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The Formula Grinds On

Posted: Aug 16 2010     By: Jim Sinclair      Post Edited: August 16, 2010 at 4:35 pm
Filed under: General Editorial

My Dear Friends,
I could be quoting all the developments of the day to you, pointing out the spin, MOPE and outright fabrication of each. I will of course do this, but there is a much bigger story that cannot and will not be reversed. It is set in cement and will unfold exactly as I have outlined to you probably 1000 times in the past 7.5 years.
I have reverted to trying to explain this in cartoons.
It all started with the fraudulent OTC derivative market that did grow to over 1 trillion before they changed the computer virtual illusion of price valuation to a humourless "Value to Maturity." That sick joke of virtual computer valuation assumes full payment and no bankruptcy in the real estate market.
This gave rise to the Formula of 2006.
That was because the flush of Lehman Brothers set off a major economic downward spiral with all the rules inherent in such a situation.
There was no intervention as the causal point (OTC Derivatives) therefore neither Has the speed or direction of the downward spiral decelerated? The small pop in economic data had to happen as the trillions entered the system, but in light of what entered, the only real increase was in the pockets of the demonic Banksters.
Now the economy has turned decidedly lower and in all probability will continue to make new lows because there has been no meaningful intervention in the Formula of 2006 which grinds menacingly on.
In this light please review the following three cartoons. The lesson communicated via the three illustrations have an inherent conclusion in reality. Gold will trade at $1650, and due to Currency Induced Cost Push Inflation, my estimate might be flawed on the low side.
Jim Sinclair  www.jsmineset.com

Jim Sinclair’s Commentary
Maybe it never have dawned on the US Administrations that you should not treat your banker badly.
The legislative just made a motion again to declare China a currency manipulator, unmindful that the economic future of the entire West depends on China increasing their US Treasury position.

China Sold More Treasurys in June 

AUGUST 16, 2010, 2:05 P.M. ET
By TOM BARKLEY And MEENA THIRUVENGADAM

WASHINGTON—China was a net seller of U.S. Treasurys for a second straight month in June, while overall inflows into long-term U.S. assets continued, the Treasury Department said Monday.
China’s holdings fell $24 billion to $843.7 billion, though it remained the largest foreign holder of Treasurys. That followed net sales of $32.5 billion in May.
Recent bouts of selling by China have stoked concerns that the largest creditor nation to the U.S. may reduce its exposure, though the move has partly reflected a portfolio rebalancing into longer-term securities.
Access thousands of business sources not available on the free web.
Among all foreign investors, net purchases of U.S. Treasury notes and bonds totaled $33.3 billion in June, compared with net buying of $14.9 billion the previous month.
Japan, the second-largest holder of Treasurys, was a net buyer, boosting its portfolio to $803.6 billion from $786.7 billion in May.
More…



Jim Sinclair’s Commentary

The downward spiral is now in control. Because the intervention only lined the pockets of the Banksters, the economic recovery was more virtual than real. Now we are headed to lower Western world economic lows.

NY manufacturing falls short of forecast By Wanfeng Zhou
NEW YORK | Mon Aug 16, 2010 9:53am EDT
(Reuters) – A gauge of U.S. regional manufacturing rose in August after plunging the previous month, but it fell short of forecasts and contained some grim details, adding to evidence the U.S. recovery is losing momentum.
The New York Federal Reserve said on Monday that its "Empire State" general business conditions index increased to 7.10 in August from 5.08 in July. The figure was below the 8.00 expected by economists polled by Reuters.
Despite this month’s small rise, the index remains well below its recent high near 32 reached in April. The report is consistent with other recent data showing the U.S. economy has slowed considerably in the past few months, though most economists say a double-dip recession remains unlikely.
"While I don’t take the view that the economy is faltering, what’s happening out there is that there is not a lot of growth out there," said Joel Naroff, president, Naroff Economic Advisors in Holland, Pennsylvania.
U.S. stock futures briefly dipped after the data before rebounding. Wall Street was under selling pressure on Monday amid worries about the strength of the global economy.
More…


 

Jim Sinclair’s Commentary

All these deals are fraudulent. They are anything from a letter of credit scam to a litigation trap.
Over the years I have received hundreds of calls from CIGAs who think they just hit the jack pot. I got one of those calls today from Australia.
They are all raving bullshit and should be avoided like the Plague

Tons of gold imports turn to dust on arrival 

Gold imported into the UAE by traders and investors turned out to be fake on closer inspection
By* VM Sathish
Published Sunday, August 15, 2010
Several tons of gold imported into the UAE by traders and investors turned out to be fake on closer inspection, resulting in millions of dirhams in losses and high levels of stress to the victims.
Speaking to Emirates 24|7, Mohamad Shakarchi,, Managing Director of Emirates Gold, said: "A lot of people in the UAE who tried to import gold at lower prices or through dubious overseas companies have been cheated.
We have inspected many consignments from African countries, especially Ghana, and found that there is not an ounce of gold in them.
For importing pure dust or other metals with yellow colour, these traders have paid several million dirhams.”
Dubai Customs sources confirmed the incidence of fake gold imports, but did not reply to a questionnaire sent by Emirates 24|7 ten days ago.
“The concerned official is on leave,” said a spokesman.
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Jim Sinclair’s Commentary
Everything is lining up for illustration number three of today’s attempt to get you to understand Currency Induced Cost Push Inflation, our future.

China Favors Euro to Dollar as Bernanke Shifts Course (Update3) 

By Candice Zachariahs and Ron Harui – Aug 16, 2010 11:42 AM
China, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S.
The nation has been buying “quite a lot” of European bonds, said Yu Yongding, a former adviser to the People’s Bank of China who was part of a foreign-policy advisory committee that visited France, Spain and Germany from June 20 to July 2. Japan’s Ministry of Finance said Aug. 9 that China bought 1.73 trillion yen ($20.1 billion) more Japanese debt than it sold in the first half of 2010, the fastest pace of purchases in at least five years.
“Diversification should be a basic principle,” Yu said in an interview, adding a “top-level Chinese central banker” told him to convey to European policy makers China’s confidence in the region’s economy and currency. “We didn’t sell any European bonds or assets, instead we bought quite a lot.”
China’s position may make it harder for the greenback to rebound after falling as much as 10 percent from this year’s peak in June as measured by the trade-weighted Dollar Index. The nation cut its holdings of U.S. government debt by $100 billion, or 11 percent, through June from last year’s record of $939.9 billion in July 2009, according to Treasury Department data released today.
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Jim Sinclair’s Commentary
There has been no change in the fact that Wall Street owns Washington.
You expected anything different?

Banks to benefit most from White House program to help fight foreclosures 

By Vicki Needham – 08/15/10 03:05 PM ET
Banks will get the biggest benefit from an Obama administration housing program designed to help unemployed homeowners escape foreclosure.
Housing experts expressed concern that banks, not homeowners, will be helped by the White House’s $3 billion funding infusion — $2 billion from the Treasury Department and another $1 billion from the Housing and Urban Development Department — going to those states hit hardest by the housing market crash and unemployment.
"Giving money to the banks isn’t what the government should be doing right now," said Dean Baker, co-founder of the Center for Economic and Policy Research.
"I’m not a big fan; it’s ill-conceived," he said.
The basic principle is to help struggling homeowners but with so many people underwater on their mortgages the new funding is unlikely to do much good, Baker said.
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Jim’s Mailbox

Posted: Aug 16 2010     By: Jim Sinclair      Post Edited: August 16, 2010 at 4:38 pm
Filed under: Jim's Mailbox

Capital Flow Transition from Public to Private Sector 

CIGA Eric

Any record, especially ‘Junk" bond issuance, during periods of aggressive currency devaluation is always dangerous.
U.S. companies issued risky "junk" bonds at a record clip this week, taking advantage of keen investor appetite for returns amid declining interest rates and tepid stock markets.
The borrowing binge comes as the Federal Reserve keeps interest rates near zero and yields on U.S. government debt are near record lows. Those low rates have spread across a variety of markets, making it cheaper for companies with low credit ratings to borrow from investors.
I continue to watch is the performance of long-term high grade corporates relative government bonds (LTCBTRILTGBTRIR). This ratio represents one of the best money flows measures between the public and private sectors.
Many stock market experts suggested that a rally could not materialize without job creation and the worst was yet to come in 1932. Contrary to popular consensus, capital flows retreated from the public to private sector. This is illustrated below down trendline breaks in the corporates to government bonds and large cap stocks to government bonds in 1932. The 2010 "flush" of the private sector and subtle return to it is very similar to that of setup of 1932.
Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI)
U.S. Large Cap Stocks Total Return Index (LCSTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) Ratio:
Source: online.wsj.com
Thanks Bob
More…



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The People’s Money

By: Jake Towne - 16 August, 2010 There is nothing super-complicated about sound money. Rather, the truth is pretty simple. In cahoots with the central bank, the government prints unbacked currency. Most dollars are not physical linen – it is merely electrons in bank accounts, which is shown simply here, “Fractional Reserve Banking in Pictures.” Full Story

Gold and Deflation

By: Frank Holmes, U.S. Global Investors Inc. - 16 August, 2010 I have been speaking and writing about gold’s appeal in a deflationary environment – this is a concept that opposes the conventional opinion that the gold price will not rise without inflation. Those who cling to that singular gold-inflation relationship have not examined the history of gold as money. Whenever there is substantial inflation or deflation, governments tend to either be too slow to react or they overreact with policies, and this is typically good for gold. Full Story

Smoke From The Copper and Gold Markets

By: David Coffin & Eric Coffin - 16 August, 2010 The dollar denominated copper price benefited from a Euro recovery beginning in mid July. Other base metals also gained from the falling Dollar. Traders had become more cautious about gold after its long uptick, but some greater comfort with the economy after Europe managed to push back from the brink also helped the brief move into base metals. However, internal fundamentals are also playing a role copper’s price move. Full Story