Posted at 8:14 PM (CST) by & filed under In The News.

Dear CIGAs,

I have received advice from Computershare advising that the Direct Registration System (DRS) is now available to all registered shareholders Computershare manages. This includes Canadian residents.

Jim Sinclair’s Commentary

These guys will never stop writing these garbage credit default derivatives. They even have an index as if the underlying paper was functional.

Tracking big increases in counterparty credit risk
Previous peak came after September collapse of Lehman and AIG, CDR says
By Alistair Barr, MarketWatch
Last update: 2:00 p.m. EDT March 9, 2009

SAN FRANCISCO (MarketWatch) — Counterparty credit risk in the derivatives market surged to a new record Monday, reflecting concern that the U.S. financial system remains fragile in the midst of a long recession.

The CDR Counterparty Risk Index, which tracks credit default swaps on leading banks and brokerage firms, jumped more than 13 basis points to a record 300.9 during midday action.

The index, compiled by New York-based Credit Derivatives Research, has risen more than 53 basis points since last week. A basis point is one-hundredth of a percentage point.

Credit default swaps are a common type of derivative contract that, as the name implies, pay out in the event of default. When prices for credit default swaps rise, that suggests investors are willing to pay more to protect against defaults.

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Jim Sinclair’s Commentary

Statements from positioned people in China are not like the East, made off hand and without truthful purpose.

You know we have discussed this point on more than one occasion.

Above USDX .8900 there is no basis to the argument that increasing the supply of dollars by back hand means is self destructive to the Chinese Central Bank.

China can buy more gold, oil with forex -official
2009-03-09 05:52 (UTC)

BEIJING, March 9 (Reuters) – China should use part of its nearly $2 trillion in foreign exchange reserves to buy more gold, oil, uranium and other strategic commodities, the head of China’s energy bureau said in comments published on Monday.

The comments made by Zhang Guobao, head of the National Energy Administration, marked the latest call out of Beijing that the government should diversify the world’s largest stockpile of forex reserves.

Zhang’s proposals were published by the Beijing-based China Reform Daily, a newspaper run by China’s powerful economic planning agency, the National Development and Reform Commission.

Zhang said the State Administration of Foreign Exchange could directly buy more gold and other strategic materials.

He added that agencies such as China’s National Oil Reserves Centre should be allowed to issue foreign exchange bonds to obtain money from China’s forex reserves for overseas purchases.

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Jim Sinclair’s Commentary

Pakistan according to its neighbour.

Ex-Indian general: Pakistan nuclear weapons prevent India from retaliatory attacks twice
www.chinaview.cn 2009-03-09 17:45:49

NEW DELHI, March 9 (Xinhua) — Pakistan’s possession of nuclear weapons prevented India from attacking it twice, one after the Mumbai attacks last November and the 2001 terrorist attack on Indian Parliament, the semi-official Press Trust of India quoted a former Indian Army general as saying on Monday.

Former Indian Army chief Gen. Shankar Roychowdhury told a seminar in New Delhi that Pakistan’s nuclear weapons deterred India from attacking that country after the Mumbai strikes, according to the report.

He also told the seminar, entitled "Nuclear Risk Reduction and Conflict Resolve" that it was due to Pakistan’s possession of nuclear weapons that India stopped short of a military retaliation following the attack on Parliament in 2001, said the report.

The 2001 Indian Parliament attack was a high-profile attack by militants belonging to the Lashkar-e-Taiba and Jaish-e-Mohammed groups against the building housing the Parliament of India in New Delhi.

The attack led to the death of a dozen people, including five terrorists, six Indian policemen and one civilian. It also led to tensions between India and Pakistan and the 2001-2002 India-Pakistan standoff.

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Jim Sinclair’s Commentary

I am not sure Santelli made any mistakes when he went Ballistic on CNBC, but overlooking that small part of the video the rest is totally worth the few minutes it will take you to watch. Strange, none of my Bloomberg interviews were shown.

 

 

Jim Sinclair’s Commentary

Here comes another $500 billion! Remember the Lady head of the FDIC only requested $100 billion. What does she know?

FDIC Bill Dodges a New TARP Fight
By DAMIAN PALETTA

WASHINGTON — A three-page bill designed to bolster the Federal Deposit Insurance Corp. could let the Obama administration sidestep a huge political problem: securing more financial firepower without opening a debate over the Troubled Asset Relief Program.

The legislation, introduced late Thursday by Senate Banking Committee Chairman Christopher Dodd, would temporarily allow the FDIC to borrow $500 billion to replenish the fund it uses to guarantee bank deposits, if the Federal Reserve and Treasury Department concur. Those funds would be distinct from the contentious $700 billion financial-sector bailout, which lawmakers are loathe to expand.

The FDIC can presently only borrow $30 billion from Treasury. The bill would permanently raise that level to $100 billion, which the FDIC could tap without prior approval from the Fed and Treasury.

Mr. Dodd, a Connecticut Democrat, already has four Republican co-sponsors for the bill and it could quickly gain momentum, in part because of strong backing by community bankers.

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Jim Sinclair’s Commentary

You know the maniacs in Wall Street are still writing this crap.

Scholes Advises ‘Blow Up’ Over-the-Counter Contracts
By Christine Harper

March 6 (Bloomberg) — Myron Scholes, the Nobel prize- winning economist who helped invent a model for pricing options, said regulators need to “blow up or burn” over-the-counter derivative trading markets to help solve the financial crisis.

The markets have stopped functioning and are failing to provide pricing signals, Scholes, 67, said today at a panel discussion at New York University’s Stern School of Business. Participants need a way to exit transactions and get a “fresh start,” he said.

The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over,” he said, referring to credit-default swaps and other complex securities that are traded off exchanges. “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.”

Scholes also recommended moving the trading of credit- default swaps, asset-backed securities and mortgage-backed securities to exchanges to allow for “a correct repricing” of the assets. The securities are currently traded between banks and investors, without any price disclosure on exchanges.

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Jim Sinclair’s Commentary

Here comes a major confidence shaker.

Pension system is cracking
New York needs to establish a more affordable benefits tier for its new public employees
March 8, 2009

In these days of imploding institutions, public pensions may well be next. They are outstripping private benefits at such a pace that governments cannot sustain them. New York should act now to create a slimmed-down category of benefits for new hires.

A few New York leaders who get the problem – Gov. David A. Paterson, Mayor Michael Bloomberg – are raising the need for reform. So far, the unions aren’t persuaded. But public pressure is building, from overwhelmed taxpayers who’ve witnessed their own pensions diminish or disappear, and from hard-pressed local governments and schools, which will be required to make dramatically higher payments into the funds.

Nassau County, which is struggling with a $130 million deficit, will see its $97 million annual contribution for county workers grow $40 million by 2011, predicts County Comptroller Howard Weitzman. Extrapolate that to Suffolk County and the rest of the schools, villages and towns on Long Island, and it’s a $320-million budget-buster.

At one time, pensions were considered essential to attract people into government service. But studies today show that, with benefits, public employees now make 42 percent more than private-sector workers in comparable jobs.

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Jim Sinclair’s Commentary

In the 70s it was not the gold gang that made the big dollars. It will not be this time either.

They, as a community, seek reasons why they are wrong and rarely why they are right.

Believe me, I know.

Hedge funds turn to gold
By Henny Sender in New York and Javier Blas in London
Published: March 8 2009 18:13 | Last updated: March 8 2009 18:13

Hedge fund investors who made money last year by betting against investment banks are now buying gold as a way of betting against central banks.

The gold bulls include David Einhorn, founder of hedge fund Greenlight Capital, who last year came under the spotlight for his short selling of shares in Lehman Brothers, after arguing that the bank did not have enough capital to offset its exposure to falling property prices. Other funds looking at gold include Eton Park and TPG-Axon, investors said.

Their belief in bullion is being expressed even as gold prices have retreated from last month’s break above the $1,000 an ounce level. Spot gold in London closed last Friday at $939.10, after falling last week to $900.95 an ounce.

Investors such as Mr Einhorn are turning to gold because they are worried about the response of the US Federal Reserve and other central banks to the global economic crisis. A bet on gold is essentially a bet against all paper currencies.

“The size of the Fed’s balance sheet is exploding and the currency is being debased. Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed,” Mr Einhorn wrote in a recent letter to his investors. “Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency, while inflation speaks for itself.”

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Jim Sinclair’s Commentary

Are we not all asking the same question?

Minnesota Bank Asks Why It Pays for Wall Street Greed
By Linda Shen

March 6 (Bloomberg) — TCF Financial Corp., the Wayzata, Minnesota-based bank that never made a subprime loan and hasn’t lost money since 1995, is asking why it should help clean up the mess made by Wall Street.

“I’m kind of bitter,” said William Cooper, chief executive officer of the 448-branch bank, adding that over the years TCF has invested about $1 billion in the Federal Deposit Insurance Corp.’s fund that guarantees bank deposits. “We pay for the excesses of our competitor over and over again.”

TCF is among more than 8,300 banks and lenders insured by the FDIC facing increased fees and a one-time “emergency” charge designed to raise $27 billion this year for the agency’s depleted coffers. Community banks may take a 10 percent to 20 percent hit to 2009 earnings even if the FDIC halves that charge, said Camden Fine, president of the Independent Community Bankers of America.

The ICBA and its 5,000 mostly locally owned member banks are rebelling against the costs, as well as curbs on pay and business practices imposed on recipients of U.S. capital after public outrage over bonuses and perks. Community banks rely more on deposit funding, so they suffer a “much heavier burden” as a result of deposit insurance proportionate to size than peers such as New York-based Citigroup Inc. and Wells Fargo & Co., with its headquarters in San Francisco, Fine said.

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Jim Sinclair’s Commentary

Hyperinflation will not and cannot be avoided. Protect yourself or suffer the loss of everything you have worked for!

Let sleeping shadow banking systems lie
By: James Saft

Rather than vainly trying to refloat the shadow banking system, the U.S. would be better off grappling with the inevitable ultimate solution — debt destruction and inflation.

The common denominator of policies like the Term Asset-Backed Loan Facility (TALF) that was detailed on Tuesday, is that they try to solve fundamental problems with indebtedness by attempting to float asset prices high enough that they are back in proportion with the debt.

Even more, they use the same structures that worked out so poorly — highly levered hedge fund like vehicles and securitisation — but this time substitute government funding and leaves the taxpayer as main bag-holder if the deals go bad.

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Jim Sinclair’s Commentary

I told you for a long time that for every loser there is a winner.

Therefore it is now reasonable to assume the absolute majority of the $9.5 trillion dollar bailout has been paid out to the winners.

Therefore tax and debt dollars have funded the yet unnamed winners.

Top U.S., European Banks Got $50 Billion in AIG Aid

The beneficiaries of the government’s bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Among those institutions are Goldman Sachs Group Inc. and Germany’s Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter

Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Societe Generale SA.

More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.

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Jim Sinclair’s Commentary

Credit default derivatives and the Credit Default Index quoted daily on Financial TV are as described in this Guardian article, "Acts of Satan." They are. Then who are the agents of Satan?

"AIG had a sought-after selling point: a triple-A credit rating. For a fee, it would stand behind lesser institutions’ credit obligations. By lending its gilt-edged rating, it could give clients’ investments a higher value and make them easier to trade. Headquartered in Connecticut but largely run from London, the division transacted billions in credit default swaps (CDS) – instruments trading financial risk – which have been dubbed "acts of Satan" by a leading US credit analyst, Christopher Whalen.

Hedge fund hotel yields up secrets
Wheeler-dealing in UK led to US insurer’s record loss
‘Acts of Satan’ ripped black hole in financial system
Andrew Clark
Saturday March 7 2009
The Guardian

It is Mayfair’s house of financial horrors. Owned by the Abu Dhabi royal family, One Curzon Street is among London’s flashiest office blocks. But behind the elegant curves, polished white stone, sweeping windows and panoramic atrium lie billions of dollars in losses that have threatened the global financial system.

Popular with financial enterprises, the building is known as a hedge fund hotel. Its tenants include GLG Partners, one of the City’s star funds, which has fallen on hard times, and the struggling Swiss bank UBS, but on the fifth floor can be found the most notorious of the property’s troubled tenants – a formerly obscure financial products division of the sprawling American International Group (AIG).

It was in this London office of AIG that big-brained financial whiz-kids created a casino offshoot of the once-mighty insurer that spectacularly wrecked the company, racking up billions of dollars in losses on arcane derivatives, swaps and contracts. Fatally undermined by the unit’s wheeler-dealing culture, AIG crashed to the US’s biggest corporate loss of $61.7bn (£43bn) for the final quarter of 2008 and is limping along the brink of oblivion, saved from bankruptcy by an eye-watering $150bn of emergency aid from US taxpayers.

The Federal Reserve chairman, Ben Bernanke, wasted few words in condemning the division’s antics, telling Congress this week: "This was a hedge fund, basically, that was attached to a large and stable insurance company."

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Jim Sinclair’s Commentary

It is about time, wouldn’t you say?

Militant threat from Pakistan alarms U.S.
Officials see indication of presence within United States
By Josh Meyer | Washington Bureau
March 8, 2009

WASHINGTON — The Mumbai terrorist siege and other recent plots and attacks have stoked alarm among U.S. officials that the next strike on U.S. soil is less likely to come from traditional Al Qaeda operatives than from virtually unidentifiable Pakistani militants who enjoy easy access to the United States and already have a significant presence here.

But U.S. efforts to identify and thwart the growing threat posed by the Pakistani extremists—both inside the United States and against American interests overseas—are being undermined by the government of Pakistan, which has a long history of close ties to the militant organizations such as Lashkar-e-Taiba that are radicalizing, training and funding extremists, according to current and former U.S. and Western counterterrorism officials.

Even before the gunfire in Mumbai stopped last November, the FBI and other U.S. agencies went on red alert, searching for any evidence of plotters in the United States.

Although they did not find any direct connections, authorities did find troubling evidence of the group’s continued presence on U.S. soil, including fundraising and support cells that are well-hidden within the large numbers of the Pakistani diaspora.

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Jim Sinclair’s Commentary

Somebody Will.

Will US attack Pakistan to secure nuclear weapons? 
Speculation is rife that United States of America, increasingly worried by the expansion of fundamentalist and Jehadi forces in Pakistan, could attack that country to secure its nuclear arsenal. Such a move could suck many nations into the quagmire..
CJ: Akbar Majid ,

WILL THE attack on the Sri Lankan cricket team in the heart of Pakistan prove to be the last straw on the camel’s back? Has the belligerence shown by the Taliban and Lashkar-e-Taiba convinced the world that no business is possible with the Jehadis?

The answer to these questions cannot be a straight yes or no. However, if the grapevine is to be believed then the next few months could see a paradigm shift in the War Against Terror in so much so that there could be a possibility of a war staring South Asia.

Speculation is rife that United States of America, increasingly worried by the expansion of fundamentalist and Jehadi forces in Pakistan, could attack that country to secure its nuclear arsenal. US fears that terror groups, either forcibly or with the connivance of security official can manage to obtain a nuclear weapon, a situation which could be nothing less than catastrophe.

India, which is holding the elections next month could also be seriously affected, if the US seriously pursues the aggressive agenda and decides to divest Pakistan of nuclear weapons. Most probably the elections scheduled in April will have to be postponed in case of such an attack and an emergency like situation could be imposed here.

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Jim Sinclair’s Commentary

Libor has been green on the screens for the past three weeks!

New Fears as Credit Markets Tighten Up
By LIZ RAPPAPORT and SERENA NG

The credit markets are seizing up again amid new anxieties about the global financial system.

The fear and uncertainty that sent stocks to 12-year lows is now roiling the market for corporate bonds and loans, which have given back much of the gains they chalked up earlier in the year.

Short-term credit markets are still performing better than they did last year thanks to government programs to buy commercial paper and guarantee short-term debt. But some risk premiums are widening. The spread on junk bonds, for example, has climbed to 19 percentage points over that of comparable Treasury bonds, up from 16 percentage points in February. And Libor, the London interbank offered r ate, a common benchmark interest rate, has crept up over the past weeks, from 1.1% in mid-January to 1.3% on Friday, reflecting banks’ concerns about being paid back for even short-term loans. It is still well below its peak of 4.8% last October.

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Jim Sinclair’s Commentary

Be careful of how you protect yourself. Distance yourself from financial agents in everything, including gold.

More gold fraud likely as economy swoons: Agents
3/8/2009 8:0:2
Source ::: REUTERS

NEW YORK: Investigators expect to uncover more fraud involving gold in a recession that has already exposed several Ponzi schemes and other crimes, law enforcement officials with the US Postal Inspection Service said on Thursday. Agents with the federal agency have been working with the FBI, US prosecutors and other investigators on a series of scams from Ponzi schemes in financial investments and oil futures to gold coins all over the United States. “It’s the same scam but they are just selling different products,” Ronald Verrochio, Postal Inspector in Charge of the New York division of the U.S. Postal Inspection Service (USPIS), said in an interview. He spoke to Reuters at a seminar marking national consumer protection week to warn the public about being bilked by seemingly attractive investments.

“A lot of these scammers develop their scams following current economic trends and we’re bracing to see gold being used as a carrot,” USPIS spokesman Al Weissmann told the seminar, which was attended by government agents, prosecutors, attorneys and victims of fraud.

The price of gold hit an 11-month high above $1,000 an ounce on February 20, just below a record of $1,030.80 reached a year ago as investors sought a safe haven from financial market turmoil. Spot gold was trading at $927.90 on Thursday. New York division agents have helped uncover various scams involving selling unwitting investors gold coins, which turn out to be a fraction of their purported worth. Postal inspectors investigate mail fraud, enforcing more than 200 US federal laws that pertain to the mail. They investigate corporate and securities fraud cases when mail is suspected of being used to commit a crime. “It’s a very old adage but if it sounds too good to be true, it probably is,” said Verrochio, whose agency has been known as the “silent service” for its relatively low profile.

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Posted at 3:32 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Here is the problem. Paying off the winner by bailouts is only creating a more difficult situation.

Let us keep in mind that Buffett has plenty of these on his book.

Jim Sinclair’s Commentary
August 22, 2007

Behind the curtain of silence the subprime loan problem, better described as a global meltdown of credit and default derivatives, continues. The reason for this condition is an attempt to value that for which there is no value. It is spreading globally as you have seen.

Keep in mind that over the counter derivatives generally have the following characteristics.

  1. Without regulation.
  2. Without listing on public exchanges.
  3. Without standards.
  4. Therefore not in the least bit transparent.
  5. Therefore without an open market of the bid/ask type.
  6. Dealt in by private treaty negotiations.
  7. Without a clearinghouse.
  8. Unfunded without financial guarantee of any kind.
  9. Functioning as contracts of specific performance.
  10. Financial character or ability to perform is totally dependent on the balance sheet of the loser in the arrangement.
  11. Evaluated by computer assumptions made by geek, non market experienced mathematicians who assume religiously that all markets return to their normal relationships regardless of disruptions.
  12. Now in the credit and default category alone considered by accepted authorities as totalling hundreds of trillions in notional value.
  13. Notional value becomes real value when the agreement is forced to find a real market for ending the obligation which is how one says sell it.

Posted at 3:22 PM (CST) by & filed under General Editorial.

Dear Jim,

Why is gold off today?

CIGA Arlen

Dear Arlen,

Because Warren Buffett always talks his book.

You can be sure he shorted gold and general equities prior to his commentary that "The US economy fell of the cliff."

My guess is he is long US Treasuries, short gold and the equities market.

He factored his deflationary comment into gold.

The fact that is ignored is once the bailout binge gates are open, there will always be more bailouts.

These bailouts so far, even if there are not any more, have guaranteed hyperinflation.

It almost seems that our economic leaders are executing a plan to kill whatever is left of capitalism.

The gold market manipulators on the COMEX take the lead and do their lower gold thing based on Buffett’s wrong interpretation of what deflation means when you pour trillions into the system. This is then widely disseminated by the media.

There is no valid argument that bailout money went into a lost black hole because the tax dollars are paying unnamed winners.

Gold is going to $1224, $1650 and then on to Alf’s numbers.

Respectfully yours,
Jim

Posted at 2:57 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

I wonder how much of our own tax money, also known as TARP, TALF, CRAP or whatever, has found its way into the coffers of the government’s friends at the Comex and is being used to trash the price of paper gold. I would think that if someone threw $20 billion here or $40 billion there my way that I could do some strange things to whatever markets I wished. Needless to say, the mugging that regular occurs when trading rolls into New York continues. Maybe we should set up an algorithm that computes how far down they can take gold based on a certain number of points up on the DOW… let’s see – 80 DOW points up means $20 down in gold…. 100 DOW points up translates to what, $40 down on gold, etc.?

I read an article last evening about some of the big hedge funds moving into gold. Too bad that they still have not figured out that they could break the death grip of the bullion banks by standing for delivery and removing the warehouse gold. Those guys will simply never learn. I suppose we should not expect anything different. After all, they are products of the American public education system and the inherent bias against the yellow metal among the elites in the West. “Students – repeat after me – Paper – GOOD; GOLD –BAD; now write that 1,000 times and turn it in at the end of class today”.

It is evident that the Chinese will have to do the heavy lifting for these mental lightweights. News out of China that the head of the National Administration has advised diversification of China’s massive foreign reserves into gold, oil, and other strategic commodities is further confirmation of the thinking that now prevails in the upper echelons of China’s political powers. They know full well what is going on and are intelligent enough to secure the real deal, not paper scraps like the hedge funds seem to love lining their bird cages with. Any weakness in gold will absolutely delight the Chinese who are looking at ways to reduce their glut of Dollar holdings but do so in a way that does not throw the forex markets into a tizzy.

It should be noted that the Chinese are not momentum traders – they trade the way the professionals in this industry formerly traded – they buy into weakness when the long term trend favors a market. Hedgies will end up selling into the hands of the Chinese.

Technically gold ran into selling resistance at the 20 day moving average on Friday and at the now downtrending 10 day moving average in today’s session. The bearish crossover of the 10 day below the 20 day is a sell signal for the short term oriented. Downside support now lies back at the 40 day and 50 day moving averages coming in near $910 and $900 respectively. If we can hold above those levels, the most likely outcome then becomes a range trade and a period of consolidation since it is evident that the official sector price capping is too strong right now for the bulls to push it out of the way. A downside breach of the 50 day moving average puts $890-$880 into play. Prices will have to break above $960 to resume the upward trend.

We are back to the 11:00 AM CDT bashing of gold which occurs when the physical market closes in London. That is when the paper sellers double down on their orders and go gunning for stops. I have seen this occur so many times since 2002, that it might as well be part of the official Comex rules.

Traders are now myopically focused on the reported holdings in GLD to the point of obsession. If they do not see those rise, they sell… Now that’s what I call a strategic, forward-thinking, long term oriented, macroeconomic approach to trading/investing. That’s what we get for dispensing so much Ritalin to children who could not learn to sit still and pay attention. They apparently never learn to do so even when they become adults and become traders.

There still appears to me to be a fair amount of long crude/short gold spreading taking place. The thinking behind that play is that the worst of the economic carnage is over, commodity markets look to be perhaps bottoming, stocks are showing insufficient selling pressure to break into new lows and that therefore gold and other safe havens are no longer needed (hence the weakness in the bonds). You then buy crude oil on the expected economy recovery and get rid of gold.

Readers who have not yet purchased any physical gold but who have all their “insurance” money in the paper ETF or even only in the mining shares, take advantage of these bouts of price weakness to institute scale down buying programs. There is no substitute for owning the actual metal especially with so many well-founded doubts about that ETF. Remember – this is for buyers of the real metal – traders have to deal with what the market gives them and utilize sound and disciplined money management practices.

The Dollar moved higher early in the session but then faded as the equity markets stabilized. The one currency that did not recover off of its lows to any extent was the Japanese Yen. The Euro in particular came well off its overnight levels and actually moved into positive territory at one point. Gold now seems to be moving inversely to the Euro – more evidence of the idea that when risk is back in vogue, gold goes out of vogue. Remember when gold and the Euro were trading almost in lockstep? Not any more… How long that will last is unclear. The one point in all of this yo-yo trading is that we are nowhere near seeing a long term bottom in equities. There are way, way too many people looking to try to pick a bottom in the stock market. That sort of mentality is not synonymous with bear market bottoms. Bear market bottoms occur when NO ONE wants anything to do with stocks and that means NO ONE. The way these guys plow back into equities and unload gold at the faintest whiff of a bottom in equities tells me that we have much lower to go into the DOW and the other equity indices. Short term trading bottoms – those are one thing – long term solid bottoms heralding viable economic recoveries – no way. Still too much optimism out there… just listen to the constant drum beat coming from CNBC among so many of their anchors and guests… “Well John – are we ready to bottom yet” “So tell me Jake – what you buying?” “Okay Sandy – we’re looking good today – just how high can we take this thing?”  Does any of that sort of thing sound like capitulation or total despair? Are you kidding – there is too much hope for a bottom.

There really is not much more to say about today….the longs in gold simply have no conviction and are too easily pummeled. They will need to show some mettle soon or risk handing the bears the initiative. A move that can hold the lows of  that former congestion zone will show that they still have a bit of meddle in them.

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 9:00 AM (CST) by & filed under Jim's Mailbox.

Jim,

"And judging by the state of preparations, the forthcoming Group of 20 summit is going to be a disaster. " writes Wolfgang Münchau.

It seems he doesn´t have much hope on the meeting of last resort.

Regards,
CIGA Christopher

An L of a recession – reform is the way out
By Wolfgang Münchau
Published: March 8 2009 18:15 | Last updated: March 8 2009 18:15

The US is dragging its feet over the financial sector. The European Union is doing the same, as well as failing to adopt policies that could shield it from an increasingly probable speculative attack. And judging by the state of preparations, the forthcoming Group of 20 summit is going to be a disaster.

So it looks like it is going to be an L – not a V or a U. I mean an L-shaped recession, one that starts with a steep decline, followed by very low growth for many years. In a V-type recession, the recovery is instant. In a U-type, it comes eventually. My guess is that we are currently somewhere in the middle of the vertical bit of the L, but it is the horizontal bit that is the scariest. History never repeats itself exactly, but we know from economic history that financial crises are surprisingly similar. This looks like Japan all over. Without financial restructuring, the economy is not going to recover. And Japan was lucky. It was surrounded by a booming global economy.

The best way to fight such a disaster is to restructure the banking system and provide short-term economic stimulus through monetary and fiscal policy. Speaking at a recent Aspen Italia conference in Rome, Martin Feldstein, a former economic adviser to Ronald Reagan and president of the National Bureau of Economic Research, estimated that US consumer spending would fall by $500bn (€395m, £355bn) annually, and construction spending by $250bn. Against this combined annual $750bn shortfall, the current stimulus package is woefully inadequate. In other words: we are looking at an L.

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Jim,

It looks like the folks across the pond like to do their bank takeovers on the weekend too. This leaves only two non government controlled banks in Great Britain. This is being billed as part of the "credit crisis" but it really should be called a part of a "solvency crisis."

Greg Hunter

Taxpayer ‘set to control Lloyds’

The government is to take a majority stake in the recently-created Lloyds Banking Group, the BBC has learned.

Under an agreement with the Treasury, the government’s stake will increase from 43% to between 60% and 65%.

Some £260bn of toxic loans will be insured, and Lloyds will be required to lend more to households and companies.

The deal was agreed on Friday night, but there are some legal formalities to be concluded. It is understood it will be formally announced on Saturday.

Reports said Lloyds had been unhappy to give the government a majority stake.

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Jim Sinclair’s Commentary

Here is Economic Law that cannot be violated and if attempted, hyperinflation becomes unavoidable as it is today.

Dear Mr. Sinclair,

The excerpt below was written by Kenneth Rogoff, the then Economic Counsellor and Director of Research at the IMF, to Joseph Stiglitz who was Chief Economist at the World Bank between 1997 and 2000.  Mr. Rogoff appears to believe based on historical fact that monetary inflation always leads to price inflation and that this very premise generally makes things worse.  Obviously we already know this, but I felt it was interesting to note this exchange between an IMF and World Bank economists.

Best Regards,
CIGA Marc

"Governments typically come to the IMF for financial assistance when they are having trouble finding buyers for their debt and when the value of their money is falling. The Stiglitzian prescription is to raise the profile of fiscal deficits, that is, to issue more debt and to print more money. You seem to believe that if a distressed government issues more currency, its citizens will suddenly think it more valuable. You seem to believe that when investors are no longer willing to hold a government’s debt, all that needs to be done is to increase the supply and it will sell like hot cakes. We at the IMF—no, make that we on the Planet Earth—have considerable experience suggesting otherwise. We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably. Uncontrolled inflation strangles growth, hurting the entire populace but, especially the indigent. The laws of economics may be different in your part of the gamma quadrant, but around here we find that when an almost bankrupt government fails to credibly constrain the time profile of its fiscal deficits, things generally get worse instead of better."

Jim,

Wait until the Mideast gets wind of this.

Saying things are "Out of Control" is a gross understatement. "A Prelude to Total Chaos" is a more apt description.

Regards,
CIGA Wallace

Barack Obama ‘too tired’ to give proper welcome to Gordon Brown
Barack Obama’s offhand approach to Gordon Brown’s Washington visit last week came about because the president was facing exhaustion over America’s economic crisis and is unable to focus on foreign affairs, the Sunday Telegraph has been told.
By Tim Shipman in Washington
Last Updated: 10:03PM GMT 07 Mar 2009

Sources close to the White House say Mr Obama and his staff have been "overwhelmed" by the economic meltdown and have voiced concerns that the new president is not getting enough rest.British officials, meanwhile, admit that the White House and US State Department staff were utterly bemused by complaints that the Prime Minister should have been granted full-blown press conference and a formal dinner, as has been customary. They concede that Obama aides seemed unfamiliar with the expectations that surround a major visit by a British prime minister.

But Washington figures with access to Mr Obama’s inner circle explained the slight by saying that those high up in the administration have had little time to deal with international matters, let alone the diplomatic niceties of the special relationship.

Allies of Mr Obama say his weary appearance in the Oval Office with Mr Brown illustrates the strain he is now under, and the president’s surprise at the sheer volume of business that crosses his desk.

More…

Posted at 2:01 AM (CST) by & filed under General Editorial.

Dear CIGAs, At long last we are now offering Compendium Version 2 for sale. There will also be a very limited printing of Compendium Version 1 for sale as well. If you want a copy I suggest you order it while you have the chance. 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! Dan Duval JSMineset Editor