Thought for the weekend:
The entire financial world hangs by the LIBOR rate. It better drop Monday morning and stay down or it has all hit the fan.
Jim Sinclair’s Commentary
The question is will you lose your pension? The uncomfortable answer is probably YES.
Check out Bear and Lehman. Don’t forget GE is a major OTC derivative manufacturer within their financial arm.
WaMu employees likely to lose pensions; many to lose jobs
San Francisco Business Times – by Kirsten Grind
Washington Mutual employees are likely to lose their current pensions and they might not find out for another two months whether they have a job, according to a J.P. Morgan Chase executive who spoke to employees from both companies in a frank, hourlong conference call Thursday.
JPMorgan (NYSE: JPM) also plans to rebrand WaMu branches across the country with the JPMorgan Chase name, said Charlie Scharf, head of JPMorgan Chase’s Retail Financial Services group.
WaMu employs about 43,000 employees nationwide – including 3,500 in downtown Seattle – and JPMorgan Chase has about 195,600.
Scharf, who spent a chunk of the conference call answering blunt questions from employees, said employees’ pension plans are part of WaMu’s business that’s held up in Chapter 11 bankruptcy, so it’s not J.P. Morgan’s responsibility to honor them. That likely means employees who are currently accruing money into the plan as well as employees who are already retired might be cut off.
Jim Sinclair’s Commentary
This is going to stand the world on top of its head financially primarily in oil and gold. It has the capacity of being the one piece of straw that breaks the banking system’s back completely.
This is no longer an if but a when. It looks very close to me, perhaps weeks, not months.
I would say the odds of this happening before the election is now north of 65%.
No denying it: It’s war in Pakistan
The army in engaged in full-scale battles against the Taliban and Al-Qaida. Tens of thousands of civilians have fled, and there is no end in sight.
By JANE PERLEZ and PIR ZUBAIR SHAH , New York Times
Last update: October 2, 2008 – 8:41 PM
PESHAWAR, PAKISTAN — War has come to Pakistan, not just as terrorist bombings, but as full-scale battles, leaving Pakistanis angry and dismayed as the dead, wounded and displaced turn up right on their doorsteps.
An estimated 250,000 people have now fled the gunship helicopters, jets, artillery and mortar fire of the Pakistani Army, and the assaults, intimidation and rough justice of the Taliban fighters who have dug into Pakistan’s tribal areas.
About 20,000 people are so desperate they have flooded over the border from the Bajur tribal area to seek safety in war-torn Afghanistan.
Many others are crowding around the city of Peshawar, in northwest Pakistan, where staff members from the U.N. refugee agency help at nearly a dozen camps.
The International Committee of the Red Cross flew in a special surgical team from abroad last week to work alongside Pakistani doctors to help treat the wounded in two hospitals. “This is now a war zone,” said Marco Succi, a Red Cross spokesman.
Not since Pakistan forged an alliance with the United States after 9/11 has the Pakistani Army fought its own people on such a scale and so close to a major city. After years of relative passivity, the army is now engaged in heavy fighting with the militants on at least three fronts.
Jim Sinclair’s Commentary
Maybe we can have another bailout bill this week for states and municipalities with pork and bicycles attached. Today’s bailout that has the markets all befuddled is a bad joke with a lot of fanfare that means very little. The vote certainly was no booming success.
Schwarzenegger to U.S.: State may need $7-billion loan
In a letter obtained by The Times, the governor warns that tight credit has dried up funds California routinely relies on and it may have to seek emergency aid within weeks.
By Marc Lifsher and Evan Halper, Los Angeles Times Staff Writers
October 3, 2008
SACRAMENTO — California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.
The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.
The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.
Plans by several state and local governments to borrow in recent days have been upended by the credit freeze. New Mexico was forced to put off a $500-million bond sale, Massachusetts had to pull the plug halfway into a $400-million offering, and Maine is considering canceling road projects that were to be funded with bonds.
California finance experts say they know of no time in recent history when the state has sought an emergency loan of this magnitude from the federal government. The only other such rescue was in 1975, they said, when the federal government lent New York City money to avoid bankruptcy.
“Absent a clear resolution to this financial crisis,” Schwarzenegger wrote in a letter Thursday evening e-mailed to Paulson, “California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing.”
The letter, obtained by The Times, came on the eve of a vote by the House of Representatives on a $700-billion rescue package, but it was too soon to know how the package would affect the nation’s paralyzed credit markets. The Senate approved the so-called rescue bill Wednesday night.
Jim Sinclair’s Commentary
Be cautious of the “set in cement” opinion that the negative economic conditions in Europe will exceed the size of the unwind in the USA, the largest economy on the planet and the one who wrote over 75% of all OTC derivatives. This opinion is over discounted in the markets which tends to vote against it or at the least vote for overstatement.
The European situation may come all at once, giving a scary visage, but in the final analysis will be considerably smaller in financial terms than the many trillions already fried in dollar based financial entities.
IMF Says U.S. Faces `Sharp Downturn’ as Market Crisis Worsens
By Christopher Swann
Oct. 2 (Bloomberg) — The U.S. may fall into a recession as the financial rout deepens, the International Monetary Fund said in its most pessimistic outlook for the world’s largest economy since the credit crisis began last year.
“The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis,” the fund said in a section of its semiannual World Economic Outlook released in Washington today. There is “a substantial likelihood of a sharp downturn in the United States,” the fund said.
By contrast, the IMF in July projected the U.S. would “contract moderately” in the second half of 2008 before recovering in 2009. Officials also said in a July update of economic forecasts that the global growth outlook was more “balanced.”
“Strong actions by policy makers to deal with the stress and support the restoration of financial system capital seem particularly important,” the lender said today. Next week, the IMF will release updated projections for gross domestic product for the U.S. and other economies.
The warning came as the U.S. Congress worked to pass a $700 billion bank rescue package to reassure financial markets. The Senate passed the legislation late yesterday, and the House of Representatives may vote tomorrow after rejecting a different version three days ago.
Walter J. “John” Williams informs us that:
Fed Began Sidestepping No “Bailout” Before First House Vote – M1 and M2 Annualized Surges of 800% and 200% are Panic Distortions (Offset in M3).
Visit John’s site at www.shadowstats.com
As Jim points out, financial collapses happen on weekends. We look for major European banks, among the world’s largest, to fail, be forced to merge or be taken over by their respective governments this weekend.
The Europeans are not apt to see solace in the US dollar. Such an event turns Europeans towards gold as the only safe asset with no liability associated with it.
The world of collapsing financial institutions will turn the tide towards gold. Keep in mind that 90 percent of all the OTC crap was manufactured in the good ole USA. The only real ball outside of that was UBS.
Financial Crisis: So much for tirades against American greed
Ambrose Evans-Pritchard says it is ironic that European banks have turned out to be deeper in debt than their US counterparts.
By Ambrose Evans-Pritchard
Last Updated: 1:12AM BST 02 Oct 2008
It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an “American problem”, the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its “superpower status”. Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.
By Monday, Mr Steinbrück was having to orchestrate Germany’s biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was “staring into the abyss,” he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).
Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe’s dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ”le capitalisme sauvage” of the Anglo-Saxons.
We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for “regulatory capital relief rather than risk mitigation”. In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.
It turns out that European regulators have allowed even greater use of “off-books” chicanery than the Americans. Mr Paulson may have saved Europe.
The amount of calls and emails coming in are actually frightening in the sense of the work it would take to answer. I really must ask you to give me a break as there is so much on my table.
Please know that I am on top of things, feeling great and am full of energy. Also please know that there nothing wrong with anything I am attached to. I have never felt more sure about gold and the investments therein.
I am not concerned about anything. Time will prove me totally correct.
Be logical. Read what I have written and relax.
THIS WEEKEND WILL BE BRUTAL FOR EUROPE and the World
We must understand that Europe will be in the news now about their banking crisis as their financial system along with those of the rest of the world begin to disintegrate. Europe has been blaming the US for their problems, yet they are at least as bad and will now come to light. Please continue to protect yourselves and listen to wise people like Jim Sinclair.
Note the article below:
France, Germany clash on financial rescue
Wed, 01 Oct 2008 17:50:27 GMT
By Huw Jones and Paul Taylor
BRUSSELS, Oct 1 (Reuters) – France and Germany were at loggerheads on Wednesday over the idea of a U.S.-style financial rescue fund for Europe as EU governments went their separate ways in response to the global credit crisis.
The European Commission appealed for more consistency in deposit guarantee schemes and stronger pan-European financial supervision, but the apparent discord between Paris and Berlin underlined the difficulty of finding a common approach.
French Finance Minister Christine Lagarde said in a German newspaper interview that a “European safety net” could be needed to prevent a bank in a smaller EU country from going bankrupt.
But Chancellor Angela Merkel said Germany “cannot and will not issue a blank cheque for all banks, regardless of whether they behave in a responsible manner or not”.
A European government source said Paris had floated the idea of a 300 billion euro ($425 billion) EU rescue fund ahead of a meeting of leaders of the four big European powers and top EU officials tentatively set for Saturday in Paris.
But Lagarde told reporters: “There is no such thing. There is nothing of the sort,” when asked about the report.
The German Finance Ministry said: “The government completely disagrees with these plans.”
European Commission President Jose Manuel Barroso said he was working closely with French President Nicolas Sarkozy to present proposals to the leaders in Paris.
The whole world will end unless Congress passes this bill we are warned… this bill is about freeing up the credit markets we are told….Wall Street must be bailed out or else Main Street will fall we are told….
Yes indeed, we must make certain that employees that ride bicycles to work instead of driving those dirty cars can have their employers can pay for those expenses….
Unreal – this has become nothing but a pork barrel spending project loaded with goodies….
Email your State Senator and let them know your opinion on the Bailout Bill:
205 (Page 205 in the link above)
1 SEC. 211. TRANSPORTATION FRINGE BENEFIT TO BICYCLE
3 (a) IN GENERAL.-Paragraph (1) of section 132(f)
4 is amended by adding at the end the following:
5 ‘‘(D) Any qualified bicycle commuting re
7 (b) LIMITATION ON EXCLUSION.-Paragraph (2) of
8 section 132(f) is amended by striking ‘‘and” at the end
9 of subparagraph (A), by striking the period at the end
10 of subparagraph (B) and inserting ‘‘, and”, and by adding
11 at the end the following new subparagraph:
12 ‘‘(C) the applicable annual limitation in
13 the case of any qualified bicycle commuting re
15 (c) DEFINITIONS.-Paragraph (5) of section 132(f)
16 is amended by adding at the end the following:
17 ‘‘(F) DEFINITIONS RELATED TO BICYCLE
18 COMMUTING REIMBURSEMENT.-
19 ‘‘(i) QUALIFIED BICYCLE COMMUTING
20 REIMBURSEMENT.-The term ‘qualified bi
21 cycle commuting reimbursement’ means,
22 with respect to any calendar year, any em
23 ployer reimbursement during the 15-month
24 period beginning with the first day of such
25 calendar year for reasonable expenses in
26 curred by the employee during such cal
1 endar year for the purchase of a bicycle
2 and bicycle improvements, repair, and stor
3 age, if such bicycle is regularly used for
4 travel between the employee’s residence
5 and place of employment.
6 ‘‘(ii) APPLICABLE ANNUAL LIMITA
7 TION.-The term ‘applicable annual limita
8 tion’ means, with respect to any employee
9 for any calendar year, the product of $20
10 multiplied by the number of qualified bicy
11 cle commuting months during such year.
12 ‘‘(iii) QUALIFIED BICYCLE COM
13 MUTING MONTH.-The term ‘qualified bi
14 cycle commuting month’ means, with re
15 spect to any employee, any month during
16 which such employee-
17 ‘‘(I) regularly uses the bicycle for
18 a substantial portion of the travel be
19 tween the employee’s residence and
20 place of employment, and
21 ‘‘(II) does not receive any benefit
22 described in subparagraph (A), (B),
23 or (C) of paragraph (1).”.
24 (d) CONSTRUCTIVE RECEIPT OF BENEFIT.-Para
25 graph (4) of section 132(f) is amended by inserting
1 ‘‘(other than a qualified bicycle commuting reimburse
2ment)” after ‘‘qualified transportation fringe”.
3 (e) EFFECTIVE DATE.-The amendments made by
4 this section shall apply to taxable years beginning after
5 December 31, 2008.
Follow this logic:
Paper is collapsing as there is no credit market right now for major and financial entities.
The masses sell Honest Money (Gold) and run into paper, backed by bankrupt governments.
Proper logic would be to sell that paper and move into gold and gold shares that are at giveaway prices.
History proves the latter to be the course of action to take
Jim Sinclair’s Commentary
A key reason why central banks want to hold onto gold is the instability of their most common reserve asset, the dollar.
Central banks in Europe favour gold as crisis unfolds
London: Sales of gold by European central banks are likely to be lower than expected over the next year as the global banking crisis boosts bullion’s appeal as a “safe” reserve asset.
And banks elsewhere in the world, most notably in Asia and the Middle East, may even become buyers of gold in an attempt to diversify their reserves away from the dollar, analysts say.
Under the terms of the Central Bank Gold Agreement, signed in 1999 by key European institutions including Germany’s Bundesbank and the European Central Bank and renewed in 2004, members can sell up to 500 tonnes of gold a year.
But in the fourth year of the latest agreement, which ended on Friday, sales fell well short of this ceiling, to just over 357 tonnes. With banks worried by the outlook for the financial sector, sales could be even lower in the final year of the pact.
Jim Sinclair’s Commentary
This will go down as the dumbest thing our financial leaders ever do.
This has set off a huge amount of OTC default derivatives now moving to full value as a counterparty goes Chapter 11.
In a sense, do not let this happen to you. For God sake protect yourself
Gold is the only item that will, as the smoke clears, be understood as the single asset of wealth protection.
Lehman Hedge-Fund Clients Left Cold as Assets Frozen (Update3)
Oct. 1 (Bloomberg) — Lehman Brothers Holdings Inc.’s bankruptcy probably means the end of hedge-fund manager Oak Group Inc. after 22 years in business.
John James, who runs the Chicago-based firm with $25 million of assets, didn’t buy Lehman stock or debt. Instead, his potentially fatal mistake was to rely on the bank’s prime brokerage in London, a unit that provides loans, clears trades and handles administrative chores for hedge funds. He’s one of dozens of investment managers whose Lehman prime-brokerage accounts were frozen when the company filed for protection from creditors on Sept. 15.
“We’re probably going out of business and liquidate, game over,” James, 59, said. “We’ve lost 70 percent of our assets.”
The list of funds trapped in the Lehman morass keeps growing. London-based MKM Longboat Capital Advisors LLP said last week it will close its $1.5 billion Multi-Strategy fund in part because of assets stuck at Lehman, according to an investor letter.
LibertyView Capital Management Inc. of Hoboken, New Jersey, owned by Lehman’s Neuberger Berman unit, told investors on Sept. 26 it had suspended “until further notice” attempts to calculate the value of its funds. LibertyView wasn’t included in the Sept. 29 sale of Neuberger to Bain Capital LLC and Hellman & Friedman LLC.
Jim Sinclair’s Commentary
They just realized this?
IMF Says Financial Turmoil Now “Full Blown Crisis”
(CEP News) – According to a first glance of the IMF’s Global Economic Outlook, the financial turmoil has now been upgraded to a “full blown crisis”, and strong action is needed to counter it.There is a substantial likelihood of a severe economic downturn in the United States, although Europe may be partially insulated against further shocks.
As a consequence, the IMF called on governments across the globe to take strong action to “deal with the stress and support the restoration of financial system capital.”
In an interview with Reuters on Sept. 30, IMF Managing Director Dominique Strauss-Kahn said the U.S. Congress must act urgently and approve the $700 billion rescue package. He said even if the plan is not perfect, it’s better than nothing.
Strauss-Kahn also said Europe needs to develop a plan for its own financial crisis.
Jim Sinclair’s Commentary
We do not have to worry that the following will happen here because the Zimbabwe situation was caused by foolish political judgment, the move towards socialism, a puppet central bank and a fascist/dictatorial type of government.
Life in Zimbabwe: Wait for Useless Money
|HARARE, Zimbabwe Long before the rooster in their dirt yard crowed, Rose Moyo and her husband rolled out of bed. It is time to get up, intoned the robotic voice of her cellphone. Its glowing face displayed the time: 2:20 a.m.
They crept past their children sleeping on the floor of the one-room house Cinderella, 9, and Chrissie, 10 and took their daily moonlit stroll to the bank. The guard on the graveyard shift gave them a number. They were the 29th to arrive, all hoping for a chance to withdraw the maximum amount of Zimbabwean currency the government allowed last month the equivalent of just a dollar or two.
Zimbabwe is in the grip of one of the great hyperinflations in world history. The people of this once proud capital have been plunged into a Darwinian struggle to get by. Many have been reduced to peddlers and paupers, hawkers and black-market hustlers, eating just a meal or two a day, their hollowed cheeks a testament to their hunger.
Like countless Zimbabweans, Mrs. Moyo has calculated the price of goods by the number of days she had to spend in line at the bank to withdraw cash to buy them: a day for a bar of soap; another for a bag of salt; and four for a sack of cornmeal.
I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000.
If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?
When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.
What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.