Posted at 6:02 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Ok, I am not shy. Mugabe move over, here comes the US Federal Reserve.

Zimbabwe will happen in the US. The dollar is going to tank like never before!!!

Consequences, consequences, consequences. They are unavoidable.

The US dollar is not worth a Continental. This is just how Zimbabwe today started!

Fed has abandoned monetary policy, critic says
Sat Jan 3, 2009 9:58pm EST

SAN FRANCISCO (Reuters) – The Federal Reserve has embarked on a campaign of unsupervised industrial policy to end the country’s financial crisis, a move that could undermine its independence, a former top U.S. official said on Saturday.

John Taylor, who was under secretary of treasury for international affairs from 2001 to 2005, said the explosive growth of the Fed’s balance sheet since September was "unbelievable."

"This doesn’t really seem like quantitative easing in the sense of finding a growth rate in the money supply," he told a panel discussion during the annual meeting of the American Economics Association.

"What you are looking at now is really being determined by other considerations. How much should we buy of mortgage-backed securities? How much should we loan to foreign central banks? This is really more like an industrial policy," he said.

The Fed’s balance sheet has more than doubled in size to over $1.2 trillion in recent months as it has tried to shield the U.S. economy from the worst financial crisis since the Great Depression by supporting key credit markets.

This has included direct purchases of mortgage-backed bonds by the Fed and support for top-rated non-financial borrowers in the crucial commercial paper market, as well as hundreds of billions of dollars lent to banks on the basis of collateral.

"If you have a situation where the Fed is borrowing to invest in all these sectors it seems to me you have a huge governance issue…that demands a lot of thought," Taylor said.

Taylor said the U.S. Congress has a legitimate right to demand a say in who the Fed lends money to. The outcome would be "radical reform" that would risk monetary policy independence, he said.

This concern was echoed somewhat by the president of the St Louis Federal Reserve Bank, James Bullard, who also took part in the panel discussion. He said the close collaboration between the Fed and U.S. Treasury in fighting the crisis could have unintended consequences.

"We are blurring the institutional arrangements a little," Bullard said. "I am concerned about independence. Fed independence is very important," he told reporters.

(Reporting by Alister Bull, editing by Leslie Adler)

Link to article…

Posted at 6:00 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The following reasons offered at a press conference of the NY Fed (not really) assure us that Zimbabwe/Mugabe economics will never occur in the USA.

1. There was no theft of funds here.
2. The use of the trillions of dollar of bailout money is totally transparent.
3. Those that caused the problems have been dealt with severely.
4. The Balance Sheet of the US Fed is pristine.
5. The Fed will of course mop up all the excess liquidity as soon as they get set up as the Miraculous Hedge Fund, retaining goofy Madoff as their manager floating $5 trillion in the internal US credit market as China opts out.

Zimbabwe’s money man plans to keep on printing
January 1 2009

The activists print anti-Gono fliers in English and Shona and target people standing in line at banks to withdraw money. They feature cartoons of Gono loading Reserve Bank money into the back of cars or gulping down feasts, usually with his foot on a child’s skeleton.

"IT’S YOUR MONEY — TAKE IT NOW!" screams one flier.

"IF GONO STAYS WE WILL ALL DIE!" bellows another.

"Gono is the weak link in the Mugabe regime because he’s become incredibly powerful and incredibly bloated, and he’s got very few friends in the system," said one activist involved in the project, who spoke anonymously for fear of reprisals. "No ministry can get access to cash without going to Gono. He controls everything. He’s become this power-mad individual who’s loathed by the whole country."

He said other members of the group regarded the GonoGoNow project as their most dangerous anti-regime activity. "They think Gono would kill over this," said the activist.

Gono recently launched his book, "Zimbabwe’s Casino Economy," dashed off in 60 days. In an economy where most U.S. dollar transactions are banned, his book is priced at $40.

Tony Hawkins, an independent Harare-based economist whose citation awarding Gono an MBA distinction is appended, these days describes Gono’s performance as "disastrous."

More…

 

Jim Sinclair’s Commentary

Pakistan today!

India Set to Show Pakistan Links to Mumbai Attacks, Times Says
By Jay Shankar

Jan. 4 (Bloomberg) — India will release evidence next week of Pakistani involvement in the terrorist attacks on Mumbai, the Times of India reported, citing officials it didn’t identify.

A detailed confession by the lone surviving terrorist, Ajmal Kasab, will highlight a report to be delivered to India-based diplomats of the U.S., U.K., China and other countries, as well as to officials in foreign capitals, the newspaper reported. A copy will also be given to Pakistan, it said.

The report includes photographs and identities of all 10 terrorists, phone logs, data from a global positioning system device and call intercepts, the paper said.

Other evidence includes a logbook recovered from the vessel that carried the terrorists from Karachi, records of satellite phones used by the attackers and transcripts of conversations between the terrorists and their “handlers” in Pakistan during the Nov. 26-29 attack, the Times reported, quoting government sources it didn’t identify.

The U.S. Federal Bureau of Investigation was granted “unprecedented” access to all the evidence and intelligence collected by India, according to the newspaper.

More…

Jim Sinclair’s Commentary

Remember the comparative interest rate gang that declared that to be the sole determinant of a currency’s value? Where have those bulls all gone?

Evans says Fed needs to mimic below-zero rates
Sat Jan 3, 2009 9:37pm EST
By Ros Krasny

SAN FRANCISCO (Reuters) – A grim economic outlook highlights the need for the Federal Reserve to step up quantitative measures to boost growth, with official interest rates already effectively at zero, Charles Evans, president of the Chicago Fed, said on Saturday.

Evans said that based on the outlook for rising unemployment, falling industrial production and a wider output gap, economic models suggest rates should be below zero.

"If it were not constrained by zero, those models would want to push it below zero, but that’s not possible," Evans told reporters after a panel at the American Economic Association’s meeting in San Francisco.

Quantitative easing, a way to flood the banking system with large amounts of money, "is a way to mimic below-zero rates and provide support to the economy," he said.

More…

Posted at 2:46 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

The following is breaking news from CIGA Tom.

http://www.youtube.com/watch?v=sxBl9BXLom4

 

 

Dear Jim,

Just one little spark could blow this whole thing sky high and gold and oil with it!

Best,
CIGA BT

‘Light the fire’ order set Mumbai ablaze

Evidence is growing that the bombings were orchestrated by militants in Pakistan

TENSIONS between India and Pakistan, the rival nuclear powers, are on a knife edge this weekend as Islamabad refuses to admit that the Mumbai terrorist outrage was planned and carried out by Pakistanis.

Zarar Shah, a leading commander of the Lashkar-e-Taiba group, has admitted under interrogation in Pakistan that he advised the terrorists by telephone as the attack unfolded.

Controllers in Pakistan watched live television and warned the gunmen of the arrival of Indian commandos, according to evidence amassed by the FBI and handed over to the Pakistani government.

More…

Dear Big Tatanka,

Yes, in a big way.

Regards,
Jim

 

Dear Jim,

It looks like a longer drawn out conflict with Israel. Barak says "it won’t be short and it won’t be easy." Tens of thousands is not a week long incursion! Freezing in Ukraine, Europe soon, bombs in the Middle East, Tanzania looks pretty good right now!

Israel okays call-up of tens of thousands of IDF reservists
By Barak Ravid, Haaretz Correspondent, and Reuters

Israel’s government has approved the call-up of tens of thousands of reservist soldiers, it was annnounced Saturday, almost simultaneously with the launch of a Gaza ground incursion aimed at halting rocket fire on Israel’s southern communities.

Prime Minister Ehud Olmert’s office said in a statement that, in accordance with a secret cabinet discussion Friday, the government ordered the armed forces "to draft the necessary reservists, on a scale of tens of thousands of troops."

More…

IDF soldier killed, another seriously wounded in Gaza ground operation
By Amos Harel, Yoav Stern and Yanir Yagana, Haaretz Correspondents, and News Agencies

An Israeli soldier was killed in a clash with Gaza militants on Sunday, the first fatality suffered by Israel since it launched a ground operation on Saturday night against the coastal territory’s Hamas rulers.

The soldier, from the Israel Defense Forces Golani infantry brigade, was killed in the densely populated Jabalya refugee camp in the northern Gaza Strip.

More…

Best,
CIGA Big Tatanka

Dear BT,

Looking your way today from Africa, it certainly looks that way.

a. Israel makes a serious mistake in judgment.
b. Pakistan goes nuclear.
c. Terror returns to major international centers.

There is potential for something terrible looking your way.

Regards,
Jim

Posted at 11:17 PM (CST) by & filed under In The News.

Dear CIGAs,

A misjudgment by Israel, Pakistan goes nuclear and 2012 is tomorrow. If this is not it, it is close.

Israeli tanks roll into Gaza strip as ground invasion begins
BY ERICA SILVERMAN in Ramallah, West Bank and CHRISTINA BOYLE in New York
DAILY NEWS WRITERS
Updated Saturday, January 3rd 2009, 7:18 PM

Israeli troops and tanks crossed into the Gaza Strip under the cover of darkness Saturday, signaling the start of a bloody ground offensive that military leaders warned would not be short.

Hamas, which seized control of Gaza a year and a half ago and has been attacking Israel with rockets, responded with defiant threats.

"We will fight till our last breath. Your invasion of Gaza will not be a cakewalk. Gaza will be your cemetery," Hamas spokesman Ismail Radwan said.

Israeli officials called up tens of thousands of reservists and warned the incursion would not end quickly.

"It won’t be easy and it won’t be short," Defense Minister Ehud Barak said in a televised address. "We do not seek war, but we will not abandon our citizens to the ongoing Hamas attacks."

More… 

Israel’s Worst Fears
Its U.S. ambassador says the big threat is that Iran has almost enough fuel for its first nuclear weapon.
Published Jan 3, 2009
From the magazine issue dated Jan 12, 2009

Sallai Meridor has been Israel’s ambassador to the United States since 2006. During that time, his government’s main strategic worry has been Iran, and that remains so today despite the fighting in Gaza. Israel warns that Iran is making rapid progress toward a nuclear bomb—Meridor calculates that Tehran should have enough fuel for its first bomb sometime in 2009—and that Israel will take military action unless the United States and other allies step in. A former intelligence officer, Meridor recently met with NEWSWEEK editors in New York to discuss Iran and how best to deal with it. Excerpts:

NEWSWEEK: Is there a timetable on Iran’s nuclear program? The CIA is saying they could have a weapon by 2015.
MERIDOR: Look, this is the most critical issue for America and the Western world. The major concern is instability and the potential for nuclear weapons to escape the region, which is not necessarily going to wait until Iran has a nuclear warhead on a missile. The closer they get to having a bomb, and the closer they are perceived to be, you can expect Iran’s neighbors to start acting on the assumption that Iran is going to have a bomb.

How close is Iran?
The last IAEA [International Atomic Energy Agency] report, some weeks ago, indicated that the Iranians already have 630 kilograms of low-enriched uranium. The previous report found 480 kilograms. At that pace they are producing close to 2.5 kilograms a day. And over the past few months they have had a technological breakthrough. Experts differ on how much low-enriched uranium you need for a first bomb. But even if you took the more conservative assumption, sometime in 2009 they will have enough. That nobody would argue against: no intelligence service, no experts.

More…

 

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.

U.S. Debt Expected To Soar This Year
$2 Trillion Increase May Test Federal Ability to Borrow
By Lori Montgomery
Washington Post Staff Writer 
Saturday, January 3, 2009; Page A01

With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world’s appetite for financing U.S. government spending.

For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world’s mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.

But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.

With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.

More…

 

Jim Sinclair’s Commentary

This is one way to cut down on public assistance. Starve our fixed income retirees out of the equation.

Savers facing accounts with no interest
Millions of savers are braced for zero per cent accounts within days as the Bank of England is poised to cut interest rates to the lowest level in its 315-year history.
By Edmund Conway and Myra Butterworth
Last Updated: 1:44PM GMT 03 Jan 2009

Experts have warned the return on savings could plumb new depths with the Bank expected to take unprecedented steps to regain control over the economy.

They widely believe the Bank will reduce borrowing costs to below their 2 per cent level – and possibly all the way down to 1 per cent – in its first meeting of the year next week.

More than 7 million people have saving accounts which already pay interest of 1 per cent or less. If a cut is passed on in full by banks, these accounts will dive towards negative territory for the first time on record.

Many elderly people who rely on the income from savings have found themselves struggling in recent months as returns fall.

Just 18 months ago average interest rates on savings accounts were as high as 6 per cent. But consecutive cuts by the Bank’s Monetary Policy Committee have led to banks slashing their savings rates, with the current average rate being just 2 per cent.

More…

Posted at 7:31 AM (CST) by & filed under General Editorial, Jim's Mailbox.

Dear Jim,

What? There is a bottomless pit of money? Unbelievable!

Regards,
Green Hornet

(Click images to enlarge)

zimbabwe-2008-01-18 Zimbabwe1

U.S. governors seek $1 trillion federal assistance
Fri Jan 2, 2009 5:48pm EST
By Jon Hurdle

PHILADELPHIA (Reuters) – Governors of five U.S. states urged the federal government to provide $1 trillion in aid to the country’s 50 states to help pay for education, welfare and infrastructure as states struggle with steep budget deficits amid a deepening recession.

The governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin — all Democrats — said the initiative for the two-year aid package was backed by other governors and follows a meeting in December where governors called on President-elect Barack Obama to help them maintain services in the face of slumping revenues.

More…

Dear Green Hornet,

No, there is no bottomless pit of money!

There is a bottomless pit of worthless PAPER. This is the thesis of Mugabe/Zimbabwe economics, and will have the same results as applied by Mugabee/Zimbabwe.

The reality is that yes, the Zimbabwe paper pit is quite possible in the US dollar scenario. It is not only possible but getting closer to probable with each event as discussed below. Wake Up!

Break the "illusion" and see the "real" situation. It is just that SIMPLE.

People believe the Illusion to be real and the real to be an illusion until they WAKE UP!

I have only one agenda here.

WAKE UP!

Jim

Posted at 5:33 PM (CST) by & filed under Jim's Mailbox.

Jim,

I’m slipping under the radar this month. We’re buying January Comex gold for delivery and removal from the Comex warehouse. We found this little tidbit out when Trader Dan told me about his November delivery, so we are taking the gold out as fast as possible. Hope this helps

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

Dear JB,

"When COMETS Unite"

I have a small story for you. I used to keep fish in my office as a hobby. In the Asian tradition, having an Arawanas is very good luck. This type of fish looks like a WW2 landing craft. It has a snake like body and an landing craft mouth.

You feed Arawanas little fish. The entire procedure is rather gross, but hey, for good luck the gross might be worth it.

One day I brought home the usual little plastic bag full of wiggling Arawanas food.

These little wiggling guys actually organized and attacked the Arawanas all at once. Together they ate off his fins. Now I had a fin-less Arawanas floating helplessly upside down.

It did not take long for the Arawanas to perish for his sins against the little wiggling guys.

The name of the food that an Arawanas eats is "COMETS." I am not joking.

I was so impressed by these courageous COMETS that I let them live long and prosper in the dead arawanas’s 150 gallon tank. They had earned their good life. They eat harmless dead dried flies.

The moral of this TRUE story is that when COMETs unite they can kill anything of any size, no matter how dreadful looking it is.

For an Arawanas to be good luck, they cannot be exposed to united Comets. Comets are better luck than any Arawanas. This is certainly true for my COMETS!

The ugly Arawanas is a COMEX paper gold manipulative short seller. We are the COMETS!

Jim

Jim Sinclair’s Commentary

The following was sent in courtesy of CIGA Carey:

Forrest Gump Explains Mortgage Backed Securities

Mortgage Backed Securities are like boxes of chocolates.
– Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds.
– Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates.
– These boxes were then sold all over the world to investors.
– Eventually somebody bites into a turd and discovers the crime.
– Suddenly nobody trusts American chocolates anymore worldwide.
– Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal.
– Mama always said: "Sniff the chocolates first Forrest".

Posted at 5:14 PM (CST) by & filed under In The News.

To our friends at the Comex, I say:

"Utinam barbari spatium proprium tuum invadant!" (May barbarians invade your personal space!)
–Complimentus Via CIGA Rusty Bayonetium

Jim Sinclair’s Commentary

The ABSOLUTE END of the hedge fund era is spelled "MADOFF."

SEC Said to Probe More Ponzi Schemes After Madoff Disclosures
By David Scheer

Jan. 2 (Bloomberg) — U.S. regulators working to untangle Bernard Madoff’s alleged $50 billion Ponzi scheme are probing other money managers suspected of using similar tactics, two people with knowledge of the inquiries said.

The U.S. Securities and Exchange Commission is pursuing at least one case in which investors may have been cheated out of as much as $1 billion, according to one person, who declined to name the manager and asked not to be identified because the probe isn’t public.

Regulators may discover additional Ponzi arrangements as declining stock markets prompt investors to withdraw their cash and they question how their money is being managed. This week, the SEC said it halted what the agency described as a $23 million scam targeting Haitian-Americans, and said the Florida- based operators had tried as recently as last month to bring in more investors.

Investigators haven’t found evidence the suspected frauds are of the same magnitude as in the Madoff case, which would be the biggest of its kind in history, the people said. In a Ponzi scheme, early investors are typically paid with money from later participants.

More…

Madoff Mess Is Nothing New
William P. Barrett, 12.18.08, 06:00 PM EST
Forbes Magazine dated January 12, 2009

The scope of the unfolding Bernard L. Madoff scandal– $50 billion and counting–is breathtaking. But aside from the extra zeros, little about it is new. In fact, the ploys and plays on human nature that Madoff used to pull off his brash heist have a long, infamous history.

The Reputation Ruse
Madoff was the former chairman of Nasdaq and thus a trusted Wall Street wheel. Investors counted on his reputation, rather than on diligent inspection of his audits, to safeguard their money.

More…

Biggest Bums Of 2008
Robert Lenzner
12.24.08, 03:38 PM EST

It’s hard to surpass Bernie Madoff for being a bum, but several executves and highly placed officials come awfully close.

The biggest bum of 2008 (and for decades prior) is Bernard Madoff, whose knavish duplicity betrayed the trust of small and large investors across the globe. The Madoff Ponzi scheme is a criminal act that has decimated important foundations like the Picower and destroyed the wealth of widows and orphans.

Our bums list should include those conspirators in this scheme (family or otherwise), the handful of investors who claim they knew it was a scam but did not inform the government (they know who they are), the greedy fools behind the feeder funds that facilitated Bernie at his cheating (our sympathy to the family of Rene-Thierry Magon de la Villehuchet, the investment manager who lost more than $1 billion with Madoff and took his own life two days before Christmas).

More…

L’Oreal Family Mixed In With Madoff
Javier Espinoza, 12.24.08, 10:40 AM EST

Fortune of billionaire heiress Liliane Bettencourt may have been exposed to Wall Street fraudster Bernard Madoff.

Liliane Bettencourt, the billionaire heiress to the L’Oreal cosmetics empire, may have become the latest victim of Bernard Madoff’s Ponzi scheme. Bettencourt entrusted part of her $22.9 billion fortune to the alleged Wall Street fraudster through a fund managed by New York-based Access International Advisors, press reports said on Wednesday. It is the second time this month Bettencourt has hit the headlines for financial reasons, having earlier provoked ire from her daughter for offering part of her fortune to a photographer friend.

According to French market regulator Autorite des Marches Financier, a total 500.0 million euros ($699.5 million) from approximately 100 French funds were exposed to Madoff’s fraud, out of which 40.0 million euros ($55.9 million) came from private individuals.

More…

Madoff Investor Reportedly Kills Self
Andrew Farrell, 12.23.08, 04:50 PM EST

French aristocrat who managed money in New York dies, apparently by his own hand.

The fallout from Bernie Madoff’s alleged massive Ponzi scheme is far more than financial. Thierry Magon de La Villehuchet, a fund manager who invested with Madoff, apparently committed suicide at his office.

De La Villehuchet, found dead this morning, was co-founder and chief executive of Access International Advisors, which had invested $1.4 billion with Madoff.

More…

Could SEC Have Stopped Madoff Scam In 1992?
Liz Moyer, 12.23.08, 03:22 PM EST

An investigation into a feeder fund could have led the agency toward unearthing the fraud.

In the unfolding tale of Bernard Madoff’s alleged $50 billion Ponzi scheme, feeder firms have grabbed much of the focus.

They get their name because they marketed the funds that held the assets ultimately managed by Madoff. Lawsuits are filling the courthouses as burned investors attempt to recoup at least some of their losses from the firms. Last week New York Law School sued Ascot Partners, run by GMAC Financial Services Chairman Ezra Merkin, for losing $3 million of its money to Madoff. Other Ascot investors, including Mort Zuckerman, are expected to follow. Ascot reportedly steered $1.8 billion of client money to Madoff.

More…

Blumenthal May Investigate Charities Ripped Off By Madoff
Carrie Coolidge, 12.22.08, 06:30 PM EST

Connecticut’s attorney general is looking at whether trustees did required due diligence.

The list of victims who have fallen prey to Bernie Madoff’s alleged $50 billion Ponzi scheme is growing longer by the day. Among its victims are countless nonprofit organizations, ranging from Yeshiva University and Tufts University to the North Shore-Long Island Jewish Health System Foundation.

Now at least one attorney general is asking for records to determine if trustees sitting on nonprofit boards failed to perform their fiduciary responsibility to do proper due diligence.

More…

 

Jim Sinclair’s Commentary

Hey, if Enron can shred the trades why pick on goofy Madoff?

Fund Manager Ordered Not to Destroy Madoff Documents
DECEMBER 25, 2008, 11:50 A.M. ET

At a hearing Wednesday in New York state court, J. Ezra Merkin, the chairman of lender GMAC who runs funds that were invested with Bernard Madoff, was enjoined from concealing or destroying any documents related to Mr. Madoff.

Mr. Madoff was arrested for allegedly carrying out a massive fraud scheme that stretched back for decades and …

More…

Jim Sinclair’s Commentary

Axiom = Keep in mind that it is impossible to have a loser without either a CASH winner or a winner in position value.

QUESTION = Where have all the Trillions gone? The world according to Tarp!

WISDOM = As Forest Gump says, "That is all I have to say about that."

Jim Rogers: $700 Billion Banking Bailout is ‘Horrible Economics’
By William Patalon III
Executive Editor
Money Morning/The Money Map Report

Ask investing icon Jim Rogers about the $700 billion U.S. banking bailout, and he’ll tell you that it’s nothing but “horrible economics.”
And with good reason: Most of the major U.S. banks are already bankrupt.

“Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt,” Rogers said in a recent teleconference at the Reuters Investment Outlook 2009 Summit. “What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent. What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics.”

A long-time China bull, Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

It was after Rogers “retired” in 1980 that the investing masses first really got to see him in action. Rogers traveled the world (several times), and penned such bestsellers as “Investment Biker” and the recently released “A Bull in China.” He also made some historic market calls: Rogers predicted China’s meteoric growth a good decade before
it became apparent to everyone else, and he subsequently foretold of the powerful updraft in global commodities prices that’s fueled a year-long bull market in the agriculture, energy and mining sectors.

More…

 

Jim Sinclair’s Commentary

With one exception, energy, I agree with every point made. Think hyper – inflation and energy in dollars. Think Pakistan and energy. Outside of that – spot on!

Ten Major Threats Facing The Dollar in 2009
By: Eric deCarbonnel   Friday, January 02, 2009 11:12 AM

Ten major threats are facing the dollar in 2009.

1) Foreign central banks selling US assets

Most of the nations which have been financing the US’s massive current account deficits in recent years have either begun to sell their dollar reserves last year or are planning on selling them this year in order to support their currencies. These nations generally fall into three categories:

A) Oil Producing Nations

Oil producing nations have built up lavish spending habits and large dollar reserve in recent years as a result of profits from rising oil prices. Now that commodity prices have crashes, those profits are gone, and those Oil producing nations will have to bankroll their spending by selling their accumulated dollar assets. Saudi Arabia, for example, is projecting a 2009 Budget Deficit, which it intends to finance by selling off its US holdings. Russia, meanwhile, has already sold over 20% of its $598.1 billion reserves, and it can be expected to continue doing so this year.

B) Emerging markets that have been relying on capital flows to fund their trade deficits

Many emerging markets around the world have been running trade deficits in recent years financed by capital flows. The most prominent example from this group is India.

India’s strong capital flows from tourism, software services, and remittances not only financed its trade deficit, but also increased its foreign reserves to an all-time high of 316.2 billion in May of 2008. However, due to the global slowdown and selloff of emerging markets, those capital flows have now reversed. India’s central bank, for example, has been forced to sell off its US holdings to curb its currency’s decline, and its total reserves have decreased by $62.2 billion. The central bank’s dollar sales in October alone exceeded purchases by a record $18.7 billion. India now has $254 billion foreign reserves left, the majority of which will be sold this year to protect its currency.

More…

Jim Sinclair’s Commentary

Are the shorts listening? Will you be left behind or lose your behind?

Don’t Miss the Coming Gold Bull

With the massive monetary expansion experienced in recent months and the promise for unprecedented levels of money and credit supply increase in coming months, the United States Federal Reserve looks on paper to be sending America straight into hyperinflation. Germany’s post-World War I Weimar Republic, post-World War II Hungary, 2001 Argentina, and present day Zimbabwe are all analogous examples of massive debt monetization, which all led to hyperinflationary disaster. Never before has the entire world’s economy been linked to one nation’s, however, as is the case today with the United States.

In a case of economic mutually assured destruction, foreign creditor nations and their central banks can’t afford to spark a run on the US Dollar, because it would kill their own export-based economies, as well as devalue their debt repayments and foreign exchange reserves. But the United States has been financing consumption through debt for decades and has resorted to monetary expansion to finance its debt and deficit spending, which is only going to increase with Barack Obama’s infrastructure and social programs. The Troubled Assets Relief Program (TARP) itself amounts to $700B, all of which will essentially be "printed." Foreign demand for US debt is all but gone, as creditor nations are now attempting to unwind their USD positions. Huge creditor nations like China and Iran were net sellers of US Treasuries in recent months, attesting to the weakening of the American debt bubble. So where’s all this excess liquidity go?

The answer is gold, and it is the only way to prevent the hyperinflationary scenarios referenced above from materializing in the United States.

The Fed has been on a money printing binge of unprecedented proportions, but has been able to thus far "trap" the excess liquidity from reaching the consumer level, which is what causes price inflation. It started a massive foreign currency sale this summer through the Exchange Stabilization Fund (ESF) that led to a supply increase of Euros and suppression of dollar usage. It has been liquifying troubled banks by issuing them T-bills financed through monetization in exchange for toxic assets by utilizing reverse repurchase agreements. And it has used the recent deleveraging and commodity collapse (partially caused by credit defaults in many of the overleveraged institutions that were supporting the commodity bull) to supply the temporary demand for US Dollars and feeding its own foreign exchange reserves.

But the excess liquidity thus far is trapped in time-sensitive and manipulated instruments now, and without a demand for American debt, it has to go somewhere. As T-bills expire and the stock market descends further, actual currency is going to be released out of sequestration into the economy. The Fed cannot allow the market to breach below its November lows, unless it wants widespread insolvency in insurers and banks, which are legally required to halt operations in the event of insolvency. I’ve heard estimates of 7500 and 8000 in the Dow as being minimum support levels that, if broken for an extended time, would lead to economic collapse in America as financials would all go under. To prevent this and to finance Obama’s deficit spending, actual dollars will have to be injected into the system and they will be.

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Jim Sinclair’s Commentary

Law & Order – Special Victims Unit.

Paper gold has NO LIMIT, unless YOU and I limit it.

Join me in the Good Fight. Reduce the Comex warehouse holdings by 50%. Stop the daily price theft.

They did it this Africa morning again, yet they are paper tigers

More money, less Gold to push gold price to $2000
2009-01-02 10:55:00

Is more money chasing less and less gold every day? Yes, it is true. And that should be one reason why gold prices could zoom to a record $2000 levels in 2009!

According to a 2009 forecast from Mumbai-based Commtrendz Risk Management Services, all over the world broad money supplies in developed nations generally have an average growth rate of around 7% annually, while world gold supplies have hardly gone up by 1-2% over years.

In 2008, central banks around the world have acted in concert to lower interest rates to such levels that low interest rates themselves start to stimulate economies. The ECB, BOE has cut short-term interest rates by 0.75% to 2.5%, 1% to 2% respectively of late.

Japan and the US Interest rates are just about at zero. The fiscal spending programs of US could expand into multi trillions.

of dollars. The above efforts coupled with monetary stimulations in the form of direct injections into the money system, if happen to get the world out of deflationary grip could leave explosive inflationary situation on the back of high crude oil prices.

Nominal paper money increase will lead to inflationary push to whole commodities complex and crude oil should not escape from it.

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Jim Sinclair’s Commentary

Remember that thing called Jim’s Formula?

Cash-poor states eager for a piece of Obama plan
By BETH FOUHY

NEW YORK (AP) — President-elect Barack Obama’s plan to jolt the economy by overhauling the nation’s roads, bridges and transit systems has local officials clamoring for their share despite questions as to whether the program will actually work.

"California’s fiscal house is burning down," state Treasurer Bill Lockyer declared recently after a California regulatory board halted financing for some 1,600 infrastructure projects because of the state’s nearly $15 billion deficit.

California’s woes are far from unique, as the deepening economic crisis has wreaked havoc on state budgets across the country. At least 40 states are running deficits, forcing governors to raise taxes and trim spending while postponing urgent repairs to roads, bridges, hospitals and ports.

"Because of the downturn in revenues, we’re all starting to delay construction projects that are clearly maintenance. That risks public safety," said Maryland Gov. Martin O’Malley in an interview.

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Posted at 2:38 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

I just watched Martin Feldstein on TV. He is head of the National Bureau of Economic Research and a highly respected economist. He is worried about the politicians ignoring inflation.

He says the US economy will bottom at best in early 2010. Like many rational non political economists, he is concerned about inflation as a result of a change in the makeup of the US political structure. I concur with him completely. We will be lucky to have an economy bottoming at the end of 2009. It may not bottom until mid 2010 or later. Much depends upon when and how much liquidity returns to the banking system.

In my opinion, the only highly visible market for appreciation at this time is foreign currencies and gold. World stock markets are getting a rally which we have expected and which may continue for a time, but the only visible long term bull market is in gold and foreign currencies.

Respectfully yours,

Monty Guild
www.GuildInvestment.com