Posted at 4:55 PM (CST) by & filed under In The News.

Dear Friends,

Gold is going to $1650 and that is for starters.

The US dollar is going to .6200 and then .5100.

The Safe Haven Dollar is as stupid now as the Goldilocks Economy and rear view mirror economic events were.

I am getting calls from people who either don’t read or should only be in US dollar treasury bills.

My leash is getting tight so please read JSMineset first. Email me if you do not understand something and if it was ill presented, it will be corrected. Do not call me and ask me if I have changed my mind since I posted something this morning. Remaining polite is becoming hard.

The following amount of money can:

1. Pay off every mortgage in the USA.
2. Send a check for $1400 to ever person on this planet.

Hyperinflation cannot be avoided.

Respectfully yours,
Jim

U.S. Taxpayers Risk $9.7 Trillion on Bailouts as Senate Votes
By Mark Pittman and Bob Ivry

Feb. 9 (Bloomberg) — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps. The Senate is to vote early this week on a stimulus package totaling at least $780 billion that President Barack Obama says is needed to avert a deeper recession. That measure would need to be reconciled with an $819 billion plan the House approved last month.

Only the stimulus package to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

More…

 

Jim Sinclair’s Commentary

And finally for this evening a word from Bloomberg for the all the Pollyanna’s out there.

Bank Failures May Reach 1,000 on Bad Loans, RBC Says (Update2)
By David Mildenberg and Margaret Chadbourn

Feb. 9 (Bloomberg) — As many as 1,000 U.S. banks may fail in the next three to five years, almost double the one-year tally at the height of the saving-and-loan collapse, as losses mount on commercial real-estate loans, RBC Capital Markets analysts said.

Most of the failures will probably occur at banks with less than $2 billion in assets as their commercial customers default, said Gerard Cassidy, an analyst at RBC, in an interview today.

“There are billions of dollars of losses embedded in the system, and the system has to flush them out,” Cassidy said. “The people that are going to take the losses are the taxpayers and bank stockholders, and if regulators say there won’t be much loss to taxpayers, they will be lying.”

Regulators are taking steps to help lenders avoid losses as President Barack Obama’s administration readies a rescue package that may include guarantees for toxic assets, according to people familiar with the plan. The Federal Deposit Insurance Corp. closed nine banks so far this year after shutting 25 in 2008 and identified 171 “problem” institutions as of the third quarter.

The FDIC has already raised the estimate for the cost of U.S. bank failures through 2013 after fourth-quarter financial reports from banks signaled possible additional losses to the deposit insurance fund. The agency said failures through 2013 may cost more than the $40 billion estimated in October.

More…

Jim Sinclair’s Commentary

What, me worry? If I’m not why would you?

IMG_5797

Jim Sinclair’s Commentary

Here is a neat approach. The Fed buys its own paper in amounts in excess of what it issues thereby financing itself and no longer requiring China’s help.

The catch is that the value of the US government would head for the floor as rates went through the roof because there are too many treasuries already out there.

How damn stupid can a central bank be? To the degree they buy their own paper they depreciate the paper already out there. Have you ever seen a stock buyback stop a bear market in the buyback company? All a stock buyback ever does is to allow the insider a firm bid to sell into.

If the Fed does what amounts to a buyback is China the seller?

Fed Lacks Consensus on Treasuries as Yields Rise
By Scott Lanman and Craig Torres

Feb. 9 (Bloomberg) — Federal Reserve officials have failed to resolve an internal debate over whether to purchase long-term Treasuries, even as rising yields on the securities threaten to undermine the central bank’s objective of cutting borrowing costs for consumers and businesses

Policy makers are instead focusing on a program to purchase $200 billion in consumer and small-business loans and on a plan to buy $600 billion in home-finance debt, according to people familiar with the deliberations.

Forgoing purchases of Treasuries may exacerbate a jump in borrowing costs for the government as federal debt managers seek to finance an unprecedented budget deficit. Benchmark 10-year note yields this week exceeded their level of Dec. 1, when Fed Chairman Ben S. Bernanke first talked about the option. That’s raised other borrowing costs, potentially delaying a recovery.

“The Fed will get a lot more bang for its buck by buying mortgages than buying Treasuries,” said John Ryding, founder and chief economist of RDQ Economics LLC in New York and a former Fed economist. “We were kind of a little surprised when the Fed wanted to go down this route” in comments starting in December, Ryding said.

More…

Jim Sinclair’s Commentary

Hello, I am from the Federal Government here to help you.

GM, Chrysler May Face Bankruptcy to Protect U.S. Debt (Update3)
By Mike Ramsey and Tiffany Kary

Feb. 9 (Bloomberg) — General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

If federal officials fail to get a consensual agreement to change their position regarding repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.

“They are negotiating to see if they can reach an agreement,” said Workman, a bankruptcy lawyer based in Washington. “If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us’” to be first in line for repayment.

More…

Jim Sinclair’s Commentary

Here is an FYI from CIGA Jesse. Maybe GM deserves to go broke?

General Motors to Invest $1 Billion in Brazil Operations — Money to Come from U.S. Rescue Program
By Russ Dallen
SAO PAULO — General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

"It wouldn’t be logical to withdraw the investment from where we’re growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.

Meanwhile, he cut the company’s revenue forecast for this year by 14% to $9.5 billion from $11 billion, as the economic crisis began to cause rapid slowdowns in sales.

GM already announced three programs of paid leave, and Ardila added that GM Brazil "is going to wait and see how the market behaves in order to know what decision to take" with regard to possible layoffs.

For Ardila, the injection in Brazil’s automobile sector of 8 billion reais ($3.51 billion) recently announced by the federal and state governments of Sao Paulo "has already begun to revive sales," which fell by 12% in October.

More…

 

Jim Sinclair’s Commentary

Let the truth be known!

You know all these car company got the major axe, not from bad business, but first from the use of OTC derivatives by their credit arm which in turn killed business.

If you cannot borrow money to buy a car, no cars are bought!

Nissan to Cut 20,000 Jobs as Carmaker Forecasts Loss (Update3)
By Makiko Kitamura

Feb. 9 (Bloomberg) — Nissan Motor Co., Japan’s third- largest automaker, said it will slash 20,000 jobs and post its first loss in nine years as the global recession cripples car demand and a stronger yen ravages the value of overseas earnings.

The company expects a net loss of 265 billion yen ($2.91 billion) for the year ending March 31, compared with its October estimate of 160 billion yen in net income. It also scrapped its second-half dividend.

Nissan’s sales in the U.S., its biggest market, plunged 31 percent in January as demand for Altima sedans and Xterra sport- utility vehicles dried up. Chief Executive Officer Carlos Ghosn’s elimination of 9 percent of the workforce caps a month in which all of Japan’s carmakers slashed forecasts and Panasonic Corp. and NEC Corp. cut workers.

“The economic storm is wreaking havoc on everyone,” said Yuuki Sakurai general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion in assets. “Things could get even worse.”

More…

Jim Sinclair’s Commentary

It is so stupid as not to be stupid.

Money given to Pakistan for any reason goes to them for one reason and into very few pockets.

Damn, country leadership can be a great private enterprise.

Police injured in Pakistan attack
BBC News – UK
A suicide bomber has driven a car loaded with explosives into a police check post in north-western Pakistan, injuring at least 15 policemen.
See all stories on this topic

Video Is Said to Be Polish Hostage’s Beheading in Pakistan
New York Times – United States
By AP DERA ISMAIL KHAN, Pakistan (AP) — A graphic video delivered to reporters on Sunday appeared to show the execution of a Polish engineer by Pakistani
See all stories on this topic

Tougher on Pakistan
News & Observer – Raleigh,NC,USA
27 news article "Taliban clamp down in Swat" suggested the need for new US foreign policy toward Pakistan. US policy undermined India’s democracy and
See all stories on this topic

Losing Hearts and Minds in Pakistan
Washington Post – United States
President Asif Ali Zardari gave a frank assessment of the challenges that Pakistanfaces, as well as outlining the need for US support in improving
See all stories on this topic

Pakistan to Present Mumbai Probe Report to Committee, Geo Says
Bloomberg – USA
9 (Bloomberg) — Pakistan has completed its investigation into the Mumbai attacks and will submit its report to a defense committee today, GEO television
See all stories on this topic

US Skeptical About Pakistan’s Restrictions on Nuclear Scientist
Washington Post – United States
Pakistan has "given us some initial commitments but we’re going to be following [the situation] very closely. The important thing is that they know we are
See all stories on this topic

Pakistan Vows to Monitor Scientist
New York Times – United States
Mr. Khan is a hero in Pakistan for developing the country’s nuclear program, and many claimed the Zardari government was detaining him at the behest of
See all stories on this topic

Nuclear Scientist Khan Isn’t Threat, Pakistani Minister Says
Bloomberg – USA
8 (Bloomberg) — Pakistan will ensure that nuclear scientist Abdul Qadeer Khan doesn’t resume selling atomic technology to other countries after his release
See all stories on this topic

Pakistan enjoys world support against Indian ‘designs’: Gilani
Daily Times – Lahore,Pakistan
Gilani described reported Indian plans to get Pakistan declared a ‘terrorist state’ as wishful thinking, and said Pakistan’s diplomacy and foreign policy
See all stories on this topic

US envoy Holbrooke to reach in Pakistan today
Times of India – India
MUNICH: US special envoy Richard Holbrooke will arrive in Pakistan on a two-day visit on Monday, Geo TV reported. He will hold separate meetings with
See all stories on this topic

Posted at 3:50 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

As stated many times on this page, trying to come up with explanations that detail the price movements of the Comex gold market day in and day out has become a fruitless task. The Dollar goes up, gold goes down. Oops- I mean the Dollar goes down, gold goes down. The stock market goes up,  gold goes up as risk comes back in. Oops – I mean the stock market goes up, gold goes down. Crude oil goes down, gold goes down. Oops – I mean crude oil goes up and gold goes down.

The point is simple – we continue to watch a market that is not a free one and therefore analysts who are frequently quoted by the wire service writers who always are looking for sources to quote, have no idea how to explain the gyrations in the Comex gold market. I would much rather have someone who is honest instead of pretending to be some sort of omniscient wizard who has a cosmic connection to the Comex gold market and unfailingly knows beforehand exactly what it will do on any given day and why. Then again our government is currently filled with such people so what can we expect.

Here’s a clue to the clueless analysts – just look at the CFTC commitment of traders reports – that is all you need to know to explain the price action in paper gold. Last Friday’s report showed what we who have been following this market since the bull move began in 2001 – all of the selling pressure in the Comex gold market has been coming from the commercial side as usual and that selling is concentrated in the bullion banks who continue to pull this flim-flam scheme and sucker the hedge fund managers who refuse to get in the war.

I was watching the wonderfully done War Between the States’ movie, “Gods and Generals” last evening. It detailed the early years of the war 1861-1863 and focused a great deal on the battle of Manassas, Fredericksburg and Chancellorville and particularly one of my heroes, Confederate General Thomas “Stonewall” Jackson. What I find so admirable about Jackson was his intuitive grasp of the battlefield and how quickly he was able to adjust to changing conditions and anticipate the movement of the Federalists forces. He ran rings around the Union generals and even with a smaller force was able to pull off victory after victory because of his tactical skills and his ability to maneuver his men bringing them to bear on the battlefield at exactly the right time and the right place to achieve maximum effect. He was a fearless, pious, killer who despised the Yankee invaders.

To make an analogy – the bullion banks are the Federalist forces, numerous in the sense of being well-supplied,  but the hedge funds, instead of being led by skillful tacticians who insist on victory and possess a killing instinct,  are instead led by inept idiots who insist on marching right into the fortified positions of their enemy expecting to be able to drive them out  from behind their redoubts and who refuse to change their tactics and adapt even when they achieve the same results time and time again, namely defeat. The delivery intentions for the February contract for today showed again a big ZERO when it came to longs standing for delivery. Yes, that is a ZERO, NADA, NOTHING, NOT ONE OUNCE, of real physical gold was demanded by the longs but particularly by the hedge funds who will die in their ranks before actually doing something tactically brilliant and forcing the enemy to come out of his entrenched fortifications and search for actual gold to deliver to aggressive longs who mean business and are intent on destroying their enemy for good. Might as well fire wadding at the enemy instead of lead….slingshots against rifles…

Tip to hedge fund managers – go over and look at what some of your brethren did in the grain markets which forced the CBOT to take action to limit the amount of grain delivery receipts…

The results are predictable – gold stalled out as the bullion banks simply sold more paper gold and absorbed all the bids. The longs ran and once again the bullion banks plundered the damn fools. For the sake of our readers, that is why Jim and I have constantly cautioned those who want to trade the paper market, not to chase the price of gold higher but to buy it only on weakness and sell it into strength when it becomes obvious that the capping move is in play. Do not follow the lead of the hedge funds – if they are going to play the part of the fool, let them do your work for you and make money off of their ignorance. Fade them….

See the chart for the technical support levels now that gold has rolled over. $880 is back in play should today’s low not be able to hold.

The XAU looked as if it might be on verge of a breakout last Friday as it managed the best close since October 2008. It could not generate any upside follow through in today’s session however.

The Dollar was down against every single major today – even against the Yen. The commodity currencies continue moving higher and that is something that has major implications for the entire commodity world. It also shows that “risk” is back in meaning the safe haven bid for the dollar has faded which is why gold is supposedly going back down. I will remind that brilliant commentators who told us this when gold goes down when the “risk is out” mentality comes back once again.

The grains are higher today with crude oil and natural gas higher also. Copper was taken lower alongside of silver as there remains some uncertainty in that market over what the Chinese are actually doing. Platinum was knocked lower on news of Nissan job cuts as it served to reinforce how bad things are in the automotive industry worldwide right now. Palladium followed platinum lower.

Something that is happening to the bonds that I think is quite significant – they have broken down below the 100 day moving average with every one of the major moving averages that I track now having turned decidedly down. There is a bit of support near the 123^00 level but frankly, it is not much. The 200 day moving average, a huge area from a technical perspective, is down near the 120 ^28 region. If bonds were to break down below that, I think the Fed would either have to move in and begin buying up the long end of the curve or face a crippling rise in the interest rates. It appears that the porkulus bill coming out of Washington has bond traders rightfully anticipating a tidal wave of supply which will be far too massive for current demand to absorb. People are wondering whether or not the bond market bubble has popped – guess what – it has. Bond traders might just now be attempting to draw out the Fed and see if they will make good on their prattle about actually buying bonds to force down interest rates. Speculators and monetary authorities have this understanding… the monetary authorities make noises and the specs test them to see if there is anything of substance behind their bluster.

Tomorrow is another day – who knows what we can expect to see.

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

February0909Gold1230pmCDT.jpg

Posted at 9:43 PM (CST) by & filed under In The News.

Men acquire a particular quality by constantly acting a particular way… you become just by performing just actions, temperate by performing temperate actions, brave by performing brave actions.
–Aristotle

 

Dear Friends,

Of all the charts concerning the Weimar Experience, one needs your clear understanding as it may seem to be a great contradiction. That chart is of the Weimar Equity Market during a period that could be similar in many ways to that which is coming in the future of the US dollar.

Should the uptick rule be reinstated internationally and forcefully applied in Canada (the front door of naked short sellers to the world) as the US dollar meets its fundamental destiny, then equities could put on and out do the 1930 rally before a total collapse (as occurred in the Weimar Equity Market experience).

Respectfully yours,
Jim

Click chart for more…

weimar_stocks

 

Jim Sinclair’s Commentary

The US dollar and US dollar proxies all top in the form of up-trending neckline head and shoulders.

$USD - SharpCharts from StockCharts_Page_1

 

Jim Sinclair’s Commentary

All that I have warned you about in the timeframe of reference (2000 to 2011) will come to the forefront. Here is the reason that no politician on this amoral planet has the stomach for.

The selection between many Kent State executions or hyperinflation will end up with hyperinflation. That is fact.

WTO chief warns of looming political unrest

BERLIN (AFP) – The global economic crisis could trigger political unrest equal to that seen during the 1930s, the head of the World Trade Organization (WTO) said in a German newspaper interview Saturday.

"The crisis today is spreading even faster (than the Great Depression) and affects more countries at the same time," Pascal Lamy told the Die Welt newspaper.

Questioned about the risks of political instability, Lamy — who wraps up his four-year term as WTO director-general in September — responded that that was "the main danger".

"This crisis weighs heavily on politics and puts peace in danger," he said.

"Some democracies are old and sufficiently stable to overcome such problems, (but) others are going to be confronted by unrest and inter-religious and inter-ethnic conflicts."

He went on to warn against protectionism, saying it would be "wrongly easy" for nations to throw up trade barriers in response to the economic and financial downturn.

More…

 

Jim Sinclair’s Commentary

Damned if you do and double damned if you do not!

Stimulus will lead to ‘disaster,’ Republican warns

 

WASHINGTON (CNN) — Leading Republicans warned Sunday that the Obama administration’s $800 billion-plus economic stimulus effort will lead to what one called a "financial disaster."

"Everybody on the street in America understands that," said Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee. "This is not the right road to go. We’ll pay dearly."

Shelby, of Alabama, told CNN’s "State of the Union" that the package and efforts to shore up the struggling banking system will put the United States on "a road to financial disaster."

But Lawrence Summers, the head of the administration’s National Economic Council, said Republicans have lost their credibility on the issue.

"Those who presided over the last eight years — the eight years that brought us to the point where we inherit trillions of dollars of deficit, an economy that’s collapsing more rapidly than at any time in the last 50 years — don’t seem to me in a strong position to lecture about the lessons of history," Summers told ABC’s "This Week."

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Jim Sinclair’s Commentary

The future of the dollar is poor to none.

Recent dollar strength is no different from any of the manias we have experienced in the past eight years. 30 year bonds at 147 is the most recent moment of market madness.

The Fed balance sheet qualifies it as the USA’s own "Bad Bank." That condemns the US dollar to monetary hell once the foolishness of the dollar as a "Safe Haven" is spent.

Dan Norcini’s Commentary

The following article goes to emphasize what Jim has stated repeatedly since the bailouts began in earnest, namely that the Fed has become the largest hedge fund of them all.

Also, when that former Fed governor let slip a while back in that video clip that played widely on YouTube that the Fed could always upwardly revalue the official gold holdings from its current value down near $42. Only the gold community caught the significance of that Freudian “slip” of the tongue.

They have no way out of this man-made disaster except to upwardly revalue gold which is simply another way of saying devalue the dollar. Unless that occurs, the monetary system in its current form will not survive and a Bretton Woods II will be needed. I see no way to ever make good on the sheer size of indebtedness that has been created without a currency devaluation – if one could ever call such an occurrence, “making good”. Good for the issuer of the debt but certainly not for the owner.

The Insolvency of the Fed
Daily Article by Philipp Bagus and Markus H. Schiml | Posted on 2/5/2009 12:00:00 AM

Since August 15, 1971 the US dollar has been an irredeemable paper currency. Every irredeemable paper currency in history has failed. Yet, the experiment of the US dollar and the rest of the fiat paper world continues.

During the current crisis, however, financial systems all over the world are increasingly struggling, and the end of the experiment seems closer. In fact, the Federal Reserve System has used up much of its "ammunition" for monetary interventions in an attempt to keep the experiment going, lowering its target interest rate almost to zero. Other central banks are also quickly approaching the "zero limit" for interest rates.

Figure1

During these inflationary decades, economic structures have developed that can only survive with falling interest rates. As the world approaches a zero interest rate, it appears that finally there might be a full adaptation of the structure of production to the demands of consumers, and the experiment might come to an end.

Yet, has the Fed really "run out of ammunition"? First of all: what is the Fed shooting at? It is trying to artificially stimulate the economy with its monetary policy, thereby it is also unwittingly shooting at the value of the currency. Through its monetary policy, the Fed is trying to bail out an insolvent and illiquid banking system to maintain an unsustainable structure of production. As long as the currency is not totally destroyed, the Fed will never run out of ammunition. In order to assess the ammunition left, one should have a look at the balance sheet of the Federal Reserve — especially at the assets the Fed can still obtain. The Fed’s balance sheet also gives insights on the condition or quality of the dollar.

More…

 

Jim Sinclair’s Commentary

This was the great US Balance of Trade "plus" tool that now is heading in the deficit way.

Boeing jet orders: Minus 13
More ’09 cancellations may cut production
By JAMES WALLACE
P-I AEROSPACE REPORTER

With the cancellation of another 16 orders for its 787 Dreamliner, which is two years late, The Boeing Co. has started out 2009 losing more orders than it has won.

Number of canceled orders in 2009

Boeing has won 18 orders and lost 31 through cancellations. A Russian airline backed away from its order for 15 Dreamliners a week ago. The latest 787 order cancellation came from a Dubai leasing company.

Underscoring just how difficult the current industry downturn will be, Boeing Chief Financial Officer James Bell told an industry conference Thursday that Boeing might have to lower production rates in 2010. Bell did not say so, but if fewer planes are built the company could trim or reassign some of the people who assemble its jets in Renton and in Everett.

Boeing recently announced it will reduce its work force by about 10,000 jobs this year — about half of those jobs in the Puget Sound area. The cuts are a result of the global recession and economic crisis. Airlines are cutting capacity as traffic falls. But so far, Boeing has said that most of the job losses will not be related to production because it wants to keep building jets at current rates, given a record backlog of planes.

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Jim Sinclair’s Commentary

A safe haven? Only a moron attaches that to the US dollar.

U.S. Debt Default, Dollar Collapse Altogether Likely
February 03, 2009

The prospect of the United States defaulting on its debt is not just likely. It’s inevitable, and imminent.

The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.

Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse be rolled back ten for one or more?

There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.

Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.

Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.

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Jim Sinclair’s Commentary

Are you looking for the money you have lost in your IRA’s at the hand of the predatory beings of the hedgie’s world? I can tell you where a lot of it has been spent.

Ex-Madam says clients paid with corporate credit cards
07 February 2009 00:54 AM

NEW YORK (Reuters) – A former madam of a high-priced New York prostitution ring alleges in a U.S. television interview to be aired on Friday that investment bankers, Wall Street lawyers, CEOs and media executives often paid for her services using corporate credit cards.

The former madam, Kristin Davis, said her clients included investment bankers from JPMorgan, Goldman Sachs, Merrill Lynch, Lehman Brothers and Deutsche Bank, according to an article about the interview posted on ABCNews.com.

The banks either declined comment or did not immediately respond to a request for comment from Reuters.

ABC news said that Davis’ client list also included a vice president of a major media company, the part owner of a Major League Baseball team, the CEO of one of the country’s largest private equity firms and a major New York real estate developer.

"Some of these guys I was invoicing on corporate credit cards," Davis told ABC’s "20/20" news magazine, according to the station’s website.

More…

Jim Sinclair’s Commentary

1. Israel makes a major error in judgement.
2. Pakistan goes nuclear into the wrong hands.
3. Turkey is a victim.
4. January 14th 2011

Obama’s biggest foreign policy challenge? It’s Pakistan
By JONATHAN S. LANDAY AND SAEED SHAH
McClatchy Newspapers

A nearly completed U.S. military study is expected to say that nuclear-armed Pakistan, not Iraq, Afghanistan or Iran, is the most urgent foreign policy challenge facing President Barack Obama.

Pakistan – convulsed by a growing al-Qaida-backed insurgency, hamstrung by a ruinous economy and run by an unpopular government that’s paralyzed by infighting and indecision – is critical to U.S. efforts to stabilize Afghanistan, thwart the spread of nuclear weapons and prevent tensions with neighboring India from escalating into a nuclear showdown.

The U.S. Central Command review is assessing the situation in the Middle East and South Asia as the Obama administration plans to draw down U.S. forces in Iraq and double the 30,000-strong American military presence in Afghanistan, several people involved in the study told McClatchy Newspapers. They spoke on condition of anonymity because the study is still underway and they weren’t authorized to discuss it publicly.

The assessment, they said, is expected to recommend major changes in the U.S. approach to the volatile region, including major increases in U.S. aid to Pakistan in areas such as public education, health care and good governance, in a bid to stem the poverty and illiteracy that help fuel the country’s Islamic insurgency.

Stepped up non-military aid also could ease popular anger at the government and its chief ally, the United States, which many Pakistanis accuse of stoking the insurgency by relying primarily on military offensives and missile strikes that have claimed numerous civilian lives, the officials said.

More…

Pakistan heads toward crisis as coalition flounders
U.S. looks on with alarm as key Western ally’s inability to deal with jihadist menace threatens to destabilize region
SAEED SHAH
Special to The Globe and Mail
February 7, 2009

ISLAMABAD — Almost a year after elections were held in Pakistan, which restored democracy after more than eight years of military rule, growing Islamist violence, a crisis of governance and an economy in a tailspin threatens this key Western ally with collapse.

The new U.S. administration of President Barack Obama has made Pakistan one of its foreign policy priorities. Aides say that the U.S. President is "scared" by what he sees in Pakistan, a country that is crucial to meeting his goals of stabilizing Afghanistan and routing al-Qaeda. Next week, Richard Holbrooke, the special envoy just appointed to handle Afghanistan and Pakistan, arrives in Islamabad on a fact-finding mission, which is expected to be followed by swift action by Washington.

Critics say the Pakistani government is gripped with paralysis, as patronage, not policy, occupies Islamabad under President Asif Zardari. Some see echoes of the last period of civilian rule in Pakistan, between 1988 and 1999, when a series of floundering governments were repeatedly toppled by the army amid allegations of massive corruption and misrule.

Already the military and civilians are privately blaming each other for inaction as jihadists push ever deeper into the country from the northwest, with a de facto extremist mini-state now existing in Swat, a valley just 160 kilometres from the capital, Islamabad. Along the border with Afghanistan, Taliban and al-Qaeda enjoy a safe haven, undermining the international coalition’s fight against insurgents in Afghanistan.

More…

What kind of ally is Pakistan?
Saturday, February 7, 2009

It could be an episode of "24." A rogue bombmaker peddles nuclear weapon technology to Iran, North Korea and Libya. He’s caught but then set free in the seething, violent politics of his home country.

This isn’t a Hollywood script. It’s the real-life story of A.Q. Khan, the father of Pakistan’s nuclear program. On Friday he was freed from house arrest in the country’s capital in a move that drew sharp criticism from Washington.

Pakistani leaders served up the awkward news as a hands-off legal matter and the end of a lengthy court case that began when Khan was arrested in 2004. But it carries another meaning – a very troubling one – for Pakistan’s neighbors and allies.

Quite simply, the nation isn’t a reliable force for peace or stability in a central front of the terrorism fight. Khan was accorded the status of a populist hero, a scientist who gave his country a mighty weapon to hold far-bigger India at bay. When he set up a black market network to sell nuclear supplies to three of the worst countries imaginable, he was given wrist-slap treatment and protected from international investigators.

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Posted at 9:34 PM (CST) by & filed under Jim's Mailbox.

Jim’s Formula:
September 1, 2006

  1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
  2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella – Goldilocks situations.
  3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
  4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.
  5. Lower profits leads to lower Federal Tax revenues.
  6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
  7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
  8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).
  9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
  10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
  11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
  12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.

Jim,

You might have already seen this but wanted to sure you had.  It only reveals what your formula has told us was coming.

Report to the Secretary of the Treasury
from the Treasury Borrowing Advisory Committee
of the Securities Industry and Financial Markets Association

February 4, 2009

Dear Mr. Secretary:

Since the Committee last convened in early November, the contraction in economic activity has deepened and broadened, while financial markets have remained under duress. The unprecedented volatility present in capital markets when the Committee last met has diminished somewhat but conditions still are exceptionally challenging. Policy efforts have begun to unlock credit for select high-quality borrowers. But the magnitude of wealth destruction, the still heightened cost of economy-wide capital and the impaired system of financial intermediation continue to cast a dark cloud over the economic outlook.

Monetary and fiscal policy action now being implemented will help to prevent an even more serious downturn than otherwise would be the case. Policymakers’ efforts to restore the flow of credit to households and businesses, backstop critical financial intermediaries through capital injections and loan guarantees, and stimulate economic activity via lower interest rates, tax cuts and government spending are positives. Nonetheless, the necessary deleveraging of both the financial and household sector is considerable and has further to run.

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Posted at 12:19 AM (CST) by & filed under Jim's Mailbox.

Jim,

This is what Merrill sent us today.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

David Rosenberg over the ML Squawk box this AM

Why we think gold and commodities too are a no brainer: The protectionist trend is fully intact — see the front page of the WSJ ("Nations Rush To Establish New Barriers To Trade"): The WTO is gathering on Monday to discuss stemming the "wave of barriers to world commerce".  Russia has raised trade barriers to such an extent that EU officials are headed to Moscow to meet the country’s trade officials. Egypt just raised duties on sugar.  The USA is planning retaliatory action against Italian water and French cheese — and levying new tariffs on Chinese-made goods too. This may not exactly be Smoot-Hawley, but this is starting to look more like the 1930s than many are willing to admit. Also have a look at "Free-Traders Conspicuously Quiet on Buy American" on page 2 of the FT.

Dear Jim,

What do you think of the equity market here?

Regards,
CIGA Green Hornet

Dear Green Hornet,

Short and sweet.

If the uptick rule is reinstated as Cox (ex SEC caretaker) advised going out the door of the SEC offices then a 1930 rally has a 70% chance of occurring. I think it would.

If the lobby of the hedgies is rich enough then the uptick rule will not be reinstated and the equity market rally will be short and lacking of any noteworthy character.

It is business as usual as the Big Money game of Hedgie Lobbyists own versions of pork.

The Hedgies are the short side of all markets.

See you in Toronto.

All the best,
Jim

Posted at 5:43 PM (CST) by & filed under In The News.

Dear Friends,

1. The position of Volcker as Chairman of the Economic Advisory Board is a window dressing presently to placate conservatives.
2. Chairman Volcker is there, but on his own agenda, no one else’s.
3. Chairman Volcker, assuming he is blessed with eight more years of life, will once again perform as Master of the Financial Universe, saving whatever then is left of the USD.
4. All you need to do is review Chairman Volcker’s previous and present words to understand that agenda.
5. Yesterday, Chairman Volcker said it would cost trillions more, not billions, to paste together the tattered economy.
6. Chairman Volcker historically has defined the economic condition we are in as the Mother of Financial Crises. MOTHER OF ALL.
7. Chairman Volcker historically has said that the US dollar will decline as long as no policies are put in place with the proven capacity to change deficits towards surpluses.
8. Chairman Volcker had the total backing of the then sitting Administration when he bankrupted the USSR in the early 1980s.
9. Chairman Volcker will act when conditions get so terrible that the sitting Administration applies to him for his help. There will be a price for that help.
10. The Federal Reserve Gold Certificate Ratio, modernized and revitalized, will be adopted as I have outlined to you multiple times.
11. The Chairman will require that policies be put in place that have historical precedent to cause deficits to move towards surpluses, untenable now.
12. That mark to the low is a pummelled dollar below .5100 USDX.
13. This will mark the time for long term investment in companies leading the technology and biomedical fields of that time.
14. As a result of the "FRGCR" the price of gold will go up and remain up. This will effectively defeat 99.9% of the present gold writer’s outlooks for the metal.
15. I believe the most successful owners of gold will be the Carlyle corporation.
16. I believe the consolidator of the gold industry, assuming they rise to Russian and Chinese competition, will be Barrick. This has also been outlined to you multiple times.

Respectfully yours,
Jim

Obama names outside economic advisory panel

Published: Friday February 6, 2009

President Barack Obama on Friday charged a new Economic Recovery Advisory Board to provide him with independent advice on pulling the United States out of recession.

The president signed an executive order formally creating the board which will hold regular briefings for Obama and Vice President Joe Biden and will be under the chairmanship of former Federal Reserve chief Paul Volcker.

The board will be modelled on the Foreign Intelligence Advisory Board that offers the president an independent viewpoint on intelligence issues, the White House said.

Volcker, 81, played a prominent role during Obama’s election campaign, providing him with economic advice and gravitas as the US meltdown developed.

The announcement came on a day when new government data showed unemployment surging to 7.6 percent — the highest since 1992, as 598,000 jobs were cut.

Among other business figures on the new board were Obama supporter Penny Pritzker, chairman of the Pritzker Realty Group and former Obama campaign finance chair, Charles Phillips, President of the Oracle Corporation and Laura D’Andrea Tyson, a former Clinton administration economic official.

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Jim Sinclair’s Commentary

Every bank has its own Patsy.

You know those trillion dollar deals don’t really stand out too well. Quadrillion dollar deals must be totally invisible.

Ever heard the words Compliance, Ethics and Oversight?

More major BS in a spin it all world.

Deutsche Bank Fallen Trader Left Behind $1.8 Billion Hole
By SCOTT PATTERSON and SERENA NG

The fall of Boaz Weinstein, once one of Wall Street’s hottest traders, speaks volumes about why financial firms still are reeling from the shattered global markets.

As a chess master, poker and blackjack devotee and top trader at Deutsche Bank AG, Mr. Weinstein made big bets using complex financial instruments, generating large returns for the bank and about $40 million in annual pay for himself. But in 2008 the group he ran saddled the bank with $1.8 billion in losses, erasing more than two years of trading gains.

On Thursday, the German banking giant reported a 2008 loss of $5 billion (€3.9 billion), its first one-year loss in over five decades and a reminder that financial firms are not out of the woods. In an earnings conference call, Chairman Josef Ackermann described the market environment as a "series of earthquakes with constantly changing epicenters."

The losses are the latest reminder of the challenges faced in the new financial order. Wall Street firms long relied for much of their profit on massive risk-taking by aggressive traders deploying the firms’ own money; with that game over, firms are struggling to find fresh sources of revenue.

But first they must stabilize their institutions after the holes dug by former Masters of the Universe. Last month, Deutsche Bank shut down Mr. Weinstein’s operation and wound down many of his positions. He left the bank this week, with plans to start a hedge fund.

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Jim Sinclair’s Commentary

Today in Pakistan.

India: Official Accuses Pakistan in Mumbai Attacks
By REUTERS
Published: February 6, 2009

India has for the first time directly accused Pakistan’s Inter-Services Intelligence spy agency of links to the planners of the terrorist attacks in Mumbai in November. “The perpetrators planned, trained and launched their attacks from Pakistan, and the organizers were and remain clients and creations of the ISI,” Shivshankar Menon, India’s foreign minister, said in a speech in Paris. Mr. Menon accused Pakistan of “prevarication” in investigating the attacks, which killed more than 160 people. The speech, delivered Wednesday, was released to the news media on Thursday. Pakistan said Indian officials should avoid making such statements at a time when Islamabad was in the process of investigating the matter.

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Pakistan nuclear scientist ‘free’

A court in Pakistan has freed disgraced nuclear scientist Abdul Qadeer Khan from house arrest.

Dr Khan, who has been under tight restrictions since 2004, can now leave home and receive visitors.

Dr Khan welcomed the ruling and said he was not bothered what the international community thought of his release.

Dr Khan admitted transferring nuclear secrets to other countries in 2004 but was later pardoned by former Pakistani President Pervez Musharraf.

The US has repeatedly said it wants to question Dr Khan but Pakistan has always refused access.

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Reflecting upon Pakistan and Its Nuclear Weapons
February 6, 2009 – 12:00am
By Luis de Lencquesaing

The centrality of Pakistan was first revealed to me two summers ago. I was visiting Cornell friends in Islamabad and Lahore. During a dinner conversation I had with the Turkish ambassador — a diplomat who impressed me by his particularly refined vision of the global dynamics — the topic of Pakistan’s role in the world came up. The ambassador emphasized the strategic role of Pakistan, which sits at the juncture of the broader Middle-East and South Asia.

Is Pakistan not parted in two by the Indus River, on the banks of which Alexander the Great died, and which academics often define as the border between these two universes? This duality is not only geographic, but also cultural. Whether walking down the streets of Lahore, or crossing through villages in the Kashmiri mountains, I was struck by the contrast between the joyful women in their blue or pink Punjabi Shalwar Kamiz with a veil negligently passed over their heads, and the women in black Burkas, with only their mysterious eyes visible. The relaxed Islam of South Asia coexists with Saudi Wahhabism. Pakistan belongs to both worlds. Although Vice President Biden probably was not thinking about the Pakistani women when he visited the country a few weeks ago — I guess you have to be French and 20 for that — he certainly was signaling that in the crucial regions of the Middle East and South Asia, Pakistan is the key actor. For that reason alone, it is the center of the world.

Dryden Road. Jan. 28, 2009. 7:30 a.m. I peek out the window from under my covers, see a snow storm, and wonder why I am not studying in California.

I get to the Statler for a working breakfast organized by the Cornell International Affairs Review on nuclear weapons in Pakistan. Gaurav Kampani, a graduate student in the government department who works on the politics of nuclear proliferation gave us a pessimistic presentation. In the midst of such a “wave of hope,” this talk reminded us that President Obama’s magic may not be enough to solve all the problems of the world between now and Slope Day.

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Jim Sinclair’s Commentary

Hedge funds at the dock.

Market Rap – Bernard Madoff, the Mafia, and the Friends of Michael …
In 2005, Patrick Byrne, the CEO of Overstock.com (OSTK) and future Deep Capture investigative reporter, began a public crusade against illegal naked short selling (hedge funds and brokers creating phantom stock to manipulate stock … It is a common misperception that Boesky’s testimony led to the 98-count indictment of Michael Milken. Considering the scope of business the two criminals did together, Boesky actually provided very little information to the government. …
Recent Articles – http://www.marketrap.com/article/selected_articles

Judge Orders Accused NY Lawyer Freed on Bail – Funds and ETFs * US…
A U.S. grand jury indicted Dreier on Jan. 30, accusing him of securities fraud, conspiracy and wire fraud for lying to hedge funds and investment funds that he was selling notes on behalf of a New York developer and a pension fund in …
CNBC Top News and Analysis – http://www.cnbc.com/

New York investment fraud lawyer Marc Dreier bailed out! | Press …
By heather 
As reported by Reuters, Dreier, a high profile New York attorney for 30 years, wasindicted by a US federal grand jury for securities fraud, conspiracy, wire fraud, misrepresenting hedge funds and investment funds in New York and …
JusticeNewsFlash.com | Legal… – http://www.justicenewsflash.com/

[Updates] Riveting Testimony by a Great American, Harry Markopolos …
By Larry Doyle 
When Mr. Markopolos remarks that FINRA is in bed with the industry, is he referencing that they are invested in hedge funds, fund of funds, and private equity? Our new SEC chair, former FINRA chair Mary Schapiro, ….. Many of these people shouldn’t be appointed, they should be indicted. I guess honest and decent people like Harry Markopoulos don’t have a place in today’s governments. Obama promised change, but he has filled his administration with corrupt and incompetent …
NO QUARTER – http://www.noquarterusa.net/blog/

The Divagator: Considerations of Huntington
By The Divagator 
2008 Was Lean Year for New Hedge Funds – Raising money to start any new venture was tough last year, but especially so if you were a hedge fund. Assets for new hedge-fund launches declined 35 perc… 23 minutes ago. Volokh Conspiracy …Germans Probe Report Of Nazi Doctor’s Death – German TV network says concentration-camp doctor Aribert Heim died in Cairo in 1992. He was indicted in Germany in absentia in 1979 on hundreds of counts o… 2 hours ago …
The Divagator – http://divagator.blogspot.com/

 

Jim Sinclair’s Commentary

Pension funds are broke and those anticipating retirement are going to get a royal screwing. This is another problem akin the 1950’s Japanese SciFi wherein the unstoppable green blob ate the earth. Recognition that practically all major retirement fund are broke is the one that fires social unrest and hyper inflation. The green blob is the present economic rescue plan and the seven to follow.

Ford May Add $4 Billion to Pensions, Spurring Aid Bid (Update2)
By Keith Naughton

Feb. 6 (Bloomberg) — Ford Motor Co. may have to contribute $4 billion to its pension plan after a 2008 shortfall, a cash drain that risks dragging the second-largest U.S. automaker closer to a federal bailout.

The collapsing stock market left the fund with a $4.1 billion deficit for its projected obligations, after 2007’s $3 billion surplus, Ford said in its fourth-quarter financial results. That may force an infusion of money starting next year, according to the viability plan filed with Congress in December.

Such spending would add to the strain on the only Detroit automaker not relying on government aid. With U.S. auto sales at their lowest since the early 1980s, Ford said Jan. 29 it lost a record $14.6 billion last year and tapped its entire $10.1 billion credit line while the money was still available.

“The pension is another demand on cash at a time when Ford cannot really afford it,” said Pete Hastings, a fixed-income analyst with Morgan Keegan Inc. in Memphis, Tennessee.

Ford is working to pare costs through steps such as closing plants and is trying to raise money by selling its Volvo unit. The Dearborn, Michigan-based automaker is in early talks with China’s Geely Automobile Holdings Ltd., people familiar with the matter have said.

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Jim Sinclair’s Commentary

8th in 2009 and counting.

California’s Alliance Bank marks eighth failure of the year
By John Letzing
Last update: 7:42 p.m. EST Feb. 6, 2009

SAN FRANCISCO (MarketWatch) — Culver City, Calif.-based Alliance Bank was closed by regulators Friday, marking the eighth bank failure of the year amid the ongoing credit crisis, the Federal Deposit Insurance Corporation said. San Diego-based California Bank & Trust has agreed to assume the failed bank’s deposits, the FDIC said. Alliance Bank had $1.14 billion in assets and $951 million in total deposits as of Dec. 31, the FDIC said.

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Jim Sinclair’s Commentary

This is not capable of correcting the economic malaise as it does not even address the real problem.

It is quite capable of initiating the inflationary potential of monetary stimulation without any historical precedent.

The adventure begins now, which will culminate in an inflation of such dimension that it also lacks historical precedent.

Reinstate the uptick rule guys if you want a hand from an equity rally of some duration.

Senators Reach Accord on Stimulus Plan as Jobs Vanish
By CARL HULSE and DAVID M. HERSZENHORN

Published: February 6, 2009

WASHINGTON — Spurred by a dismal unemployment report for January and prodded by President Obama, senators reached an accord on Friday evening on an economic stimulus program of some $780 billion.

Democrats succeeded, after a long day of private negotiations and intense public debate, in winning the support of enough Republicans to move the package toward a final Senate vote, where Democrats are confident of passage, given the support announced by several Republicans. Exact outlines of the accord, which is somewhat smaller than the amount originally sought by President Obama, were not immediately available, but the senators agreed to cut some spending and strip out some business tax cuts to gain enough Republican support.

Senator Harry Reid of Nevada, the Democratic majority leader, hailed the agreement. “This is a very critical juncture for our great country,” he said on the Senate floor.

The timing of the Senate vote was not clear, but Mr. Reid signaled that action could take place over the weekend. Once it the package is approved, differences between the Senate legislation and a considerably different version passed recently by the House will have to be reconciled. President Obama has said he hopes all that can be accomplished in time for him to sign the measure within 10 days.

Three centrist Republicans, Arlen Specter of Pennsylvania and Olympia J. Snowe and Susan Collins, both of Maine, were among the senators wooed by Democrats, whose efforts were bolstered by Rahm Emanuel, the president’s chief of staff, who is a former Congressman from Illinois.

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Posted at 3:19 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The following is making the rounds on the internet. Enjoy.

Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers..

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. No, they are borrowing it from China.  Your children are expected to repay the Chinese.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn’t that stimulating the economy of China?
A. Shut up."