Posted at 12:10 PM (CST) by & filed under General Editorial.

Dear Friends,

  1. It is axiomatic that the most leveraged gold market most often (95 percent of the time) sets the price of any cash market. First derivatives (listed futures) commands price.
  2. This remains true as long as the COMEX warehouse of gold is NOT meaningfully depleted by long gold contracts by taking delivery from the exchange warehouse.
  3. As long as an exchange maintains a warehouse that historically overwhelms historical demand for delivery the first derivative, The COMEX listed gold future, will be the primary cause of price.
  4. Taking delivery from the COMEX warehouse is not an easy process as the system is designed not to violate your contract but to be a world-class pain in the ass.
  5. The COMEX requires re-assays, assuming you wish to re-deliver. This then places another raving pain in the ass in your way.
  6. The COMEX market is effectively an international 24-hour market as there is no location where you cannot buy or sell a COMEX clone.
  7. Cash bullion gold as opposed to the semi cash markets that non-USA banks trade is the only totally private means of buying and selling gold.
  8. As currency problems increase, first the knowledgeable public such as you clean out the coin market.
  9. This is the first time that the international coin markets have been cleaned out everywhere. This did not happen globally in the 70s.
  10. Large gold bars are still available in major markets but the backup inventory is getting low.
  11. As long as the COMEX warehouse remains adequate and large bars still are available, the paper market, the leveraged COMEX market, will rule the price.
  12. Only with a decline in COMEX warehouse inventories and a run down in large bar supplies of the cash market will the cash bullion market command the price of the COMEX futures market.
  13. It was not the buying by the Hunts that caused silver to move above $30 into the $50 area, but rather the universal belief that they would take delivery, which would deplete or exceeded the COMEX warehouse supply.
  14. The War between paper gold and bullion gold is a war to determine which will take command of the price of gold, nothing more, nothing less. There will be no two markets trading at different prices. All this battle is about is IF the bullion gold market is going to take the lead in making the singular price away from the traditional axiom that the most leveraged market makes the price. I believe the bullion, in these most unique conditions, will command the one gold price making it hard to impossible to manipulate the gold price via the paper gold market, as is the practice every day.

Posted at 3:07 PM (CST) by & filed under General Editorial.

My Dear Friends,

I am absolutely sick to my stomach. I am grateful that I am 67 years old because I fear for my children and grand children.

How can they maintain the principles taught to them in a degraded, sinful and sociopathic world?

The world is crying out for relief from a financial world akin to Caligula’s rule of Rome

Not only was the case for corporate Federal governance not moved forward, it has collapsed on the FASB/SEC return to total value fabrication of the weapons of mass financial destruction, OTC derivatives.

Corporate governance takes back seat in bailouts
Treasury’s investments will do little to advance cause, experts say
By Alistair Barr, MarketWatch
Last update: 6:48 p.m. EDT Oct. 17, 2008

SAN FRANCISCO (MarketWatch) — The U.S. Treasury’s plan to invest $125 billion in nine of the country’s largest banks will do little to advance the corporate governance movement, experts said on Friday.

Some of the corporate governance and executive compensation rules in the original bailout legislation have since been softened by interim final rules drawn up by the Treasury as part of its plan to inject capital into banks, they added.

“The rock struck the water and it made a significant splash, but the ripples have been limited by the actual rules,” Patrick McGurn, special counsel at corporate governance specialist RiskMetrics Group, said in an interview. “From a corporate standpoint, the fine print has limited some of the impact of the bailout package.”

Earlier this month, Congress passed massive bailout legislation allowing the Treasury to spend $700 billion buying bad assets from struggling financial institutions.

But stock markets plunged further and credit markets froze, forcing the government to use $125 billion of that money to invest directly in nine of the largest U.S. banks, including Citigroup (C), J.P. Morgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Morgan Stanley (MS) and Goldman Sachs (GS).

To gain support for the bailout plans, the Treasury said financial institutions benefiting from government support would have to adhere to stricter corporate governance rules and executive compensation limits.

More…

Posted at 9:08 PM (CST) by & filed under General Editorial.

Jim Sinclair’s Commentary

When this goes off crude will trade $100 higher within 60 days.

Pakistani politicians divided over action on terror
Parliament session split as extremists denounce Nato
Soaring poverty feared to increase suicide attacks

A deep rift over anti-terror policy has opened up within Pakistan’s political class, as extremist violence and an economic crisis push the country to the verge of collapse. A special session of parliament called by the government to forge a political consensus on the “war on terror” has backfired spectacularly as parties, including some in the ruling coalition, denounced the alliance with Washington and Nato rather than backing the army to take on the Pakistani Taliban.

A party in the coalition government, the religious Jamiat-Ulama-I-Islam party, has even demanded that, as parliamentarians had received a presentation from the army, Pakistan’s Taliban movement should also be allowed to address them. It comes as the political and economic situation worsens, with intensified suicide bomb attacks and an alarming depletion in Pakistan’s foreign exchange reserves. The country is seeking an emergency $10bn bailout from the international community, while a severe shortage of electricity is crippling business and punishing households.

Critics of the government, which is led by controversial president Asif Ali Zardari, complain that there is a paralysis of decision-making and policy. A leaked US top secret National Intelligence Estimate on Pakistan concludes that the country is “on the edge”. A US official was quoted summing up the assessment as “no money, no energy, no government”.

Yesterday a US missile strike inside Pakistan’s tribal border area with Afghanistan killed up to six suspected militants, and a suicide attack on a police station in the north-west killed three officers and wounded 15.

More…

Jim Sinclair’s Commentary

Follow the USA, the non-existent and overruled FASB and the SEC and you just can make up any price you want.

EU calls for clear plan on valuing derivatives
The Associated Press
Published: October 17, 2008

BRUSSELS, Belgium: European Union regulators called Friday for a clear plan on valuing some of the shadowy high-risk credit derivative investments estimated at around US$600 trillion (444 trillion) that are now a key issue in easing the global financialcrisis.

Billions of euros (dollars) have been wiped off banks’ balance sheets in recent months on fears that some complex investments may be based on assets that are nearly worthless such as housing loans that may not be paid back when a recession puts people out ofwork.

The market for derivatives boomed over the last decade as investors sought new ways to parcel out risk, with many jumping on a gravy train that few really understood. Billionaire investor Warren Buffett has been vocal in avoiding them, dubbing them “financial weapons of massdestruction.”

EU financial services chief Charlie McCreevy called on national supervisors and the financial industry to agree on the real risks credit derivatives pose and how they can be limited to prevent further lossesunraveling.

“I would like to have, by the end of this year, concrete proposals as to how the risks from credit derivatives can be mitigated,” he said in astatement.

More…

Jim Sinclair’s Commentary

Maybe the FBI should just arrest all the OTC derivative manufacturers.

Lehman Is Focus of Three U.S. Grand Jury Probes; 12 Subpoenas
By Linda Sandler and Christopher Scinta

Oct. 17 (Bloomberg) — Lehman Brothers Holdings Inc., which last month filed the largest bankruptcy in history, is the subject of three federal criminal probes and at least 12 subpoenas, according to a lawyer for the failed bank.

“We are facing three grand jury investigations,” said lead Lehman bankruptcy lawyer Harvey Miller yesterday in Manhattan federal court. The probes, launched by the New York U.S. attorneys in Brooklyn and Manhattan as well as in Newark, New Jersey, are focusing in part on Lehman’s role in the $330 billion auction rate securities market and possible crimes associated with the New York-based bank’s $6 billion June stock issue, according to a person familiar with the case.

The New York Post reported today that Lehman Chief Executive Officer Richard Fuld is among the 12 subpoenaed, without saying where it got the information. Miller declined to immediately comment on whether Fuld was among those subpoenaed.

Investigators have subpoenaed Ernst & Young LLP, Lehman’s auditor; U.K.-based bank Barclays Plc, which bought Lehman’s North American brokerage; and the New Jersey Division of Investments, which runs a pension fund that lost $115.6 million on a $180 million investment in the June stock sale, according to people familiar with the case. It’s not clear whether these subpoenas are part of the 12 noted by Miller.

Yusill Scribner, a spokeswoman for U.S. Attorney Michael Garcia in Manhattan, declined to comment. Fuld’s lawyer, Patricia Hynes of London-based Allen & Overy, didn’t immediately return a call or e-mail seeking comment.

More…

Posted at 1:06 PM (CST) by & filed under General Editorial, JSMineset Editor.

Dear Friends,

Since Editor Dan and I have to ration our time, we will from today on only be able to return calls, faxes and emails to those people who have taken a positive step to show corporate confidence in me.

These people we owe our time to and these people will get it.

Thank you for understanding our situation,

Jim and Editor Dan

Posted at 12:56 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The eloquent and highly perceptive Ambrose Evans Pritchard informs readers to the problem Jim has long stated. Derivatives were always going to be the big problem.

The world at large is slowly beginning to awaken to what Jim Sinclair has been saying for a long time.

Respectfully yours,
Monty Guild.
www.GuildInvestment.com

Fears of Lehman’s CDS derivatives haunt markets
It is a full week after bankers gathered in New York to start sorting out the derivatives mess left by the bankruptcy of Lehman Brothers. We still do not know who is on the hook for some $360bn of default insurance, or how much they will have to pay.
By Ambrose Evans-Pritchard
Last Updated: 12:18AM BST 17 Oct 2008

Lehman Brothers former chief executive Dick Fuld has faced heavy criticism

Ominous talk of big names and big sums continues to haunt global markets, thwarting efforts by the US and European authorities to unlock inter-bank lending. Traders have noted with acute interest that insurer AIG – now nationalised – says it will need another $38bn from the US government, on top of the $85bn bail-out it has already received. AIG is the world’s biggest underwriter of credit protection.

Those on the wrong side of these Lehman debt contracts – known as credit default swaps (CDS) – must come up with the money by Tuesday, the next D-Day in the ever-fraught calendar of the credit markets. There has been a deafening silence so far.

There is no easy way of finding out who they are, so every bank and insurer is suspect. The $55,000bn CDS market is “completely lacking in transparency and completely unregulated” in the words of Chris Cox, the chairman of the US Securities and Exchange Commission.

The settlement auction on Lehman CDS contracts last week was in itself a bombshell. Creditors retrieved just nine cents on the dollar from the Lehman wreckage. As Naked Capitalism put it, the bank had “vaporised”. The biggest players at the auction were Goldman Sachs and Deutsche Bank but they were almost certainly transacting for clients.

The insurers of the debt — a third are hedge funds — will have to pay 91pc of the $400bn in contracts.

More…

Monty,

What good is knowing all of this when our esteemed financial leaders pulled the plug on Lehman, a very major OTC Derivative creator.

I do not for a minute think I know more than Paulson and Bernanke.

The SEC overrules FASB, who in fact earlier this week allowed the gang to lie, allowing those cartoon values come back onto balance sheets. Now we are at square one. What just sold for .0875 cents by Lehman can be valued at whatever your in house demonic thief geek says is value to maturity, even though there is no way to know what market conditions will be at maturity. Why not say $90 or more on the .0875 OTC bag of crap just sold by Lehman?

Think about this!

Your friend,
Jim

Posted at 12:15 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Why is there even an FASB?

They are a bunch of bean counters that like two plus twp to be four. The earth cries out to its maker as the evil is too much to bear.

The common man is a slave.

The middle class is regulated.

The super rich have no regulation, law or feeling of responsibility except to themselves.

The damage they do will be vented on their children, but they do not give a damn.

Financial Sodom and Gomorrah:

“And the Lord said, Because the cry of Sodom and Gomorrah is great, and because their sin is very grievous;

I will go down now, and see whether they have done altogether according to the cry of it, which is come unto me; and if not, I will know.

— Genesis 18: 20-21 (KJV)”

Sometimes men just push too far.

That time the evildoers are the denizens of Sodom, a city on the plains of Jordan near the Dead Sea.

This time the evil doers are OTC derivative manufacturers and the false/misleading valuation of worthless asset-less so called assets.

Somehow I do not believe the cocky evil doers will walk away with their winnings, their health and live happily ever after in Greenwich CT and Toronto.

SEC allows change that may delay bank write-downs
Thu Oct 16, 2008 3:54pm EDT

NEW YORK/WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission has agreed to a request from banks that could allow them to delay writedowns on certain securities that have dropped in value due to thecredit crisis.

In a letter late on Tuesday, the chief accountant of the SEC told Financial Accounting Standards Board (FASB) Chairman Robert Herz, that banks, at least temporarily, could treat so-called perpetual preferred securities more like debt securities when assessing them for impairments.

In explaining the decision, SEC Chief Accountant Conrad Hewitt said such securities were “hybrid” securities with equity and debt-like characteristics that presented a particular challenge to banks.

In the letter, Hewitt said the SEC “would not object” to banks treating perpetual preferred securities as debt until FASB provides clearer guidance on how to address impairment charges for these securities.

A FASB spokesman was not immediately available to comment.

More…

Jim Sinclair’s Commentary

When one party in a special performance contract fails financially the OTC derivative moves from notional value to full value. I don’t believe there are 200 experts that know their ass from their elbow on how to settle this mess.

Lehman Looks to Unwind Derivatives Trades
LEHMAN bankruptcy attorneys sorting thru 1.5 mil derivatives trades involving 8,000 counter-parties.

Lehman Brothers Holdings Inc.’s legal and financial advisers said Thursday they plan to hire about 200 professionals to help settle the more than 1 million derivatives trades the investment bank entered into before it collapsed last month.

Lehman attorney Harvey Miller said at a court hearing that advisers are working around the clock to understand Lehman’s transactions in the wake of the “chaos” that resulted from its Sept. 15 bankruptcy filing, the largest ever in U.S. history.

Much of their work will focus on wading through about 1.5 million derivatives trades involving 8,000 counterparties. Lehman’s chief restructuring officer Bryan Marsal of turnaround firm Alvarez & Marsal said about 210 financial professionals will be hired to unwind those trades.

Mr. Miller credited Mr. Marsal for his work so far, saying he has “brought order to thi s chaos.” Alvarez & Marsal has 144 employees working on the Lehman matter along with 165 Lehman employees still working at the bank.

More…

Will Bailouts Risk Hyperinflation?
By CNBC.com | 13 Oct 2008 | 06:07 AM ET

Government bailouts of the financial system will destroy the dollar, euro and sterling because of hyperinflation, Martin Hennecke, senior manager of private clients at Tyche told CNBC. But Todd Everts, president & CEO of Wall Street Global, disagreed.

“The privatization of the banks is the first step down the road to hyperinflation,” Hennecke said Monday. “Maybe we are not seeing the Zimbabwe-style (hyperinflation), but inflation is a major major risk and investors should look at this very carefully.”

Standard and Poor’s projected in 2005, well before the current crisis hit, that all the major Western governments would be heading towards default on their sovereign bonds, Hennecke said.

But the dollar’s value is set to decrease over time, argued Everts, after hearing Hennecke’s case.

More…

Posted at 9:58 PM (CST) by & filed under General Editorial.

Dear Jim,

I was reading your latest article and was very alarmed – I have been up most of the night in regards to these 3 comments and would greatly appreciate your thoughts.

I am currently totally invested in bullion 65 % gold and 35% silver.

Can you please help with these 3 ideas …

  • Silver will demonstrate the fact that it is more an industrial metal than a precious
  • Silver is not a currency because it is simply too HEAVY to settle debts or to be universally fungible.
  • Silver performs best when there is reasonable industrial demand and distrust of currency. When this happens rounding up the gang and their money will have a lot to do with which party is elected.

Also are saying that silver is unlikely to recover from this point in time and not likely to track gold at at least 90-100 to 1 ratio? THIS WOULD BE A MAJOR CONCERN FOR MANY INVESTORS AND I THINK IT WOULD BE VERY HELPFUL FOR US ALL

Thank you so much – I do realize your time is valuable.

Many kind Regards
CIGA Brad

Dear Brad,

Silver will perform with gold.

My concern is that after $1200 in gold, silver may not keep pace with gold due to its industrial demand component.

That is 100% consistent with what I have said for years.

What I said is absolutely true, but you give it too much of a bearish interpretation.

I never in any way made a bearish prediction for silver.

I said be realistic as markets move up as what I told you, in my opinion, is correct.

All the best,
Jim

Jim,

It just keeps getting worse…

…averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day

God Save Us,
CIGA Rick in Missouri

Banks borrow record $437.5 billion per day from Fed
Thu Oct 16, 5:14 PM ET

NEW YORK (Reuters) – Financial institutions ran to their lender of last resort for record amounts of cash in the latest week, under extreme pressure from the worst global financial crisis in a generation, Federal Reserve data showed on Thursday.

Banks and dealers’ overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day.

Some analysts are concerned that banks’ dependence on Fed lending might become long term and difficult to change.

“The banking system is going to become addicted to this very cheap money. Unwinding it will be very difficult,” said Howard Simons, strategist with Bianco Research in Chicago.

More…

Dear Rick,

See you in Weimar.

Regards,
Jim