Posted at 1:07 PM (CST) by & filed under Guild Investment, Jim's Mailbox.

Dear Jim,

Please note this Reuters memo from yesterday. Norway has the safest bonds while Germany is also safe.

Your pal,
Monty

Norway safest govt debt investment, Ecuador riskiest -study
Tuesday, December 16, 2008 2:14:06 AM (GMT-08:00)
Provided by: Reuters News

LONDON: The country least likely to default on its sovereign debt in the next five years is Norway and the country most likely to is Ecuador, according to a study by data provider CMA Datavision.

Using an "industry standard" model and its own credit default swap (CDS) pricing data, CMA Datavision says the cumulative probability of default (CPD) for Norway over the period is three percent, and 93 percent for Ecuador.

The United States’ CPD is six percent, making it the sixth most financially stable sovereign behind Norway, Japan, Germany, France and Finland.

Argentina, Ukraine, Pakistan and Venezuela all have a CPD of 80 percent or higher, according to the study.

The cost of insuring against governments defaulting on their debt has ballooned in recent months as the global economic downturn has forced them to announce heavy borrowing plans to pay for large-scale fiscal packages of spending and tax cuts.

The CDS rates on US, UK and most euro zone sovereign debt have hit record highs recently. Looking at CDS pricing in isolation, investors are paying more to insure against the UK government defaulting than McDonald’s.

More…

Posted at 1:01 PM (CST) by & filed under General Editorial.

Dear Friends,

Now that the wind has turned on both gold and gold shares we must not cease in our fight for what is right – a level playing field as mentioned in point 1. If we do not do our duty, your duty, both the Comex short side manipulators and the naked/pool shorts will be back again.

Respectfully yours,
Jim from Africa

 

Comrades in Golden Arms (CIGAs),

I call upon you for positive action.

We need 100,000 emails to Cox using the data of #2 below.

1. The Comex must be stopped. I know there are two of you reading this that can by yourself stop the Comex without the need of anyone’s assistance. If I have helped you now it is time to return the favor.

Please stop the Comex. Reduce their warehouse by only 50% and the short manipulators are done.

We do not wish to break the playing board, we only wish to equal the advantage between the public and the up to now pocket picking short gold bank manipulators.

2. The short pools and naked short sellers have caused us unprecedented and undeserved losses of capital value. The total capital value loss in junior gold exploration, development and producer shares is well over $50 billion.

Let us use their Mea Culpa on Madoff to say that the SEC has blown another one by supporting the useless thieves who violate the law daily using Canada as the jitney into the US as naked and pool short sellers. This is so blatant, so clear, so evident that we can only assume that the SEC is purposely looking the other way.

S.E.C. Issues Mea Culpa on Madoff
By ALEX BERENSON and DIANA B. HENRIQUES
December 17, 2008

The Securities and Exchange Commission said Tuesday night that it had missed repeated opportunities to discover what may be the largest financial fraud in history, a Ponzi scheme whose losses could run as high as $50 billion.

The commission said it received credible allegations about the scheme at least nine years ago and will immediately open an internal investigation to examine why it had failed to pursue them aggressively.

The S.E.C. issued the statement hours after Bernard L. Madoff, the 70-year-old Wall Street executive accused of operating the scheme, discussed the fraud with federal authorities at a meeting in New York on Tuesday, according to people briefed on the meeting.

Mr. Madoff kept several sets of books and false documents and lied to regulators when they questioned him in previous examinations of his firm, Bernard L. Madoff Investment Securities, said Christopher Cox, the chairman of the S.E.C.

Investigators never used subpoena powers to obtain information, but rather “relied on information voluntarily produced by Mr. Madoff and his firm,” Mr. Cox said.

When he was arrested last week, Mr. Madoff estimated that investors lost as much as $50 billion in the fraud, according to court filings. Mr. Madoff has said the scam was a Ponzi scheme, a type of fraud in which early investors are paid off with money from later victims, until no more money can be raised and the scheme collapses.

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Posted at 12:48 PM (CST) by & filed under In The News.

Dear CIGAs,

If you feel gold is free of Madoffs you are dreaming.

Jim Sinclair’s Commentary

Gold will go to $1200 and then $1650 on its way to Alf’s lofty levels.

Quantitative Easing and Fiscal Stimulation guarantee that.

After rate cuts: The Fed’s new ball game
With rate cuts doing little to help boost the economy, the Fed has begun to print money to finance its liquidity programs. But that could spell disaster down the road.
By David Goldman, CNNMoney.com staff writer
Last Updated: December 15, 2008: 5:08 PM ET

NEW YORK (CNNMoney.com) — After what is likely to be the last in a long series of interest rate cuts Tuesday, the Federal Reserve is expected to continue its new, perhaps more effective monetary strategy: printing lots of money.

The Fed traditionally uses its rate-cutting tool to encourage lending and boost the economy. But despite a staggering 4.25 percentage points of cuts since September 2007, the economy has not improved – in fact, it has gotten worse, drifting in to a recession last December.

Economists expect the Fed to produce one more cut to its benchmark funds rate at the conclusion of its Federal Open Market Committee meeting Tuesday, trimming the rate to 0.5%, the lowest level on record. Whether one last rate cut will help stimulate economic growth remains to be seen.

At any rate, the Fed will likely continue to use its new favorite tool, quantitative easing, "Fed-speak" for pouring new money into the economy.

More…

Jim Sinclair’s Commentary

Stop the Comex and I promise you $1250 in gold immediately!

RPT-FEATURE-Nervy investors spur rush at Swiss gold refiners
Wed Dec 17, 2008 8:04am EST
By Arnd Wiegmann and Lisa Jucca

MENDRISIO/ZURICH, Switzerland, Dec 17 (Reuters) – Sealed off by grey concrete walls and barbed wire, the workmen in protective glasses and steel-toed boots at this smelter cannot work fast enough to meet demand from the nervous rich for gold.

This refinery near Lake Lugano in the Alps is running day and night as people worried about recession rush to switch their assets into something that may hold its value.

"I have been in the gold business for 30 years and I have never experienced anything like this," said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world’s three largest.

"Production has dramatically increased since the middle of the year. We cannot cope with demand," said Schnellman, wearing a gold watch on his wrist.

Spot gold hit a record $1,030.80 an ounce on March 17. It fell below $700 in late October, partly because investors sold their holdings to cover losses in equity and bond markets hit by the credit crisis, and is now around $830 an ounce.

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Jim Sinclair’s Commentary

For the real numbers subscribe to www.shawdowstats.com. The real numbers push events after the spin has spun itself out as it has now.

Treasury Reports 2008 Federal Deficit of $1.009 Trillion (GAAP-Based), 
$5.1 Trillion Including Social Security/Medicare
Total U.S. Government Obligations at $66 Trillion
Against what had been the recently publicized, cash-based "official" fiscal 2008 (year-ended September 30th) federal deficit of $454.8 billion, and similar $161.8 billion deficit in 2007, the U.S. Treasury reported this afternoon (December 15th) that the 2008 deficit [change in net position] was $1,009.1 billion, versus $275.5 billion in 2007, using generally-accepted accounting principles (GAAP). Since 2002, the Treasury has been reporting the government’s finances using annual statements prepared using accounting standards similar to those used in corporate America, but the statements typically have minimal, if any, following in the popular financial media.

The new numbers, however, still do not account for the annual change in the net present value of unfunded Social Security and Medicare liabilities. Counting those changes, as a corporation would for its pension and healthcare liabilities for retirees, the 2008 annual deficit was $5.1 trillion, versus $1.2 trillion in 2007. Such showed total U.S. obligations – gross federal debt outstanding plus the net present value of unfunded liabilities – at $66 trillion, roughly 4.6 times the level of reported U.S. GDP, and greater than total estimated global GDP.

These numbers remain unsustainable, already are deteriorating severely for fiscal 2009, and eventually will doom the U.S. dollar to hyperinflation, as discussed in the Hyperinflation Special Report at www.shadowstats.com.

I have not had a chance to review the statements in careful detail, yet, and there apparently have been some minor accounting changes that do not alter the picture meaningfully. A more complete analysis will follow in the upcoming newsletter. The full financial statements, including the GAO’s auditing comments, are available at: http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

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Posted at 3:47 AM (CST) by & filed under Guild Investment.

Dear CIGAs,

Policymakers have a duty to “Eliminate as completely as possible all of the inbuilt elements that are amplifying the booms and busts,” a quote in today’s Financial Times by Jean-Claude Trichet, the President of the European Central Bank.

Let us hope that Mr. Trichet is speaking of derivatives and not just excessive leverage. If derivatives continue to be manufactured we will have more busts and more booms. Derivatives which amplify leverage must stop being created and must be transacted through a documented clearing intermediary. Derivative sellers must use only strong and viable counterparties.

We believe that today was a major cycle turn day and the rally in gold was a result of dollar weakness. Today’s price action demonstrates to us that the dollar strength has ended and a new downtrend in the US dollar was established about 8 trading days ago. In our opinion, this is bullish for gold.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Posted at 3:12 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

I am just returning from a short trip and am unable to put together much of a commentary on today’s market action so please reference the chart for the technical picture. I do want to note however that the HUI is trading above the 100 day moving average, a significant technical achievement. The XAU has not quite mustered the strength to best that level but the session high from yesterday and its current session high is right on that level so it is attempting a breakthrough. Should both indices manage two consecutive closes above that level, especially with the 10, 20, 40 and 50 days all turning higher, it will be difficult for even the most die-hard gold bear to argue against the move.

The fact is that the US Dollar’s horrendous fundamentals have caught up with it. The bear market rally caught a tremendous amount of speculative longs on the wrong side as the bottom fell out of it. We have remarked in the past that the rally in the dollar had NOTHING to do with fundamentals or safe haven buying as the talking heads in the press would have you believe but was rather the effects of a short-lived but massive repatriation of investment funds from abroad by US based hedge funds looking to deleverage, cut losses and meet margin calls and redemptions. I am particularly interested in what it is going to do after the new year begins as that will be the key to many other markets.

Click chart to enlarge today’s action in Gold as of 12:30pm CDT with commentary from Trader Dan Norcini

December1608Gold1230pmCDT

Posted at 6:39 PM (CST) by & filed under General Editorial.

My Dear Friends,

Once again the gold banks stole your golden candy. They will do it again tomorrow and continue until they really have to trade real gold.

My question to the most financially able among you is as follows:

Have you had enough of the daily short side manipulation carried on by the same people blatantly on the floor of the make believe gold paper gold exchange, the COMEX? Over the weekend they thumbed their noses at you in an article concerning the increase in delivery taking. The COMEX member quoted laughed at us saying they had a warehouse of $8 billion that was too big to feel any effort to take delivery.

Maybe Madoff didn’t know about the COMEX. $8 billion in today’s world is chump change, however the chumps at the evil COMEX can’t count the amount of fingers they have.

To our most financially able readers, those who have all the physical gold they want, it only takes 21,000 one hundred ounce bars taken delivery of and removed from the COMEX to convert that market to a cash market from a make believe no gold, paper gold market and price maker.

STOP THE COMEX.

Respectfully yours,
Jim

Posted at 2:02 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

With a feeding frenzy to point out how the biggest of the big can be major turkeys, no one has asked the inviting question, what did he do with the money? It is hard to spend billions on oneself.

Top banks admit huge losses in Wall Street ‘pyramid’ fraud
Dec 15 09:11 AM US/Eastern

Top world financial groups on Monday revealed massive potential losses from an alleged scam run by Wall Street trader Bernard Madoff, admitting they were fooled by a classic pyramid investment fraud.

British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.

Royal Bank of Scotland said it could lose about 400 million pounds (598 million dollars, 444 million euros), joining a growing list of banks and investors in Europe, Asia and the United States struck by the scandal.

Shares in Santander, the biggest bank in Spain and the second largest in Europe after HSBC , plunged after the lender said it had an exposure of more than three billion dollars to Madoff Investment Securities in New York.

France’s Natixis investment bank, already brought low by subprime losses, put its maxiumum exposure at 450 million euros (606 million dollars). Retail banking giant BNP-Paribas revealed potential losses of 350 million euros.

More…

Jim Sinclair’s Commentary

Where is the money?

Wall Street ‘fraud’ victims continue to rise
December 15, 2008

The list of institutions and individuals set to lose billions of pounds after investing in a fund run by Bernard Madoff, the Wall Street broker and former Nasdaq chairman, is growing by the hour.

The list of institutions and individuals set to lose billions of pounds after investing in a fund run by Bernard Madoff, the Wall Street broker and former Nasdaq chairman, is growing by the hour.

Royal Bank of Scotland (RBS), the bank majority-owned by the Government, today admitted that it had an exposure of £400 million to the $50 billion alleged fraud.

It joins Man Group, the world’s largest listed hedge fund manager, HSBC and Santander, the Spanish group that owns Britain’s Abbey, Alliance & Leicester and Bradford & Bingley, which are exposed to Mr Madoff’s business.

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Jim Sinclair’s Commentary

The moment these non US entities dumped Fanny and Freddie and jumped into practically no interest US Treasuries for safety, the US dollar rally crumbles and kicks those geniuses in the rear.

Foreign investors fled agencies, bought T-bills
Monthly inflows hit record as investors sought safety from U.S. troubles in U.S. assets
By Laura Mandaro, MarketWatch
Last update: 1:47 p.m. EST Dec. 15, 2008

SAN FRANCISCO (MarketWatch) — Foreign investors shed their holdings of Fannie Mae and Freddie Mac debt after the U.S. government’s takeover of the floundering mortgage institutions, and instead piled into short-term Treasury bills, October data released Monday show.

The rush to safety lifted monthly inflows of net foreign investments in U.S. securities to a record high of $286.3 billion, said the U.S. Treasury in its monthly Treasury International Capital, or TIC, report.

The upshot was that foreigners increased their holdings of U.S. dollar assets even after the U.S. financial system delivered a list of historic failures and near-misses, including the September bankruptcy of Lehman Brothers, and then had its worst October for stock trading since 1987. See article on October trading records.

"For now, the U.S. dollar has reassumed its reserve-currency primacy," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Foreign private investors, central banks and other overseas institutions sold a net $50.2 billion in Fannie Mae and other government agency bonds in October, a reversal from the $6.2 billion in net purchases made in September, the U.S. Treasury said.

The rush for the exits followed the U.S. government’s decision to seize formal control of Fannie Mae and Freddie Mac after the government-sponsored enterprises – which had operated as independent, publicly traded mortgage financers with the implicit backing of the U.S. government – skirted near bankruptcy.

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Jim Sinclair’s Commentary

Oh what beautiful morning. Those that flamed the planet with their OTC derivatives and gold bearishness are becoming a bad chapter in world history.

Citadel joins rush to lock up funds
By Henny Sender in New York
Published: December 14 2008 19:00 | Last updated: December 14 2008 19:00

Citadel Investment Group has joined the rush of hedge funds suspending redemptions to investors, a development that is in effect locking up hundreds of billions of dollars in cash during a volatile period in global markets.

Ken Griffin, Citadel’s founder, sent a letter on Friday to investors in the group’s flagship Kensington and Wellington funds telling them that the group had decided to hold on to their money at least until March.

Citadel has about $15bn under management after suffering big recent losses.

Citadel trades in many of the markets hardest hit by recent volatility – including convertible bonds, corporate bonds, credit derivatives and so-called “pipes”, or private investments in public equities.

Citadel did not respond when called for comment.

Citadel joins a growing list of hedge fund groups – including Tudor, Farallon and DE Shaw – that have imposed restrictions on the ability of investors to withdraw money.

More…

 

Jim Sinclair’s Commentary

Kerry forgot to add to his statement the Pakistani Intelligence, the Pakistani Military Leaders, Pakistani Military Grunts and a significant amount of Pakistani civilians.

I imagine the Washington Post meant a great deal of the Pakistan population makes up the bad guys this article suggests be killed forthwith.

The more of this rhetoric, the closer we come to some entity with support from the US, Great Britain and others sending in troops. This will come after a major PR campaign to color the place all bad, making them all fair targets.

U.S.’s Kerry urges Pakistan to control spy agency

Mon Dec 15, 2008 8:05am EST

NEW DELHI, Dec 15 (Reuters) – The Pakistan military’s powerful spy agency must be tightly controlled and not allowed to act independently, U.S. Senator John Kerry said on Monday after meeting Indian leaders to discuss the deadly Mumbai attacks.

India has blamed last month’s attacks that killed 179 people on the banned Islamist militant group Lashkar-e-Taiba, which analysts say has long had ties with the Pakistan military’s Inter-Services Intelligence (ISI) spy agency.

New Delhi has also demanded Islamabad do more to stop such militant groups from using Pakistani soil to launch attacks on Indian cities.

The Mumbai attacks have renewed suspicion in India and elsewhere about ties between Lashkar and the ISI, ratcheting up tensions between the nuclear-armed neighbours.

"In the United States, our intelligence agency is obviously held accountable, not just to the administration that runs it but also to the United States Congress and, through the Congress, to the people," Kerry told reporters in New Delhi after meeting Indian Prime Minister Manmohan Singh.

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Posted at 1:48 PM (CST) by & filed under General Editorial.

AgesofGoldDear CIGAs

I want to bring your attention to some recent correspondence I had with Timothy Green, a veteran journalist and seasoned gold bug. For almost three decades, Green worked as a consultant on the annual gold surveys of Consolidated Gold Fields and Gold Fields Mineral Services (now GFMS), focusing on the Middle East, India and the Far East.

His first book, "The World of Gold," came out in 1968 and has been revised several times. His latest book, “The Ages of Gold,” is reviewed below and no doubt will see several revisions in the years ahead. Green has written for Life, Fortune, The Smithsonian, Readers Digest, the Observer and several other major publications and is eminently qualified to discuss the often complex but never boring subject of gold.

Green believes that gold’s safe haven status has become a key driver in the current marketplace, noting its strong performance against several major currencies including the Euro and Sterling. He’s also certain that "grassroots gold buying of coins and small bars will continue – and, importantly, people will hold that metal for a long time. That kind of buying is not a quick trade, but a generational thing."

"In 1930s in similar situations Europeans became great hoarders of gold coin, especially in France, Belgium and Switzerland, and hung on for decades. When I first looked at the gold market in Paris in l966 the story was still the hoards under the bed and in the cabbage patch. In short, a new generation of long term hoarders is being established," he pointed out.

Green sights Ralph Hawtrey, a distinguished economist at the British Treasury in the late l930s who remarked: "There is a very real convenience in using metallic reserves. Other assets take the form of debts, and every debt depends for its value on the person and local situation of the debtor. Gold is an anonymous asset, and is capable of transportation from one place to another without retaining any link with the place of origin."

"In writing my book, The Ages of Gold, I noted that Hawtrey’s perception of the metal as a unique asset remains true to this day. Thousands of small investors now buying gold coin and small bars seem to agree," he said.

The Ages of Gold is the story of the mines, the markets, the goldsmiths and the merchants who over the past 6,000 years made gold a symbol of wealth and power. Green chronicles gold’s origins in Mesopotamia, Egypt, Troy, Minoan Crete, Greece, Rome, Byzantium, Pre-Columbian South America along with the voyages for West African gold by the Phoenicians. His carefully crafted, well-illustrated 480 page tome masterfully links the modern world of gold with the ancient one which is no small feat.

The Ages of Gold is available online at the GFMS website (http://shop.gfms.co.uk). While you are there, don’t forget to check out their annual gold, silver and other metals surveys which are renowned throughout the minerals industry.