Posted at 10:14 PM (CST) by & filed under In The News.

Dear CIGAs,

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

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

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

pennies

Jim Sinclair’s Commentary

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

UK deficit ‘more than predicted’

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

The odds favor the Taliban.

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

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

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

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

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

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

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

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Posted at 6:40 PM (CST) by & filed under Jim's Mailbox.

Geithner’s Stress Test "A Complete Sham," Former Federal Bank Regulator Says
Posted Apr 06, 2009 10:00am EDT by Aaron Task

GeithnerVid

The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri – Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.

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Jim,

Today you challenged any of your readers to present a "practical method of draining $20 trillion from the international monetary system.” You offered one ounce of gold to "that person able to present a PRACTICAL method, not academic horseshit that draining this mad monetary expansion is possible."

Based on the illustration below, God has accepted your challenge:

OTC DERIVATIVES CAN BE DRAINED INTO OBLIVION

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"Black holes are places where ordinary gravity has become so extreme that it overwhelms all other forces in the Universe. Once inside, NOTHING can escape a black hole’s gravity." – not even OTC DERIVATIVES!!

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All the Best,
CIGA Wallace

PS – God said to tell you he’ll accept an I.O.U. for the one ounce of gold!

Jim,

Spin and currency devaluation are used to create the illusion of endless economic prosperity.

“You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.”

Updated through March 2009

The global quantitative easing (currency devaluation) can influence nominal returns as depicted by the U.S. dollar priced Large Cap Stocks Total Return Index (LCSTRI) and Long-Term Government Bond Total Return Index (LTGBTRI) charts. Unfortunately this influence on this trend is largely an illusion during periods of excessive currency devaluation. When LCSTRI and LTGBTRI are priced in a constant currency such gold, the illusion of nominal returns provided by quantitative easing (global currency devaluation) is revealed by sharp down trends. The downtrends reveal the consequences or price of global quantitative easing.

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Stand Tough CIGAs!

CIGA Eric

Jim,

The assumption is that the government reaction must produce inflation eventually. You’ve commented that it cannot be drained. I don’t recall what you were referring to.

Could you comment on the website about the following? Of course they may not drain, BUT the issue is whether they can or not.

Shelly

Bernanke: Many Fed lending programs extend credit primarily on a short-term basis and thus could be wound down relatively quickly. In addition, since the lending rates in these programs are typically set above the rates that prevail in normal market conditions, borrower demand for these facilities should wane as conditions improve

Bernanke: The Federal Reserve can conduct reverse repurchase agreements against its long-term securities holdings to drain bank reserves or, if necessary, it could choose to sell some of its securities. Of course, for any given level of the federal funds rate, an unwinding of lending facilities or a sale of securities would constitute a de facto tightening of policy, and so would have to be carefully considered in that light by the FOMC

Click here to read the full speech…

Dear Shelly,

Ok, you tell me by what miracle of divine intervention are we going to drain $12.7 trillion in the US alone out of the WORLD monetary system.

There is no practical system to do this. There will be none invented. It simply cannot happen and the consequences will result.

Are you going to ask the shadow trillionaires to return it?

Are you going to drain it from your Fed Member Banks?

Is Goldman going to give it back along with AIG if they are even still here?

Are you dreaming?

This is how the Sheeples are lulled to sleep to today throw away their lifelines.

I have to admit that I am getting so strained at holding the same hands all the time.

The Sheeple must start to think and simply not just feel fear and greed with my email address and phone number on their computerized Rolodex. Shelly, if you in your heart really believe you know more than I do and that all this monetary stimulation has any PRACTICAL method of draining please sell all your gold positions on the next rise, which is certain to come. That will save me the 30 minutes it takes to think out these answers and compose them.

I challenge anyone to present a practical method of draining what will be more than $20 trillion from the international monetary system. Hell, I challenge anyone to come up with a practical plan to drain even half of it I underscore practical because we are presently dying of lies, academic impracticalities and outlandish spin. One ounce of gold will be delivered to that person able to present a PRACTICAL method, not academic horseshit that draining this mad monetary expansion is possible.

Keep in mind the concept of "PRACTICAL," which means it does not kill any incipient recovery also due to come some day, somewhere.

Jim

Posted at 3:18 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

The dollar was up today and that translates to everything commodity being down. Selling pressure was evident in nearly every single commodity futures market with only a bare few escaping the move out of those markets. Computer algorithms are what they are and have become a fact of market life.  Right now, those algorithms are keying on the level of the Dollar and  the level of the S&P. When the S&P moves lower, the Dollar moves higher and the computers then have orders flowing into the pits to sell commodities as “risk aversion” increases. When risk aversion drops off, as stocks move higher, the dollar then moves lower and commodity markets experience broad based buying. That old friend of ours, the Euro-Yen cross, continues to be a good harbinger of which way investor sentiment is leaning. Today it was lower which is another way of saying the investors were trying to avoid risk. In our brave new world, that means the “risky” asset known as gold (?) is a definite sell.

Down it went and into the sell stops and that was that.

I mentioned last week that support at $880 in gold must hold or gold will move sharply down to test the $860 – $850 level. That is where we are headed as we came all the way down to $865 before a bit of a session bounce occurred. The bounce was not enough to take it back up above $885 so the bears are now in control of the paper gold market. Technicians will point to a short term topping formation which was confirmed by the loss of support at $880. If bulls do not immediately (and that means tomorrow) push prices back above $880, then the move down to $860-$850 will gather momentum as additional long side liquidation will take over.

You have support at that level centered around $852 (see the chart) and then below that near the $816 – $820 level. Seasonally, this is not a particularly strong time of the year for gold so we have that workingagainst it in addition to the bearish technicals. Gold would have to recapture the $930 level to convince the “sell the rally” trade to abandon their logic and flip around to buying dips.

Gold deliveries were ZERO today which means that the longs are no where near threatening any Comex default as we are constantly being told by various internet essays.  The paper gold shorts are quite confident as they have little in the way of determined opposition that would threaten their complacency. Hedge funds who are determined to play the paper gold game against the bullion banks and employ momentum based strategies for the buy side will continue to lose money. It is really that simple.

To show you how effective the bullion bank short selling has been – open interest in gold, after bottoming out near 261,000 in December of last year, had been on a steady increase as gold prices moved off their lows and had reached to near the 390,000 level. It has now dropped nearly 40,000 contracts alone in the last 7 trading sessions and no doubt a substantial bit more than that after today’s debacle. The funds are getting flushed out once again with open interest now back at levels last seen in early February of this year. Another way of saying this – most of the buyers that had come into this market in the last two months were flushed out in 7 days with the bullion banks banking their paper profits thanks to the hapless longs.

I have given up on telling the hedge funds what they need to do to turn this loser’s game around (buy into the weakness and hold the contracts into delivery) but they will not change tactics so that is that. Gold will need India to rescue it.

Silver is even more peculiar than gold since it too is getting whalloped even in the face of three successive days of 2 million ounce out-movements from the Comex warehouses.

I am particularly confused by today’s price action across the gamut of markets because there was NO SAFE HAVEN that I could point to based on the price action. Equities got hit pretty hard today but bonds also went down. Crude oil was down and most of the grains were down. Copper was down after touching the magical $2.00 mark on Friday. If money was flowing into some sector for safety today, I sure as heck could not see which one. That is why the move higher in the Dollar is so opaque. Maybe people were buying US corporate debt; I am just not sure what they were doing other than sticking cash under their mattresses.

The HUI and the XAU, after only last week setting up bullish chart formations, have now completely broken down once again. Both look to be headed back down towards their March lows. Perhaps they can set up a sideways trade after moving down towards that level and uncovering some buying.

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

Posted at 2:47 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The COMEX manipulators are taking gold out to the shack for a whipping.

Is this payback for taking delivery? Are they really the boss they are claiming to be today?

TIPs are indicating the strong expectation of higher inflation. Please read this article so you can understand there is no practical means of draining all the liquidity. There are academic plans but they are just that – useless.

Why are you letting the COMEX manipulators whip you for calling their hand at the last delivery? Yes, this weakness is showing us all who is boss in gold, the COMEX gold banks.

Are you going to allow this forever or are you going to continue to stand for delivery.

This weakness in gold is a paddling for taking delivery.

There is no reason for gold being lower today whatsoever.

The Gold Banks are giving us a lesson of how dare we take delivery.

Screw them and continue to take delivery.

Treasury Inflation Protected Securities – TIPS

What Does Treasury Inflation Protected Securities – TIPS Mean?
A special type of Treasury note or bond that offers protection from inflation. Like other Treasuries, an inflation-indexed security pays interest every six months and pays the principal when the security matures. The difference is that the coupon payments and underlying principal are automatically increased to compensate for inflation as measured by the consumer price index (CPI).

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The Fed’s Dilemma
Will the central bank withdraw inflationary liquidity too soon, too late, or just in time?
April 3, 2009 7:00 AM
By David Gitlitz

During the credit crisis, the Federal Reserve has gone to unprecedented lengths to provide the financial system with abundant supplies of liquidity. There are two purposes behind these actions: to guard against the risk of systemic failure and to root out the deflationary forces that appeared in conjunction with the risk-abhorrence of last fall. Up to this point, these efforts have mostly worked.

It is likely, however, that this extraordinary exercise in monetary ease will at some point have significant inflationary consequences. And the Fed will face a big dilemma if this happens before the market is restored to stability and the economy has emerged from recession. In this scenario, the Fed would have to either tolerate significantly higher inflation for a period, or tighten its policy in the face of still-significant weakness in the economy and markets.

The Fed’s task was made no easier when Treasury Secretary Tim Geithner unveiled the details of his bank-rescue plan — the Public Private Investment Program — which makes the Fed a major supplier of financing to support purchases of toxic assets that are now clogging the banking system. Excluding this program, the Fed’s own rescue plans could force its balance sheet to balloon to near $4 trillion over the next several months, up from less than $1 trillion last September. Including the Treasury program, another $2 trillion could be added to the total.

Some of this liquidity could be offset through a program whereby the Treasury issues debt and deposits the proceeds with the Fed. That would serve to drain funds from the system, partly sterilizing the Fed’s asset acquisitions. But the Treasury’s capacity to issue debt to fund this program may be limited. The first sign of resistance to the massive borrowing requirements being borne by the federal government came at a recent auction of five-year notes: Demand for the debt was less than expected. So it’s questionable whether the Treasury will essentially want to compete against itself by floating a large amount of additional debt to fund the Fed.

And even if that Treasury assistance goes through, it would account for a relatively small part of the total liquidity that has been added to the system through the Fed’s acquisition of assets.

The Fed is now proceeding on the explicit assumption that once the crisis fades and the economy enters recovery, it can unwind its balance sheet quickly enough to avoid a significant breakout of inflation. But that assumption may rely on faulty premises.

For one thing, the Fed is aggressively expanding a program that provides loans with three-year terms. Unless there is some way of sterilizing the impact of those loans, it will be impossible for the Fed to withdraw that liquidity until the loans come due. At the same time, the Fed is acquiring mortgage-backed securities, assets that may prove difficult to unload at a later date.

There’s also a larger issue at stake: Will the Fed actually know when it’s the right time to unwind its balance sheet? And since it has gone to unprecedented lengths in carrying out its extraordinary monetary ease, how easily and quickly will it be able to shift from an anti-deflationary to an anti-inflationary mindset? When that choice arrives, the Fed may opt for what it considers the least risky solution: tolerating a higher-inflation environment in the interest of market and economic stability.

On that score, a surprisingly honest acknowledgement of the potential quandary facing the central bank came last month from Jeffrey Lacker, president of the Richmond Fed. Lacker told a group at the College of Charleston that the potential inflationary impact of the Fed’s actions “depends on our skill at the Federal Reserve in withdrawing the stimulus in a timely way. That is a very delicate, very hard policy.”

Lacker referred to the “spotty” nature of an economy in recovery, and asked, “Do we keep policy easy and stimulative because of the sectors that are lagging behind . . . or do we get ahead of the curve? It’s going to be a tough call.”

Lacker has strong anti-inflation credentials. So to hear him describe the Fed’s looming choice as a “tough call” seems to raise the probability that the Fed will accede to an inflationary — and unnerving — outcome.

More…

Posted at 5:38 PM (CST) by & filed under In The News.

So Much Ado About So Little

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

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

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

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

What in the world are you worried about?

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

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

My Dear Friends,

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

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

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

OTTI Assets:

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

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

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

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

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

You think Mother Nature might be a little peeved?

Respectfully yours,
Jim

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Jim Sinclair’s Commentary

Pakistan is CRITICAL now!

Tomorrow is too late.

How long is the Obama Administration going to discuss:

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

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

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

White House Financial Disclosures Paint Scarlet $ on Larry Summers

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

This report in the TimesOnline provides many of the details:

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

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

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

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Jim Sinclair’s Commentary

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

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

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

Can you explain how your thesis works?

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

Cops storm G20 ‘rioters HQ’
3/04/2009

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

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

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

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

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

More…

Posted at 5:36 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

The big lie that dollar bulls would love to make permanent is the dollar is a refuge place depository. Expect more attempts to bull the dollar as the world implodes financially and geopolitically. None of these efforts will succeed, but it will frustrate the hell out of realists while convincing the Sheeples.

Hey Guys,

Bear market rallies in the dollar have ended with the violation of the PUT on the weekly chart. This is confirmed by the marginal money flows in the US dollar Index contract. A move called three drives to a top tend to reflect inflection points in trends. The UDX is in the process of completing the third drive. Once the third drive is complete, it will be tough to pressure gold.

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Regards,
CIGA Eric

Hi Jim,

Not sure if you saw Bill M’s interview with William K Black this Friday.

Best to you,
CIGA Bernie

The Best Way To Rob A Bank Is To Own One
By Bill Moyers
Video – Audio and Transcript
April 3, 2009

BILL MOYERS: Welcome to the Journal. 
For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you’re about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.

WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.

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Bernie,

Although it is good, Mr. Moyers has no clue what really happened.

You need 50 years of hands on experience not only in general markets, but in arbitrage to understand the complex nature of these instruments of mayhem.

I sometimes wish I did not have those qualifications. As a result, I am delighted to be 68.

Jim

Posted at 11:12 PM (CST) by & filed under In The News.

Dear CIGAs,

Do you really want to know what came out of the G20? Read below.

China positioning its currency for a run at world supremacy
By Don Lee 
April 3, 2009

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In a series of what might be called baby steps, Chinese officials recently have moved to globalize the yuan and promote its influence overseas, with Shanghai designated as command central.

Since last December, China has signed deals with six countries, including South Korea, Malaysia and most recently Argentina, for currency swaps that would inject Chinese money into foreign banking systems. That would allow foreign companies to pay for goods they import from China in yuan, bypassing the dollar — the currency that dominates international trade and finance, including foreign exchange reserves.

Beijing is also taking initiatives to use the yuan, also known as the renminbi, to settle trade accounts between some Chinese provinces and neighboring states, starting with Hong Kong.

"The central bank has set promoting the renminbi for payment settlements as the main task for this year’s work," said Shi Lei, an analyst in the global financial markets section at Bank of China in Beijing.

China is also spreading the yuan’s influence in Asia by making loans and investments in other countries, as well as through its many tourists who carry loads of Chinese currency abroad. In Cambodia, where the dollar has long dominated, a tour guide in Angkor Wat recently asked visitors if they could pay him in yuan.

Meanwhile, Chinese officials have called attention to the risks of an international monetary system that relies on the dollar, which many analysts have begun to see as unstable because of heavy deficit spending embraced by Washington to combat the recession.

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Jim Sinclair’s Commentary

The G20 is going to fix all the secondary fallout from this? What are you smoking?

Bankruptcy Filings by Businesses Increase 78% in First Quarter
By Bill Rochelle

April 3 (Bloomberg) — Bankruptcy filings by larger companies liquidating or reorganizing in Chapter 11 in the first quarter rose 78 percent from the same period a year earlier and almost tripled from 2007 as the U.S. was mired in the 15th month of a recession.

Almost 131,000 bankruptcies of all types were filed in March, the most for any month since 2005, when Congress erected barriers to individuals looking to rid themselves of debt.

Filings increased 9.2 percent in March over February, according to data compiled by Automated Access to Court Electronic Records, a service of Jupiter ESources LLC in Oklahoma City. March bankruptcies rose 38 percent from a year earlier and 79 percent from 2007.

The surge of filings in March “suggest that earlier estimates of 1.4 million to 1.5 million cases in 2009 should be revised to somewhere in the 1.5 million to 1.6 million range,” said Mike Bickford, president of AACER, a bankruptcy data and management service. If Bickford’s high estimate proves correct, 2009 filings would exceed 2008 by about 45 percent.

Public companies filing for bankruptcy or reorganization through March 31 had a combined $101 billion in debt, according to a report earlier this week by Bankruptcydata.com. That’s almost ninefold higher than the $11.7 billion in the same period last year.

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Jim Sinclair’s Commentary

You often ask what event has the potential of throwing all the spin right against the wall in terms of disturbing the social order. Here it is.

$1 trillion hit to pensions could cost taxpayers, workers
Published: Friday, April 3, 2009 at 10:15 a.m. 
Last Modified: Friday, April 3, 2009 at 10:15 a.m.

SANTA FE, N.M. — Massive investment losses sustained by public pension funds are pressuring state lawmakers from New Mexico to New York to spend more taxpayer money to shore up their programs, boost the retirement age for newly hired government workers and seek more from employee paychecks.

Pensions need $270 billion in additional contributions over the next four years, and more than $100 billion annually for two decades hence, according to the Center for Retirement Research at Boston College.

The pension trouble is just one more economic challenge for states. Income and sales tax collections are dropping fast as unemployment rises. Jobless benefits funds are running dry, requiring federal borrowing. And because of substantial budget holes, states are cutting back on a wide range of services, including child care subsidies for low-income families and aid to public schools, and in some cases laying off workers.

But as bad as the budget picture looks, it is dwarfed by the size of the gaps in states’ pensions, which have collectively lost at least $1 trillion as financial markets swooned over the past year. Public pensions cover about 14 million state and local employees and paid out almost $163 billion to seven million retirees in 2006-2007, according to the Census Bureau.

Because pensions involve long-term obligations and investments, there’s no immediate risk that states will be unable to pay retiree benefits. But replenishing pensions could squeeze states for years to come, forcing lawmakers and governors to juggle their spending priorities — pitting pensions against schools, colleges, health care, prisons and other government services.

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Jim Sinclair’s Commentary

Add to this Dr. Doom, the means of production, the knowledge of how to, and delivery systems. Now how much of that can you move or protect.

Security of Pakistan’s nuclear weapons
By Hari Sud
Column: Abroad View

Published: April 03, 2009

Toronto, ON, Canada, — In the midst of all the turmoil in Pakistan, who is watching the country’s nuclear weapons? It is a declared intention of Osama bin Laden’s al-Qaida terrorist group to acquire nuclear weapons. Are Pakistan’s nuclear weapons within their reach?

All the terrorists would have to do is bribe a few guards, kill any who could not be bribed, and get away – if not with a full-blown nuclear weapon, then at least with enough nuclear material to set off a dirty bomb.

Thanks to the links between Pakistan’s intelligence service and terrorist elements, it is no longer possible to distinguish friend from foe. The Taliban have been reorganized, trained and sheltered by Pakistan’s intelligence agency. They have been bold enough to mount terror operations in Islamabad, Lahore, Karachi and other big cities.

Over the past eight years, new recruits and new Taliban leaders in association with al-Qaida have started waging war with Pakistani forces. Their grievances include Pakistan’s cooperation with NATO and the United States. After killing a large number of Pakistani troops in frontier provinces, the Pakistani Taliban has forced the civilian government to permit the practice of ancient Islamic Sharia law there.

The Taliban’s objective is to split the Pashto-speaking frontier provinces from Pakistan and join them with Pashto-speaking areas in Afghanistan to create a nation called Pashtunistan. The bombings in recent months and the daring attack on a police academy near Lahore were designed to avenge the excesses of Pakistani forces in the frontier area. Slowly the Taliban are moving to achieve their objective. Today Sharia law, tomorrow a separate homeland and later full nationhood.

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Jim Sinclair’s Commentary

In a universal game of liar’s poker, an honest man had but one choice to make.

This speaks ill of any opportunity of recovery before abomination.

Hold on to your gold lifeline as all finance is a lie. The world is broken. The system is smashed. The OTC derivatives have done their dirty work.

You do not sign off on an audit for one reason only. It is a fraud.

Jonathan Weil, Honest Man Emerges From Muck of Banking Crisis
April 2, 2009.

Relevant excerpts:

Remember this man’s name: Charles Bowsher. He’s one of the few people leaving the banking crisis behind with his reputation enhanced.

Bowsher, who was comptroller general of the U.S. from 1981 to 1996, had a simple reason for resigning last week as chairman of the Federal Home Loan Bank System’s Office of Finance. He didn’t want to put his name on the banks’ combined financial statements, because he was uncomfortable vouching for them. Bowsher, 77, had held the post since April 2007.

“I was not comfortable as an audit-committee member in signing off on the financial statements, after I became aware of the standards and processes for valuing the mortgage-backed securities,” Bowsher told me.

Bowsher told me he was concerned, in part, with the methods used for determining when losses on hard-to-value securities should be included in banks’ earnings and regulatory capital. The way the accounting rules work, as long as such losses can be labeled “temporary,” they don’t count in net income.

The FASB’s rules on this subject, which have never been well defined, are now in flux. Today, after caving in to pressure by the banking industry and members of Congress, the Financial Accounting Standards Board is set to vote on a plan to relax its rules on mark-to-market accounting, so that companies can disregard market prices and ignore losses on their securities indefinitely.

While that wouldn’t make the banks any healthier, it would make their numbers look prettier. The FHLBanks have been among the most vocal lobbyists pressing for the change.

Bowsher said the process of valuing such assets was fraught with doubt already. “Now if you think about it, the FASB might be changing the whole thing, and everybody might mark their assets up,” he said. “Who wants to be part of that?”

Full article…

Jim Sinclair’s Commentary

The US Fed and now the US Treasury have taken the 5th Amendment.

You might consider this the new world order as transparency has now expired.

Don’t throw away your lifeline.

Watchdogs: Treasury won’t disclose bank bailout details
By Chris Adams | McClatchy Newspapers

WASHINGTON — The massive programs designed to rescue the nation’s financial sector are operating without adequate oversight, with vague goals and limited disclosure of their details to the taxpayers who are paying for them, government watchdogs told a Senate panel Tuesday.

The Troubled Asset Relief Program, or TARP, was launched in the midst of last fall’s collapse of the nation’s banking system and is designed to get loans flowing to businesses and individuals.

But "without a clearer explanation" about parts of the program, "it is not possible to exercise meaningful oversight over Treasury’s actions," said Elizabeth Warren, a Harvard Law School professor who leads a special congressional oversight panel monitoring the TARP program. Her comments came in a Senate Finance Committee hearing on the bailout program.

Noting that TARP passed Congress six months ago, Warren said that her group has repeatedly called on the Treasury Department to provide a clear strategy for the program — and that "the absence of such a vision hampers effective oversight."

Although she has asked Treasury to explain its strategy, "Congress and the American public have no clear answer to that question."

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Jim Sinclair’s Commentary

Getting a straight story from FASB is becoming impossible. It seems that the FASB caved on permanently impaired assets (totally worthless paper) but held back some on mark to market. You need to be a CPA PhD to figure this one out. I know such a person and will keep up the effort to get you a straight answer.

Under New Accounting Rule, Toxic Assets May Be Revalued
By Binyamin Appelbaum and Zachary A. Goldfarb
Washington Post Staff Writers
Friday, April 3, 2009; A15

The board that sets U.S. accounting rules voted yesterday to let financial firms report higher values for some troubled assets, a controversial step likely to increase some banks’ reported earnings but also heighten suspicions that the companies are concealing problems.

The move by the Financial Accounting Standards Board was made with unusual speed under intense pressure from Congress and the financial industry, which have argued that the old rules exacerbated the financial crisis by forcing banks to overstate expected losses.

But the decision to ease what are known as mark-to-market requirements has raised concerns among some financial experts who warn that it will become harder for banks and investors to agree on what the troubled assets are actually worth and thus discourage their sale. The ability of financial firms to sell assets to investors is considered essential for an economic revival because this could restore the major source of funding for bank lending to consumers and businesses.

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Jim Sinclair’s Commentary

The G20 has fixed everything. I feel they have not fixed anything and only added another $1 trillion in monetary inflation. God help us all in this emotional world of hyper-spin.

One in 10 Americans gets help to buy food
Fri Apr 3, 2009 1:41am BST

WASHINGTON (Reuters) – A record 32.2 million people — one in every 10 Americans — received food stamps at the latest count, the government said on Thursday, a reflection of the recession now in its 16th month.

Food stamps, the major U.S. anti-hunger program, help poor people buy groceries. The average benefit was $112.82 per person in January.

The January figure marks the third time in five months that enrollment set a record.

"A weakened economy means that many more individuals are turning to SNAP/Food Stamps," said the Food Research and Action Center, an anti-hunger group, using the acronym for the renamed food stamp program, the Supplemental Nutrition Assistance Program.

The U.S. unemployment rate was 8.1 percent in February, the highest in 25 years. New claims for jobless benefits totaled 669,000 last week, the highest in 26 years, the government said on Thursday.

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Jim Sinclair’s Commentary

As more people get food coupons and the jobless fall off the unemployment benefits time out, it is only predictable that crime will rise, first in anger directed at the illegal and legally employed immigrants. This is the extreme of just that.

Gunman kills up to 13 hostages, some 26 others injured in U.S.
22:33 03/ 04/ 2009

NEW YORK, April 3 (RIA Novosti) – At least 13 people were killed and another 26 injured when a gunman stormed an immigration centre in Binghamton, near New York, American media reported.

CNN said that the one of the gunmen, who was armed with a high-powered rifle, had been killed by police. It also said two hand guns were recovered from the scene.

David Paterson, the governor of New York, told CNN "that there are fatalities. We are monitoring the situation and I have directed the State Police to assist the Binghamton Police Department, in any way, they can."

Eyewitnesses earlier told a CNN reporter that police had taken two Asian men, who were both handcuffed, out of the American Civic Association building, which is currently surrounded by police snipers. The men have been taken to a local detention center.

Sky News said that FBI negotiators and SWAT teams had entered the building, 140 miles from New York, and freed 20 hostages. However, around 40 hostages are reported to still being held hostage.

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G20 – Lies, damned lies and Gordon Brown lies

Gordon Brown has really surpassed himself in creative alchemy. He has turned $100 billion of G20 new commitments into $5 trillion of air!

Gordon Brown has really surpassed himself in creative alchemy. He has turned $100 billion of G20 new commitments into $5 trillion of air!

Take $100 billion of committed new money, add $500 billion of already committed money, add non-committed but discussed amounts of $500 billion and you present a headline lie of $1.1. trillion. But it gets worse, Gordon Brown then claims the largest fiscal stimulus in history of $5 trillion. This is another lie. The $5 trillion contains no new funds but only the IMF’s estimate of the rise in the G20’s government borrowings between 2008 and 2010.

Poor Benjamin Disraeli is turning in his grave when he hears these lies. (The phrase,”lies damned lies and statistics” originates from the former UK prime minister).

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Jim Sinclair’s Commentary

The key point of the story is dead wrong.

The nuance here, not seen as you would have to be a floor trader to know, is that the borrowers of gold for delivery would not be the COMEX but rather the short who then remains short but now to the ECB, still at risk to price.

The Default would have to be first the member, then the exchange itself, then the total assets of all members individually.

BY TAKING DELIVERY OUT OF THE COMEX WAREHOUSE YOU ARE FORCING THE SHORT TO PRESENT THE GOLD ANY WAY THEY CAN ARRANGE TO DO IT. THAT IS WHAT HAPPENED HERE. THAT IS WHAT WE WISH TO DO, NOT DEFAULT THE PLAYING BOARD.

This may be the most well read article on the web and the least understood.

Most, if not all of the expert commentary and this article is dead wrong.

Did the ECB Save COMEX from Gold Default?
April 02, 2009

On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000 + contracts, representing about 15% of the April COMEX gold futures contracts remained open. Technically, short sellers are required to give “notice” of delivery to long buyers. However, in reality, buyers are the ones who control the amount of gold to be delivered. They “demand” delivery of physical gold by holding futures contracts past the expiration date. This time, long buyers were demanding in droves.

In normal times, very few people do this. Only about 1% or less of gold contracts must be delivered. The lack of delivery demand allows the casino-like world of paper gold futures contracts to operate. Very few short sellers actually expect or intend to deliver real gold. They are, mostly, merely playing with paper. It was amazing, therefore, when March 30, 2009 came and passed, and so many people stood for delivery, refusing to part with their long gold futures positions.

On Tuesday, March 31st, Deutsche Bank (DB) amazed everyone even more, by delivering a massive 850,000 ounces, or 8500 contracts worth of the yellow metal. By the close of business, even after this massive delivery, about 15,050 April contracts, or 1.5 million ounces, still remained to be delivered. Most of these, of course, are unlikely to be the obligations of Deutsche Bank. But, the fact that this particular bank turned out to be one of the biggest short sellers of gold, is a surprise. Most people presumed that the big COMEX gold short sellers are HSBC (HBC) and/or JP Morgan Chase (JPM). That may be true. However, it is abundantly clear that they are not the only game in town.

Closely connected institutions, it seems, do not have to worry about acting irresponsibly, in taking on more obligations than they can fulfill. Mysteriously, on the very same day that gold was due to be delivered to COMEX long buyers, at almost the very same moment that Deutsche Bank was giving notice of its deliveries, the ECB happened to have “sold” 35.5 tons, or a total of 1,141,351 ounces of gold, on March 31, 2009. Convenient, isn’t it? Deutsche Bank had to deliver 850,000 ounces of physical gold on that day, and miraculously, the gold appeared out of nowhere.

The announcement of the ECB sale was made, as usual, dryly, without further comment. There was little more than a notation of a sale, as if it were a meaningless blip in the daily activity of the central bank. But, it was anything but meaningless. It may have saved a major clearing member of the COMEX futures exchange from defaulting on a huge derivatives position. We don’t know who the buyer(s) was, but we don’t leave our common sense at home. The ECB simply states that 35.5 tons were sold, and doesn’t name any names. Common sense, logic and reason tells us that the buyer was Deutsche Bank, and that the European Central Bank probably saved the bank and COMEX from a huge problem. What about the balance, above 850,000 ounces? What will happen to that? I am willing to bet that Deutsche Bank will use it, in June, to close out remaining short positions, or that it will be sold into the market, at an opportune time, if it hasn’t already been sold on Tuesday, to try to control the inevitable rise of the price of gold.

Circumstantial evidence has always been a powerful force in the law. It allows police, investigators, lawyers and judges to ferret out the truth. Circumstantial evidence is admissible in any court of law to prove a fact. It is used all the time, both when we initiate investigations, and once we seek indictments and convictions. We do this because we deal in a corrupt world, filled with suspicious actions and lies, and the circumstances are often suspicious enough to give rise to a strong inference that something is amiss. Most of the time, when the direct evidence is insufficient to prove a case beyond a reasonable doubt, or even by a preponderance of direct evidence, circumstantial evidence fills the void, and gives us the conviction. We even admit evidence of the circumstances to prove murder cases. In light of that, it certainly seems appropriate to use circumstantial evidence in evaluating possible regulatory violations. The size and timing of the delivery of Deutsche Bank’s COMEX obligation is suspicious, to say the least, when taken in conjunction with the size and timing of the ECB’s gold sale. It is circumstantial evidence that the gold used by Deutsche Bank to deliver and fulfill its COMEX obligations, came directly or indirectly, from the ECB.

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Jim Sinclair’s Commentary

The following is from John Williams’ www.shadowstats.com by subscription

SGS-Alternate Unemployment Rate at 19.8%

Click here to visit the site…