Posted at 6:55 PM (CST) by & filed under In The News.

Dear CIGAs,

For your information, there is an Angel at $1156 that has been putting up a great fight in the last two sessions.

 

Jim Sinclair’s Commentary

If rates rise, the make believe (MOPE) recovery will collapse, period!

Elusive and fragile recovery threatened by soaring deficit
Business leaders warn of potential economic relapse as Chancellor prepares report
By Sean O’Grady, Economics Editor
Monday, 7 December 2009

As the Chancellor adds the final polish to his pre-Budget report on Wednesday, some of Britain’s leading business organisations have warned that the recovery will be fragile and that soaring public borrowing threatens the UK’s international credit rating. Britain runs a high risk of a "relapse" into recession next year.

The Engineering Employers’ Federation says that conditions in the British manufacturing sector have continued to improve, but that signs for a strong rebound in 2010 "remain elusive."

While the EEF say that "the worst of the downturn is behind the sector and the weak pound and recovering world markets are beginning to have a positive impact", confidence across manufacturing remains fragile.

The EEF also warned that given the experience of previous recessions when investment took some three to four years to recover, the steep cutbacks seen during the current downturn present a significant threat to industry’s longer term competitiveness.

Yesterday, the British Chambers of Commerce became the latest group to call on the Treasury to set out a credible plan to tackle the structural deficit, which they estimate at £90bn per year – that is the borrowing that will still be needed to keep up with public spending even if the economy recovers some of its old vigour. However, the BCC also stressed that addressing the deficit had to be done gradually.

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Jim Sinclair’s Commentary

Turkey today.

Turkey says no more troops for Afghanistan
Reuters
Sunday, December 6, 2009; 7:49 AM

ISTANBUL (Reuters) – Turkish Prime Minister Tayyip Erdogan, who left for the United States on Sunday to meet President Barack Obama, said Turkey would not contribute additional troops to Afghanistan.

Erdogan’s trip comes at a time when Turkey’s deepening ties with fellow Muslim countries has fed perceptions that the NATO member is turning away from its traditional western allies.

Obama last week announced he was sending 30,000 more U.S. soldiers to Afghanistan, and Washington wants others to follow suit. "Turkey has already done what it can do by boosting its contingent of soldiers there to 1,750 from around 700 without being asked," said Erdogan before his departure in Istanbul.

Turkey’s soldiers are not engaged in combat operations and Ankara has long resisted pressure from Washington to offer more combat troops.

Erdogan said Turkey would continue its training of Afghan security forces.

The prime minister also said he would discuss other regional issues such as Iraq and the Middle East with the U.S. president.

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Jim Sinclair’s Commentary

Maybe F-TV got ahead of itself.

It appears as if the Chairman is not buying it. He should not as we all know the headwinds are still fierce.

Bernanke Sees ‘Formidable Headwinds’ for U.S. Economy
By Craig Torres and Shobhana Chandra

Dec. 7 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the U.S. economy faces “formidable headwinds,” including a weak labor market and tight credit that are likely to produce a “moderate” pace of expansion.

“The economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate,” Bernanke, 55, said today in a speech to the Economic Club of Washington. He said inflation remains “subdued” and might even move lower.    

Treasuries advanced as traders pared bets the central bank will increase interest rates before August. Bernanke, in response to a question after his speech, repeated the Fed’s statement that rates are likely to remain low for an “extended period.”

The yield on the benchmark two-year Treasury note fell seven basis points to 0.76 percent at 3:35 p.m. in New York. The Standard & Poor’s 500 Index was down 0.2 percent to 1,103.92 after rising as much as 0.4 percent.

“Bernanke suspects we will grow below normal recovery standards, and that pace could be around awhile,” said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta. “Fed policy may stay where it is, essentially zero, for some time. There are serious risks out there.”

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Jim Sinclair’s Commentary

These guys will not stop manufacturing financial WMDs until they are in the ground.

BIS sounds risk alarm.
The Bank for International Settlements stated in its latest quarterly report, published over the weekend, that banks may once again be lured to take big risks because of rock-bottom interest rates. The study found evidence of a significant link between an extended period of low interest rates prior to the financial crisis and banks’ risk-taking, which it said could consequently fuel new asset price bubbles. BIS also noted the volume of international debt securities issued in Q3 fell 16% from Q2, to $1.998T while net issuance almost halved to $475B. Total turnover in exchange-traded derivatives was stable at $425T, which is about 60% of the volume seen before the financial crisis

Jim Sinclair’s Commentary

Pakistan today.

Peshawar huge blast kills 10, injures 45
Mon, 07 Dec 2009 10:55:16 GMT

At least 10 people have been killed and 45 others wounded in a blast outside a court building in Pakistan’s northwest city of Peshawar.

The explosion occurred Monday following recent attacks in Peshawar that lies on the edge of Pakistan’s lawless tribal belt.

Dr. Jamil Ahmad at the city’s Lady Reading Hospital said at least 10 people were killed, including two policemen, adding that 45 others were wounded.

Security and government facilities are main targets of militants. On November 19, an explosion killed 19 people outside another judicial complex in Peshawar.

Earlier on Saturday, an explosion in Peshawar left four people dead.

Hundreds have lost their lives in a series of terrorist attacks in Pakistan beginning in October when the Pakistani army launched an offensive against pro-Taliban militants in the northwest.

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Jim Sinclair’s Commentary

Can you recall that three years ago when Pakistan was no story?

Soon Turkey will be on the geopolitical risk map.

Opinion: Explaining Turkey’s high-risk activism
Turkey’s search for its own path is accompanied by significant risks.
By Ronald H. Linden — Special to GlobalPost
Published: December 7, 2009 11:17 ET
Updated: December 7, 2009 14:37 ET

WASHINGTON — On Monday, Prime Minister Recip Erdogan of Turkey arrived in Washington trailing a list of actions designed to achieve “zero problems” with his country’s neighbors. Considering how many immediate neighbors there are (seven) and who they are (e.g. Iran, Iraq, Syria, Armenia) this is a tall order. Ankara’s activism has raised the stakes in its own neighborhood and eyebrows in the United States.

Turkey has long been a valuable member of NATO and supporter of U.S. initiatives, e.g. the first Gulf War, Afghanistan. Its application to join the EU has been in Brussels’ mailbox for more than 20 years. Now, several developments in the region — an erosion of U.S. interest and power, the rise of an assertive Russia and Iran, a nonexistent “peace process” in the Middle East and the emergence of the Black Sea as a central energy corridor — have spurred Turkey to carve out its own distinctive role.

Turkey is poor in energy resources but rich in strategic location. Russia is now its largest trading partner and energy supplier. Ankara has agreed to let the Russians build the “South Stream” pipeline across Turkish territorial waters. Last year Turkish reaction to Russian dismemberment of Georgia — with whom Turkey had extensive ties — was muted and U.S. attempts to put more naval forces in the Black Sea at the time were rebuffed. When the foreign minister visited Georgia, a deputy undersecretary simultaneously visited the breakaway Abkhazia region.

But it would be misleading to see this as an East-West choice. Turkey has not retreated from involvement in European energy plans and signed the long-delayed agreement on the Nabucco Pipeline the same month as that on South Stream. It rapidly recognized the new state of Kosovo, which the EU and U.S. wanted and Russia did not. President Obama’s visit in April, 2009 produced a jump in favorable views of the U.S. but suspicions linger from years of being other countries’ instrument.

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Jim Sinclair’s Commentary

Our allies in the war.

Pakistan court studies amnesty deal

Pakistan’s Supreme Court has begun a hearing on an amnesty deal that has shielded the country’s president and many other senior officials from corruption charges.

A 17-member panel stated hearing the petitions against the amnesty on Monday, Azhar Hussain, a court official, said, without giving further details.

The process could pave the way for challenges to the rule of Asif Ali Zardari, the president.

The amnesty deal, known as the National Reconciliation Ordinance (NRO), was announced two years ago by Pervez Musharraf, then the country’s president.

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Jim Sinclair’s Commentary

I think China is playing to a cagey and is going get front run again.

Russia’s central bank eyes more gold
2009-12-07 16:20:00

MOSCOW (Commodity Online): Russia’s Central Bank picked up the pace of gold purchases in November, diversifying reserves as a weaker dollar boosts the appeal of bullion. And, it has announced that Russia may buy more gold in the coming days.

Russia’s gold reserve probably rose by $790 million to $23.1 billion in the week ended November 27. The Central Bank increased gold holdings by almost 130 tonnes in the last year. The bank’s holdings equaled $23 billion on December 1, a gain of 13 per cent in the month.

Russia plans to increase gold holdings and diversify the structure of its reserves, seeking alternatives to a weakening dollar.

That development worries some people: Since central banks typically buy US dollars to store their foreign exchange reserves, the growing taste for gold can be seen as the latest sign that the greenback’s status as the world’s sole reserve currency is in jeopardy.

The yellow metal has been on a tear since the end of August, but the rally gained added momentum starting on November 4, the day after the Reserve Bank of India announced that it had bought 200 tonnes of gold from the International Monetary Fund in October.

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Posted at 4:16 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Here are the answers to the many communications today:

1. The economy is not improving, but is in reality bouncing along the lows. The only improvement is in Management of Perspective Economics.

2. That bottom bouncing is disappointing when you consider the degree of monetary and now fiscal stimulation that has been entered in to.

3. If interest rates rise here the lows will become an economic breakdown.

4.Commercial loans and residual OTC derivatives threaten up to 1000 banks according to certain establishment analysts.

5. When interest rates do rise (which they will) it will be a currency event impacting the long end then pulling at the near.

6. From 1968-1980 overnight money rose from 3% to 21%. The yield on 10 year money went to 14 7/8%. In the same period with rising interest rates gold rose to $835.

7. The GLIB assumption that rising interest rates means lower gold is world class because it fails to consider many items before coming to that conclusion. Short rates must rise at a percentage greater than expected inflation in the same period. Jump to any conclusion before we see where the economy is, and what the position of the US dollar is results in amateurish nonsense.

8. My suggestion that at a point one removes their capital from any investment, even gold, brought in howling bulls berating me. Doing capital recall is axiomatic for professionals and the reason why we last decades.

9. The gold price is the dollar value in the inverse. Right now that is enough to know.

10. Hyperinflation is a currency event based on a loss of confidence in the currency in question. Those that scream deflation never read economic history and have no knowledge of economics. Basically they are foolish shallow people making fools of themselves in public.

11. Dubai must threaten default, or you will never reach an agreement with creditors.

Hold on to this knowledge. Think about it. Don’t pick up the phone because I am on your speed dial or ram out an email because you disagree with me.

Everything you need and every question asked is here on JSMineset, usually multiple times from many different angles.

JSMineset is probably the largest book ever written on economics, currencies and markets in general. Please use it.

If you read this site only occasionally then you are missing the entire point. It is like attending class occasionally then calling the professor because you do not understand the lesson given last week when you were not there.

Please don’t send me articles that were on JSMineset in the last two days asking questions about it.

Posted at 8:12 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

Almost every comment now making its way around the community regarding the "Carry Trade" is akin to the machine below:

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Dear Jim,

Since the actual carry trade on the dollar determines a "Synthetic Short" on the US dollar, then it is fair to assume that as soon as interest rates, for any reason, start to rise shorts will be closed and the dollar sustained and propped up.

Isn’t that going to put big downward pressure on Gold?

Could you kindly also let us know, in your view, what is going to be Gold’s biggest threat?

Regards,
CIGA Francesco

Dear CIGA Francesco,

This is a popular concept that needs explanation.

1. The size of the carry trade cannot be known. There are no reliable sources of information by which you can validate statements such as "The Mother of All Carry Trades,” made by popular academics. What passes through Libor and what any source of dollar lending does lies in a non transparent private treaty market. None of this in terms of a meaningful percentage can be gauged by reviewing COT (Commitment of Traders) data.

You can therefore assume that any source that says they can size the carry trade is full of bull.

2. The carry trade is not an all on or off arena. Some will close their positions but others convinced that rates will remain relatively low for a period of time will enter transactions. Most

commentators refer to the carry trade as if it was a singular large bull elephant that enters and exits certain trades, bashing and breaking everything in sight.

As an example, on Friday some may have closed carry trade positions while other would have seen it as a point of entrance.

3. Those that participate in the carry trade are well financed (at least at the start) and generally of above average market intelligence. Commentators again see the carry trade as a static long of an asset and short a currency. That is so far from the truth that it is actually STUPID. I am sure some carry traders were sellers as gold approached $1224 and will be again at $1274-$1278.

4. Once getting a lead (profit) in the transaction a wise carry trader will see to hedging the currency and interest cost risks.

5. Much of the carry trade today is done as an OTC derivative transaction in legs (positions) or in whole or combinations thereof.

6. The major factor of the carry trade is that the currency of choice should have negative fundaments and a RELATIVE low interest cost. Note the word RELATIVE. That means if rates begin to rise, the short term interest rate should rise so as to maintain the state of RELATIVE low interest rates for the carry currency in comparison to other currencies.

7. Remember even then the carry trade is not one enormous trader, it is many traders, some entering and others exiting.

To make the statement “synthetic dollar short,” it carries a connotation of a singular unit, unhedged and never changing, that will at some point attempt a singular exit. That simply is not the truth of the matter.

The carry trade is destined to go for years in the US dollar with periods when their will be large positions and at other times smaller positions.

Those who think differently should review the years of carry experience in the Japanese Yen. Recognize that the policies of the US Fed and Treasury are a mirror image of what resulted there for many years

In conclusion, the concept "Synthetic Dollar Short" is glib when describing the carry trade and therefore an unknowable factor by which to trade gold.

Trading gold, which is insurance against the effects of depraved economics, is the proper understanding of what gold is as a currency. Few if any will do as well as those reading here that entered gold under $300 and still maintain that position.

I will advise taking the cost of your position out between gold at $1580 and $1620, letting the balance of your position ride as the price shows its intention of reaching Alf and Martin’s numbers.

Respectfully yours,
Jim

Posted at 3:26 PM (CST) by & filed under General Editorial.

Dear CIGAs,

We are quickly running out of both Compendium sets, and once they are gone that is it! If you have been waiting for the right time to pick one up now is your chance! All Compendium orders placed by the end of the month will arrive in time for the holidays, so why not pick one up as a gift for someone you care about? You will continue to support the site here while giving one of the largest compilations of information and market insight available for purchase anywhere!

Dear Readers,

Hundreds of phone calls and thousands of emails from readers are overwhelming. We all work tirelessly to keep bringing you the most up to date news that affects the Gold market.

Almost every question we receive has been answered repeatedly here on JSMineset and can be found on the Compendium.

If you take value from this site, purchase a Compendium. You are getting a lot for your money and will keep us from becoming a paid subscription only site.

To those of you who have supported us, we thank you!

Regards,
Jim

**ANY COMPENDIUM PURCHASE WILL ALSO GET YOU THE LINK TO JIM’S 3 HOUR CIGA MEETING IN TORONTO FROM FEBRUARY 2009 – Email jsmineset@gmail.com if you have not received the link**

**PLEASE NOTE YOU DO NOT NEED A PAYPAL ACCOUNT TO PURCHASE ANY OF THE COMPENDIUM SETS. COMPENDIUMS SHOULD ARRIVE WITHIN 4-6 WEEKS DEPENDING ON YOUR LOCATION**

What you will receive with each set:

Compendium Version 1 ($50 USD): (VERY FEW LEFT!!!)

 

Compendium Version 1 includes all articles posted from the inception of JSMineset in 2002 to December 2005. It comes packaged as a searchable PDF database and includes several thousand articles on Gold and financial markets. As a bonus, a separate Technical Analysis video disc by Jim Sinclair is included in the package. This video is viewable on a computer only and is both PC and Mac compatible.

Compendium Version 2 ($80 USD):

Compendium Version 2 includes all articles posted from December 2005 to the end of October 2008. All articles are categorized and presented in HTML format and are PC and Mac compatible. Several thousand articles are again included in this archive disc which makes up literally thousands of pages of market commentary from Jim himself. Compendium Version 2 also includes an hour long DVD video commentary on financial markets by Jim Sinclair. This disc is playable in any DVD player and any computer that supports DVD playback.

Compendium Version 1 & 2 Package ($130 USD):

This package includes both compendium 1 & 2 which are shown above. As you have noticed by this point, JSMineset does not subsidize costs with garbage advertising nor do we ever promote products through our free eblast system. If you feel JSMineset has helped you over the years purchase Compendiums 1 and 2 and help keep us alive! For the price you pay the information you receive is unbeatable and you know it is going to a good cause.

All prices are in US dollars and include shipping and handling.

Thank you all for your continued support!

Dan Duval
JSMineset Editor

Posted at 2:56 PM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

OTC derivatives have been and are so clearly flawed that Mr. Fred can see that under any degree of pressure they will fail.

The Chinese are not happy.

CHINESE OFFICIAL SLAMS WESTERN BANKS

A senior Chinese official who oversees China’s largest state-owned enterprises has publicly slammed western investment banks for “maliciously” peddling complicated derivative products that caused huge losses for Chinese companies. In Beijing’s strongest criticism on the matter to date, Li Wei, vice director …

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Jim Sinclair’s Commentary

Pakistan grows in terror. The West should be terrorized over the Talbanization of Pakistan.

The Taliban concentrates on Pakistan as the Surge finds token resistance in Afghanistan. The Pakistan government, if you can call it that, expresses fear that the Surge in Afghanistan will result in increased terror in Pakistan.

India should be more than concerned, but has for so long seen Pakistan as adversarial that they are habituated to it, and therefore as a nation blinded to it.

The West has “Plan B" which is that India will handle the problem if push comes to shove. That might in fact be both too late and a fuse in itself.

The risk in giving a date for a pullout is your opposition will just wait you out. This is certainly true when the Taliban and others can be counted on to increase the pressure by orders of magnitude in Pakistan.

Pakistan prosecuted those that murdered Daniel Pearl, a point to remember.

Those that fight for generations never forget.

Mosque massacre shows Taliban strength
Islamic extremists kill 36 officers, soldiers and family members in attack on Pakistani military
Saeed Shah
Published on Friday, Dec. 04, 2009 10:03PM EST Last updated on Saturday, Dec. 05, 2009 3:14AM EST

In a devastating assault on the Pakistani military, Islamic extremists yesterday attacked a mosque used by soldiers in Rawalpindi, killing at least 36 people, including senior military personnel and their children, as they gathered for Friday prayers.

Among the dead were five officers above the rank of major, including Major-General Bilal Umar, director-general of the Pakistan Armoured Corps. Also killed were a retired major and three rank-and-file soldiers.

Of the 17 children killed, at least 11 were the sons of army officers, including the son of a major-general and the sons of two brigadiers. The fathers of three senior officers, including the father of a major-general, were among the dead. More than 75 people were injured, including General Mohammad Yusuf, a former vice-chief of the Pakistani military.

Pakistan’s Western allies are constantly pressing the country to do more to aid the faltering campaign against Taliban extremists in Afghanistan. The message was repeated by U.S. President Barack Obama in his speech this week announcing an additional 30,000 troops for Afghanistan, but Islamabad insists it has its hands full dealing with its own domestic insurgency. Attacks such as yesterday’s will make it even less likely that Pakistan will turn its attention to Afghan insurgents that use its soil to attack NATO forces across the border.

The mosque, used exclusively by army personnel and their families, was located inside the heavily guarded cantonment area of Rawalpindi, surrounded by housing for army officers. The assailants – at least four in number – struck around 1:20 p.m., hurling grenades and opening fire on worshippers, before two of the attackers blew themselves up inside the mosque, wrecking the building and leaving the holy site stained with blood and littered with body parts. Security forces killed the two remaining assailants, who killed indiscriminately, the military said. However, there were rumours that an unspecified number of attackers got away.

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Posted at 1:48 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

The following is a priority read!

CIGA Richard’s analysis of bank failure reveals the horrific damage that is being done by FASB’s capitulation allowing financial entities to value worth-less assets at values that the financial entity has concluded is correct, not values that are market related.

"There is not enough information available at this point to determine the causes of this huge discrepancy between the claimed and actual values of AmTrust’s assets. However, in the absence of an allegation of criminal fraud it stands to reason that the failure to require fair value accounting contributed substantially to this discrepancy."

Dear Jim,

Six more banks were closed this week. Collectively, they had assets of $13.425 billion and deposits of $9.368 billion. The total estimated cost to the FDIC’s Deposit Insurance Fund (“DIF”) is $2.384 billion.

Consistent with recent trends, by the time these banks were finally closed their condition had deteriorated to a point far worse than banks were allowed to in the years before this crisis. As a result, the FDIC continues to incur much higher rescue costs than it would if it were able to close them at a stage more like they have been historically. The total cost to the DIR of closing this week’s failed banks exceeds 25% of their total deposits. By contrast, the FDIC was only required to make up about 5.7% of insured deposits in connection with the three banks it closed in 2007, at the beginning of this crisis.

The details of this week’s closings also point out some troublesome discrepancies between the value of assets stated on the banks’ balance sheets and their perceived market value. Five of the six acquiring banks this week required the FDIC to enter loss-share agreements as a condition of their purchasing the assets of the failed institutions.

Insisting upon a loss-share agreement indicates the prospective buyer is so worried about the value of the assets it is purchasing, it is unwilling to alone bear the risk that their value will turn out to be lower than anticipated. In the case of the three banks closed in 2007, none of the acquiring banks required that the FDIC enter into a loss-share agreement.

The largest of this week’s bank failures, AmTrust Bank of Cleveland, Ohio, gives us an unsettling preview of the kind of unsubstantiated asset valuations we are certain to see more of in light of the Financial Accounting Standards Board (“FASB”)’s having suspended fair value accounting requirements at the beginning of this year. On paper, AmTrust appeared to be very well capitalized. It claimed to have assets of $12 billion against deposits of $8 billion, a ratio of 1.5:1.

However, closing AmTrust cost the FDIC an estimated $2.0 billion, 25% of the value of its deposits. Furthermore, the purchasing bank, New York Community Bank (“NYCB”), was only willing to purchase about $9.0 billion (75%) of AmTrust’s assets, and did so only on the condition that the FDIC agree to share the risk of loss with respect to $6.0 billion of that amount. In the final analysis, it appears that NYCB had confidence in the value of only $3 billion of the $12 billion in assets on AmTrust’s balance sheet.

Furthermore, the parties appear to have concluded that the $12 billion in assets listed on AmTrust’s balance sheet were only worth about $6 billion. Otherwise, the FDIC would not have allowed for a $2 billion charge to the DIR to make good on AmTrust’s $8 billion in deposits.

There is not enough information available at this point to determine the causes of this huge discrepancy between the claimed and actual values of AmTrust’s assets. However, in the absence of an allegation of criminal fraud it stands to reason that the failure to require fair value accounting contributed substantially to this discrepancy.

The facts surrounding the closings of the remaining five banks this week raise similar concerns.

Buckhead Community Bank of Atlanta, Georgia, had total stated assets of $874 million and deposits of $838 million. The FDIC’s projected cost to close this bank is $241.4 million (approximately 29% of deposits). The acquiring bank purchased essentially all of Buckhead’s assets valued at $874 million, but it required the FDIC to enter into a loss-share transaction with respect to $692 million of that amount. The FDIC’s loss estimate suggests that it considers the fair value of Buckhead’s claimed $874 million in assets to actually be about $596.6 million.

Greater Atlantic Bank of Reston, Virginia, had total stated assets of $203 million and deposits of $179 million. The FDIC’s projected cost to close this bank is $35 million (approximately 19.5% of deposits). The acquiring bank purchased essentially all of Greater Atlantic’s assets valued at $203 million, but it required the FDIC to enter into a loss-share transaction with respect to $145 million of that amount. The FDIC’s loss estimate suggests that it considers the fair value of Greater Atlantic’s claimed $203 million in assets to actually be about $144 million.

Benchmark Bank of Aurora, Illinois, had total stated assets of $170 million and deposits of $181 million. It is the only one of the six closed this week that on its face showed assets valued below deposits. The FDIC’s projected cost to close this bank is $64 million (approximately 35.4% of deposits). The acquiring bank purchased essentially all of Benchmark’s assets valued at $170 million, but it required the FDIC to enter into a loss-share transaction with respect to $139 million of that amount. The FDIC’s loss estimate suggests that it considers the fair value of Benchmark’s claimed $170 million in assets to actually be about $117 million.

First Security National Bank of Norcross, Georgia, had total stated assets of $128 million and total deposits of $123 million. The FDIC’s projected cost to close the bank is $30.1 million (approximately 24.5% of deposits). The acquiring bank purchased about $118 million of First Security’s assets, but it required the FDIC to enter into a loss-share agreement with respect to $82.4 million of that amount. The FDIC’s loss estimate suggests that it considers the fair value of First Security’s claimed $128 million in assets to be $92.9 million.

Finally, Tattnall Bank, Reidsville, Georgia, had stated assets of $49.6 million and deposits of $47.3 million. The FDIC’s projected cost to close the bank is $13.9 million (approximately 29.4% of deposits). This estimate suggests the FDIC considers the fair value of Tattnall’s claimed $49.6 million in assets to be $33.4 million.

Full details of all these closings can be seen at the FDIC’s web site: http://www.fdic.gov/index.html.

This week’s bank closings continue to warn of U.S. banks’ deteriorating balance sheets and of the FDIC’s inability to resolve troubled banks before they cause extraordinary losses. Nationwide, banks are going broke much faster than the FDIC can close them. This creates a domino effect whereby the FDIC loses the ability to mitigate losses at the same time it exhausts its capacity to pay claims.

As of November 12, 2009, the DIF had fallen into deficit and in order to replenish it, the FDIC ordered banks to pre-pay three years’ worth of deposit insurance premiums, amounting to about $45 billion. In the three weeks since then, the FDIC has been forced to acknowledge another $3.394 billion in liabilities – more than 7.5% of the new revenue it is attempting to raise by way of the pre-payments. Very soon the entire $45 billion will be wiped out and the U.S. Treasury will become the FDIC’s sole source of funding for years to come.

Any suggestions that U.S. federal deficits will be reduced, quantitative easing will be curbed or the Fed will attempt to drain liquidity from the financial system need to be evaluated in this context.

Respectfully yours,
CIGA Richard B.

Posted at 1:47 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

A deeper look into the "misleading" job figure (MSNBC).

A depraved society lives in a sea of lies. Its heroes are those that lie and steal successfully. This is called the “Ocean of Samsara."

The Society of Lanka was saintly compared to what we must move through as we seek a better world.

Sodom and Gomorrah were kindergarten for the post grades we now have in the financial world.

Stay strong. To survive this, hold firmly to your beliefs and stay on the high road.

A deeper look behind the jobless numbers
Despite the upbeat report, long-term unemployment worsens
updated 7:18 p.m. ET, Fri., Dec . 4, 2009

WASHINGTON – Within the vast pool of 15.4 million unemployed workers, a split is emerging: The number of long-term jobless — those out of work six months or longer — is growing, while the number of short-term unemployed is declining.

The trend highlights a considerable challenge for the economy and policymakers: finding a way for the millions of Americans laid off last fall and early this year to get back to work.

The data, buried in Friday’s unemployment report, are stark: The number of Americans out of work for 27 weeks or more reached 5.9 million last month, the most on records dating from 1948. That’s 18 percent more than just three months ago, when the total was just below 5 million.

The tally of those out of work for 14 weeks or less, however, has dropped to 6.3 million from 7.1 million in August, a decline of about 11 percent.

Looking at it another way, the long-term jobless now make up 38.3 percent of the unemployed population, not that far from the 41.1 percent accounted for by those out of work for 14 weeks or less. (The rest are in the 15-to-26 weeks bracket.)

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Jim Sinclair’s Commentary

The Japanese rumor takes a Bloomberg stage.

I would say that is smoke so there may be fire.

U.S. Treasuries’ Biggest Overseas Buyer May Sell
By David Wilson

Dec. 4 (Bloomberg) — Speculation that the Japanese government plans to sell $100 billion of U.S. Treasury debt to pay for domestic spending may impede the Obama administration’s borrowing plans.

Japan has been this year’s biggest buyer of Treasuries, which means it has done more to help finance the widening U.S. budget deficit than any other country. Its holdings have risen by $125.5 billion, according to data compiled by the Treasury. The comparable figure for China, which surpassed Japan last year as the largest international investor in the securities, is $71.5 billion — 43 percent lower.

The CHART OF THE DAY shows this year’s total holdings of the two countries in the top panel and tracks the gap between them in the bottom panel.

Japan will inform the U.S. about the possible $100 billion sale, according to a Market News International report yesterday that cited “rumors” from unnamed sources.

“There’s absolutely no such proposal right now,” Chief Cabinet Secretary Hirofumi Hirano told reporters today in Tokyo. “That kind of talk often surfaces at this season.”

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