Posted at 2:39 PM (CST) by & filed under Jim's Mailbox.

Jim,

George Soros calls CDS `Instruments of Destruction’ and adds they need to be outlawed.

Click here to view the video…

He says that bondholders with CDS like those of GM gets more benefits on bankruptcy than on reorganization. In his own words: " it is like buying insurance on someone else´s life and owning the license to kill him"

Regards,
CIGA Christopher

Dear Christopher,

The description above of CDS is correct, but the chances of getting rid of this is equal to the chances of getting rid of the Banksters.

Possible, but not probable.

Regards,
Jim

Jim,

Side By Side Analysis:

(1) US TBd (20 Years +) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest

(2) 30-Year TBD Yields

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Comments:

“The 28 year long bond up-trend-line will be defended by the Fed no matter the cost.” – Jim on JSMineset.com.” This is what the defense looks like on paper.

CIGA Eric

Dear Jim,

I thought I’d send you an update as lots of people think gold might have formed a double top. Technically speaking odds are still much higher this will end up being an ascending triangle pattern. The weekly Royal Gold chart pattern is corroborating those assumptions. The triangle pattern is becoming more and more obvious. Royal Gold is the high quality stock out there. As long as it doesn’t fall back below 38-39 it is my belief it will lead gold and the mining stocks on their way to higher prices.

All the best,
CIGA Olivier
www.tischendorf.com

Here’s the link to the chart:

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469&cmd=show[s158290387]&disp=P

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Posted at 10:12 AM (CST) by & filed under General Editorial.

Dear Friends,

As we move into the later part of June, keep in mind that all the talk now about higher rates via lower long bonds got its start with Russia, China, Brazil, India and others interested in swapping dollar instruments for instruments denominated in a basket currency.

That is distinctly dollar negative going forward on supply versus demand while index and futures trading is easily manipulated short term.

Algorithms triggered by faster algorithms will have their day, but not weeks.

Regards,
Jim

Posted at 5:08 PM (CST) by & filed under General Editorial.

Dear Friends,

You know that information that comes to me has been reliable. You also know that the entire purpose of all of working here at JSMineset has been to get you through this safely. You also know that if we had not been here hundreds of thousands of people now holding gold would not be.

So please pay attention to the following.

I have heard rumors for some time, but today it was confirmed to me, that the Canadian mint’s present problems are not unique and that other depositories (vaults) have had an army of auditors descend on them in the last two weeks. Some of these depositories have names so famous that it would scare the hell out of you. The repercussions would be drastic if they turn out to be troubled.

Why take the risk?

I suggest to you now that you take delivery of all gold held in vaults and depositories on your behalf, but this time even from the most prestigious.

You can get delivery via armoured car service to your bank and utilize safe depository, spread over a few banks. You can insure your safe depository if you do not mind making your holdings public.

I believe that this recommendation is warranted, but also it will be the financial saviour of many.

Respectfully yours,
Jim

Posted at 5:04 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Here is the best advice I know of for those that insist on TRADING EVERYTHING ALWAYS:

Study these lyrics, and if you are really good at trading you will break even.

Trading is a zero sum game. You only can win a zero sum game by quitting.

The Gambler
by Kenny Rogers

On a warm summers evenin on a train bound for nowhere,
I met up with the gambler; we were both too tired to sleep.
So we took turns a starin out the window at the darkness
til boredom overtook us, and he began to speak.

He said, son, Ive made a life out of readin peoples faces,
And knowin what their cards were by the way they held their eyes.
So if you dont mind my sayin, I can see youre out of aces.
For a taste of your whiskey Ill give you some advice.

So I handed him my bottle and he drank down my last swallow.
Then he bummed a cigarette and asked me for a light.
And the night got deathly quiet, and his face lost all expression.
Said, if youre gonna play the game, boy, ya gotta learn to play it right.

You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run.
You never count your money when youre sittin at the table.
Therell be time enough for countin when the dealins done.

Now evry gambler knows that the secret to survivin
Is knowin what to throw away and knowing what to keep.
cause evry hands a winner and evry hands a loser,
And the best that you can hope for is to die in your sleep.

So when hed finished speakin, he turned back towards the window,
Crushed out his cigarette and faded off to sleep.
And somewhere in the darkness the gambler, he broke even.
But in his final words I found an ace that I could keep.

You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run.
You never count your money when youre sittin at the table.
Therell be time enough for countin when the dealins done.

You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run.
You never count you r money when youre sittin at the table.
Therell be time enough for countin when the dealins done.

Jim Sinclair’s Commentary

To clear up the arguments, the IMF bonds to be bought by Russia, China, Brazil, India and others will be SDR based instruments and NOT dollar denominated. When the word swap is used by the BRUC nation that means give their treasury instruments to the IMF and take SDR bonds in exchange.

The new instruments are a basket of currencies. That is about as dollar negative as it gets.

IMF Bonds Are Coming Soon, but You Won’t Be Able to Buy Any
JUNE 1, 2009, 5:00 AM ET
By Bob Davis

The International Monetary Fund is putting final touches on its plans to issue its first bonds. Russia has already said it would buy $10 billion of the bonds, which would be priced in the IMF’s quasi-currency, “special drawing rights.” SDRs are a basket of currencies consisting of the euro, yen, pound sterling and U.S. dollar. As of Friday, 1 SDR equals $1.55.

China, Brazil and India also have said they are interested in buying IMF bonds, with China likely to purchase more than $20 billion of instrument. The IMF wants to issue bonds as a way to build up its lending war chest as the global economic nosedive continues.

But don’t start lining up at the IMF to buy some yourselves. Only the IMF’s 185 member nations and some central banks will be eligible to purchase them and trade them — among themselves. Some at the World Bank worry that the IMF bonds might push up borrowing rates somewhat for the Bank, though IMF officials doubt the IMF bond issuance will be large enough to affect World Bank borrowing costs much

And don’t expect to see a physical bond certificate or coupons. The IMF isn’t designing a paper bond with some fancy lettering or a picture of, say, the IMF headquarters or John Maynard Keynes. All the transactions will be handled electronically.

More…

Jim Sinclair’s Commentary

It always starts on the West Coast and moves East. Always!

California nears financial "meltdown" as revenues tumble
By Jim Christie – Thu Jun 11, 12:15 pm ET

SAN FRANCISCO (Reuters) – California’s government risks a financial "meltdown" within 50 days in light of its weakening May revenues unless Governor Arnold Schwarzenegger and lawmakers quickly plug a $24.3 billion budget gap, the state’s controller said on Wednesday.

Underscoring the severity of California’s cash crisis, Controller John Chiang, who has previously warned the state’s government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.

Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger’s budget plan by $827 million, Chiang said.

He warned California’s state government is speeding toward a financial disaster unless officials act urgently to balance its books.

"Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government," Chiang said in a statement.

More…

Jim Sinclair’s Commentary

You want to know the truth?

– Annual Retail Sales Plunge Worst of Post-World War II Era 
– May "Core" Monthly Retail Sales Gained 0.15% versus 0.46% Total 
– Corrected Merchandise Trade Data Added $20 Billion to 2008 Deficit 
– Annual Surge in Gross Federal Debt Nears $2 Trillion, Spiking Treasury Yields 
http://www.shadowstats.com/ (only by subscription)

Two very important few liners:

The Fed defends the long term up trend line today on long bond issue using QE at today’s auction. That 28 year long bond up-trend-line will be defended by the Fed no matter the cost. I believe they would buy one trillion if they need to.

The World Health Organization declares a Flu Pandemic. Nobody really cares except those that will die in the Fall. This Flu will cull the gene pool. Anybody hear from the scientist that said this was a lab escape pandemic?

 

Jim Sinclair’s Commentary

Sent in from a CIGA: "I only trust the Bank of Myself for my Gold and Silver!

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Jim Sinclair’s Commentary

The US dollar is at .7938. Yesterday it was well over .8100. Currencies, supposedly storehouses of value, are not supposed to trade like pork bellies. If you cannot see the hand writing on the wall, the spinmeisters have blinded you.

Mr. Fred sees it all clearly. Gold is going to $1650 and beyond. The US dollar has lead weights on it and is going to .7200 – .6200 and .5200.

Do not join the madness. Stay the course and keep your insurance!

Jim Sinclair’s Commentary

This is getting hot. Who has ever considered chasing the Fed for wrong doing at this level?

This is modestly dollar negative and certainly not dollar positive. The reputation of management is a criterion in currency value.

Lawmakers Order Fed to Relinquish Merrill Documents
By Amit R. Paley
Washington Post Staff Writer
Wednesday, June 10, 2009

A congressional oversight committee issued a subpoena yesterday to force the Federal Reserve to turn over internal documents related to Bank of America’s acquisition of Merrill Lynch, part of a growing investigation into whether government officials pressured the bank to withhold details about the deal from investors.

The subpoena, which was issued by the House Oversight and Government Reform Committee, is highly unusual and the first issued by the panel this year. It comes after the Fed refused to send the committee internal e-mails and notes related to its role in the purchase.

A Fed spokesman said the central bank was already complying with the subpoena. The agency had previously allowed congressional investigators to review 6,000 pages of documents but would not give them copies because the documents were of "a confidential and supervisory nature," the spokesman said.

In written testimony prepared for a committee hearing tomorrow, Bank of America chief executive Kenneth Lewis says he informed Treasury and Fed officials that he "had concerns about closing the transaction" in mid-December after he "became aware of significant, accelerating losses at Merrill Lynch."

"At that time, we considered declaring a ‘material adverse change,’ which as a matter of contract law can, if upheld, allow an acquirer to avoid consummating a deal," Lewis said in the testimony, which was obtained by The Washington Post. "Treasury and Federal Reserve representatives asked us to delay any such action, and expressed significant concerns about the systemic consequences and risk to Bank of America of pursuing such a course."

More…

Jim Sinclair’s Commentary

Alt A mortgages are hanging out to dry. They were in the main obtained on a declaration of assets paying interest only. Now they are resetting.

Foreclosure crisis spreads from subprime to prime mortgages
By Stephanie Armour, USA TODAY

The pace of prime borrowers going into foreclosure is accelerating, especially in states with mounting unemployment or property values that saw a big run-up during the housing boom.

It’s a marked shift from earlier this year, when foreclosures were driven by defaults on subprime loans. And it has major implications — ravaging the credit scores of borrowers who once had unblemished records and dragging down property values in more affluent neighborhoods.

It also threatens to undermine the housing recovery.

"It’s definitely a concern," says Brian Bethune at IHS Global Insight. "(Unemployment) is a major driver of foreclosures, and it will frustrate the housing recovery process."

In the first quarter, almost half of the overall increase in the start of foreclosures was due to the increase in prime, fixed-rate loans, according to the Mortgage Bankers Association (MBA). At the end of the fourth quarter, 2.4% of prime mortgages were seriously delinquent, more than double the 1.1% at the end of March 2008, according to a report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

More…

Jim Sinclair’s Commentary

A Federal organization threatening a Federal organization at this level in the midst of crisis conditions that are barely camouflaged has more than justice at its foundation.

Investigators say Fed threatened bank CEO
By ANNE FLAHERTY, Associated Press Writer
Wed Jun 10, 7:35 pm ET

WASHINGTON – The Federal Reserve threatened to force the ouster of Bank of America CEO Kenneth Lewis if he didn’t follow through with plans to buy Merrill Lynch & Co., Republicans said Wednesday after reviewing internal documents.

Republicans also said there was evidence that the government tried to restrict information related to the merger from being publicly released.

However, none of the documents showed that the government explicitly instructed Bank of America to hide Merrill Lynch’s losses from shareholders, they said.

The House Oversight and Government Reform Committee is investigating claims that top government officials, including then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, urged Lewis to go through with the acquisition and not disclose to shareholders the details of Merrill Lynch’s deteriorating financial state.

Lewis was scheduled to testify on Thursday before the panel, which is chaired by Rep. Edolphus Towns, D-N.Y.

More…

Jim Sinclair’s Commentary

They shot a killer WHAT? Shoot my dog and it is instant WAR.

City of Blue Ash Police Department
4343 Cooper Rd
Blue Ash, OH 45242
(area code 513)
Main: 745-8555
Fax: 745-8598

Chihuahua is shot by police
11/06/2009

A family have slammed police who failed to subdue their pet Chihuahua with a Taser stun gun – then shot him dead.

The dog, called Jack, escaped from their garden and bit the hand of an officer who caught him.

Owner Sharon Bullock said: "It is heartbreaking. He wasn’t vicious."

Her husband Scott said: "Two grown men that can”t gather up a 5lb dog – and they’re trained police officers…it’s ridiculous."

Police in Blue Ash, Cincinnati, said the officers acted according to rules.

More…

 

Jim Sinclair’s Commentary

Think about the outrageous implications if these are real! It is even more so than if they are fake!

US government securities seized from Japanese nationals, not clear whether real or fake

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.

Milan (AsiaNews) –  Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

More…

Posted at 4:52 PM (CST) by & filed under General Editorial.

Question: Do you expect Gold to take another hit to the downside before the end of the 3rd week in June, or is this it?

Answer: It is important to understand the art of reading a market opinion that combines direction and time. All market moves have what we will call windows in time. The window is open or closed to the move. The window for decline is open until the third week of June ends. That is not as mechanical as your question indicates. It could rise from here and chop up and down into the third week. It might decline into the third week but as we enter the forth week the potential for decline becomes less to nil. After the fourth of July it simply isn’t there.

No one knows in absolute terms what a market will do, except in retrospect, and of course every talking head who starts their presentation, "As I said one year ago" etc…

Question: The last time I asked you if Gold would cross the $1000 mark and you said it would make TWO attempts. I consider the FIRST attempt was made. The second week of June was weak as you wanted. Next week is the third week… and the Armstrong turn date.

Answer: At that time gold had traded over $1000 one time. A few closes above $1000 is a reasonable basis to say "yes, that was above." Very early on in JSMineset we took the position that gold would have to penetrate and close above $1000 THREE TIMES before it did not look back. I suggested you print and pin that up.

We have had two attempts, in my opinion, at $1000. The first was clear, the second somewhat subjective and the next one is coming quite soon.

I cannot say if Mr. Armstrong is looking for three from here or is in agreement that two have happened. I will speculate that Armstrong and I are in agreement but you will have to ask him. He has given all his contact info to his readers so you should have it if you have read him.

Question: Can you explain why it was good for weakness in the 2nd week of June? Was it chart-wise?

Answer: Not really. It was action to confirm the existence of a cycle grouping by influencing the market direction of least resistance. Please recall the constant warnings from the top of the rally recently in the form of the market being vulnerable to the commercials as they were not yet in position to benefit from the move. In my opinion, it is certainly standing right in front of us.

Ok, it was pushed lower by the Commercials in the past few weeks for their own purpose, but it went down easily, did it not? You can reasonably conclude at that time the cycle influence was into the market structure.

Do you understand that concept as it is not thinking of a photo in time, but thinking of it in motion?

Posted at 3:50 PM (CST) by & filed under Jim's Mailbox.

Jim,

Nothing bad has happened so far, so this news is meaningless. Be careful drawing that conclusion. We are currently in uncharted waters for USA, Inc.

"The Formula"

US Fiscal Balance vs. US Dollar: Federal Government Budget As A % of GDP, 12 Month Moving Average:

The Federal budget, or total receipts less total outlays, divided by GDP defines “The Formula.” The Federal budget is normalized or divided by GDP to remove the effects of dollar devaluation and smoothed to provide unbiased historical comparisons. For example, -5% Formula reading in 1992 is largely comparable to the -5% Formula reading in 2008.

As stated previous on jsmineset.com, an economy is either rising at a rising rate or business activity is falling at an increasing rate. This is economic law 101. Falling business activity manifests itself as falling “Formula” values. Think of the Formula, Trade and Current Account Deficits as a speedometer of money flows in/out of the US. A negative speedometer in the "Formula" reading implies outflows. Ultimately, persistent outflows will send interest higher and devalue the dollar. For a detailed review of how the formula works: http://jsmineset.com/index.php/2009/02/08/jims-mailbox-74/

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"Leading Formula"

Federal Taxes Withheld (TW) Less Total Government Outlays (TO) As A % of GDP, 12 Month Moving Average.

The leading formula is nothing more than a slight modification of the “Formula.” Tax withheld less outlays, divided by GDP defines the “Leading Formula.” Taxes withheld, a sub sector of total receipts, is more sensitive to marginal changes in business activity. This sensitivity of provides leading characteristic within the Formula calculation.

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Federal Taxes Withheld 12-Month Moving Average (TW12MA) AND Federal taxes Withheld 12-Month Moving Average Year-over-Year Change (TW12MA12LN)

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CIGA Eric