I TOLD YOU...GET READY...It's "print... or die"... or "print and die".

To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical. - Thomas Jefferson


Posted: Jul 10 2010 By: Jim Sinclair Post Edited: July 10, 2010 at 5:54 pm

Filed under: Jim's Mailbox

Bullish Money Flows in Gold
CIGA Eric

Targeted, fearful headlines, intended to create an emotional response in gold, continue to hide inflows (outflow of short) into weakness from connected players. The operation is coordinated and professional.

Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest

While connected players setup for the next advance, they do so while retail money is clearly on the wrong side of the trade (short).

Gold London P.M Fixed and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest

Are you ready for the unexpected?

More…

European Banks are Worse than Wall Street

World Sovereign Default Risk Rose 30% as European Debt Crisis Deepened

Venezuela nabs two for trying to 'Twitter' a run on banks. Consider this fair warning on a new threat: "flash mobs" that could trigger crises including bank runs, and runs on key commodities. Do you remember how Johnny Carson made one offhand remark that sparked "The Toilet Paper Crisis of 1973"? The burgeoning social networks could be used to spread a panic far and wide, whether it is justified or not.


Dollar weakness reflects optimism. Tony's comments: "How upside-down is people's thinking when the value of the dollar falling is seen as a good thing, because people will pull out of gold and silver to hold counter-inflationary real money? Are people so obsessed with the numbers 'Hey, I have 10% more dollars now!' - that they don't think about what these changes mean? 'Why did the price of everything go up 15%?'"


Secret gold swap has spooked the market


Jimmy Rogers: 'I don't have investments in the UK'.


Americans May Be Slammed with Shocking Tax Hike


US Shopping Center Vacancies Approach Record High


Before The Bell: US Stock Futures Down Over Worries On Growth





U.S. marks 3rd-largest, single-day debt increase, $166 billion jump spurs concerns over policy.


Deficit hits $1 trillion in June for second year, and IMF presses US to cut debt,


Europe's "Toothless" Bank Tests Making Matters Worse


New Loan Delinquencies on the Rise Again


Office Vacancy Rate Keeps Climbing


U.S. Tomahawk Missiles Deployed Near China Send Message.

IF YOU DON"T KNOW WHAT A DOLLAR IS...HOW CAN YOU EXPECT TO PROTECT YOURSELF?

Part 2



Richard Russell: Everything you need to know about gold in three sentences Thursday, July 08, 2010
Text Size:
From Richard Russell in Dow Theory Letters:

...As I've said a thousand times, Fed Chief Bernanke will absolutely not accept deflation...

Shrewd gold-accumulators are well aware of [this]. As the deflationary and deleveraging forces press on the US economy, the Bernanke Fed is ready to devalue the US dollar in its ("whatever it takes") battle to hold back deflation.

Let's boil the whole thing down to three sentences.

(1)The Fed will not tolerate the growing forces of deflation.

(2) To combat the deflationary forces, the Fed will devalue the dollar by printing trillions more of Federal fiat money.

(3) Once it is realized that the Fed is on the path to devalue the dollar, there will be a panic to buy and own gold.

Crux Note: Learn more about the excellent Dow Theory Letters here.



Top investor Hussman: March 2009 lows won't hold
Says stocks are grossly overvalued...



Mysterious BIS gold swaps are likely a bullion bank bailout



Gold fund manager Holmes: Gold will soar in deflation
"Whenever you have big currency instability, gold starts to perform as an attractive asset class."

Mysterious BIS gold swaps are likely a bullion bank bailout

James Turk: Inflation, not deflation, is the threat to the dollar

Time And Time Again

Posted: Jul 08 2010 By: Jim Sinclair Post Edited: July 8, 2010 at 9:22 pm

Filed under: General Editorial

Dear Friends,

Gold is headed to $1650 and beyond. All your concerns in retrospect will be seen to have been concerns caused by manufactured noise.

Time and time again you have seen this. Time and time again gold will not be stopped.

Nothing has changed. Nothing has been rescued. The can that is being kicked daily down the path is going to turn around and bite the kickers.

Gold is the only insurance.

Regards,
Jim

Federal Budget Deficit Hits $1 Trillion For 1st 9 Months Of FY’10

WASHINGTON -(Dow Jones)- The federal budget deficit for the first nine months of the 2010 fiscal year was just over $1 trillion, the Congressional Budget Office reported Wednesday.

The shortfall, reflecting $2.6 trillion in outlays for the first three quarters and $1.6 trillion in receipts, narrowed slightly compared with the same point in fiscal 2009.

Receipts were 0.5% higher for the period compared to the first three quarters of 2009, CBO said in its monthly budget review.

The rise in revenues was a result of increased corporate tax collections, due to improving economic conditions, and a shift by the Federal Reserve to higher- yielding investments.

But individual income and payroll tax receipts were down 4% over the nine- month period, suggesting that wages and salaries have not improved to the extent that corporate profits have.

More…

“Myths” Paul Krugman Does Not Want To Talk About

Posted: Jul 08 2010 By: Greg Hunter Post Edited: July 8, 2010 at 8:56 pm

Filed under: USAWatchdog.com

Jim Sinclair’s Commentary

Gold is headed to and through $1650. Greg Hunter points out a major and present reason why.

Dear CIGAs,

I have been telling you for months there is going to be a double dip in the economy. Nobel Prize Winning economist Paul Krugman also thinks the economy is so bad we need to keep on stimulating the economy. In a New York Times Op-Ed piece last week, Krugman said, “. . . somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.” In short, cut backs, or austerity, is not what the economy needs right now. (Click here for the complete NYT Op-Ed from Krugman.)

In a nutshell, Mr. Krugman thinks America will do no harm in the short term if the U.S. government prints money to prop up the economy until it can stand on its own. He thinks it is a myth to believe in “invisible bond vigilantes” who financially attack countries with sky high debt. Krugman wrote, “Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there’s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off. What reason do we have to believe that any of this is true? Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems.”

What evidence does Krugman give that America can keep printing money until things get better? Interest rates on government debt are staying low. For example, the 10 year Treasury is paying around 3%. Krugman said, “Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately.”

What Krugman glosses over is the government has spent trillions keeping rates down and the economy going. The Fed has bought at least $1.25 trillion in mortgage backed securities with money printed out of thin air. There has been “quantitative easing” (code for money printing) to the tune of at least $300 billion to buy, what else, government debt. Congress has raised the debt ceiling to more than $14 trillion. That helped fund an $862 billion stimulus plan and a $700 billion TARP bailout for the banks. (Part of TARP has been paid back, but taxpayers are still owed around $296 billion.) Now, the Fed is considering ways to head off another plunge in the economy. A recent Telegraph UK story said, “Fed watchers say Mr. Bernanke and his close allies at the Board in Washingtonare worried by signs that the US recovery is running out of steam. . . .Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed’s balance sheet from $2.4 trillion . . .to uncharted levels of $5 trillion.” (Click here for the complete Telegraph UK story.)

There is also evidence the government is buying its own debt from hedge fund manager Eric Sprott. In December of 2009, Sprott took a hard look at who was buying Treasuries. Sprott discovered a sector the Treasury Department calls “Households” that bought $528 billion in government debt by the third quarter of 2009. The Sprott report said, “We must admit that we were surprised to discover that “Households” had bought so many Treasuries in 2009. They bought 35 times more government debt than they did in 2008. Given the financial condition of the average household in 2009, this makes little sense to us. With unemployment and foreclosures skyrocketing, who could afford to increase treasury investments to such a large degree? . . . -who is the Household Sector? They are a PHANTOM. They don’t exist. They merely serve to balance the ledger in the Federal Reserve’s Flow of Funds report.” (Click here for the Sprott report.)

In June of 2010, according to a CNN story, “Households” held nearly $800 billion in Treasuries. This “phantom” buying has people like Eric Sprott thinking, “It makes us wonder if it’s all just a Ponzi scheme.” Are “Households” and the world really flocking to the safety of Treasuries? Or is the Fed becoming a buyer of last resort? I think it is probably both. When the government buys its own debt, it creates false demand and artificially depresses interest rates.

The idea that interest rates are being magically held down by extreme demand for our ballooning debt is the real myth. Krugman fails to recognize any downside of all this money printing. Maybe he has fallen victim to his own prejudices. As Krugman says in the beginning of his Op-Ed piece, “Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.

Milton Freidman, another Nobel Prize winner in economics, summed up the result of a loose monetary policy in his famous quote, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” If the country takes the path Mr. Krugman is suggesting, we might not have a double dip in the economy, but we will have some very big inflation because you just can’t have it both ways.

Link to full article…

25 Signs of Expectations for an Economic Collapse in 2010

Michael T. Snyder

Bad economic signs are everywhere: consumer confidence is plummeting, banks are hoarding cash, financial experts are bearish and almost everyone is buying gold. The G20 nations have all pledged to dramatically cut government spending in an effort to control debt, so worries about a double-dip recession are escalating. A full-fledged economic collapse this year is possible, but it seems more likely that we will sink into another recession that could deepen into a depression heading into 2011. A sampling of the 25 signs that tell Snyder extreme economic stress lies dead ahead: the declining Consumer Confidence Index; banks hoarding cash in preparation for the next financial crisis; the Societe Generale’s forecast of $1,430 gold; the New York Times’ prediction of a third Depression; Moody’s comment regarding an ‘uncomfortably high probability’ of the US slipping back into recession; the US Department of Agriculture’s forecast of 43 million Americans on food stamps in 2011; George Soros’ claim that a European recession in the coming months is almost inevitable; Fed Chairman Bernanke’s public announcement that the US unemployment rate is likely to remain high for some time; the National League of Cities warning that large numbers of US cities will be facing horrible economic conditions over the next couple of years; debates at the Fed about what to do in the event of a double-dip recession; sales of new homes in the US at the lowest level ever recorded; 46 US states facing a Greek-style financial crisis. What to do about all this? Start preparing for difficult times: get out of debt, reduce expenses, develop additional income streams, store food and supplies. Don’t wait until the storm hits, start preparing immediately. The signs that we are headed towards an economic nightmare are all around us.

http://seekingalpha.com/article/212785-25-signs-of-expectations-for-an-economic-collapse-in-2010?source=email

CHART OF THE WEEK

www.theglobeandmail.com/report-on-business/economy/california-on-verge-of-system-failure/article1609891/

China seen letting U.S. down gently as it prepares for dollar's fall

Jim Sinclair’s Commentary

Here is your perfect example of the Ski Jump recovery.

The Self-Inflicted Insanity of American Unemployment

News that the unemployment rate has fallen to a "mere" 9.5% seems to suggest an improvement in our dire economic prospects. The reality, however, is far grimmer, as the latest US Bureau of Labor statistics indicate. On balance, it would seem that the apparent "ignition" to the economy achieved in March and April through expanding employment, income, spending and production has somehow "sputtered" in May and June. This is indeed disturbing, since such sustained "ignition" is now necessary since fiscal policy is about to go into reverse.

There are many costs associated with high unemployment, both economic and social. They include not only daily income losses, which are catastrophic for most Americans, but also increased crime rates, family breakdown, increased incidence of mental and physical health disorders, increased alcohol and substance abuse and a generalized misery (See Bill Mitchell).

Yet despite the obvious pathologies created by long-term unemployment, bad policy continues to drive the Obama administration to perpetuate these trends. Worse, with polls indicating rising discontent with Democrat incumbents in the House and Senate, the President’s political advisors appear to be recommending that the President ignore the advice of his economic team and press forward with deficit reduction ahead of job creation spending.

More…

Jim Sinclair’s Commentary

Actually, in Mandarin that could be a threat.

China Says It Won’t Use U.S. Debt as Threat
BY AARON BACK

BEIJING—China’s foreign-exchange agency sought to ease concerns about how it uses its huge currency reserves, saying it operates on market principles and would never wield its holdings of U.S. government debt as a threat.

The statement Wednesday by the State Administration of Foreign Exchange was the latest in a series of moves by the agency aimed at addressing concerns about its influence. Presented in question-and-answer form, the statement, posted on the agency’s website, rebutted what it portrayed as misconceptions about its management of China’s $2.4 trillion in foreign-exchange reserves, the world’s largest.

The statement rejected the notion posited by some …

More…

China says it won't dump treasuries or pile into gold

Jim’s Mailbox

Posted: Jul 07 2010 By: Jim Sinclair Post Edited: July 7, 2010 at 6:41 pm

Filed under: Jim's Mailbox

Dear CIGAs,

Please read this outstanding article provided by CIGA Richard B. so that you can see behind the opaque curtain of management of news in finance

Dear Jim,

Since May 22, 2010, the FDIC has announced the closings of 14 more banks, bringing the total so far this year to 86. Collectively, they had assets of $6.86 billion and deposits of $5.92 billion.

The FDIC’s estimate of the cost of closing these 14 banks is $1.16 billion, about 20% of deposits. 11 of the 14 failures were 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 closings, the FDIC entered into new loss-share agreements covering an additional $4.82 billion.

That brings the FDIC’s total losses for 2010 up to $17.62 billion. The total face value of assets now guaranteed under FDIC loss share agreements has grown to $176.74 billion.

Releases Provide Insight Into FASB-Blessed Over-Valuations

The FDIC’s Press Releases issued in connection with bank closings provide a basis for evaluating the extent to which each failed bank’s management may have been exaggerating the value of its assets. These facts are important to discover in light of the Financial Accounting Standards Board (“FASB”) having last year rolled back fair value accounting requirements, giving bank management tremendous leeway to assign unrealisticly high values to the institutions’ least liquid, most difficult to value assets.

In connection with each closure, the FDIC obtains competing bids from parties who are interested in taking over the failed bank’s deposits and assets. The FDIC’s estimated loss is basically the difference between the bank’s deposits and the value of the assets agreed upon between the FDIC and the successful bidder.

Since about the first quarter of 2009, this price discovery mechanism has been muddied by the FDIC’s extensive use of loss-share agreements in resolving bank failures. Loss share agreements increase the value buyers are willing to assign to failed banks’ assets in exchange for the FDIC indemnifying them against future losses resulting from the assets turning out to be worth less than the value agreed to.

Still, each bank closing announcement provides a basis for comparing the stated value of the failed bank’s assets against the market value agreed to in connection with the loss share agreement, and therefore understanding the extent to which FASB’s capitulation may be affecting bank values across the board.

Applying this analysis to the largest eight of the 14 banks that failed over the past six weeks leads to the following figures. The highest of the over-valuations was 84%. The lowest was 20% — a still worrisome number.

Over-Valuations Range From 84% to 20%

Washington First International Bank of Seattle, WA, had stated assets of $520.9 million and deposits of $441.4 million. The FDIC estimated it closing cost $158.4 million. Based on that estimate, the bank’s assets were really only worth about $283 million, and had been over-valued by 84%.

Peninsula Bank of Englewood, FL, had stated assets of $644.3 million and deposits of $580.1 million. The FDIC estimated its closing cost $198.4 million. Based on that estimate, the bank’s assets were really only worth about $385.3 million, and had been over-valued by 67%.

First National Bank of Savannah, GA, had stated assets of $252.5 million and deposits of $231.9million. The FDIC estimated it closing cost $68.9million. Based on that estimate, the bank’s assets were really only worth about $163 million, and had been over-valued by 55%.

TierOne Bank of Lincoln, NB, had stated assets of $2.8 billion and deposits of $2.2 billion. The FDIC estimated it closing cost $297.8 million. Based on that estimate, the bank’s assets were really only worth about $1.9 billion, and had been over-valued by 47%.

Sun West Bank of Las Vegas, NV, had stated assets of $360.7 million and deposits of $353.9 million. The FDIC estimated it closing cost $96.7 million. Based on that estimate, the bank’s assets were really only worth about $257 million, and had been over-valued by 40%.

Bank of Florida – Southwest, of Naples, FL, had stated assets of $640.9 million and deposits of $559.5 million. The FDIC estimated it closing cost $91.3 million. Based on that estimate, the bank’s assets were really only worth about $468.2 million, and had been over-valued by 37%.

Bank of Florida – Southeast, of Fort Lauderdale, FL, had stated assets of $595.3 million and deposits of $531.7 million. The FDIC estimated it closing cost $71.4 million. Based on that estimate, the bank’s assets were really only worth about $460.3 million, and had been over-valued by 30%.

Nevada Security Bank of Reno, NV, had stated assets of $480.3 million and deposits of $479.8 million. The FDIC estimated it closing cost $80.9 million. Based on that estimate, the bank’s assets were really only worth about $399 million, and had been over-valued by 20%.

Slow Pace of Closings Not Encouraging Given Backlog

Over the past six weeks the pace of announced bank closings has been quite slow compared to the rest of the year. This might be an encouraging sign were it not for the known backlog of seriously under-capitalized banks, known to number more than 425. Given this backlog, a slowing pace of closures implies little more than Manipulation of Perspective Economics (“MOPE”) and Pretend and Extend being put into overdrive.

In the updated study of key FDIC enforcement actions last month, I pointed out there were at least 425 banks currently operating under serious FDIC enforcement orders that only issue when banks are found to be seriously under-capitalized. Since then, the FDIC announced its May enforcement actions. A total of 26 new banks became subject to a serious enforcement order for the first time, while only 5 had their orders lifted.

Meanwhile, over the past six weeks 39 new banks became subject to serious Federal Reserve System Enforcement Actions – 35 Written Agreements (“WAs”) and 4 Prompt Corrective Action Directives (“PCADs”). WAs have to be read on a case-by-case basis, but at the very least, their issuance indicates the bank fared very poorly in its last inspection. PCADs indicate a bank is seriously under-capitalized and at imminent risk of failure.

With this serious a backlog overhanging regulators, it does not inspire confidence to see them resolving so few troubled institutions over time. MOPE-inspired pronouncements of a recovering economy are looking thinner by the minute. An honest look at the facts makes a ski jump-shaped renewal of the economic downturn look very likely.

The pace of new bank closing announcements can be expected to pick up dramatically in the near future. There is no basis to believe the number of troubled institutions is decreasing or the serious problems threatening the banking sector are improving.

Respectfully yours,
CIGA Richard B.

Starting Now: America's Second Great Depression



Bernanke Created Half of 234 Years’ Worth of Money Supply. Here is a quote: “The U.S. turned 234 years old yesterday, and yet over half of the
nation’s money supply was created since Helicopter Ben took over the
flight controls four years ago. No wonder gold is in a full fledged
bull market . . .”


With the US trapped in depression, this really is starting to feel like 1932 Ambrose Evans-Pritchard:


Investors Fear Rising Risk of US Regional Defaults



Companies Clutching Cash But Stingy with Jobs


Unemployment is Here to Stay


Sultans of Swap: BP Collapse Potentially More Devastating than Lehman's


Gary North: Congress or Fed Too Big To Fail?


Increasing Risk of Double-Dip Recession as Leading Economic Indicators Start to Turn


Turning Lemons Into Lemonade for 390 Years


Hungary to Ask for "Precautionary Bailout" from EU and IMF


7.9 Million Jobs Lost, Many Never to Return


State and Local Government Workers' Job Security Fades


Muni Holdings Are "Untold Problems" for US Banks
- Bloomberg


Office Vacancy Rate in US Climbs to 17 Yr High
- Bloomberg


Greenback Weaker Amid Ongoing US Concerns
- Market Watch














"All we have of freedom, all we use or know -
This our fathers bought for us long and long ago. " - Rudyard Kipling, The Old Issue, 1899

Target-Date Retirement Funds—Safe as You Think?


Expect Government Layoffs At State, Local Level
- USA Today


Investors Worry US Municipals Could Become the Next Europe

Investors are worried that the risk of default for US local governments is growing, amid signs that some regions are facing the same type of difficulty in curbing pension and budget deficits as some European countries.

Evening Thoughts For The Day

Posted: Jul 06 2010 By: Jim Sinclair Post Edited: July 6, 2010 at 7:57 pm

Filed under: General Editorial

Dear CIGAs,

Krugman was quite vocal in calling upon the Fed and Administration to stimulate.

Interest rates will not do it.

He says we are doing as seen in the movie "Japanese Economics 2."

Can you imagine what will happen when the Ski Jump becomes apparent to the many?

Time And Time Again

Posted: Jul 06 2010 By: Jim Sinclair Post Edited: July 6, 2010 at 2:10 pm

Filed under: In The News

Dear Friends,

Risk according to market pundits, blogs and for payment advisers is on one minute, and off the next, causing the gold market to roar and wane.

Hedge funds are the real cause of the moves by painting the charts intentionally or by accident. Amateur technicians run and jump constantly making contributions to the gold banks from their piggy banks.

Simply stated:

1. Leave your emotions at the door or get out of gold.
2. Gold is going to $1650. About that price objective I do not have the slightest doubt.
3. Gold is going to $1650 on or before January 14th, 2011. According to Armstrong the gold price will take until June of 2011 and go much higher.

This is just another time like many in the past, and some in future, where you go to the hole you have dug, jump in and pull a rock over the top. Peek out daily between July 8th and July 15th.

Yes, read JSMineset every day.

Respectfully,
Jim Sinclair

US Told to Seek Foreign Partners


Banks Too Big to Fail, Too Big to Bail Out: Roubini


obama's vision for America...
Venezuela Slum Takes Socialism Beyond Chavez



If you own a home and make payments...please read and understand the following.
Jim is doing his very best to try and protect you from the Bankerbastard crooks...

Dear Jim,

Yesterday you spoke of mortgage payment servicers as if it was something anyone with a mortgage MUST know.

I missed the point of why.

Could you tell me again in simple language that is easily understood why I should be concerned and act to do something.

Respectfully,
CIGA Arlen

Dear Arlen,

1. A service company should be a simple middle man that receives your mortgage payment and pays it to the lender for a modest fee.
2. Yesterday I sent you a list of the bailouts on which a major mortgage service company received one billion dollars.
3. If the servicer was simply a mortgage service company middleman how did it lose so much money as to need a one billion dollar bailout?
4. That smells like financial limburger cheese on a hot sidewalk in NYC.
5. The mortgage servicer is doing some other speculative business.
6. Therefore not only do you have to worry if your lender was paid, but what the dickens is a mortgage servicer doing speculating while your money is moving through that company’s balance sheet.
7. If for any reason the owner of the note is not paid you can be absolutely certain that you are going named in a lawsuit by the lender for payment.
8. The lender has a good chance of prevailing over you.
9. For this reason, every CIGA now has one more reason to be quite concerned about knowing who actually owns your mortgage and ascertaining if they have they been paid fully and up to date.

Regards,
Jim

Jim’s Mailbox

Posted: Jul 06 2010 By: Jim Sinclair Post Edited: July 6, 2010 at 7:43 pm

Filed under: Jim's Mailbox

Dear Jim,

Allow me to chime in here and bolster your comments to CIGA Arlen.

First and foremost, what your readers need to understand is that no one who has a loan secured by a mortgage on his home is safe. Mortgage servicing companies, including Wells Fargo Bank, CitiBank, JPMorgan Chase, and Bank of America, etc. control everything. This is why, as banks, mortgage companies, and hedge funds began to fold, beginning with the Mortgage Meltdown in 2007, the acquisition of mortgage servicing rights was the name of the game.

Regardless of whether Fannie Mae, Freddie Mac or a securitized Trust Fund purportedly “owns” your loan, the Servicer controls your destiny. Back in 1995, I first started seeing Servicers manufacture a default on a current loan and institute a foreclosure action even though the consumer had made every payment on time. Once this process begins, it is virtually impossible for the consumer to straighten out the problem and get back on track. This is because the Servicer’s policies, procedures and technologies are set up to automatically trigger a series of unstoppable events once there is the slightest deviation e.g., an increase in your interest rate on an Adjustable Rate Note, an increase in escrow items, a late payment, or bankruptcy.

Through the mortgage auditing work that I have been doing since 1991, and particularly with all of the expert report writing I have been doing over the past two years analyzing the securitization of these residential mortgage transactions, I can tell you with certainty that even though the noise has quieted down since the bailout, the house of cards is crashing down at lightning speed.

I subscribe to the Bloomberg Terminal to research whether or not my client’s loan is in a particular securitization trust which is tremendously helpful. For example, an attorney I am working closely with here in Massachusetts has a client who was facing a foreclosure sale date of July 15^th. The foreclosing entity was Deutsche Bank National Trust Company as Trustee of the IndyMac INDA 2005-AR1 Mortgage Loan Trust-AR1. Using Bloomberg, I was able to establish that the loan in question is not being tracked as an asset of the Trust. I wrote an expert report laying out the fraud; the foreclosure was canceled; and now the foreclosing law firm is begging the attorney I am working for not to sue them.

There is so much fraud throughout the system that it is unimaginable. We are now living in a criminal culture where the Banksters are running the show with impunity. Virtually every subprime securitization I have audited is suffering default rates between 20% to 57% of the entire portfolio. Each of these securitizations is a Ponzi scheme. There was never going to be enough money in the system to return the investors’ principal. Those in the know (spell that SERVICERS) knew these loans were designed to fail and purchased credit default swaps and other derivatives to short the deals.

This is why Jim says to Arlen below:

2. Yesterday, I sent you a list of the bailouts on which a major mortgage service company received one billion dollars.

3. If the servicer was simply a mortgage service company middle man how did it lose so much money as to need a one billion dollar bailout.

The only credible explanation as to why Deutsche Bank (a Trustee for 1900 securitization Trusts) and mortgage Servicing companies such as those Jim refers to would be receiving bailouts is if they were being paid on their credit default swaps.

It is clear for me to see through my use of the Bloomberg Terminal that the mortgage servicing industry is squeezing the last bit of liquidity out of the market. At these double-digit default rates, with a 50% severity loss rate, most of these Trusts will be wiped out by 2014.

In historical terms, I think of this as The Civil War, and it won’t be long before we see the Carpetbaggers and Scalawags (the debt buyers and junk-yard dogs, etc.) coming around to pick up the pieces.

I can also tell you that 90% of the foreclosures are illegal and fraudulent and could be stopped if consumers had the right analyst and attorney working together. The problem here is that the scheme has stripped homeowners of their cash, savings, and assets in the process.

Well, I could go on but I shall leave you with these thoughts to mull over.

My best advice to CIGAs: follow Jim’s advice and hunker down. Gold is the most stable repository of real wealth that civilized society has ever known. The dollars that have been created through the financialization of our economy via derivatives trading is totally unsustainable. Perception drives the market and when the world learns too late that that super-hyper-inflation of our currency will render it worthless, perhaps this madness will stop.

Kindest regards,

CIGA Marie

Marie McDonnell, CFE
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analyst
Certified Fraud Examiner
Marie.McDonnell@truthinlending.net
P.O. Box 2760, Orleans, MA 02653
Tel. (508) 255-8829 Fax (508) 255-9626

I NEED A NEW FREAKING COMPUTER, BEFORE I CAN POST ANYMORE...
SEND MONEY OR A NEW COMPUTER...TILL THEN...ILL TRY THE BEST I CAN...


Davidowitz: US Economy a "Complete Disaster"


Barack Obama: The great jobs killer


"Falcon" suggested this piece by Bob Chapman, who suggests that thing might get downright medieval: Struggling and Faltering to Manage Economic Recovery. Chapman writes: "As a result of this and other failures we are about to experience the worst economic collapse since 1348 [during the Great Plague.]"


Hell no don't rush...
Housing Cheapest in 40 Years, But Buyers Don't Need to Rush


Tired of Fluctuations, Many are Shedding Stocks


Short Sellers Flag School Stocks


Detroit Three See Auto Sales Drop by More than 10%


Eurozone Jobless Figure at Record High


Hungary to Ask for "Precautionary Bailout" from EU and IMF


US Stocks in Precarious Place Given Economic Uncertainty


Bond Rally Reflects Gloom

In The News Today

Posted: Jul 05 2010 By: Jim Sinclair Post Edited: July 5, 2010 at 3:24 pm

Filed under: In The News

Dear CIGAs,

In the process of securitization your mortgage changes owners. In some cases this happens many times. The paperwork in many cases has been lost, is incomplete or simply impossible to sort out.

If you do not believe this contact your servicer and try to hunt down who now owns your mortgage. You will be stonewalled almost from your first inquiry.

You will note here that servicers in some cases are getting huge money. For what? I ask. They are supposed to be simple middlemen between your payment and funds transfer to the lender, therein being paid for the service, hence the term servicer.

If you pay the servicer, but the present owner of the mortgage does not get the funds, you will be sued for payment. You will have to sue the servicer to get your funds back. If servicers had to be bailed out that means they were not operating as a fiduciary, but as a speculator of some sort. You can therefore be royally screwed.

For your sake please go to this site because if the real lender does not get paid you should be asking what happened to your money?

http://bailout.propublica.org/list/simple

Jim Sinclair’s Commentary

This guy’s nose is growing. Look, you can see it.

ECB chief rules out risk of new recession
AFP – Monday, July 5

AIX-EN-PROVENCE, France (AFP) – – ECB president Jean-Claude Trichet ruled out on Sunday the risk of a new recession, after a week of soft economic data fuelled market fears of a dreaded double-dip into a new slump.

"I don’t think so at all," Trichet told journalists when asked if a double-dip recession was on the horizon.

"At a global level it is clear that we are experiencing a recovery, which is confirmed particularly in the emerging world but also in the industrialized world," he said at an economics conference in the south of France.

But he warned that growth could not be taken for granted in industrialised countries, saying that "it depends on us, it depends on the capacity of the industrialized countries to reinforce confidence."

"This is the reason why it is so important that we have fiscal policies designed to reinforce confidence of households … of businesses … of savers and of investors," he said.

Trichet also said that austerity drives being implemented in several European countries would not hurt the recovery, as some top economists and US officials have suggested.

More…

Jim Sinclair’s Commentary

Here is some important data for CIGAs.

Unemployment Insurance Tracker
Application by Olga Pierce and Jeff Larson, ProPublica – January 20, 2010

The unemployment insurance system is in crisis due to a combination skyrocketing unemployment and – in some cases – poor planning. A record 20 million Americans collected unemployment benefits last year, and twenty-six states have run out of funds and been forced to borrow from the federal government, raise taxes, or cut benefits. In many other states the situation is deteriorating fast. Using near real-time data on state revenues and the benefits they pay out, we estimate how long state trust funds will hold up. Click on a state to find the latest, plus historical data, and details on tax increases and benefit cuts. (Updated Weekly: last update July 01, 2010)

Click to view full chart on site…

Jim Sinclair’s Commentary

This is awful. California and Illinois, now with more than 40 others states, are broke!

Europe is financial kindergarten compared to the more than 40 states of the USA that MUST be bailed out.

Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole
By MICHAEL POWELL
Published: July 2, 2010

CHICAGO — Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.

Payback Time

He picks the papers off his desk and points to a figure in red: $5.01 billion.

“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.

Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”

For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.

More…

Jim Sinclair’s Commentary

Bond Vigilante means OTC derivative destroyer of everything they touch.

Austerity means nothing because of the outrageously poor timing. Austerity is the key to hyperinflation because of the outrageously poor timing.

Myths of Austerity
By PAUL KRUGMAN
Published: July 1, 2010

When I was young and naïve, I believed that important people took positions based on careful consideration of the options. Now I know better. Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.

Which brings me to the subject of today’s column. For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.

This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.

Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there’s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off.

What reason do we have to believe that any of this is true? Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”

More…

WAKE UP SHEEPLEZ...

"For what avail the plough or sail, or land or life, if freedom fail?" - Ralph Waldo Emerson


A warning on a Republican website...
http://rmcpac.com/blog/what-would-life-be-under-martial-law


A Market Forecast That Says ‘Take Cover’


Roubini Sees Euro Zone '10 Growth "Closer to Zero"


Illinois facing 'outright disaster' amid budget crisis


The Clock is Running Out


40% of Florida Home Sales are Foreclosures


Fed Made Taxpayers Unwitting Junk-Bond Buyers


Gold Miners and Explorers Face Serious Supply Problems


Pelosi: Unemployment Checks Fastest Way to Create Jobs


Market's Swoon Prompts Fear of the Dreaded "Death Cross"


A Depressing Thought: Deflation


Pending Home Sales Plunge Record 30%


Layoffs Climb as Housing Slump Deepens


Just the start...
1.3 Million Unemployed Won't Get Benefits Restored


Stock Futures Head Lower to Open Third Quarter


New Jobless Claims Rise in Sign of Weak Job Market


Global Markets on "Cliff Edge" Amid Fears Over European Banks


Ambrose Evans-Pritchard: Time to Shut Down the US Federal Reserve?


Suiting Up for a Post-Dollar World


US Money Supply Plunges at 1930s Pace and Housing Index Dives


UK Manufacturing Outlook Follows Euro-Zone Slowdown


CBO Says Debt Will Reach 62% of GDP by Year's End


Jim Sinclair’s Commentary
The dollar, like all fiat currencies, is no storehouse of value for your life’s work.
Over 40 US States are headed just this way.

Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole By MICHAEL POWELL Published: July 2, 2010
CHICAGO — Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.
He picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.
More…



Jim Sinclair’s Commentary
The forever part is real. When accountants and lawyers run businesses only profit matter.
The cost will certainly overshadow any of the profits made by exporting manufacturing.

7.9 million jobs lost, many forever Chris Isidore, senior writer, On Friday July 2, 2010, 11:46 pm EDT
The recession killed off 7.9 million jobs. It’s increasingly likely that many will never come back.
The government jobs report issued Friday shows that businesses have slowed their pace of hiring to a relative trickle.
"The job losses during the Great Recession were so off the chart, that even though we’ve gained about 600,000 private sector jobs back, we’ve got nearly 8 million jobs to go," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.
Excluding temporary Census workers, the economy has added fewer than 100,000 jobs a month this year — a much faster and stronger jobs recovery than occurred following the last two recessions in 2001 and 1991.
But even if that pace of hiring were to double immediately, it would take until 2013 to recapture the lost jobs. And the labor market very likely doesn’t have years before it gets hit with the shock of the inevitable next economic downturn.
"It’s virtually certain that the next recession will come before the job market has healed from the last recession," said Achuthan.
More…

John F. Kennedy held a dinner in the White House for a group of the brightest minds in the nation and, at that time, he made this statement: This is perhaps the assembly of the most intelligence ever to gather at one time in the White House with the exception of when Thomas Jefferson dined alone.





House Democrats ‘Deem’ Faux $1.1 Trillion Budget ‘as Passed’




Recession cut into employment for half of working adults, study says.




Double-Dip Recession Warning Signs are Everywhere! Batten Down the Hatches!



Outlook Turns Darker for US Economy- Sydney Morning Herald




BofE Rate Setter Fears New UK Recession



Nearly 1 in 3 First-Quarter Home Sales a Foreclosure Sold at Steep Discount




Central Banks Warn of New Crisis if Exit Left Too Late




And this from the Communist News Network...
China Slowdown Fears Hit Global Markets




It's Everyone for Themselves After Toronto Failure




Europe's Recovery Falters




Payrolls Drop by 125,000, Jobless Rate Falls




No Bucks, No Boom for The Fourth




New Data Shows US "Recovery" in Peril




Only a Government Bureaucrat...




U.S. is Unprepared for New Generation of Terror Bombs, Experts Say




Jim Sinclair’s Commentary
There is NO fiat currency that will remain a storehouse of value for what you have worked all your life for.

CBO says debt will reach 62 percent of GDP by year’s end By Michael O’Brien – 06/30/10 09:24 AM ET
The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.
The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.
And while the national debt would stabilize at 67 percent of GDP over the next decade if current law were maintained, extending tax cuts enacted during the administration of President George W. Bush and keeping growth in appropriations in line with inflation would mean that the debt would reach almost 90 percent of GDP by 2020.
By contrast, GDP has averaged "a little above" 36 percent per year over the past 40 years.
The report comes as President Barack Obama’s fiscal commission meets again on Wednesday to work on crafting solutions to reining in deficits and the debt over time.
More…





Jim Sinclair’s Commentary
Go to this link and review the beneficiaries of Bailout Funds, especially those that are NOT banks or financial Institutions.
http://bailout.propublica.org/list/simple








"In every government there necessarily exists a power from which there is no appeal, and which, for that reason, may be formed absolute and uncontrollable. The person or assembly in whom this power resides is called the sovereign or supreme power of the state. With us, the sovereignty of the Union is in the people." - Charles Pinckney, 1788

The Zimbabwe School Of Economics
posted by Blogger at Marc Faber Blog - 7 hours ago
"In the US, we have a totally new school, and it’s called the Zimbabwe school. And it’s founded by one of the great leaders of this world, Mr Robert Mugabe, that has managed to totally impoverish his own c...

We Have Inflation Now
posted by Blogger at Jim Rogers Blog - 7 hours ago
"We have inflation now. Everybody who shops knows there is inflation… prices are going up" in CNBC Jim Rogers is an author, financial commentator and successful international investor. He has been freque...

Six months to go until the largest tax hikes in history"Will hit families and small businesses in three great waves on January 1, 2011..."

Legendary trader Gartman: Gold is about to go "parabolic"Could take off when the public begins buying in "panic."

Patrick Heller: Massive drain of Comex silver inventories continues




Jim Rickards: Gold is money and probably manipulated for its deadly power




Euro State Insolvency Idea Not Ruled Out: EU's Rehn
European Monetary Affairs Commissioner Olli Rehn refused to rule out in a newspaper interview that a mechanism to allow euro zone member states to undergo "orderly insolvency" could be drawn up.





Markets Create Spun Reasons For Financial Reporting Posted: Jul 01 2010 By: Jim Sinclair Post Edited: July 1, 2010 at 9:30 pm
Filed under: General Editorial
My Dear Friends,
Markets create spun reasons for financial reporting. Reasons given by financial reporting do not make markets. Financial reporting is the basis for frantic interlopers to talk their position
As the day wore on, Financial TV today decided gold was down because there was no longer any chance of serious debt problems for Greece, Spain, Italy, Portugal or Italy. Their reason was that the Spanish debt offerings went so well even in the face of potential rating agency downgrades announced yesterday.
The euro took out the $1.24 to $1.25 resistance in a short covering panic thereby busting the dollar in its mirror image.
The gold banks piled on the Comex paper exchange, therein scaring the hell out of the super leverage guys, taking gold down hard.
This gives us certain points to consider:
1. You can clearly see that in this mirror image Forex market the US dollar can trade as easily at $1.72 as the euro can go to $1.35 on a simple short squeeze. This is a pure casino and needs no other reason than a crowded short position on the euro and a crowded long position on the US dollar. After that it is as easy to return to a hammered euro and a mirror image strong dollar.
The hedge funds and the major international banks are having their way with these markets until their frantic greed destroys ever thing they touch, no exceptions.
2. I have traded tops in the gold market successfully and know well what they look like. Today was not a top in the gold market. That is fact.
3. Volatility is only going to get worse. I am sure you will see gold range $300 in a day and trade into Asia, as there is no close, near unchanged.
4. As it become impossible for business and governments to select the right currencies consistently in these huge frantic greed driven operations, gold becomes more attractive as the asset of last resort as it has always been in similar situations.
5. Gold being the final refuge asset of the financial rape of the Western world, it will eventually be the final and huge profit for the profiteers.
6. The Western world economies will be in shambles for decades to come.
7. Gold will certainly trade at $1650 and most likely much, much higher.
8. Stay focused and check your emotions at the door.
9. Review the reasons given early today why we are in gold. This will serve to keep you focused and not a plaything of the profiteers.
Respectfully, Jim







Who bought the Spanish sovereign bond offering?


1. Enron?


2. New York State retirement fund?


3. The rescue the euro funds via beards?


US States will have a $62 billion budget deficit this July fiscal year end.
Can you imagine what next July is going to look like as the Formula grinds on? Intervention was not aimed at the cause, OTC derivatives, so therefore all those trillions have only enriched the wicked at the cost of Main Street.




Spain sells bonds a day after downgrade warning By HAROLD HECKLE (AP)
MADRID, Spain — Spain successfully raised euro3.5 billion ($4.3 billion) Thursday in an oversubscribed bond sale, a reassuring sign for markets a day after ratings agency Moody’s warned it may join others in downgrading the country’s debt.
The average interest rate for the five-year bonds was 3.65 percent, up from 3.53 percent at the last such auction in May, and the sale was 1.7 times oversubscribed, the Treasury Department said. The government had hoped to sell between euro2.5 and euro3.5 billion of the bonds.
A Treasury official said the oversubscription ratio showed the Moody’s warning went "totally unnoticed."
Moody’s Investors Service sent a shudder through financial markets when it said late Wednesday it has placed Spain’s AAA sovereign rating under review for a possible downgrade because of worsening economic prospects.
The agency said it will re-evaluate Spain’s credit rating over the next three months, adding it expects that any cut would only be by "one, or at most two, notches".
Spain’s borrowing costs have risen significantly this year, deepening worries among investors already fretting over the country’s ability to climb out of an economic slump while enacting deep spending cuts to reduce its budget deficit.
More…




National debt soars to highest level since WWII




Coming to a neighborhood near you...
Oregon city turns off streetlights to save money



Corruption Suspected in Airlift of Billions in Cash From Kabul.





a fascinating history piece on AIG, and its parent company, AIC.



Europe's Banks Still on Life Support



Roubini Says Greece Needs Orderly Debt Restructuring to Avoid "Inevitable Default"



Britain "Might Not Cope with Another Bank Emergency"



You Don't Recover from a Debt Crisis with More Debt



Fannie Mae to Charge Strategic Defaulters, with Everything







“This is the darkest hour before dawn and we should never underestimate monetary authorities' ability to deal with the adversity.” - Gideon Gono (Governor of the Reserve Bank of Zimbabwe, who helped orchestrate the world's highest currency inflation rate of 89.7 sextillion percent per year.)

TODAY IS MUNI-MELTDOWN DAY...YOU JUST LOST A BIG CHUNK OF YOUR RETIREMENT...

Bond Guru Gundlach Warns That US Will Default


A dark day for personal privacy in America: $600 Sale? Get Ready for Tax Form. Essentially, this makes everyone into unpaid de facto IRS agents.


Silver Posting Best Streak Since Hunt Conspiracy No Matter Which Way Economy Turns


Zero Hedge: Was AIG manipulating the precious metals markets?


Dollar should be replaced as international standard, U.N. report says



Stamp of Idiocy (The Mogambo Guru)


Consumer Confidence Tumbles in June


Oil Prices Plummet on Concerns About US Demands


Gold May Reach New Highs on "Double Dip" Fears

Why We Do What We Do Posted: Jul 01 2010 By: Jim Sinclair Post Edited: July 1, 2010 at 1:26 pm
Filed under: General Editorial
Dear Extended Family,
There are times when you must ignore the hedgie madness in the marketplace and revert to why we are doing what we are doing.
The deflation being spoken of today is the catalyst for the coming hyperinflation. The fact is it has been so in all historic examples. The flooding of markets with debt has been brought on for different reasons, but the ways and means of hyperinflation has always been the same.
Therefore it is today’s financial market deflation talk that is the reason why you should own gold.
This continued downturn in business will find government in a panic, not in austerity when their constituency does the Greek dance of panic as the pain on Main Street becomes intolerable. It will.
Contemplate what each of the following means to you one at a time. Do not try to do them all at once. You do not want to do this as a routine memory exercise as much as a meditation on why you have bought the insurance you have.
- Gold is a currency with no liabilities attached. - Gold is competition to paper currency. - Gold is not a commodity. - Gold is a barometer of fear. - Gold is a barometer of confidence in Government. - Gold is insurance. - Insurance is not something to trade. - Gold is money when money fails. - Hyperinflation is a currency event, not an economic event. - Hyperinflation is a currency event described as a loss of confidence in the currency. - Gold in your hand eliminates counter-party risk. - Gold is the high ground when the global tsunami hits. - Gold removes financial agents between you and your assets.
Be strong in your conviction and do not be bothered by the return of the Prechterites and top callers.
Respectfully, Jim

Jim Sinclair’s Commentary
How have I described OTC derivatives to you for the past ten years?

"A Gigantic Ponzi Scheme, Lies and Fraud": Howard Davidowitz on Wall Street Posted Jul 01, 2010 08:00am EDT by Aaron Task

Day one of the Financial Crisis Inquiry Commission’s two-day hearing on AIG derivatives contracts featured testimony from Joseph Cassano, the former head of AIG’s financial products unit. Goldman Sachs president Gary Cohn was also on the Hill.
Meanwhile, the Democrats are still trying to salvage the regulatory reform bill, with critical support from Senator Scott Brown (R-Mass.) reportedly still uncertain.
According to Howard Davidowitz of Davidowitz & Associates, what connects the hearings and the Reg reform debate is the lack of focus on the real underlying cause of the financial crisis: Fraud.
"It was a massive fraud… a gigantic Ponzi Scheme, a lie and a fraud," Davidowitz says of Wall Street circa 2007. "The whole thing was a fraud and it gets back to the accountants valuing the assets incorrectly."
Because accountants and auditors allowed Wall Street firms to carry assets at "completely fraudulent" valuations, he says the industry looked hugely profitable and was able to use borrowed funds to make leveraged bets on all sorts of esoteric instruments. "Their bonuses were based on profits they never made and the leverage they never could have gotten if the numbers were right – no one would’ve given them the money in their right mind," Davidowitz says.
To date, the accounting and audit firms have escaped any serious repercussions from the credit crisis, a stark difference to the corporate "death sentence" that befell Arthur Anderson for its alleged role in the Enron scandal.
More…

Hourly Action In Gold From Trader Dan Posted: Jul 01 2010 By: Dan Norcini Post Edited: July 1, 2010 at 2:07 pm
Filed under: Trader Dan Norcini

Dear CIGAs,
It is not a pretty day for Easy Company in the Gold war today (nothing is ever easy in Easy Company). There appears to have been another one of those mass exodus days in which leveraged trades were being unwound en masse and money was rushing into Treasuries. Apparently deflationary fears led to wholesale dumping of commodities with only a few commodity markets moving higher and defying the selling trend such as the grains and natural gas, and oddly enough, lumber, of all markets.
Interestingly enough, the European based currencies, Euro, Sterling and Swissie, were all strongly higher, particularly the Euro, based on the assumption that things were not quite as bad in Euro land as initially feared. The Yen was sharply higher as well. Gold/Yen, Gold/Euro, Gold/Sterling, trades were all crushed in the process. It appears that there was a type of currency trade unwind occurring in which gold, which has been trading as a currency of late, was involved. As for the reason, I honestly do not know other than the fact that there was some thinking that the European sovereign debt crisis may not be as bad as many were fearing based on the fact that the big bond sale by Spain went pretty decent compared to the worst expectations. Additionally the European banks involved in a lending plan involving the ECB did not ask for as much money as was projected by most analysts.
That seems an awfully slim reed to lean on for such a massive trade unwind in the currencies, but whatever the reason, the US Dollar was on the receiving end of the deal as it was mauled brutally. Gold, which had been drawing a lot of its recent strength from fears surrounding the health of the European currencies, instead of moving inversely to the Dollar, followed the Dollar lower. Remember, both Gold and the Dollar were safe haven plays during the European debt crisis and if those fears were fading, then money outflows due to trade unwinds would affect both the Dollar and the Gold market for the short term.
However, Gold is not going to lose its safe haven status because we experience a day of trade unwinding on a large scale. When the focus shifts back to the woes involving the health of the US currency, gold’s fortunes will revive and it will begin moving higher. It could very well be that the US data that came out today, especially on the housing front and unemployment numbers, is going to cause the focus of the Forex markets to shift back to the US and away from Euroland. If that is the case, we might finally see the same fear that rocked Greece, Spain, etc, begin pressuring the US Dollar lower which will eventually shore up the gold market. California, Illinois, etc. and a host of individual US states are experiencing severe financial duress and without a solid picture on the jobs front, their revenues are going to continue to decline exacerbating an already tenuous fiscal condition. Falling tax revenues at the federal level are not going help reduce a wildly out of control US deficit and debt problem either which to me makes the rush into Treasuries even more suspect. Old habits die hard however and Treasuries continue to be seen by investors as a place to park money while they wait to see what direction things are going to take.
The result of this rush into Federal IOU’s dropped the yield on the ten year almost to 2.9% today. That is the lowest level it has been in more than a year (April 2009 to be precise). What is telling is that even with mortgage rates falling to new lows housing is still DEAD in the water. People are obviously not spending or lack confidence to commit to large item purchases. And why wouldn’t they be? After all, the only jobs being created out there are in government which has to print money to pay the salaries of all those new federal workers anyway since it is technically bankrupt with our national debt now at levels never before seen in the history of our nation when looked at on a % of GDP.
The technical damage to the daily chart of gold is quite severe with today’s sell off. The weekly chart is still in an uptrend however. It does appear that the waning upside momentum on the daily chart was confirmed with today’s huge liquidation plunge. I want to see tomorrow’s price action before I get too convinced that we are going to see much more in the way of downside action.
The HUI damage appears to be worse on the charts having been unable at this point to hold support near 453. It could still get back above that level before the close of trading today if the S&P scoots up off its worst levels but for now the shares continue to follow the broader equity markets.
Tomorrow is a big jobs report day with nearly everyone and their mother looking for a real stinker. It could be that if the numbers come out a wee bit better than expected, which is another way of saying that they are not as lousy as many are fearing, we will see a relief rally in the equities. If that happens, the gold shares will move higher.
There are certainly a lot of cross currents at work in these markets making them extremely challenging to read. The best way for an investor (not a trader) to navigate them is to rely on the longer term charts, particularly the weekly but also the monthly. Try not to get caught up too much in the day to day swings being generated by the billions of Dollars sloshing around the planet moving into and out of so many different markets with seemingly inexplicable movements. I want to point out that there are more than a few hedge funds getting obliterated out there right now and a lot of the price swings being seen are being generated by forced margin related selling or even buying back of huge leveraged short side bets. A lot of funds are not going to survive these markets so if you are a trader, learn from their folly and keep your trading size small so as not to get hurt.
Click charts to enlarge in PDF format with commentary from Trader Dan Norcini


This chart shows the bear market is far worse than you realizeThe "real" S&P 500 is close to new crisis lows...

US Jobless Claims Increase to 472K- Bloomberg

N American markets Have Worst Quarter since Lehman- Financial Post

Dollar's Share of Global Reserves Declines- Bloomberg

CBO Tells Obama Forecast Remains Bleak- Washington Post

Personal Savings Rate - Worse than We Thought- Fortune

Fed Made Taxpayers into Junk-Bond Buyers- Bloomberg

Moody's Downgrade Warning Hits Spanish Stocks- Wall Street Journal