Posted at 3:14 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

As goes Motors so goes the USA.

GM stock hit by bankruptcy report

US carmaker General Motors has seen its shares fall sharply after a report that the US government wants the firm to start bankruptcy proceedings by 1 June.

The New York Times said the Treasury Department wants a court-led reorganisation, but the firm wants to reorganise without going to court.

Shares in the firm were 16% lower at $1.71 in afternoon trade in New York.

On 30 March, the US government gave GM 60 days to develop a new restructuring plan and gain further state aid.

‘Fast track’

The White House has already given the firm $13.4bn (£9bn) in public money to prevent it from collapsing, but any additional aid requires the firm to meet tougher rules.

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Jim Sinclair’s Commentary

Oh my God, Mark to Market is called a gimmick!

–noun
1. an ingenious or novel device, scheme, or stratagem, esp. one designed to attract attention or increase appeal.
2. a concealed, usually devious aspect or feature of something, as a plan or deal: An offer that good must have a gimmick in it somewhere.
http://dictionary.reference.com/browse/gimmick

Steve: FASB Retreats

Steve Forbes, 04.13.09, 06:00 AM EDT

Investors cheered as the accounting gimmick known as mark-to-market was softened by the Financial Accounting Standards Board.

Investors cheered as the accounting gimmick known as mark-to-market was softened by the Financial Accounting Standards Board. And not a moment too soon, as these rules were destroying our financial system. We can allow ourselves a moment of thanks that common sense prevailed for once. But there is still much work to be done.

Enacted to prevent another Enron, mark-to-market never made sense during our current crisis. It forced banks to write assets down to market prices, even if they hadn’t sold them or even if there was no market. During a deep recession, this proved a disaster. Can you imagine writing down a home you hadn’t sold? It would bankrupt you, the way mark-to-market nearly bankrupted us all.

The reforms, though, should have been more sweeping. Recalcitrant regulators could still mitigate much of the good. To get things really moving, our government now needs to fix our atrocious tax code. Individuals and businesses spend 7.6 billion hours a year filing their taxes, at a cost of $193 billion. It’s immoral to squander so much time and money. Barack Obama could sideline Republicans by instituting a flat tax, but this is likely too progressive for this president.

Another needed action is to tie the dollar back to gold. All these new spending programs will be paid for with inflationary dollars, creating a new risk for down the road. Alexander Hamilton understood that tying the greenback to gold created economic progress and a lawful society. And it did so for almost 200 years. We need vision like that again, or any current rallies could prove short-lived.

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Jim Sinclair’s Commentary

Amateurs or professional. He is right because there is no practical means of draining the unprecedented injection of monetary stimulus.

Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923
April 12, 2009

I am an amateur economist. But, one doesn’t need years of schooling to be a better "economist" than Ben Bernanke. One merely needs to take the blinders off and release common sense. A broad background in law, economics and history helps, but it is not absolutely necessary. Economics is the study of human nature as it applies to money. So, it is precisely those who are narrowly educated, like some professional economists who don’t study enough history, take an intensely academic viewpoint on things, and who don’t understand fundamental human nature, who get things wrong. A narrowness of outlook and training may be blinding people like Ben Bernanke from reality, but, if they are operating knowingly and intentionally, as some claim, the situation is even more frightening.

Unfortunately, Ben Bernanke has been wrong on almost all his predictions concerning the course of this crisis. That has been true since the beginning. Where, then, can we obtain the confidence that he knows what he is doing, or, frankly, that he knows more than we do, as he should? Many wrong-headed people seem to believe that we must throw away common sense and listen to him, and the others who think like him, even though we have been consistently correct, over the past 4 years, and he has been consistently wrong. The American people understandably have little confidence in the Washington crowd. Is this surprising in light of the events? What assurance is there that they know how to address this situation, when they first failed to regulate the financial madness, and, then, afterward, were completely wrong on almost all economic projections, one after another?

One must reach the inevitable conclusion that neither Bernanke, nor his comrades, such as Timothy Geithner, actually "know" what they are doing. Instead, that crowd in Washington DC, think that if they throw money around, it will land somewhere, and help things. They are wrong. But, to partly achieve this goal, they have forced changes in accounting standards, legalizing misrepresentation of bank bookkeeping, and removed "mark to market" standards, replacing those standards with a system of "mark to fantasy" that is remarkably similar to that which previously existed and caused this crisis. "Mark to fantasy" accounting, now the order of the day once again, will allow insolvent banks to present the false appearance of big profits this quarter, even as they are really on the brink of failing. The end result will be more economic imbalances, as investors unknowingly misallocate their investment dollars to buy into the fraud.

In truth, there is only one way to save the zombie banks, and it is not through faked-up accounting books. The only way is to inflate their obligations away, while increasing the value of their assets at the expense of the rest of us. That appears to be the plan, if there is any plan. But, if Ben Bernanke and that crowd do know what they are doing, the most nefarious heist against the American people, as well as other innocent folks all over the world, is being planned. The upcoming massive inflation is going to be a stealth tax upon millions of innocent people, all for the benefit of a few still wealthy bank executives, who made huge mistakes, and should be forced to pay for those mistakes themselves. I will give Ben Bernanke and Timothy Geithner the benefit of the doubt and conclude, until presented with more evidence, that they simply don’t know what they are doing.

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Jim Sinclair’s Commentary

Here is a small example of how inflation begins to work itself through an economy as tax revenues start to seriously contract. Watch when tax revenues fall off the cliff.

Cities Turn to Fees to Fill Budget Gaps
By DAVID SEGAL
April 11, 2009

After her sport utility vehicle sideswiped a van in early February, Shirley Kimel was amazed at how quickly a handful of police officers and firefighters in Winter Haven, Fla., showed up. But a real shock came a week later, when a letter arrived from the city billing her $316 for the cost of responding to the accident.

“I remember thinking, ‘What the heck is this?’ ” says Ms. Kimel, 67, an office manager at a furniture store. “I always thought this sort of thing was covered by my taxes.”

It used to be. But last July, Winter Haven became one of a few dozen cities in the country to start charging “accident response fees.” The idea is to shift the expense of tending to and cleaning up crashes directly to at-fault drivers. Either they, or their insurers, are expected to pay.

Such cash-per-crash ordinances tend to infuriate motorists, and they often generate bad press, but a lot of cities are finding them hard to resist. With the economy flailing and budgets strained, state and local governments are being creative about ways to raise money. And the go-to idea is to invent a fee — or simply raise one.

Ohio’s governor has proposed a budget with more than 150 new or increased fees, including a fivefold increase in the cost to renew a livestock license, as well as larger sums to register a car, order a birth certificate or dump trash in a landfill. Other fees take aim at landlords, cigarette sellers and hospitals, to name a few.

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Jim Sinclair’s Commentary

Look at the new news for the West!

West Warned on Nuclear Terrorist Threat From Pakistan
April 12, 2009 by national

The next few months will be crucial in defusing a global terrorist threat that would be even deadlier than the conflicts in Afghanistan and Iraq, a leading Washington counter-terrorism expert warns.

David Kilcullen — a former Australian army lieutenant colonel who helped devise the US troop surge that revitalised the American campaign in Iraq — fears Pakistan is at risk of falling under al-Qaeda control.

If that were to happen, the terrorist group could end up controlling what Dr Kilcullen calls “Talibanistan”. “Pakistan is what keeps me awake at night,” said Dr Kilcullen, who was a specialist adviser for the Bush administration and is now a consultant to the Obama White House.

“Pakistan has 173 million people and 100 nuclear weapons, an army which is bigger than the American army, and the headquarters of al-Qaeda sitting in two-thirds of the country which the Government does not control.”

Compounding that threat, the Pakistani security establishment ignored direction from the elected Government in Islamabad as waves of extremist violence spread across the whole country — not just in the tribal wilds of the Afghan border region.

“We have to face the fact that if Pakistan collapses it will dwarf anything we have seen so far in whatever we’re calling the war on terror now,” Dr Kilcullen told The Age during an interview at his Washington office. Late last month, when US President Barack Obama unveiled his new policy on Afghanistan and Pakistan, he warned that al-Qaeda would fill the vacuum if Afghanistan collapsed, and that the terror group was already rooted in Pakistan, plotting more attacks on the US.

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Posted at 1:28 AM (CST) by & filed under General Editorial.

Dear CIGAs,

Many of you have wrote in asking about the Barron’s Financial Weekly article that mentioned me over the weekend. My official reply has been posted on the Chairman’s Corner section of the appropriate corporate site.

While many of you do not have any particular relationship to my corporate interests, comparing the Barron’s article to the readily available facts of the situation will prove to be an eye opener on the shortfalls of this well known publication’s fact checking abilities. I invite you all to compare the article with the facts of the situation and make your own conclusion.

Your friend,
Jim

Posted at 10:43 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

You need to maintain a sense of humor under all circumstances. You will have to agree with me that the following article is timely.

SEC Faults Its Handling Of Tips on Short Sales — Too Few Complaints Resolved, Report Says
Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, March 19, 2009; Page D01

"Only 123 of 5,000 naked short-selling tips were forwarded for further investigation, and none led to enforcement, the report said".

The SEC’s enforcement division disagreed with most of the report’s findings.  "There is hardly unanimity in the investment community or financial media on either the prevalence, or the dangers of, ‘naked’ short selling," it wrote.  The division added, "The people closest to the trading, with the deepest u nderstanding of and access to the data, did not see and refer any of the large-scale, damaging ‘naked’ short sale abuse."

Obviously under former SEC Chairman Christopher Cox, illegal naked short selling (FTD’s) was part of generally accepted SEC procedures.  "none led to enforcement"

However, under new leadership the SEC sounds like they may want to send a message to the FTD er’s. Time will tell.

New SEC Chairman Mary Schapiro is working to revamp the agency’s system for collecting tips and pursuing investigations.

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Jim Sinclair’s Commentary

Just in case you have not focused on it, the gross obligations of the US Government in February 09 passed the ENTIRE World GDP. That is fact, but hey, in today’s world it seems who cares, it is only paper. We can always make more and more paper, maybe.

Federal obligations exceed world GDP
Does $65.5 trillion terrify anyone yet?
Posted: February 13, 2009 11:35 pm Eastern
By Jerome R. Corsi
© 2009 WorldNetDaily

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

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Jim Sinclair’s Commentary

Please consider the implication to markets and inflation when, not if Pakistan implodes into Taliban hands.

Troops patrol streets in southwest Pakistan
AFP
QUETTA, Pakistan (AFP) — Paramilitary troops patrolled the streets Sunday to deter any violence as the Pakistani city of Quetta came to a standstill for a …
See all stories on this topic

Pakistan militants torch Afghan supplies
Reuters – USA
PESHAWAR, Pakistan (Reuters) – Taliban militants set fire on Sunday to 10 container trucks carrying supplies to Western forces in Afghanistan in a pre-dawn …
See all stories on this topic

Baluch militants kill six mine workers in Pakistan
Reuters – USA
By Gul Yousafzai QUETTA, Pakistan (Reuters) – Separatist militants in Pakistan’sBaluchistan province have claimed responsibility for killing six coal-mine …
See all stories on this topic

Posted at 3:32 PM (CST) by & filed under Jim's Mailbox.

Jim,

This woman from the FT was one of the few that called the current crisis well ahead of time. She rightfully has been named Journalist of the Year in the UK.

FRGCR here we come! Remember CIGA’s: you heard it here first, on JSMineset!

Regards,
CIGA Pedro

Dear Pedro,

This is no joke anymore. It is for real, but now FRGCR is being considered as part of the SDR more than dollars in the manner I have outlined to you.

Jim

Fiat Currencies May be Replaced by Gold Standard

Gillian Tett is the head financial writer for the Financial Times, one of the leading mainstream financial publications. Investment analyst and financial writer Yves Smith says of Tett:

[Whatever] Tett is writing about … will be taken seriously, since Tett is read by central bankers.

So it is newsworthy that Tett writes today that the odds of a return to the gold standard are increasing:

A panel at the World Economic Forum meeting in Davos … was asked to produce one concrete recommendation to fix the global financial crisis.

The top pick? … a new reserve currency, akin to an old-style gold standard….

Moreover, these musings about a gold standard are currently cropping up in all manner of unlikely places. One savvy European property developer (who aggressively sold most of his holdings in early 2007) recently told me that he is now moving a growing proportion of his assets from government bonds into gold, even at today’s elevated prices.

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Jim Sinclair’s Commentary

The following is from CIGA Hermit:

http://www.pbs.org/moyers/journal/04032009/watch.html

The Best Way to Rob a Bank Is to Own One

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout.
Here is the transcript of the video you can watch at the URL above
April 3, 2009

BILL MOYERS: Welcome to the Journal.
For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you’re about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.
WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.
BILL MOYERS: Bill Black was in New York this week for a conference at the John Jay College of Criminal Justice where scholars and journalists gathered to ask the question, "How do they get away with it?" Well, no one has asked that question more often than Bill Black.
The former Director of the Institute for Fraud Prevention now teaches Economics and Law at the University of Missouri, Kansas City. During the savings and loan crisis, it was Black who accused then-house speaker Jim Wright and five US Senators, including John Glenn and John McCain, of doing favors for the S&L’s in exchange for contributions and other perks. The senators got off with a slap on the wrist, but so enraged was one of those bankers, Charles Keating – after whom the senate’s so-called "Keating Five" were named – he sent a memo20that read, in part, "get Black – kill him dead." Metaphorically, of course. Of course.

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Geithner, Paulson Named in $200 Billion Lawsuit
AIG-related case claims they violated shareholders constitutional rights
April 10, 2009
© 2009 WorldNetDaily

A $200 billion lawsuit filed on behalf of shareholders of American International Group has been amended to include Treasury Secretary Tim Geithner, former Treasury Secretary Henry Paulson and former Securities and Exchange Commission C hairman Christopher Cox as defendants.

The case, filed earlier by a public interest law firm, Freedom Watch USA, is on behalf of shareholders of AIG who have watched the value of the company plummet by some $214 billion.

The class action lawsuit filed in federal court in Los Angeles is a "wide reaching" claim that will do what Congress cannot, said Freedom Watch USA founder Larry Klayman.

"The American people, not the compromised ruling elite in Washington, D.C., have begun a second American Revolution to take the country back from the con men on Wall Street, and on Pennsylvania Avenue – who under successive administrations played a central role in the meltdown of the U.S. financial system and economy," Klayman said.    

The amended complaint now alleges that the additional defendants violated the constitutional rights of the shareholders by denying them the right to their property, the shares themselves.

"The inspiration for this amendment was information disclosed by University of Missouri professor William K. Black on the Bill Moyers’ PBS television show last Friday, where he implicated these government officials in a massive cover up of the banking scandal, mostly for the benefit of Goldman Sachs, the former employer of both Paulson and Geithner, in which they held a significant financial interest," Klayman reported.

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Posted at 12:51 AM (CST) by & filed under Jim's Mailbox.

Dear Jim,

I see your last posting is about RGLD. I bought back RGLD at 38.05 a few days back. I agree with your take. This one offers great value as the secondary offering should provide a decent price floor.

The daily is hitting the MA 200. Great support as well.

All the best,
Olivier

www.tischendorf.com

Dear Olivier,

What I was pointing out regarding Royal Gold was not only my present deep respect for the company, but the fact that the ABSOLUTE LOW in 2005 was established when BARRONS WEEKLY wrote a large article deriding its then market value as unwarranted. The article which was a classic hatchet job did state that it had received its information from a short seller in Royal Gold.

Respectfully,
Jim

Jim,

Here are my daily and weekly charts:

Daily    

clip_image001

Weekly 

clip_image002

Good Morning,

I know you (and I) have interest in the Cando. Funny how markets setup while nobody is paying attention.

http://www.facebook.com/photo.php?pid=1498512&l=bcd3c9f6ad&id=557304509

CIGA Eric

Dear Jim,

I thought this might be of interest…

The dollar is dead and soon the Wall Street and Finance Fraternity Brats will realize it.

CIGA BJS

Top Chinese Banker: Dollar Soon Irrelevant
Thursday, April 9, 2009 8:53 AM
By: Dan Weil Article Font Size 

Zhu Min, executive vice president of the Bank of China, a government-run commercial bank, says that the Federal Reserve’s decision to print billions and billions in new dollars to head off the financial crisis would make the greenback irrelevant to global finance and trade.

That will happen unless there is another global currency to balance it, he told CNBC.

While the dollar remains a global currency, it can’t support the world economy by itself, Zhu says.

“Either we ask the U.S. to take the whole responsibility of the world economy, with the dollar as global legal tender, or else we need something else as an anchor,” Zhu says.

He reiterated a call for the use of an International Monetary Fund (IMF) instrument to offset the dollar’s influence on international reserves and trade.

Known as special drawing rights (SDR), the practice dates back to the late 1960s, when the IMF used the vehicle to supply reserve assets to expand trade when gold and the dollar were in short supply.

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Jim,

The following is a great piece by the head of Barrick Gold on Squawk box.

Hi Jim,

Picked a good day to release this one.

CIGA Eric

Federal budget deficit sets March record $192.3B
Federal deficit hits March record $192.3 billion; near $1 trillion halfway through budget year

Martin Crutsinger, AP Economics Writer

WASHINGTON (AP) — The Treasury Department said Friday that the budget deficit increased by $192.3 billion in March, and is near $1 trillion just halfway through the budget year, as costs of the financial bailout and recession mount.

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Formula:
http://www.facebook.com/photo.php?pid=1496088&l=546ca4b7a7&id=557304509

Leading Formula:
http://www.facebook.com/photo.php?pid=1496089&l=b3cff986c9&id=557304509

Taxes Withheld:
http://www.facebook.com/photo.php?pid=1496090&l=cc15df9868&id=557304509

Jim

This is spin to the 1 trillionth power.

CIGA Bjs

All 19 US banks pass Treasury’s ‘stress tests’
The pending results of the US Treasury’s "stress tests" will show that all 19 banks are capable of surviving further shocks – but some will only be able to do so if they receive further capital injections.
By James Quinn, Wall Street Correspondent
Last Updated: 6:21PM BST 09 Apr 2009

The mixed outcome of the tests – the results of which will be published at the end of the month – emerged as Wells Fargo surprised the market with an unexpected pre-close statement in which it revealed it made $3bn (£2bn) of profit in the first quarter.

The figure is 50pc higher than the profit earned in the same quarter last year, and beat even the most optimistic expectations.

The news sent financial sector shares soaring, with Wells Fargo rising $3.05 at $17.94, Goldman Sachs $3.50 higher at $118.25, and JP Morgan Chase up $3.21 at $30.64.

The rally in the financial sector came despite the warning that some lending banks will need more money as a result of the stress tests, which have been carried out by 200 Treasury officials over the past six weeks.

Although the exact results of the tests remains the subject of conjecture, it is understood that all 19 institutions involved will "pass" the tests – although that is not surprising as should an institution be deemed to have insufficient capital, the US government will step in and provide it.

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Posted at 3:25 AM (CST) by & filed under General Editorial.

Dear CIGAs,

Let us all remember when Barron’s Weekly panned Royal Gold (RGLD) hard in 2005.

That was the absolute low for Royal Gold (RGLD) since that absolutely uncalled for event.

You will recall Barron’s clearly and unabashedly admitted they had gotten their information for that hatchet job from a source that was short Royal Gold (RGLD).

Royal Gold prices share offering
Apr 8 2009 8:07am EDT

TORONTO (Reuters) – Royal Gold Inc said late Tuesday it has agreed to sell 6.5 million shares at $38 per share, and will use the proceeds to finance its acquisition of a stake in the gold produced from the Andacollo mine in Chile.

Denver-based Royal Gold said it expects proceeds from the offering, net of commission and expenses, of $235.3 million. The company said its offering will close on April 14.

Royal Gold, which acquires and manages precious metal royalty interests, earlier this week said it would acquire a stake in the gold produced from the Andacollo mine in Chile from Canada’s Teck Cominco and Chilean state-owned entity ENAMI for $300 million.

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