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Dollar to Become World's `Weakest Currency,' Drop to 75 Yen, JPMorgan Says

posted by Eric De Groot at Eric De Groot - 3 hours ago

Another way of saying this would be that JPMorgan expects the price of gold to be the strongest in U.S. dollar terms. The rewording, being equally correct, only begs further explanations. This is not... [...

 

 

 

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A Closer Look At FDIC Bank Closures

Posted: Nov 18 2010     By: Jim Sinclair      Post Edited: November 18, 2010 at 2:20 pm
Filed under: General Editorial

Jim Sinclair’s Commentary

I consider this analysis one of the most important articles ever carried on www.jsmineset.com. I ask you to please read it so you know what a camouflage operation this so called recovery is.
Major congratulation are due to CIGA Richard for all the work he has put into bringing this to our attention.
Look how degraded the Western Financial system is, yet the public sees no wrongdoing in what Western Society has become.
The Piper must, will and is being paid.

Dear CIGAs,
The following analysis covers the 38 banks closed by the FDIC between August 6, 2010, and November 12, 2010. So far this year, the FDIC has closed 146 banks. So far in this crisis, since 2007, it has closed 311 banks.
Collectively, the 38 banks had stated assets of $13.78 billion and deposits of $11.97 billion. The FDIC’s estimated cost of closing all 38 banks was $2.72 billion, about 23% of deposits. That brings the FDIC’s total estimated losses for 2010 up to $21.6 billion.

Loss Share Remains The Rule
In the overwhelming majority of cases (30 closings out of 38), resolution of the failures was accomplished by way of the FDIC entering into loss share agreements covering a high percentage of the assets taken over by the successor banks. In connection with these 30 closings, the FDIC entered into new loss-share agreements covering an additional $8.2 billion in assets.
That brings the total face value of assets covered by FDIC loss share agreements up to about $189 billion. As we have discussed in the past, these loss share agreements typically guarantee at least 80% of the value of assets over a period of eight to ten years.
This is another form of quantitative easing being practiced by the federal government. FDIC loss share agreements place an artificial floor under the value of bank assets. This forestalls the day of reckoning when banks are forced to own up to the decimated condition of their balance sheets.

Failures Show Dramatic Overvaluations
One of the more valuable bits of information we can glean from FDIC bank failure announcements is the extent to which management of the failed banks exaggerated the value of the banks’ assets. These exaggerations were made legal in early 2009 when the Financial Accounting Standards Board repealed fair value accounting requirements.
Taking the 38 failed banks as a whole, they had declared assets of $13.78 billion and deposits of $11.97 billion. The FDIC estimated the closings cost $2.72 billion, meaning the banks’ assets were really only worth $9.25 billion. Overall, bank management overvalued assets by $4.53 billion, around 49%.
Specific examples were far worse:
Maritime Savings Bank of West Allis, Wisconsin, had stated assets of $350.5 million and deposits of $248.1 million. The FDIC estimated its closing cost $83.6 million. Based on that estimate, the bank’s assets were really only worth $164.5 million, and had been overvalued by 113%.
ShoreBank of Chicago, Illinois, had stated assets of $2.16 billion and deposits of $1.54 billion. The FDIC estimated its closing cost about $370 million. Based on that estimate, the bank’s assets were really only worth about $1.17 billion, and had been overvalued by 84%.
Premier Bank of Jefferson City, Missouri, had stated assets of $1.18 billion and deposits of $1.03 billion. The FDIC estimated its closing cost $407 million. Based on that estimate, the bank’s assets were really only worth $623 million, and had been overvalued by 84%.
K Bank of Randallstown, Maryland, had stated assets of $538.3 million and deposits of $500.1 million. The FDIC estimated its closing cost $198.4 million. Based on that estimate, the bank’s assets were really only worth $301.7 million, and had been overvalued by 78%.
Finally, Horizon Bank of Bradenton, Florida, had stated assets of $187.8 million and deposits of $164.6 million. The FDIC estimated its closing cost $58.9 million. Based on that estimate, the bank’s assets were really only worth $105.7 million, and had been overvalued by 78%.

Pace of Bank Closings Artificially Slow
The FDIC’s closure of 38 banks over three months is by no means an insignificant number. However, in the context of the FDIC’s overhang of troubled banks, it suggests the pace of bank closings is being kept artificially low.
As of April 2010, there were about 425 banks operating under serious FDIC enforcement orders that called into question the banks’ solvency. Since then, upwards of 25 new banks have come under such orders each month.
Therefore, closing 13 banks a month has done nothing to reduce the backlog of troubled banks operating in the Country. That backlog could only have grown.
Most likely, the pace of bank closings had been held back artificially by the need to keep up appearances for the benefit of the mid-term elections. With those now behind us, I would expect the pace of bank closings to accelerate considerably.
Respectfully yours,
CIGA Richard B.

 

In The News Today

Posted: Nov 18 2010     By: Jim Sinclair      Post Edited: November 18, 2010 at 2:07 pm
Filed under: In The News
Jim Sinclair’s Commentary
Washington’s purchase by Wall Street has created an amalgamation between law and those that would ignore law for profit, arrogantly, in the light of day and now without accountability.
This article lays out the truth that foreclosure fraud is the product of producing false evidence created at the pleasure and for the purpose of the Banksters and courts.
Some have called us the devils. Looking at our Bankster run nation, it is not hard to understand why.
Main Street is real America, but it is down trodden and silent.

Janet Tavakoli: JP Morgan, Rubin Fraud on the Courts and Fraud as a Business Model Janet Tavakoli
President, Tavakoli Structured Finance
Posted: November 12, 2010 03:51 PM
Foreclosure fraud isn’t about losing paperwork or having incorrect paperwork. It is about committing fraud and trying to manipulate the U.S. legal system. No one — not even a bank — can show up in court with phony evidence.
State Attorneys General decry foreclosure fraud, because among other things, people signed affidavits making representations that were untrue. This is fraud on the court. All of these foreclosures may be vacated.
Corrupt people in Congress and corrupt regulators cannot intervene for the banks this time. Banks have to face state courts, and many Attorneys General are happy to take them on.
Banks that committed fraud on the court do not get a do-over. Even if they can show up later with correct documents, it does not erase the original crime of fraud on the court. Anyone who presented phony documents as evidence in court broke the law.
Former Ohio Attorney General Richard Cordray advised banks that engaged in fraud on the courts (by submitting falsified affidavits) to negotiate meaningful loan modifications.
More…

Jim’s Mailbox

Posted: Nov 18 2010     By: Jim Sinclair      Post Edited: November 18, 2010 at 2:03 pm
Filed under: Jim's Mailbox
Dear Jim,
Why is Ireland taking a massive loan it claims it doesn’t want or need? Is the game plan here to get the European periphery fully on the hook to the ECB and the IMF, the way the IMF has repeatedly done in Africa? Is the idea to make sure no one ever entertains the thought of leaving the Euro or the EU, and that the paths to exit are blocked via indenture?
Regards,
CIGA Anon

Dear CIGA Anon,
Contrary to the general thinking, you are correct.
Regards,
Jim

Dollar to Become World’s `Weakest Currency,’ Drop to 75 Yen, JPMorgan Says CIGA Eric
Another way of saying this would be that JPMorgan expects the price of gold to be the strongest in U.S. dollar terms. The rewording, being equally correct, only begs further explanations. This is not an option.
It’s far too late for the austerity, balanced budget, or, in other words a strong dollar policy. Notice how infrequent the phrase “strong dollar policy” is spoken today. Capital knows that any serious adoption of austerity policies will bring down a world of hurt on those clamoring for it.
As I have said many times before, the flow of capital (secular trends) demand only acquiescence. Opinions, egos, or theories against their direction always fail.
The dollar may fall below 75 yen next year as it becomes the world’s “weakest currency” due to the Federal Reserve’s monetary-easing program, according to JPMorgan & Chase Co.
The U.S. central bank, along with those in Japan and Europe, will keep interest rates at record lows in 2011 as they seek to boost economic growth, said Tohru Sasaki, head of Japanese rates and foreign-exchange research at the second-largest U.S. bank by assets. U.S. policy makers may take additional easing steps following the $600 billion bond-purchase program announced this month depending on inflation and the labor market, he said.
Source: bloomberg.com
More…

Hourly Action In Gold From Trader Dan

Posted: Nov 18 2010     By: Dan Norcini      Post Edited: November 18, 2010 at 2:14 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
What a difference an evening makes – once word began circulating that Ireland was going to be bailed out by the ECB suddenly the hedge funds fell back in love with risk after seeking a divorce from her just the other day. The result – where some markets were limit down yesterday (cotton), today there were limit up. Such is the fickle nature of global capital flows or more appropriately, hot money flows. Do some of you out there find it as amusing as I do watching these hedge funds panicking over Chinese talk about rate hikes to tame inflation only to then run right back into every single market that they threw away the previous few days once they see more QE this time coming from the ECB.
Make no mistake about it, the ECB is engaging in its own version of QE, just as Jim has repeatedly said they would. And if anyone is under any illusions that this was about Ireland, please let me dispel that notion here and now. It is about bailing out the BANKS who are on the hook for the money loaned to Ireland. It is always about the big banks ( I think that there is a special place in hell reserved for that crowd of international thieves). Now that Ireland has apparently received the same treatment as Greece, I suppose Portugal and Spain are next in line.
I wonder what Germany must be thinking about all this.
Regardless, the European Monetary Union is a joke – everyone knows it – there is no one size fits all policy that can ever make this forced union which resembles a patchwork quilt function properly. That did not stop the hedgies from bidding up the Euro once again with the result that down went the Dollar and up went the entirety of the commodity world. Fundamentals be damned; it is off to the races again as inflation is now back in vogue whereas yesterday it was deflation that the hedge fund world was enamored with.
I still have my eyes on the bond market as it could not take out this week’s high and is sharply lower today as I type these comments. That market more than any other is what I am watching to tell me what the investor sentiment is towards inflation or deflation. Based on what I am seeing of the price action, inflation is winning out unless the bonds can pull off a major reversal and climb back above 129 by tomorrow afternoon. That looks remote right now. Failure to do so will have cemented a major top on the weekly charts with the bond market failing to climb much above 135 back in early October thus creating a double top that was confirmed with last week’s breach of the 129 level. The implications for gold are obvious – it is going to move considerably higher once the market becomes totally convinced that the gazillions of dollar and now Euros floating around the planet are going to result in a strong surge in inflation. China is already struggling with inflationary pressures, thanks in part to their refusal to let their currency float higher in combination with the Fed’s QE which is pushing investment capital into China and causing enormous problems for their managers.
The bounce higher in gold is friendly as it is working to confirm technical chart support centered near $1,330. Bulls are not out of the woods yet as they must get the price back at least as high as $1,365 to give themselves some breathing room and unnerve some of the new shorts in the market. As long as the ten day moving average is headed lower, some technicians will look to sell rallies so the first order of business to revive the gold bull will be to get this moving average headed up, or at least no longer moving down. Maybe some more consolidation is the order of the day. I would much prefer to see that sideways trade that holds above support and cements a new and higher price level.
Silver looks better on the charts than does gold as it is back above the 10 day moving average which never turned lower although price did sink down below this level. The 20 day MA however has been thus far serving as downside support. Bulls will need to push it back through and close it above $27.80 or so to snatch back the initiative from the shorts and force some of them to cover.
The Dollar had pushed through all of its major moving averages (10 – 50 day) on its chart and looked as if it was making an upside run towards 80 but it has retreated on news about Ireland. We will have to keep a close watch on its chart to see if we can spot any clues as to what is coming next. As long as market participants are convinced that the ECB will be successful at containing any spread of financial contagion, the Dollar will encounter selling pressure. Any shift of focus back onto China and rate hike talk will spur Dollar buying and commodity selling. Take your pick as to what the funds are going to be looking at on any given day. You might as well attempt to count the grains of sand on a beach as to decipher what this crowd is going to be gazing at in tomorrow’s trade. That is why it is still best to use the longer term charts such as the weekly to get the main trend of these markets and try not to let the day to day gyrations captivate your attention too much. Too short sighted of a focus will end up only giving you a case of severe whiplash. Suffice it to say that any crowd of traders who throw away most of their positions one day only to put them all back on the next are not making informed calm decisions but are trading emotional swings. Using the word, “Schizophrenic” to describe this crowd is an insult to those who truly have to contend with that malady. Learn the fundamentals of the markets you trade and let these bozos set up opportunity for you from which you can profit. Very few of them are going to survive the mess that they have made of our markets.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini