Posted at 2:52 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

There wasn’t much in the way of supportive factors for gold in today’s trading session as the Dollar was higher, crude oil was lower and bonds were lower. Equities were a tad weaker but after yesterday’s monster rally, the thinking in many quarters is that global stock markets have bottomed out. That removed the safe haven flow into both bonds and gold and allowed gold shorts to push the market down into stops as weak-handed longs were driven out. Those sell stops were the property of the trading funds who once again were handed their heads by the bullion banks.

Failure by the bulls to push up and through the $960 area was the signal by shorter-term oriented traders to book profits if they were long and to add to shorts if they were short. The onus is now on the bulls to hold price above the $900 level. If they can do that, gold has a very good chance at consolidating its recent gains. If not, back down to near the $880 level we go once again. We had an $80 run higher in gold when the news hit that the Fed was embarking on a course of printing money to buy US Treasury and Agency debt. You might recall that news resulted in the single largest daily price drop in the Dollar in many a year. Gold shorts saw their lives pass in front of their eyes with a multitude of them who had gone short below the $900 level squeezed out. The problem for the bulls is that long liquidation tied to the stock market rally, overcame buying coming from those who are looking longer term at the implications of the Fed’s quantitative easing policy and its devastating effect on the Dollar.

Make no mistake about it – the Fed believes that it is wise enough and nimble enough to nip the inevitable inflationary aspects of its policies when those begin to occur –and occur they will. Their immediate concern however is deflation and they are apparently determined to avert that at all costs, even if it means giving further impetus to the growing movement among many in the international community to abandon the Dollar as the global reserve currency. As a matter of fact, both China and Russia are becoming quite vociferous about this issue.

This shift in sentiment away from the Dollar is momentous. It is the rare breed that is able to spot turning points in history while they are indeed occurring. It is generally only after the fact that the majority are able to point a finger at a particular occurrence and state; “history was made here”. Nonetheless, we are getting a ringside seat and observing the events transpire that will alter our way of life here in the United States forever. As citizens, we have reaped the benefits of the Dollar as the reserve currency, benefits which include a life-style for the average American that is leaps and bounds beyond that of the overwhelming majority of the world’s population. It encompasses everything from the size of our cars and of our homes all the way to the size of our military and our ability to project power around the globe. The loss of the Dollar’s reserve currency status would threaten all of this. That is why many of us are so deeply concerned about what is occurring in Washington with regard to its spending orgy and to the ruinous policies that the Fed’s short-sighted members are currently wedded to. There is still time to save the Dollar but one wonders just who is left in our nation’s capital to lead the charge.

Back to gold – I am concerned by gold’s inability to hold near the 700 level when priced in Euros and the 650 level when priced in terms of the British Pound. We also have gold backing down from its highs in terms of most of the other major currencies as well. That has taken some of the luster off of the metal in spite of the fact that reported holdings in the gold ETF, GLD, are still holding near recent record levels.

From my current vantage point it seems that while gold lacks sufficient impetus to push it through $960 and on up then to $1,000, it also should be well supported on any price dips given the medium to longer term implications of the Fed’s quantitative easing program. That portends that a range trade is the more likely outcome to look for over the near term with the metal waiting for some sort of signal to break it out either way. The current boundaries of this range are $960 on the top side and $885 – $880 on the down side. Official sector price capping has once again appeared, this time at the $960 level, (they can read the price charts as well), while value buying is coming in near the $900 level and on down. I am not sure what it will take to dislodge the bullion banks from the upper level but once again I would emphasize that hedge funds have it in their power to seriously threaten their death grip on the gold market if they will simply stand for delivery and force the issue. Next week begins that delivery process for the April contract so let’s see if any of them wise up between now and then.

The mining shares are weaker today with the paper gold price weakness undercutting efforts of the bulls to push further through the swing highs made back in February of this year.

Bonds have been rocked pretty hard today with traders’ focus back on the big supply coming this week. I should note here that bonds have surrendered half of the gains made following last week’s announcement of the Fed’s intent to purchase up to $300 billion in Treasuries. Given the huge surge in treasury buying on the heels of that news, the low of that day near the 123^23 level, takes on extreme technical significance. If that level is tested and fails to hold, bonds are in danger of facing a rapid collapse, especially if the thinking that the worst of the financial news is now behind us gains additional credibility. A lot of money that sought a safe haven in the bond market will flow out of bonds and into equities if investors become convinced that the stock market has bottomed and the economy is poised for a rebound later this year. Please keep in mind that I am not advocating such a view – I am merely stating what will happen if a sufficient number of investors adopt this view and move their funds accordingly.

Equities are now sneaking back into positive territory as I put the finishing touches on these comments here just before the pit session close in gold. That is pulling the euro off its lows and serving to push the Dollar back off of its session highs. The yen is especially weak today as “risk” is coming back into vogue a bit and this is serving to bring sellers back into the Japanese currency. It is down against not only the US Dollar, but against all the other majors as well. The Euro-yen cross, while it has lost some of its predictive aspect for risk, still remains a decent indicator so we will be monitoring that for possible clues to both the bonds and to gold.

Crude oil is lower today but remains above the $50 level with the quantitative easing play by the Fed proving to have been the catalyst to allow the bulls to shove it out of the range trade and put in a more definitive bottom. The peak gasoline demand season lies just ahead. Even natural gas looks like it too has bottomed out.

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 11:57 PM (CST) by & filed under In The News.

Dear CIGAs,

The media is rejoicing today because China likes US treasuries, but tonight they do not want the US dollar. Now there is a contradiction in terms.

The West will never learn that the East will always speak obligingly when they cannot oblige. The Western Media insists, consistently, on making fools of themselves on everything Chinese.

What the Chinese and Russians are moving toward is using a basket of currencies in which the dollar is not a primary price element as a reserve index. That would be the final song for the USA dollar.

Now does that look like a major give up on all paper currencies? It makes me think of Gold as a currency! How about you?

What a mess Washington has on its hands because of one non-simple thing, OTC derivatives.

China calls for new reserve currency
By Jamil Anderlini in Beijing
Published: March 23 2009 12:16 | Last updated: March 24 2009 00:06

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

More…

 

Jim Sinclair’s Commentary

This is an interesting addition to today’s gala biz news events.

When it goes wrong today, it really goes wrong.

No, nothing today is going to increase participation in small business lending. In fact, trend wise it will not be long until there is no small business lending.

Top lenders pull plug on small biz loans
Several of the SBA’s most active lenders have sharply reduced their loan volume. Will new government programs get them back into the lending market?
By Emily Maltby, CNNMoney.com staff writer
Last Updated: March 23, 2009: 4:23 PM ET

NEW YORK (CNNMoney.com) — At a time when small business owners desperately need loans and credit lines to help them weather the recession, some of the industry’s most active lenders have bolted shut the doors to their vaults.

Temecula Valley Bancorp (TMCV) and Capital One Bank (COF, Fortune 500) have stopped taking applications for new loans through the Small Business Administration’s flagship 7(a) loan program, and Bank of America (BAC, Fortune 500) has slowed its lending volume to a trickle. Small Business Loan Source, a non-bank SBA lender that specialized in commercial real estate financing, is closed to new applications and leaving all new SBA lending activity to its parent company, First Bank in Clayton, Mo.

These four institutions were among the 30 largest SBA lenders in the 2008 fiscal year, accounting for 4% of the program’s loan volume, or $524 million of the $12.8 billion that was lent to nearly 70,000 businesses, according to data compiled by Coleman Publishing, which monitors small business lending trends.

Their sudden absence from the lending scene has left a hole that the banks continuing to participate in the program have not filled in. If current lending trends continue, only two of the top 30 lenders are projected to increase their loan volume this year, according to Bob Coleman, the head of Coleman Publishing.

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Posted at 9:30 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Is it a new well planned State initiative or a leap in the dark?

Do values hide in the details?

What kind of business model will the banks have on the day after Toxic Assets?

How many banks will there be in 2011?

As it appears now the Treasury will provide up to $150 billion with the Fed lending $850 billion of non-recourse (no payback if you lose) finance for the purchase of defunct OTC derivatives on the books of the largest Fed member banks and primary US Treasury dealers.

In plain language, either the Fed or private money will step into the shoes of the banks from which these binding contracts of the specific performance contracts called toxic assets are purchased.

The mode of purchase by private money (because the Fed finances the transaction) is best understood as buying a call.

The entire transaction then stands on a premise of recovery in the underlying values.

If the underlying values do not recover, which the odds sustain, then the Fed as the lender will also be the owner of these defunct and unlikely to recover so called toxic assets.

The plan succeeds in keeping the one trillion off the Fed balance sheet for now and shows it as a performing loan in good standing. In that transformation lies today’s alchemy.

The money, one trillion dollars, does enter the system once again accruing not to the bank’s ability to loan, but to the counter party of the OTC derivative.

The key to understanding all of this is the fact that the banksters did not invest their own money in the securitized investments, aka their product. They manufactured them leaving the banksters as party to the performance of the OTC derivative. That means the so called toxic assets that the banksters hold and can sell is exactly what I described to you. They are specific performance contractual obligations assembled as packages to the securitized instrument. These items cannot be evaluated even by Karnak the Great.

This initiative is a leap into the dark because it does not necessarily provide funds to the banks from which the toxic assets come. The reason for that is the taking on of a specific performance contract obligation in which the funds paid migrate to the counter party. The funds and the specific performance contract are incontrovertibly attached.

The slimmed down banks may be faced with a lack of business, as there is no guarantee even if they could lend that the economy would be at that level to make lending a profitable enterprise. The banks, pray to God, are out of the OTC derivative business.

What will the banks do to make money? What is their new business plan the day after toxic assets? The answer to that is merge until there will be less than 10 major banks by 2011.

This is the creation of another one trillion as a massive subsidy to the private but fat cat Wall Street banksters.

One result can be counted on – hyperinflation.

In gold I am sure that nothing will change as the average trader buys strength and then sells weakness, endlessly making fools of themselves. It will be this way to $1650 and beyond.

Geithner’s Plan "Extremely Dangerous," Economist Galbraith Says
From The Business Insider, March 23, 2009
Henry Blodget  |  March 23, 2009

Tim Geithner has finally revealed his plan to fix the banking system and economy.  Paul Krugman, James Galbraith, and others have already trashed it. 

Why?

In short, because the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit.

Why does Tim Geithner keep repackaging the same trash-asset-removal plan that he has been trying to get approved since last fall? 

In our opinion, because Tim Geithner formed his view of this crisis last fall, while sitting across the table from his constituents at the New York Fed: The CEOs of the big Wall Street firms.  He views the crisis the same way Wall Street does–as a temporary liquidity problem–and his plans to fix it are designed with the best interests of Wall Street in mind.

If Geithner’s plan to fix the banks would also fix the economy, this would be tolerable.  But no smart economist we know of thinks that it will.

We think Geithner is suffering from five fundamental misconceptions about what is wrong with the economy.  Here they are:

The trouble with the economy is that the banks aren’t lending. 
The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it.  As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem.  The banks, meanwhile, are lending.  They just aren’t lending as much as they used to.  Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed.

The banks aren’t lending because their balance sheets are loaded with "bad assets" that the market has temporarily mispriced. 
The reality: The banks aren’t lending (much) because they have decided to stop making loans to people and companies who can’t pay them back.  And because the banks are scared that future writedowns on their old loans will lead to future losses that will wipe out their equity.

Bad assets are "bad" because the market doesn’t understand how much they are really worth. 
The reality: The bad assets are bad because they are worth less than the banks say they are.  House prices have dropped by nearly 30% nationwide.  That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion).   The banks don’t want to take their share of those losses because doing so will wipe them out.  So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer.

Once we get the "bad assets" off bank balance sheets, the banks will start lending again. 
The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating. So they’ll sit there and say they are lending while waiting for the economy to bottom.

Once the banks start lending, the economy will recover. 
The reality: American consumers still have debt coming out of their ears, and they’ll be working it off for years.  House prices are still falling.  Retirement savings have been crushed.  Americans need to increase their savings rate from today’s 5% (a vast improvement from the 0% rate of two years ago) to the 10% long-term average.  Consumers don’t have room to take on more debt, even if the banks are willing to give it to them.

The two charts below from Ned Davis illustrate the real problem: An explosion of debt relative to GDP.  The first is Nonfinancial Debt To GDP.  The second is Total Debt To GDP.

In Geithner’s plan, this debt won’t disappear.  It will just be passed from banks to taxpayers, where it will sit until the government finally admits that a major portion of it will never be paid back.

More…

Posted at 9:28 PM (CST) by & filed under Jim's Mailbox.

Jim,

In the same day of the announcement to buy one trillion OTC derivatives from the banks, they are already asking for more than one trillion.

CIGA BJS

Dear CIGA BJS

See the Krugman comments earlier. The problem globally is over one quadrillion. Sure they need more money.

Regards,

Jim

Toxic asset mountain looms over Treasury plan
PPIP may need to at least double in size to tackle troubled loans, securities
By Alistair Barr, MarketWatch
Last update: 5:29 p.m. EDT March 23, 2009

SAN FRANCISCO (MarketWatch) — The Treasury Department’s latest plan to stabilize the financial system targets a formidable mountain of troubled loans and mortgage securities from the real estate boom earlier this decade. Some experts said Monday that more money may be needed to complete the arduous climb.

Between $75 billion and $100 billion of Treasury money will be funneled into the so-called Public-Private Investment Program, or PPIP. Private investors will buy troubled assets alongside the Treasury and will get access to government loans and guarantees, generating $500 billion to purchase toxic assets. It could be expanded to $1 trillion later, Treasury said Monday. See full story.

"Purchasing $1 trillion in toxic assets won’t be enough to solve the banking system’s problems; the program probably needs to be at least twice as large," said Mark Zandi, chief economist at Moody’s Economy.com.

The first half of the plan focuses on loans sitting on bank balance sheets. U.S. banks may be holding as much as $2.5 trillion of toxic assets that haven’t been written down yet, Zandi estimated.

"To cover losses on these assets, the government will ultimately need an additional $300 billion to $400 billion," he added. "The up to $100 billion that officials plan to commit now is a good start, but they will eventually have to ask Congress for more."

The other part of Treasury’s plan targets mainly non-agency residential mortgage-backed securities (those issued by private firms rather than government agencies like Fannie Mae and Freddie Mac) and commercial mortgage-backed securities.

The Legacy Securities Program, as it is known, will incorporate the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF. Investors will get TALF loans to help them buy non-agency residential MBS that were originally rated AAA. Commercial MBS and other asset-backed securities still rated AAA will also be eligible, Treasury said.

More...

Posted at 7:13 PM (CST) by & filed under General Editorial.

Dear Friends,

Referring back to my recent Bloomberg radio interview, the rally at this time is no surprise.

In order to have legs in this rally there must be immediate and significant action on two items – the uptick rule on short sales and the practice of naked short selling.

Without immediate and real action of the two key market points and this attempt at a 1930s type equity rally will certainly fizzle.

Regards,
Jim

Posted at 5:43 PM (CST) by & filed under In The News.

Dear CIGAs,

A comment on today’s Treasury plans for financing private investments in defunct OTC derivatives:

"Giving money and power to government is like giving whiskey and car keys to teenage boys."
— P.J. O’Rourke, Civil Libertarian

Jim Sinclair’s Commentary

Sorry Paul, There is no practical solution

Having paid out OTC derivative winners to the tune of $9.5 trillion, it is too late to erase the mess. That could only have been done prior to Lehman being flushed on purpose. After Lehman went, ALL the dominoes fell.

Sorry, Paul Krugman, you are right on almost everything with one exception: There is no practical solution as it all has gone too far. The winners are too lopsided now versus the losers on the OTC derivative and are protected by contract law.

Keep in mind that an OTC derivative is an unfunded special performance contract.

Under the law the ONLY way to cancel contracts is the US government declaring by Presidential Order an Economic Emergency, an act he will not do. An Economic Emergency Declaration is when there is no solution, and is considered a Draconian surrender to circumstances.

G-20 Must Freeze The $1.5 Quadrillion Derivatives Bubble As The First Step To World Economic Recovery
By Webster Tarpley
3-22-9

(Highlights from the article)

"That cause is unquestionably the $1.5 quadrillion derivatives bubble. Derivatives have provoked the downfall of Bear Stearns, Countrywide, Northern Rock, Lehman Brothers, AIG, Merrill Lynch, and Wachovia, and most other institutions which have succumbed. Derivatives have made J.P. Morgan Chase, Bank of America, Citibank, Wells Fargo, Bank of New York Mellon, Deutsche Bank, Société Générale, Barclays, RBS, and money center banks of the world into Zombie Banks."

"Krugman is right: "zombie ideas" rule Obama’s Washington. The Fed’s TALF amounts to subsidies for securitization, meaning more derivatives. The derivatives bailout was pioneered by Gordon Brown, Alistair Darling, and Mervyn King in the case of Northern Rock. These efforts are doomed to costly futility. The $1.5 quadrillion derivatives bubble is comparable to the black holes of astrophysics, those artifacts of gravity collapse which will irresistably suck in all matter that comes near them. It compares to a world GDP of a mere $55 trillion, itself a figure inflated by financial speculation."

"The derivatives are the black holes of financial engineering, and can easily consume all the physical wealth and all the money in the world, and still be bankrupt. Gordon Brown’s demand of $500 billion for the IMF is enough to bankrupt several nations, but pitifully inadequate to deal with the derivatives. They can only be dealt with by re-regulation — a quick freeze, leading to extinction and permanent illegality. We reject Brown’s IMF world derivatives dictatorship."

"Derivatives pose the question of fictitious capital — financial instruments created outside of the realm of production, and which destroy production. In 1931-2, fictitious capital appeared as tens of billions of dollars of reparations imposed on Germany, plus the war debts owed byBritain and France to the United States. These debts strangled world production and world trade. Bankers and statesmen tried desperately to maintain these debt structures. But US President Herbert Hoover proposed the Hoover Moratorium of 1931-1932, a temporary freeze on all these payments. The Lausanne Conference of June 1932 was the last chance to wipe out the debt permanently. But the Lausanne Conference failed to act decisively, and passed the buck. By the end of 1932, there was near-universal default on reparations and war debts anyway. And by January 1933, Hitler had seized power. We urge the London G-20 to defend world civilization against derivatives. It is time to lift the crushing weight of derivatives from the backs of humanity before the world economy and the major nations collapse into irreversible chaos and war, as seen during the 1930s."

More…

Despair over financial policy
March 21, 2009, 7:12 am

The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.

More…

Jim Sinclair’s Commentary

OTC derivatives bury two credit unions.

Oh excuse me, toxic assets did it.

Recall my suggestions to those in credit unions? Nothing has changed.

US Seizes Two Major Credit Unions
By MARCY GORDON

The National Credit Union Administration said it has taken over and put into conservatorship the two corporate credit unions, U.S. Central Federal Credit Union, based in Lenexa, Kan., and Western Corporate Federal Credit Union, in San Dimas, Calif. U.S. Central has about $34 billion in assets while Western Corporate, known as WesCorp, has an estimated $23 billion in assets.

A conservatorship enables the government to operate a financial institution. Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Some of the 28 corporate credit unions in the U.S. have sustained steep losses on paper from the depressed value of the mortgage-linked securities they hold.

The NCUA, which oversees some 7,800 federally insured credit unions, said it "will continue to take any and all steps necessary to preserve a well-functioning system of corporate credit unions and to protect the assets of (retail credit unions) and their members during the … financial market dislocation."

The financial services provided by the two corporate credit unions "will continue uninterrupted" and there will be no direct impact on the 90 million members of retail credit unions nationwide, the NCUA said in a news release.

More…

Jim Sinclair’s Commentary

The Treasury will fix nothing by planning to make soft loans to finance one trillion dollars worth of OTC derivative purchases.

The dirt will certainly be in the details of the financing that you will never see.

This is creative (as in creative accounting) if nothing else and it is nothing else.

Geithner Relies on Investors for $1 Trillion Plan
By Rebecca Christie and Robert Schmidt

March 23 (Bloomberg) — The Obama administration unveiled its plan to remove toxic assets from the books of the nation’s banks, betting that it can revive the U.S. financial system without resorting to outright nationalization.

The plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington.

Barely two months after President Barack Obama took office, he and Treasury Secretary Timothy Geithner are staking much of the new administration’s economic credibility on the theory that removing the devalued loans and securities from banks’ balance sheets will help them start lending again and resuscitate the economy.

The Standard & Poor’s 500 Stock Index rose 4.4 percent to 802.43 at 12:42 p.m. in New York, and the S&P 500 Financials Index jumped 9.3 percent. Yields on benchmark 10-year Treasury notes were little changed at 2.65 percent.

Because the program depends on private investors stepping up, it may be weeks or months before it’s clear whether the approach will work. “You will start to see this buying up the assets” shortly after private asset managers are chosen by May, Austan Goolsbee, a member of the White House Council of Economic Advisers, said in an interview with Bloomberg Television.

More…

Jim Sinclair’s Commentary

The French get it!

French unions delay decision and vow more action
Friday, March 20, 2009
By Tamora Vidaillet

French unions said on Friday they would keep up pressure on President Nicolas Sarkozy after up to 3 million people joined protests over the economic crisis.

But the unions held off deciding on a possible new round of strikes until a meeting planned for March 30.

The turnout at a day of rallies and demonstrations in cities across France on Thursday was the largest at any protest since Sarkozy’s election in May 2007. The demonstrators challenged the government’s response to the crisis.

Representatives from eight unions told a news conference that while they had yet to decide on how they would proceed, they were united in their will to make their voices heard.

"What counts in today’s message is the affirmation by all unions that there will be a united follow-up to yesterday’s movement," said Maryse Dumas, second-in-charge at the powerful CGT trade union.

More…

Jim Sinclair’s Commentary

Oh yeah, here are some more OTC derivatives to bail out.

You think they did not securitize commercial real estate?

Defaulting Commercial Properties Hit Banks on Vacancy-Rate Rise
By Ari Levy and Daniel Taub

March 23 (Bloomberg) — U.S. banks, battered by record losses from the worst housing slump since the Great Depression, now must weather increasing loan delinquencies from owners of skyscrapers and shopping malls.

The country’s 10 biggest banks have $327.6 billion in commercial mortgages, which face a wave of defaults as office vacancies grow and retailers and casinos go bankrupt. A projected tripling in the default rate would result in losses of about 7 percent of total unpaid balances, according to estimates from analysts at research firm Reis Inc.

Commercial property prices are down almost 20 percent in the past year, and with the global recession worsening, there’s “significant stress” in the market, said William Schwartz, a credit analyst at DBRS Inc. in New York. Moody’s Investors Service is reviewing the financial strength ratings of 23 regional lenders, as “these losses are likely to meaningfully weaken the capital position of many banks in 2009,” said Managing Director Robert Young in New York.

More…

Jim Sinclair’s Commentary

There is no line in the sand of where a state goes from being capable to failed. It is a process all media has to spin, or so it appears.

Where Pakistan is concerned the process has gone beyond repair.

Pakistan is a FUBAR Taliban state.

Pakistan ‘perilously close’ to being failed state

NEW DELHI (AFP) — Pakistan is "perilously close" to becoming a failed state and is already "pretty dysfunctional," a senior Indian government official has said.

Home Minister P. Chidambaram also voiced fears that the rise of the Taliban in neighbouring Pakistan could have a spillover effect on India.

"I do not think it (Pakistan) is a failed state but if it does not arrest the decline, it is perilously close to becoming one," he said in an interview on India’s CNN-IBN network to be aired late Monday.

"It is pretty dysfunctional today," Chidambaram said.

Asked if India has a stake in ensuring stable civilian rule in Pakistan, he replied: "Of course a stable civilian democratic government means that we know who we are dealing with and there are checks and balances."

He added that the rise of the Taliban in Pakistan "will encourage fundamentalists in India to imitate them, and number two the Taliban could become a sponsor of terror in India."

More…

 

Jim Sinclair’s Commentary

The entire Federal Reserve and Treasury program in terms of the predictable result is described below:

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
–Thomas Jefferson

Some might say that financiers work, but today’s crowd is better described as scheming. That cannot be considered work in terms of Jeffersonian Democracy.

Nothing has taken place by chance since Lehman’s flushing.

Gold is very much a part of the plan.

The results of the flushing of Lehman could have been accurately predicted by my dog Mia.

Jim Sinclair’s Commentary

This is so true that it is not in the least bit funny. It is so sad that we accept that all our elected officials and CEOs of major companies are devout criminals without any redeeming human value.

What else is there to say?

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Jim Sinclair’s Commentary

Not that it will make any difference, but deluging the gatekeepers with our disdain for their lack of consideration of the level playing field seems appropriate. Lack of the uptick rule favors the few at the cost to the many due to a strong and over financed lobby. It is another wrong so lightly taken.

Dear Mr. Rivera,

Thank you for your comment on the uptick rule. The Commission has announced that it will consider proposals relating to short sale price tests at an open meeting scheduled for April 8, 2009. The meeting will be webcast from the SEC’s website at www.sec.gov/news/openmeetings.shtml.

Should the Commission vote to publish a proposal for comment, a comment file for the rulemaking will be created once the proposal is published by the Commission. Your comment will be placed in that file.

Sincerely,
Adam P. Knapp

Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
(202) 551-6551

 

Jim Sinclair’s Commentary

Auto companies that refuse to discount their inventory to cost or below, but choose rather to store (all of them) in hard times and wait for an economic pickup that will not come in later 2009 are not worthy of being called business people.

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Jim Sinclair’s Commentary

The innocence of the banksters?

This is just too wrong.

Toxic assets are OTC derivatives on real estate mortgages, credit cards, auto loans, or basically anything securitized.

Whomever they quote here is either a pawn, dope, or bankster.

Note how careful the interviewee is when he called a real estate loan "the makings of" and stops there. The media is feeding the public with a con-job that would make AIG and Madoff proud.

What this article would infer is that the banksters are not responsible, while in fact, this is ALL the doing of the OTC derivative manufacturers and distributor banksters. The modern name for these parasitic scoundrels is BANKSTERS.

So What’s A Toxic Asset?
A Closer Look At The Financial Black Holes That Are Clogging Up The Nation’s Credit Flow
March 23, 2009

(CBS)  The Obama administration rolled out a plan Monday that could facilitate the purchase of up to $1 trillion worth of toxic assets from struggling banks in an effort to clean up their balance sheets and get them to start lending again.

So what exactly are these toxic assets, which have caused such huge problems in our financial system?

Every time you see foreclosure signs littering neighborhoods, you’re probably looking at the makings of a toxic asset, reports CBS News correspondent Bianca Solorzano.

"Toxic assets are the ones that nobody wants to touch because they’re just considered too dangerous," Doug Rediker, of New America Foundation, told CBS News.

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Jim Sinclair’s Commentary

Please note the Formula takes you through to this point when there is no further international lenders and the US must (as is the case now) turn inwards on itself to raise capital. The beard right now is the Fed buying Treasury debt.

Soon there may be nobody left to lend to America
Irwin Stelzer
From The Sunday Times
March 22, 2009

Anyone who thought Ben Bernanke and his Federal Reserve Board colleagues were out of ammunition received a rude, or pleasant, shock last week. Rude, if you worry that a few extra trillions sloshing around the economy might one day trigger a wave of inflation; pleasant, if you worry that the economy is sinking fast, and the Obama administration and Congress haven’t a clue what to do about it.

The Fed plans to buy $300 billion of Treasury IOUs in the next six months (more to come if needed), pour $1.45 trillion into the mortgage market, and keep interest rates close to zero for “an extended period”. There’s more in the Fed’s “do whatever it takes” arsenal if these steps don’t bring interest rates down so people can borrow more cheaply to buy houses, cars and other durable goods. But so far, so good: interest rates on 30-year mortgages fell below 5%. Whether that will encourage enough creditworthy borrowers to sop up the huge inventory of unsold homes, much less trigger new construction, is difficult t

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Jim Sinclair’s Commentary

There is ONE simple cause of this crisis and that is OTC derivatives. This presentation is yet another in the long line of STRATEGIC DENIAL.

By refusal to face the real problem there will be no solution at all. The result of this denial is hyper-inflation.

The result of hyper inflation is that Alf Fields will be more correct on gold than I will be at my $1650 projection prior to January 14th 2011. My target will probably come a lot prior to that date.

My Plan for Bad Bank Assets
The private sector will set prices. Taxpayers will share in any upside.
By TIMOTHY GEITHNER

The American economy and much of the world now face extraordinary challenges, and confronting these challenges will continue to require extraordinary actions.

No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.

The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.

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Jim Sinclair’s Commentary

The newest acronym you need to add to your vocabulary is TBTF – Too Big To FAIL.

Everything TBTF so far has been bailed out directly or indirectly.

Everything TBTF will be bailed out directly or indirectly.

The final solution will be the dissolution of the US dollar. There is no other possibility.

Half of auto suppliers facing bankruptcy
By ED BRAYTON 3/23/09 6:36 AM

Automotive News reports on a new study that concludes that half of all U.S. auto supply companies potentially face bankruptcy in 2009, with devastating results for the American economy:

More than half of the top U.S. auto parts suppliers could file for bankruptcy protection in 2009 with at least one million job losses, according to a study by global consultants A.T. Kearney.

Those suppliers, which ship parts directly to automakers, are pressured from above by production cuts by the automakers and from below by increasingly fragile companies that supply them with components, the study found.

Four major suppliers declared bankruptcy in 2008. The Treasury Department established a $5 billion fund to help auto suppliers last week, but that was far short of the $18.5 billion the industry was seeking.

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Jim Sinclair’s Commentary

Inheriting a Narco State south of the border is overshadowed by all the other shadows created in the last 8 years.

There is no question that oil production has peaked even if there is no peak yet in oil production from avowed enemies of the West. That is to say that the enemies with oil production seem too continually grow.

Mexican Drug Cartel Violence Spills Over, Alarming U.S.

TUCSON — Sgt. David Azuelo stepped gingerly over the specks of blood on the floor, took note of the bullet hole through the bedroom skylight, raised an eyebrow at the lack of furniture in the ranch-style house and turned to his squad of detectives investigating one of the latest home invasions in this southern Arizona city.

A 21-year-old man had been pistol-whipped throughout the house, the gun discharging at one point, as the attackers demanded money, the victim reported. His wife had been bathing their 3-month-old son when the intruders arrived.

“At least they didn’t put the gun in the baby’s mouth like we’ve seen before,” Sergeant Azuelo said. That same afternoon this month, his squad was called to the scene of another home invasion, one involving the abduction of a 14-year-old boy.

This city, an hour’s drive north of the Mexican border, is coping with a wave of drug crime the police suspect is tied to the bloody battles between Mexico’s drug cartels and the efforts to stamp them out.

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Posted at 5:00 PM (CST) by & filed under In The News.

Dear Friends:

The Federal Reserve moves to self financing by buying tons of US Treasury instruments in a clear message that:

  • Inflation = Good
  • Deflation = Bad

Therefore:

  • Higher price of Gold = Good
  • Lower price of Gold = Bad

Which also infers that:

  • Higher dollar = Bad
  • Lower dollar = Good.

This simple formula seems to be too complex for the talking heads who seem to have a difficult time making simple adjustments to their broadcasts, such as no smiling when reporting the Dow is down 500 points or now looking incredulous when reporting gold isup $1.

Fed quantitative easing via financing themselves put a floor under gold. When you have a floor under a market it will seek the ceiling.

The first floor temporary ceiling is at $1224. After that look to $1650 followed b y Alf’s numbers.

Bank crisis spawns new kind of gold rush
2009 recession and banking crisis has set off a rush to invest in gold and other precious metals at unprecedented levels
DAVID PARKINSON
From Friday’s Globe and Mail
March 20, 2009 at 1:00 AM EDT

In 1897, at the height of a major U.S. recession and banking crisis, a gold discovery on the Klondike River in Yukon Territory triggered one of the biggest gold rushes ever seen. Now, more than a century later, history is – sort of – repeating itself.

No, the world’s downtrodden aren’t beating a frenzied path to a harsh, remote swath of the Canadian north this time around. But the 2009 recession and banking crisis has set off a rush to invest in gold and other precious metals at unprecedented levels – a move that has tightened the global supply/demand picture and helped push prices to record highs. And increasingly, they are opting for the tangible comfort of physical gold – actual gold bars and coins that they can cling to in troubled times.

“When the banking crisis hit [last fall], we saw an avalanche of demand,” said James DiGeorgia, a Florida-based coin and precious metals dealer and editor of the Gold & Energy Advisor newsletter. “People are scared to death that all this debt [being taken on by governments] is going to debase the [U.S.] dollar and other currencies around the world.”

Data from the World Gold Council show that while demand for gold for industrial, dental and jewellery purposes fell 10 per cent in 2008, net purchases of physical gold for investment purposes jumped 64 per cent to 1,091 tonnes. In the fourth quarter – as the U.S. banking crisis reached new depths – net gold investment volumes surged 182 per cent from a year earlier. As a result of the boom in investment demand, overall gold demand rose 4 per cent last year, further widening the annual supply shortfall in the gold market.

“These dramatic retail investment inflows reflect the extreme uncertainty that surrounds the global economy and financial system,” the World Gold Council said. “In an environment where investors are more concerned about the loss of capital than they are about the return on capital, the absence of default risk or counterparty risk has been a key attraction for gold.”

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Jim Sinclair’s Commentary

The felonious game is over.

The handwriting is no longer on the wall, it is now in neon lights 100 feet high.

The pressure against naked shorting is picking up speed. You never would have seen this in the last 8 years. Look for criminal charges of fraud soon against the practitioner. Only the most dense hedge fund manager can fail to see the jig is up on this convenient and previously profitable crime.

Now old fails to delivers are an invitation akin to a sign on the hedge fund door saying "Arrest me please!"

Check your own investments to see the "Fails to Deliver."
http://failurestodeliver.com

In a year or so you will be able to check the location of the dense hedge fund manager:
http://www.felonspy.com/search.html

Naked Short Sales Hint Fraud in Bringing Down Lehman
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.’”

While the commission’s Enforcement Complaint Center received about 5,000 complaints about naked short-selling from January 2007 to June 2008, none led to enforcement actions, according to a report filed yesterday by David Kotz, the agency’s inspector general.

The way the SEC processes complaints hinders its ability to respond, the report said.

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Jim Sinclair’s Commentary

Your first reaction to Fed and Treasury intentions might be "Are these guys nuts?"

The better question is what do they know that the general populous does not?

The answer to that is the entire mountain of OTC derivatives is falling down.

The premise concerning external floating dollars is reasonable.

Fed Planning 15-Fold Increase In US Monetary Base
by Eric deCarbonnel

The fed is planning moves that would more than double its balance-sheet assets by September to $4.5 trillion from $1.9 trillion. Whether expressing approval or concern over the fed’s intentions, most commentators fail to understand the real magnitude of the projected expansion of the US monetary base because they don’t take into account the amount of dollars circulating abroad.

At least 70 percent of all US currency is held outside the country, and this means the US monetary base is considerably smaller than the fed’s overall balance sheet. Take, for example, the true US domestic money supply at the beginning of September 2008, before the fed started its quantitative easing. From the Federal Reserve’s website, we know that currency in circulation was 833 Billion. This translates as 583 Billion dollars circulating abroad (70 percent), and 250 Billion dollars circulating domestically (30 percent). Since the bank reserve balances held with Federal Reserve Banks were 12 billion, that gives us a 262 Billion domestic monetary base as of September 2008. Now compare that to the projected US domestic monetary base for September 2009 which is 3,818 billion (4,500 billion – 583 billion (dollars circulating abroad) – 99 billion (other fed liabilities not part of the money supply)). The fed’s planned balance sheet expansion results in a 15-fold increase in the base money supply.

262 Billion = US monetary base as of September 2008 (minus dollars held abroad)
3,818 Billion = projected US monetary base in September 2009 (minus dollars held abroad)

3,818 Billion / 262 Billion = 15-Fold Increase in US monetary base

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Jim Sinclair’s Commentary

A Plan finally, but not much of a Final Plan.

An economy wrecked by over leveraging (borrowing) on fraudulent paper will now be saved by providing low cost leverage (borrowing) to buy fraudulent paper. Are these people intelligent or what?

Treasury’s toxic asset plan could cost $1 trillion
Geithner releases initial outlines of proposal to be unveiled on Monday

WASHINGTON – The Obama administration’s latest attempt to tackle the banking crisis and get loans flowing to families and businesses rely on a new government entity, the Public Investment Corp. to help purchase as much as $1 trillion in toxic assets on banks’ books.

The plan that Treasury Secretary Timothy Geithner intends to announce Monday aims to use the resources of the $700 billion bank bailout fund, the Federal Reserve and the Federal Deposit Insurance Corp.

The initiative will seek to entice private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases and also sharing risks if the assets fall further in value.

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Jim Sinclair’s Commentary

This will not take 10 years nor will it take 10 months. It is here and now!

Gregg: ‘This country will go bankrupt’

Posted: 10:53 AM ET
March 22, 2009

WASHINGTON (CNN) – Even though he was almost a member of the new Obama administration, New Hampshire Republican Judd Gregg Sunday slammed President Obama’s approach to handling the country’s fiscal outlook.

“The practical implications of this is bankruptcy for the United States,” Gregg said of the Obama’s administration’s recently released budget blueprint. “There’s no other way around it. If we maintain the proposals that are in this budget over the ten-year period that this budget covers, this country will go bankrupt. People will not buy our debt, our dollar will become devalued. It is a very severe situation.”

Gregg, known as one of the keenest fiscal minds on Capitol Hill, also told CNN Chief National Correspondent John King that he thought it was “almost unconscionable” for the White House to continue with its planned course on fiscal matters with unprecedented actual and projected budget deficits in the coming years.

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Jim Sinclair’s Commentary

I love the name of the new bill, "Federal Reserve Thingy."

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Jim Sinclair’s Commentary

Toxic assets are OTC derivatives, nothing else.

Toxic Asset Plan Foresees Big Subsidies for Investors  NYT
By EDMUND L. ANDREWS, ERIC DASH and GRAHAM BOWLEY
The goal of the plan, to be announced next week, is to leverage the dwindling resources of the bailout program with money from private investors

Jim Sinclair’s Commentary

Deficits for years is Death for the dollar

New Deficit Forecast Casts Shadow on Obama Agenda  NYT
By JACKIE CALMES
New projections for the fiscal years 2010 through 2019 show deficits totaling $2.3 trillion, more than the White House’s predictions

Posted at 4:57 PM (CST) by & filed under Jim's Mailbox.

Jim,

This reverse head and shoulders continuation pattern yields a target of 1300 based on the upside down head at 700 and the neck line at 1000. That difference of 300 added to the neckline yields a pattern based target of 1300 minimum. Thanks to philbond007 for the chart.

CIGA Ken

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Dear Ken,

$1224 then $1650.

Regards,
Jim