Posts Categorized: Jim’s Mailbox

Posted by & filed under Jim's Mailbox.

Jim,

Pakistan making the guns…

This is a chilling reality of what we face as a Nation in Afghanistan.

CIGA Tom

Click here to view the video…

Dear Jim,

Mr. Armstrong is jailed. Before I accept his analysis give me some background on his problems.

Respectfully yours,
CIGA Dr. Bob

Dear Dr. Bob,

Armstrong was one of the three that in the 70s invented the OTC derivative of which three went to jail.

The OTC derivative structure then is no different from the OTC derivative structure out there today. No one is in jail.

His alleged contempt of court issue was because of a judge’s opinion he had funds hidden. As I understand it no client of his firm was harmed.

The basis of his problem is that many of the derivatives he created caused a tax credit.

Regards,
Jim

 

Jim

The question being ask should not be when will this end but rather how bad will it get.

http://www.facebook.com/photo.php?pid=1255867&l=51ed0&id=557304509

Regards,
CIGA Eric

Click charts to enlarge

February109-Eric1 February109-Eric2

Posted by & filed under Jim's Mailbox.

Jim’s Formula:
September 1, 2006

  1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
  2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella – Goldilocks situations.
  3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
  4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.
  5. Lower profits leads to lower Federal Tax revenues.
  6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
  7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
  8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).
  9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
  10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
  11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
  12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.

Jim,

You might have already seen this but wanted to sure you had.  It only reveals what your formula has told us was coming.

Report to the Secretary of the Treasury
from the Treasury Borrowing Advisory Committee
of the Securities Industry and Financial Markets Association

February 4, 2009

Dear Mr. Secretary:

Since the Committee last convened in early November, the contraction in economic activity has deepened and broadened, while financial markets have remained under duress. The unprecedented volatility present in capital markets when the Committee last met has diminished somewhat but conditions still are exceptionally challenging. Policy efforts have begun to unlock credit for select high-quality borrowers. But the magnitude of wealth destruction, the still heightened cost of economy-wide capital and the impaired system of financial intermediation continue to cast a dark cloud over the economic outlook.

Monetary and fiscal policy action now being implemented will help to prevent an even more serious downturn than otherwise would be the case. Policymakers’ efforts to restore the flow of credit to households and businesses, backstop critical financial intermediaries through capital injections and loan guarantees, and stimulate economic activity via lower interest rates, tax cuts and government spending are positives. Nonetheless, the necessary deleveraging of both the financial and household sector is considerable and has further to run.

More…

Posted by & filed under Jim's Mailbox.

Jim,

This is what Merrill sent us today.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

David Rosenberg over the ML Squawk box this AM

Why we think gold and commodities too are a no brainer: The protectionist trend is fully intact — see the front page of the WSJ ("Nations Rush To Establish New Barriers To Trade"): The WTO is gathering on Monday to discuss stemming the "wave of barriers to world commerce".  Russia has raised trade barriers to such an extent that EU officials are headed to Moscow to meet the country’s trade officials. Egypt just raised duties on sugar.  The USA is planning retaliatory action against Italian water and French cheese — and levying new tariffs on Chinese-made goods too. This may not exactly be Smoot-Hawley, but this is starting to look more like the 1930s than many are willing to admit. Also have a look at "Free-Traders Conspicuously Quiet on Buy American" on page 2 of the FT.

Dear Jim,

What do you think of the equity market here?

Regards,
CIGA Green Hornet

Dear Green Hornet,

Short and sweet.

If the uptick rule is reinstated as Cox (ex SEC caretaker) advised going out the door of the SEC offices then a 1930 rally has a 70% chance of occurring. I think it would.

If the lobby of the hedgies is rich enough then the uptick rule will not be reinstated and the equity market rally will be short and lacking of any noteworthy character.

It is business as usual as the Big Money game of Hedgie Lobbyists own versions of pork.

The Hedgies are the short side of all markets.

See you in Toronto.

All the best,
Jim

Posted by & filed under Jim's Mailbox.

Dear Jim,

Being a farmer, I watch weather and commodity markets quite closely. It is my opinion that a major drought in the heartland of the US in either of the next 2 growing seasons (2009 or 2010) will bring massive food inflation. There is currently a drought in Argentina/Southern Brazil worse than they have seen in over 30 years. Click here to view a video on the drought…

There is a drought in northern China as I write this Click here to view an article on the drought…

We haven’t had a major crippling drought in the U.S. since 1988. The 19 year Benner cycle says we are overdue. If it occurs in 2009 or 2010 we will see massive food inflation worldwide in my opinion.

As always your efforts and counsel are hugely appreciated.

CIGA Eddie H.

Dear Eddie,

You should focus on the even longer weather cycles which underscore the conglomeration of cyclical indicators of types and kinds coming in a peak and trough just before or on January 14th, 2011.

Regards,
Jim

Posted by & filed under Jim's Mailbox.

Jim,

The US Empire’s death knell was sounded last year in South Ossetia/Georgia. Now the fallout/rollback begins.

CIGA Pedro

"Kyrgyzstan’s president said Tuesday that his country is ending U.S. use of a key airbase that supports military operations in Afghanistan.

A U.S. military official in Afghanistan called President Kurmanbek Bakiyev’s statement "political positioning" and denied the U.S. presence at the Manas airbase would end anytime soon.

Ending U.S. access would have potentially far-reaching consequences for U.S. and NATO operations in Afghanistan, where the United States is preparing to deploy an additional 15,000 troops to shut down the Taliban and al-Qaida."

Kyrgyzstan closing US base key to Afghan conflict
By MIKE ECKEL, Associated Press Writer

MOSCOW – Kyrgyzstan’s president said Tuesday his country is ending U.S. use of an air base key to military operations in Afghanistan_ a decision with potentially grave consequences for U.S. efforts to put down surging Taliban and al-Qaida violence.

A U.S. military official in Afghanistan called President Kurmanbek Bakiyev’s statement "political positioning" and denied the U.S. presence at the Manas air base would end anytime soon.

The United States is preparing to deploy an additional 15,000 troops in Afghanistan and Manas is an important stopover for U.S. materiel and personnel.

More…

Posted by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

As long as the uptick rule is absent from the market a 1930s type rally in equities cannot be sustained. That is fact.

January 25, 2009, 6:01 AM EST
Relevant excerpts:

 The latest attack on short selling could come in the form of a reinstatement of the so-called uptick rule, which requires that a stock moves upward in price before it can be sold short.

Many critics attribute the market’s recent downward spiral, in part, to the absence of the uptick rule, which was in place for nearly 70 years before the Securities and Exchange Commission repealed it in July 2007. They claim that without the rule, short sellers fuel volatility while driving stock prices down to unrealistic levels. . . . .

 Mary Schapiro, the new chairwoman of the SEC, has stated that she favors reinstating the uptick rule, according to published reports.

More…

 

Ackerman Urges New SEC Chief to Restore Uptick Rule to Regulate Short Sales of Stocks

Congressman also receives letter supporting reinstatement of the regulation from Christopher Cox, the former SEC Chair who rescinded the rule

January 27, 2009

 (Washington, DC) – U.S. Rep. Gary Ackerman (D-NY), a Senior Member of the House Financial Services Committee, today sent a letter to the new Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro – on her first day in office – that urges her to reinstate the uptick rule, the depression-era regulation that required a stock to increase in price before a short sale could be executed.

“One of the simplest but most important and effective initiatives that the SEC could undertake immediately to combat market volatility is the reinstatement of a so-called uptick rule” Ackerman wrote. “For more than 70 years, the uptick rule curbed short-selling runs until, short-sightedly, the Commission revoked it in 2007. The lack of a price test in our exchanges created an environment that provided short sellers with the ability to both exploit and accelerate the failures of a number of companies, including Bear Stearns and Lehman Brothers, the collapse of which had a devastating effect on confidence in the U.S. financial markets.”

Ackerman also received a letter from former SEC Chairman Christopher Cox dated January 20, 2009 – the day he left the agency – in which Cox said he supports the reinstatement of an uptick rule. Cox sent the correspondence despite the fact that the SEC rescinded and refused restore the regulation during his tenure as Chairman.

More…

Dear CIGAs,

The following is compliments of CIGA Kahama.

Acts2:38

A woman had just returned to her home from an evening of church
services , when she was startled by an intruder. She caught the man in the
act of robbing her home of its valuables and yelled: ‘Stop! Acts2:38!’
(Repent and be Baptized, in the name of Jesus Christ , so that your sins
may be forgiven.)

The burglar stopped in his tracks. The woman calmly called the police and
explained what she had done.

As the officer cuffed the man to take him in, he asked the burglar: ‘Why
did you just stand there? All the old lady did was yell a scripture to
you.’

‘Scripture?’ replied the burglar. ‘She said she had an Ax and Two 38s!’

Send this to someone who needs a laugh today and remember: Knowing
scripture can save your life – in more ways than one!

 

Good morning Jim,

It’s been a while since I’ve been in touch, so I hope all is well!

I was shocked to see this article on Bloomberg this morning.

Gold Rally Fills Vaults With Bullion as Bank Stimulus Increases
By Pham-Duy Nguyen and Nicholas Larkin

Jan. 30 (Bloomberg) — The same unprecedented steps that central bankers are taking to rescue the banking system are driving investors to gold, the commodity investors buy when they lose confidence in financial assets.

David Einhorn, manager of the $5.1 billion Greenlight Capital Inc. hedge fund, bought gold for the first time. Steven Lehman, the Federated Investors Inc. fund manager who beat 99 percent of his peers last year, is betting on bullion with Toronto-based Yamana Gold Inc. and Goldcorp Inc.

The combination of central banks spending trillions of dollars to prop up the banking system in the worst financial crisis since the Great Depression will cause gold to appreciate at least 17 percent this year from $882.05 an ounce on Dec. 31, surpassing the record of $1,032.70 in London, according to 16 of 24 analysts surveyed by the London Bullion Market Association. The metal traded at $909.10 yesterday.

“The government can print endless money, but they cannot increase the supply of gold,” said Michael Pento, chief economist at Delta Global Advisors Inc. in Huntington Beach, California, who is doubling holdings of the precious metal to 8 percent of his $1.5 billion in assets. “Anything the government cannot replicate by decree, I want to own.”

Investors typically buy gold during times of financial turmoil as a store of value. The commodity has gained in five of the past six U.S. recessions.

More…

Jim,

You were the first to warn!

I believe you think the risk of a planetary Weimar is more than 10%?

All the best,
CIGA Jeroen

Attali Warns of ‘Worldwide Weimar’ as Governments Print Money
Interview by Farah Nayeri

Jan. 30 (Bloomberg) — Imagine a country so ravaged by inflation that $1 will buy you 630 billion in the local currency, where a loaf of bread costs tens of billions, and where wheelbarrows are the new wallets.

That was the Weimar Republic in November 1923. A similar prospect may now await the world economy, says French economist Jacques Attali in “La Crise, et Apres?” (“The Crisis, and Then?”), a stinging new critique of the financial meltdown.

Attali, 65, served as a special adviser to French President Francois Mitterrand in the 1980s and later became the first head of the European Bank for Reconstruction and Development. He went on to found microfinance agency PlaNet Finance. In 2007, he steered a panel on economic growth that made recommendations to Nicolas Sarkozy, the current president.

More…

Dear Jeroen,

It gives me no pleasure to know this is occurring without any practical manner to oppose it.

All we care about is that those who read here protect themselves.

Respectfully,
Jim

Dear Jim,

As the following two pieces (one article and one press release) suggest, the uptick rule is in play with both new SEC Chairman Mary Schapiro and Congressional Democrats calling for its reinstatement. Even former SEC Chairman Cox – on his last day in office – pulled a 180 and called for the rule’s reinstatement.

I respectfully suggest that the readers of this site take this opportunity to contact both their representatives and the SEC to express their support for reinstatement. We know the hedge funds will be fighting back with all they’ve got. The direct email address for the SEC Chairman’s Office is:
chairmanoffice@sec.gov

Respectfully yours,
CIGA Richard B.

Market participants split on reinstatement of the uptick rule
While many question its effectiveness, some feel it’s better than an outright ban on short selling
By Jeff Benjamin
January 25, 2009, 6:01 AM EST

Relevant excerpts:

The latest attack on short selling could come in the form of a reinstatement of the so-called uptick rule, which requires that a stock moves upward in price before it can be sold short.

Many critics attribute the market’s recent downward spiral, in part, to the absence of the uptick rule, which was in place for nearly 70 years before the Securities and Exchange Commission repealed it in July 2007. They claim that without the rule, short sellers fuel volatility while driving stock prices down to unrealistic levels. . . . .

Mary Schapiro, the new chairwoman of the SEC, has stated that she favors reinstating the uptick rule, according to published reports.

More…

Ackerman Urges New SEC Chief to Restore Uptick Rule to Regulate Short Sales of Stocks
Congressman also receives letter supporting reinstatement of the regulation from Christopher Cox, the former SEC Chair who rescinded the rule
January 27, 2009

(Washington, DC) – U.S. Rep. Gary Ackerman (D-NY), a Senior Member of the House Financial Services Committee, today sent a letter to the new Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro – on her first day in office – that urges her to reinstate the uptick rule, the depression-era regulation that required a stock to increase in price before a short sale could be executed.

“One of the simplest but most important and effective initiatives that the SEC could undertake immediately to combat market volatility is the reinstatement of a so-called uptick rule” Ackerman wrote. “For more than 70 years, the uptick rule curbed short-selling runs until, short-sightedly, the Commission revoked it in 2007. The lack of a price test in our exchanges created an environment that provided short sellers with the ability to both exploit and accelerate the failures of a number of companies, including Bear Stearns and Lehman Brothers, the collapse of which had a devastating effect on confidence in the U.S. financial markets.”

Ackerman also received a letter from former SEC Chairman Christopher Cox dated January 20, 2009 – the day he left the agency – in which Cox said he supports the reinstatement of an uptick rule. Cox sent the correspondence despite the fact that the SEC rescinded and refused restore the regulation during his tenure as Chairman.

More…

Posted by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

Extremely good comments from an extremely gifted intellect.

Jim,

Now the most dangerous phase of the fiat money and credit cycle begins,

The extent of last year’s financial collapse caused deep systemic shock and insecurity to world governments, democratically elected political leaders by their nature are insecure and need to believe they operate within a predictable system that ensures their security and control and that future events over which they have authority progress substantially according to expectations or at least gives them adequate cover if they don’t,

The shock of last year’s events were of such magnitude that the resulting threat caused a temporary focus away from many national interests in favor of supranational solutions, governments in this instant looked to find their bearings, needed a breathing space and instinctively looked to rally around a common cause. It was almost as though national interests were paralyzed and a common cause ignited as an alien spaceship hovered menacingly in the sky threatening the existence of earth.

From disagreements emerging at the world economic forum at Davos it appears that we now move to the next entirely predictable but very dangerous, accelerating and possibly unstoppable phase where governments regardless of culpability find it politically expedient to polarize and hold other nations responsible for their problems,

CIGA Peter

Dear Jimmy,

OF course if this develops on an actual basis (countries actually start to do more protectionist things) and not just on a talk basis (countries brag how good they are and blame other s for world problems), then we have trade wars and a very long depression. My call for a depression ending in mid 2010 would have to be changed to a depression ending in 2012 or later.

Monty Guild
www.GuildInvestment.com

Posted by & filed under Jim's Mailbox.

Folks,

Mr. Sinclair often communicates in something I refer to as "Sinclair speak." He’s telling us quite a bit below. First, gold will re-enter the monetary system. Second, the implementation of the mechanism to accomplish this will result in STABILIZING the gold price at a new higher level… there will be no "crash." Finally, in the future, gold mining entities will be viewed as "utilities" and will pay dividends. How would you like to own something configured to take advantage of these eventualities?

CIGA Frank

"Everyone is looking for where and when the top in gold will come. Will it be Jim’s $1650 or Alf Field’s $10,000 plus before it comes back down?

To put it nicely, you are all wrong. Gold is going up and STAYING up.

There is no top to look for because like all things people strive for, the top does not exist.

Gold will trade within $200 of a given point as a product of the Master of the Financial Universe, Paul Volcker, taking control when all this is totally out of control. He will instate the revitalized and modernized Federal Reserve Gold Certificate Ratio, not gold convertibility, and not tied to interest rates as an automaticity.

The Gold mining business will then be the best business there is and the highest dividend paying monetary utility."
— James Sinclair

Dear Frank,

You are totally correct!

Jim