Posted at 2:01 PM (CST) by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

None of these people have their own assets on the line so why worry in today’s world of political expediency?

Of course the most significant risk is not a topic for public and financial TV testimony.

Dear Jim,

I am surprised Ben has any hair left at all. I guess if they don’t talk about this it does not exist. He thinks state and local government finances represent the most important domestic risk factor in the US economy, yet they received only two brief mentions in 19 pages of minutes from the Fed’s April policy-setting meeting.

Federal Reserve’s worry list gets longer
Last updated 07:56 12/07/2010

The US Federal Reserve’s list of worries may be getting longer.

A fading recovery, persistently high unemployment, Europe’s debt troubles and commercial real estate losses have garnered most of the attention. But some Fed officials have begun talking more about another trouble zone – recession-hit US state and local government finances.

The problem is that they have to balance their budgets, unlike the federal government, which is running a deficit equal to more than 10 percent of total economic output.

"They have no choice but to cut spending or raise taxes — or they get some more help from Washington," said Harm Bandholz, an economist with Unicredit in New York.

He thinks state and local government finances represent the most important domestic risk factor in the US economy. Yet they received only two brief mentions in 19 pages of minutes from the Fed’s April policy-setting meeting.

Minutes from the Fed’s last meeting, on June 22-23, set for release on Wednesday, are likely to show the central bank trimmed its economic growth forecast, largely because of a run of disappointing data and fears of a European slowdown.

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Notes From Underground: Kan faces a big test within the DPJ–can he remain prime minister?
Yra | July 11, 2010 at 9:50 pm

The biggest story from the weekend was the release of the Chinese trade numbers and surprisinly the export component rose 44 percent year-over-year, while the imports slowed resulting in an increase in the trade surplus.We know that this will not play well in Washington and will provide fresh fodder for the protectionist drumbeat that is […]

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Jim Sinclair’s Commentary

You want fiat currency as a storehouse of value? If so you are simply nuts.

Crisis Awaits World’s Banks as Trillions Come Due
CIGA Eric

The sovereign debt crisis would seem to create worry enough for European banks, but there is another gathering threat that has not garnered as much notice: the trillions of dollars in short-term borrowing that institutions around the world must repay or roll over in the next two years.

The sovereign debt crisis, like the onset Great Depression in 1929-1932, is everywhere. The US dollar is enjoying a safe haven bid relative to other fiat currencies due to fears that the Euro will disintegrate. The dollar strength in no way reflects true safety. California, New York, New Jersey, Michigan, etc are infected with the same debt and balance sheets problems of the higher profile, weaker members of the European Union.

Safety is a relative term. The dollar can continue to rally on capital flows seeking safety within the fiat world, but ultimately, the same forces that cause them to flee the Euro will take down members with the US Union. The term setup before the fall comes to mind with the U.S. dollar.

A change in the direction in the credit spreads or ratio between long term high grade corporate bonds and government bonds total return index, similar to July 1932 and the revaluation of gold by 1934, will mark the transition of capital flows from public to private sector. This is market the end of the illusionary rally in the dollar.

Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):
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Source: nytimes.com

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Posted at 10:44 PM (CST) by & filed under In The News.

Dear CIGAs,

I would like to welcome our newest little buddy to the family!

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Jim Sinclair’s Commentary

So far this weekend.

Bank Closing Information – July 9, 2010
These links contain useful information for the customers and vendors of these closed banks.

Home National Bank, Blackwell, OK
USA Bank, Port Chester, NY
Ideal Federal Savings Bank, Baltimore, MD
Bay National Bank, Lutherville, MD

http://www.fdic.gov/

Jim Sinclair’s Commentary

Dean Harry, my dear friend of 45 years, opines.

Harry Schultz on the Power Elite, Free Markets, the Internet & Why Gold Is Going Much Higher
On Jul 11, 2010, at 7:44 AM

Daily Bell: Where is gold going? Silver? Harry Schultz: Much higher. Sky is the limit for gold. Governments are losing control of gold. They cheat, steal, lie, maneuver … but gold will beat them and is already doing so, in stages.

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Jim Sinclair’s Commentary

From Kitco.com.

Gold

We are now in the very early stages of Stage Three with gold having gone up 24% in 2009 and up 13.3% in the first 6 months of 2010. As such there are no shortage of prognosticators who see gold going parabolic reminiscent of 1979 when gold rose 289.3% in the course of just over a year (from a $216.55 closing price on Jan. 1, 1979 to a closing price of $843 per ounce barely a year later on Jan. 21, 1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks! A 289% increase in the price of gold from $1250 would put gold at $4,866.   That being the case what appear on the surface to be rather outlandish projections of what the bull market in gold will top out at don’t seem quite so far-fetched. 

Below is a list of the parabolic tops for gold as discussed in articles and/or speeches by well known economists, academics, market analysts and financial commentators.  Their prognoses are limited to those above the CPI adjusted 2010 price of $2,300 and they are grouped according to the extent each individual sees gold appreciating over the next few years (and next few months in a few cases).

The list below is provided on my site – with a link to the actual article in which each estimate was put forth if you care to check out the rationale behind each individual’s projections.

Higher than $10,000

Mike Maloney: $15,000;
Howard Katz: $14,000;
Silver-Coin-Investor.com: $7,000-$14,000;
Jim Rickards: $4,000 – $11,000
Roland Watson: $10,800 (in our lifetime);

$5,001 – $10,000

Arnold Bock: $10,000 (by 2012);
Porter Stansberry: $10,000 (by 2012);
Tom Fischer: $10,000;
Shayne McGuire: $10,000;
Eric Hommelberg: $10,000;
Gerald Celente: $6,000 – $10,000;
Peter Schiff: $5,000 – $10,000 (in 5 to 10 years);
Egon von Greyerz: $5,000 – $10,000;
Patrick Kerr: $5,000 – $10,000 (by 2011);
Peter Millar: $5,000 – $10,000;
Alf Field: $4,250 – $10,000;
Jeff Nielson: $3,000 – $10,000;
Dennis van Ek: $9,000 (by 2015);
James Turk: $8,000 (by 2015);
Joseph Russo: $7,000 – $8,000;
David Petch; $6,000 -  $$8,000;
Michael Rozeff: $2,865 – $7,151;
Martin Murenbeeld: $3,100 – $7,000;
Dylan Grice: $6,300;
Murray Sabrin: $6,153;
Harry Schultz: $6,000;
Paul van Edeen: $6,000;
Paul Brodsky/Lee Quaintance: $3,000 – $6,000;

$5,000

David Rosenberg: $5,000;
Martin Hutchinson: $5,000 (by end of 2010);
Doug Casey: $5,000;
Peter Cooper: $5,000;
Robert McEwen: $5,000;
Martin Armstrong: $5,000 (by 2016);
Peter Krauth: $5,000;
Tim Iacono: $5,000 (by 2017);

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Jim Sinclair’s Commentary

Something for the dollar bulls to consider.

Chinese Rating Firm Critical of U.S. Debt

BEIJING—A Chinese firm that aims to compete with Western rating companies declared Washington a worse credit risk than Beijing in its first report on government debt Sunday amid efforts by China to boost its influence in global markets.

Dagong International Credit Rating Co.’s verdict was a break with Moody’s Investors Service Inc., Standard & Poor’s Ratings Services and Fitch Ratings, which say U.S. government debt is the world’s safest.

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Posted at 10:33 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

Section 9006 of the Patient Protection & Affordable Care Act (Healthcare Reform) amended the IRS Code of 1986 to require reporting (i.e. 1099) of all "amounts in consideration of property" and "gross proceeds" greater than $600.

http://democrats.senate.gov/reform/patient-protection-affordable-care-act-as-passed.pdf

http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00006041—-000-.html

If I’m reading this correctly, it means that anytime you sell something (gold/silver coins for example) and receive $600 or more in proceeds that business must report that sale to the IRS. This previously was not the case.

H.R. 5141 has been introduced which repeals this amendment to the IRS code.

http://www.washingtonwatch.com/bills/show/111_HR_5141.html

Here is the IRS code with the amendments (underlined and bold) included.

IRS Code of 1986
TITLE 26, Subtitle F, Chapter 61, Subchapter A, PART III, Subpart B

§ 6041. Information at source

(a) Payments of $600 or more

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration of property, premiums, annuities, compensations, remunerations, emoluments, gross proceeds, or other fixed or determinable gains, profits, and income (other than payments to which section 6042 (a)(1), 6044 (a)(1), 6047 (e),6049 (a), or 6050N (a) applies, and other than payments with respect to which a statement is required under the authority of section 6042 (a)(2), 6044 (a)(2), or6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.

Regards,
CIGA Tom

Dear CIGA Tom,

Yes, let’s not forget lawn sales, auto trade ins, and your children’s lemonade stand if successful.

Orwellian, to say the least.

Regards,
Jim

Posted at 5:54 PM (CST) by & filed under Jim's Mailbox.

Bullish Money Flows in Gold
CIGA Eric

Targeted, fearful headlines, intended to create an emotional response in gold, continue to hide inflows (outflow of short) into weakness from connected players. The operation is coordinated and professional.

Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest
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While connected players setup for the next advance, they do so while retail money is clearly on the wrong side of the trade (short).

Gold London P.M Fixed and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest
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Are you ready for the unexpected?

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Posted at 7:17 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

How is your bank today?

Enforcement Actions
Legal actions by the Board and written agreements approved by the Federal Reserve Banks

July 9, 2010
Written agreement with Commonwealth Bankshares and Bank of the Commonwealth
July 8, 2010
Written agreement with Dickinson Financial Corporation II and Dickinson Financial Corporation
July 8, 2010
Written agreement with Central Pacific Financial Corporation
July 7, 2010
Written agreement with BCB Holding Company, Inc.
July 6, 2010
Written agreement with Star Bancorp
July 6, 2010
Written agreement with Central Virginia Bancshares and Central Virginia Bank

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Jim Sinclair’s Commentary

QE to infinity!

U.S. marks 3rd-largest, single-day debt increase
$166 billion jump spurs concerns over policy
By Stephen Dinan
8:36 p.m., Wednesday, July 7, 2010

The nation’s debt leapt $166 billion in a single day last week, the third-largest increase in U.S. history, and it comes at a time when Congress is balking over higher spending and debt has become a key policy battleground.

The one-day increase for June 30 totaled $165,931,038,264.30 – bigger than the entire annual deficit for fiscal year 2007 and larger than the $140 billion in savings the new health care bill will produce over its first 10 years. The figure works out to nearly $1,500 for every U.S. household, or more than 10 times the median daily household income.

Daily debt calculations jump and fall, and big shifts are common. But all three of the biggest one-day debt increases have occurred under the tenure of President Obama, and all of the top six have been in the past two years – an indication of just how quickly the pace of deficit spending has risen under Mr. Obama and President George W. Bush.

"What matters is the overall trend line, and the overall trend line is shooting up," said Robert Bixby, executive director of the Concord Coalition, a bipartisan deficit watchdog group, who said it is one more reason for a fiscal wake-up call.

Fears over red ink have stalled key parts of Mr. Obama’s agenda in Congress in recent weeks, including his push for another round of stimulus spending. Just last week, House Democrats had to use a tricky parliamentary tactic to pass an emergency war-spending bill, aid for teachers and new spending caps.

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Posted at 1:01 PM (CST) by & filed under USAWatchdog.com.

Jim Sinclair’s Commentary

Here are two points to consider when your emotions on gold threaten to overtake you.

Dear CIGAs,

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I was sitting here trying to find a way to wrap up the week and then, like a bolt of lightning, an idea hit me.  Gold expert Jim Sinclair sent me this story: “Federal Budget Deficit Hits $1 Trillion For 1st 9 Months Of FY’10.”  The story said, “The shortfall, reflecting $2.6 trillion in outlays for the first three quarters and $1.6 trillion in receipts, narrowed slightly compared with the same point in fiscal 2009.”  So where did the “shortfall” come from?  Try the more that 8 million who lost their jobs.  The story went on to say, “. . . individual income and payroll tax receipts were down 4% over the nine-month period, suggesting that wages and salaries have not improved to the extent that corporate profits have.” Corporate profits have “improved”because they laid-off all those workers!!  (Click here for the entire Dow Jones Newswires story)

Sinclair says, “Nothing has changed. Nothing has been rescued. The can that is being kicked daily down the path is going to turn around and bite the kickers.   
Gold is the only insurance.”  When things get bad enough, there will be more stimulus cash put into the economy and more bank bailouts.  Sinclair is like legendary football quarterback Joe Montana–never bet against either of them.

The second story that should scare the heck out of you is one where the headline reads,“IMF presses US to cut debt.”  The story goes on to say, “The International Monetary Fund on Thursday urged the United States to rein in its ballooning budget deficit without putting the “modest” economic recovery at risk.  Amid jitters that high levels of unemployment may force a double dip recession, the IMF warned the slow U.S.recovery would continue and that debt problems loomed.”  (Click here for the complete story from Yahoo News.)

Talk about a squeeze.  The U.S. has lost millions of jobs; it has falling tax revenues and a ballooning deficit.  Now is the time the International Monetary Fund picks to tell the U.S. to cut its debt?  Not a chance going into the 2010 mid-term elections!  People like Paul Krugman and Nancy Pelosi are pushing for more spending (money printing).  I am betting they will get their wishes granted.  

These two stories do not bode well for the so-called “recovery,” the value of the U.S. dollar and  keeping interest rates held down to ridiculously low levels.  These two stories scare the heck out of me.  Not just because of what they say, but also because they’re making their way into the mainstream media.  That means, before long, everybody will catch on America is in deep financial trouble.  We do not have a “dip” coming our way but a swan dive off of Niagara Falls into a dry river bed.

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