Posted at 12:10 AM (CST) by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

Extremely good comments from an extremely gifted intellect.

Jim,

Now the most dangerous phase of the fiat money and credit cycle begins,

The extent of last year’s financial collapse caused deep systemic shock and insecurity to world governments, democratically elected political leaders by their nature are insecure and need to believe they operate within a predictable system that ensures their security and control and that future events over which they have authority progress substantially according to expectations or at least gives them adequate cover if they don’t,

The shock of last year’s events were of such magnitude that the resulting threat caused a temporary focus away from many national interests in favor of supranational solutions, governments in this instant looked to find their bearings, needed a breathing space and instinctively looked to rally around a common cause. It was almost as though national interests were paralyzed and a common cause ignited as an alien spaceship hovered menacingly in the sky threatening the existence of earth.

From disagreements emerging at the world economic forum at Davos it appears that we now move to the next entirely predictable but very dangerous, accelerating and possibly unstoppable phase where governments regardless of culpability find it politically expedient to polarize and hold other nations responsible for their problems,

CIGA Peter

Dear Jimmy,

OF course if this develops on an actual basis (countries actually start to do more protectionist things) and not just on a talk basis (countries brag how good they are and blame other s for world problems), then we have trade wars and a very long depression. My call for a depression ending in mid 2010 would have to be changed to a depression ending in 2012 or later.

Monty Guild
www.GuildInvestment.com

Posted at 6:44 PM (CST) by & filed under In The News.

NakedTOShorts

Jim Sinclair’s Commentary

Is it possible that protection of the Hedge Fund bullies has run its course?

It is possible the destructive bullies like JO have shot their wad but don’t know it.

Is the end of all this misbehavior and destruction of value finished by Madoff and the displays of Wall Street disdain for normal humanity?

How about King Street and Bay Street with their jitney crimes?

Where is your outrage with last one minute sellers?

You can borrow mine because I have more than enough to go around.

They will have their comeuppance one way or another. This I promise you personally.

Obama Calls Bonuses ‘Shameful’ as Dodd Vows to Reclaim Money
By Dawn Kopecki and Julianna Goldman

Jan. 29 (Bloomberg) — PresidentBarack Obama fed a swelling populist revolt against Wall Street bonuses, calling it “shameful” that banks doled out $18.4 billion as taxpayers bail out companies and the U.S. remains mired in a recession.

The bonuses are “the height of irresponsibility,” Obama said today before meeting Treasury Secretary Timothy Geithner and Vice President Joe Biden at the White House. Firms need to “show some restraint and show some discipline,” Obama said.

The president joined politicians such as Senator Christopher Dodd, who today called for using “every possible legal means to get the money back.” The bonus pool for 2008 by New York City financial companies was the sixth-largest ever amid record losses in the securities industry, State Comptroller Thomas DiNapoli said in a report yesterday.

Banks and financial firms have fired 265,000 people since the collapse of the subprime mortgage market triggered the worst financial crisis since the Great Depression. Bear Stearns Cos. and Lehman Brothers Holdings Inc. collapsed, while Merrill Lynch & Co. was taken over by Bank of America Corp. and Goldman Sachs Group. and Morgan Stanley converted into bank holding companies. The Treasury Department program has injected about $200 billion into banks across the country from the Troubled Asset Relief Program.

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Jim Sinclair’s Commentary

It is quite probable that the bombastic gold and gold share legal and illegal short sellers no longer carry all the Aces.

The Holy Ganges starts with a trickle and becomes a roar. At $900 gold is no trickle.

Hedge funds offer to price in gold
ByJames Mackintosh and Javier Blas
Published: January 29 2009 00:15

A hedge fund has begun offering investors the chance to have their investment denominated in gold, as worries grow over governments debasing their currencies by printing money.

Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than US dollars, sterling or euros.

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Jim Sinclair’s Commentary

A simple common recession has been turned into a planetary economic disaster. None of this ever needed to happen.

Greed devoured common sense and a blind eye was turned against the obvious worthlessness of OTC derivatives under even mild market pressure.

From this point we are proceeding toward a Global Weimar in which only gold has value. Everything else churns, value wise, violently as in a death spiral.

All of this is the doing of the OTC derivative manufacturers and distributors who are now pig rich as their reward for bloody murder of the planet’s formerly sound economies.

Among humans, these mass murders are "Siafu" and should be referred to as "Siafu." Siafu are predacious by nature.

Where is your RAGE?

Airlines report ‘shocking’ plunge in traffic
By Kevin Done, Aerospace Correspondent

The airline industry reported on Thursday an "unprecedented and shocking" plunge in global air cargo traffic.

Air freight accounts for 35 per cent of the value of goods traded internationally and the International Air Transport Association said traffic volumes had fallen by 22.6 per cent year-on-year in December.

Giovanni Bisignani, Iata director general, said, "there is no clearer description of the slowdown in world trade. Even in September 2001 (after the 9/11 terrorist attacks in the US), when much of the global fleet was grounded, the decline was only 13.9 per cent."

International passenger traffic fell in December by 4.6 per cent. Iata said the drop was less dramatic than in cargo, as volumes had been supported by year-end leisure travel that had been booked in advance.

Airlines are still struggling to reduce capacity to match falling demand, however, and are flying with more empty seats. Capacity was reduced by 1.5 per cent year-on-year in December, resulting in airlines filling only 73.8 per cent of available seats, down from 76.2 per cent a year ago.

"Until this comes into balance, even the sharp fall in fuel prices cannot save the industry from drowning in red ink," said Mr Bisignani.

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Jim Sinclair’s Commentary

Are you tired of the manipulation of gold on the Comex? There is a very easy way to make right what is clearly WRONG!

Get into the fight, and stop fighting with your mouth.

Dan, Monty and I can lead, but we need a few warriors with us.

dogs

Jim Sinclair’s Commentary

The following cartoon was sent in courtesy of CIGA Annette.

silvertsunami

 

Russian prime minister Vladimir Putin calls for end of dollar stranglehold
By Ambrose Evans-Pritchard in Davos
Last Updated: 11:13AM GMT 29 Jan 2009

Russian prime minister Vladimir Putin has called for concerted action to break the stranglehold of the US dollar and create a new global structure of regional powers.

"The one reserve currency has become a danger to the world economy: that is now obvious to everybody," he said in a speech at the World Economic Forum.

It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos.

Mr Putin said the leading powers should ensure an "irreversible" move towards a system of multiple reserve currencies, questioning the "reliability" of the US dollar as a safe store of value. "The pride of Wall Street investment banks don’t exist any more," he said.

For all his bluster, Mr Putin’s bargaining power is weakening by the day. Russia’s foreign reserves have fallen by 34pc since August to $396bn (£277bn) after months of capital flight and the collapse in the price of Urals crude oil to $45 a barrel. The rouble also fell to a record low yesterday after sliding for weeks in a controlled devaluation.

Mr Putin said: "We are witnessing a truly global crisis. The speed of developments beats every record, and the strategic difference from the Great Depression is that under globalisation this touches everyone. This has multiplied the destructive force. It looks exactly like the perfect storm."

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Jim Sinclair’s Commentary

Nail the Comex the way they deserve and gold will be at $1224-$1250 five trading days later.

I am not suggesting breaking the playing field in any way, but rather taking delivery of your Comex gold and therein reducing the warehouse supply by 50% so shorts have to have gold.

How about those new funds buying gold, the ones that are buying real physical gold, not paper. Many are readers here.

It is a real possibility as this fund is one of the most notorious of the bank short sellers. With that sceptic’s attitude maybe this fund is going to send the Comex gang a good 250,000 volt shock.

I think it might just happen on the next three deliveries.

That would be the rest of his Grandfather’s advice.

Gold attracts more flows amid recession
Wed Jan 28, 2009 9:29am GMT
By Frank Tang and Jennifer Ablan

NEW YORK (Reuters) – Gold, the traditional safe haven in times of economic turmoil, proved to be more a commodity that everyone loved to hate last year even amid the turbulence that engulfed world markets.

But as 2009 gets under way the yellow metal has found huge traction with money managers.

In the last eight sessions, gold has rallied as much as $100 (70 pounds) an ounce to hit a near four-month high of $915.30 on Monday — in spite of a rising dollar.

The furious rally in the bullion stems from expectations that the U.S. government will need to borrow about $2 trillion of debt this year to finance its rescue packages for the battered banking sector. Already, outstanding Treasury debt stood at $5.5 trillion at the end of September.

Against this backdrop, investors are largely shunning everything from U.S. Treasuries to stocks, which are down 10 percent and 7.5 percent so far this year, respectively, while pouring cash into gold.

"I think gold is rising because of fiscal deterioration and the prospect that the U.S. may be downgraded," said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC in Princeton, New Jersey.

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Jim Sinclair’s Commentary

Nail the Comex the way they deserve and gold will be at $1224-$1250 five trading days later.

I am not suggesting breaking the playing field in any way, but rather taking delivery of your Comex gold and therein reducing the warehouse supply by 50% so shorts have to have gold.

How about those new funds buying gold, the ones that are buying real physical gold, not paper. Many are readers here.

It is a real possibility as this fund is one of the most notorious of the bank short sellers. With that sceptic’s attitude maybe this fund is going to send the Comex gang a good 250,000 volt shock.

I think it might just happen on the next three deliveries.

That would be the rest of his Grandfather’s advice.

Gold attracts more flows amid recession
Wed Jan 28, 2009 9:29am GMT
By Frank Tang and Jennifer Ablan

NEW YORK (Reuters) – Gold, the traditional safe haven in times of economic turmoil, proved to be more a commodity that everyone loved to hate last year even amid the turbulence that engulfed world markets.

But as 2009 gets under way the yellow metal has found huge traction with money managers.

In the last eight sessions, gold has rallied as much as $100 (70 pounds) an ounce to hit a near four-month high of $915.30 on Monday — in spite of a rising dollar.

The furious rally in the bullion stems from expectations that the U.S. government will need to borrow about $2 trillion of debt this year to finance its rescue packages for the battered banking sector. Already, outstanding Treasury debt stood at $5.5 trillion at the end of September.

Against this backdrop, investors are largely shunning everything from U.S. Treasuries to stocks, which are down 10 percent and 7.5 percent so far this year, respectively, while pouring cash into gold.

"I think gold is rising because of fiscal deterioration and the prospect that the U.S. may be downgraded," said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC in Princeton, New Jersey.

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Jim Sinclair’s Commentary

This is total horse-shit.

A so called asset that has no market is worth nothing at all.

How packages of broken and semi broken mortgages are going to make each item have value when it is only a negotiated value as so many parts of the package are permanently broken and semi broken is as impossible as a Gordian knot to undo.

They are worthless items that accounting rules are giving a break to by allowing them to be valued at any value at all.

Here is another amoral, bombastic statement that you have no right to know the TRUTH about.

What a disgrace!

Let the banks holding your assets "Lie" to you regarding values, and all will be well. How far have we sunk into a state of total disgrace as human beings?

Let The Bank of England refuse to tell pound holders how many pounds are outstanding and all will be well.

The USA no longer publishes M3 because people might find out what is really happening in fiscal stimulation.

Why not let public companies issue shares and never tell stockholders how many are outstanding?

Where is your OUTRAGE?

Robert Rubin Says Mark-to-Market has Done ‘Damage’
By Josh Fineman and Ian Katz

Jan. 28 (Bloomberg) — Robert Rubin, who quit his post as senior counselor at Citigroup Inc. this month, said an accounting rule forcing companies to mark down assets every quarter to reflect market value has “done a great deal of damage.”

“I spent my whole life at Goldman Sachs believing in mark- to-market accounting, and having said that, if you look at the experience from the last two years, I think mark-to-market accounting has led to terrible vicious cycles in asset prices,” Rubin, the former U.S. Treasury secretary, said during a discussion at the 92nd Street Y late yesterday.

Companies including Citigroup and American International Group Inc. say mark-to-market, also known as fair-value accounting, doesn’t work when few buyers are willing to trade assets like subprime mortgages. Proponents such as the U.S. Financial Accounting Standards Board say the rule adds to transparency and gives investors information about companies.

Rubin joined Citigroup in 1999. Earlier this month, he announced he won’t stand for re-election to the board. Rubin, 70, proposed that a “reserve” accounting standard be adopted, which drew applause from the audience.

Citigroup received a $45 billion bailout from the U.S. government after reporting more than $85 billion of credit losses and writedowns from investments tainted by the subprime-mortgage crisis.

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Jim Sinclair’s Commentary

Money when threatened with hyper-inflation must maintain high levels of confidence. The following is the absolute opposite. It is despicable, illegal, wrong and another example of how you have no right to know you are in financial danger.

Where is your OUTRAGE?

Government Regulators Aided IndyMac Cover-Up, Maybe Others
Darrel Dochow May Not Be the Only Official Who Helped Banks Hide Financial Problems
By BRIAN ROSS, JUSTIN ROOD, and JOSEPH RHEE
Jan. 16, 2009—

A brewing fraud scandal at the Treasury Department may be worse than officials originally thought.

Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News.

In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules — even if it disguised the bank’s health to the public.

Treasury Department Inspector General Eric Thorson announced in November his office would probe how a Savings and Loan overseer allowed the IndyMac bank to essentially cook its books, making it appear in government filings that the bank had more deposits than it really did. But Thorson’s aides now say IndyMac wasn’t the only institution to get such cozy assistance from the official who should have been the cop on the beat.

The federal government took over IndyMac in July, after the bank’s stock price plummeted to just pennies a share when it was revealed the bank had financial troubles due to defaulted mortgages and subprime loans, costing taxpayers over $9 billion.

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Posted at 3:55 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

It looks like someone forgot to tell the US equity markets that they were supposed to be “stimulated” by passage of the $825 billion and rising “stimulus” plan approved by the Dems in Congress last evening. Then again perhaps investors looked at the plan and were not “stimulated” by its details since all those digital TV’s that it gives away money for are not made in the US but overseas. I did want to let the readers know that I sent in an invoice to the feds in the amount of $25,000 requesting a direct payment to me personally so that I could purchase a really nifty 4 wheeler that comes with a built in cooler for hauling cold drinks on those outings in the great outdoors. I will let you know when I get the check so that you can also apply. I am not worried about the cost because when I am gone from this planet I will be leaving it to my kids since they, along with their grandkids, will end up being the ones that are paying for this anyway.

By the way, some one has calculated that the size of the package means that the feds could send every man, woman and child a check for $2,700 or $22,000 for every person living below the poverty level in the nation. No doubt that could be increased a bit if they eliminated the $50 million that the bill throws to the National Endowment of Arts and $ one billion for Amtrak, which has not shown a profit in 40 years!

Even the bond market has finally figured this one out – as lousy as the economic data gets (did you see that new home sales hit a 14 year low according to today’s data release) the bonds still cannot muster much of an upward move. Traders there are slowly coming to realize that bonds are not such a “safe haven” when the feds are multiplying them faster than ACORN can register non-existent or dead voters. Bond traders rightly fear a tidal wave of supply that is going to overwhelm whatever demand still exists for them.

The bond chart has turned absolutely horrendous with today’s sell off breaching a short term support level which had emerged near the 128 ^15 level. There looks to be nothing in the way of technical chart support until down near the 100 day moving average at 125 ^08. About the only thing that the bond bulls have going for them is the extremely oversold level but that is not a lot to hang your hat on once sentiment shifts, especially in a market that had blown up into a bubble of cosmic proportions. Tomorrow’s weekly and monthly close in the bonds will be significant.

All of this contributed to gold’s rise from support – if bonds are no longer safe havens then where can one go with their wealth to protect it from the depredations being inflicted upon it by Central Bankers and ignorant politicians. Answer  – Gold.  Pause here as the camera pans in closer to zoom in on the bullions coins I am holding in my hand and then pans back out so that you can see the 800 telephone number to phone so that you can purchase some gold and pay for the cost of the advertisement.

Seriously, sometimes I get the feeling that we sound like a TV advertisement for gold but when you look at what is transpiring in the world around us and see the folly that passes for statesmanship among our leaders, you get the idea that you are watching a train wreck in slow motion. The monetary authorities and the politicians set the stage for this mess, greed on Wall Street took over and now the monetary authorities and the politicians are somehow supposed to fix it all. It reminds me of the story of the clumsy janitor cleaning a store full of fine crystal – he knocks over some of the crystal and attempts to sweep it up but in the process the handle of his broomstick knocks more crystal off of shelves that are behind him. As he turns to deal with that mess, once again the broomstick takes down more crystal to the point where he has managed to ruin nearly everything in the entire store. It would have been better off if he had never even attempted to clean the store in the first place.

Technically the price action in gold is most encouraging. After stalling out at $920 due to bullion bank price capping, gold probed lower looking for buying support and found it almost exactly on the topside of the Downsloping trendline from which it broke above last week. This is classic, and I do mean “classic”, bullish price action from a technical perspective – a triangular consolidation formation in which the market is coiling tighter and tighter and then breaks out, sees a retest of the breakout point and then rebounds in the direction of the initial breakout.

Tomorrow’s price action becomes most important now. In a “normal” freely traded market, more often than not, the market will continue in the direction of the breakout after completing such a pattern. I have seen this pattern occur so many times in the span of my trading career that I have long ago lost count. However, we all know when it comes to gold, that this market is anything but a normal “freely traded”, protestations of the willfully blind notwithstanding. That is why we need to see this thing get a strong close on Friday. If it does, it will show that the bulls have unnerved the shorts and recaptured the initiative and are in a position to try to take the bullion bank redoubt at $920. If it cannot, it will show that they have surrendered their initiative and allowed the shorts to regroup after giving them a sharp, swift blow and a good fright. The side with the greatest conviction will win. Perhaps the fickle fund managers will surprise us and show some resolve for a change instead of cutting and running. If the bulls can manage to close gold above the $900 level on the weekly charts, they will have gained the upper hand in the gold war. Don’t forget that tomorrow is also the end of the month and that the close will be significant from a long term chart perspective. Gold’s monthly chart remains most impressive and I will get one for you tomorrow to keep in front of your eyes everytime the deflationists and their demise of gold predictions trouble you.

The HUI and the XAU picked up their divorce from the broader equity markets once again which is encouraging to see for the friends of gold as the miners need to continue their upward trek if the gold sector is going to advance as a whole. The HUI still needs a good close above the 307 level and preferably above 310 to get things moving. The XAU needs to get a close above 127 and preferably above 130 to fire that index higher. Shorts are going to try to dig in at these levels so bulls will have to prove their mettle to dislodge them from their lairs. At least in today’s session, the share bears are getting gored by the bulls.

The Dollar moved slightly higher today mainly on the back of weakness in the Euro. Also the commodity currencies from Australia and New Zealand were especially weak which makes gold’s move higher all the more impressive as nearly every factor that in times past would  have seen strong downward pressure in gold was present today and yet for all that gold still moved higher. Couple that with weakness in the bonds and it sure looks like more and more people are viewing gold as the last safe haven around and the best place to be right now.

Crude oil continues moving within its trading range as it drops lower to test the downside portion of that range. Higher crude oil prices will serve to benefit gold but are not essential to its welfare as investors are buying gold now out of currency concerns and not so much for inflationary pressures. That will come in time as this orgy of newly created money eventually begins to flow back into the commodity sector further on down the road.

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

January2909Gold1230pmCDT.jpg

Posted at 8:06 PM (CST) by & filed under General Editorial.

Dear Friends,

Sadly it is business as usual in Washington DC. After all the election promises we are looking at political priorities, insider driven bailouts and pumps. The Fiscal Stimulation bill isn’t. As presently presented there is no real fiscal stimulus until later in 2010 and 2011. The bill does re-establish social safety nets which is spiritually correct and economically questionable.

As far as "Bad Bank" is concerned it already exists. It is the US Federal Reserve having purchased the least desirable of the non-functional OTC derivatives that broke the back of US financial concerns.

Listening to the big wigs at Davos was like listening to a conference of the Liar’s Club because nobody can really be as stupid as what those guys are selling.

Personally, I was driving a snowmobile combing 14 miles of ski trails. We had a great snow storm today in the developing country of North Western CT. That was much better than listening to more of what caused all of this, and watching the COMEX Gold chart painters running you guys all over the place, robbing you because those that can in this camp will not join the fights. Shame!

Jim

Posted at 7:32 PM (CST) by & filed under In The News.

NakedTOShorts

"Justin Oliver"

THE CONNING TOWER
By Keith Conning

Link to site…

 

Jim Sinclair’s Commentary

Ever ask yourself what the IMF may have invested their reserves in that might be hidden in the loss category? Might as well throw the world Bank into the question as well.

IMF expects G-7 growth to grind to a halt
Bloomberg News
Published: January 28, 2009

WASHINGTON: The global economy will slow close to a halt this year as more than $2 trillion of bad assets in the United States help sink economies from Russia to Britain, the International Monetary Fund said Wednesday.

Bank losses worldwide from toxic U.S. assets may reach $2.2 trillion, the IMF said in a report, more than the $1.4 trillion that the fund predicted in October. World growth will be 0.5 percent this year, the weakest postwar pace, the fund said in a separate report.

The reports signal that write-downs and losses at banks totaling $1.1 trillion so far are only half of what’s to come and that already contracting economies may worsen. Advanced and developing countries need to be "even more supportive" of demand than they already have been, with lower interest rates and fiscal stimulus, the lender said.

"Unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth," the IMF said.

The IMF’s latest forecast revises its estimate of world growth down from 2.2 percent in November.

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Jim Sinclair’s Commentary

In geopolitics nothing much changes. Send me the money so I can send it to my private bank in Dubai, oops, I mean so I can fight your enemies for you.

Pakistan to US: Give us more money
Wed, 28 Jan 2009 16:33:14 GMT

Pakistan’s President Asif Ali Zardari says Islamabad’s success in fight against terrorism is pending more financial support from Washington.

"Give us the tools, and we will get the job done," Zardari said in an opinion piece published in The Washington Post on Wednesday.

Zardari said he hoped US President Barack Obama has understood that "for Pakistan to defeat the extremists, it must be stable. For democracy to succeed, Pakistan must be economically viable."

He further called on Obama to push Congress into passing a legislation introduced last year that would give an annual USD 1.5 billion aid to Islamabad for social programs.

Zardari noted that Islamabad had made "remarkable progress" in the past several months in its battle against the al-Qaeda-linked and pro-Taliban militants along the troubled Pakistan-Afghanistan border.

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Jim Sinclair’s Commentary

Listening to Grandfather’s advice is a good idea.

Greenlight Founder Takes Grandfather’s Advice on Gold
By Stewart Bailey and Saijel Kishan

Jan. 28 (Bloomberg) — Greenlight Capital Inc. founder David Einhorn is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.

Since Einhorn was 10 years old, his grandfather has warned him that investing in bullion and gold-mining stocks was the only “sensible” thing to do given the threat of inflation and the risks of so-called fiat currencies, New York-based Greenlight said in a Jan. 20 letter to clients. The firm had never before considered buying bullion or mining-company shares.

“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”

Greenlight is turning to the centuries-old currency to mitigate the effects of the economic collapse and government efforts to end it. Bullion gained for the eighth straight year in 2008 as governments in Europe and the U.S. rescued banks from collapse.

Greenlight said in the letter that in addition to buying gold, it has added call options on gold and the Market Vectors Gold Miners exchange-traded fund to its other investments. Call options are the right to buy a security or commodity at a set price, within a set period of time. The owner of the call profits when the security rises above the set price.

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Jim Sinclair’s Commentary

You can be sure this will not pass under the radar of all governments. This is the macrocosm experience to come, now occurring in the microcosm of Iceland

Iceland’s PM: Government Has Collapsed

Iceland’s prime minister says his ruling coalition has collapsed under pressure from the global financial crisis. Geir Haarde said he will speak to the president, Olafur Ragnar Grimsson, Monday in an effort to dissolve the government.

Mr. Haarde’s government, a coalition featuring his Independence party and the Social Democratic Alliance, has been under mounting public pressure since the crisis hit the island-nation in October.

Last week, the prime minister, who suffers from cancer, called early national elections in May and said he would not run. At the time, analysts questioned whether the government could survive four more months.

The situation worsened Sunday, when Commerce Minister Bjorgvin Sigurdsson quit, citing his role in the economic collapse and growing public demands that the government resign immediately.

Sigurdsson acknowledged that Icelanders have lost faith in their government, and he said he wants to share in the responsibility for the economic collapse.

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Posted at 3:45 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold was caught up in several cross currents today as safe haven buying subsided a bit based on the rally in the stock equities versus continuing fears over the well-being of the financial system and the generally weaker Dollar. Not only that, but the volatility in the crude oil pit kept gold quite volatile as well.

As in yesterday’s session, gold and the stock market went in opposite directions with “risk” coming back into play as could be seen from the move higher in the Euro-Yen cross. I am sure the Japanese monetary authorities are absolutely delighted to see their yen going lower for a change. Recalling that a few months ago gold was seen as a risky trade to be avoided at all costs during times of financial upheaval, now it is being seen as a superfluous trade because risk is back! Hey, if risk is in why not buy that risky yellow metal? Ah yes, the “efficient” markets. For now gold is going in the exact opposite direction of the Euro-Yen cross, a bellwether for the precious metal which had been a fairly reliable indicator of what to expect for the metal.  This serves to show how yesterday’s wisdom becomes today’s folly when it comes to trading today’s convoluted markets.

Once again we have a repeat of yesterday in the currency arena with the Dollar moving lower as a sign that “safe haven” is out and risk is in so why rush into the perceived safety of the Dollar. That feeds into that new lock step relationship between gold and the Dollar in which both move lower together. If one does not need to run into the Dollar for safety, then why bother with gold is the new thinking du jour. That has led to shorter-term longs bailing out of gold which was stymied yesterday in its upward march by concerted bullion bank selling near the $920 level. Once the “Do Not Pass Go” sign was put out, the day traders ditched and ran which turned the very short term indicators bearish. Fund managers are you still insisting on trying to beat the bullion banks at the paper game by your losing strategy of buying higher and higher and then selling lower and lower? Then take some of your money and stand for delivery and remove the gold that allows the shorts to laugh at your naivety.

Incidentally, it did not help matters any that the mining shares, as indicated by the HUI and the XAU were knocked lower yesterday. That pretty much undercut short term sentiment towards gold. After all, it is hard to be wildly bullish on the metal when the shares are going down.

Technically gold  has indeed stalled out at $920 and is now seeking to uncover some quality buying to generate an obvious support level. The first level looks to be once again that $880 level which has been quite a significant number both on the way up and on the way down. Below that lies the $870 level which also closely corresponds to the 50 week moving average on the continuous weekly chart. Support then looks to come in near the $845 level.

Resistance remains the $920 level set out by the bullion banks with stronger resistance near the $935 region.

The fairly steep drop in open interest in yesterday’s session reveals a goodly amount of long liquidation occurred during the rollover period in which longs bailed out of the February but did not move into the April in equal numbers. Open interest readings have been healthy and remain supportive of any move higher as they are still at relatively low levels.

In a best case scenario, gold will be able to maintain support above $870 and consolidate with a period of some sideways chopping action building  a base from which to launch higher. I will feel okay about the metal as long as it holds above $845 and bounces into a chop from that level.

It will now take a weekly push above that $920 level to keep the weekly chart firmly in a bullish posture. A downside breach of $820 would give the bears a definite advantage.

Keep in mind that after watching the stock market drop into the toilet, equity bulls are just itching for any reason to buy as bottom pickers are anxious to get in hopes of nailing that ever elusive exact bottom. The S&P will have to get back above 950 to convince me that we are breaking out of a trading range and even at that, it will need to do so on strong volume. Right now I think we are seeing a good deal of short covering taking place in the broader equity markets as traders wonder when the reflation policies followed by the Fed will begin to take effect. Many are hoping in hope but in markets, hope reigns eternal especially among those who have been on the losing side for so long. People generally WANT TO BE BULLISH on the stock market so the least bit of good news or hope for good news will bring in buying both from new longs and from nervous shorts.

By the way, that so-called “economic stimulus” plan being put forth by the Democrats in Congress – buried on page 147 of the bill, according to reports on Drudge, is a provision for $335 million for the prevention of sexually transmitted diseases. Yepper – that ought to do the trick to get this economy moving again – I wonder how many jobs this will help create (maybe in the condom industry). Seriously – where do these bozos who write this sort of legislation come from? They must have been escapees from Area 51 where aliens altered their brains and turned them into unthinking idiots. Maybe there is life on Mars and it has impregnated the brains of some politicians and turned them loose on the earthlings to destroy us all and take over the planet.

There seems to be a bit more people beginning to talk about inflation coming down the road versus the almost one-sided deflation chatter that we have been getting since last July. That will eventually feed through to gold and will be quite negative for bonds but for now, the deflation psychology seems to be pretty well entrenched. For me personally, the one market I will be looking at to try to get a clue as to when the inflation genie will begin wreaking havoc will be the price of crude oil. Energy prices are a very good harbinger of what is to come. While crude looks to have possibly bottomed near the $35 level, it still has not broken out into an upside trending move. Rather it has been moving in a sideways chop. The longer it holds the chop and remains above the $35 region, the more likely it is building a base for an eventual upside move. I still want to see a close above $50 before getting too bulled up about its prospects but I am monitoring it closely.

I have not mentioned it in some time but the CCI (the Continuous Commodity Index), which is the one I prefer to use when getting a broad view of the complex, has a similar pattern to that of crude oil. It has stopped going down and is moving sideways. If this pattern continues, it too will be building a base in which many of the commodity markets will be setting the stage for an eventual upside recovery. The CCI will  need to break out above 390 to see a commodity sector wide rally unfold.

Bonds set back a bit after yesterday’s upside move and appear to be unable to garner any more followers among the bulls for now. The chart pattern is extremely negative on the long bond with the shorter-dated 10 and 20 day moving averages making downside bearish crossovers of the 40 day moving average and targeting the 50 day. Bonds themselves are trading below the 50 day which will serve as upside resistance should it be able to generate some more upside action.

The HUI now needs to get a strong close above 316 to break out to the upside and into a bull trend while the XAU has 127-128 to best on a closing basis to do the same. For now they too look rangebound. Traders seem unwilling or unable to push them beyond these levels but they so far have maintained a footing in the upper regions of the trading range that has been carved out since early December 2008 which is friendly.

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

Januar2809Gold1230pmCDT

Posted at 2:37 PM (CST) by & filed under General Editorial.

My Dear Friends,

1. President Obama was JUST given the hook by having his speech flushed away on Bloomberg TV in preference for Trichet speaking privately to Bloomberg at Davos. Man that was a big mistake on Bloomberg’s part.

2. Once again you permit the Comex short gang to paint their own chart for gold in the short term. As long as the more financially capable members of the gold gang do not buy gold on the Comex and take delivery the knuckle draggers from the gold banks will continue to take from all of you. Gold is headed to Alf’s number but if the Comex has their way it is 10 feet forward and nine feet backward.

Regards,
Jim

Posted at 10:42 PM (CST) by & filed under Guild Investment.

BRITAIN

…GORDON, HOW I LOVE YOU, HOW I LOVE YOU, MY DEAR OLD GORDON…[sung to George Gershwin’s old American folk song "Swanee"]

We conjecture that this tune will not be sung in the halls of Britain in the future.  The current British Prime Minister, Gordon Brown, is presiding in a major decline in the fortunes of his country.  This is the same "brilliant" Gordon Brown who forcefully told the British people when he was Chancellor of the Exchequer (finance minister), that Britain no longer needed the hoard of gold in its reserves.  During his tenure Britain proceeded to sell off half of their inventory in 2001 at the princely price of $270 per ounce.  How does that compare to today’s $890/per ounce?  I think you will agree Gordon flubbed that one in a big way.

Now, Gordon Brown is presiding over a decline in the British Pound to a 23-year low, an economy declining at about 6% per year, and a banking system crisis that he is trying to bailout…but it is proving to be too little too late.  Of course, as we keep saying in our communications, too little bailout today, will necessitate a much larger bailout later.  It is going to be cheaper to do a large bailout the first time versus coming back and making it bigger than it should be later.

To put it another way, it is easier to stop a runaway train when it is coasting at 10 miles per hour than when it reaches 70 miles per hour.  For Gordon, the current failure is nothing new.  Since his days as Chancellor, his economic policies have always been muddled.  For the sake of all countries, let us hope that Britain will be steered by more competent leadership and financial management.

There was also a very good article this past weekend in the Daily Mail’s "Mail Online" that articulates just how fragile and precarious the British banking system has become.  The link to the article is: http://www.dailymail.co.uk/news/article-1127278/Revealed-Day-banks-just-hours-collapse.html

MEXICO AND PAKISTAN…POLITICS

There is a lot of worry about Iran, Afghanistan, and Iraq and we understand the need to be concerned about these places.  However, we do not hear enough in the American press about the two major trouble spots which are coming to the fore, Mexico and Pakistan.

Mexico has serious economic problems.  Corruption, falling national oil production, and rising narco-terrorism as six major drug cartels fight for control of the lucrative drug trade.

We believe that the government’s ability to govern is compromised, and that many in the police departments and military are working for various narco-lords.  As a major symptom, we point to the open gunfights on the streets of Mexico’s cities, and the fact that 4,000 have been killed by rival drug gangs within the past year on Mexico’s streets.

Another symptom is that many more illegal immigrants transit into the U.S. every day to seek employment and to flee narco-terrorism.

We can expect more illegal immigration into the U.S., and the increased pressure it puts on the U.S. health care delivery and education systems.  We can expect more costs for oil and police protection as narco-terrorists try to corrupt U.S. police agencies, especially the border patrol.

In Pakistan, Al Qaeda has taken over a large part of the best farm land in the country and has terrorized the Pakistani populace with their lifestyle demands, such as men must wear beards, and not trim them, and girls may not attend school.  Breaking the strict lifestyle codes can get one rapidly beheaded.  The Pakistani secret service is well known to be supportive of Al Qaeda, and they have many apologists in the corrupt Pakistani political system.  We should watch carefully as Pakistan could become a source of a great deal of global conflict and possible nuclear disturbance incoming years.

HOW TO INFORM ONESELF ABOUT GLOBAL ECONOMIC EVENTS

May we suggest the Financial Times of London, The Asian Wall Street Journal and The Economist as regular reading for all investors?  We have found that most countries national newspaper’s do a poor job of covering global economic, social, and political events.  The above three international publications do a better job.

SUMMARY

The world banking crisis continues to simmer, and no strong, definitive solution has been found.  Implementation of good ideas has not been fast enough, in no small part due to the political shortsightedness of both sides of the political aisle and the politicians desire to pander to local voters, while ignoring the national best interest.  Where did all the statesmen and women go?

Our favorite investment, gold, has done well this month, and we see no reason that it will not continue to do well.  We hold gold and some asset based stocks, which pay high dividends.  Other than that, we hold primarily cash balances in government guaranteed paper.

This is a conservative approach, and one which is working for us thus far in 2009.  We do not anticipate making any major commitments to common stocks in the U.S. or abroad until a further correction has been seen in world markets.

For no charge, as a service to our readers, we will be happy to examine your current investment portfolio, and explain how we might restructure it to meet your needs for income and capital appreciation in the current environment.  Please give us a call if we can help you in this regard.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com