Posts Categorized: Jim’s Mailbox

Posted by & filed under Jim's Mailbox.

Jim,

The Economist magazine is projecting Tanzania to have the world’s ninth fastest growing economy this year!

Best,
CIGA Bernie

Tanzania will be in a position to grow rapidly as the world economy emerges from the current downturn," Mr. Hayes added.

The country is in fact projected to have the world’s ninth-fastest growing economy this year, ranking just behind China and ahead of India, according to a December 2008 report by the London-based Economist magazine.

Tanzania: Kikwete Takes Center Stage At UN And U.S. Meetings
Written by Kevin J. Kelley, The East African
Thursday, 01 October 2009 20:16

October 1,2009 (New York )— With the Obama administration having sent off Kenya for corruption and impunity, Tanzania has emerged as East Africa’s star player on the US pitch.

It was Tanzania’s President Jakaya Kikwete rather than Kenya’s Prime Minister Raila Odinga who commanded the spotlight in New York at last week’s opening sessions of the United Nations General Assembly.

The Tanzanian head of state was asked to initiate a discussion at a luncheon hosted by US President Barack Obama.

He outlined African agricultural issues at the two-hour meeting to which 24 African leaders had been invited. Mr Odinga was not among them.

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Dear Jim,

Many writers warn about the confiscation of gold by the present or future administrations.

Can you please give me some guidance?

CIGA Big Tatanka

Dear Big Tatanka,

People need to understand why Roosevelt ordered the confiscation of gold, making it a controlled substance something akin to cannabis. The reason was his intention to increase and let the market thereafter increase the price of gold in order to create an effect equal to today’s increase in the supply of money, but more so to escape the gold bonds and money called gold certificates. It was a simple means to novate the contract between the holder of gold certificates and the US Treasury. As a side result, big business that had issued gold bonds were able to pay off those gold bonds in paper money, thereby buying them back not at the gold value, but at the par value redemption price.

Court cases on the bond issues went as high as the Supreme Court, but by a narrow margin these cases were decided in favor of the government.

The most interesting point was that exportation of gold was forbidden by law, affecting non US interests that had stored their gold in the USA.

It is that event which has made good business for new vault locations such as in China’s Hong Kong. See the article below.

So my test for any measures of confiscation would be a deluge of gold leaving the US to return to their home ports.

Since the motivation of novating the gold certificates and gold bonds does not exist now, I rate confiscation as low of the probability scale.

As always the Goldman’s of the world will end up the biggest winners long gold. You can bet on that.

All the best,
Jim

Hong Kong recalls gold reserves, touts high-security vault
In a challenge to London, Asian states invited to store bullion closer to home

Sept. 3, 2009, 6:22 a.m. EDT
By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) — Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city’s airport, in a move that won praise from local traders Thursday.

The facility, industry professionals said, would support Hong Kong’s emergence as a Swiss-style trading hub for bullion and would lessen London’s status as a key settlement-and-storage center.

"Having a central government-sponsored vault would create a situation where you could conceivably look at Hong Kong as being a hub, where metal could be traded for the region," said Sunil Kashyap, managing director at Scotia Capital in Hong Kong, adding that the facility was the first with official government backing in the region.

The Hong Kong Monetary Authority, which functions as the territory’s unofficial central bank, will transfer its gold reserves stored in other vaults to the depository later this year, the Hong Kong government said in an earlier statement.

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Jim Sinclair’s Commentary

Here is an Eastern view on the month of November for the infallible COT.

Jim,

As Krishna related to Arjuna… he speaks to the community and has an ominous warning for COT.

"Krishna also added: I have come here to slay these men. Even if thou dost not fight, all the warriors facing thee shall die. Arise therefore! Win thy glory, conquer thy enemies, and enjoy thy kingdom. Through fate of their own karma I have doomed them to die!! Be thou merely the means of my work… tremble not. Thou shalt conquer thy enemies in battle."

Regards,
CIGA Pedro

Posted by & filed under Jim's Mailbox.

Jim,

Shadowstats.com continues to reveal the illusion.  B/D model continues to tweak the headline number, but the jobs creation histogram frames the size of the tweak relative to the overall labor problem.  Infinite QE has arrested the deterioration in average weekly claims, but for how long?

CIGA Eric

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Posted by & filed under Jim's Mailbox.

Jim,

Another sign the recession is ending, no doubt. "NO"

This little piece of news was released on a Friday evening.

CIGA Bernie

CONSUMER BANKRUPTCY FILINGS SURGE PAST ONE MILLION DURING FIRST NINE MONTHS OF 2009

October 2, 2009, Alexandria, Va.— Consumer bankruptcies totaled 1,046,449 filings through the first nine months of 2009 (Jan. 1-Sept. 30), the first time since the 2005 bankruptcy overhaul that filings have surged past the 1 million mark during the first three calendar quarters of a year, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The filings for the first three-quarters of 2009 were the highest total since the 1,350,360 consumer filings through the first nine months of 2005.

"Bankruptcy filings continue to climb as consumers look to shelter themselves from the effects of rising unemployment rates and housing debt," said ABI Executive DirectorSamuel J. Gerdano. "The consumer filing total through the first nine months is consistent with our expectation that consumer bankruptcies will top 1.4 million in 2009."

The September 2009 consumer filing total reached 124,790, a 41 percent increase from the 88,663 consumer filings in September 2008. The September 2009 filings also represented a 4 percent increase over the 119,874 filings in August 2009 and it is the fourth highest single month since the 2005 law change. Chapter 13 filings constituted 28 percent of all consumer cases in September, unchanged from the August rate.

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Jim Sinclair’s Commentary

Faber, Rogers, Dent and Celente All Agree

Dear Jim,

Do you suppose this is why so many of your readers have been on edge?

To your credit, you are most likely correct in saying that after a few days of "flight to safety" in the dollar, "a weaker economy will put downward pressure on the dollar."

However, if your readers are expressing an unreasonable degree of discomfort, it’s most likely because the memory of what happened this time last year is so fresh in their minds.  They need to be reminded that conditions have changed dramatically in the past twelve months.  Therefore, they have nothing to fear.

Cheers!
CIGA Black Swan

CAUTION: Crash/Collapse Dead Ahead Say Faber, Rogers, Dent and Celente
Author: Mac Slavo
– October 2nd, 2009

After a massive upswing in US stocks over the last six months, the recent rally may finally be coming to an end. It seems that the trend of rising stocks on bad or better than expected news may be in a reversal, as evidenced by market participants’ caution over the last couple of weeks. For those that follow contrarian investors like Marc Faber, Jim Rogers, Gerald Celente and Harry Dent, this should come as no surprise.

Marc Faber, publisher of the Gloom Boom & Doom Report, advised his subscribers and followers to take positions in US tech stocks, the banking sector and hard assets at the bottom of the markets in early March of 2006. However, he did provide a word of caution on March 16, 2009, making it known that while he was a short-term bull on stocks, that eventually, the economic fundamentals would catch up:

“probably a total collapse in the second half of the year when it becomes clear that the economy is a total disaster.”

As recently as September 3rd, on Delhi TV, he made another call, essentially telling investors to get out:

“I believe in the next 10 days to two weeks we’ll get big moves in markets. And I wouldn’t be surprised if the Dollar would for a change strengthen and equity markets would correct and possibly quite meaningfully so.”

Gerald Celente, Trends Research forecaster and contrarian thinker, advised listeners of the Jeff Rense show on September 23rd to look out below, calling it the Christmas Crash. He believes that the next collapse will come quickly, sometime this Fall, but as late as January or February of 2010:

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Posted by & filed under Jim's Mailbox.

Jim,

Spending soars to highest in eight years!

US consumers fell into the clunker trap! Unless they bought their car cash, many US consumers chose to increase their debt in such challenging time!

I really don’t get it. When will they learn??

Regards,
CIGA Christopher

Spending soars to highest in eight years on clunkers’
Real disposable incomes off 0.2%, marking third monthly decline in a row
By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) — Spurred by government subsidies to buy cars, U.S. consumer spending soared 1.3% in August, the fastest increase since the post-Sept. 11 shopping binge of eight years ago, the Commerce Department estimated Thursday.

Spending on durable goods rose 5.3% in August as auto sales surged on the government’s cash-for-clunkers program.

The clunkers program accounted for most of the increase, the government said. The program, intended to get motorists to trade in older vehicles that were less fuel-efficient, ended in August, and most analysts expect that the boost in spending was a one-time event.

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Posted by & filed under Jim's Mailbox.

Hi Frank,

Jim Sinclair once wrote that when we look back on gold we will see that it went up in a straight line as much as any market can. Graph these numbers and take a look:

3/31/04    – 427
6/30/04    – 392
9/30/04    – 418
12/31/04  – 437
3/31/05    – 427
6/30/05    – 435
9/30/05    – 468 
12/31/05  – 516  
3/31/06    – 581
6/30/06    – 613
9/30/06    – 598 
12/31/06  – 636 
3/31/07    – 663
6/30/07    – 647
9/30/07    – 743 
12/31/07  – 834
3/31/08    – 915
6/30/08    – 924
9/30/08    – 870 
12/31/08  – 880
3/31/09    – 918 
6/30/09    – 926
9/30/09    – 1006 (estimate)

5 1/2 years of data seems to validate Jim’s opinion.  For all of the volatility, the trend has been inexorably upward.  Most of the volatility is contained within the quarter as the quarter end price is little changed from the previous quarter end price during corrections.

CIGA Mike

Dear Jim,

The strategy continues to steadily unfold.

Respectfully yours,
Monty

China boosts int’l use of RMB with sovereign bond sale in Hong Kong

HONG KONG, Sept. 28 (Xinhua) — The launch of Renminbi sovereign bonds in Hong Kong on Monday shows China’s efforts to boost the international use of the yuan step by step, officials and analysts said.

The bond issue, worth only 6 billion yuan (878.5 million U.S. dollars), marked a key milestone in the internationalization of the RMB.

Hong Kong was chosen for, and will benefit from, the milestone bond sale thanks to its unique position as the international financial center providing desired cushion against the potential risks when the program was launched, analysts said.

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Jim,

Nominal and real home prices continue to deteriorate as household leverage unwinds.  As long as these trends are in place don’t expect the strategy of infinite QE to ease.  In other words, don’t expect the dollar to rally.

CIGA Eric

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Long Term Secular Trends
By CIGA Eric 9/30/09

Money talks, and bull sh*t walks.

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Guys,

How long will it taking before people realize that monetary inflation will trump weak demand as a determinant for price for key strategic international commodities?

CIGA Eric

Crude and gasoline futures rise on supply data
Oil prices rise after government reports unexpected drop in US gasoline supply
By Chris Kahn, AP Energy Writer
On Wednesday September 30, 2009, 2:55 pm EDT

NEW YORK (AP) — Oil prices climbed more than 5 percent, surpassing $70 a barrel Wednesday after a government report said the nation’s gasoline supply dropped unexpectedly and demand increased from last year.

Benchmark crude for November delivery added $3.90 to settle at $70.61 a barrel on the New York Mercantile Exchange. Brent crude rose $3.06 to $68.55 a barrel on the ICE Futures exchange in London.

The Energy Information Administration put U.S. gasoline stockpiles at 211.5 million barrels last week, a drop of 0.8 percent from the prior week. It also said demand for gasoline over the four weeks ended Sept. 25 was 5.4 percent higher than last year.

The price of oil, which is used to make gasoline, rose as investors placed some final bets on the last day of the quarter. Crude prices have waffled between $59 and $75 during the past three months, but equities markets surged during the quarter as investors became increasingly confident that the economy was healing.

Despite the drop last week, gasoline supplies are still considered to be well above normal. They’re nearly 11 percent higher than they were last year, and much of last week’s drop came as many U.S. refiners cut back on their operations.

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Posted by & filed under Jim's Mailbox.

Jim,

Salient points:

1. All the leverage is still there (i.e. nothing has been solved).
2. Banks are hoarding taxpayers money and not lending.
3. Equities are priced for a massive recovery, which current lending implies is simply not going to happen.

Here’s a link to the video…

Regards,
CIGA Pedro

 

Hi Jim,

What a beautiful and timely article. No matter how tough we think we are (or are not) it’s nice to have your confidence behind us.

I can never hear too much of your expertise. I have one additional question that you might not have an answer but I thought I would ask. It seems to me that in the near future the general equity market will have some sort of a correction. How will this affect the gold and silver equities? Since I have come this far I am in it for the long haul but just wanted to know what to expect.

Have a great night and as always… THANKS.

Warmest Regards,
CIGA Ron

Dear Ron,

Gold will follow the dollar, and gold shares will after 2 to 5 trading days follow gold itself. It is the dollar that is the determinate.

After 2 to 5 trading days of flight to so called safety in the dollar, a weaker economy will put downward pressure on the dollar and therefore upward pressure on gold.

Silver in my opinion will be pulled two ways at first, up by gold and down by the economy. This will result in price indifference until gold’s upward momentum becomes the greater influence.

There are silver specialists that might have some additional answers for you.

Regards,
Jim

Posted by & filed under Jim's Mailbox.

Jim,

Western banks find out that even Saudi families may default on their debt.

This fight between 2 Saudi families could be a $15.7B potential loss for 8 international banks, BNP and Citigroup among them.

In addition, the Saad group involved in infrastructure among other businesses may file for bankruptcy.

"Saudi Arabia’s economy will contract 1 percent this year as the debt problems of family-run businesses dissuade banks from lending, Riyadh-based Jadwa Investment Co. said in a July 28 report. In addition to these two Saudi conglomerates, “several other family groups are stressed financially,” Jadwa said"

Best regards,
CIGA Christopher

SAMA will not buy up Gosaibi, Saad debt: Al-Jasser
Saudi Gazette – 06 September, 2009

SAMA won’t buy up the $ 15 billion debt of Ahmad Hamad Algosaibi & Bros. and Maan Al-Sanea’s Saad Group that defaulted after borrowing more than SR58 billion (about $ 15.7 billion), said Muhammad Al-Jasser, the central bank governor.

“Absolutely not,” Al-Jasser said when asked by Bloomberg News whether the Saudi Arabian Monetary Agency would buy up the debt from local banks.

Units of the two family-owned businesses have borrowed at least SR58. 88 billion ($ 15.7 billion) from more than 80 regional and international banks, including Paris-based BNP Paribas SA, New York-based Citigroup Inc. and Arab Bank Plc in Amman, Jordan, according to documents provided by lenders. About $ 5 billion of that is owed to Saudi banks, Standard Chartered Plc said in an Aug. 26 report.

Al-Jasser’s comment made in London Saturday where he was attending a meeting of central bank governors and finance ministers of the Group of 20 countries refuted an Economist Intelligence Unit report this month that said the “fall-out for local banks may be limited as the Saudi Arabian Monetary Agency is expected to help local banks to cover losses.”

International and regional banks are suing the Al-Khobar- based Saudi groups after both missed payments due from their Bahraini-based banking units, which are now under the administration of the Bahraini central bank. Court cases are also taking place between the two after the Al-Gosaibi group said in a May 22 New York filing that Al-Sanea, the owner of Saad Group, used ‘falsified documents’ to obtain $ 10 billion. Saad Group will respond to the claim through the judicial process, according to an Aug. 1 e-mailed statement to Bloomberg News from the company.

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Dear CIGAs,

CIGA Doug sends us this extraordinary work of genius suggesting that we consider subscription. I concur.

My Favourite Excerpt:

"Here is a very illustrative analogy of the crisis today that imposed itself on our researchers: a rubber ball in a staircase. It seems to rebound on every step (then giving the impression that the fall has stopped) but it falls even lower on the next step, resuming its collapse."

CIGA Doug

GEAB N°37 is available! Global systemic crisis: In pursuit of the impossible recovery
– Public announcement GEAB N°37 (Septembre 16, 2009) –

Before this summer, LEAP/E2020’s team announced that there would be no recovery in sight in September 2009, and not until summer 2010 in any event. Well indeed, contrary to the claims of the media, and financial and political circles, we confirm our anticipation.

The slowdown in the speed of collapse of the global economy, at the origin of all the « good news » (1), is only due to the world’s enormous public financial effort of the last twelve months (2). But the « time saved » using taxpayers’ money around the world should have been dedicated to redesigning the international monetary system at the heart of the current systemic crisis (3). Yet, besides a few cosmetic considerations (4) and huge gifts to US and European banks, nothing serious has been undertaken, and, when it comes to the future, the « every man for himself » rule prevails (5).

Now, as summer 2009 comes to a close, and as the three rogue waves start impacting the global economy hard (unemployment (6), bankruptcies (7) and monetary shocks (8)), the time to mend the system, or to prepare for a soft transition towards a new global system, is over (9). The first signs of a major decoupling (10) are beginning to appear: the rest of the world is rapidly moving away from the Dollar zone. As shown by the chart below, there is a 95 percent chance that 1,000 billion new USDs will be printed in a very near future… not very attractive for the Dollar zone.

Inconsistent statistics reflect a chaotic world economy

We are heading straight to the phase of geopolitical dislocation expected to begin in the fourth quarter of 2009 (11). In this issue of the GEAB, our team analyses the trends at work (real estate market, srategic issues…) within the current chaos resulting from a flood of unchecked public expenditure and a persistently uncontrolled financial system in a context of growingly inconsistent statistics. Paradoxically, dislocation has become, according to our researchers, the only way to economic recovery (a recovery that will take place around a global architecture and interaction between economic, social and financial spheres profoundly different from anything we knew in past decades. Our team believes that the first features of the “post-crisis world” should begin to appear by summer 2010 and, in the coming months, they will dedicate themselves to their identification.

Meanwhile, as anticipated in the previous editions of the GEAB, no one can now construct a true picture of today’s global economic situation as macroeconomic figures are more and more contradictory or simply absurd (12). Measurement data and instruments have been so manipulated (13) and limited to a volatile US Dollar as sole benchmark (14), that no government, international organisation or bank (15) can now tell in which direction the global system is heading. The media reflect this chaos and contribute to their readers’/auditors’/viewers’ bewilderment: depending on the day, or even the hour, that they give contradictory news on finance, economy or currency. Policy makers, entrepreneurs, employees,… economists or analysts… are reduced to Pascal’s wager (16) to assess what will happen in future months.

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Posted by & filed under Jim's Mailbox.

Dear CIGAs,

While market players feel grip of the October selling fear, they fail to see the comparisons of 2009 with 2003. After the Japanese liquidity blast from 2002-2003, the dollar began to fall aggressively in 2003. Stocks soared.

Today’s infinite QE of 2008-2009 makes the Japanese liquidity blast of 2002-2003 look like a mini sip from a Dixie cup. As a result, the dollar is falling aggressively. Like 2003, expect gold and equities to follow the lead of a lower dollar in 2009.

Oh by the way gold ran from $319 to $425 from April 2003 to April 2004.

CIGA Eric

Click chart to enlarge

SPX 2003  2009 Plus UDX

Dear Jim,

This was found by a friend of mine. Notice her comments below.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

Monty,

I found this on Bloomberg, but most of the information after the first paragraph had already been dropped. I find that when a story could affect the markets, it disappears… (not just from Bloomberg). This below is from a London source:

Nicole Reynolds, CFA

Problem Loans Up 174%

The annual report of the combined regulatory agencies (Federal Reserve Board of Governors, Federal Deposit Insurance Corp (FDIC), Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) yesterday said “losses from syndicated loans facing banks and other financial institutions tripled to $53 billion in 2009, due to poor underwriting standards and the continuing weakness in economic conditions.” The report is named “the Shared National Credit Program (SNC) 2009 Review.”

Reuters says “According to the report, criticized assets rated ‘special mention’, ‘substandard’, ‘doubtful’ and ‘loss’, touched $642 billion, representing 22.3 percent of the SNC portfolio, compared with 13.4 percent a year ago.

Classified assets rated ‘substandard’, ‘doubtful’, and ‘loss,’ rose to $447 billion from $163 billion in 2008. The volume of SNCs rated ‘doubtful’ and ‘loss’ in 2009 rose almost 14-fold to $110 billion, while non-accrual loans touched $172 billion, up from $22 billion in 2008.

“The report also said foreign banks held about 38 percent of the $2.9 trillion in loans, while hedge funds, pension funds, insurance companies and other entities held about 21 percent. The report also said that non-banks continued to hold a "disproportionate share" of classified assets compared with their total share of the SNC portfolio. They hold 47 percent of loans seen as ‘substandard’, ‘doubtful’ and ‘loss’.”

Let’s note that hedge funds, pension funds, et al. do not have access to TARP money but it looks like the credit issue has not been resolved, even if some bank recipients have been paying back TARP money.

 

Jim Sinclair’s Commentary

This is another correct take on the same report.

Dear Jim,

Every bit of the "recovery" in bank profits this year was an illusion stemming from the FASB being intimidated into abandoning fair value accounting requirements. The reality is rapid deterioration across the entirety of their loan portfolios, as evidenced by the following article. This is the kind of MOPE that influences honest investors to lose more of their dwindling savings in order to prop up struggling financial companies.

Respectfully yours,
CIGA Richard B.

U.S. large-loan bank losses triple to $53 billion
On Friday September 25, 2009, 6:05 am EDT

(Reuters) – U.S. regulators say that the level of losses from syndicated loans facing banks and other financial institutions tripled to $53 billion in 2009, due to poor underwriting standards and the continuing weakness in economic conditions.

According to the Shared National Credit Program (SNC) 2009 Review, an annual inter-agency report released on Thursday, credit quality deteriorated to record levels with respect to large loans and loan commitments.

The Shared National Credit Program which was set up in 1977 to review large syndicated loans now reviews and classifies all institutional loans of at least $20 million that are shared by three or more supervised institutions.

According to the report, criticized assets rated ‘special mention’, ‘substandard’, ‘doubtful’ and ‘loss’, touched $642 billion, representing 22.3 percent of the SNC portfolio, compared with 13.4 percent a year ago.

Classified assets rated ‘substandard’, ‘doubtful’, and ‘loss,’ rose to $447 billion from $163 billion in 2008.

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