Posted at 6:43 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

You can be sure this is the number after being sent back 12 times for revision as unacceptably too high. This is dollar rot of the most virulent kind.

Three-month budget gap exceeds FY 2008 full year
Tue Jan 13, 2009 3:23pm EST

WASHINGTON (Reuters) – The United States racked up a record $485 billion deficit for the first three months of fiscal 2009, exceeding the $455 billion gap for all of the previous year, the U.S. Treasury said on Tuesday.

In December, the government posted a deficit of $83.62 billion versus a year-ago surplus of $48.26 billion — a wide swing that the Treasury attributed to a steep drop in corporate tax receipts and outlays from its financial rescue fund.

The December budget gap was in line with consensus forecasts of an $83 billion deficit from economists polled by Reuters.

The combined October, November and December deficit was nearly five times the year-ago budget hole of $107 billion, according to Treasury data.

The ballooning deficit could constrain President-elect Barack Obama’s ability to revive the U.S. economy with a massive fiscal spending program this year. The deficit for fiscal 2009, which started October 1, is expected to hit a staggering $1.186 trillion, according to the non-partisan Congressional Budget Office. This is even before an estimated $800 billion in proposed tax cuts and stimulus spending from Obama.

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Jim Sinclair’s Commentary

I am surprised that the S&P, the same guys that sit on Commodity Index committees, do not also say "Whilst upgrading US Debt."

More around the corner dollar pushing.

S&P are the same guys that rated SIVs along with Treasuries.

S&P threatens to strip Spain of top AAA rating

Standard & Poor’s has threatened to strip Spain of its coveted AAA rating as country’s budget deficit explodes, offering the clearest warning to date that even wealthy states are running out of room to borrow.
By Ambrose Evans-Pritchard
Last Updated: 7:31AM GMT 13 Jan 2009

The move caused fury in Madrid and revived fears in the currency and bond markets about the underlying health of Europe’s monetary union.

Spanish officials are irked that S&P has placed Spain’s debt on "CreditWatch Negative", a notch lower than the "outlook" alert issued on Irish bonds last week. It is the first time that a AAA country has suffered such a harsh verdict since the start of the global financial crisis.

Such a move typically precedes a downgrade within weeks but the finance ministry insisted last night this would not be allowed to happen. "There’s not going to be a rating downgrade because we are taking measures to overcome the crisis," it said.

Trevor Cullinan and Myriam Fernández, the agency’s analysts, said the housing crash had set off a downward spiral in Spain that would drive the budget deficit above 6pc by 2006, double the EU’s Maastricht limit.

"We expect a substantial worsening in the Kingdom’s public finances," it said, predicting 2pc contraction in 2009 and a long slump as years of credit excess are slowly purged.

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Jim Sinclair’s Commentary

Regardless of any interim technical dollar strength, it is doomed my friends, doomed. That will not and cannot change. A break up of the euro is a very long shot and would not reverse the terminal nature of the US dollar.

Bernanke Urges ‘Strong Measures’ to Stabilize Financial System
By Craig Torres

Jan. 13 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke warned that a fiscal stimulus won’t be enough to spur an economic recovery and that the government may need to buy or guarantee banks’ tainted assets to revive growth.

“Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke, 55, said in the text of a speech at the London School of Economics. “More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets.”

Bernanke’s speech indicates he sees further government aid to the U.S. financial system as essential to an economic recovery. The U.S. Treasury has already channeled $350 billion in taxpayer funds to recapitalize banks and other financial institutions, while the Federal Deposit Insurance Corp. has guaranteed principle and interest payments on $111.2 billion in bonds issued by financial companies.

The Fed chairman recommended three approaches on troubled assets. Public purchases of the bad assets are one possibility, as was originally planned under U.S. Treasury Secretary Henry Paulson’s Troubled Asset Relief Program, the Fed chairman said.

The government could also agree to absorb, in exchange for warrants or a fee, part of the losses on a specified portfolio of troubled assets, he said. Regulators used that method recently with Citigroup Inc.

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Jim Sinclair’s Commentary

The almost seasonal nature of media babble about how negotiations and deals with North Korea have neutralized any nuclear threat is just that – babble.

Algorithms cannot see mushroom clouds on the horizon, but markets will.

NKorea says it won’t give up nuclear weapons

By JAE-SOON CHANG

SEOUL, South Korea (AP) — North Korea said Tuesday it will hold onto its nuclear arsenal until it is satisfied the U.S. is not hiding atomic weapons in South Korea.

The North has long accused Washington of stationing nuclear weapons in South Korea for a possible attack on the communist nation. Both the South and the U.S. deny having nuclear weapons in South Korea.

Regional powers have been trying for years to rid North Korea of its nuclear program, but negotiations have recently stalled. The Foreign Ministry indicated it would consider giving up its nuclear weapons if the U.S. threat is removed and diplomatic relations between the two nations are established.

"We won’t need atomic weapons when U.S. nuclear threats are removed and the U.S. nuclear umbrella over South Korea is gone," the statement said.

The statement, carried by state-run Korean Central News Agency and monitored in Seoul, comes a week before President-elect Barack Obama’s inauguration, and amid signs that the regime wants good relations with the next U.S. administration.

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Jim Sinclair’s Commentary

Now NATO is arming the militants. 8 hours ago in Pakistan.

Sure beats buying ammo.

Militants attack NATO truck depot in Pakistan: police

PESHAWAR, Pakistan (AFP) — Taliban militants launched a rocket attack on a NATO supply depot in northwest Pakistan early Tuesday, torching one truck and damaging three others, police said.

The attack on the outskirts of the city of Peshawar was the first since Pakistan launched a massive military operation late last month in the rugged Khyber tribal region bordering Afgahanistan to clear militants from the area.

That offensive was mounted after a series of spectacular attacks on depots in and around Peshawar in which hundreds of vehicles used to ferry supplies to NATO and US forces in Afghanistan were torched.

"The militants fired six rockets on a NATO terminal during the night. One truck was hit and it caught fire, while three other vehicles suffered minor damage," senior police officer Fida Mohammad told AFP.

Police and paramilitary soldiers tracked down the attackers and a brief gun battle ensued, he said. After about 30 minutes, the militants fled.

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Jim Sinclair’s Commentary

Pakistan Saturday:

We won’t bow to pressure: Zardari

Islamabad (IANS): Stressing that Pakistan would not "bow down" to any pressure, President Asif Ali Zardari said that if India wants to build up world pressure on Pakistan, it is a "mistake", a media report Sunday said.

"If India wants to build world pressure on Pakistan, it is a mistake," Zardari said during a dinner reception hosted Saturday for Islamabad-based foreign ambassadors at the Aiwan-e-Sadr.

Zardari separately met Indian High Commissioner to Pakistan Satyabrata Pal and discussed the regional situation with him.

During the dinner meet with ambassadors, the president said Pakistan had sincerely and unconditionally offered cooperation into the Mumbai terror attack probe but India had not responded to the call. "Pak-India tension could sabotage the peace process in the region," The Nation newspaper quoted Zardari as saying.

Zardari Saturday asked the world powers to play their role through effective diplomacy to defuse tension between Pakistan and India.

"Pakistan will take strict action against anyone or any group found guilty in the terror attacks on Mumbai. We want the issue to be resolved peacefully through bilateral dialogue," he said.

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Jim Sinclair’s Commentary

Pakistan’s infallible Nuclear Defense Program, except for the two guys on the left with their backs turned chewing the fat. There is safety and soundness. What wise ass said they came by bullock cart?

nw_20090112_6900_image_0

Pakistani Nuclear Security Worries U.S. Officials
Monday, Jan. 12, 2009

Preventing Pakistan’s nuclear arsenal from falling into extremist hands is a more important security priority for the United States than stabilizing Afghanistan and Iraq, according to a Bush administration report delivered to the team preparing for Barack Obama’s presidency, the New York Times reported yesterday.

"Only one of those countries has a hundred nuclear weapons," the report’s lead author said. Concerns persist over Islamabad’s ability to protect the arsenal, according to the Times.

U.S. intelligence officials have briefed Obama on the possibility that some Pakistani scientists with radical Islamic sympathies have sought to join the ranks of the nation’s nuclear elite.

There are "steadfast efforts of different extremist groups to infiltrate the labs and put sleepers and so on in there," said one of the most senior officials in the Bush administration.

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India ready to break with Pakistan over lack of help with Mumbai inquiry
David Byers, in Delhi

India plans to break off business, transport and tourist links with Pakistan and isolate it from the rest of the world if it fails to help to investigate the Mumbai terrorist attacks, the country’s Home Minister told The Times today.

Speaking in an interview that will raise the temperature further between the two countries, Palaniappan Chidambaram accused Pakistan of doing nothing to assist India bring to justice the perpetrators of the attacks on the country’s financial capital, which killed 165 people between November 26 and 29.

Asked what Pakistan was doing to help with the investigation, in which India handed over a dossier of evidence to its neighbour last week, Mr Chidambaram said: "Zero. What have they provided? Nothing."

The minister — who will brief David Miliband on the investigation’s progress when the British Foreign Secretary arrives in Delhi tomorrow — gave an indication of action that would be taken if Pakistan continued to refuse to investigate the attacks, blamed by India on Islamic militants with links to the Pakistani Inter-Services Intelligence agency (ISI).

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Posted at 4:02 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold showed a good deal of resiliency this morning even in the face of a stronger dollar as it bounced from near the intersection of upsloping trendline support and horizontal support near the $810 level. Whether the bounce in crude oil from off of support had anything to do with its strength is unclear but the fact that it managed this is friendly nonetheless.

The dollar’s gains were supposedly related to the improvement in the balance of trade picture although  some of its strength against the Euro in particular was in association with ratings agency warnings about some euro-zone countries’ credit worthiness. Yesterday it was Spain that made that news- today it was Ireland and Greece. There was even chatter about a breakup of the EMU (European Monetary Union) as a result. Jim has long said that the Euro is really a basket of junk that owed its strength to the fact that is was simply NOT the Dollar. This has been proven correct as there are now forces at work in Euroland which are creating stresses in that monetary union. Germany in particular has become a sort of safe haven among Euro debt buyers with money flowing into German bunds shoving yields there lower while other nations are seeing rising yields. This should prove to be quite interesting as the year progresses. The point in all this is that perhaps some of the money that might have been flowing into Euro debt is now making its way to gold. That would explain the strength in gold even in the face of the weaker euro. At some point in this endgame, nearly all of these paper currencies are going to end up forfeiting investor confidence as the chinks in their façade become more and more visible to even casual observers.

Speaking of the balance of trade – The numbers for November 2008 were released this morning and they showed a remarkable shrinkage of the trade deficit to $40.44 billion where the average consensus number was $51.30 billion. Both exports and imports were down with imports dropping a whopping 12% versus the previous month coming in at $183.25 billion, the lowest reading since November 2005. It is evident that the slowing economy severely curtailed consumer spending. The resulting slowdown impacted even the trade deficit with China which shrank to $23.06 billion versus October’s deficit of $27.96 billion.

The trade deficit number was the lowest since November 2003.

Looking at the numbers in a bit more detail, we find that in November, the import price of crude oil fell 27.5% to an average of $66.72/barrel versus that of October at $92.02. The US- OPEC trade deficit number for November was $5.61 billion – that is the lowest number since April 2004 when it came in at $5.3 billion. Nothing like cheap oil to bring down the trade numbers… wait until next month!

My thinking is that were it not for the stronger dollar, the deficit would have narrowed even more. Exports in dollar terms were $142.8 billion versus $151.54 billion in October. In the ag sector for instance, some would-be grain buyers are watching the dollar and are putting off buying as the US grains become more expensive due to it strength. Same goes for some of our domestically produced meat. Exported related businesses here want a weaker dollar while importers love a stronger dollar. The former makes our goods cheaper overseas and stimulates buyers to act while the latter helps consumers here at home by making the cost of imported goods lower.

Open interest showed a sharp drop in yesterday’s session as more than 15,000 contracts were liquidated. That was expected given the size of the sell off. I do believe however that some of this fall off in the open interest is related to the commodity index fund rebalancing that continues to occur. Index funds, instead of rolling out of the February into the April ahead of the delivery period for the Febs simply chose not to re-establish longs in the April in order to bring their portfolio holdings into line with the new weightings for gold. Keep in mind that the percentage weighting of gold was lowered in some of the indices and that means either longs are liquidated outright or new purchases are simply skipped. Either way to see gold moving higher in the face of this is again encouraging. It shows that there are other buyers are work besides the index funds.

The mining shares were up slightly today and while this is friendly, nothing conclusive can be drawn from today’s price action.

Bonds are acting a bit uncertain as to what they want to do right now. They are caught between poor economic numbers and the indisputable fact that a huge supply of the things is coming at the market with the fury of a hurricane at some point in the not-too-distant future.

Platinum and palladium were both lower along with the commodity currencies among which the New Zealand Dollar was notably weaker. For today at least, commodities are out of vogue once again. Even natural gas was dumped today and that came in the face of some of the coldest weather this year in store for the upper mid West. Some places in Minnesota and in North Dakota had thermometer readings of -35 below! With those temps I wonder if the heaters ever actually shut off or if they run all day and all night. I think the bears have the right idea – just sleep the winter away – that way we would not have to sit here and watch the stupidity that passes for market price action each day and try to come up with reasons to explain the inexplicable.

I would like to see gold get back above the $840 level to feel a bit more comfortable about its near term future. For now, it has held its first test of support above the 40 day and the 100 day moving averages. The 10day and 20day have both stopped moving higher with the 10day now threatening a bearish crossover of the 20 day so the bulls will have to perform here and push the price back above yesterday’s high to shake the confidence of the shorts but as stated – they will first need to get back above $840 and then they can target $860 where they are buy stops lurking. Downside support below $810 is the even numbered psychological support near $800 which also happens to closely correspond with the 50day moving average. None of gold’s friends will want to see the 50 day moving average violated.

Those of you who might watch these things will note that the usual chart painting that regularly occurs at the Comex as the pit session draws to a close once again appeared for all to see. The obvious intention of the culprits at work here is to dishearten the bulls by erasing all of the gains made during the session since it is the pit close which gets reported to the technical data services for use in charting the Comex gold price. I am reaching the point with the gold market of relying more and more on the 12 hour charts simply because gold trading is too global now to focus so narrowly on the price action generated by 5 hours of shenanigans in New York.

Gold deliveries did not occur today as no contracts were assigned although January showed an increase in open interest so I am expecting to see more deliveries either tomorrow or the next day. Very soon we will be seeing just what kind of deliveries we can expect with the February contract. Those funds who intend to play the paper game against the bullion banks never seem to learn. Either that or they have something written into their charters that specifically states that no brains are to be used when it comes to their trading “strategies”. If these guys simply learned to buy in size on the price dips, the bullion banks would have NO ONE to buy from to effect their short cover. That, in addition to standing for delivery of the physical gold and taking it out of the warehouses, and the reign of the bullion banks over the paper sand box would immediately come to an inglorious end.

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

January1309Gold1230pmCDT.jpg

Posted at 2:14 PM (CST) by & filed under Jim's Mailbox.

Jim,

The rate of acceleration of the downtrend is historic. This is carnage. This is dangerous to the US dollar. Not much else to say.

Regards,
CIGA Eric

Formul1

Dear Jim,

Here is a well done summary of the virtual insanity of those who have priced bonds as if they deserved almost no return for taking a big risk in US paper. PT Barnum’s quote was correct when it comes to US Treasury paper. His quote was "There is a sucker born every minute.”

Your pal,
Monty

The bond bubble is an accident waiting to happen
The bond vigilantes slumber. As the greatest sovereign bond bubble of all time rolls into 2009, investors are clinging to an implausible assumption that China and Japan will provide enough capital to keep the happy game going for ever.
Ambrose Evans-Pritchard
Last Updated: 12:22PM GMT 12 Jan 2009

They are betting too that debt deflation will overwhelm the effects of near-zero interest rates across the G10 and nullify a £2,000bn fiscal blast in the US, China, Japan, Britain, and Europe.

Above all, they are betting that the Federal Reserve chief Ben Bernanke will fail to print enough banknotes to inflate the US money supply, despite his avowed intent to do so.

Yields on 10-year US Treasuries have fallen to 2.4pc – a level that was unseen even in the Great Depression. This is "return-free risk", said bond guru Jim Grant.

It is much the same story across the world. Yields are 1.3pc in Japan, 3.02pc in Germany, 3.13pc in Britain, 3.26pc in Chile, 3.47pc in France, and 5.56pc in Brazil.

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Jim,

Here are the corrections from yesterday (I should know better you told me to let the break tell me when).

I let the curve tell me when (if by chance this is the right fit) so my mistake for saying the end of 2012

Regards,
CIGA Alex

image002 - 20090113_035118

Dear Alex,

You ask about the high 2012 potential, not 2010.

The answer is this chart maximizes along the upper trend line at Alf’s mark of:

Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE).

Jim

Dear Extended Family,

Trader Dan says it all:

"Don’t like the current psyche – stick around another week or so; next week it will probably be hyperinflation only to be followed by a return to the barter system the week after that, and then a round circle back to deflation once again. Don’t feel bad if you cannot understand what the markets are saying right now – the market itself has no idea what it is saying. Maybe it is attempting to get in touch with its inner child or some other sort of nonsense. Thank fund managers for clearing things up for us all."

Dear CIGA Browsers,

Let stay alert for the answer to last week’s request from Hedge Fund Association lobbyists to the Security Regulators of the USA, Great Britain and Australia seeking freedom from reporting Short Positions as part of the 13-F regulation interpretation.

Form 13F
What Does Form 13F Mean?
An SEC reporting form filed by institutional investment managers in accordance with the provisions of section 13(f) of the Securities and Exchange Act of 1934, which states that all institutional investment managers who are managing over $100 million on the last trading day of any month of the calendar year must disclose their holdings on a quarterly basis.
www.wikopedia.com

Posted at 7:11 PM (CST) by & filed under Jim's Mailbox.

Jim,

The problem with socialism is that you eventually run out of other people’s money.
–Margaret Thatcher

Regards,
CIGA JB Slear

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Dear Jim,

If the scale continued to the top of the Curve, is it possible by 2012 Gold would be in the 3,000 range?

If this is the right fit.. something interesting happens at the end of 2012

Regards,
CIGA Alex

gold_log_jan1109 - 20090112_091735 

Dear Alex,

Yes.

All the best,
Jim

Posted at 6:03 PM (CST) by & filed under Jim's Mailbox.

Hi Jim,

Maybe this has been answered on your website and I either missed it or didn’t understand it.

What needs to change in order to drive the dollar lower? We seem to have all of the ingredients in place for a weaker dollar yet that doesn’t seem to matter. When will it matter? When do the buyers of the dollar become sellers?

Again thanks for all you do. By the way I am 63 and also believe in your "burnout" before "rust-out" theory.

Regards,
CIGA Ron

Dear Ron,

I had lunch this afternoon in Joberg with a group of very well known personalities in African Mining. Rob S, a member of this assemblage, told a story that I believe prophetically answers your question.

The monetary parable was about a special variety of monitor lizard in Australia that lives off road kill (Hedge Funds, I imagine). The species, like the Komodo Dragon, kills by infecting its victim with a vicious saliva.

Fortunately for our Australian friends this lizard becomes terrified quite easily and runs for the nearest high point, usually a bush or tree, when confronted with terror like a human being or a bad dream.

The knee jerk reaction to fears of an imploding world economy, the fear that Obama produced calling for Tarp funds now indicated that crisis is here, up the tree goes the down-under lizard. The Tree is the dollar and long bonds. This awful, stinking, road kill eating, vile lizard is what is left of the hedge fund business after Madoff.

Your question is when does it end.

The answer is that Fiscal Stimulation will produce a degree of economic results that draws out a measure of inflation from Monetary Stimulation relative to the intensity of the new Administration’s degree of concern. Acting as president and calling for legislative action NOW to release TARP funds before you are the president is a demonstration not only of concern but total panic.

As inflation starts to work its way out of absolute monetary madness, .72 on the USDX comes directly into the market’s cross hairs. Three back to back closes below .72 and the dollar show is over. The dollar will plummet after the realization that the Fed will never be able to issue bonds on the crap they have been stuffed with and kills the idea of the Rentendollar coming out of the Fed’s inventory of SIVs backing massive future bond issues. The game is then over and the beginning of the concept of the Federal Reserve Gold Certificate Ratio, Modernized and Revitalized becomes the tool of choice starts.

Gold is going to $1650 on its way to Alf’s numbers.

Today you have been had by paper gold ONE MORE TIME.

Regards,
Jim

Posted at 5:47 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Below zero? It would have to be to make it less attractive than the dollar.

Euro Falls Versus Dollar, Yen on Speculation ECB Will Cut Rates
By Anchalee Worrachate and Ron Harui

Jan. 12 (Bloomberg) — The euro fell for a second day against the dollar as the International Monetary Fund’s Managing Director Dominique Strauss-Kahn said Europe is “underestimating the needs” of fiscal stimulus for the economy.

The currency also dropped to a one-month low versus the yen as traders increased bets the European Central Bank will cut its main interest rate to the lowest level since 2005 this week to help pull the 16-nation economy out of a recession. The yen rose against all 16 major currencies tracked by Bloomberg as falling Asian and European stocks damped demand for carry trades.

“The way to play it in the near term is to short the euro going into the announcement because the likelihood is that the ECB is going to cut,” said Daragh Maher, deputy head of global currency strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “My preference is short the euro against the yen. Economic reports throughout the week are likely to add to the environment of high risk aversion.”

The euro dropped to $1.3342 as of 8:43 a.m. in London, from $1.3476 in New York on Jan. 9. The currency declined to 120.28 yen from 121.81 and traded as low as 120.11, the weakest since Dec. 12. Against the British pound, the euro rose to 89.16 pence from 88.78 pence. The yen strengthened to 90.13 per dollar, from 90.39 last week.

The yen strengthened to 62.52 against Australia’s dollar from 63.59 and strengthened to 52.79 versus New Zealand’s dollar from 53.49 as investors trimmed holdings of higher-yielding assets funded in Japan.

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Jim Sinclair’s Commentary

What the hell has this world become!!!!!

Madoff to Remain Free on Bail With New Restrictions

NEW YORK (AP) — A judge allowed disgraced investor Bernard Madoff to remain free on bail Monday, rejecting an attempt by prosecutors to send him to jail for mailing more than $1 million in jewelry to family and friends over the holidays.

The decision means Madoff will avoid having to leave the comfort of his $7 million penthouse and await trial in a cramped jail cell with nothing but bunkbeds, a sink and toilet. Madoff will remain under house arrest and under the constant watch of security guards.

The ruling further outraged investors who have been clamoring for Madoff to be sent to jail for allegedly carrying out the largest financial fraud in history. They find it shocking that Madoff is free on bail, despite distributing assets that could be used to help repay investors who lost billions.

Stephen A. Weiss, a lawyer for several dozen Madoff investors, said there "are people on the street who are very unhappy" with the ruling.

"There is a thirst for blood that transcends just those who have been victimized. There is a feeling … that folks like Bernard Madoff get a different brand of justice than the guy in the street," Weiss said.

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Jim Sinclair’s Commentary

What is the Globe and Mail smoking today?

Comments to the Globe & Mail as the reason for gold’s pounding today:

Physical demand for gold was seen softening after holding firm in the normally very strong fourth quarter.

“It tends to tail out in the first quarter … the market over the next few weeks will probably focus on weaker demand,” said analyst Michael Widmer at BNP Paribas.

AND

“Physical demand in the key demand centres continues to be lethargic with limited purchases,” Mr. Unni (Pradeep Unni at Richcomm Global Services) said, adding that gold could drop substantially in the next couple of months.

Click here to read the article…

 

Jim Sinclair’s Commentary

Pakistan Today

Hundreds cross from Afghanistan to attack Pakistani military
Monday, January 12, 2009

KABUL, Afghanistan — Vice President-elect Joe Biden promised U.S. support for Afghanistan’s struggle against terrorism, drugs and corruption in a visit Sunday to an area of the nation that is a Taliban stronghold.

The future of the region where al Qaeda planned the Sept. 11 attacks "affects us all," Biden said.

Underscoring the difficulty of the situation, hundreds of militants crossed into the frontier area of Pakistan from eastern Afghanistan and attacked paramilitary forces on the same day that Biden visited Afghanistan’s southern Kandahar and Helmand provinces.

More…

Afghan rebels strike Pakistan military camp
Assault shows Taliban allied across border
By Laura King
Los Angeles Times / January 12, 2009

ISLAMABAD, Pakistan – Hundreds of militants crossed over from Afghanistan to attack a Pakistani military outpost yesterday, officials said, in an illustration of the merging of the Taliban insurgency on the two sides of the border.

The attack pointed up the growing boldness of militants operating in the lawless tribal areas abutting Afghanistan at a time when the Pakistan government has diverted some forces to the frontier with India.

While stepping up their campaign against government troops, the insurgents also employed extreme forms of cruelty to intimidate civilians in the tribal areas.

More…

Pakistan’s Jamaat ‘ban’ lie nailed
12 Jan 2009, 1012 hrs IST, Times Now

NEW DELHI: TV channel Times Now has exposed yet another of Pakistan’s lies — Islamabad may want the world to believe that it has cracked down on the Jamaat-ud-Dawa, but that is far from the truth.

There is concrete evidence now that the Lashkar-e-Taiba’s front organization has re-emerged in the form of Tehreek-e-Tahafuz Qibla Awal.

Times Now has got visuals from Lahore, where the Tehreek recently held a rally. Addressing that rally were some of the top Jamaat and Lashkar leaders. The Jamaat-ud-Dawa is clearly going about with business as usual, just under a different name.

More…

Posted at 3:41 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

With crude oil getting whacked and the Dollar having another one of those “let’s get out of risky trades” rallies, gold had as much chance as a snowball at one of Al Gore’s global warming symposiums (Note to Al – look out the window every now and then if you want to learn something – that white stuff that is everywhere is called ‘snow’). It collapsed through downside support near $840 and continued lower driven by sell stops until it breached the $830-$828 support level. If gold cannot recapture that $830 level and hold above it, technically-related selling pressure will increase. Support now emerges near the 40 day moving average at $814 with the 100 day moving average just beneath that at $810. Should gold move down into that region, it will be critical from a technical standpoint for the market to attract quality buying or face a much greater exodus of longs that could bring the market down to $800 or below. First resistance is back near $840 and then at today’s high. Above that is $880 which is the level capped by the bullion banks.  Last Friday’s release of the Commitment of Traders data proved that it was that same crowd which one again stymied gold’s forward advance, much to the chagrin of the newsletter writers and hedge fund ninnies who were again made fools of as they chased prices higher only to have their pockets summarily picked by these vultures.

Note to the fund managers – this is not the soybean market – if you wish to make money playing the paper gold game against the bullion banks then have the good sense to alter your losing strategy and begin accumulating gold on weakness instead of the brain-dead and discredited method of chasing momentum higher. That will not work for gold. It has not worked for 8 years – why should things be any different in 2009?

Judging from the open interest readings, there are a large number of new speculative short positions being placed in this market. The bullion banks use this selling to cover existing shorts as the markets moves lower in addition to that of exiting longs. Over the last eight years, spec selling into weakness has not proved to be a profitable strategy either. The only way to have consistently made money in the gold market has to buy into weakness and sell into strength – the EXACT OPPOSITE of what these tech driven funds practice.

As a further point of note – the index funds spent the entire portion of their day today running out of all the various commodity markets that they had just run into over the past week as they rebalanced their portfolios. The commodity circus continues…. Corn went limit down, soybeans were beaten back and wheat puked – deflation is back in vogue where last week it was inflation. Copper in particular was mauled which it should have been after the stupid index fund buying of last week. Don’t like the current psyche – stick around another week or so; next week it will probably be hyperinflation only to be followed by a return to the barter system the week after that, and then a round circle back to deflation once again. Don’t feel bad if you cannot understand what the markets are saying right now – the market itself has no idea what it is saying – maybe it is attempting to get in touch with its inner child or some other sort of nonsense. Thanks fund managers for clearing things up for us all….

The impetus for knocking the grains lower was the USDA report this morning which came in with a bearish slant to it. Even at limit down corn is still 75 cents above its low made late last year and it still appears to me that prices went as low as they are going to go in that particular pit. Let’s continue to monitor both the grains and the crude oil to get some clues as to gold’s performance. Crude could not hold above $40 so a test of the low near $35 is right around the corner. What it does with that level will tell us whether a bottom is in this market as well or we are going to try for $30 before bottoming. Stay tuned.

Yen carry trade unwinding was definitely taking place today as all of the major currencies, with the exception of the yen, were down against the dollar with the British Pound getting hit particularly hard. Also, the commodity currencies, the Canadian, Australian and New Zealand dollars, were all sold down today – not a good sign for the commodity complex in general. Platinum and palladium both confirmed that move in the currencies by moving lower and further away from overhead resistance.

The charts of the HUI and the XAU are near clones of the paper gold chart at the Comex. Support near 262 – 263 in the HUI gave way while support near 107 in the XAU so far is holding, but barely. The XAU is oscillating around the 100day moving average as is the HUI. Their shorter term moving averages have now turned lower confirming a short term trend change. We will have to see where buyers surface in this sector before feeling confident that the selling is exhausting itself. It is unclear to me right now where that might be although 102 for the XAU looks to be a logical region as there is a gap on the chart with that level serving as the top of that gap and 99 the bottom. If 107 fails, prices will work into this gap. On the upside, the index will need to get back above 118 to turn the charts friendly.

Bonds resumed their uptrend this morning as the euphoria over an improving economy due to the incoming administration’s fiscal stimulus plan faded as swiftly as the morning dew. That, plus a downgrade of Spanish debt this morning from S&P sent European debt lower with a flow into US debt in its place. Talk that Spain’s ‘AAA’ rating was going to be downgraded sent the euro lower. The Swiss Franc was able to withstand the selling that hit some of the European currencies. Whether this was safe have buying or an unwind of the Swiss Franc carry trade is unclear to me at this point. The Swissie, along with the yen, have both been recipients of these carry trades although not to the same extent as the latter. Either way, it moved slightly higher today.

About the only good thing that might be said for gold is that Jack Bauer is back on the trail of the bad guys in 24 (you know it is a bad day when we have to resort to fiction to look for inspiration!). Then again, the way the show’s execs have neutered him the last two seasons, maybe he is going to end up singing along with them and playing all around nice guy. Maybe Rambo can come back out of retirement once again and beat them with a cane.

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

January1209Gold1230pmCDT.jpg

Posted at 1:21 AM (CST) by & filed under In The News.

Monty Guild’s Commentary

This is why China will dominate. They behave more intelligently than the politically driven west.

China makes strategic use of commodity collapse
Tue Jan 6, 2009 2:45am EST
By Eadie Chen – Analysis

BEIJING (Reuters) – China’s government is using the collapse in commodity prices to further its domestic agenda, with support for stricken sectors tailored to speed up reform plans rather than rescue ailing companies or prop up prices.

To survive plummeting demand for exports — a sharp turnaround after several years of booming global demand — many industries are looking for state help and consolidation.

But China’s policymakers are sticking to their economic blueprints and not letting sympathy for troubled corporates overwhelm longer-term priorities. Instead, they are favoring the strongest in each industry in a drive toward consolidation, and at the same time using low prices as a chance to stock up.

On Monday, it emerged that China was poised to buy up thousands of tonnes of rubber and sugar to create a bigger state buffer of supplies for the future, adding to efforts to enlarge stocks of everything from oil to corn to industrial metals.

At the same time, however, it’s letting small coal mines go to the wall, seizing a chance to make good on years of rhetoric, as well as allowing smaller, less efficient metal producers go under.

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Jim Sinclair’s Commentary

Today in Pakistan:

Crowd tries to attack US consulate in Pakistan
Jan 11 11:56 AM US/Eastern
By ASHRAF KHAN

KARACHI, Pakistan (AP) – Security forces used tear gas and batons to repel anti-Israel protesters who tried to attack a U.S. consulate in Pakistan on Sunday, as tens of thousands of people demonstrated worldwide against Israel’s offensive in the Gaza Strip.

Israel launched its campaign in Gaza on Dec. 27 to stop rocket fire from the militant Palestinian group Hamas. Gaza health officials say nearly 870 Palestinians have been killed, roughly half of them civilians. Thirteen Israelis have also died.

Tens of thousands of angry demonstrators protested Sunday across the Arab world, in Europe and Asia.

Some 2,000 protesters in the Pakistani port city of Karachi burned U.S. flags and chanted anti-Israel slogans, and several hundred of them marched on the U.S. Consulate, senior police official Ameer Sheikh said.

"They were in a mood to attack," Sheikh said. "They were carrying bricks, stones and clubs."

A U.S. Embassy spokesman in Islamabad, Lou Fintor, said the protesters did not get close to the consulate, which was closed Sunday.

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Jim Sinclair’s Commentary

Turkey is a victim.

Turkey coup plot arrests now at more than 100
By SELCAN HACAOGLU

ANKARA, Turkey (AP) — A Turkish court formally arrested 14 more people Sunday for ties to an alleged secularist plot by ultranationalists to bring down the Islamic-rooted government, bringing the total of people involved in the case to more than 100.

The prime minister said the crackdown will shed light on a network of renegade agents within the state and make Turkey transparent. Critics say it is designed to silence the government’s opponents.

The case highlights a difficult question about who holds the levers of power in a nation where tensions between secularists and Islamists, and liberals and rightists, have created deep fault lines in the country.

The problem is aggravated by key demands from the European Union — which Turkey hopes to join — to reduce the military’s influence in politics, make security officials accountable for torture and grant more rights to the country’s Kurds.

Over the weekend, an Istanbul anti-terror court formally arrested and jailed 18 coup plot suspects, including a former police chief and four active duty military officers. Fourteen of the 18 were arrested Sunday.

Police detained another 33 suspects in the case Sunday and displayed confiscated weapons. Prosecutors say the plot aimed to destabilize Turkey through a series of attacks and trigger a coup in 2009.

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Jim Sinclair’s Commentary

Plausible Denial?

U.S. Rejected Aid for Israeli Raid on Iranian Nuclear Site
By DAVID E. SANGER
Published: January 10, 2009

WASHINGTON — President Bush deflected a secret request by Israel last year for specialized bunker-busting bombs it wanted for an attack on Iran’s main nuclear complex and told the Israelis that he had authorized new covert action intended to sabotage Iran’s suspected effort to develop nuclear weapons, according to senior American and foreign officials.

White House officials never conclusively determined whether Israel had decided to go ahead with the strike before the United States protested, or whether Prime Minister Ehud Olmert of Israel was trying to goad the White House into more decisive action before Mr. Bush left office. But the Bush administration was particularly alarmed by an Israeli request to fly over Iraq to reach Iran’s major nuclear complex at Natanz, where the country’s only known uranium enrichment plant is located.

The White House denied that request outright, American officials said, and the Israelis backed off their plans, at least temporarily. But the tense exchanges also prompted the White House to step up intelligence-sharing with Israel and brief Israeli officials on new American efforts to subtly sabotage Iran’s nuclear infrastructure, a major covert program that Mr. Bush is about to hand off to President-elect Barack Obama.

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Jim Sinclair’s Commentary

This is the problem. It is as much internal politics, the emergence once again of the feared (by present political parties in power) BJP that demands strong secular actions as it is terrorism sponsors, not the Pakistan government at the top but at almost every level below that.

Either "UPA" acts or "BHP" governs is the political challenge being laid down now.

Time for action against Pakistan: BJP
11 Jan 2009, 0448 hrs IST, TNN

BHOPAL: Time has come for India to move away from waging a war of words with Islamabad to taking action, BJP president Rajnath Singh said in Bhopal on Saturday supporting military action against terrorist outfits based in Pakistan.

"India has no other option but to take military action against Pakistan,” he said.

"The Prime Minister and his council of ministers have only been giving statements, which is not enough. The Union government should stop this ineffective verbal war with Pakistan. There is no need to just create a war hype in the country without real action. Since Pakistan is not taking any initiative to stop terrorist organisations within its territory, the time has come for us to take the world community into confidence and go for military action against the country which will not stop terror organisations from killing our innocent citizens,” Rajnath said.

The BJP president said, "Our country needs to show some diplomatic skill and urge the international community to support India against Pakistan. There is more than enough evidence that Pakistan’s intelligence agency, ISI, is directly linked to terror organisations and has been helping terrorist groups to carry out attacks in India and other parts of the world. Indian diplomacy should concentrate on bringing ISI on the international radar as an intelligence agency with questionable credentials.”

The UPA-led government should have snapped its diplomatic ties with Pakistan immediately after the Mumbai serial train blasts which killed 200 people, he said. "India has blundered, our assessment of Pakistan has been wrong. We should have taken strong steps against Pakistan after the Mumbai train blasts. Instead, our Prime Minister justified that Pakistan too is a victim of terror attacks. It was a mistake on our behalf to sign an agreement for a joint terror mechanism with Pakistan.”

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Jim Sinclair’s Commentary

Turkey comes on the heels of Pakistan, even if intelligence agencies are snoozing.

Turkey imprisons four army officers in Ergenekon case

ANKARA, Jan. 10 (Xinhua) — A Turkish court early on Saturday sentenced to prison four army officers in the ongoing "Ergenekon" investigation, the semi-official Anatolia news agency reported.

Five prosecutors, including Zekeriya Oz, the top prosecutor of the ongoing Ergenekon case, demanded a criminal court in the Turkish largest city of Istanbul to imprison four army officers on charges of being members of the "Ergenekon terrorist organization," according to the report.

The court decided to send the four officers to prison, and release two others, said the report.

An alleged criminal network known as "Ergenekon" was uncovered after police seized 27 grenades, TNT explosives and fuses in a shanty house in Istanbul on June 12, 2007.

Police waged operations in several provinces and detained a number of people, including retired senior army officers, journalists and businessmen, for their alleged involvement in the network.

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Police discover weapons, hand grenades in Turkey coup probe: report
Posted Sat Jan 10, 2009 6:49pm AEDT

Turkish police have unearthed weapons and hand grenades near the capital of Ankara in a probe into an alleged plot to topple the Islamist-rooted government that has fuelled political tensions, Anatolia news agency reports.

The dig at a forest in the suburb of Golbasi resulted in the discovery of two light anti-tank weapons, 10 hand grenades, bullets and explosives, Anatolia said.

Using metal detectors and sniffer dogs, anti-terror police dug the area on the basis of documents seized from former police chief Ibrahim Sahin, one of some 40 suspects detained Wednesday, it said.

Sahin was one of the most prominent figures involved in a major scandal in 1996 which unveiled collaboration between members of the security forces, politicians and gangsters in acts outside the law, including murders of Kurdish dissidents.

Some media reports suggested the dig could shed light on the fate of weapons procured from Israel, which went missing during Sahin’s term and are believed to have been used in illicit operations.

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