Posts Categorized: In The News

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.


Posted by & filed under In The News.

Dear CIGAs,

Now that the G20 has saved us all it might be interesting to consider every OTC derivative still out there as the small size of a little penny. You must keep in mind that upon designation as an OTTI, other than temporarily impaired assets, (previously known as PIA, "permanently impaired assets") the value of the obligation moves from nominal to full value. The others will move there as a percentage of their worth.

It is so good to know that the G20 have saved our souls.

Look at the OTC derivatives illustrated as little pennies all piled in a brick. Nominal to full value would engulf the planet deeper in this crap.


Jim Sinclair’s Commentary

All G20 deficits are going to be larger than predicted for years to come, upward adjusted of course after shockingly large releases of data.

UK deficit ‘more than predicted’


The government may have to find an extra £39bn a year by 2016 to bring borrowing under control, the Institute for Fiscal Studies (IFS) says.

This is on top of the £38bn of fiscal tightening the chancellor announced in the pre-Budget report (PBR).

If the money were raised entirely through tax-raising measures then families would face an average increase of £1,250 in taxes a year.

Alistair Darling is due to present his Budget on 22 April.

He has warned that the recession will be more severe than forecast.

He may also be forced to revise his forecast for public sector net borrowing, with the IFS forecasting that the budget gap could reach £150bn a year (more than 10% of GDP) over the next three years.

He and Gordon Brown will meet the Bank of England governor later to discuss measures agreed at the G20 summit.


Jim Sinclair’s Commentary

Less Bats, less bees, less food, more costly corporate farming rejoices.

Georgia might close caves to protect bats
Disease that’s killed critters in 8 states could head here
The Atlanta Journal-Constitution
Monday, April 06, 2009

A disease is heading toward Georgia, and state officials say they may close caves to stymie its arrival.

Yes, caves. The disease is white-nose syndrome, and it has decimated bat populations in eight states from New Hampshire to West Virginia. If unchecked, it could reach Georgia, home to 16 species of bats.

It’s such a mystery that the U.S. Fish and Wildlife Service has urged cave explorers to stay away from caves in those states, plus those in adjacent states.

The disease is apparently not harmful to humans, but scientists don’t know if cavers help transfer the disease from one site to the next, said Diana Weaver, a spokeswoman for the agency.

The Georgia Department of Natural Resources might follow the agency’s suggestion and close caves on state property, said DNR biologist Katrina Morris.



Jim Sinclair’s Commentary

The odds favor the Taliban.

Zardari: Pakistan fighting Taliban for survival
Mon, 06 Apr 2009 22:28:33 GMT

Pakistan’s President Asif Ali Zardari tells top visiting US officials that his country is fighting Taliban insurgents for its ‘survival’.

"Pakistan is fighting a battle for its own survival," president Zardari told Richard Holbrooke, US’ special envoy for Afghanistan and Pakistan, and Admiral Mike Mullen, Chairman of the Joint Chiefs of Staff during a meeting in Islamabad on late Monday.

"The President said the government would not succumb to any pressure by militants," a statement issued by the presidency quoted Zardari as saying on Monday.

The US officials flew into Islamabad on Monday following two days of discussions in neighboring Afghanistan.

It is the first top-level US visit since President Barack Obama put Pakistan, along with Afghanistan in his new war plan against al-Qaeda and Taliban militants.

Pakistan has been hit by a wave of violence seven and a half years after US-led forces invaded neighboring Afghanistan in 2001 in a mission that was said to oust al-Qaeda and Taliban.


Posted by & filed under In The News.

So Much Ado About So Little

"A sale of 12.9 million ounces of gold as ‘probably the most viable’ option to ensure the long-term funding of the IMF. Proceeds would be used for an interest-bearing endowment."
–WSJ, 26 February 2008.

12.9 million ounces of gold at $906 per ounce, as I write, is slightly less than $12.4 billion. The Chinese would buy $12.4 billion in gold with a telephone call.

Central banks would be willing to buy twice or even ten times that amount.

How foolish the IMF and Gordon Brown have been in gold. Both sold to major buyers at historic lows in price. Brown sold at $248 and the IMF started their sales at $106 in the 70s.

What in the world are you worried about?

Their sales at any amount will, as in the past, be an enduring monument to their lack of acumen in knowing the gold price.

In fact they are both the two dumbest gold haters that exist.

My Dear Friends,

Spinmeisters always tell the Sheeples when they cannot control something that the government favors that something.

Watch this strategy unfold as the US dollar heads for .5100 on the USDX.

This will reach Spiritual Spinmeister levels as the Hollow Jolly 2009 season arrives.

OTTI Assets:

There has been a new term given to completely destroyed, absolutely valueless and always to be worthless OTC derivatives. These had previously been called "Permanently Impaired Assets."

The new name is OTTI Assets, which translates as "Other than Temporary Impairment Assets." These now under the new FASB rules will be carried as valued decided upon by the banks.

Sodom and Gomorrah at least enjoyed themselves in their drop into perdition. These criminals just count beans as they kill everybody.

"We the Sheeple" are the victims. Wall Street benefits, of course.

The disgrace is that bank shares rally on the permissions to deceive.

You think Mother Nature might be a little peeved?

Respectfully yours,


Jim Sinclair’s Commentary

Pakistan is CRITICAL now!

Tomorrow is too late.

How long is the Obama Administration going to discuss:

  1. The means of producing Nukes.
  2. Dr. Doom, the purveyor of Nukes.
  3. Knowledge of how and facilities to manufacture Nukes.
  4. Raw materials to produce Nukes.
  5. All the same on delivery systems for Nukes.
  6. Not just standing Nukes.

If you want the face of the world to change once again and forever and the price of crude to stay permanently over $100, all you need to do is send ambassadors, with money to discuss the problem.

Sending money only insures a comfortable retirement for the present Pakistani government.

US Afghan envoy Holbrooke in Kabul for talks
Reuters – USA
Richard Holbrooke, whose mandate also covers Pakistan, is making his second visit in his new role, at a time when violence in Afghanistan has reached its …
See all stories on this topic

Pakistan mosque blast ‘kills 20’
BBC News – UK
At least 20 people have been killed after a suicide bomber detonated a device at the entrance to a Shia mosque in north-east Pakistan, police say. …
See all stories on this topic

‘Pakistan find 46 dead Afghans in truck container’
QUETTA, Pakistan (AFP) — Pakistani and Afghan officials were Sunday preparing to send home the bodies of 46 Afghans found crammed into a truck container …
See all stories on this topic

Suicide Bomber Kills 8 Paramilitary Officers in Pakistan
By Shaiq Hussain and Pamela Constable
Washington Post Foreign Service
Saturday, April 4, 2009; 6:15 PM

ISLAMABAD, Pakistan, April 4 — A suicide bomber attacked a small paramilitary camp in an exclusive, heavily protected neighborhood of the Pakistani capital Saturday, killing at least eight paramilitary officers before blowing himself up, police said.

The bomber tried to enter the camp, a cluster of tents in a wooded area between two residential streets, just after dark, but then detonated his explosives. The blast was heard several miles away and sent panic through the nearby Jinnah Super Market, which caters to affluent residents.

Witnesses said the 7:30 p.m. blast was followed by a heavy barrage of gunfire.

No group asserted responsibility for the attack, but the leader of a Taliban militia faction in northwestern Pakistan warned earlier in the week that his fighters would soon strike in Islamabad. The leader, Baitullah Mehsud, also claimed that he had carried out an attack on a police academy near Lahore this past week.


Jim Sinclair’s Commentary

Yes, but it is NOT a scam in the sense that all bailout money is applied to pay the debit on the failed OTC derivative as the credit is paid out to the winners inside and outside of the firm.

You do not see the inside payments. AIG is not an exception. It just paid out more externally. That is why it was visible.

Exclusive: Big Banks’ Recent Profitability Due to AIG Scam?
March 30, 2009

Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turn keeps on duping U.S. taxpayers into believing everything is good.

I present the insider perspective of trader Lou (who wishes to remain anonymous) in its entirety:

AIG-FP accumulated thousands of trades over the years, all essentially consisted of selling default protection. This was done via a number of structures with really only one criteria – rated at least AA- (if it fit these criteria all OK – as far as I could tell credit assessment was completely outsourced to the rating agencies).

Main products they took on were always levered credit risk, credit-linked notes (collateral and CDS both had to be at least AA-, no joint probability stuff) and AAA or super senior portfolio swaps. Portfolio swaps were either corporate synthetic CDO or asset backed, effectively sub-prime wraps (as per news stories regarding GS and DB).

Credit linked notes are done through single-name CDS desks and a cash desk (for the note collateral) and the portfolio swaps are done through the correlation desk. These trades were done is almost every jurisdiction – wherever AIG had an office they had IB salespeople covering them.

Correlation desks just back their risk out via the single names desks – the correlation desk manages the delta/gamma according to their correlation model. So correlation desks carry model risk but very little market risk.


Jim Sinclair’s Commentary

The present Administration may set a record for poor vetting of their superstars or just business as usual.

White House Financial Disclosures Paint Scarlet $ on Larry Summers

The White House did a Friday left-cheek sneak yesterday, announcing that Executive Branch Financial Disclosure reports are now available through an online ordering process. Making hay out of these reports is the nature of the beast in politics, and by dumping them on a Friday, they blunt the impact of criticisms like this:

Lawrence Summers, director of President Barack Obama’s National Economic Council, earned millions working at a hedge fund and speaking to banks such as Citigroup Inc. that later received taxpayer bailout money.

Hedge fund D.E. Shaw & Co. paid Summers more than $5 million in salary and other compensation in the past 16 months, according to a financial disclosure form released by the White House yesterday. Summers served as a managing director at the New York-based firm. Summers, a former Treasury secretary, also earned more than $2.7 million in speaking fees.

A report like this cuts both ways. Do we want advisers who couldn’t get arrested on the lecture circuit? Should the President be raiding The Learning Annex to staff his administration? One of Bloomberg’s experts makes the point succinctly:

The disclosure statement for Summers and several other top administration officials illustrates the quandary Obama and his predecessors have faced in their personnel decisions because "powerful people are almost always also rich people" who have earned money from private interests, said Steffen Schmidt, a political science professor at Iowa State University in Ames, Iowa



Jim Sinclair’s Commentary

How can you possibly fear the pittance of gold the IMF has for sale? It is a total joke.

AIG Bailout Exceeds Value of Fort Knox Gold
April 02, 2009

At the end of this Fox Business News video with Chris Powell, Secretary/Treasurer of the Gold Anti-Trust Action Committee (GATA), it is learned that, if indeed all the gold in Fort Knox is still there, it is worth less than all the bailout money already paid to AIG.

That, in itself, is a weighty argument for the yellow metal being undervalued at today’s prices, perhaps by a quite considerable margin. The current GATA media blitz is related to their recent Freedom of Information Act request to see if they can get someone to audit the contents of Fort Knox, besides the Treasury Department, that is.

This report in the TimesOnline provides many of the details:

Is there any gold inside Fort Knox, the world’s most secure vault?

It is said to be the most impregnable vault on Earth: built out of granite, sealed behind a 22-tonne door, located on a US military base and watched over day and night by army units with tanks, heavy artillery and Apache helicopter gunships at their disposal.

Since its construction in 1937 the treasures locked inside Fort Knox have included the US Declaration of Independence, the Gettysburg Address, three volumes of the Gutenberg Bible and Magna Carta.


Jim Sinclair’s Commentary

How in the name of all that is holy can you be afraid of the IMF?

A bear’s bear
There is a time for stocks and a time for gold. Now is the time for gold, Ian Gordon says
From Thursday’s Globe and Mail
April 2, 2009 at 7:14 AM EDT

Anyone wondering what a bear’s bear sounds like need only spend some time with Ian Gordon, a Vancouver-based investment adviser and market historian whose genial nature seems at odds with his decidedly grim outlook. Basing his views on an interpretation of market cycles going back more than 200 years, the president of Long Wave Analytics has been consistently accurate in his forecasts in recent years. And if he is right now, much worse is yet to come.

Can you explain how your thesis works?

I sort of extended Kondratieff’s economic cycle into something far bigger than he had ever intended. [Nikolai Kondratieff was a Soviet economist who concluded in the 1920s that capitalist economies endure recurring booms and busts over long cycles running up to 60 years.] I quickly discovered that it was very easy to recognize exactly where you were in the cycle.

You divide the cycle into the four seasons of the year and say that right now we’re at the beginning of a long winter. Why is that?

‘We’re only really at the beginnings of this massive collapse of the debt structure. Much as the central banks are trying to feed money into the system, the collapse basically takes money out faster than they can put it in,’ Ian Gordon says. (Laura Leyson for the Globe and Mail)


Jim Sinclair’s Commentary

Washington is going to fire the CEOs. That is the job of the directors under pressure from the stockholders in a capitalistic system.

If the new system requires a name, the closest parallel is FACISM.

Welcome to change brought about by many Administrations, Nixon forward.

U.S. May Oust CEOs at Banks Needing ‘Exceptional’ Aid (Update1)
By Jesse Westbrook

April 5 (Bloomberg) — Treasury Secretary Timothy Geithner said he’s prepared to oust the senior management and boards of directors at banks that require “exceptional” assistance from the U.S. government.

“If in the future, banks need exceptional assistance in order to get through this, then we will make sure that assistance comes,” while ensuring taxpayers are protected, Geithner said today in an interview on the CBS “Face the Nation” program. “Where that requires a change in management and the board, then we will do that.”

Geithner noted that American International Group Inc., Fannie Mae and Freddie Mac had their chief executives removed after it became clear the companies couldn’t survive without government rescues. The Treasury is reviewing how much capital the biggest U.S. financial companies need in order to endure a severe economic downturn.

“Where we’ve had to do exceptional things,” the government has replaced management and boards of directors, Geithner said.

Geithner’s pledge comes as signs emerge that the world economy may be stabilizing. Confidence among U.S. consumers climbed last month from the lowest level on record, according to the Conference Board. U.K. house prices rose in March for the first time since October 2007, while Chinese manufacturing increased, reports last week showed.


Jim Sinclair’s Commentary

Let’s see, everything starts in California, so you will within a year read about this in the US.

Cops storm G20 ‘rioters HQ’

Police hunting G20 rioters threatened 70 squatters with tasers after storming their derelict HQ yesterday.

The dramatic arrests came as further violent protests failed to materialise.

Petros Persad, 20, who was in one of the East London squats, said: "They battered down the doors.

They didn’t beat us up but it was scary. They burst into the room, pointed tasers at us and told us to get down with our faces on the floor." The Met said officers were hunting for suspects wanted for "violent disorder".

Outside the G20 summit at the ExCel Centre in Docklands, more than 1,500 police officers were deployed. But only 500 demonstrators turned up.