Posted at 11:20 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

I would like to send a special thank you out to the following:

  • CIGA Green hornet
  • CIGA Arlen
  • CIGA Jeff
  • CIGA Dr. Bob
  • CIGA Rusty Bayonet
  • CIGA Omid
  • CIGA Eric
  • CIGA Annette
  • CIGA Salim

Your help is deeply appreciated.

Sincerely,
Jim

 

Jim Sinclair’s Commentary

Dean Harry speaks to us. His great wisdom is not limited to finance.

We are all privileged to know him.

TWO WOLVES
This is as good as I have ever heard it explained!

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One evening an old Cherokee told  his grandson about a battle that goes on inside all people.

He said, ‘My son, the battle is between two ‘wolves’ inside us all.

One is Evil. It is anger, envy, jealousy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego.

The other is Good. It is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion and faith.’

The grandson thought about it for a minute and then asked his grandfather: ‘Which wolf wins?

The old Cherokee simply replied,  ‘The  one you feed.’

 

Jim,

You mentioned how the legal issues are likely to dog the financial companies for years to come.

CIGA Charlie

New Jersey sues Lehman over pension fund loss
By Isabelle Clary
Posted: March 18, 2009, 10:29 AM ET

New Jersey Attorney General Anne Milgram filed a lawsuit Tuesday on behalf of the $59 billion New Jersey Division of Investment, Trenton, against executives of Lehman Brothers Holdings, claiming the state’s pension fund lost more than $100 million on investments in Lehman, said Robert Corrales, spokesman for Gov. Jon Corzine.

The suit alleges fraud and misrepresentation on the part of Lehman executives “in violations of New Jersey and federal securities laws, negligent misrepresentation, breach of fiduciary duty, fraud, and aiding and abetting. It seeks to recover compensatory and punitive damages,” Mr. Corzine’s office said in a statement.

More…

Posted at 11:13 PM (CST) by & filed under In The News.

Dear CIGAs,

The Death of the Dollar is set in cement.

$1 trillion deficits seen for next 10 years
By ANDREW TAYLOR

WASHINGTON (AP) — President Barack Obama’s budget would generate deficits averaging almost $1 trillion a year over the next decade, according to the latest congressional estimates, significantly worse than predicted by the White House just last month.

The Congressional Budget Office figures, obtained by The Associated Press Friday, predict Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019. That’s $2.3 trillion worse than the White House predicted in its budget.

Worst of all, CBO says the deficit under Obama’s policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.

The latest figures, even worse than expected by top Democrats, throw a major monkey wrench into efforts to enact Obama’s budget, which promises universal health care for all and higher spending for domestic programs like education and research into renewable energy.

The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his allies controlling Congress would have to consider raising taxes after the recession ends or paring back his agenda.

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Jim Sinclair’s Commentary

The American motor industry is finished. As goes Motors, so goes the USA. What a disaster has been brought on us by the OTC derivative manufacturers and distributors.

GM, Chrysler May Need Additional Aid, Rattner Says
By John Hughes

March 20 (Bloomberg) — General Motors Corp. and Chrysler LLC, which have requested as much as $21.6 billion in additional government aid, may need “considerably” more than that, said Steven Rattner, the Treasury’s chief auto adviser.

“It could be considerably higher, I won’t deny that,” Rattner said, when asked whether U.S. aid sought could rise. Rattner spoke in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” scheduled to air today.

Rattner and President Barack Obama’s auto task force are assessing proposals from GM and Chrysler and deciding whether to recommend additional aid or tip the car companies into bankruptcy. Rattner said the task force will give its “sense of direction” before March 31. Chrysler and GM have received $17.4 billion since December and requested more last month.

“What they’ve asked for depends on them achieving plans that are somewhat ambitious,” Rattner said. “Like all management teams they tend to take a reasonably, slightly perhaps, optimistic, view of their business. So it could be more, I can’t rule that out.”

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Jim Sinclair’s Commentary

Remember Jim’s Formula? Forget the dollar!

U.S. Federal Deficit Soars Past Previous Estimates
1:55 p.m. ET Friday, March 20, 2009

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated.

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Jim Sinclair’s Commentary

No, but it is the death of the US dollar.

Terence Corcoran: Is this the end of America?
Posted: March 19, 2009, 7:38 PM by NP Editor
By Terence Corcoran

U.S. law-making is riddled with slapdash, incompetence and gamesmanship

Helicopter Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his energy minister is threatening a trade war over carbon emissions, his treasury secretary is dithering over a banking reform program amid rising concerns over his competence and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.
As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America?

Probably not, if only because there are good reasons for optimism. The U.S. economy has pulled out of self-destructive political spirals in the past, spurred on by its business class and corporate leaders, the profit-making and market-creating people who rose above the political turmoil to once again lift the world out of financial crisis. It’s happened many times before, except for once, when it took 20 years to rise out of the Great Depression.

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Jim Sinclair’s Commentary

The next problem. Take a number.

Commercial Real Estate: The Banks’ Next Big Problem
By 24/7 WALL ST. Friday, Mar. 20, 2009

In most large American cities there are office buildings which sit half finished in their financial districts. There are still huge cranes next to some of them. If the construction on a site ended months ago, there is nothing left beyond the skyscraper skeleton and a security fence to keep vandals out.

As businesses such as law firms, investment banks, car companies and retailers cut jobs and move to less expensive offices, the commercial real estate industry is collapsing with astonishing speed. None of the unfinished buildings were erected with cash from the developers. Banks put the money up for the physical location and structure, and perhaps even the rent from tenants, as security deposits in most cases. The land is no longer worth much. The buildings are half empty or unfinished and tenants are leaving, and, in many cases, defaulting on their leases. Lawsuits to get payment of those obligations are long and expensive. As often as not, the former tenant could not afford to pay a judgment anyway. (Read "Four Steps to Ending the Foreclosure Crisis.")

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Jim Sinclair’s Commentary

Are these guys trying to start a civil war?

They may not have brains, but you must say "En Grande Bol."

Citigroup Plans Big Bonuses Despite Rules Against Them
By STEPHEN GANDEL Friday, Mar. 20, 2009

AIG isn’t the only bailed-out financial firm paying big bucks to managers who helped steer their company to near collapse. Citigroup has pledged millions of dollars in bonuses to senior executives for the next few years, despite lawmakers efforts to eliminate such payments.

It’s not clear whether the bonuses, which Citigroup says are for 2008 but won’t start paying out until 2010, will be allowed. Under compensation rules passed by Congress in mid-February, cash bonuses are barred for top executives at bailed-out banks.

But Citi finalized its bonus program shortly before the new rules were introduced. That might make the payments permissible, though they could be made almost worthless by new tax rules just passed by the House of Representatives and headed for consideration in the Senate. Even so, Citigroup’s move in January to set in place bonus payments for years to come raises questions about whether it was trying to evade compensation rules it knew were coming.

More…

 

Jim Sinclair’s Commentary

Please watch this video as it will explain to you the Gordian Knot that ties Pakistan to Afghanistan not recognized by the US planners. The USA still thinks buying the leadership of Pakistan is some means of overcoming this growing threat to the world. Buying the Pakistan leadership by aid only worsens the problem.

Pakistan is another problem lacking practical solution and a problem soon to take center stage of world geopolitical events. Markets will be thrown into long-term turmoil by what this means to energy supply, and the future of the US dollar.

Please view this well done and educational documentary.

 

Jim Sinclair’s Commentary

Even though bonuses are a beard for the real problem, this cartoon certainly portrays the accurate character of the players. I wear blue shirts with white collars and French cuffs, but let that be the only comparison.

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Rather Than Wall Street, Why Not Bail Out A Generation?
by Jesse Jackson

AIG, the world’s largest insurance company, of which we — U.S. taxpayers — now own 80 percent, has consumed nearly 170 billion of our dollars to bail out bad bets it made selling credit insurance to banks and investment houses. This weekend, we learned where the money went — largely to other Wall Street banks: $12.9 billion to Goldman and Sachs; $2.3 to Citibank; and, remarkably, nearly $12 billion to Deutsche Bank of Germany; the same to Societe Generale of France; $8.5 billion to Barclays Bank of England; $5 billion to UBS of Switzerland, which is now under investigation for running a tax avoidance scheme for the very wealthy.

To add insult to this injury, the very bankers who caused the catastrophe are paying themselves "retention bonuses" totaling over $165 million in order to avoid "losing talent." Apparently, it takes a lot of talent to lose hundreds of billions.

This raises a simple question. Instead of using our money to bail out the folks who got us into this mess, why don’t we help the generation that we’ll rely on to dig our way out of the hole? Instead of shipping billions to bankers in Germany and France, why not relieve the debt that burdens more and more of our own children as they struggle to pay for college.

The burdens are clear. College tuitions have been rising faster than inflation — they’re up about 58 percent since 2000. Grants haven’t kept up. As a result, students are taking on more and more debt. These days, two of every three students graduate with debt, which averages more than $21,000. But the average is misleading

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How to create a 1930s type equity rally in a fledgling depression caused by a credit lock up.
By Mr. J.P. Morgan (aka Jim Sinclair)

JPM had to stop the short pool raids that were being conducted by Jesse Livermore. Morgan invited Livermore to visit him. They came to some unpublished arrangement, and Livermore ceased his short selling pool operations.

Today it will require more than lip service so far offered to a future US reinstating of the “Up Tick” rule. It must happen in its full form.

Saying shame-shame to the naked short sellers is a waste of time.

Canada will have to own up to the fact that they are the planetary naked short sale central requiring that brokers ask but one time if the client intends to deliver. The client of course says yes. The Canadian broker then has performed their complete regulatory duty. The client fails to deliver for months or years.

Since a naked short sale results in a credit of the account there are no problems with margin or back office wink-wink.

What is required is the old fashioned uptick rule to come back and be strictly enforced in the USA. T3 (trade date plus three days to deliver) for a fund or institution and T21 (trade date plus twenty one days to make delivery) for an exchange floor or NASDAQ based market maker.

Brokers representing naked short sellers who call themselves specialist/market makers in the shares are kidding no one. They are not market makers that stand ready at all times to make bids and offers in the company being naked shorted via them.

What the naked short has done compared to a legal short is expand the capitalization of the company under attack fraudulently. The legal short seller by borrowing the share to make delivery delivers registered shares and does not expand the capitalization of the company.

In order for a 1930s type rally to have legs, talking about controlling the hammer and sledge no uptick and naked illegal short who fraudulently expanding a company’s capitalization must be controlled and known to be under control. A public roast of a few of those that do not get the message and back off will be necessary.

Short selling is a necessary part of market, but like all games there must be rules and those rules must be adhered to.

J.P. Morgan then turned his attention to the banking system, which was locked up credit wise.

J.P. Morgan’s loaning of funds to each bank came with the specific binding orders that the funds were to be used to make loans and not for any other purpose.

The problem now is that every penny that enters the front door of an AIG, Citi or any other busted beggar goes out the back door to pay off the winners of OTC derivatives.

As long as funds in equals the amount going out the back door, no 1930s type rally can have legs. Thus there will be no "timeout" in the downward spiral during which practical solutions might be sought.

TARP, LARP, FLARP and whatever is to come cannot be for the purpose of making some shadow figures in the dark trillionaires.

Bailouts must be for making loans within and outside the system. Failing to make all the above happen means all hope is lost.

The Fed can buy every instrument the Treasury prints for the rest of your life. Without JP Morgan’s measures as above, it will only result in the US dollar at a negative value.

I know exactly how to turn this thing around, buying time for a solution yet hold no hope that it will occur.

Those that would lose by doing the right thing have the most powerful lobby opposing such actions backed by untold amounts of money and are buying every politician that ever ran for or was appointed to office.

The West has never had more sinister enemies than their own financiers seeking to have more money than any being ever could spend.

Jim Sinclair’s Commentary

These are real people with real problems and deep suffering delivered to them by the degraded, amoral, filthy rich of OTC derivative finance. The USA needs no external enemies when this type of cancer is rotting it from within.

Sacramento’s tent city homeless camp is coming down, sources say
By Cynthia Hubert and Ryan Lillis
Published: Thursday, Mar. 19, 2009 – 12:02 pm

Sacramento’s burgeoning tent city homeless camp north of downtown is about to become history, sources told The Bee today.

Mayor Kevin Johnson, working with a coalition of property owners, homeless advocates and others, has come up with a plan to move 100 to 200 men and women off of the land near the Blue Diamond almond plant and into apartments, shelters and other structures, according to participants in the discussions.

SMUD, which owns the bulk of the land, hopes to fence off the property some time within the next four weeks to pursue an upgrade of its substation there, said spokeswoman Elisabeth Brinton.

"We have been patient, working with city leaders and advocates and taking their lead," Brinton said. "We are committed to doing the right thing for the community."

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Jim Sinclair’s Commentary

On balance the Russians are correct as compared to the US Fed or Treasury in Russia’s resistance to printing paper.

On the downside, the SDR doesn’t have a snowball’s chance in hell of becoming a reserve currency of merit.

The Russians need not be considered the opposition as the West has home grown real enemies from within.

China backs talks on dollar as reserve -Russian source
Thu Mar 19, 2009 11:24am EDT
By Gleb Bryanski

MOSCOW, March 19 (Reuters) – China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decisionmaking globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency)," the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund’s Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

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Jim Sinclair’s Commentary

This is a unwise precedent. It makes international capital wary of US domicile.

It is a diversion from the real problem and economically unsound. There are other means of accomplishing the same thing.

House Approves 90% Tax on Bonuses After Bailouts
By CARL HULSE and DAVID M. HERSZENHORN
Published: March 19, 2009

WASHINGTON — The House overwhelmingly approved on Thursday a near total tax on bonuses paid this year to employees of the American International Group and other firms that have accepted large amounts of federal bailout funds, rattling Wall Street as lawmakers rushed to respond to populist anger.

Despite questions about the legality of the retroactive 90 percent levy, Democrats and some Republicans said the tax on bonuses for traders, executives and bankers earning more than $250,000 was the quickest way to show angry Americans that Congress intended to recoup the extra dollars. Even backers of the measure noted it was an extraordinary step.

The House vote sent some employees into a panic about the prospect of, in effect, having to give up money they might already have spent. And it had regulators fearing it could undermine the Treasury’s efforts to stabilize the financial system if banks tried to flee the bailout program or if other firms refused to participate in coming rescue operations to protect their bonuses, some executives said.

Vikram S. Pandit, chief executive of Citigroup, lobbied against the legislation in a meeting Thursday with the Senate majority leader, Senator Harry Reid, according to an industry official.

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Jim Sinclair’s Commentary

Amoral behavior and financial crimes are not victimless.

An employer has obligations to those employed that transcend the employer’s private pocketbook.

The financial rule violator starts a chain of events for which he/she carries eternal responsibility that will not be denied, its outcome here, now and forever.

Desperate Japanese head to ‘suicide forest’
updated 10:19 a.m. EDT, Fri March 20, 2009
By Kyung Lah
AOKIGAHARA FOREST, Japan (CNN) — Aokigahara Forest is known for two things in Japan: breathtaking views of Mount Fuji and suicides. Also called the Sea of Trees, this destination for the desperate is a place where the suicidal disappear, often never to be found in the dense forest.

Taro, a 46-year-old man fired from his job at an iron manufacturing company, hoped to fade into the blackness. "My will to live disappeared," said Taro. "I’d lost my identity, so I didn’t want to live on this earth. That’s why I went there."

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Jim Sinclair’s Commentary

The French get it.

Sarkozy under pressure as ‘millions’ take to streets
By James Mackenzie, Reuters
Thursday, 19 March 2009

As many as three million people took to the streets across France today to protest against President Nicolas Sarkozy’s handling of the economic crisis and demand more help for struggling workers.

The protests, which polls show are backed by three quarters of the French public, reflect growing disillusion with Sarkozy’s pledges of reform as the crisis has thrown tens of thousands out of work and left millions more worried about their jobs.

Bright spring sunshine helped the turnout and the total reported by union organisers surpassed the 2.5 million seen on an earlier day of protest on Jan. 29.

Streets in central Paris were packed with protesters waving anti-Sarkozy placards and chanting slogans, with badges reading "Get lost you little jerk!", the now infamous comment made by Sarkozy to a protestor at an agriculture show, much in evidence.

"There are more and more workers who feel they are not responsible for this crisis but that they are the main victims of it," said Bernard Thibault, head of the CGT, one of the eight trade unions organising the strikes.

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Sodom and Gomorrah

Is described in the old testament as a place where no honest person could be found. Forget Sodom and Gomorrah, this is the final act of deceit that the media will present as a solution to the problem.

Establishing "false fabricating" as an accounting foundation is simply wrong. This act proves beyond any doubt that there is no practical solution to the planetary meltdown of the fraudulent instruments of OTC derivatives.

Financial inhumanity does not deserve to be bailed out of this disaster.

Some change the new faces brought to the filth of the financial community.

"Facts (bankruptcy of spirit and finance) do not cease to exist because they are ignored."
–Aldous Huxley

Shame on the FASB! They have failed to perform their purpose!

 

Click here to view Monty’s recent commentary on FASB 157…

 

Accounting Brothel Opens Doors for Banker Fiesta: Jonathan Weil
Commentary by Jonathan Weil

March 19 (Bloomberg) — The banks demanded that the accountants give them leeway in how they report losses to investors. The accountants responded by giving away their souls.

This week, the Financial Accounting Standards Board unveiled what may be the dumbest, most bankrupt proposal in its 36-year history. If it stands, the FASB ought to change its name to the Fraudulent Accounting Standards Board. It’s that bad.

Here’s what the board is floating. Starting this quarter, U.S. companies would be allowed to report net-income figures that ignore severe, long-term price declines in securities they own. Not just debt securities, mind you, but even common stocks and other equities, too.

All a company would need to do is say it doesn’t intend to sell them and that it probably won’t have to. In most cases, it wouldn’t matter how much the value was down, or for how long. In effect, a company would have to admit being on its deathbed before the rules would force it to take hits to earnings.

So, if these rules had been in place last year, a company that still owned shares of American International Group Inc. or Fannie Mae, for instance, could exclude those stocks’ price declines from net income entirely. It would make no difference that the companies were seized by the government last year, or that both are penny stocks. The loss would get buried away from the income statement, in a balance-sheet line called “accumulated other comprehensive income.”

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Jim Sinclair’s Commentary

Please note the words "Naked Short" and "Fraud" linked together by an unquestionable expert witness.

Naked Short Sales Hint Fraud in Bringing Down Lehman (Update1)
By Gary Matsumoto

March 19 (Bloomberg) — The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

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Posted at 3:59 PM (CST) by & filed under General Editorial.

Dear CIGAs,

For those of you who have purchased Compendiums in support of JSMineset, we will be emailing you a link to Jim’s 3 hour CIGA meeting in Toronto. This is available for download at this time only to those who have purchased a Compendium and are helping to support JSMineset.com.

If you would like to purchase a Compendium please click any of the package links below. I will be emailing the links out tomorrow to email addresses that are associated with your payment.

Regards,

Dan Duval
JSMineset.com Editor

We release Compendiums every couple years to help cover the operating costs of running a site like JSMineset. Over the years we have gotten quite large and these costs have grown substantially. If you like what we do here please purchase a copy – you will be supporting a good cause and allow us to continue providing this service free of charge.

**PLEASE NOTE YOU DO NOT NEED A PAYPAL ACCOUNT TO PURCHASE ANY OF THE COMPENDIUM SETS. COMPENDIUMS SHOULD ARRIVE WITHIN 2-4 WEEKS DEPENDING ON YOUR LOCATION**

What you will receive with each set:

Compendium Version 1 ($50 USD):

 

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!

Posted at 3:07 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold ran into a bout of pre-weekend selling in today’s session as bears were able to prevent bulls from capturing the hill at the $960 level and holding it. Chart readers can see the significance of that level for if it falls, gold will move back up to $1,000 again. It looks to me like there was a bit of profit taking by short-term oriented longs not only in gold, but in crude, and the European currencies. It is not completely unexpected to see the Forex arena moving to bid the Dollar up a bit considering the fact that it just experienced its single largest day fall in more than 20 years. Longer term, now that the Fed has embarked on its currency debauching policy, traders will be looking to sell rallies in the greenback. We are still going to have the crosswinds involved from safe haven dollar buying whenever stocks falter so the day to day gyrations in the currency markets are going to flow over into the gold market as traders/investors attempt to sort all of this out.

Gold appears to be pausing or resting after its big move higher with short-term oriented traders booking profits and some fresh short sellers emerging but overall, it held up well today as eager buying came in on the dips. Ditto that for the mining shares as the HUI and the XAU are actually both in positive territory as I write this.

Volume was pretty hefty in gold again yesterday but off the torrid pace of Wednesday’s monster number. Open interest readings are healthy. We will get another look into market internals this afternoon to when the Commitments data is released but unfortunately, it will not contain the numbers for Wednesday on since the cutoff date is Tuesday.

Rollover activity in gold is picking up with June receiving the bulk of the new buying. These rollover periods have been used quite effectively in the past by the bullion banks to squash price rallies so bulls will have to perform to keep their momentum and maintain the initiative. April will be entering its delivery period soon and we will then see whether or not a sufficient number of longs have finally seen the light and decided to start standing for delivery. AT this point I am not very optimistic that they will since this new generation does not seem to know how to attack even when they are handed a battle plan that guarantees them victory.

Equities were pulled lower by the weakness in financials. This will bolster talk that the recent rally in stocks was nothing but a dead cat bounce. The weekly chart in the S&P is not particularly impressive although last week’s move higher did give bulls some cause for hope. That bottom down near the 670 level must hold or the S&P is going to 600. Upside resistance remains near the 790 level followed by 835.

Bonds surrendered the better part of their gains after being up nearly a full point today – something I find telling. Could it be that the market is still concerned about the supply glut that is coming? The weekly bond chart has decidedly improved although the fade from well off the highs indicates that the most likely course of price movement over the next few weeks is a sideways chop. Bonds will need some sort of fresh news to encourage bulls seeing that they have gotten all the bang that they are going to get from the Fed’s announced buy program.  While that has served to put a floor under them, it will take some new fodder to feed this market.

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

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Posted at 4:09 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

SEEING THE HANDWRITING ON THE WALL, THE U.S. GOES FOR QUANTITATIVE EASING

China has been the biggest buyer of U.S. Treasury securities due to their large trade surplus with the United States. Now, Chinese officials have made it clear that they will not be buying as many U.S. Treasury bonds, agency bonds, and government securities of other nations, due to the fact that their trade surplus with the rest of the world is falling and their huge foreign exchange reserves have stopped growing rapidly.

Further, the Chinese have been spending more of their money purchasing raw materials as they continue to buy up base metals, oil, and other reserves to stoke their economic machine. Chinese officials have made statements recently that their purchases of bonds will fall as their trade surplus falls.

This is the primary reason that the U.S. yesterday announced the purchase of $300 billion of U.S. Treasury bonds by the Federal Reserve over the next six months. This is Quantitative Easing, or to put it more plainly, printing money. The long term effect is highly inflationary.

We predict that this is only the first of many Quantitative Easing activities, and the U.S. will have to print more money to buy much of the $2 trillion in new bonds that are going to be issued in the coming year. This will have large effects, including:

  1. A decline in the value of the U.S. dollar. (The decline began yesterday as soon as the announcement was made.)
  2. Substantial inflationary pressures.
  3. Long-term upward pressure on the prices of fixed assets, gold, commodities, real estate that produces steady income, stocks that can grow.
  4. Serious negative effects on the economic future of coming generations of Americans (personally, I blame the U.S. political class for their unmitigated shortsightedness.)

 

The Financial Times
Federal Reserve plan stuns investors
By Krishna Guha in Washington
Published: March 18 2009

The Federal Reserve on Wednesday stunned investors by announcing plans to buy $300bn of US government debt, triggering a plunge in bond yields and the dollar.

In a further display of aggression, the US central bank also said it was more than doubling its purchases of securities issued by housing giants Fannie Mae and Freddie Mac to $1,450bn. It said it now expected to keep interest rates near zero for an "extended period" of time.

The yield on 10-year US Treasuries plummeted 50 basis points to 2.50 per cent, while private borrowing rates fell by roughly half as much. Equities bounced with big gains in troubled banks such as Citigroup and Bank of America. But the dollar fell 3.2 per cent against the Euro and 2.3 per cent against the yen.

Goldman Sachs said the Fed was throwing the "kitchen sink" at the problem. The plan to buy Treasuries caught investors off guard. "It appears that they wanted to give the market a jolt," said Peter Hooper, an economist at Deutsche Bank.

The last time the central bank attempted to bring down yields on long-term securities through direct intervention came during the ill-fated Operation Twist in the 1960s. Recent comments by Ben Bernanke, Federal Reserve chairman, and William Dudley, New York Fed president, did not suggest that Treasury purchases were imminent.

But the deterioration in the US outlook, problems rolling out the US financial rescue plan and the Bank of England’s success in buying UK government gilts seem to have persuaded the Fed to act.

Alan Ruskin, a strategist at RBS, said it was a "flip-flop" that "could be cast as a sign of desperation" but "confirmed that Bernanke will do whatever it takes to get some hold of the problem".

The Fed said it would concentrate on Treasuries with maturities of two to 10 years. It said its objective was to "improve conditions in private credit markets" – not to help the government finance its mounting deficits. The Bank of Japan said it was stepping up its purchases of Japanese government debt by about a third to Y1,800bn a month.

Wednesday’s Fed announcement will increase the size of its balance sheet by another $1,150bn to about $3,000bn even before the roll-out of a $1,000bn scheme to finance credit markets. Once this scheme is fully implemented, its balance sheet could approach $4,000bn – nearly a third the size of the US economy.

A swollen Fed balance sheet runs the risk that the US central bank may find it difficult to manage down the money supply when the economy turns, raising the possibility of inflation.

Gold surged in response to the Fed’s announcement, rocketing from a session low of $884.10 a troy ounce to a high of $942.90, a jump of 6.6 per cent.

REMINDER, FOR A LIMITED TIME…

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. In recent weeks, we have received a number of requests to review investment portfolios and have been responding to them as time permits. In order to provide a more meaningful evaluation of your portfolio, we will need additional information about your overall financial picture. Please give us a call if we can help you in this regard.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 4:05 PM (CST) by & filed under In The News.

Dear CIGAs,

Remember less than six weeks ago the prevailing opinion of the talking heads was that the euro was stone dead? The wrong basis for this opinion was that Euroland was in much more trouble than the USA.

The hedgie’s raid was on against the Middle European currencies (still in force) and the prevailing opinion in the financial media is that they are dead. In dollar terms they are all going to look a lot better, especially the healthier ones.

 

Jim Sinclair’s Commentary

You and I know Putin has not been far off the mark in his recent general comments on monetary policy. These comments have not been well entertained by the US media.

Putin is spot on here.

Putin Warns Against Printing Money to Cover Deficit
By Alex Nicholson

March 19 (Bloomberg) — Russia won’t resort to printing money to cover budget deficits that Prime Minister Vladimir Putin said are likely to continue for the “next few years.”

The government should tackle the deficit “by using the reserves that have been accumulated in recent years, or if necessary by borrowing under market conditions,” Putin told the Cabinet in Moscow today, adding that Russia doesn’t yet need to borrow and won’t seek loans abroad. “Resorting to a printing press would be unwise and extremely dangerous.”

Finance Minister Alexei Kudrin said the government plans to borrow 410 billion rubles ($12.3 billion) more than it repays on the domestic market this year, which amounts to about 1 percent of gross domestic product.

Russia’s revised 2009 budget contains a deficit of 2.98 trillion rubles, or 7.4 percent of planned GDP of 40.4 trillion rubles. Kudrin said on March 14 that the deficit may exceed 8 percent of GDP. The deficit will be reduced to 3 percent of GDP in 2011, according to a draft of the government’s anti-crisis plan distributed to reporters.

The government approved the plan and the revised budget with Russia’s first deficit in a decade as it attempts to stabilize the economy with a 1.6 trillion ruble bailout modeled on plans developed by the U.S. and U.K.

More…

 

Jim Sinclair’s Commentary

Financial crimes are not victim-less. The way to correct the criminal element (suits) is to make financial crimes, in which a death is a result, a capital crime. They are capital crimes, you know!

Without buyers, Bank Medici to give up its license
Thursday, March 19, 2009

VIENNA: Bank Medici, which managed $3.2 billion in funds that were invested in the Ponzi scheme operated by Bernard L. Madoff, will return its banking license after talks with possible buyers of the bank failed, the Austrian lender said Thursday.

The bank said it would probably not be able to strike a deal soon because market conditions had cast a shadow over negotiations with investors who it had said might be interested in its banking license.

‘‘Market turbulences have heavily influenced talks to potential investors, and a transaction in the near future is unlikely,’’ Bank Medici said.

‘‘Under the current circumstances, it is not possible to build a substantial new banking business to substitute lost revenue,’’ it added. ‘‘Therefore the supervisory board decided yesterday to return the banking license.’’

Medici was the investment manager for the Herald Lux Fund and a distributor for both Herald Lux and another fund, Herald, which had a combined $2.1 billion under management before Mr. Madoff’s fraud was exposed. It was also the investment manager for the Thema International Fund, which had $1.1 billion under management.

More…

Jim Sinclair’s Commentary

Recall our conversation concerning the decline in the dollar from the algorithm driven dollar bear market rally being akin to a person walking into an elevator only to find no elevator car, but only an elevator shaft straight down.

China backs talks on dollar as reserve -Russian source
Thu Mar 19, 2009 11:24am EDT
By Gleb Bryanski

MOSCOW, March 19 (Reuters) – China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decisionmaking globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency)," the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund’s Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

More…

Jim Sinclair’s Commentary

The end is precious!

Jim Sinclair’s Commentary

Back door or front door, no matter what it is getting bailed out which will lead to hyperinflation.

It must be obvious to you now that there will be no limit to bailouts short of a new revolution in the USA.

Parts makers are surging on the stock exchange because they are broke and getting bailed out to go broke again.

It should also be obvious to you that when I sent you an email titled "This is It," it was in fact "It."

I do not send emails unless there is large interest and the content is need to know.

U.S. to Aid Auto Industry With $5 Billion for Suppliers
By BILL VLASIC
Published: March 19, 2009

DETROIT — The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The Treasury Department said the program would guarantee payments to suppliers for products shipped to ailing car companies.

The supplier fund is the first direct action taken by President Obama’s auto task force to prop up the auto industry, which has suffered big losses from the steep decline in new-vehicle sales.

“The Supplier Support Program will help stabilize a critical component of the American auto industry during the difficult period that lies ahead,” Treasury Secretary Timothy F. Geithner said in a statement.

The presidential task force is continuing to review requests for additional federal aid from General Motors and Chrysler, both of which are subsisting on government loans.

More…

Jim Sinclair’s Commentary

No wonder Spitzer got set up. He asked for it. He may be asking for it again as below.

This also speaks to the strategy of setting up and then knocking down the straw man to create a diversion from the real for the general public.

The Real AIG Scandal
Tuesday 17 March 2009
by: Eliot Spitzer  |  Visit article original @ Slate Magazine

It’s not the bonuses. It’s that AIG’s counterparties are getting paid back in full.

Everybody is rushing to condemn AIG’s bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG’s counterparties are justified with an appeal to the sanctity of contract. If AIG’s contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

But wait a moment, aren’t we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes – income taxes to sales taxes – to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won’t be laid off. Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? Haven’t we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn’t they have accepted a discount, and couldn’t they have agreed to certain conditions before the AIG dollars – that is, our dollars – flowed?

More…

 

Jim Sinclair’s Commentary

1. Please note that financial news services this morning are mating the word FRAUD with NAKED SHORT SELLING. The case being quoted is the raid on Lehman after Bear Stearns collapsed. If one entity goes down on this then all entities who have practiced this become targets of successful slam dunk civil litigation. The need is only to review fails to deliver, using "discovery" for the details.

2. Conversations on reinstatement of the "Up Tick Rule" in the US are picking up speed at exchange management and legislative levels. The question is will Canada enforce the rules they have or keep the only onus on the broker to ask if their client intends to make delivery. If the client says yes it all ends there. Market makers in Canada and the US are beards for naked short selling brokerage house income. I have been in this business for 50 years now. There is little I do not know about the cheaters.

3. Banks who are predicting positive earnings in the first quarter of 2009 are relying on a abrogation of the mark to market rules of FASB. Please note Monty’s excellent review of the impact of such a change posted yesterday here…

Bankers don’t give a damn about the damage they do as long as their ends are accomplished. That is the UGLY face of personal enterprise, not a form of capitalism but instead more fascism.

Respectfully yours,
Jim

 

Jim Sinclair’s Commentary

A more accurate depiction of the AIG bailout:

AIG-Robber

 

Jim Sinclair’s Commentary

A very good, simple and clear representation of the problem lacking a practical solution.

clip_image001

 

Jim Sinclair’s Commentary

Here is the reason behind the Fed action to buy Treasuries thereby monetizing in a form, itself.

Allure of US Treasuries set to fade
By Wang Xu (China Daily)
Updated: 2009-03-18 07:27

Holdings of US Treasury bonds rose in January, but the increase is the slightest since last June, indicating the country’s appetite for the securities is set to diminish as a result of the falling trade surplus and rising concern over investment security.

image The country’s reserves of US Treasuries rose by $12.2 billion to $739.6 billion by the end of January, according to the latest International Capital Report by the US Treasury Department. Although China remained the largest creditor of the US government, analysts say its future purchases would shrink.

Treasury debt holdings grew by $14.3 billion in December.

"Purchases of US Treasuries are set to decline, given the fall in the trade surplus," Erh-Cheng Hwa, chief economist of Bank of Communications, told China Daily.

China ran hefty trade surpluses in the past years and accumulated $1.95 trillion in foreign exchange reserves by the end of 2008. In an attempt to seek stable returns, most of the reserves were channeled to low-risk assets such as US Treasury bonds.

The nation’s trade surplus dropped to $4.8 billion in February, down 87.6 percent from a year earlier. Some analysts say it may decline further as the nation’s stimulus package props up demand for foreign goods while doing little to boost exports.

Sun Mingchun, economist with Nomura International, estimates that the trade surplus is likely to fall to $155 billion this year, only about half of last year.

More…

Jim Sinclair’s Commentary

This is nothing compared to what is coming in the midst of rotten business.

Consumer prices rise 0.4 percent in February
Consumer prices rise in Feb. by largest amount in 7 months as gasoline, clothing prices jump
Martin Crutsinger, AP Economics Writer
Wednesday March 18, 2009, 3:42 pm EDT

WASHINGTON (AP) — U.S. consumer prices rose in February by the largest amount in seven months as gasoline prices surged again and clothing costs jumped the most in nearly two decades.

But the increase appeared to ease many economists’ concerns about dangerous price movements in either direction. The recession is expected to dampen any inflation pressures for at least the rest of this year, while the slight uptick in prices over the last two months also has made the possibility of deflation more remote.

The Labor Department reported Wednesday that consumer inflation rose 0.4 percent in February, the biggest one-month jump since a 0.7 percent rise in July. Two-thirds of last month’s increase, which was slightly more than analysts expected, reflected a big jump in gasoline pump prices.

Core inflation, which excludes food and energy, rose 0.2 percent in February, also slightly higher than the 0.1 percent rise economists expected.

The Federal Reserve, meanwhile, said Wednesday it would spend up to $300 billion to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. The central bank also will spend another $750 billion on mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, bringing its total purchases of those securities to $1.25 trillion.

More…

Jim Sinclair’s Commentary

New $1 buying power note identified at the Treasury printing press.

Zimbabwe demands apology from USA regarding monetary policy criticisms

new dollar

 

Jim Sinclair’s Commentary

What you will not see on Bloomberg

Jim Sinclair’s Commentary

The dollar rally has fundamentally been a joke since it started.

The dollar rally was technical money flows that triggered algorithms firing illogical signals bound to bury the computer trader.

.7200 on the USDX is not a fundamentally defendable level.

.5200 to .6200 is the magnet.

By the way, $887.50 on gold wasn’t too bad either.

Dollar Rally Crumbles as Fed Ramps Up Printing Press
By Oliver Biggadike and Ye Xie

March 19 (Bloomberg) — The rally that pushed the dollar to the highest levels since 2006 is in danger of crumbling as the Federal Reserve starts buying Treasuries and ramps up its purchases of mortgage debt, adding to a flood of greenbacks.

“The implications of today’s Fed decision are unambiguous,” currency strategists at Citigroup Inc. wrote in a research report within a half hour of the Fed’s decision yesterday. The dollar “should weaken,” they said.

Fed policy makers said yesterday they plan to buy as much as $300 billion of U.S. government bonds and step up purchases of mortgage bonds, expanding the central bank’s balance sheet by as much as $1.15 trillion. The extra supply of dollars threatens to overwhelm investors just as the budget deficit swells.

The trade-weighted Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, tumbled 2.7 percent to 84.595, its biggest one-day drop since 1971. That pushed its decline to 5.6 percent since reaching 89.62 on March 4, the highest in almost four years.

It fell yesterday by the most in nine years versus the euro, to $1.3474, and traded at $1.3631 as of 12:01 p.m. in London. The dollar dropped today against Japan’s currency to a three-week low of 94.72 yen.

More…

Jim Sinclair’s Commentary

Hyperinflation is caused by inventing money out of thin air in significant size.

The following Times article defines yesterday’s announcement for Fed initiative action as "a tactic that amounts to creating vast new sums of money out of thin air.

Fed Plans to Inject Another $1 Trillion to Aid the Economy
By EDMUND L. ANDREWS
Published: March 18, 2009

WASHINGTON — The Federal Reserve sharply stepped up its efforts to bolster the economy on Wednesday, announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.

Having already reduced the key interest rate it controls nearly to zero, the central bank has increasingly turned to alternatives like buying securities as a way of getting more dollars into the economy, a tactic that amounts to creating vast new sums of money out of thin air. But the moves on Wednesday were its biggest yet, almost doubling all of the Fed’s measures in the last year.

The action makes the Fed a buyer of long-term government bonds rather than the short-term debt that it typically buys and sells to help control the money supply.

The idea was to encourage more economic activity by lowering interest rates, including those on home loans, and to help the financial system as it struggles under the crushing weight of bad loans and poor investments.

More…

Jim Sinclair’s Commentary

Looks like the Fed and Treasury want a 1930’s type rally.

Don’t feed the bears
Commentary: SEC should restore the uptick rule to calm financial markets
By Chuck Jaffe, MarketWatch
Last update: 10:40 p.m. EDT March 17, 2009

BOSTON (MarketWatch) — The government is stressing that it doesn’t want companies — especially financial firms — to collapse. Now it looks like Washington may finally offer some support by reinstating a rule that was foolishly removed after working for more than 65 years.

Forget for a moment that trading rules always sound like inside baseball because the logic behind both the rules and stock trading can be hard to follow. But if you follow the string out long enough, you will quickly figure out how one little rule change probably made your bad market ride even worse.

On Monday, a bipartisan bill was introduced in Congress that would require the Securities and Exchange Commission to reinstate the "uptick rule," which from 1938 until 2007 prevented traders from making a short sale unless the price of a stock in its most recent trade had been up from previous levels. It was the second Congressional push for the rule this year, and this time it appears the calls for action will be answered because, just last week, the SEC announced plans to revisit the rule — and to consider other short-selling regulations — on April 8.

Short shrift

A short sale is a bet against a stock, and typically involves borrowing shares, selling them, and waiting for the stock’s price to decline before buying the shares back on the open market. The borrower gets the stock back, and the short-seller keeps the difference between the higher selling price and the lower repurchase price.

The basic reason for the uptick rule is that requiring the market to have an upward move makes short sales more difficult, easing some of the downward pressure that builds when a market is in a free-fall.

Critics noted that traders and market sharpies never worried much about the uptick rule, knowing that plenty of stocks that are dropping will take a momentary pause for a quick upside trade. Moreover, short-sellers and their trading partners would sometimes create those upside trades just so they could follow suit with the short sale they really wanted to do.

More…

 

Jim Sinclair’s Commentary

The inviting conclusion to the panic tactics of the US financial leaders is that the entire mountain of OTC derivatives have rolled over as a domino impact of the Lehman collapse.

The question now is if the rating agencies will keep US debt AAA.

I would guess the rating agencies will remain a degraded, untrustworthy bunch and keep the rating.

What the Pros Say: US Is Now ‘Bankrupt’
19 Mar 2009 | 06:04 AM ET

Global stocks traded higher, as did the dollar against the euro, Thursday after the Federal Reserve’s surprise announcement it would buy $300 billion in US Treasurys in order to help the ailing economy.

But experts tell CNBC they have concerns over the Fed’s latest move and that the current national balance sheet is a disaster.

US is Already ‘Bankrupt’

Technically, the U.S. is already "bankrupt" because it has a debt that is almost four times the size of its economy, says Puru Saxena, CEO of Puru Saxena Wealth Management. He tells CNBC that the U.S. is at risk of hyperinflation.

Fed to Buy Treasurys is Not a Good Sign

Stephen Roach, chairman for Asia at Morgan Stanley does not view the Fed’s plan to buy $300 billion worth of long-dated government debt as a constructive sign for prospects going forward.

Fed’s Move Unlikely to Help Economy

The Fed pumping money into Treasurys won’t help, says Martin Weiss, president of Weiss Research. He also discusses what can be done to turn the US economy around.

The US Stuck in Zero-Rate Mode?

America is arrogant to deny their similarity to Japan’s economy, says Stephen Roach, chairman for Asia at Morgan Stanley. He tells CNBC that the US economy is in a "zero-interest rate" mode, like Japan.

Quantitative Easing & the Fed’s Balance Sheet

Thomas Lam, vice president and senior treasury economist at UOB, says the Fed’s latest moves such as to buy long-dated Treasurys will stretch its balance sheet and pump more liquidity into economy.

Tackling US Economy

Housing problems need to be tackled before the U.S. economy can pick up, according to Adam Carr, senior economist at ICAP.

More…

Jim Sinclair’s Commentary

You have to see the mindset of the "I deserve it all, and I deserve it NOW!"

The public is starting to get very angry at this "screw you" attitude.

That is taxpayer’s money they are squandering on a bunch of idiots that caused all the problems in the first place.

Four Fannie Mae execs to get big bonuses
updated 1:00 a.m. EDT, Thu March 19, 2009

NEW YORK (CNN) — Troubled mortgage giant Fannie Mae planned to pay four top executives retention bonuses ranging from $470,000 to $611,000, according to a February SEC filing.

Executive vice presidents Kenneth Bacon, David Hisey, Michael Williams and Thomas Lund will be receiving bonuses of close to half a million dollars each. Bacon supervises community development for the company, Hisey is its deputy chief financial officer, Williams is its COO and Lund oversees the single-family mortgage business.

By contrast, Fannie Mae CFO David Johnson received no bonus on top of his salary of $625,000, while CEO Herb Allison received no compensation or bonuses in 2008 or 2009.

A spokesman for Fannie Mae deferred comment on the bonuses to the Federal Housing Finance Agency.

More…

Jim Sinclair’s Commentary

This is our money all these bankster types are paying out.

Judge orders release of Merrill bonus recipient names

NEW YORK (CNN) — New York State Supreme Court Justice Bernard Fried ordered Bank of America on Wednesday to disclose information about nearly $3.6 billion in bonuses Merrill Lynch paid employees just before it was acquired by the bank.

The judge’s decision concluded weeks of back-and-forth between New York Attorney General Andrew Cuomo and Bank of America regarding the release of the information. Cuomo is leading an investigation into whether Bank of America and Merrill failed to properly disclose to shareholders details about the bonuses.

"Today’s decision in the Bank of America case is a victory for taxpayers," Cuomo said in a statement. He added, "Fried’s decision will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December. "

Bank of America spokesman Scott Silvestri said the bank would abide by the judge’s ruling.

"We will, of course, comply with the order of the court and turn over the information requested. We will continue to cooperate in the attorney general’s investigation," Silvestri said.

A petition to keep information including bonus details confidential was initially filed by Bank of America in New York state court on March 4. At the time, Bank of America spokesman Robert Stickler said, "We do this out of concern for the privacy of our employees and because we think disclosure would create a competitive disadvantage."

More…

Jim Sinclair’s Commentary

This is simple, predictable and unavoidable no matter how creative purchases via the Caribbean can be. This is the primary reason for the Fed committing to purchases US Treasuries, the value of which is a number certain to grow in size over time.

Quantitative Easing here is Easing of Credit Markets due to the externally falling sales by the US Treasury more than actual sales by non US entities.

Foreign debt purchases fall sharply in January
Offshore banking centers sell Treasurys; central banks sell agencies
By Laura Mandaro, MarketWatch
Last update: 3:59 p.m. EDT March 16, 2009

SAN FRANCISCO (MarketWatch) – A big jump in foreign sales of long-term U.S. securities raised concerns Monday that the U.S., in the midst of a massive debt issuance to fund its economic revival plans, may run into trouble getting other countries to finance its deficit.

Foreign purchases of long-term U.S. Treasurys, Fannie Mae (FNM) and Freddie Mac (FRE

) bonds, corporate debt and stocks — netted for acquisitions of foreign debt from U.S. residents — dropped to negative $43 billion in January from positive $34.7 billion in December, said the Treasury Department Monday.

January’s sales marked a record low, said currency strategist Michael Woolfolk, and the reasons for the plunge could spell bad news for the U.S. dollar.

"This was a truly awful report, throwing into question the funding of the U.S. current account deficit," said Woolfolk, senior currency strategist at the Bank of New York Mellon, in emailed comments.

Economists anticipate the U.S. current account gap, or the balance of trade with other countries in goods, services and investments, narrowed to a deficit of about $137.5 billion in the fourth quarter. The Commerce Department releases that report Wednesday.

Concerns that U.S. creditors could balk at buying more U.S. debt were thrown into relief last week after China, the biggest holder of U.S. government debt, said it was worried about the safety of its U.S. bonds.

More…

Posted at 3:11 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Here comes the index funds and the hedge funds on the return to the “anti-dollar” move.

You will recall they all began a mass exodus beginning in July of last year that took many months to complete as they had built a massive long position across the entire gamut of commodity markets. Those long positions were as much a play on the weaker dollar as they were on a move to hard assets or tangibles as investors were fearful of the spectre of runaway inflation with the Dollar the probing new life time lows. That all came to a screeching halt as risk aversion and the need for cash to meet both redemption requests and margin calls resulted in a wholesale repatriation of funds from emerging markets abroad and a huge reversal in the Yen carry trade. We all know the results of that by now having watched it unfolding before our eyes – the Dollar embarked on a sharp move higher which sent commodity prices crashing alongside of equities as every single commodity market was crushed with not even gold being spared for a short season before it took on its historic safe haven role.

What we are now seeing continue this morning after beginning yesterday, are these same exact players who bailed out en masse, now returning en masse to the commodity markets as the long term implications of the Fed’s announcement becomes crystallized in the minds of investors world wide. The death knell of the US Dollar was just rung by Bernanke and company – we wonder how many heard it. Their action guarantees that the US will experience at some point in the not-too-distant future soaring inflation with the increasing likelihood of a hyperinflationary event following.  Think about what they announced and sweep aside all the high-sounding phrases and flowery rhetoric – they are going to create in excess of US $1 trillion out of thin air and buy US debt . This is the very monetization that we have been predicting they would be forced to resort to but which we were somehow hoping could be avoided for the sake of our nation’s future.

The cards have been dealt and the Fed has shown its hand – with the US embarking on a spending spree that makes the word “orgy” too mild to describe it, they have decided to devalue the currency and debauch our Dollar. They have no other choice now short of defaulting on our debt obligations. I am not sure how this is going to go down with the Chinese who have become our largest holder of US debt but I would strongly suspect that the Chinese will move with even greater speed in their reserve diversification process. I also suspect that the recent chatter coming from several quarters about the need to have a new global reserve currency or some combination thereof is going to garner more earnestness.  If the path which the Fed has chosen to follow were being implemented by any other nation on the face of this earth, the currency of that nation would immediately become practically worthless overnight. The only thing that allows the Fed to get away with this con is the fact that the Dollar is the global reserve currency. How do you think this is going to sit with other nations around the world? I am both sickened and angered by what these men, who were given a stewardship of our national currency, have done to us. As I have said many times before, I would much prefer to see a sound US economy, sound monetary policy, a balanced budget and responsible spending and taxing policies. Instead we have the worst of all possible worlds. All we can now do is to attempt to protect our wealth from the ravages that are going to be inflicted upon it. It is coming and nothing can avoid the consequences of this action.

Gold continued its torrid reversal off the lows made early in yesterday’s session. It experienced a bit of selling during the Asian session last evening as shorts were trying to push it back below the technically significant $930 level. They failed. It ran right on into the heavy resistance band on the charts near $960 this morning which is the level that is so critical for the shorts to defend if they are going to prevent an almost immediate return to the $1000 level. A breach of $960 that can hold that level for a couple of hours and many of the shorts will cover. That will also bring in fresh money from the momentum funds which have been sitting on the sidelines who are watching to see if that level will fall before their algorithms kick in.  See the chart for the technical levels…

Yesterday’s volume readings in gold were huge with over 269,000 contracts trading hands. I have not yet had time to check it against the data base but it certainly was one of the largest volumes I can recall seeing. Interesting enough open interest increased only a relatively minor amount in that wild session indicating that a whole lot of hurt was administered to both longs and shorts yesterday.

The HUI and the XAU both ran right up their recent swing highs and are attempting to gather enough momentum to break above those levels. For the HUI that means a breach of the 326- 328 level need to occur and hold to set up a solid trending move higher. The XAU looks a bit stronger technically than the HUI as it breached its former swing high near 135 but it needs to push above there a bit further for a bona fide breakout to occur. The move in both indices is occurring with several technical indicators on the daily charts not yet in the overbought zones so they are primed technically for further gains if the bulls can perform and the shorts will blink. Stay tuned on this one. The weekly charts show both indices right on the 50 week moving average so how they can finish out this week will tell us a great deal about what to expect moving forward. If they can best the 50 week average, then the next target is the 100 week moving average.

The Dollar – what can one say about it now except that the charts have turned decidedly ugly. A look at the weekly continuous chart shows what could very well be a long term double top at the 90 level on the USDX. It would take a weekly close below the 79 level to confirm that but all of the technical indicators are showing very strong bearish divergence signals on that same chart. There is support at the 40 week moving average near 81.60 and then again at the 50 week moving average near the 79.90 – 80.00 level. If those were to fail, it would not take a lot of time to see the dollar move back down towards it all time lows. Remember that there is or should I say was, a sizeable speculative long contingent in the Dollar according to the recent COT reports. Those folks rushing into the long side of the dollar for a safe haven play were blindsided by Bernanke and company. Nothing like a long side spec flush as the friends of gold can well attest to after having watched so many of them for the last 8 years.

I have been monitoring the action in the bond market this morning as I was particularly interested in seeing whether we would get much more in the way of upside action after that mind-boggling, stunning move yesterday. The Fed has obviously moved to put at least a short term bottom in the bond market – technically it cannot be argued otherwise, but what I am personally watching is to see just how high bond traders can take this thing especially with outside support that in the past was forthcoming from foreign Central Banks, particularly the Chinese, Japanese and the OPEC block of nations. Keep in mind that with the slowdown in global trade and the drop off in Chinese and Japanese exports, not to mention the big drop off in OPEC oil revenues, there is a lot less in the way of Dollars that need to be recycled into US Treasuries from those sources. That is a very large chunk of buying that has evaporated from the bond markets at the same moment in time that the supply is being ramped up exponentially. That is not going to be lost on traders although many shorts are no doubt a bit hesitant to step back in front of those things after the shellacking they received yesterday. The question traders will be asking is whether the announced Fed buys will be sufficient to offset the drop off in buying from abroad. We will see soon enough.

Equities gave up a good portion of their gains from yesterday (at least they have as I am writing this). Perhaps the euphoria has run smack dab into reality.

I might mention here that the Fed’s quantitative easing looks to have been the spark that took crude oil up and over the $50 level. That is no mean feat especially considering the fact that we were swimming in a sea of the stuff for the immediate term. You might recall that crude oil became a proxy for the ills of the US Dollar back during the commodity boom of recent memory with many investment funds pouring money into the black gold as an inflation hedge. At the time many commercials were bewailing the fact that the specs were driving prices beyond the boundaries of fundamental value but they were powerless to halt the rise. With the global economy as sick as it currently is, the conditions are obviously different than before the bubble burst but the fact remains that many investors have come to view crude oil as a play on inflation. That must be respected. We would all do well to also recall Monty’s recent missive on crude oil and his astute observations on the long term outlook for the gooey stuff (how is that for  proper, sophisticated nomenclature?).

Let’s keep watch also on the commodity currencies, the Aussie, Kiwi and Loonie to see how they fare. All are up today against the greenback. If the focus of the markets shifts to inflation fears away from deflation fears, those currencies should benefit. I am wondering what the Swiss monetary authorities must now be thinking after watching every single bit of the fruits of last week’s foray into the Forex markets to knock the props out from under the Swissie go up in smoke. The Swissie not only took back all of its losses; it even added more gains just for spite. I am curious whether they will come back in and try again.  I would also venture to say that the Swiss monetary authorities must be FUMING at the US Fed right about now. With the Dems in Congress poking them in the eye over Swiss bank secrecy and picking on UBS, it is not too much of a stretch of the imagination to state that US/Swiss relations are probably at an all time low. The only question I have now is who is going to be next in this game of musical chairs of currency devaluation that is taking place.

One last thing – the collapse in the Dollar with the subsequent strong move higher in the competing major currencies has pushed the gold price down in those terms. We will want

to see how gold responds to this in the days ahead as the ideal environment for the yellow metal is a simultaneous move higher in terms of all major currencies, and not just in US Dollar terms. I would prefer to see Euro-priced gold keep its footing near the €700 level and British Pound priced gold hovering near the 650 level and then moving higher. That would indicate that the ferocious gold buying that had been coming out of Europe and Britain a few weeks ago was not just a flash in pan but can be sustained.

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

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Posted at 7:20 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

FASB 157: Be careful what you wish for.

Removing the mark to market rules may give a short term rally to bank stocks, but it could easily turn out to be a disaster for banking, for the US taxpayer and the US economy.

For those who remember the Japanese banking crisis and ensuing malaise, Japan is moving toward 2 decades of deflation and low or no economic growth.

In Japan, failure to fairly value bank assets kept banks from writing off bad assets and thus kept them from performing their first function, to make loans and act as a clearing agent for economic activity. Watch out and be very careful what you wish for… the same thing could and possibly will happen in any country that removes mark to market requirements.

This is a key issue and one which Jim Sinclair knows a great deal. Listen carefully to his wise advice on this subject.

In other news, Competitive Devaluations of currencies are underway.

Time line… Britain(a few weeks ago) introduces Quantitative Easing. Result: the Pound falls decisively.

Then we saw Swiss intervention to lower the Swiss Franc… then US Quantitative Easing (QE) today.

This means although major nations such as these talk free trade and no tariffs or only limited tariffs they are actually fighting a trade war with competitive devaluations of their currencies.

The US is the latest to announce the obvious. They are using QE to devalue the dollar and to serve other purposes as well. This can only be very positive for gold and negative for the US dollar long term.

Jim Sinclair has called for this repeatedly and he is once again correct.

Some of you did not listen to him and bought gold or gold shares on margin. Some people further aggravated the problem by buying the rallies and selling the declines. You were in effect doing the opposite of what Jim instructed you to do.

In my opinion, the first characteristic of successful investors and traders is that they take responsibility for their own actions.

Respectfully yours,

Monty Guild
www.GuildInvestment.com