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

Dear CIGAs,

Yesterday the Euro was in – today the Euro is out. Yesterday the Swiss Franc was in – today the Swiss Franc is out. Yesterday the Dollar was out – today the Dollar is in.

Translation – more hedge fund madness.

I am going to make a suggestion to the regulators since we have now apparently reached the point where the Federal Government gets to now dictate executive compensation and such (then again the fools that dreamed up these financial weapons of mass destruction only have themselves to blame for bringing down the heavy-hand of the government busybodies upon them). One way to restore some sort of stability to the financial markets would be to issue an executive order banning all hedge funds from investing anywhere with real money. To compensate them for their loss of entertainment, the government should buy all of their managers and their employees an X-Box complete with the newest, fastest moving and most addicting video games and have them all distributed before the month of February is out.

Such an act would to two things – it would rid those of us who love the markets and remember when they were once sane, of the hedge fund created idiocy that we are forced to daily observe. Secondly it would demonstrate a compassionate care for the feelings of the hedgies by helping to ameliorate their withdrawal from the trading business. After all, those guys are used to pushing lots of buttons without knowing why or what they are doing and to cut them off cold turkey might be harmful to their overall psychological well being. I would hate to think that we might see some of them standing on street corners furiously pushing the crossing buttons on the red lights. Such a sight would no doubt even move the most dispassionate among us.

By the way, those of you looking for a good deal on a corporate jet or helicopter should contact Bank of America – news has come out that they are selling Merill’s copter plus some of their own fleet. I think they should put them up on Ebay. We could all chip in and buy them and then structure a debt package backed by these jets and this helicopter and sell it back to Bank of America as a high-yielding security after we get Moody’s and Fitch to stamp it “AA”. Let’s stick a yield on it of 5% and let AMBAC insure it for us. Then we could take our profits and buy lots more helicopters and corporate jets from distressed financial companies and do this some more. If the financial companies held enough of our helicopter/jet securities on their books, they could then feel confident and would begin lending again. We would all then get the credit for saving the economy and all of the politicians in Washington could just go home before they further destroy the nation. Having become extremely popular, we could then run for public office, get elected all over the nation and then go to Washington where the first thing we could then do would be to reintroduce gold back into the monetary system. And to think some of those who read this site happen to believe that we who love honest money do not have a plan!

Gold was out yesterday – today it was back in. Tomorrow – who knows? See the chart for the technical picture as I have made a few notes that are fairly self-explanatory.

Euro gold was back over the €700 level at the PM Fix today.

A side note – deliveries in February have so far been disappointing when compared to December 2008. Only a bit more than 200,000 ounces of gold have been stopped compared to 1.17 million after the first 4 delivery days back with the December contract. That is not going to help dislodge the strangle hold that the bullion banks have on the Comex.

The mining shares are higher but so are the broader stock equities and gold bullion so it is tricky trying to read what they are keying off of in today’s session. Again, both the HUI and the XAU are showing consolidation patterns on the charts.

I should note as I did yesterday, both crude oil and particularly natural gas, are looking more and more like they are in the bottoming process. While one can never be too sure with the kind of volatility we are seeing currently in so many markets, both of these energies have stopped moving lower and look to be probing for a solid bottom. Again, if these are indeed bottoming, it will be beneficial to gold since it will help put a floor under the entire commodity sector, particularly as measured by the various commodity indices. In looking at the crude oil chart, it is still trading within a broad range between $35 – $50. It will take a breach of $50 on good volume on a closing basis to convince a lot of skeptics that crude has finally bottomed for good.

Bonds continue heading lower but have managed a decent intraday bounce in the session. They are overdue for a bounce higher but need some sort of spark to set it up. Today’s low is not far above the 100 day moving average so clearly if they are going to bounce, they had better do it soon or else we are going to see the distinct possibility of another sharp downleg.

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

February0409Gold1230pmCDT.jpg

Posted at 1:36 AM (CST) by & filed under General Editorial.

Dear Friends,

How many times have I warned you that FRAUD is rampant in gold storage, gold deals and internet financial anything.

I predict billions will be lost by gold investors who sent money to people just because they like what they write, like the pay in the USA and get gold somewhere else deals or are simply to lazy to do what is so easy and requires no agent.

I have told you not to leave a penny with any coin dealer, to distance yourself from all financial agents and not to deal with internet financial anything.

Did you listen? Many have not!

If you did not and have gold in anything like this get your gold or your money tomorrow.

FORGET EXCHANGE TRADED FUNDS.

Buy your gold on the Comex at the world gold price and take delivery out of their warehouse.

Your only insurance is gold in your hand. Do what I have done.

Respectfully yours,
Jim

AUDIT AFTER GOLD DEALER’S SUICIDE SUGGESTS CUSTOMERS LOST MILLIONS
By ROBERT J. COLE
Published: October 5, 1983

Some $60 million worth of gold, silver and platinum sold to thousands of individuals and then supposedly stored in Rocky Mountain vaults may never have existed, an investigation suggested yesterday.

The possibility emerged in an audit conducted by the accounting firm of Touche Ross & Company in connection with the suicide last Wednesday of Alan David Saxon, 39-year-old chairman of Bullion Reserve of North America, a gold dealer with offices in Los Angeles, Dallas and Hong Kong.

Bullion Reserve has 30,000 to 35,000 customers. If the missing assets cannot be found, most of their investments may be lost.

Vaults Near Salt Lake City

Lawyers for the company said the audit showed that a depository, owned by Perpetual Storage Inc. of Salt Lake City and buried 200 feet in a nearby mountain range, contained only about $900,000 in bullion and coins. Another $140,000 to $150,000 worth of coins were found at Brinks Inc. of Los Angeles, another Bullion Reserve storage center.

The discovery, made over the weekend, prompted Bullion Reserve to file a bankruptcy petition Monday in Los Angeles, seeking court protection from its creditors.

More…

 

Jim Sinclair’s Commentary

Do this and gold goes to Alf’s numbers.

I rate the probability of the following occurring at 10 out of 10. It is called global hyperinflation.

This form of hyperinflation, a currency event, will occur by mutual panic if not as a plan of last resort.

This mutual panic and/or plan of last resort has a time window of on or before January 14th, 2011.

U.S. dollar devaluation on its way
Posted: February 02, 2009, 4:01 PM by Diane Francis

In 1992, I was given what became my favorite hotel bill keepsake when I stayed in Mexico City and was charged one million for a brief business stay.

It wasn’t a mistake. That was one million pesos and the Mexican peso was becoming worthless. By 1993, then-President Carlos Salinas de Gortari stripped three zeros from the currency and renamed it the Nuevo (or New) Peso.

The transition from worthless to one Nuevo Peso to one U.S. dollar was done in three years from January 1, 1993 to January 1, 1996. The word "nuevo" was removed from the currency and it returned to be called "peso".
Now it is 2009 and what appears to be looming, according to one authoritative press report this weekend, is a massive pre-emptive devaluation of the U.S. dollar as Team Obama readies itself to announce the “Big Bang” – a gigantic bailout of the frozen U.S. economy involving trillions of dollars.

So far, Washington has allocated US$750 billion for banking rescues and another US$825 billion for job creation projects. But that’s nothing.

More…

Posted at 5:25 PM (CST) by & filed under Jim's Mailbox.

Jim,

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

CIGA Pedro

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

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

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

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

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

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

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

More…

Posted at 4:07 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

I wish I could blithely write cogent explanations day in and day out for what is transpiring in these markets and bring light into the murkiness, but alas, even after being involved in them on a daily basis for as many years as I have been, there are times when I admit that I haven’t a clue as to what is taking place or why. Today is one of those days.

A couple of things started the ball rolling today. First was the housing numbers data which surprised by coming in stronger than expected. That put a bid into equities for a while but the main effect was that it brought back the “risk” trades. Keep in mind something I said just a short time ago – one day risk is in, the next day it is completely out. All the convulsions we are watching these markets go through, especially in the Forex arena, is the result of hedge funds blasting in or blowing out from one day to the next. For today at least, Blue Horseshoe loves risk so the Dollar was promptly whacked lower along with Treasuries and money flowed back into the majors. The Australian Dollar was particularly strong as was the Euro. The Swiss Franc was also sharply higher, something that one does not normally expect to see when “risk” is in.

My view is that some of what we saw in the Forex markets was the result of the news that the Fed had extended the deadlines for currency swaps to October 30 of this year with 13 other Central Banks. No doubt this move was intended to meet dollar liquidity needs overseas as investors angrily dumped the worthless crap that Wall Street had peddled them. It is my opinion that the US monetary authorities DO NOT WANT a stronger Dollar, protestations to the contrary. Our agricultural exports have been shriveling up as the move up in the Dollar has been an effective price hike on foreign buyers at EXACTLY the wrong time. AG exports were the ONE PART of our economy which has been a shining beacon and that has been effectively mangled by the Dollar’s rise. At a time in which every nation on the planet is going to play the competitive currency devaluation game, why would we expect to see the US do anything differently than the rest? Yes I know about the need to be able to sell US debt abroad but let’s just say that the authorities do not want a Dollar collapse but they certainly do not want a soaring Dollar either. My guess is that they are happy to see it deflate in value and trade down towards the lower edge of its trading range. Certainly, someone does not see it as having any “value” up near the 87 level on the USDX.

Under normal circumstances we would have expected to see gold moving higher as the Dollar got trampled especially with crude oil showing such resiliency. Not so – today’s reason to explain the inexplicable says that gold is not needed during times when “risk” is in so let’s sell it. Wait another day because as soon as “risk is out”, gold will then be seen as too risky to buy and that will be the reason used to tell us why it is being sold off.  Actually I think the reason gold is lower today is because Jack Bauer hit the terrorists’ hideout last night in “24” and destroyed the CIP device in the process. Way to go Jack – maybe Jack can now save us from what the feds are doing to our monetary system.

The real reason is that a huge seller/sellers showed up today as gold rallied higher in New York, especially after the London PM Fix was done, and sat on the bids and that was that. No doubt they were some of the same crowd that did the selling yesterday as open interest indicates that plenty of fresh selling occurred yesterday.

Locals saw the stone wall in front of the market and ditched their positions and went short which also tripped the 3 minute bar charts bearish and the day trading crowd began to sell. That pushed out some weak or stale longs who decided to get out and wait for another entry point a bit lower. It looked as if $900 was going to hold on the downside test but sellers came in and gave it enough of an extra push to take out some stops near that level. Gold is attempting to recapture that level but so far has not been successful. Should the bulls not be able to hold it here, the next downside level will be good old $880 once again. That number has taken on an incredible significance from a technical level.

The gold charts, especially when viewed in other foreign currency terms, look very impressive, even with today’s weakness. Even on the shorter term 12 hour chart that I employ for analysis purposes for the daily updates, there remains a definite uptrending channel that is very much intact. If the bulls cannot quickly push prices back above the $900 level and hold it there, the most likely outcome is for a move down to retest $880 which should garner strong buying interest. We also have the upper boundary of the triangular consolidation pattern that was in place going back to October of last year which comes in near the $870 area with the 20 day moving average coming in near the $865 level further reinforcing this level. Gold is sitting right on top of its 10 day moving average which has flattened out a bit but is still moving upwards.

Interestingly enough, the mining shares as indicated by the HUI and the XAU are not following Comex gold lower to a large extent. They are down but just barely and have been vacillating back and forth between positive and negative territory. Both indices look like they have set up consolidation patterns on the daily charts and are working a trading range. It will take a strong close above the 310 level on the HUI to set a spark that is large enough to blaze through the brush being thrown in front of the mining shares. For the XAU, we still need to see a CLOSE above 127, preferably 130.

Bonds are moving lower today after bouncing yesterday as who needs them since risk is in.

Natural gas might be probing for a bottom and crude oil seems reluctant to break much lower. It would be a good thing for gold should we get a solid bottom in these energy markets. There are a growing number of players who are looking for serious inflation problems to arise in the global economy at some point and who will be looking to acquire long positions in a variety of commodity markets. Deflation is still winning the day but it WILL give way to a major inflationary outbreak in the future. Prices in various commodities have moved lower to attempt to adjust for the new dynamic in supply/demand factors but once a price is found in which clearing begins it will not take much to push prices inexorably higher.

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

February0309Gold1230pmCDT

Posted at 10:36 PM (CST) by & filed under General Editorial.

Retirement and Benefits Programs

Of all the problems delivered to the doorstep of middle America by OTC derivative manufacturers and distributors, nothing will exceed the bankruptcy of retirement and benefit programs for the American worker.

This financial crisis is defined as the inability of the funds to meet their requirements on an increasing basis year to year.

More and more people who make and deliver real goods are getting letters from their paid-in retirement fund informing them of the curtailment of benefits that have up to now been taken for granted due to what the fund calls “Critical Status.”

It is assumed in presentations by the funds that this "Critical Status" will be overcame. It will NOT because SIVs are not coming back for reasons I have already outlined to you in detail. Simply said, the OTC derivative cannot recover simply because they have been fraudulent since their inception.

This is not because things are flush but rather there is a shortage of cash and over the top inventory of OTC derivative products that cannot be valued.

Social unrest will not be avoided as there is no practical solution to the core problem that is yet even to be admitted to, let alone faced. The problem is that all OTC derivatives have been frauds since the beginning of their creation.

I have in my hand a letter from the New England & Industry Pension Fund, one of the largest union pension funds in the business.

Hidden in the flowery language and on the back page it says:

1.  Elimination of early retirement options, i.e., the right to receive a Pension prior to the age of 64 including:
a. Early Retirement Pensions.
b. Thirty Year Full Service Pensions.
c. Minimum thirty Year (75%) service Programs
d. Special Service Pension prior to the age 64.
e. All partial pensions to the extent any such pension is tied to one or more of the Adjustable Benefits listed above.

2.  Elimination of all Disability Pensions prior to Age 64

3.  Elimination of all Benefit Payments prior to the age 64.
a.  120 Certain Payment Options
b.  Christmas Benefit

4.  Elimination of Death Benefits including
a.  Single Payment Death Benefit.
b.  Thirty-Six Month Annuity for Unmarried Participants.

All of this is emplaced as the fund is in “Critical Status.”

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

Dear CIGAs,

These are our financial leaders bequeath to our, not their, grandchildren and the grandchildren of them, all thanks to looking the other way as OTC manufacturers and distributors plied their evil fraudulent trade.

Leaders

Jim Sinclair’s Commentary

What the OTC derivatives and terrible business does not do to financial entities, attorneys will. When it is all said and done, Wall Street is history killed stone cold dead by the OTC derivative manufacturers and distributors.

RBS Faces 2nd Round Of US Investor Disclosure Suits
By Liz McKenzie

Law360, New York (February 02, 2009) — The Royal Bank of Scotland Group PLC faces another securities class action from U.S. investors alleging that the U.K. clearing bank failed to disclose its exposure to the subprime mortgage market before reporting one of the biggest losses in British banking history.

Filed on Thursday in the U.S. District Court for the Southern District of New York by investor Ferdinand Levy, the lawsuit claims the bank downplayed its risk exposure and issued misleading information to investors about its financial security.

The complaint accuses Edinburgh, Scotland-based RBS and several of its executives of breaching U.S. securities law by failing to properly record losses for impaired assets, failing to acknowledge the extent of impairment of its debt securities portfolio, failing to maintain adequate internal controls and concealing the fact that its capital base was insufficient to withstand the deterioration in the U.S. subprime mortgage market.

Despite assuring investors that its economic outlook was still promising, investors allege that “the dislocation in the financial markets was then having an increasingly severe impact on RBS’ business, which significantly increased the risk level of Series S ADSs [American depositary shares].”

In December 2007 the bank was forced to write down £1.5 billion ($2.18 billion), in great part because of its exposure to the U.S. subprime mortgage market, the suit claims.

More…

Jim Sinclair’s Commentary

Not only is it a bad idea, but we already have a "Bad Bank." That bank is the Federal Reserve with all the crap they hold, having been stuffed by the bailouts.

A bad bank is a very bad idea
By Rolfe Winkler
Updated Monday, February 2nd 2009, 9:48 AM

When rumors surfaced on Wednesday that the Obama administration may create a "bad bank" to buy toxic assets, financial stocks soared. Of course bank shareholders were happy; the plan is likely to be a titanic taxpayer hand-out. It has to be to achieve the administration’s goal of keeping banks in private hands.

To understand the banking crisis, and Obama’s emerging solution, all you need to know is one equation: Assets = Liabilities + Equity. This equation explains why banks are dropping like flies.

A bank’s assets are the loans it makes to borrowers. Its liabilities are the dollars it borrows from lenders and depositors to fund those loans. Shareholder equity is what’s left over.

During the bubble, banks made loans for houses at vastly inflated prices. Say, for instance, a bank lent $1 million to a borrower buying a Miami condo in 2006. The borrower promised to repay $1 million over the life of the loan, so the bank valued this asset at $1 million.

Flash forward to 2009, and the condo is now worth $500,000. The borrower defaults because he’d rather lose the condo than pay a million-dollar mortgage on a property now worth half that.

The bank forecloses on the condo and sells it for what it can get, the current market value of $500,000. The bank’s asset, the loan, has fallen from $1 million, which the borrower owed, to $500,000, the amount recovered. A 50% loss.

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Monty Guild’s Commentary

Between Variable Annuities and Derivatives the insurance companies may be more broke than the banks. Their capital may be more impaired, and it may take them longer to get solvent.

If something like an annuity sounds too good to be true… it probably is. How are insurance companies going to be able to meet their commitments to guarantee a 5% return on stocks and bonds for annuity holders, when world markets are down an average of 43% in 2008 and 8% in the first month of 2009? A global depression hitting stock values possibly for one or two more years? The high fees insurance companies took for annuities exacerbates the problem.

This is another big scandal waiting to hit the news.

Jim Sinclair’s Commentary

You think when you call the "Good Hands" you are in a check is forthcoming. All our insurance companies are broke. Thank you one more time to the OTC derivative manufacturers and distributors.

Allstate’s Catastrophe Bonds Face ‘Imminent’ Default (Update3)
By Neil Unmack and Oliver Suess

Feb. 2 (Bloomberg) — A catastrophe bond sold by Allstate Corp. faces “imminent” default following the collapse of Lehman Brothers Holdings Inc., Standard & Poor’s said. It would be only the second such security to fail in a decade.

New York-based S&P downgraded $250 million of debt sold by Allstate’s Willow Re Ltd. to D, the lowest grade, from CC, according to a Jan. 30 statement. Northbrook, Illinois-based Allstate sold the bonds in 2007 to protect against losses caused by U.S. hurricanes.

“The issuer has notified Standard & Poor’s that it will not have sufficient funds to make the scheduled interest payment,” S&P analyst Gary Martucci in New York wrote in the statement.

Insurers started using so-called cat bonds in the 1990s to transfer the risk of claims that could threaten their solvency. Bond investors in Zurich Financial Services AG’s Kamp Re 2005 Ltd. lost money when property damages caused by Hurricane Katrina in 2005 exceeded the threshold that entitled Zurich to keep investor funds to pay insurance claims.

“The market was already pricing Willow Re in the area of 50 cents,” said Christophe Fritsch, head of insurance-linked securities at Axa SA in Paris. “New deals will improve dramatically. Investors will make sure that they will only be exposed to insurance risk and won’t take credit risk.”

More…

 

Jim Sinclair’s Commentary

Repeated presence of many auditors means only one thing. The last one refused to sign off on the audit. That is fact, jack.

Lehman Brothers saga – 4th auditor appointed
By Francis Chan
Feb 2, 2009

A FOURTH independent auditor in Singapore has been appointed to help deal with investor complaints linked to Lehman Brothers.

The complaints come after investment products from the bankrupt United States investment bank failed late last year.

On Monday, Hong Leong Finance appointed National University of Singapore law professor Hans Tjio to review complaints from its customers who invested in Morgan Stanley’s Pinnacle Notes Series 9 and 10.

The Monetary Authority of Singapore (MAS) said Professor Tjio’s role would be similar to those of three other industry leaders appointed last year to review complaints over the failed structured products.

One of the three, Mr Hwang Soo Jin, who was previously overseeing the complaints-handling process of brokerages that sold the products, will also review cases received at brokerages in relation to Pinnacle 9 and 10, said MAS.

Besides Hong Leong Finance, brokerage firms like DMG & Partners Securities, Kim Eng Securities, OCBC Securities and UOB Kay Hian also sold the notes to retail investors here.

More…

Jim Sinclair’s Commentary

The specs can spec and the Comex manipulators can jiggle, but it is all in vain. Gold is going to

$1064, $1250 and then on to Alf’s price predictions, all of which will be the product of inescapable hyperinflation, a currency event certain to occur.

Chinese Cautious on Treasury Notes
Published: January 31, 2009

LONDON (Reuters) — China’s willingness to continue buying United States Treasury securities in large numbers will depend on its need to protect the value of its foreign investments, the Chinese premier, Wen Jiabao, said Saturday. He also said that a stable yuan is in everyone’s interests.

“Whether we will buy more U.S. Treasury bonds, and if so by how much — we should take that decision in accordance with China’s own need and also our aim to keep the security of our foreign reserves and the value of them,” Mr. Wen said.

His enigmatic remarks, made near the end of a visit to Europe, could raise new concerns about China’s commitment to continue purchasing United States government debt.

More…

 

Jim Sinclair’s Commentary

Out of the news, but not out of core geopolitical tinder box perma-status.

American Kidnapped in Pakistan
Solecki Is the First Single-National American Kidnapped in Pakistan Since Daniel Pearl in 2002
By HABIBULLAH KHAN and NICK SCHIFRIN

ISLAMABAD, Pakistan, Feb. 2, 2009 – The head of a U.N. aid office in Pakistan was kidnapped today, the first single-national American kidnapped in Pakistan since Daniel Pearl was abducted and killed in 2002.

John Solecki’s sport utility vehicle was attacked in Chaman Housing, a posh residential area in Quetta, while he was on his way to work at the local U.N High Commissioner for Refugees office, according to officials.

At least one gunman, working with a driver and at least one accomplice, fired into the car, which was not bulletproof, killing Solecki’s driver Syed Hashim, the officials added.

The car then hit a wall and Solecki was hustled out of his vehicle into the kidnappers’ car.

"It’s difficult to establish now whether he was targeted because he was an American, but he was definitely targeted for being a foreigner," a senior intelligence official in Quetta told ABC News.

More…