Posted at 2:59 PM (CST) by & filed under General Editorial.

Dear Jim,

Can junior gold stock holders finally breathe a sigh of relief regarding Naked Shorting in your opinion?

CIGA Ken

Dear Ken,

To a degree, yes.

This would explain the recent hatchet job on the AMEX junior gold with the 7th largest short on the exchange.

Regards,
Jim

High & Low Finance
Goodbye to Naked Shorting
By FLOYD NORRIS
Published: April 30, 2009

In some circles, those are fighting words. There are companies that blame all their problems on that kind of trading, which is illegal if it is intended to manipulate the market. There are claims that it has destroyed thousands of public companies, although those making the claims have trouble naming any such companies.

But now, it appears, naked shorting — the practice of selling shares short without borrowing them — is almost gone. The Securities and Exchange Commission’s hurried changes of short-selling rules last fall appear to have all but eliminated the number of companies where such selling seems to be occurring. This appears to be an example of regulation working.

The primary example of the decline in naked short-selling is in the shares of Overstock.com, an Internet retailer whose chief executive, Patrick M. Byrne, has for years been on what he called a “jihad” against such trading. Overstock has sued many Wall Street firms for facilitating such trading, as well as a hedge fund and a research firm that it believes acted illegally in spreading negative information about the company. The suits have not yet gone to trial.

The primary evidence of naked short-selling is a large number of trades where shares were not delivered on time, causing a “fail” in Wall Street jargon. Naked short-selling can save a trader the costs of borrowing shares, or can make it possible to short a stock where borrowing is very difficult because so many others want to sell it short. A large number of fails does not prove naked short-selling, since there are other reasons for trades to fail, but such a number does indicate it is likely.

Critics of naked short-selling often say it produces “counterfeit shares,” but that term is misleading. Any short-seller, naked or not, takes on the same economic risks. If the price rises, the trader will lose money. If it falls, he will profit.

More…

IT AINT OVER ‘TIL THE FAT LADY SINGS
May 1, 2009

Spring is here and optimism is creeping back into the world economy. In this newsletter we will discuss why there will be a long time before the fat lady will sing (for explanation see Wikipedia). In our view we are still in the first act of three in a drama, the  outcome of which will dwarf  the most tragic  of Wagner’s operas.

In our January 2009 Newsletter we forecast that there would be a correction up in the US stockmarket similar to 1930 when the market went up 50% from the low and then declined by a total of 90% and resulted in a depression. None of the fundamentals have changed and we are going to see the most horrendous hyperinflationary depression that the world has experienced for at least 200 years. It will be worse than the 1930’s because the world is now totally interconnected both financially and economically and because there has never been in history a worldwide asset bubble and credit bubble of this magnitude .

“There can be no other criterion, no other standard than gold.
Yes, gold which never changes, which can be turned into ingots
bars, coins, which has no nationality and which is eternally and
universally accepted as the unalterable fiduciary value par exellence”
Charles de Gaulle

THE US GOVERNMENT HAS LOST ALL CONTROL

The US Government is not running the country. It is running around like a headless chicken reacting to events and firefighting. It doesn’t have a cohesive or proactive plan how to deal the biggest financial crisis that the world has ever experienced.  So it  hasn’t taken a single measure that could solve the crisis. The only thing it knows is to print money. The US Government doesn’t understand that running the printing presses ever faster can never be a solution to a problem that was caused by excessive credit and deficit spending.

Wall Street is in control

All  reactive decisions taken by the Government are governed by Wall Street who are more in control than the Government. Wall Street understands the problem much better since they are the principal beneficiaries of the current financial crisis. The crisis was created by the loose monetary policy of the US Government.   Wall Street  took advantage and exacerbated the problem by issuing unlimited amounts of toxic debt and derivatives. Wall Street obviously had the total blessing of Government which benefited greatly from political donations and the perceived prosperity that the credit bubble created. So not only did Wall Street make immoral amounts of money during the credit bubble but they are now the main beneficiaries of the Governments money printing. So far the US Government has lent, invested or committed $ 13 trillion since the crisis started in 2007.  The majority of these funds are being used to save the financial system.

Wall Street by, being too big to fail, has created the perfect situation for itself. Losses are being socialised and absorbed by the Government and profits are privatised. So whilst the economy as a whole is suffering greatly due to financial crisis, most of the financial sector is continuing to prosper. In the medium term such unfair inequality will have political and social consequences.
What the US Government doesn’t understand is that directing virtually all their rescue efforts to Wall Street is not going to solve the problem. The Nobel Prize winning economist Joseph Stiglitz said in a recent interview that the bank rescue efforts will probably fail because the programs have been designed to help Wall Street rather than to create a viable financial system. Stiglitz went on to say: “the people who designed the plans are either in the pockets of the banks or incompetent”.

US debt growing exponentially

The US Federal debt in 2009 is likely to grow by at least $2 trillion and reach 100% of and GDP at around $13 trillion.  In 1929 Federal debt was only 15% of GDP!  Also in 1929 the US was a creditor nation as against today when the US can only survive due to its foreign creditors. In 1929 total US debt (private, commercial,  state, federal, etc.) was 170% of GDP.  In 1932-3 it reached 260%. In 2009 total US debt to GDP (excluding unfunded liabilites of circa $ 60 trillion) will be around 425%. Before this crisis is over this percentage will be significantly higher and possible even exponentially higher.

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What is important to understand is that the US and the rest of the world is entering this crisis in a much worse position than in the 1930’s. This is one of the reasons why the current crisis will be much worse. But it will also be worse because the whole world is in a similar situation which is unprecedented in world history. What  makes this crisis totally insoluble is the toxic debt and the derivatives outstanding of over $1 quadrillion. We have in the last few years consistently stated that a major part of these derivatives is worthless. Fudging the valuation methods of the derivatives is not going to solve the problem. at best it will defer the eventual collapse for a few months.

The Stress Test of US banks

In our April 2008 Newsletter we stated that the US banking system was a house of cards. A stress test has just been done on the US top 19 banks in order to ascertain their strength under various economic scenarios. The results are  expected to be published on 4 May.  Unofficial and unconfirmed advance reports of the stress test state that 16 of the 19 banks are technically insolvent. Not one of these 16 banks can withstand further disruption of cash flow or deterioration of loan portfolio without further injection of funds. The 5 top banks are so severely under-capitalised that there is doubt about their ability to survive.

The findings of the Stress Test  are unlikely to be published without major censorship.  Like most reports emanating from the US authorities the final publication will bear little resemblance to reality. Also the problem with the stress tests is that the criteria set assumes a relatively mild downturn and not the severe crisis that is going to unfold.

The fact that the whole financial system is bankrupt is not new to our readers who have been told that this was the case for the last few years. It is now a certainty that the biggest US banks cannot survive any further losses without additional government money. And since there are still $ trillions probably tens of trillions of losses to come, it is guaranteed that the money printing will continue at an even faster pace.

US AAA Rating – a farce

US Federal debt is still triple A rated. This is an absolute joke. We are looking at a country which has lent or committed $13 trillion in the last 12-18 months on top of a Federal debt of $11 trillion and unfunded liabilities of $60 trillion. Government debt is set to grow at an accelerating rate for many years to come since there is no chance of  balancing the budget with escalating outgoings and revenue falling rapidly. US Government debt will therefore grow exponentially and there is no possibility that this debt will ever be repaid in today’s money.

The rating agencies never anticipate major problems with either sovereign or commercial debts issuers. They always react after the event and therefore serve very little purpose in protecting investors. They are commercial organisations that are paid by the debt issuers and therefore they are more interested in pleasing their paymasters than the investors.

If the rating agencies had integrity and understood what they were doing they would have downgraded US debt long ago.   However, the consequences of downgrading the US  would be so dramatic that they are unlikely to take any action before the dollar and treasury debt have collapsed.

World trade collapsing

The table below shows the decline in exports from 15 major exporters for the 12 months to February 09. The top exporters had the following declines China -41%, Japan -38%, Germany -32% and USA -22%.

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Posted at 2:11 PM (CST) by & filed under Jim's Mailbox.

Dear Mr. Sinclair,

A UNIQUE and SERIOUS one down for the count….

Warm regards,
CIGA Annette

Silverton Failure Spurs Fears of Fallout
American Banker  |  Friday, May 1, 2009
By Joe Adler

The failure, the first ever of a bankers’ bank and the industry’s 30th this year, created a new wrinkle in the disastrous fallout from the housing crisis hitting the Southeast. Silverton was the largest of the six banks that have failed in Georgia this year.
WASHINGTON — The failure of Silverton Bank of Atlanta on Friday presents new worries to institutions that have relied on the $4.1 billion-asset bankers’ banks and others like it, observers said.

Silverton, whose operations were folded into a bridge bank formed by the Federal Deposit Insurance Corp., leaves behind over 1,000 bank customers that used its services, as well as 400 bank stockholders and other institutions that participated in loan deals Silverton originated.

"This is going to have an effect on all the downstream participant banks they sold those participations to," said Ralph MacDonald 3rd, a partner at Jones Day in Atlanta.

The failure, the first ever of a bankers’ bank and the industry’s 30th this year, created a new wrinkle in the disastrous fallout from the housing crisis hitting the Southeast. Silverton was the largest of the six banks that have failed in Georgia this year. Eleven Georgia banks have gone down since the start of 2008.

It also raises questions about whether regulators should have done more to rein in Silverton. It became a national bank almost two years ago, shortly after it began an aggressive expansion into national markets and started pushing construction and development loans. That $1 billion portfolio helped spell the bank’s downfall, regulatory officials said.

More…

Dear Friends,

My feeling is always that the best help you can be to a Patriot is to fall in beside her with arms and say you are not alone.

I believe in giving business to the worthy, support to the worthy and whatever I am to her.

Therefore if you agree with her work, send business her way, whatever it is. Don’t sit on a log and expect others to do what you should do.

There is nothing more cowardly than the vocal patriot that hides the moment the shooting starts. Damn them anyway! They are worse than the opposition because they are false.

Many wrote me concerning the recent public attack on me, but how many of you wrote to the boss of the attacker with the outrage your mentioned to me? The sorry answer is less than 1/64th of 1% of my readers.

The following is a priceless education given to you free of charge from a true ADVOCATE of the ABUSED. Failing to support her shows your support of the banksters.

This does not facilitate running away from obligations. It facilitates the equitable person paying a fair amount on a comfortable time schedule. Neither she nor I would have it otherwise.

Regards,
Jim

Good morning, All,

…and thank you for your interest in my statement below which is excerpted from a message I wrote to Jim Sinclair, a well respected precious metals specialist and a commodities and foreign currency trader who is an authority on Gold, and a courageous patriot. (http://jsmineset.com)

Today, I am in Boston which is 90 miles north of where I live and work. I am here on a mission to further my investigation of the three foreclosure cases now before the Massachusetts Land Court, two of which the Judge has voided as a matter of law because the entity bringing the foreclosure was not the “real party in interest.”

When I learned of this decision, I contacted the Judge’s clerk to request a cleaner copy for my files and learned that a Motion to Vacate hearing was scheduled three days hence. I wanted to be certain that the Judge would not be persuaded to overturn his own orders and told the Clerk that I knew Judge Long was right for more reasons than he presently realized. I asked if there was any way that I could intervene as a Friend of the Court and file an Amicus Affidavit and Analysis to support the Judge’s position.

The clerk checked with Judge Long and advised that would be okay as long as I did so by Motion and understood that he might not be able to use my work because the evidence had already come in through the underlying cases.

I worked tirelessly for the next three days and produced a 1” thick, three-ring binder containing my analysis of each of the three cases.  For your reference, I have attached the Judge’s Memorandum Decision, my Motion and Affidavit, and my work product on the Ibanez case.  I found that in two of the three loans, those loans were not even in the Trust fund!

For the first time in human history, I have put before the Court the inner workings of the securitization mechanism which will reveal the Truth that virtually every foreclosure in the country that involves a securitized loan is illegal; moreover, every court in the nation in every jurisdiction – state, federal and bankruptcy is being defrauded as the Banksters use the judicial system to launder their ill-gotten gains and cover up their criminal activities.

Judge Long took my binder home over that weekend and on Monday, April 21st he issued a Notice of Docket Entry containing instructions… and a warning… to the Plaintiffs’ counsel.  Without a question, I have already influenced this debate as the Judge is now asking to see the securitization documents that I told him (in my affidavit) were essential to adjudicate these cases.

I am a single practitioner who has taken on way too many pro bono cases this year because of the value of the cases and because the people I help are worthy. (See last week’s New York Times involving my clients in Seattle: http://www.nytimes.com/2009/04/24/business/24mers.html?_r=2&ref=business)

It would be a godsend to me now to receive financial assistance from non-profits, or donations from others who have some spare change. The templates I am developing, once perfected and systemized, can be used everywhere to fight wrongful foreclosures and restore justice.

One of Jim Sinclair’s devotees here in Massachusetts contacted me to ask if I would prepare a seminar for the accountants and attorneys he trains through his CLE courses. I will be meeting with him tomorrow.

I’m working on getting a website up and running so that I can keep people posted on my progress with the Land Court cases and other important matters.  I have been trying to stay under the radar screen, but my friend Jim Sinclair has convinced me that it is time for my light to shine.  God bless him!

I hope that you find the attached helpful.

With kind regards,
Marie

Marie McDonnell
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analysts
Marie.McDonnell@truthinlending.net

Click charts to enlarge in PDF format

IBANEZ SECURITIZATION DIAGRAM ins (2) 

IBANEZ TIMELINE mmap (2)

Jim,

"The COT is very short of gold and needs to make their cover. Cover they will as you get your pockets picked one more time. The COT will then undoubtedly shift to the long side before June and jam the royal metal up."

The fear of the COT flipping the trap door over the elevator shaft has gold investors nervous. They are likely still shell-shocked from the D wave decline during September and November 2008.

A to B transitions, however, are more characterized by a series of smaller beatings rather than the classic elevator shaft method. I have spot shadowed the last two A to B transitions. The violence of the C to D wave transition is replaced by something more akin to bouncing along the floor. Expect this bouncing to be more aggressive as volatility expands with each iteration of the ABCD cycle.

http://www.facebook.com/photo.php?pid=1583332&l=a9f4dab9e8&id=557304509

Surprisingly, it doesn’t take too much for the bullion banks to reverse their net exposure. Dan and I have talked about this before, but they often use spreads to temporarily release the market in a given direction. I wouldn’t be completely surprised to see the market make another run at 1000 in May using such a tactic.

I’ll keep you posted. Going to crunch more data.

CIGA Eric

Dear Jim,

I have never seen a budget so large! It looks like your Formula hits another home run out of the park and it also seems like a lot of headlines in the news are explained by it.

More spending will lead to a higher final gold price.

Best,
CIGA BT

Congress approves $3,400bn budget
By Andrew Ward in Washington
Published: April 30 2009 03:06 | Last updated: April 30 2009 03:06

Congress on Wednesday passed a $3,400bn budget resolution that laid the foundation for healthcare reform and a series of other Democratic policy goals, handing President Barack Obama a key victory on his 100th day in office.

The plan sailed through the House and Senate with overwhelming Democratic support but not a single Republican backed the measure, highlighting deep partisan division over a budget that would sharply increase government spending and expand the national debt.

The budget resolution is a nonbinding blueprint and more tough debate remains ahead before the plan is fleshed out in final appropriations and taxation legislation over the summer.

More…

Posted at 1:58 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

I have time for only a few brief comments today so I want to focus on a market that I think bears close watch, namely the US long bond. Yesterday I remarked that bonds had broken down technically and failed to maintain support at a critical level generated on the day in which the Fed first announced its quantitative easing program and its intent to make sizeable purchases of longer dated US debt. They continued sliding further today as selling momentum increased dropping just shy of a full point at one time during the session. The day is still not over and these bonds have made a fool out of me more than once over the last few years, but as of right now, they look very vulnerable to further declines. Obviously a swift sell off in the equity markets can be expected to bring in buying in the bonds but whether or not they can recapture broken support levels on the chart remains unclear even if that were to occur. Rest assured that the US monetary authorities are more than displeased to see what is occurring in the long bond and have doubt taken notice. It would not surprise me to see them make some sort of concerted foray into the market to attempt to impose their wills on it.

I do not think it can be emphasized sufficiently enough that the technical breakdown in the long bond carries profound consequences for the future of the US economy moving forward but it is particularly significant because it indicates to me that the bond vigilantes have indeed awakened from their prolonged period of hibernation. It is evident that the bond market has now shifted its focus firmly to the looming massive supply of debt coming its way and that the fear is that current levels of demand (the Fed’s planned purchases notwithstanding) will not be able to keep up with this expected huge increase supply. Economics 101 tells us that oversupply in the face of steady or falling demand means lower prices and the bonds are responding to this inexorable fact.

That this technical breakdown is occurring alongside a strong move higher in copper, a move higher in the grains, sugar and various other commodities is not without significance. I have been remarking that gold has been caught in a sort of no man’s land of recent weeks as the market psychology has been wavering back and forth between deflationary fears and expectations of future inflationary pressures. When safe haven flows dry up, gold has been struggling to sustain its gains as insufficient buying tied to its role as an inflation hedge has been present to offset the waning safe haven buying. Once the market however becomes firmly convinced that the inevitable and inescapable product of this reckless spending and nearly unlimited amounts of new debt creation by Washington and other nations will begin to produce its noxious offspring, then gold will find solid, sustained and strong buying in the face of any setbacks in price. We are not quite there yet, but with the bonds breaking down and the CCI slowly grinding higher, it seems to me that many large scale market participants are voting with their wallets and are buying commodities to position themselves for an inflation play that will makes them billions in profits in the months and years ahead.

I want to emphasize that my analysis is based solely on the price action of some key commodity markets that I monitor and that all important CCI index. Were it not for the fact that the natural gas market has been so weak due to its current supply glut, I am convinced that we would have already seen a CCI (Continuous Commodity Index) moving up a bit more strongly rather than its current grind higher. Either way it does more and more appear that we are slowly but surely seeing a shift away from the deflationary scenario to an inflationary one. The transition will be much like the shift from winter to spring so expect periodic episodes in which the former will not go quietly into the night. Let’s just watch this unfold and attempt to understand what the market price action is telling us.

Gold once again found buying support near the $880 level as the bulls were able to drive prices well off session lows once again. It was helpful to see both the HUI and the XAU moving higher today. Nothing has changed in the near term technical picture for gold yet. Bulls are attempting to fend off a concerted effort to take it lower but cannot yet break the downsloping trendline that dominates the daily chart. The triangle pattern is still intact for now.

Copper has run right back up into a region where if it is going to fail technically, this is the spot. If it can push higher into next week, and particularly if it could somehow take out the $2.20 level, it should bode well for the entire commodity complex. We will just have to wait and see.

The Dollar was relatively flat today.

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

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Posted at 1:51 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

CHINA: ECONOMIC, POLITICAL AND MILITARY POWER

China has many geopolitical interests and wants to be the world’s pre-eminent super power.  Their thinking is long term, which contrasts markedly with the short term, short sighted, politically expedient thinking found in the Europe/Japan/U.S. axis.  China continues to set itself up to be the world’s greatest economic power in twenty years.  Here is how we believe they will do it.

1. China is a gold buyer and holder, giving their currency a strength not shared by other nations.
2. They are moving toward more bilateral trade agreements.  They have signed six recently where the Chinese Yuan was the medium of exchange.
3. China is making their opinions felt on the world stage with comments on how the U.S. should handle their deficits, and how the IMF should behave (selling gold to help poor countries and giving money to whom and when).
4. By announcing that they would become a major trader in metal commodities like the London Metals Exchange, they are stating that they will be holding metal for their own use, and acting as an agent for the purchase of commodities by others.  This insures the availability of resources for themselves, and gives them a lever to withhold commodities for military or political adversaries.
5. At about the same time as these other events were announced, China staged a show of their naval forces to exhibit to the world that they are also a burgeoning naval power.

China is following through for their long term goals to be the world economic, military and political superpower.  As an outside observer, I would say that they are making good progress implementing their plan.  In an article from the April 23rd, Financial Times, Jim O’Neill, chief economist at Goldman Sachs says it well:

China Shows the World How to Get Through a Crisis

By Jim O’Neill, FINANCIAL TIMES  

Call me mad but this crisis is good for China. It is also good for China’s role and responsibilities in the world.

Yesterday, we upgraded our gross domestic product forecasts for China for 2009 and 2010; we are now looking for 8.3 and 10.9 per cent, respectively, up from 6 and 9 per cent.

Why the optimism? It was clear that the massive rise in exports, the mainstay of the China growth model until 2008, was not sustainable. At one stage in late 2007, Chinese exports to the US alone were about 12 per cent of total GDP. This meant that exports would suffer badly in the event of something going wrong with demand in the US, and the risk of a protectionist backlash.

This led some of us to expect an end to the fixed Rmb8.28 exchange rate to the dollar and a gradual shift to a more flexible, stronger exchange rate a few years ago.

Fast-forward to the crisis. When this intensified post-Lehman, global trade suffered enormously and quickly, and it was clear that Chinese growth would suffer. It was also reasonably clear that, just as they did in response to the Asian crisis in 1997, Chinese policymakers would react swiftly and shift gears. That they have done.

Three policy initiatives stand out, and the results are starting to bear fruit, hence our upgraded forecasts.

First, in November the authorities announced massive fiscal expansion, centred on fresh infrastructure spending. While my industry has quibbled about its true size ever since, this misses the point. The statement of intent was clear; interestingly, the stock market noticed and has rallied since.

Second, and ultimately perhaps the most important development in the world economy, the government announced plans to develop a full medical insurance policy for the still vast rural community, the beginnings of which it plans to have fully implemented for 90 per cent of the rural community by 2011. This could result in an end to the excessively high Chinese savings rate and allow much stronger consumption.

Third, and critical to our forecast upgrade, the authorities, led by the People’s Bank of China, embarked on a timely reversal of tightening financial conditions of the previous two years. According to our Chinese financial conditions index, conditions have eased a huge 520 basis points since last October.

These three measures have set the scene for an acceleration of Chinese domestic demand for the rest of 2009 and 2010, just the right recipe for China and, critically, the world.

The next stage of China’s development has started and is likely to go on for years. It was partly in anticipation of this that we highlighted owning China "A" shares as one of our most favoured trades for 2009. As they have risen 50 per cent since the November stimulus announcement, the entry point is now less attractive but, as evidence of rising demand accumulates, many investors are rightly going to be attracted back to China.

The "C" in the Bric economies (Brazil, Russia, India, China) has always been the most important of the four and the events of the past five months continue to justify our excitement for the longer term.

Amusingly, in the past year many people have suggested that the Brics story is over. Nonsense – it is still in its infancy. Indeed, the updated longer-term projections we published last summer, suggesting that China could overtake the US by 2027 and that the Brics collectively could be as big as the G7 by 2027, still look decent bets to me.

At some stage in the coming months, once it becomes clear that Chinese GDP growth is safely back above 8 per cent, policymakers will allow for some tightening of financial conditions again, possibly led by the exchange rate.

In the next two years, China is very likely to overtake Japan to become the second-largest economy in the world. Some say that China might get old before it gets rich, but it is getting bigger and richer, that is for sure. One or two of its ageing G20 partners may wish to take a closer look at Chinese economic policy to see how it’s done.

INDIA

The Indian stock market has been doing well after the Satyam scandal.  Now, the elections are underway and results will be made public May 16th.  Some investors will wait until after the national elections to make sure the probable coalition government will be effective.  If the parties on the left, the Marxists, communists, etc. are included, you could have an ineffectual government which could result in a market setback.

COMMODITIES

The U.S. Federal Reserve has tripled the size of its balance sheet in recent months.  Deficits in the U.S., Japan, and Europe are at record percentages of GDP.  This, plus the big money supply expansion in many parts of the world, both argue strongly for a resurgence of inflation, most probably by the second half of 2010.

Stock markets are discounting mechanisms.  One need only look at the current stock market rally worldwide, while world economies continue to weaken, to see that they are discounting a recovery.  Is the recovery one year away?  Two years?  The market thinks it is more likely 12 to 18 months.  In any case, the eventual resurgence of inflation is good for commodities, especially gold, agriculture, and oil.  We believe that the recovery will include a slow growing, but stable economy for a few years in the developed world, and steady growth in China, India, and a few other countries.

GOLD

Who holds the gold?  Recently announced numbers show that China has upped their gold holdings to over 1,000 tons, making them #5, after the U.S., Germany, France, and Italy.  India is #10.  China’s recent announcement that they had increased their gold holdings indicates once again China’s efforts to strategically position themselves to be a leader in the community of nations.  Remember the old cliché about the golden rule?  He who holds the gold makes the rules.

China Doubles Gold Holdings and Raises Questions on Reserve Policy
By Jamil Anderlini in Beijing and Javier Blas in London, FINANCIAL TIMES 

China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged yesterday, in a move that signals the revival of bullion after years of fading importance.

Gold rose to a three-week high of more than $910 an ounce after Hu Xiaolian, head of the secretive State Administration of Foreign Exchange, which manages the country’s $1,954bn in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.

The news could spark interest in gold among other central banks.

"When the largest holder of foreign exchange reserves discloses an increase in gold holdings, other countries may decide to think more carefully about underweight gold positions," said John Reade, a precious metals strategist at UBS.

The increase in China’s gold reserves has come primarily from domestic production and refining. However, the news raises questions about the future of Beijing’s foreign reserves policy.

Ahead of the G20 summit in London this month, China suggested that the global financial system’s reliance on the US dollar as a reserve currency should be reduced.

China has been diversifying away from the dollar since 2005, when it broke the renminbi’s peg to the US currency and officially marked it to a basket of currencies, but it still holds more than two-thirds in US dollar denominated assets by most estimates.

As its trade surplus and foreign exchange reserves ballooned in recent years, Beijing continued to buy huge amounts of US Treasury bonds while raising the proportion of purchases it allotted to other currencies and to gold.

China’s accumulation of gold has taken place as European central banks have gradually cut back gold sales following a 1999 agreement to prevent the market from being flooded after prices were dragged sharply lower after the UK decided to sell part of its reserves.

"China’s announcement signals a broader shift in central banks’ attitude towards gold," said Philip Klapwijk, chairman of GFMS, the precious metal consultancy.

Paul Atherley, Beijing-based managing director of Leyshon Resources, said that even after the latest purchases China had a very small percentage of its reserves in gold, far below the US or other developed countries.

AGRICULTURE

Global demand for grains will once again establish itself as the global de-stockpiling of grains while prices fell will have to be reversed.  Globally, grains are in short supply, and this bodes well for the price of grains and of fertilizers.  The amount of disinformation and outright BS (a popular scientific term) about grain and fertilizer demand remains huge.

OIL

Oil prices have been stable while demand has been weak, due to falling supply.  OPEC has been disciplined, and the cheating by OPEC members on their quotas has been minimal.  So, we anticipate that oil prices will stay in the $40-$55 per barrel range for a few months, before rising to about $60 per barrel by year’s end.  We have been buying Canadian and U.S. royalty trusts on price weakness, especially those which produce oil.

REAL ESTATE

Commercial real estate is experiencing substantial demand decreases, especially in the shopping center and mall markets.  Residential real estate prices are in a long term downtrend driven by demographics, an oversupply of housing, and a shortage of cheap financing.

Homeowners who bought too much house, and have been trying to sell, have been slow to mark down the price to realistic levels.  Now, they are starting to do so.  This is counter balancing the seasonal up tick in home sales in May through August in the northern hemisphere.  We do not believe the bottom has arrived in housing prices, but we may see a short term uptrend during the spring and summer selling season.

SUMMARY

Investors are enjoying a durable market rally in stocks in China, India, Brazil and the developed markets as well.

As we stated last week markets could rise or fall about 20% from the level last Monday April 20, 2009. Clearly the markets fell early last week but the small size and short nature of the pull back made us more optimistic about the rally continuing. We look for higher prices for stocks in coming weeks. Further confirmation of the uptrend has been created by the markets’ hugely positive reaction in spite of the fears about a global flu outbreak. This argues strongly for higher stock prices over the immediate future.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 12:04 AM (CST) by & filed under General Editorial.

Dear CIGAs,

Government estimates are that from a mild to major pandemic the US GDP would drop 1 to 4 1/4%. Those figures are from the CBO May 2006 review.

The question is what will happen to Federal Income Tax revenues in the same period.

Assume the worst case scenario and a fall of more than 30% is quite possible. That suggests a Federal Budget deficit in the area of a mild $2.5 Trillion in 2009 to a severe pandemic and $7 trillion.

It is therefore clear that the largest economy has the most significant problems. Which would you want, the US dollar or the Swiss Franc?

That begs the question of what asset will hold its value best in a major human crisis? History answers that with gold.

Gold is going to Alf’s numbers on Armstrong’s timing.

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The National Debt is $11.2 Trillion!
Updated 30 April 2009.

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The Current Outbreak of Swine Flu in the United States

The current outbreak of swine flu in the United States, Mexico, and other countries has raised concerns among policymakers and public health experts about the possibility of a pandemic and about the nation’s ability to blunt the effects of such an event. (A pandemic arises when a new virus emerges that has not previously circulated among the human population; that virus causes significant illness in humans; and the virus is easily transmitted from one person to another.) Beyond the human suffering that a pandemic would engender, policymakers are also concerned about the potential for economic disruptions that might be layered on top of an economy already in recession.

The current outbreak is evolving rapidly, and the risk that it poses is not yet fully understood.  The World Health Organization has not declared the current outbreak to be a pandemic.  However, if the current strain were to cause a pandemic, it has the potential to slow the pace of the economic recovery that CBO expects to take hold later this year. The consequences of past episodes provide a basis for assessing the potential seriousness of a pandemic, particularly in light of the current economic downturn. In a May 2006 analysis, CBO considered the possible economic effects of a range of influenza pandemics. On the basis of an analysis of past pandemics, CBO devised two scenarios to illustrate the possible economic effects of an influenza pandemic. In a “mild-pandemic” scenario, resembling the pandemics in 1957 and 1968, about 75 million people would be infected in the United States, and about 100,000 of them would die (in a typical year seasonal influenza causes about 36,000 deaths in the United States). In that scenario, the pandemic would reduce real (inflation-adjusted) gross domestic product (GDP) by about 1 percent relative to what would have happened without the pandemic. In a “more severe” scenario, roughly similar to the 1918-1919 Spanish flu outbreak, about 90 million people would become infected, and 2 million people would die in the United States; in CBO’s estimation, real GDP would be about 4-1/4 percent lower over the subsequent year than it would have been had the outbreak not taken place.  Of course, there have been widespread changes since 1918 that may change the severity of an outbreak.  Faster international travel may mean faster transmission, but better antibiotics mean less risk of complications which were often proximate causes of death in the 1918-1919 outbreak.

In a paper released in September 2008, CBO focused on the government’s role in the vaccine market that stems from a 2005 plan by the Department of Health and Human Services (HHS) to prepare for and combat an influenza pandemic. That plan, although developed in response to the threat of the H5N1 virus, or “avian flu,” sheds light on the nation’s ability to respond to the current swine flu outbreak and will probably be the subject of public discussion in the coming months.

Because of the time it takes to produce a flu vaccine using current technology, a pandemic could circle the globe more quickly than vaccines could be produced. For the next several months, the nation’s response to the swine flu outbreak will be limited to measures that might reduce the spread of the virus through “social distancing,” strategic use of antiviral medications from existing stockpiles, and the capacity of the existing public and private health systems to treat infected people.

To improve the nation’s capacity to respond to a pandemic, HHS’s plan calls for an enlarged role of the federal government in promoting private-sector development of new vaccines, expanding the capacity of the industry to manufacture them, and procuring stockpiles of prepandemic vaccines. (Prepandemic vaccines are developed from strains that public health officials believe have the most potential to cause an influenza pandemic.) The prepandemic vaccine that has been stockpiled to date is an H5N1 vaccine and is unlikely to offer protection against the current swine flu outbreak.

HHS’s plan has multiple objectives, including to:

Increase manufacturing capacity by refurbishing and expanding plants that produce vaccines using traditional egg-based processes (developed in the 1940s) and increasing the availability of  more costly cell-based manufacturing technology and

Make vaccines available more quickly. The plan takes two approaches to meet this objective. First, it calls for stockpiling a relatively small amount of prepandemic vaccine that could diminish the worst effects of a pandemic by protecting particularly vulnerable groups and first responders. However, none of the stockpiled vaccine is likely to provide protection against the current swine flu outbreak. Second, it aims to develop so-called next-generation vaccines that can be produced more rapidly than currently available vaccines to more efficiently meet long-term needs.

Ongoing research has changed the environment in which HHS’s plan was originally formulated in at least one important regard. Adjuvants—substances that may be added to influenza vaccines to reduce the amount of active ingredient (called antigen) needed per dose of vaccine—are showing promise in clinical trials in the United States; some of them have been approved for limited uses in Europe. If a safe and effective adjuvanted swine flu vaccine can be developed, manufacturers may be able to provide enough vaccine for the entire U.S. population within a span of several months thereafter.

Specifically, CBO reached the following conclusions in its September 2008 paper:

The manufacturers of currently approved vaccines made in the United States cannot produce vaccines of sufficient effectiveness, in sufficient quantities, or in the time required to meet public health needs in the event of an influenza pandemic.

In the short term, adjuvanted vaccines offer the best hope for achieving HHS’s goal of having enough vaccine to protect 300 million people within six months of the outbreak of an influenza pandemic.  The manufacturing capacity that is needed to produce pandemic-influenza vaccine exceeds what is required to make seasonal vaccine; ongoing federal support may be required to meet and maintain the necessary capacity.

Adjuvants developed since 2005 could substantially reduce the amount of antigen needed per dose, raising the question about whether HHS’s current policy is the most cost-effective approach to meeting its vaccine-production goals. In light of this, the September 2008 paper briefly examined several other options to consider if adjuvanted vaccines prove successful, including reducing the capacity targeted for manufacturing cell-based influenza vaccines while expanding resources available to support the development of next-generation vaccines, entering into advance supply agreements (an approach used by several European nations that allows countries to make advance payments to manufacturers in exchange for a guaranteed supply of vaccine in the event of a pandemic), and modifying the size of the planned vaccine stockpile.

More…

Posted at 9:24 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

This is a very sad article as it speaks to the moral and ethical bankruptcy of government and finance.

Why Congress Won’t Investigate Wall Street
Republicans and Democrats would find themselves in the hot seat.

The famous Pecora Commission of 1933 and 1934 was one of the most successful congressional investigations of all time, an instance when oversight worked exactly as it should. The subject was the massively corrupt investment practices of the 1920s. In the course of its investigation, the Senate Banking Committee, which brought on as its counsel a former New York assistant district attorney named Ferdinand Pecora, heard testimony from the lords of finance that cemented public suspicion of Wall Street. Along the way, the investigations formed the rationale for the Glass-Steagall Act, the Securities Exchange Act, and other financial regulations of the Roosevelt era.

A new round of regulation is clearly in order these days, and a Pecora-style investigation seems like a good way to jolt the Obama administration into action. After all, the financial revelations of today bear a striking resemblance to those of 1933. In his own account of his investigation, Pecora described bond issues that were almost certainly worthless, but which 1920s bankers sold to uncomprehending investors anyway. He told of the bonuses which the bankers thereby won for themselves. He also told of the lucrative gifts banks gave to lawmakers from both political parties. And then he told of the banking industry’s indignation at being made to account for itself. It regarded the outraged public, in Pecora’s shorthand, as a "howling mob."

The idea of a new Pecora investigation is catching on, particularly, but not exclusively, on the left.

It’s probably not going to happen, though, in the comprehensive way that it should. The reason is that understanding our problems, this time around, would require our political leaders to examine themselves.

The crisis today is not solely one of bank misbehavior. This is also about the failure of the regulators — the Wall Street policemen who dozed peacefully as the crime of the century went off beneath the window.

More…

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Dear CIGAs,

The following is proof positive that Swine Flu has nothing to do with the present flu or swine.

Start of Swine Flu

 

Jim Sinclair’s Commentary

Today in Pakistan:

"In another development that sent a shudder through Pakistan, officials said a slew of gun attacks in the mega-city of Karachi killed at least 34 people and threatened to ignite ethnic tension.".

Pakistan army: Taliban holding town hostage
By MUNIR AHMAD – 5 hours ago

ISLAMABAD (AP) — Troops sent to repel a Taliban advance toward the Pakistani capital killed 14 suspected militants, the army said Thursday, and accused insurgents holding an entire town hostage.

In another development that sent a shudder through Pakistan, officials said a slew of gun attacks in the mega-city of Karachi killed at least 34 people and threatened to ignite ethnic tensions.

President Barack Obama expressed grave concern about the nuclear-armed country’s stability, while Pakistan’s president urged the public to support the army offensive so that the land would remain "a moderate, modern and democratic state."

Security forces backed by warplanes began pushing into Buner, a district some 60 miles (100 kilometers) from Islamabad, on Tuesday after Taliban militants poured into the area under cover of a much-criticized peace process.

More…

Obama Says Pakistan’s Government Is ‘Very Fragile’
Bloomberg – USA
By Julianna Goldman and Kim Chipman April 30 (Bloomberg) — President Barack Obama said the government in Pakistan is “very fragile” and expressed concern …
See all stories on this topic

Obama: Pakistan threat ‘internal’
Aljazeera.net – Qatar
Barack Obama, the US president, has said Pakistan’s army has begun to realise that the Taliban pose the biggest threat to the country, rather than India. …
See all stories on this topic

Taliban Pressures NATO Supply Lines in Pakistan
Voice of America – USA
Analysts say the move by Pakistan-based Taliban fighters out of their traditional base in the tribal areas along the border could spell trouble for the …
See all stories on this topic

US sees spike in Afghanistan, Pakistan attacks
The Associated Press
WASHINGTON (AP) — Terrorist attacks in Afghanistan and Pakistan have risen sharply as extremists have consolidated and expanded operations, according to the…
See all stories on this topic

Pakistan and Afghanistan: Gordon Brown in urgent need of a plan
Tehran Times – Iran
Few will argue with Gordon Brown’s description of the border area betweenPakistan and Afghanistan as being a “crucible of terrorism”. …
See all stories on this topic

House requests constraints on Pakistan bill
USA Today – USA
By Adil Khan, Pakistan Conflict Society via Reuters By Ken Dilanian, USA TODAY WASHINGTON — The Obama administration is opposing attempts by House Democrats …
See all stories on this topic

Obama warns US has ‘huge interests’ in Pakistan
AFP
WASHINGTON (AFP) — President Barack Obama has voiced worries about the weakness of Pakistan’s government and did not rule out US intervention if the Islamic …
See all stories on this topic

Gun attacks in Pakistan’s south kill 26 | Home >> Other Sections …
KARACHI (AP) – A slew of gun attacks in a major city in southern Pakistan killed at least 26 people, officials said Thursday, rattling a country already tense over a military offensive against Taliban militants in a district near the …
philstar.com – Breaking News – http://www.philstar.com/

Posted at 8:14 PM (CST) by & filed under General Editorial.

Dear CIGAs,

It can be easy to forget what is really important to us with so much happening in the world today.

We would like to take a moment to offer a special congratulations to a member of our Comrades In Golden Arms community, CIGA Big Tatanka.

He is the proud new father of a healthy 8lb, 6oz boy named Maxwell. Mother and baby Maxwell are both fine and off resting.

Congratulations BT from all of your JSMineset Family!