally.

Pakistan could collapse within six months: US expert

NEW YORK: Pakistan could collapse within six months in the face of the snowballing insurgency, a top expert on guerrilla warfare has said.

The dire prediction was made by David Kilcullen, a former adviser to top US military commander General David Petraeus.

David Kilcullen is the best known practitioner of counter-terrorism and counter-insurgency operations and had advised Gen Petraeus on the counter-insurgency programme in Iraq. Few experts understand the nature of the insurgency in Af-Pak as well and he is now advising Petraeus in Afghanistan.

Petraeus also echoed the same thought when he told a Congressional testimony last week that the insurgency could "take down" Pakistan, which is home to nuclear weapons and al-Qaida.

Kilcullen’s comments come as Pakistan witnesses an unprecedented upswing in terror strikes and now some analysts in Pakistan and Washington are putting forward apocalyptic timetables for the country.



Jim Sinclair’s Commentary

Estimates of Toxic paper has grown from $2.2 trillion one week ago to $4 trillion today.

Toxic debts could reach $4 trillion, IMF to warn
Gráinne Gilmore, Economics Correspondent

Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.

The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.

Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF’s new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system.

Paul Ashworth, senior US economist at Capital Economics, said: “The first losses were asset writedowns based on sub-prime mortgages and associated instruments. But now, banks are selling ‘plain vanilla’ losses from mortgages, commercial loans and credit cards. For this reason, the housing market will play a crucial part in how big the bad debt toll is over the next year or two.”

In its January report, the IMF said: “Degradation is also occurring in the loan books of banks, reflecting the weakening outlook for the economy. Going forward, banks will need even more capital as expected losses continue to mount.” At the same time, there is a clear shift in congressional attitudes in the United States about simply pumping money into the system, Mr Ashworth said. The British Government is also under pressure to repair its tattered finances. Injecting more money into the banks could further undermine its fiscal position.