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In The News Today

Posted: Jan 14 2011     By: Jim Sinclair      Post Edited: January 14, 2011 at 12:04 pm
Filed under: In The News

Dear CIGAs,
The MOPE has started on President Hu’s visit from China. Sure there will be some face saving statements at the photo op, but nothing more.
The Federal Reserve says it will not bail out Main Street. Screw the little guy and bail out the Fat Cats. Of course that is MOPE.
You have local to state government rolling over and any recovery whatsoever goes directly into the tank. If the Fed keeps it up more bodyguards will be required to protect the Hall of Ivy building from the Main Street no account unwashed have-nots.
In other news, all the Bears in the woods are out again speaking on the price of gold.
Gold has a habit of drawing negative technical formations and then turning around and violating them bullishly. Fundamentally gold will look back at $1400 from $1650. Sir Dean Harry’s concern with the price of gold is highlighted in his most recent HSL Group letter titled, "Wake me up at $2400."
Consumer confidence falls, but the bullish excuses why proliferate the media. That is not dollar positive. The 2011 bull predictions are looking weaker by the day. For equities it means very little as QE2 is the real driver.
The .06% rise in retail sales was hailed as an indication of good business. Considering real inflation now, .06 is pitiful to everything but the media. Statistically it is a joke.

Jim Sinclair’s Commentary
The play on this is that food and fuel are volatile therefore they mean nothing much.
Who needs fuel or food?

Consumer Prices in U.S. Rose 0.5% in December; Core Up 0.1% By Shobhana Chandra – Jan 14, 2011 8:30 AM ET
The cost of living in the U.S. climbed more than forecast in December, led by higher fuel and food prices, while other goods and services showed the smallest annual increase on record.
The consumer-price index increased 0.5 percent, more than the 0.4 percent median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The so-called core rate, which excludes volatile food and fuel costs, rose 0.1 percent, in line with the median projection.
Core prices climbed 0.8 percent in 2010 as joblessness holding above 9 percent encouraged companies from Wal-Mart Stores Inc. to General Motors Co. to offer more promotions. Limited inflation and a labor market struggling to recover are allowing Federal Reserve policy makers to stick to their plan on additional monetary stimulus.
“Inflation remains benign,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. “Higher energy costs aren’t filtering through to the consumer. There’s no pressure on the Fed to remove its accommodative easing.”
The projected gain in consumer prices was based on the median of 82 economists in a Bloomberg survey. Estimates ranged from gains of 0.2 percent to 0.6 percent.
More…




Jim Sinclair’s Commentary
Those evil beings that have brought this upon the suffering cannot benefit. Their lives will be ruled by instant Karma.
I know these awful people, and I would not want their lives in exchange for their greed ridden money. I have partnered with them in my early years.
The following has been caused by OTC derivatives and nothing else. If OTC derivatives had not existed or was truly regulated this would be a normal 4 year correction and nothing more. Instead it is ending lives, marriages, family relationships and worse.
The Fed has said today to hell with Main Street. That is you!

Too Big to Fail? Homelessness Increases as Help Decreases
A report released yesterday confirmed startling increases in homelessness nationally. It’s the second report to do so in the past month. These findings should come as a wake-up call to anyone who cares about the fundamental values on which our country is founded.
The report, "The State of Homelessness in America," issued by the National Alliance to End Homelessness, assembles data that show that from 2008 to 2009, homelessness in general increased by 3 percent, and homelessness among families increased by 4 percent. Given that the economic recession and foreclosure crises were already in full swing by then, this may not seem like an unexpected increase.
But here’s the catch: The Alliance numbers capture only a very narrowly defined slice of homelessness: People in shelters or other emergency housing, or in public places. In addition to these increases, the number of families living doubled-up with others due to economic necessity increased by 12 percent to more than 6 million. The increases documented in the Alliance report parallel those reported by the U.S. Conference of Mayors in December 2010, which found a 9 percent increase in family homelessness over the past year in the 27 cities it surveyed across the country.
The report doesn’t classify this group as homeless, but many organizations, including the National Law Center on Homelessness & Poverty, do. So does the U.S. Department of Education as it determines when children are homeless. For the people affected, the difference between a spot on a friend’s couch or floor and a shelter or park bench is significant — albeit short-lived. As the report notes, doubling up is a typical route to so-called "literal" homelessness: The report estimates that one in 10 of those who are doubled-up will eventually find themselves in shelters or on the streets.
Regardless of what we call it, the increase in doubling up makes a couple of things clear: First, homelessness is part of a larger continuum, and it is affecting an increasingly broader part of the U.S. population. Both new reports pointed to job loss and the foreclosure crisis as major causes of the recent dramatic increases, a trend that the Law Center has been tracking. As both trends continue to sweep across the country, the numbers of people affected will almost certainly increase, and the suffering of those already affected deepen.
The other clear and even more disturbing point is this: Despite the enormity of the current crisis, there is virtually no safety net in place to help those affected. According to federal government data, some 40 percent of all homeless people are unsheltered due to lack of resources. The U.S. Conference of Mayors’ report states that in the cities they surveyed an average of 27 percent of requests for emergency shelter went unmet. In some communities, there are now waiting lists for emergency shelter.
More…


Jim Sinclair’s Commentary
If energy is a tax on consumers what in the dickens do you think increased state taxes are?
As a result states will not increase their income to any degree of their expectations.
The Formula of 2006 grinds on.




Jim Sinclair’s Commentary
Honest people are scorned, but then again they are from Main Street and who cares about them. Certainly not the Federal Reserve.
Screw the Sheeple and let them still sleep on.

Christie Bankruptcy Remark Amid Bond Sale Draws Flak By Brendan A. McGrail – Jan 14, 2011 4:29 AM PT
New Jersey Governor Chris Christie’s comments that rising health-care costs might “bankrupt” the state, made on the same day of a planned bond sale, drew criticism for their poor timing and may have driven borrowing costs higher.
About 20 minutes after Christie, 48, made the bankruptcy reference in a town-hall meeting in Paramus yesterday, the New Jersey Economic Development Authority cut its tax-exempt school bond offering by almost half to $777.5 million.
“He is scaring some people when he says the state is going bankrupt,” said Gary Pollack, head of bond trading at Deutsche Bank Private Wealth Management in New York.
“It wasn’t timed well,” said Pollack, who oversees $6 billion and said he continues to buy New Jersey bonds.
Linking the governor’s remarks with the decision to reduce the debt sale is a “completely bogus interpretation and an irresponsible connecting of unconnected events,” Michael Drewniak, a spokesman for Christie, said in an e-mail to Bloomberg News. A spokesman for the Treasury Department also denied any connection, as did the deal’s main underwriter.
More…




Jim Sinclair’s Commentary
The operation to hold gold below $1400 is massive MOPE and destined to fail.
Any idea that all is well or even getting better has its foundation in sand.

New Hit to Strapped States
Borrowing Costs Up as Bond Flops; Refinancing Crunch Nears By MICHAEL CORKERY And IANTHE JEANNE DUGAN
With the market for municipal bonds tumbling, cities, hospitals, schools and other public borrowers are scrambling to refinance tens of billions of dollars of debt this year, another sign that the once-safe market is under duress.
The muni bond market was hit with the latest wave of bad news Thursday, prompting a selloff that sent the market to its lowest level since the financial crisis. A New Jersey agency was forced to cut the size of a bond issue by about 40% because of mediocre demand, and pay a higher rate than expected. And mutual fund giant Vanguard Group shelved plans for three new muni bond funds, citing market turmoil.
"We believe that this delay is prudent given the high level of volatility in the municipal bond market," said Rebecca Katz, spokeswoman for the nation’s biggest fund company.
The market has fallen every day this week, and investors have been net sellers of their holdings in municipal-bond mutual funds for nine straight weeks, according to fund tracker Lipper FMI.
Yields on 30-year triple-A rated general obligation bonds shot higher to 5.01% on Thursday, reflecting a spike in perceived risk, according to Thomson Reuters Municipal Market Data. The last time those bonds yielded 5% was Jan. 30, 2009, during the financial crisis.
More…




Jim Sinclair’s Commentary
CIGA Las Sequeira reminds us that demand for gold is not reflected by the Comex machinations.

Shanghai Gold Premium Hits $23/Oz, China Opens 1 Million Gold-Savings Accounts THE PRICE OF GOLD touched fresh 1-week highs in late Asian trade on Wednesday, slipping back as European stock markets rose and Portugal’s new issue of 10-year debt found what bond dealers called "strong demand".
The gold price in Dollars retreated below $1380 from $1387.50 per ounce.
Silver bullion traded in wholesale 1,000-ounce bars slipped 1.4% from its own 1-week high at $29.89 per ounce.
"The physical market remains tight," said an Asian dealer on Wednesday morning, three weeks ahead of the Chinese New Year, with premiums for wholesale gold bars – over and above London prices – holding near this week’s two-year highs at $3 per ounce in Hong Kong.
Over in mainland China, contract prices at the Shanghai Gold Exchange (SGE) ended Wednesday’s session unchanged at the equivalent of $45 per gram – some 1.8% above London benchmark quotes and equal to a premium of more than $23 per ounce.
"The factory worker who assembled your iPhone is buying gifts for his family in Shenzhen before going back home to Hunan," writes another Hong Kong gold bullion dealer.
More…

Jim’s Mailbox

Posted: Jan 14 2011     By: Jim Sinclair      Post Edited: January 14, 2011 at 10:30 am
Filed under: Jim's Mailbox

Jim Sinclair’s Commentary
Analyst Richard B reviews the bank closing by the FDIC, the overvaluation, and the huge loss guarantees given to those that take over the busted institution.

Dear CIGAs,
The FDIC ended 2010 by closing 11 more banks between November 12, 2010, and December 17, 2010. That brought to 157 the total number of banks closed during 2010.
To put this in perspective, a total of 323 banks have been closed since late 2007. Three were closed in 2007, 11 in 2008, 140 in 2009 and 157 in 2010.
Collectively, these last 11 banks closed in 2010 had declared assets of $2.56 billion and deposits of $2.26 billion. The FDIC’s estimated cost of closing all 11 banks was $580 million, about 26% of deposits. The FDIC’s estimated losses for all of 2010 totalled $22.2 billion.

Loss Share and More Loss Share
In 9 out of 11 cases, 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 11 closings, the FDIC entered into new loss-share agreements covering an additional $1.72 billion in assets.
That brings the total face value of assets covered by FDIC loss share agreements up to about $190.74 billion as of the end of 2010. During 2010, the FDIC increased the total value of assets under loss share by at least $69 billion.

Failures Continue to Show Dramatic Overvaluations
These last 11 failures of 2010 continue to evidence the extent to which management of the failed banks exaggerated the value of the banks’ assets. Viewed as a whole, the 11 banks had declared asset values of $2.56 billion and deposits of $2.26 billion. The FDIC estimated the closings cost 580 million, meaning the banks’ assets were really only worth $1.68 billion. Overall, bank management overvalued assets by $880 million, around 52%.
In two cases, the degree of asset overvaluation was particularly heinous, even judging by recent standards. In both these examples, management overstated the value of the banks’ assets by more than 100%.
Paramount Bank of Farmington Hills, Michigan, had stated assets of $252.7 million and deposits of $213.6 million. The FDIC estimated its closing cost $90.2 million. Based on that estimate, the bank’s assets were really only worth $123.4 million, and had been overvalued by 105%.
United Americas Bank, National Association, of Atlanta, Georgia, had stated assets of $242.3 million and deposits of $193.8 million. The FDIC estimated its closing cost $75.8 million. Based on that estimate, the bank’s assets were really only worth $118 million, and had been overvalued by 105%.
None of the executives responsible for overstating the value of these assets are being criminally prosecuted. There was barely any mention of these outrageous failures in the popular media.
There could be no greater testament to the Financial Accounting Standards Board (“FASB”)’s having turned banks’ financial statements into running jokes. The FASB has freed bank executives to place outrageously high values on banks’ worst, least liquid assets, with impunity.

Banks Being Closed Still A Drop In The Bucket
Finally, in spite of the fact that the FDIC closed more banks in 2010 than in any other year of this crisis, it is clear its backlog of troubled banks is growing. In its third quarter report released late November 2010, the FDIC indicated the number of institutions on its “Problem List” grew to 860 from 829 in the prior quarter.
Each month, dozens of new banks come under the most serious Federal Reserve and FDIC enforcement orders, placing their solvency seriously in doubt. Meanwhile, less than a dozen of the terminally ill are put out of their misery.
This leads to examples like Gulf State Community Bank of Carrabelle, Florida, whose failure was announced on November 19, 2010. The declared value of its assets ($112.1 million) actually ended up being less than the amount of its deposits ($112.2 billion), even though those assets were overvalued by at least 62%. Gulf State’s failure cost the FDIC an estimated $42.7 million, 38% of deposits.
This failure to deal with the problem in a timely and effective manner is Management of Perspective Economics, plain and simple. The problem is not going away; it is getting worse. Believing otherwise could be extremely hazardous to your financial health.
Respectfully yours,
CIGA Richard B



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