The End Of Securitized Mortgage Debt

Posted: Oct 19 2010     By: Jim Sinclair      Post Edited: October 19, 2010 at 3:40 pm
Filed under: General Editorial
My Dear Friends,
It is apparently above the head of most of the sheeple, but today the majority of OTC derivatives known as securitized mortgage debt ended.
The presence of the NY Fed in this potential litigation says that the Fed is holding paper which does not qualify for holding according to its own indenture.
This is the end of the majority of a pile of garbage two trillion dollars high. This is one of the best reasons to own gold, regardless of the mindless actions of algorithms impacting price today.
The New York Fed, Pimco and others threaten litigation via demand letters to force the Bank of America to buy back $47 billion in OTC derivatives known as securitized mortgage debt.
Because the OTC derivative cannot stand the light of day in court, a demand letter is a powerful first tool.
Respectfully,
Jim

The Height Of Nonsense

Posted: Oct 19 2010     By: Jim Sinclair      Post Edited: October 19, 2010 at 11:18 am
Filed under: General Editorial

Dear CIGAs,
Today is the height of nonsense for those that understand what is in fact taking place.
The .25 increase in Chinese money costs are symbolic and their use of MOPE.
The following statement by the US Treasury is simply an answer to China’s position that the US is involved in more than benign neglect in the collapse of the dollar rally.
Gold is going to and through $1650. Today is just another day of drama in gold, full of noise and fury signifying nothing whatsoever in terms of the trend.

US Treasury chief Timothy Geithner says America will not engage in dollar devaluation CIGA Eric
Anyone dressing (and playing the part) as a mindless zombie for Halloween should probably read the following quote.  It will help get into character later this month.
"It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to [be] competitive," he said. "It is not a viable, feasible strategy."
telegraph.co.uk
Posted by Eric De Groot at 9:39 AM
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The New Tax Man: Big Banks and Hedge Funds CIGA Eric
Cash strapped municipalities desperate to fill budgetary holes generated from false, maybe better characterized as naive, expectations sell taxes owed in exchange for collection and legal rights to the same institutions that received massive taxpayer bailouts. Even a blind man could see that the decision of local governments to make this exchange without considering the consequences of their actions and “connected money” to profit from it has great potential for backlash.
The Wall Street investors, which include Bank of America and JPMorgan Chase & Co., have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.
In many cases, the banks and hedge funds created new companies to do their bidding. They gave the companies obscure, even whimsical names and used post office boxes as their addresses, masking Wall Street’s dominant new role as a surrogate tax collector.
In exchange for paying overdue real estate taxes, the investors gain legal powers from local governments to collect the debt and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. In some jurisdictions, the new Wall Street tax collectors also chase debtors over other small bills, such as for water, sewer and sidewalk repair.
Source: huffpostfund.org
Thanks Bob
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In The News Today

Posted: Oct 19 2010     By: Jim Sinclair      Post Edited: October 19, 2010 at 2:38 pm
Filed under: In The News
Thought For The Afternoon
The algorithms will do their short term technical thing in gold. It is the nature of those predatory beasts.
If you get concerned either read the Pocketbook of Gold, or try the mantra "Gold at $1650."

Jim Sinclair’s Commentary
John Williams of the superb for subscription service straightens out today’s MOPE.

Commentary No. 330: September Production and Housing Starts
- Third-Quarter Production Growth Slowed and Housing Contracted
- Third-Quarter GDP Should Have Slowed, But the Heavily-Politicized and Guesstimated Series Virtually Is Worthless
www.ShadowStats.com


Jim Sinclair’s Commentary
And so begins the pressure that will eventually lead to litigation, forcing the manufacturers of the securitized mortgage debt OTC derivatives to buy the fraudulent paper back.
This is the death throw of a pile of garbage that now totals 2 trillion dollars in size.
Throw away your gold because of algorithms? You have to be mad.

Pimco, New York Fed Said to Seek BofA Repurchase of Mortgages 2010-10-19 17:49:57.995 GMT
By Jody Shenn
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
A bondholder group wrote to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service the loans properly, their lawyer said yesterday in a statement that didn’t name the firms.
Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.
MetLife Inc., the biggest U.S. life insurer, is part of the group represented by Gibbs & Bruns, said the people, who declined to be identified because the discussions aren’t public. TCW Group Inc., the manager of $110 billion in assets, expects to join BlackRock, the world’s largest money manager, and Pimco, which runs the biggest bond fund, in the group, the people said.
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Eric,
If you do not do "QE to infinity" you will get a form of the second article you did on the French riots in the entire Western world.
Also, expect Big Brother to crack down on the "Miscreants of Main Street" as they will be called.
Regards,
Jim

Fed’s Lockhart: Quantitative easing must be big CIGA Eric
Infinity (∞), while technically is not a number, suggests a quantity without bound. Infinity in terms of quantitative easing implies printing as much money as it takes to stabilize the imploding debt pile without having to officially recognize default. ‘Big’ suggests a finite limit, while whatever it takes to get the job done, a more accurate assessment of strategy being pursued, is far more ambiguous and difficult to explain.
"If we’re going to pursue another round of quantitative easing, it has to be a large enough number to make a difference," Lockhart said in an interview on CNBC.
Source: finance.yahoo.com
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French retirement protests take violent turn CIGA Eric
One cannot play favor to one sub sector of society without repercussions from the others. Once the helping hand of socialism is offered to society, it is nearly impossibly to remove without so sort of social disruption.
Masked youths clashed with police and set fires in cities across France on Tuesday as protests against a proposed hike in the retirement age took an increasingly radical turn. Hundreds of flights were canceled, long lines formed at gas stations and train service in many regions was cut in half.
President Nicolas Sarkozy pledged to crack down on "troublemakers" and guarantee public order, raising the possibility of more confrontations with young rioters after a week of disruptive but largely nonviolent demonstrations.
Source: news.yahoo.com
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Hi Jim,
As you said, we are seeing the stock market rise due to currency induced cost push inflation.
As the mortgage foreclosure fraud becomes more mainstream by the day and the real problems are exposing themselves (securitized mortgage debt being worthless and a fraudulently sold investment by the banks to pensions and institutions), could this not be cause for some panic? Wouldn’t that send the equity market down as that is the typical reaction in uncertain times, at least initially?
I know this should not be the case and will not be the case at some point because of the currency induced cost push effects (you have taught me well) but are we at the point in time where investors worldwide realize the problems with sovereign debt (and their governments policies) enough to actually allocate more capital towards equities because of the uncertainty surrounding these issues (versus the typical move which is selling equities)?
I think the answer might be that we are already witnessing the transformation in belief and capital allocation under stress and uncertainty, but I sure have a tough time seeing anyone on Main Street realizing this (equities) is the place to hide as this falls apart. At least not yet
Do Main Street investors really even matter when it comes to the force that pulls the market down or pushes it higher under these circumstances? I can see it becoming Main Street that hits panic mode as their pensions are falling apart, job losses are greater, and they are two steps behind in understanding what is truly going on.
I ask this as it may be a question of many CIGAs if they only catch the main theme which is equities will go significantly higher under cost push inflation. It would be nice to have an expert opinion on what to potentially expect shorter term as this all unfolds.
I read Armstrong’s recent piece, and who is to argue with him, but sometimes I find his commentary and predictions on price and time vague. However, his commentary about the Dow higher rather than lower is the main theme that is remembered after going through his work by most readers I am sure. This can be all a reader will hear and I think that sets up some people to struggle if they don’t see the Dow take off, or if we see it make a short-term correction because of uncertainty.
When he writes as to the Dow moving higher with gold, he doesn’t mention the possibility of a knee jerk short-term reaction to the shit-hitting-the-fan. It would just seem as if it is straight up from here. As far as his cycle study goes he says Dow going higher over lower is the reality, but a 20%-25% slap to equities from here on uncertainty (especially if in short order) would surely throw many readers for a loop if only focusing on the Dow exploding as per Martin.
What are the odds of a correction occurring with this event taking place (short term) versus the complete transition in investor thinking to a time that Martin discusses took place in the 30’s. A situation where if this unfolds in the next month, the recent move in the equity market in the past 6 weeks looks like nothing impressive by comparison?
Any insight you may have is great if you have the time.
Take care,
CIGA Ryan

CIGA Ryan,
This among other cause points means QE to infinity as there is no other choice. You can see this already functioning in markets. The path of currency induced cost push inflation grows and grows. One day CICP inflation falls directly off a cliff. That is what would cause $5000 gold.
Those who live in the equity world only know equities. I would buy calls on the indices on big breaks, but not go silly bullish.
It is all a play between Banksters and Hedgies. They reside in their own putrid world. Main Street has no money to do anything anymore. Main Street is focused on eating and keeping their homes.
For specs only buy a few calls on the indices every time they get hammered
Use people for what they are good at. Armstrong is the best in cyclical analysis. There is the value.
Day by day CICP inflation increases and increases until all of sudden it explodes. This is the way it is happening right now. The future hides in plain sight.
Regards,
Jim

Jim’s Mailbox

Posted: Oct 19 2010     By: Jim Sinclair      Post Edited: October 19, 2010 at 2:40 pm
Filed under: Jim's Mailbox
Jim,
I don’t know if you have followed the model on http://www.goldmodel.blogspot.com.
$1388/1389 was calculated as resistance. We have seen 1388 on the charts.
It is still early but with today’s level of the USDX, first good support for the price of gold is now 1300. That level will change as the USDX fluctuates.
CIGA Stefaan




 Hourly Action In Gold From Trader Dan

Posted: Oct 19 2010     By: Dan Norcini      Post Edited: October 19, 2010 at 2:00 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
News overnight that China’s Central Bank had raised interest rates (the first move in almost 3 years and a piddly .25% at that) in an attempt to curtail inflationary pressures developing in its economy (particularly property values) sent the foreign exchange and commodity markets into a tizzy.
Apparently China trumps the Fed’s QE. Maybe this is sort of like the childhood game, rock, paper, scissors. Let’s see – paper covers rock (that would be the Fed’s paper) but scissors ( that would be China’s attempt to contain inflation) cut paper.
I am still attempting to get it through my rather dense skull how this is supposed to cause investors to rush into the “safe haven” of the Dollar as “investors fear a slowdown in the global economy, especially in the emerging markets”, to quote the wire services. On the other hand, I give up – there is no connection. As I have stated on many occasions, the two phrases; “save haven” and “US Dollar” mentioned anywhere in close proximity to one another is like attempting to join the negative poles of two separate magnets together. Wishing it were so does not overcome the laws of physics. Any nation whose fiscal position is as atrocious as the US’s, can stake no claim to anything “safe” in regards to its currency, especially when that same currency is deliberately under attack from its own government.
I think it sufficient to say that any further slowdown in the global economy will serve to kick the Fed’s exotic Quantitative Easing machine into high gear wrecking more havoc on the Dollar. Not that the QE will do any good (it won’t) but that will not stop them from doing it anyway.
This appears more a case of a market price move begging for a reason to explain it. The simplest explanation is usually the best and it looks to me like a lot of guys were caught napping and a bit too complacent especially in the Forex markets where the European currencies, and the commodity currencies have developed a fairly good sized contingent of speculative longs. The newcomers to the party were unceremoniously flushed out. QE has been factored in and now that it is not coming forthwith, some of the larger traders apparently decided to ring the cash register which was enough to trip the short term technical indicators and the corresponding systems into action.
I want to see where this bump in the US dollar might carry it before it runs out of steam. One thing is for sure – the Japanese, the Brazilians and the Europeans are all happily whistling for the moment as their currencies sink lower. Saves some of them the expense of having to try to move the Dollar higher all by themselves.
That brings us to gold – it too got caught up some in the “excitement” generated by the Chinese move and took a bit of a breather from its strong climbing move of the past two months. It failed to hold at its initial support level near $1,350 – $1,345 and moved down to $1,330 before dip buyers stepped in and encouraged some short covering on the part of the bears. This level just so happens to be synonymous with the 20 day moving average and the median line on the pitchfork so from a technical perspective, the metal is finding support just at the point where the charts say it should. So far, so good. Let’s see if it can regain its footing here and work sideways a bit as it consolidates or wants to move a bit further down. Should it be the latter, it has some support surfacing near the $1,325 – $1,320 level.
Bulls will need to hold fast and not run to any extent in order to prevent the bears from getting a foothold. If they do this, shorts will have to cover once again and that should kick price back above $1,350. A push back above $1,355 that can hold into the close of the pit session will portend a consolidation pattern emerging.  I still think we are in a holding pattern in gold as we wait to see what comes this way in November when the FOMC will either have to put up or shut up.  I think that they have been trying to talk QE and get the same result without having to actually engage in it. Problem for them is that at some point, one’s bluff gets called and it is time to show the cards. The next two weeks or so will therefore more than likely be a bit choppy unless we get some definitive market moving data prior to that upcoming FOMC meeting in November. Lousy economic news will serve to reinforce expectations of further QE which will undermine the Dollar and support gold while news such as today’s that temporarily move QE off the market’s front page will serve to flush money out of the commodity sector and into the Dollar.
The HUI fell down below the psychological and technical support level of 500 but it is struggling to recover it as I write this, albeit, just barely. The session low was a mere few points above the 50 day moving average which needs to hold to prevent the computer algorithms from banging them even lower. The index took out three of its major moving averages today; the 10, 20 and 40 day. Bulls need to get it back above the 515 level to shake the weaker shorts back out. If they decide to run instead, the index could drop as low as 480 before stabilizing. The hedgies are obviously wasting no time whatsoever in going right back in with those ratio spread trades again.
I found it very interesting that the bond market could not move significantly higher today especially with the equities floundering and the rush into the Dollar commencing. That has to be a bit disturbing to bond bulls. Apparently that market has not gotten over its being jilted by its lovers at the Fed who refused to come out last Friday and tell it how much they loved it by offering it a gigantic bouquet of freshly minted QE dollars. It is not difficult to see the factors at work in the bonds – take the QE out of the picture and it is focused on the enormous supply and the lackluster demand. That argues for lower bond prices (higher yields) to move the paper IOU’s. Factor in the QE, and the market gets giddy because it knows the Fed will buy the damn useless things.
Incidentally for you silver fans out there, silver, priced in terms of the Euro, made an all time high in price at today’s London Fix.
Most of the commodity world is lower today as the automatic selling programs kick in on account of the Dollar moving higher. Copper is getting whacked pretty hard as traders fret over decreased Chinese demand. Natural gas in an exception to the selling trend but it has been beaten with the ugly stick to the point that it is seeing a bit of short covering. Sugar is higher today as is coffee. At least milk is unchanged so if you order cream, it won’t cost you any extra.
Let’s wait and see how today’s fall out from the China rate hike news plays out before making any extrapolations. I think it is more of a tempest in a tea pot but that assumes that discretionary traders still exist. The markets are run by algorithms so we will have to see where those lead us the next couple of days and go from there. Nothing has changed except China hiked rates ¼%. Big deal….
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini









Are We Heading Into a Hyperinflationary Storm?