Posted at 3:55 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

It looks like someone forgot to tell the US equity markets that they were supposed to be “stimulated” by passage of the $825 billion and rising “stimulus” plan approved by the Dems in Congress last evening. Then again perhaps investors looked at the plan and were not “stimulated” by its details since all those digital TV’s that it gives away money for are not made in the US but overseas. I did want to let the readers know that I sent in an invoice to the feds in the amount of $25,000 requesting a direct payment to me personally so that I could purchase a really nifty 4 wheeler that comes with a built in cooler for hauling cold drinks on those outings in the great outdoors. I will let you know when I get the check so that you can also apply. I am not worried about the cost because when I am gone from this planet I will be leaving it to my kids since they, along with their grandkids, will end up being the ones that are paying for this anyway.

By the way, some one has calculated that the size of the package means that the feds could send every man, woman and child a check for $2,700 or $22,000 for every person living below the poverty level in the nation. No doubt that could be increased a bit if they eliminated the $50 million that the bill throws to the National Endowment of Arts and $ one billion for Amtrak, which has not shown a profit in 40 years!

Even the bond market has finally figured this one out – as lousy as the economic data gets (did you see that new home sales hit a 14 year low according to today’s data release) the bonds still cannot muster much of an upward move. Traders there are slowly coming to realize that bonds are not such a “safe haven” when the feds are multiplying them faster than ACORN can register non-existent or dead voters. Bond traders rightly fear a tidal wave of supply that is going to overwhelm whatever demand still exists for them.

The bond chart has turned absolutely horrendous with today’s sell off breaching a short term support level which had emerged near the 128 ^15 level. There looks to be nothing in the way of technical chart support until down near the 100 day moving average at 125 ^08. About the only thing that the bond bulls have going for them is the extremely oversold level but that is not a lot to hang your hat on once sentiment shifts, especially in a market that had blown up into a bubble of cosmic proportions. Tomorrow’s weekly and monthly close in the bonds will be significant.

All of this contributed to gold’s rise from support – if bonds are no longer safe havens then where can one go with their wealth to protect it from the depredations being inflicted upon it by Central Bankers and ignorant politicians. Answer  – Gold.  Pause here as the camera pans in closer to zoom in on the bullions coins I am holding in my hand and then pans back out so that you can see the 800 telephone number to phone so that you can purchase some gold and pay for the cost of the advertisement.

Seriously, sometimes I get the feeling that we sound like a TV advertisement for gold but when you look at what is transpiring in the world around us and see the folly that passes for statesmanship among our leaders, you get the idea that you are watching a train wreck in slow motion. The monetary authorities and the politicians set the stage for this mess, greed on Wall Street took over and now the monetary authorities and the politicians are somehow supposed to fix it all. It reminds me of the story of the clumsy janitor cleaning a store full of fine crystal – he knocks over some of the crystal and attempts to sweep it up but in the process the handle of his broomstick knocks more crystal off of shelves that are behind him. As he turns to deal with that mess, once again the broomstick takes down more crystal to the point where he has managed to ruin nearly everything in the entire store. It would have been better off if he had never even attempted to clean the store in the first place.

Technically the price action in gold is most encouraging. After stalling out at $920 due to bullion bank price capping, gold probed lower looking for buying support and found it almost exactly on the topside of the Downsloping trendline from which it broke above last week. This is classic, and I do mean “classic”, bullish price action from a technical perspective – a triangular consolidation formation in which the market is coiling tighter and tighter and then breaks out, sees a retest of the breakout point and then rebounds in the direction of the initial breakout.

Tomorrow’s price action becomes most important now. In a “normal” freely traded market, more often than not, the market will continue in the direction of the breakout after completing such a pattern. I have seen this pattern occur so many times in the span of my trading career that I have long ago lost count. However, we all know when it comes to gold, that this market is anything but a normal “freely traded”, protestations of the willfully blind notwithstanding. That is why we need to see this thing get a strong close on Friday. If it does, it will show that the bulls have unnerved the shorts and recaptured the initiative and are in a position to try to take the bullion bank redoubt at $920. If it cannot, it will show that they have surrendered their initiative and allowed the shorts to regroup after giving them a sharp, swift blow and a good fright. The side with the greatest conviction will win. Perhaps the fickle fund managers will surprise us and show some resolve for a change instead of cutting and running. If the bulls can manage to close gold above the $900 level on the weekly charts, they will have gained the upper hand in the gold war. Don’t forget that tomorrow is also the end of the month and that the close will be significant from a long term chart perspective. Gold’s monthly chart remains most impressive and I will get one for you tomorrow to keep in front of your eyes everytime the deflationists and their demise of gold predictions trouble you.

The HUI and the XAU picked up their divorce from the broader equity markets once again which is encouraging to see for the friends of gold as the miners need to continue their upward trek if the gold sector is going to advance as a whole. The HUI still needs a good close above the 307 level and preferably above 310 to get things moving. The XAU needs to get a close above 127 and preferably above 130 to fire that index higher. Shorts are going to try to dig in at these levels so bulls will have to prove their mettle to dislodge them from their lairs. At least in today’s session, the share bears are getting gored by the bulls.

The Dollar moved slightly higher today mainly on the back of weakness in the Euro. Also the commodity currencies from Australia and New Zealand were especially weak which makes gold’s move higher all the more impressive as nearly every factor that in times past would  have seen strong downward pressure in gold was present today and yet for all that gold still moved higher. Couple that with weakness in the bonds and it sure looks like more and more people are viewing gold as the last safe haven around and the best place to be right now.

Crude oil continues moving within its trading range as it drops lower to test the downside portion of that range. Higher crude oil prices will serve to benefit gold but are not essential to its welfare as investors are buying gold now out of currency concerns and not so much for inflationary pressures. That will come in time as this orgy of newly created money eventually begins to flow back into the commodity sector further on down the road.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

January2909Gold1230pmCDT.jpg

Posted at 8:06 PM (CST) by & filed under General Editorial.

Dear Friends,

Sadly it is business as usual in Washington DC. After all the election promises we are looking at political priorities, insider driven bailouts and pumps. The Fiscal Stimulation bill isn’t. As presently presented there is no real fiscal stimulus until later in 2010 and 2011. The bill does re-establish social safety nets which is spiritually correct and economically questionable.

As far as "Bad Bank" is concerned it already exists. It is the US Federal Reserve having purchased the least desirable of the non-functional OTC derivatives that broke the back of US financial concerns.

Listening to the big wigs at Davos was like listening to a conference of the Liar’s Club because nobody can really be as stupid as what those guys are selling.

Personally, I was driving a snowmobile combing 14 miles of ski trails. We had a great snow storm today in the developing country of North Western CT. That was much better than listening to more of what caused all of this, and watching the COMEX Gold chart painters running you guys all over the place, robbing you because those that can in this camp will not join the fights. Shame!

Jim

Posted at 7:32 PM (CST) by & filed under In The News.

NakedTOShorts

"Justin Oliver"

THE CONNING TOWER
By Keith Conning

Link to site…

 

Jim Sinclair’s Commentary

Ever ask yourself what the IMF may have invested their reserves in that might be hidden in the loss category? Might as well throw the world Bank into the question as well.

IMF expects G-7 growth to grind to a halt
Bloomberg News
Published: January 28, 2009

WASHINGTON: The global economy will slow close to a halt this year as more than $2 trillion of bad assets in the United States help sink economies from Russia to Britain, the International Monetary Fund said Wednesday.

Bank losses worldwide from toxic U.S. assets may reach $2.2 trillion, the IMF said in a report, more than the $1.4 trillion that the fund predicted in October. World growth will be 0.5 percent this year, the weakest postwar pace, the fund said in a separate report.

The reports signal that write-downs and losses at banks totaling $1.1 trillion so far are only half of what’s to come and that already contracting economies may worsen. Advanced and developing countries need to be "even more supportive" of demand than they already have been, with lower interest rates and fiscal stimulus, the lender said.

"Unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth," the IMF said.

The IMF’s latest forecast revises its estimate of world growth down from 2.2 percent in November.

More…

Jim Sinclair’s Commentary

In geopolitics nothing much changes. Send me the money so I can send it to my private bank in Dubai, oops, I mean so I can fight your enemies for you.

Pakistan to US: Give us more money
Wed, 28 Jan 2009 16:33:14 GMT

Pakistan’s President Asif Ali Zardari says Islamabad’s success in fight against terrorism is pending more financial support from Washington.

"Give us the tools, and we will get the job done," Zardari said in an opinion piece published in The Washington Post on Wednesday.

Zardari said he hoped US President Barack Obama has understood that "for Pakistan to defeat the extremists, it must be stable. For democracy to succeed, Pakistan must be economically viable."

He further called on Obama to push Congress into passing a legislation introduced last year that would give an annual USD 1.5 billion aid to Islamabad for social programs.

Zardari noted that Islamabad had made "remarkable progress" in the past several months in its battle against the al-Qaeda-linked and pro-Taliban militants along the troubled Pakistan-Afghanistan border.

More…

Jim Sinclair’s Commentary

Listening to Grandfather’s advice is a good idea.

Greenlight Founder Takes Grandfather’s Advice on Gold
By Stewart Bailey and Saijel Kishan

Jan. 28 (Bloomberg) — Greenlight Capital Inc. founder David Einhorn is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.

Since Einhorn was 10 years old, his grandfather has warned him that investing in bullion and gold-mining stocks was the only “sensible” thing to do given the threat of inflation and the risks of so-called fiat currencies, New York-based Greenlight said in a Jan. 20 letter to clients. The firm had never before considered buying bullion or mining-company shares.

“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”

Greenlight is turning to the centuries-old currency to mitigate the effects of the economic collapse and government efforts to end it. Bullion gained for the eighth straight year in 2008 as governments in Europe and the U.S. rescued banks from collapse.

Greenlight said in the letter that in addition to buying gold, it has added call options on gold and the Market Vectors Gold Miners exchange-traded fund to its other investments. Call options are the right to buy a security or commodity at a set price, within a set period of time. The owner of the call profits when the security rises above the set price.

More…

 

Jim Sinclair’s Commentary

You can be sure this will not pass under the radar of all governments. This is the macrocosm experience to come, now occurring in the microcosm of Iceland

Iceland’s PM: Government Has Collapsed

Iceland’s prime minister says his ruling coalition has collapsed under pressure from the global financial crisis. Geir Haarde said he will speak to the president, Olafur Ragnar Grimsson, Monday in an effort to dissolve the government.

Mr. Haarde’s government, a coalition featuring his Independence party and the Social Democratic Alliance, has been under mounting public pressure since the crisis hit the island-nation in October.

Last week, the prime minister, who suffers from cancer, called early national elections in May and said he would not run. At the time, analysts questioned whether the government could survive four more months.

The situation worsened Sunday, when Commerce Minister Bjorgvin Sigurdsson quit, citing his role in the economic collapse and growing public demands that the government resign immediately.

Sigurdsson acknowledged that Icelanders have lost faith in their government, and he said he wants to share in the responsibility for the economic collapse.

More…

Posted at 3:45 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold was caught up in several cross currents today as safe haven buying subsided a bit based on the rally in the stock equities versus continuing fears over the well-being of the financial system and the generally weaker Dollar. Not only that, but the volatility in the crude oil pit kept gold quite volatile as well.

As in yesterday’s session, gold and the stock market went in opposite directions with “risk” coming back into play as could be seen from the move higher in the Euro-Yen cross. I am sure the Japanese monetary authorities are absolutely delighted to see their yen going lower for a change. Recalling that a few months ago gold was seen as a risky trade to be avoided at all costs during times of financial upheaval, now it is being seen as a superfluous trade because risk is back! Hey, if risk is in why not buy that risky yellow metal? Ah yes, the “efficient” markets. For now gold is going in the exact opposite direction of the Euro-Yen cross, a bellwether for the precious metal which had been a fairly reliable indicator of what to expect for the metal.  This serves to show how yesterday’s wisdom becomes today’s folly when it comes to trading today’s convoluted markets.

Once again we have a repeat of yesterday in the currency arena with the Dollar moving lower as a sign that “safe haven” is out and risk is in so why rush into the perceived safety of the Dollar. That feeds into that new lock step relationship between gold and the Dollar in which both move lower together. If one does not need to run into the Dollar for safety, then why bother with gold is the new thinking du jour. That has led to shorter-term longs bailing out of gold which was stymied yesterday in its upward march by concerted bullion bank selling near the $920 level. Once the “Do Not Pass Go” sign was put out, the day traders ditched and ran which turned the very short term indicators bearish. Fund managers are you still insisting on trying to beat the bullion banks at the paper game by your losing strategy of buying higher and higher and then selling lower and lower? Then take some of your money and stand for delivery and remove the gold that allows the shorts to laugh at your naivety.

Incidentally, it did not help matters any that the mining shares, as indicated by the HUI and the XAU were knocked lower yesterday. That pretty much undercut short term sentiment towards gold. After all, it is hard to be wildly bullish on the metal when the shares are going down.

Technically gold  has indeed stalled out at $920 and is now seeking to uncover some quality buying to generate an obvious support level. The first level looks to be once again that $880 level which has been quite a significant number both on the way up and on the way down. Below that lies the $870 level which also closely corresponds to the 50 week moving average on the continuous weekly chart. Support then looks to come in near the $845 level.

Resistance remains the $920 level set out by the bullion banks with stronger resistance near the $935 region.

The fairly steep drop in open interest in yesterday’s session reveals a goodly amount of long liquidation occurred during the rollover period in which longs bailed out of the February but did not move into the April in equal numbers. Open interest readings have been healthy and remain supportive of any move higher as they are still at relatively low levels.

In a best case scenario, gold will be able to maintain support above $870 and consolidate with a period of some sideways chopping action building  a base from which to launch higher. I will feel okay about the metal as long as it holds above $845 and bounces into a chop from that level.

It will now take a weekly push above that $920 level to keep the weekly chart firmly in a bullish posture. A downside breach of $820 would give the bears a definite advantage.

Keep in mind that after watching the stock market drop into the toilet, equity bulls are just itching for any reason to buy as bottom pickers are anxious to get in hopes of nailing that ever elusive exact bottom. The S&P will have to get back above 950 to convince me that we are breaking out of a trading range and even at that, it will need to do so on strong volume. Right now I think we are seeing a good deal of short covering taking place in the broader equity markets as traders wonder when the reflation policies followed by the Fed will begin to take effect. Many are hoping in hope but in markets, hope reigns eternal especially among those who have been on the losing side for so long. People generally WANT TO BE BULLISH on the stock market so the least bit of good news or hope for good news will bring in buying both from new longs and from nervous shorts.

By the way, that so-called “economic stimulus” plan being put forth by the Democrats in Congress – buried on page 147 of the bill, according to reports on Drudge, is a provision for $335 million for the prevention of sexually transmitted diseases. Yepper – that ought to do the trick to get this economy moving again – I wonder how many jobs this will help create (maybe in the condom industry). Seriously – where do these bozos who write this sort of legislation come from? They must have been escapees from Area 51 where aliens altered their brains and turned them into unthinking idiots. Maybe there is life on Mars and it has impregnated the brains of some politicians and turned them loose on the earthlings to destroy us all and take over the planet.

There seems to be a bit more people beginning to talk about inflation coming down the road versus the almost one-sided deflation chatter that we have been getting since last July. That will eventually feed through to gold and will be quite negative for bonds but for now, the deflation psychology seems to be pretty well entrenched. For me personally, the one market I will be looking at to try to get a clue as to when the inflation genie will begin wreaking havoc will be the price of crude oil. Energy prices are a very good harbinger of what is to come. While crude looks to have possibly bottomed near the $35 level, it still has not broken out into an upside trending move. Rather it has been moving in a sideways chop. The longer it holds the chop and remains above the $35 region, the more likely it is building a base for an eventual upside move. I still want to see a close above $50 before getting too bulled up about its prospects but I am monitoring it closely.

I have not mentioned it in some time but the CCI (the Continuous Commodity Index), which is the one I prefer to use when getting a broad view of the complex, has a similar pattern to that of crude oil. It has stopped going down and is moving sideways. If this pattern continues, it too will be building a base in which many of the commodity markets will be setting the stage for an eventual upside recovery. The CCI will  need to break out above 390 to see a commodity sector wide rally unfold.

Bonds set back a bit after yesterday’s upside move and appear to be unable to garner any more followers among the bulls for now. The chart pattern is extremely negative on the long bond with the shorter-dated 10 and 20 day moving averages making downside bearish crossovers of the 40 day moving average and targeting the 50 day. Bonds themselves are trading below the 50 day which will serve as upside resistance should it be able to generate some more upside action.

The HUI now needs to get a strong close above 316 to break out to the upside and into a bull trend while the XAU has 127-128 to best on a closing basis to do the same. For now they too look rangebound. Traders seem unwilling or unable to push them beyond these levels but they so far have maintained a footing in the upper regions of the trading range that has been carved out since early December 2008 which is friendly.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Januar2809Gold1230pmCDT

Posted at 2:37 PM (CST) by & filed under General Editorial.

My Dear Friends,

1. President Obama was JUST given the hook by having his speech flushed away on Bloomberg TV in preference for Trichet speaking privately to Bloomberg at Davos. Man that was a big mistake on Bloomberg’s part.

2. Once again you permit the Comex short gang to paint their own chart for gold in the short term. As long as the more financially capable members of the gold gang do not buy gold on the Comex and take delivery the knuckle draggers from the gold banks will continue to take from all of you. Gold is headed to Alf’s number but if the Comex has their way it is 10 feet forward and nine feet backward.

Regards,
Jim

Posted at 10:42 PM (CST) by & filed under Guild Investment.

BRITAIN

…GORDON, HOW I LOVE YOU, HOW I LOVE YOU, MY DEAR OLD GORDON…[sung to George Gershwin’s old American folk song "Swanee"]

We conjecture that this tune will not be sung in the halls of Britain in the future.  The current British Prime Minister, Gordon Brown, is presiding in a major decline in the fortunes of his country.  This is the same "brilliant" Gordon Brown who forcefully told the British people when he was Chancellor of the Exchequer (finance minister), that Britain no longer needed the hoard of gold in its reserves.  During his tenure Britain proceeded to sell off half of their inventory in 2001 at the princely price of $270 per ounce.  How does that compare to today’s $890/per ounce?  I think you will agree Gordon flubbed that one in a big way.

Now, Gordon Brown is presiding over a decline in the British Pound to a 23-year low, an economy declining at about 6% per year, and a banking system crisis that he is trying to bailout…but it is proving to be too little too late.  Of course, as we keep saying in our communications, too little bailout today, will necessitate a much larger bailout later.  It is going to be cheaper to do a large bailout the first time versus coming back and making it bigger than it should be later.

To put it another way, it is easier to stop a runaway train when it is coasting at 10 miles per hour than when it reaches 70 miles per hour.  For Gordon, the current failure is nothing new.  Since his days as Chancellor, his economic policies have always been muddled.  For the sake of all countries, let us hope that Britain will be steered by more competent leadership and financial management.

There was also a very good article this past weekend in the Daily Mail’s "Mail Online" that articulates just how fragile and precarious the British banking system has become.  The link to the article is: http://www.dailymail.co.uk/news/article-1127278/Revealed-Day-banks-just-hours-collapse.html

MEXICO AND PAKISTAN…POLITICS

There is a lot of worry about Iran, Afghanistan, and Iraq and we understand the need to be concerned about these places.  However, we do not hear enough in the American press about the two major trouble spots which are coming to the fore, Mexico and Pakistan.

Mexico has serious economic problems.  Corruption, falling national oil production, and rising narco-terrorism as six major drug cartels fight for control of the lucrative drug trade.

We believe that the government’s ability to govern is compromised, and that many in the police departments and military are working for various narco-lords.  As a major symptom, we point to the open gunfights on the streets of Mexico’s cities, and the fact that 4,000 have been killed by rival drug gangs within the past year on Mexico’s streets.

Another symptom is that many more illegal immigrants transit into the U.S. every day to seek employment and to flee narco-terrorism.

We can expect more illegal immigration into the U.S., and the increased pressure it puts on the U.S. health care delivery and education systems.  We can expect more costs for oil and police protection as narco-terrorists try to corrupt U.S. police agencies, especially the border patrol.

In Pakistan, Al Qaeda has taken over a large part of the best farm land in the country and has terrorized the Pakistani populace with their lifestyle demands, such as men must wear beards, and not trim them, and girls may not attend school.  Breaking the strict lifestyle codes can get one rapidly beheaded.  The Pakistani secret service is well known to be supportive of Al Qaeda, and they have many apologists in the corrupt Pakistani political system.  We should watch carefully as Pakistan could become a source of a great deal of global conflict and possible nuclear disturbance incoming years.

HOW TO INFORM ONESELF ABOUT GLOBAL ECONOMIC EVENTS

May we suggest the Financial Times of London, The Asian Wall Street Journal and The Economist as regular reading for all investors?  We have found that most countries national newspaper’s do a poor job of covering global economic, social, and political events.  The above three international publications do a better job.

SUMMARY

The world banking crisis continues to simmer, and no strong, definitive solution has been found.  Implementation of good ideas has not been fast enough, in no small part due to the political shortsightedness of both sides of the political aisle and the politicians desire to pander to local voters, while ignoring the national best interest.  Where did all the statesmen and women go?

Our favorite investment, gold, has done well this month, and we see no reason that it will not continue to do well.  We hold gold and some asset based stocks, which pay high dividends.  Other than that, we hold primarily cash balances in government guaranteed paper.

This is a conservative approach, and one which is working for us thus far in 2009.  We do not anticipate making any major commitments to common stocks in the U.S. or abroad until a further correction has been seen in world markets.

For no charge, as a service to our readers, we will be happy to examine your current investment portfolio, and explain how we might restructure it to meet your needs for income and capital appreciation in the current environment.  Please give us a call if we can help you in this regard.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 4:51 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is my new guard dog – he eats hedgies for lunch!

DSCF0759

Jim Sinclair’s Commentary

All hail the probable Nobel Prize Winner in Economics for 2009 and our new in place and undeniably Marxist Western economic policies.

Full Marx for such imaginative thinking
David Wighton: Business Editor’s commentary

Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable.

The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.” So says the Karl Marx quote that has been whizzing round Wall Street and the City.

We seemed a step closer to that prospect yesterday. Bank shares plunged again on both sides of the Atlantic amid concern that more capital injections will be required. Bank of America shares fell 20 per cent on reports that it needed further government help to complete the acquisition of Merrill Lynch. Merrill has suffered higher than expected losses in the fourth quarter and BoA is in talks with the American authorities about an infusion of capital.

Citigroup shares tumbled further, ahead of today’s results, which are expected to be horrible.

These falls took the combined value of Citigroup and BoA – so recently the two most valuable banks in the world – below that of Wells Fargo, the conservative West Coast lender.

More…

Jim Sinclair’s Commentary

Madoff lives in his 7.2 million dollar apartment in New York, but this poor old guy is on his own.

Where is your outrage?

93-year-old freezes to death at home after utility firm limits power use
Mon Jan 26, 4:33 PM
By The Associated Press

BAY CITY, Mich. – A 93-year-old man froze to death inside his home just days after the municipal power company restricted his use of electricity because of unpaid bills, officials said.

Marvin Schur died "a slow, painful death," said Kanu Virani, Oakland County’s deputy chief medical examiner, who performed the autopsy.

Neighbours discovered Schur’s body on Jan. 17. They said the indoor temperature was below zero Celsius at the time, the Bay City Times reported Monday.

"Hypothermia shuts the whole system down, slowly," Virani said. "It’s not easy to die from hypothermia without first realizing your fingers and toes feel like they’re burning."

Schur owed Bay City Electric Light & Power more than $1,000 in unpaid electric bills, Bay City manager Robert Belleman told The Associated Press on Monday.

More…

 

Jim Sinclair’s Commentary

Number 29 and 30 on the banks that have not been bailed out and just checked out.

Regulators Shut Two Community Banks
By Joe Adler
January 21, 2009

Federal regulators shut two community banks late Friday—the first failures of the new year—in what is expected to be a busy 2009 for the Federal Deposit Insurance Corp.

First, regulators closed $431 million-asset National Bank of Commerce in Berkeley, Ill., and transferred all $402 million of its deposits to Republic Bank in Chicago. The failed bank’s two branches will reopen as Republic branches on Saturday.

It was followed by the failure of $446 million-asset Bank of Clark County in Vancouver, Wash.

The FDIC said nonbrokered insured deposits at Clark County – which had a deposit total of $366.5 million – will be assumed by Umpqua Bank, in Roseburg, Ore. At the time of its failure, the Washington bank had roughly $39 million in uninsured deposits in 138 accounts, and $117.8 million in brokered deposits. Brokered depositors will be compensated for their insured portion by the FDIC directly, the agency said.

Clark County branches will reopen on Tuesday as branches of Umpqua. The failures commence the FDIC’s resolution activity in a year that most experts believe will equal or exceed the 25 closures suffered by the industry in 2008, when the housing crisis took direct hits at banks’ balance sheets.

More…

 

Jim Sinclair’s Commentary

Birds of a feather flock together.

U.N. crime chief says drug money flowed into banks
Sunday, January 25, 2009

The United Nations’ crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.

Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year.

"In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor."

The United Nations Office on Drugs and Crime had found evidence that "interbank loans were funded by money that originated from drug trade and other illegal activities," Costa was quoted as saying. There were "signs that some banks were rescued in that way."

Profil said Costa declined to identify countries or banks which may have received drug money and gave no indication how much cash might be involved. He only said Austria was not on top of his list, Profil said.

More…

Posted at 3:48 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold appears to have run into resistance near the $920 level which is blocking its upward path for now. Since we know that the funds are purely technical traders and have been buying, both adding new longs and for those who were short, getting out by covering, while open interest has been steadily increasing, it is safe to say that the bullion banks are the ones blocking the upward trajectory. Nothing new there and it does not take much observation for those who have been watching gold the last 8 years to know this.

The inability of the mining shares to continue higher yesterday, even in the face of a much higher bullion price, gave some paper longs at the Comex a reason to cash in some profits and emboldened the bears to dig in their heels.

To show you how fickle these markets have become, do you remember when gold was following the equity markets around not all that long ago. They went down – it went down. They went up – it went up. It was all about the famous “risk aversion” or deleveraging trade. Now the exact opposite seems to be happening. The equities go up and gold goes down. Well guess what they have come up with to now explain this turn of events? Yes – risk aversion!

Here’s the latest – equities are going up because supposedly some of the news from the banking sector is not as dire as many have come to expect. The bearish sentiment in the equity markets is misplaced. Gold has been going up because of banking sector fears and currency risk. Ergo – gold should now go down as those fears are overblown because the risk averse psychology has become too excessive. In other words – all’s clear and the water is just lovely so dive on in!

I could not make this stuff up if I tried.

Had enough – how about this one?  – Gold has now broken its relation to the Dollar. The fact that the Dollar was being bid up was evidence of a panic into safety. Now that the Dollar is going down it means that the panic is subsiding. Therefore gold should go down as well which means the inverse relationship between gold and the Dollar has been severed.

Again, I am just repeating the latest mantra du jour.

Just wait and see – when gold starts going up as the Dollar starts going down the same guys who came up with the latest explanations will be singing how the historic relationship between gold and the Dollar has been restored once again. No matter what happens – they will have proven to be right! Geniuses all!

It reminds me of the global warming crowd. When droughts were springing up and record highs were being shattered it was called global warming. When record snowfalls suddenly showed up and record lows were being set as people all over the globe freezing their keisters off,  it morphed into climate change. No matter which way the temperatures go, that crowd will always be right! Shame on you climate destroyers for not cramming your family into something that more closely resembles a go-kart rather than an automobile on your assorted trips around town. If you had any concern for the planet you would be riding a horse to work. Then again that creature gives off methane gas which is actually being seriously considered as a pollutant and thus liable to be taxed by the idiots in Washington DC, so no matter what you do, you are royally screwed. It’s too bad that there remains no undiscovered country where freedom loving people who believe in honest money and limited government could sail off to and found a nation where the money changers and government control freaks would be banned from entering.

By the way, did you notice that the new President just signed the death sentence for the US automotive industry yesterday by mandating new mileage efficiency standards – all in the name of saving us from a problem that does not exist? Yep – nothing like telling an industry already on life support that their most profitable units, the bigger and safer vehicles, will have to go in favor of smaller, less profitable ones. Don’t touch the unions however whose demands have forced the US auto industry into concentrating their efforts on the more profitable lines (the larger vehicles) in an effort to offset the financial drain imposed upon them by the exorbitant salaries and benefits that they are forced to pay these same unionized workers.

Remember that big move up in Copper yesterday? Remember how the existing home sales number ran all the shorts out and pushed the market right into technical chart resistance threatening an upside breakout? Well, that is history today as it went “KERPLUNK”! To show you how utterly insane these markets have become and the farce that the hedge funds have turned them into, consider this – Copper closed at 1.4720 on Friday. On Monday it rallied sharply blasting upwards closing at 1.5865 reaching a high of 1.6310. Today it collapsed making a low of 1.4545 and closed at 1.4850, down 10 cents a pound. In other words, it went NO WHERE in TWO DAYS but in the process it careened all over the place blowing out upside buy stops before triggering a wave of downside sell stops today. And to think this hedge-fund created madness has become the price discovery mechanism by which commercial producers and end users are somehow supposed to be able to enter into contracts and hedge risk to ensure profitability. I have been watching these futures markets for more than 20 years and I have never seen such idiocy. This is what happens when computers have taken over trading decisions based on nothing but the latest price tick. I know it sounds excessive to some, but I honestly have come to believe that the entire futures industry is very close to being destroyed by these out of control hedge funds. A commercial entity simply cannot use these markets to hedge and without commercials these markets cannot survive since they will serve no useful purpose whatsoever as all that will be left is hedge funds trading their algorithms against the algorithms of other hedge funds with the commercials using forward contracts amongst themselves and bypassing the futures markets altogether.

Back to gold – technically gold still looks very good although it has stalled just below the $920 level. Ideally, it would hold support on any subsequent RE-test of the Downsloping trendline of the wedge formation on the weekly chart which is drawn off the July and October highs. That comes in near the $880 level. I would prefer to see it consolidate above the $880 level but would view an ability to hold above the $870 level as still friendly. Failure at $870 would give the shorts enough impetus to try to shove it back to $850- $840.

Upside resistance remains near $920 while more formidable resistance comes in near the $945-$950 region. That corresponds to both Downsloping trendline resistance drawn off the peak high made back in early 2008 and the July high which also happens to be the highs made back in October last year. Those are the parameters we are working with technically.

On the daily chart, all of the major moving averages, including the 100 day moving average are all now trending solidly upwards. The 10 day is close to making a bullish upside crossover of the 20 day which will give some trend following funds a reason to buy while the RSI remains below the 70 level. So we have room to run to the upside IF, and this is a big IF, the market can push through the bullion bank selling near $920. The inability of the mining shares to continue moving higher does concern me however. In an ideal bullish environment for gold, the shares move higher alongside the bullion price.

It looks to me like the weakness in crude oil today is contributing some downward pressure in gold as many of those fund algorithms use its price action as a factor in their selling or buying of commodities. Weaker crude oil prices give rise to the deflation scenario and that still leads some to sell gold because of misguided notions of how it will perform during periods of general price deflation. Again, gold is primarily a currency – not a commodity, and it will rise when faith in paper currencies falters, all of the arguments of the deflationists notwithstanding. When governments slash interest rates to NOTHING and issue more and more paper IOU’s, the sheer supply guarantees that they will lose value meaning that investors seeking wealth preservation are buying scraps of paper that pay zero return and lose any “value” that they might have once possessed. Gold thrives in such periods as it is solid, substantial and cannot be diluted by conniving Central Bankers. Which would you rather have in your hand during times of financial chaos and upheaval – a promise by a politician or a metal which has stood the test of 6,000 years? If you have any problem making a decision, I suggest you take a good look at the price chart of the British Pound and especially the price of gold in Sterling terms.

The HUI and the XAU were unable to manage strong closes above their former double tops make back in mid-December of last year and early January of this year in yesterday’s session meeting up with selling from the opening bell and never quite being able to shrug that off. Still, their charts look good as they are consolidating right around that former double top. I would like to see them hold above the 10 and 20 day moving averages near the 115 – 116 level in the XAU and 279 – 282 in the HUI.

Bonds finally saw an up day today which is to be expected given the beating that they have taken of late. The downdraft in bonds could be called “parabolic in reverse”. Jim likes to call it a “waterfall”, which is an apt description considering the fact that if one were long while this has occurred, they have indeed taken a bath in their trading accounts or better yet, drowned under a sea of red ink.

The Dollar is generally weaker today although it has bobbed back and forth between a small gain and a small loss. The charts still appear to show a technical failure near the 88 level. It is treading water above the 50 day moving average (barely) while the 100 day lies near the 83.50 level. A breach of that level and it should move back down to retest 80.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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