Posted: Jan 26 2011 By: Jim Sinclair Post Edited: January 26, 2011 at 1:39 pm
Filed under: General Editorial
Dear CIGAs,
There is no top in gold. Tops in gold are vertical, full of flame and fury, and generally double the price in a matter of weeks.
Do you remember the Head and Shoulders in gold that broke down into a bear trap? We have seen so many bear tops in gold that turned out to be bear traps since $248 I have lost count.
When you comment on Martin Armstrong keep in mind he publish an article titled "Gold $5000"
The feel good Dow has many convinced we are headed into good business We are not.
The equities market is driven by the liquidity of QE2. The same thing that will drive gold ballistic will also drive equities, and that is the sum total of all QEs.
It is not business that gold reflects. It is debt. If you have my handbook on gold this is a good time to re-read it.
The dollar is trading quite sadly. In the end the relationship with gold and the dollar is inverse.
Someday people will consider selling into strength on a step ladder so they can buy on weakness on a step ladder down, or at least not have heart failure.
Gold reflects the article below.
Budget deficit to hit $1.48 trillion By Richard Cowan and Kim Dixon
WASHINGTON | Wed Jan 26, 2011 12:02pm EST
WASHINGTON (Reuters) – The U.S. budget deficit this year will jump nearly 40 percent over prior forecasts, mostly due to the mammoth tax-cut package brokered by President Barack Obama and lawmakers last month, the Congressional Budget Office said on Wednesday.
The CBO said the fiscal 2011 deficit will hit $1.48 trillion, up from last August’s $1.07 trillion estimate, which was crafted before Bush-era tax rates were extended at a cost of $858 billion over 10 years.
"The United States faces daunting economic and budgetary challenges," the CBO said.
The new forecast is part of a semi-annual economic review by the CBO, the nonpartisan budget analyst for Congress.
The latest CBO estimates could exacerbate a deeply partisan debate in Congress and with Obama over the best way to tackle the $14 trillion federal debt.
Congress is grappling with spending levels for the rest of this year and committees are starting to look at budget blueprints and spending for fiscal 2012 as well.
In his State of the Union speech to Congress on Tuesday, Obama called for tackling the country’s fiscal problems through tax reform and a five-year spending freeze for many domestic programs, which he said would save $400 billion over 10 years.
Obama also warned the tax breaks for the wealthy that he went along with in December to win Republican support were unsustainable.
More…
As Bankers Kill Off Mark-To-Market For Good, Former FDIC Chairman Gloats
$35 Billion 5 Year Auction Prices At 2.041%, Monetization Of Primary Dealer Takedown To Occur On February 9
Overnight Clips From A Revolutionary Egypt
Posted: Jan 26 2011 By: Dan Norcini Post Edited: January 26, 2011 at 1:34 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Click image to enlarge today’s Continuous Commodity Index chart in PDF format with commentary from Trader Dan Norcini
Posted: Jan 26 2011 By: Jim Sinclair Post Edited: January 26, 2011 at 1:30 pm
Filed under: In The News
Jim Sinclair’s Commentary
What OTC derivatives do not do to the international banking houses, litigation will.
Now it is getting so common that it may not go to settlement. BofA simply cannot settle this one.
BofA’s Countrywide sued for ‘massive fraud’
Mortgage backed securities bought by institutional investors now at junk status By Jonathan Stempel
updated 1/25/2011 6:54:05
NEW YORK — Bank of America Corp’s Countrywide mortgage unit has been sued by investors claiming they were victimized in a "massive fraud" when they bought mortgage-backed securities.
The lawsuit was filed on Monday in a New York state court by 12 plaintiffs including the TIAA-CREF fund family, New York Life Insurance Co and Dexia Holdings Inc.
According to the complaint, the investors bought hundreds of millions of dollars of Countrywide securities from 2005 to 2007 that they thought were "conservative, low-risk investments."
The investors said Countrywide misrepresented the securities’ safety in offering documents and elsewhere, and compromised their investments by ignoring its underwriting guidelines.
As a result, the complaint said, most of the securities now carry "junk" credit ratings rather than the "triple-A" ratings they once had, resulting in "significant losses."
More…
Jim Sinclair’s Commentary
This is very sad. The fraud moves on. The can is being kicked down a dead end road.
All the paper and spit laid on the broken backs of Western financial entities must dissolve into a bust in confidence, resulting in a dollar lower than anyone anticipated.
FASB Backs Off Fair-Value of Loans Proposal After Opposition By Michael J. Moore – Jan 25, 2011 5:13 PM ET
The Financial Accounting Standards Board backed off from its plan to make banks use market values to calculate how much the loans on their books are worth.
The panel, which sets U.S. accounting standards, today approved a change to its proposal that will allow banks to report some financial instruments on their balance sheets at amortized cost, as they currently do, rather than at fair value. The biggest U.S. banks and the American Bankers Association had opposed the original plan.
FASB’s planned rule would have forced lenders to mark deposits and loans to market values as they already do for traded securities. Not all changes in the values of assets and liabilities would affect net income, since some fair-value adjustments can be recorded in what’s called “other comprehensive income,” a balance-sheet item added or deducted from equity.
“The vote today is a reflection of our due process at work and how important input from our constituents is in decision making,” said Neal E. McGarity, a spokesman for Norwalk, Connecticut-based FASB.
The original proposal, which prompted 2,814 comment letters to FASB since its May release, was opposed by lenders including Wells Fargo & Co. and Regions Financial Corp. and former Federal Deposit Insurance Corp. Chairman William Isaac, now chairman of Cincinnati-based Fifth Third Bancorp, Ohio’s largest lender.
More…
Posted: Jan 26 2011 By: Jim Sinclair Post Edited: January 26, 2011 at 1:27 pm
Filed under: Jim's Mailbox
Jim Sinclair’s Commentary
The fancy song and dance manipulating every aspect of the Western financial world will come to an end.
Dear CIGAs,
So far this year, between January 7, 2011 and January 21, 2011, the FDIC has closed seven banks. Since the beginning of 2007, a total of 330 banks have been closed.
Collectively, these seven banks had declared assets of $3.72 billion and deposits of $3.20 billion. These failures cost the FDIC an estimated $641 million, about 20 percent of deposits.
Loss Share Remains The Rule In 2011
Of these first seven closures, six were accomplished by way of the FDIC entering into loss share agreements insuring the value of most of the assets taken over. The FDIC entered into new loss share agreements covering an additional $2.27 billion in assets.
That brings to about $193 billion the total value of assets guaranteed by the FDIC under loss share agreements since 2008. These agreements have acted as a huge “floor” propping up the paper value of banks’ assets.
Loss share allows failed banks’ assets to change hands without any real, present market value being established. Avoiding the establishment of real market values has become a top priority of the banking sector and its regulators.
Failures Show FASB-Blessed Overvaluations
We are coming up on the two-year anniversary of the Financial Accounting Standards Board (“FASB”)’s having done away with fair value accounting requirements for banks’ least liquid assets. With this dramatic reversal, the FASB relieved banks from the obligation to value assets at what would be paid for them in the open market. Instead, bank managers are permitted to come up with their own, theoretical valuations.
Like the FDIC’s reliance on loss share, the FASB’s abandonment of fair value accounting requirements has served to artificially prop up the paper value of banks’ assets. Most people do not realize that the supposed “recovery” in bank earnings over the past two years has primarily been due to this accounting trick.
The best evidence of this trick accounting comes to light when a bank failure is announced and the FDIC has to come up with an estimate of its losses. More often than not, the FDIC’s loss estimates reveal overvaluations that would be considered criminal had they not been specifically sanctioned by the FASB and Washington lawmakers.
The worst examples so far in 2011 are as follows:
Enterprise Banking Company of McDonough, Georgia, had stated assets of $100.9 million and deposits of $95.9 million. The FDIC estimated its closing cost $39.6 million. Based on that estimate, the bank’s assets were really only worth $56.3 million, and had been overvalued by 79%.
Oglethorpe Bank of Brunswick, Georgia, had stated assets of $230.6 million and deposits of $212.7 million. The FDIC estimated its closing cost $80.4 million. Based on that estimate, the bank’s assets were really only worth $132.3 million, and had been overvalued by 74%.
Legacy Bank of Scottsdale, Arizona, had stated assets of $150.6 million and deposits of $125.9 million. The FDIC estimated its closing cost $27.9 million. Based on that estimate, the bank’s assets were really only worth $98 million, and had been overvalued by 54%.
United Western Bank of Denver, Colorado, had stated assets of $2.05 billion and deposits of $1.65 billion. The FDIC estimated its closing cost $312 million. Based on that estimate, the bank’s assets were really only worth $1.34 billion, and had been overvalued by 53%.
These overvaluations of 50% and more are considered commonplace and draw no particular attention. Expect to see more of the same throughout 2011.
Respectfully yours,
CIGA Richard B.
Jim,
Lowes announces 1700 managers to be laid off but 8,000 -10,000 part time weekend jobs to be created.
http://www.cnbc.com/id/41265051
Now if only the rest of the country would follow suit everybody would be employed in no time.
We will all be so happy working for less with no benefits.
Thanks for keeping us so well informed
CIGA Fred W
China Plays Europe Card
Click image to enlarge today’s Continuous Commodity Index chart in PDF format with commentary from Trader Dan Norcini
Posted: Jan 26 2011 By: Jim Sinclair Post Edited: January 26, 2011 at 1:30 pm
Filed under: In The News
Jim Sinclair’s Commentary
What OTC derivatives do not do to the international banking houses, litigation will.
Now it is getting so common that it may not go to settlement. BofA simply cannot settle this one.
BofA’s Countrywide sued for ‘massive fraud’
Mortgage backed securities bought by institutional investors now at junk status By Jonathan Stempel
updated 1/25/2011 6:54:05
NEW YORK — Bank of America Corp’s Countrywide mortgage unit has been sued by investors claiming they were victimized in a "massive fraud" when they bought mortgage-backed securities.
The lawsuit was filed on Monday in a New York state court by 12 plaintiffs including the TIAA-CREF fund family, New York Life Insurance Co and Dexia Holdings Inc.
According to the complaint, the investors bought hundreds of millions of dollars of Countrywide securities from 2005 to 2007 that they thought were "conservative, low-risk investments."
The investors said Countrywide misrepresented the securities’ safety in offering documents and elsewhere, and compromised their investments by ignoring its underwriting guidelines.
As a result, the complaint said, most of the securities now carry "junk" credit ratings rather than the "triple-A" ratings they once had, resulting in "significant losses."
More…
Jim Sinclair’s Commentary
This is very sad. The fraud moves on. The can is being kicked down a dead end road.
All the paper and spit laid on the broken backs of Western financial entities must dissolve into a bust in confidence, resulting in a dollar lower than anyone anticipated.
FASB Backs Off Fair-Value of Loans Proposal After Opposition By Michael J. Moore – Jan 25, 2011 5:13 PM ET
The Financial Accounting Standards Board backed off from its plan to make banks use market values to calculate how much the loans on their books are worth.
The panel, which sets U.S. accounting standards, today approved a change to its proposal that will allow banks to report some financial instruments on their balance sheets at amortized cost, as they currently do, rather than at fair value. The biggest U.S. banks and the American Bankers Association had opposed the original plan.
FASB’s planned rule would have forced lenders to mark deposits and loans to market values as they already do for traded securities. Not all changes in the values of assets and liabilities would affect net income, since some fair-value adjustments can be recorded in what’s called “other comprehensive income,” a balance-sheet item added or deducted from equity.
“The vote today is a reflection of our due process at work and how important input from our constituents is in decision making,” said Neal E. McGarity, a spokesman for Norwalk, Connecticut-based FASB.
The original proposal, which prompted 2,814 comment letters to FASB since its May release, was opposed by lenders including Wells Fargo & Co. and Regions Financial Corp. and former Federal Deposit Insurance Corp. Chairman William Isaac, now chairman of Cincinnati-based Fifth Third Bancorp, Ohio’s largest lender.
More…
Posted: Jan 26 2011 By: Jim Sinclair Post Edited: January 26, 2011 at 1:27 pm
Filed under: Jim's Mailbox
Jim Sinclair’s Commentary
The fancy song and dance manipulating every aspect of the Western financial world will come to an end.
Dear CIGAs,
So far this year, between January 7, 2011 and January 21, 2011, the FDIC has closed seven banks. Since the beginning of 2007, a total of 330 banks have been closed.
Collectively, these seven banks had declared assets of $3.72 billion and deposits of $3.20 billion. These failures cost the FDIC an estimated $641 million, about 20 percent of deposits.
Loss Share Remains The Rule In 2011
Of these first seven closures, six were accomplished by way of the FDIC entering into loss share agreements insuring the value of most of the assets taken over. The FDIC entered into new loss share agreements covering an additional $2.27 billion in assets.
That brings to about $193 billion the total value of assets guaranteed by the FDIC under loss share agreements since 2008. These agreements have acted as a huge “floor” propping up the paper value of banks’ assets.
Loss share allows failed banks’ assets to change hands without any real, present market value being established. Avoiding the establishment of real market values has become a top priority of the banking sector and its regulators.
Failures Show FASB-Blessed Overvaluations
We are coming up on the two-year anniversary of the Financial Accounting Standards Board (“FASB”)’s having done away with fair value accounting requirements for banks’ least liquid assets. With this dramatic reversal, the FASB relieved banks from the obligation to value assets at what would be paid for them in the open market. Instead, bank managers are permitted to come up with their own, theoretical valuations.
Like the FDIC’s reliance on loss share, the FASB’s abandonment of fair value accounting requirements has served to artificially prop up the paper value of banks’ assets. Most people do not realize that the supposed “recovery” in bank earnings over the past two years has primarily been due to this accounting trick.
The best evidence of this trick accounting comes to light when a bank failure is announced and the FDIC has to come up with an estimate of its losses. More often than not, the FDIC’s loss estimates reveal overvaluations that would be considered criminal had they not been specifically sanctioned by the FASB and Washington lawmakers.
The worst examples so far in 2011 are as follows:
Enterprise Banking Company of McDonough, Georgia, had stated assets of $100.9 million and deposits of $95.9 million. The FDIC estimated its closing cost $39.6 million. Based on that estimate, the bank’s assets were really only worth $56.3 million, and had been overvalued by 79%.
Oglethorpe Bank of Brunswick, Georgia, had stated assets of $230.6 million and deposits of $212.7 million. The FDIC estimated its closing cost $80.4 million. Based on that estimate, the bank’s assets were really only worth $132.3 million, and had been overvalued by 74%.
Legacy Bank of Scottsdale, Arizona, had stated assets of $150.6 million and deposits of $125.9 million. The FDIC estimated its closing cost $27.9 million. Based on that estimate, the bank’s assets were really only worth $98 million, and had been overvalued by 54%.
United Western Bank of Denver, Colorado, had stated assets of $2.05 billion and deposits of $1.65 billion. The FDIC estimated its closing cost $312 million. Based on that estimate, the bank’s assets were really only worth $1.34 billion, and had been overvalued by 53%.
These overvaluations of 50% and more are considered commonplace and draw no particular attention. Expect to see more of the same throughout 2011.
Respectfully yours,
CIGA Richard B.
Jim,
Lowes announces 1700 managers to be laid off but 8,000 -10,000 part time weekend jobs to be created.
http://www.cnbc.com/id/41265051
Now if only the rest of the country would follow suit everybody would be employed in no time.
We will all be so happy working for less with no benefits.
Thanks for keeping us so well informed
CIGA Fred W
China Plays Europe Card
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