Dear CIGAs,

The Angels are moving targets that are refined with each market reaction. Their change is miniscule but we account for it. That fact that $1224.10 was the cash high and the fact that the $1080 area worked reasonably well has lit up $1764 even brighter than $1650.

I therefore conclude that gold is definitively going to $1650 with an overrun to $1764 prior to a reaction before it moves to higher prices on or before January 14th, 2011.

Gold buying frenzy grips China
January 06, 2010 17:25:00 IST

A gold buying frenzy is spreading across the Chinese landscape–from cities to rural towns–as you can make out from the words of Xiam Zang, a bullion dealer in Beijing: “Chinese people are buying more gold these days. There are increased sales in jewellery shops for gold ornaments, coins and bars. In fact, many people are now convinced that gold is the best investment asset.”

Zang says as gold sales are rising, “there are increased requests from jewellery shops for supplying them with gold.” “Everyone is doing good business in gold in China. The gold buying spree is not just limited to Beijing or big cities. Even in rural areas, people are simply buying gold despite the high prices,” he added

China is on a gold buying spree and the rush is set to continue in 2010 also as gold jewellery sales in mainland China and Hong Kong are expected to ramp up. According to market experts, present retail price for gold is HK$10,900 per tael and it could climb to HK$11,000 per tael before Lunar New Year.

Gold sales have risen by 10 per cent this year and are expected to accelerate in the coming two months.

A 20 per cent year-on-year sales growth can be expected before Lunar New Year. The revenue from now till mid-February can contribute up to as much as 30 per cent of the full year sales turnover.

Recent bullion purchases by central banks, including India and China, have fueled shoppers’ sentiment and helped sales during past months. The mainland maintained its position as the top buyer of gold last month. It bought 454 tonnes of gold, topping India and Russia.

More…

Jim Sinclair’s Commentary

Yeah sure and the Fed is going to drain as well. When push comes to shove there are two choices.Greece leaves the economic union which would fundamentally be the better decision or the bailout occurs.

Since wrong decisions are more likely, do not rule out a bailout. That goes for California as well because California can’t leave regardless of what the Russian professor has predicted.

New York is directly behind California.

Euro brinkmanship escalates as ECB shuts door on Greek bail-out
The European Central Bank has given its clearest warning to date that there will be no EU bail-out for Greece if it fails to control its spiralling deficit, raising the stakes in a game of brinkmanship over the future of the euro.
By Ambrose Evans-Pritchard, International Business Editor
Published: 6:47PM GMT 06 Jan 2010

Jurgen Stark, the ECB’s chief economist and the powerful German member on the bank’s inner council, said Greece’s problems are entirely "home-made" and do not meet the terms required to trigger the rescue mechanism under EU treaty law, which is limited to countries that face severe difficulties "beyond their own control".

"The Treaties set out a ‘no bail-out’ clause, and the rules will be respected. This is crucial for guaranteeing the future of a monetary union among sovereign states with national budgets. Markets are deluding themselves if they think that the other member states will at a certain point dip their hands into their wallets to save Greece," Stark told the Italian daily Il Sole .

"The country has not kept public accounts under control, nor worked to improve competitiveness. Greece is in a very difficult situation."

The comments prompted an acid retort from Greece’s new-broom finance minister, George Papaconstantinou. "Frankly we don’t need that clarification. We don’t expect to be bailed out by anybody as, I think, it is perfectly clear we’re doing what needs to be done to bring the deficit down and control public debt."

He said the government had agreed to even tougher measures than originally planned, aiming to slash the budget deficit from 12.7pc of GDP to 3pc by 2012 – a year ahead of schedule. "We are sending a message of determination and frontloading the adjustment," he said.

More…

Jim Sinclair’s Commentary

This is not uncommon for the US.

The situation speaks to the thin margin by which the funding request was met and the huge number we are now at. This huge number is MOPEd daily by the bulls regarding draining.

To drain is to pull the drain plug after creating those dollars, rendering the creation a total waste of time.

This is more "Pretend and Extend" while practicing QE to infinity, and praying to the god of greed for a sound recovery that the Austrian school says there is no chance of except for bottom bouncing at a ridiculous price with dire circumstances pending.

US Avoids Technical Default By Three Days
Tyler Durden on 01/05/2010 19:37 -0500

On December 24, the Senate passed a vote by a razor thin margin (with not a vote to spare) to raise the Federal debt ceiling from $12,104 billion to $12,394 billion. The actual debt ceiling increase took effect on December 28. And as the chart below shows, the Treasury’s cash flow projections were spot on: 3 days later, and the debt subject to limit surged to $12,254, a jump of over $200 billion in 2 days, and a whopping $150 billion over the old debt ceiling. Three days is all the buffer the administration’s reckless spending spree has afforded this country to avoid bankruptcy. Had one more Democratic vote dissented from the stopgap measure, the US would now be in technical default. There is just $140 billion left before the revised debt ceiling is breached. We hope for the country’s sake that Bill refunding in January is massive, because as we already pointed out, on January 7th we expect another ~$130 of new Treasuries to be announced for auction by January 15th. And then there are two more weeks in January… Which is why the Treasury better be using that TARP money to pay down all it can, because if the general population understands how close this nation was to the fiscal brink, many more answers may be demanded out of the ruling party as to how it could allow things to get so out of hand.

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Jim Sinclair’s Commentary

At the bottom of all the major financial disasters of the last two year lies our dear OTC derivative manufacturers and distributors as securitized investment garbage paper, credit default derivatives and credit swaps amongst a sea of other geek junk.

GMAC to post major Q4 loss.
GMAC expects to post a combined Q4 loss of around $5B, largely because of write downs on risky mortgage assets it intends to sell, with $3.8B of the loss coming from the planned sale of a mortgage unit that CEO Michael Carpenter called "a millstone around the company’s neck." The government owns a 56% stake in GMAC, and could see its holdings rise to 80% if it chooses to convert more of its stake into common equity.

Jim Sinclair’s Commentary

California and soon many other States are looking to Washington for a bailout or the default.

Greece says no need for bailout.
As EU officials arrive in Greece for a three-day fact-finding mission, Greece’s Finance Minister George Papaconstantinou rejected speculation that the country may need a bailout and said it’s "perfectly clear we’re doing what needs to be done to bring the deficit down and control the public debt." His comments follow earlier remarks by ECB Executive Board member Juergen Stark, who said the rest of the EU wouldn’t rescue Greece if its fiscal position worsens. Greece has the EU’s biggest budget deficit, registering 12.7% of GDP in 2009. Greece has pledged to cut its deficit to 8.7% this year and to bring it below the EU’s 3% limit by 2012.

Jim Sinclair’s Commentary

Kicking your banker/investor in the slats is not the wisest of IR moves.

U.S. raises anti-dumping duties on Chinese steel.
As China knocks Germany down a peg to become the world’s top merchandise exporter, and remains on track to surpass Japan as the world’s second-largest economy, trade tensions continue to rise between China and the U.S. On Tuesday, the U.S. applied additional duties of 43-289% on more than $300M worth of steel imports from China. Last week, in the biggest U.S. trade case against China, officials approved duties of 10-16% on over $2.7B worth of Chinese-made oil well tubing and casing

Jim Sinclair’s Commentary

Our healthy financial system wherein toxic paper can be valued according to the opinion of the financial companies themselves.

Thank you, FASB.

Jim Sinclair’s Commentary

A example of bottom bouncing at a drastic cost, with drastic consequences.

US pending home sales slump, factory orders rise

WASHINGTON – Pending sales of previously owned US homes fell more sharply than expected in November, but a surge in new factory orders offered assurance the economic recovery remained on track.

The National Association of Realtors said on Tuesday its Pending Home Sales Index, based on contracts signed in November, dropped 16 per cent from October to 96.0 after rising for nine straight months.

Analysts, who had looked for a decline of only two per cent, blamed the drop on the end of a rush to beat the original expiration of a popular tax credit.

They said the fact the index was up 15.5 per cent from its year-ago level indicated the housing market continued to heal.

A separate report from the Commerce Department showed new orders at US factories rose 1.1 per cent in November.

More…

Jim Sinclair’s Commentary

In the 1991 book "Boom," I said that China was headed to the position of number one world economy.

The intelligencia had a good laugh at my expense.

China Overtakes Germany as World’s Top Exporter, GTI Data Shows
January 06, 2010, 10:54 AM EST
By Jennifer M. Freedman and Jana Randow

Jan. 6 (Bloomberg) — China overtook Germany as the world’s top exporter last year, data compiled by Global Trade Information Services Inc. show.

China shipped products worth $957.7 billion in the first 10 months of 2009, while Germany sold goods worth $917.7 billion to customers abroad, according to an Internet database operated by Columbia, South Carolina-based GTI. Exports from China exceeded German shipments every month since April last year, data show.

China has already slipped past Germany to become the world’s third-largest economy and is forecast to overtake Japan this year, assuming the No. 2 spot behind the U.S. Exports have driven a 15-fold increase in China’s economy to more than $3.8 trillion since the nation opened its doors to foreign trade and investment in 1978.

Chinese exporters weathered the worst global recession since World War II better than their German counterparts, GTI’s figures suggest. Exports from China fell 20 percent in the first 10 months of 2009, according to the GTI database, while shipments from Germany tumbled more than 27 percent.

That’s almost double the 2.6 percent projected for the U.S. and four times the 1.1 percent growth predicted for the euro region. Germany’s central bank forecasts growth of just 1.6 percent for Europe’s largest economy this year.

More…

Dear CIGAs,

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Stand strong with gold
CIGA Eric

The difference between profit and a loss is often defined by your ability to stand strong, often alone, in the face of doubt.

Once again gold has risen to the currency of choice based on the inherent undisciplined nature of fiat money.

GDX remains sandwiched between two gaps as it fights with trendline support. The energy within the trend, however, has turned. This suggests higher prices over the short-term. Also, junior miners continue to outperform the majors during and after decline in gold (updated Junior to Major ratio GDXJGDXR). A rising ratio illustrates increased leveraged money flows. Rising leverage tends to coincide with rising gold prices (ta-gold-miners-follow-money).

Amex Gold Miners Index ETF (GDX):

Big money is fading strong dollar spin because it knows the following: (1) Resolution of three taps & out in the gold stocks is near, and (2) Gold is the mechanism for defeating another debt collapse at the end of an long economic cycle.

Gold Stocks 1922-:

Gold 1871-:

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Greetings Jim,

The Gold Currency Index is attempting to break out above congestion resistance this morning. A strong close this afternoon would suggest a retest of that all-time high in short order.

Best,

CIGA Erik
Prometheus Market Insight
http://www.prometheusmi.com

Erik,

Gold was strong going out of the US session.

Jim

Dear Jim,

I understood that Iceland’s unwillingness to pay was on certain CD type instruments. Is that correct?

Respectfully yours,
CIGA Arlen

Dear Arlen,

Specifically, yes. However the problem would never have occurred outside of the maze of OTC derivatives sold to Iceland which they are unwilling and unable to pay without a bailout from somewhere.

It is more of "just say no," this time coming from citizens demand.

Let’s see what the referendum does.

Regards,
Jim

Thoughts for Today:

1. Do you know what the practice of Federal Reserve repos are all about? The Fed wants to repo the toxic paper they absorbed from all over. The stuff cannot be valued because each item of the securitized vehicle has independent criteria. The OTC derivative nature of the entire pile of crap the Fed owns is impossible to assign value to and therefore impossible to quantify the losses on. The Federal Reserve would rather take in cash, put out garbage and guarantee the garbage to improve their balance sheet.

When will people learn? You cannot fool the big money, you can only fool the fools.

2. Foreclosures have made up no less than 1/3 of housing sales in 2009. Now Alt A and commercials are rolling over hard.

3. F-TV is offering a new book that blames the problems of the financial industry on Main Street. It offers a nonsensical thesis that Wall Street is the victim and Main Street is the criminal. That would fit in well with the banksters doing the work of god

4. I have received back the first run on a book that I and another wrote concerning what we feel is the consummate argument for gold. This book shows you a very powerful means of supporting gold without having to spend anything, risk anything, yet accomplish much. I will post more word on this when I know the timing of the first print run.

Jim Sinclair’s Commentary

Remember the yearend dollar party as we headed into the New Year?

Gold Extends Biggest Advance in Two Months as Dollar Declines
By Nicholas Larkin and Kim Kyoungwha

Jan. 5 (Bloomberg) — Gold rose in New York, extending its biggest gain in two months, as a weaker dollar boosted the metal?s appeal as an alternative investment. Platinum and palladium reached the highest prices in at least 16 months.

The U.S. Dollar Index, a six-currency gauge of the greenback?s value, fell as much as 0.6 percent today to a two- week low. The Reuters/Jefferies CRB Index of raw materials rose, extending yesterday?s 2.1 percent climb. Bullion futures yesterday gained 2 percent, the most since Nov. 3, and added 24 percent in 2009 as investors hedged against a declining dollar.

?The weaker dollar and broad commodity gains should continue to push gold higher in coming sessions,? James Moore, an analyst at London-based TheBullionDesk.com, said in a report. ?The market should continue to be underpinned by investment and physical dip-buying.?

Bullion futures for February delivery climbed as much as $11.30, or 1 percent, to $1,129.60 an ounce on the New York Mercantile Exchange?s Comex unit, the highest price since Dec. 17. The metal was at $1,122.90 at 8:34 a.m. local time. Gold for immediate delivery in London advanced 0.1 percent to $1,122.80.

The metal increased to $1,125.25 an ounce in the morning ?fixing? in London, used by some mining companies to sell production, from $1,121.50 at yesterday?s afternoon fixing.

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Jim Sinclair’s Commentary

Another Government says STUFF IT on OTC derivative losses.

Icelandic president angers Britain, Dutch over bank bill

REYKJAVIK (AFP) – Iceland’s president on Tuesday refused to sign an unpopular bill to compensate Britain and the Netherlands over the failure of Icesave bank, triggering anger in London and The Hague.

President Olafur Ragnar Grimsson said in a televised speech that he would put the bill to a referendum instead.

"I have decided, according to Article 26 of the Constitution, to refer this new Act to the people," he said. "The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery."

In a swift response Britain insisted that the compensation deal must go through, while The Netherlands said it was "unacceptable".

Fitch Ratings immediately downgraded Iceland’s long-term debt rating from BBB- to BB+, citing a "renewed wave of domestic political, economic and financial uncertainty".

The agency said the president’s decision "represents a significant setback to Iceland’s efforts to restore normal financial relations with the rest of the world".

More…

Jim Sinclair’s Commentary

One of the books I wrote was "The Strategic Metals War."

It is obvious who has won.

Concern as China clamps down on rare earth exports
Neodymium is one of 17 metals crucial to green technology. There’s only one snag – China produces 97% of the world’s supply. And they’re not selling
By Cahal Milmo
Saturday, 2 January 2010

Britain and other Western countries risk running out of supplies of certain highly sought-after rare metals that are vital to a host of green technologies, amid growing evidence that China, which has a monopoly on global production, is set to choke off exports of valuable compounds.

Failure to secure alternative long-term sources of rare earth elements (REEs) would affect the manufacturing and development of low-carbon technology, which relies on the unique properties of the 17 metals to mass-produce eco-friendly innovations such as wind turbines and low-energy lightbulbs.

China, whose mines account for 97 per cent of global supplies, is trying to ensure that all raw REE materials are processed within its borders. During the past seven years it has reduced by 40 per cent the amount of rare earths available for export.

Industry sources have told The Independent that China could halt shipments of at least two metals as early as next year, and that by 2012 it is likely to be producing only enough REE ore to satisfy its own booming domestic demand, creating a potential crisis as Western countries rush to find alternative supplies, and companies open new mines in locations from South Africa to Greenland to satisfy international demand.

Amid claims that Beijing is using its rare earths monopoly as a tool of foreign policy, the British Department of Business, Industry and Skills said it was "monitoring" the supply of REEs to ensure China was observing international trade rules.

More…

Jim Sinclair’s Commentary

MOPE spins the story but the imports are the real stuff.

India 2009 gold imports 300-350 T – trade body
Mon Jan 4, 2010 8:23am EST

NEW DELHI, Jan 4 (Reuters) – India imported 300-350 tonnes of gold in 2009, higher that the previous estimate of a little over 200 tonnes, the head of the Bombay Bullion Association said on Monday.

Suresh Hundia said the trade body had also revised its estimate of imports in 2008 to 439 tonnes from 420 tonnes.

"Figures of export houses had to be revised … Data for eight months had to be revised," he said.

Hundia said the estimate changed significantly because data from several large trading houses, which were allowed to import gold in early 2009, was not available earlier.

More…

Jim Sinclair’s Commentary

Regardless of MOPE, be assured this is NOT a dress rehearsal.

The dollar rally is an illusion. Gold will trade at $1650 and higher.

U.S. Treasuries Post Worst Performance Among Sovereign Markets
By Daniel Kruger

Jan. 1 (Bloomberg) — Treasuries were the worst performing sovereign debt market in 2009 as the U.S. sold $2.1 trillion of notes and bonds to fund extraordinary efforts to bolster the economy and financial markets.

Investors in U.S. debt lost 3.5 percent on average through Dec. 30, according to Bank of America Merrill Lynch indexes, the biggest annual slide since at least 1978. The 10-year Treasury yield reached its highest level in six months yesterday before a Labor Department report next week forecast to show payrolls were unchanged in December after the U.S. economy lost jobs in every month since January 2008.

“The financial system has survived,” said Ray Remy, head of fixed income in New York at Daiwa Securities America Inc., one of 18 primary dealers that trade directly with the Federal Reserve. “Now the market has to deal with other issues like deficit spending, tremendous issuance, the weakness in the dollar. How significant is this recovery, and what happens when you take away some of the government stimulus.”

The yield on the benchmark 10-year note climbed to 3.84 percent from 2.21 percent at the end of 2008, according to BGCantor Market Data. The yield touched 3.91 percent yesterday, the highest level since June 11.

Two-year note yields rose to 1.14 percent from 0.76 percent.

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Jim Sinclair’s Commentary

QE to infinity, guaranteed.

Fed may re-enter MBS market later in 2010 – Market News
Tue Jan 5, 2010 12:05pm EST

NEW YORK, Jan 5 (Reuters) – The Federal Reserve is discussing re-entering the mortgage-backed securities market later this year if its buying power is needed to hold down interest rates, Market News said on Tuesday in a story citing Fed officials.

The $5 trillion agency mortgage-backed securities market may weaken when last year’s biggest buyer, the Federal Reserve, ends its $1.25 trillion agency MBS purchasing program at the end of the first quarter of 2010.

Fed officials, however, "are prepared to contemplate changes if need be, depending on conditions in the economy, housing finance and in financial markets more broadly," Market News said in a story written by Steven Beckner.

"Among the options that has been discussed, say people in a position to know, is doing additional MBS purchases."

The Fed’s program has helped keep 30-year mortgage rates near record lows, attracting buyers to the housing market as it struggles to exit its worst slump in decades.

More…

Jim,

Money flows in the Yen suggest that the Dollar Carry Trade, which started in force in 2007, is going strong. A turn in the Yen in the coming weeks after the setup of commercial money flows will confirm it. If so, will once again show how F-TV spin is faded.

CIGA Eric

Manufacturing data, commodities lift US stocks
CIGA Eric

"The ISM number was very, very good, and we think it points to continuing strengthening and overall, bodes relatively well in the near-term for the market," said Karl Mills, president of Jurika, Mills and Keifer, an investment advisory firm in Oakland, California."

All hail the resumption of another devaluation (inflation) driven recovery.

ISM Prices Paid Index (PP) to National Purchasing Manager’s Index (PMI) Ratio:

More…

Contracts down: Is housing headed for double-dip?
CIGA Eric

The number of people preparing to buy a home fell sharply in November, an unsettling new sign that the housing market may be headed for a "double-dip" downturn over the winter.

The increasing chatter of a double-dip, recession or housing, is clearly referenced in nominal or U.S. dollar terms. In real or stable currency terms, there’s hardly enough bounce to produce the double-dip.

More…

Dear CIGAs,

Take a look at the COT chart of the Dollar linked below. It is extremely overextended internally and if any technical support levels get violated on the downside, a significant amount of long liquidation is going to occur. We got just a taste of that in today’s session as the Dollar came under strong pressure with year-end positioning now completed and managed money taking positions across a variety of markets for 2010.

Click chart to enlarge in PDF format

WILL HISTORY REPEAT ITSELF?

The Resolution Trust Corporation (RTC) was the organization created to clean up and liquidate insolvent savings and loans during the last major U.S. real estate crisis in the late 1980’s and early 1990’s.  We predicted the coming of a new RTC-like organization over a year ago.  That prediction has materialized, as the Federal Deposit Insurance Corporation (FDIC) is now undertaking the same role played by the RTC twenty years ago.

Let us examine the parallels to today.  In the late 1970’s and 1980’s, the real estate finance industry was a big donor to politicians in the U.S. Congress and to the executive branches at both state and federal levels.  After a decade or two of influencing legislation in their favor, too much power was in the in the hands of the savings and loan industry.  This led to abuses in banking and real estate finance that created the savings and loan crisis, and the failure of over 700 institutions.  The government’s plan to resolve the crisis called for the formation of the RTC to manage the liquidation of bad saving and loans portfolios, and the taxpayer picked up the bill for the losses.

Today, the banking industry, especially the Wall Street branch of the banking industry, is the big donor to the legislative and executive branches in state and federal governments.   Will history repeat itself with a few variations?

Already the taxpayer has been asked to contribute hundreds of billions of dollars.  The derivatives crisis still continues.  The underlying culprit behind the banking crisis, unregulated derivative transactions, continues unchecked.  It remains to be seen if the power that the banking industry currently holds will result in further problems for the economy, financial markets, and the taxpayer.  Many experienced observers believe that there is a strong possibility that another and much bigger crisis will develop.

FDIC HAS TAKEN THE JOB

Sure enough, the FDIC, a federal agency, has taken on the role of bailing out and selling bad banks.  About 140 banks were shut down in 2009 by the FDIC, and about the same amount were shut down in 2008.  The banks that have been taken over represent about 4% of total deposits.  This is an immense sum, and there remain many banks on the watch list.  In the last two years, we have pointed out twice that the Federal Reserve believes that there are about 3,000 banks on their solvency watch list.  Approximately 300 have thus far been liquidated, there is a long way to go until the remaining problem banks have either raised enough capital to create stronger balance sheets, or are liquidated by the FDIC.

If we assume that 50% of the troubled banks identified by the Federal Reserve (or about another 1,300) must be liquidated, we have several more years of liquidation before the banking system will be healthy in the U.S.

THE EXTEND AND PRETEND SYNDROME

According to contacts of ours in the banking industry, federal bank inspectors and legislators pressured the Financial Accounting Standards Board (FASB) to suspend fair value accounting requirements.  This allows the banking industry to overvalue and consider ‘current’ a large number of questionable commercial real estate loans on bank balance sheets.  This positively overstates the financial condition of many weak banks. Professionals in the banking and real estate industries refer to this game by the name of “Extend and Pretend”.

Loans which are not making principal and sometimes even interest payments are considered good enough to continue to be held on the lending bank’s books at cost.  This game of extend and pretend is intended to work until the value of real estate assets begins to stabilize.  The hope is that the price of commercial real estate will stabilize and slowly begin to rise so that banks will actually be repaid these loans.

An excellent article appeared in the January 11, 2010 issue of Business Week entitled “Not So Radical Reform”.  It is about financial regulation and how it is being watered down in the U.S. Congress.  Needless to say, this is a very negative prospect and one which, in our opinion, will probably lead to future declines in the standard of living of most Americans.

Below is a link to the article:

Businessweek

OUR OUTLOOK FOR ECONOMIC GROWTH AROUND THE WORLD

In our opinion, stock market appreciation is a function of corporate profit growth.  Corporate profit growth depends upon the industry or industries in which the company operates and the growth rate of the countries in which the company operates.  A summary of the markets which we believe are attractive for investment in 2010 and their estimated growth rates.

Asia Pacific (faster growing countries)

Another category is slowly growing countries where investments in exporters may be successful.

Japanese currency declines are good for exports. Even though the Japanese economy is slow growing.

The following countries produce commodities. Corporate profits in export and commodity related industries may exceed national economic growth.

Europe

Latin America

North America

SUMMARY

Opportunity to enjoy stock market appreciation can be found in many sectors of the investment world in 2010.  Stocks in fast growing counties such as those mentioned above.  Stocks located anywhere in the world which are strong exporters.  Companies which are producers of food, copper, gold, and oil.  Manufacturers of machinery which are used to produce commodities (mining, farming, and oil drilling equipment and services), or machines that are used to build manufacturing facilities (machine tools) should also do well.  Transportation equipment will benefit as global trade begins to gradually resurge in 2010.

In the last half of 2010 we expect to see rising inflation in many parts of the world.  This will increase demand for commodities, especially precious metals.

The outlook for currencies depends on many variables, including relative economic growth rates, financial decision making, and interest rate trends.  Unless the U.S. changes their current financial strategy, the U.S. dollar will continue to decline over the long term. This decline will be punctuated by periodic dollar rallies, such as the one currently taking place.

Please accept our best wishes for a happy, healthy and successful New Year.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Dear CIGAs,

I would like to wish a very Happy Birthday to our gold delivery man, CIGA JB Slear.

Jim Sinclair’s Commentary

Ron Paul is spot on.

The Austrian School’s 7 Commandments:

-The Austrian free-market economists use common sense principles.
-You cannot spend your way out of a recession.
-You cannot regulate the economy into oblivion and expect it to function.
-You cannot tax people and businesses to the point of near slavery and expect them to keep producing.
-You cannot create an abundance of money out of thin air without making all that paper worthless.
-The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever.
-You cannot live beyond your means indefinitely.
-The economy must actually produce something others are willing to buy.

Jim Sinclair’s Commentary

December 2009 bankruptcies were up 22% from December 2008.

This is not what Green Shots are made of. This is what MOPE is made of.

AP: 2009 bankruptcies total 1.4 million, up 32 pct
By MIKE BAKER, Associated Press Writer – 2 hrs 22 mins ago

RALEIGH, N.C. – U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 the seventh-worst year on record, with more than 1.4 million petitions submitted, an Associated Press tally showed Monday.

The AP gathered data from the nation’s 90 bankruptcy districts and found 1.43 million filings, an increase of 32 percent from 2008. There were 116,000 recorded bankruptcies in December, up 22 percent from the same month a year before.

While experts believe some of the increase is due to a natural recovery as consumers and attorneys become accustomed to a recent overhaul of bankruptcy laws, the numbers indicate clear correlations to recession-weary regions. Arizona saw the fastest increase, a jump of 77 percent from the year before, followed by Wyoming (60 percent), Nevada (59 percent) and California (58 percent).

Emile Harmon, who owns a law firm in Tempe, Ariz., said the firm has doubled its staff to handle the surge in bankruptcy filings. The lawyers have been steadily shifting away from their other areas of business, civil lawsuits and divorce cases.

"Bankruptcy is kind of swallowing the whole practice." Harmon said. "There’s little time to do other stuff."

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Jim Sinclair’s Commentary

Good luck Tanzania. Already gas rich, we wish you good fortune in the large oil drilling now starting.

Solo Oil: Likonde-1 Well, Tanzania, Drilling To Start Jan 7

LONDON (Dow Jones)–Solo Oil PLC (SOLO.LN), which buys interests in exploration, development and production oil and gas assets, said Monday Likonde-1 in Tanzania, the first well to be drilled …

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Jim Sinclair’s Commentary

The US economy is consumer driven.

You have to be nuts to think that people in this condition not running from their obligations will be out there buying, buying, buying.

Under Water and Not Walking Away: From 585k to 187k

Law professor Brent T. White, in an important new paper, "Under Water and Not Walking Away," describes the problem: A young professional couple with excellent credit and a solid income bought an average three-bedroom house in Salinas for $585,000 in 2006. Their monthly payment is $4,300. Then the housing bubble burst and their house now is worth only $187,000 — though they still owe $560,000 on their mortgage. He estimates it would take them more than 60 years just to recover their equity.

The problem for them — and 2.4 million of 6.9 million California mortgage holders (the most in the nation) — is that lenders failed to ensure that homes were actually worth what they sold for. Lenders in the appraisal process simply ignored bubble prices if the borrower seemed able to make monthly payments.

So what can underwater homeowners do? In White’s example, the couple could continue to pay $4,300 a month. Or they could go into foreclosure, rent a place for $1,000 a month, and in a few years buy a home selling at a pre-bubble price of $180,000 with monthly payments of $1,200. Or they could approach their lender/loan servicer and attempt to get a loan modification that reflects the home’s real value, voluntarily writing down some of the principal.

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Jim Sinclair’s Commentary

The financial industry (good ole boys club) gets bailed out of failed derivatives to the tune of trillions and California is going to be told to go fish.

There can be no real economic recovery as long as the US’s own Greece, Spain and Ireland (California) is told to go straight to Hades.

California Pushes for Federal Help
DECEMBER 31, 2009
By STU WOO

Facing a $21 billion shortfall through June 2011, California leaders want billions of dollars in budget relief from Washington that could head off deep cuts expected to state programs.

Gov. Arnold Schwarzenegger will ask the White House to waive rules that require the state to spend its own money on certain programs to receive federal funds, according to California officials briefed on the Republican’s coming budget proposal.

Such relief, combined with additional stimulus funds, could save the state as much as $8 billion in the next 18 months, the officials said.

State Senate President Darrell Steinberg, a Democrat, will visit Washington in coming months to lobby Obama administration officials and the California congressional delegation for aid. His message: The national economy will depend on California’s recovery.

Messrs. Schwarzenegger and Steinberg will also use a longstanding argument that the state sends more tax dollars to Washington than it receives in return.

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Jim Sinclair’s Commentary

Stratfor’s outline for 2010.

They should also have added Yemen and Pakistan. Both are costing money, and will only increase in costs.

This is great news for Daddy Warbucks.

"Russia’s resurgence as a major power. In the 1990s the United States became very comfortable with the idea of Russian weakness, and in the 2000s the wars in Afghanistan and Iraq have utterly consumed U.S. military capacity. With the recent decision to send even more forces into Afghanistan, the U.S. preoccupation with the Islamic world will become all-consuming, allowing Russia to do as it pleases in its near abroad."

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Jim Sinclair’s Commentary

Today on F-TV a money bunny actually called the US economy overheated.

Do these people ever go outside?

The States and the Stimulus
How a supposed boon has become a fiscal burden.
JANUARY 2, 2010

Remember how $200 billion in federal stimulus cash was supposed to save the states from fiscal calamity? Well, hold on to your paychecks, because a big story of 2010 will be how all that free money has set the states up for an even bigger mess this year and into the future.

The combined deficits of the states for 2010 and 2011 could hit $260 billion, according to a survey by the liberal Center on Budget and Policy Priorities. Ten states have a deficit, relative to the size of their expenditures, as bleak as that of near-bankrupt California. The Golden State starts the year another $6 billion in arrears despite a large income and sales tax hike last year. New York is literally down to its last dollar. Revenues are down, to be sure, but in several ways the stimulus has also made things worse.

First, in most state capitals the stimulus enticed state lawmakers to spend on new programs rather than adjusting to lean times. They added health and welfare benefits and child care programs. Now they have to pay for those additions with their own state’s money.

For example, the stimulus offered $80 billion for Medicaid to cover health-care costs for unemployed workers and single workers without kids. But in 2011 most of that extra federal Medicaid money vanishes. Then states will have one million more people on Medicaid with no money to pay for it.

A few governors, such as Mitch Daniels of Indiana and Rick Perry of Texas, had the foresight to turn down their share of the $7 billion for unemployment insurance, realizing that once the federal funds run out, benefits would be unpayable. "One of the smartest decisions we made," says Mr. Daniels. Many governors now probably wish they had done the same.

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Jim Sinclair’s Commentary

I believe that we have made a case here where the operative word is WILL, not could.

Robert Rubin: All Hell Could Break Loose Because of the Huge Government Debt

The ultimate insider, Robert Rubin, who is a former secretary of the Treasury (1995–99) and now serves as co-chairman of the Council on Foreign Relations and is a fellow of the Harvard Corporation, in a Newseek opinion piece had this to say:

The United States faces projected 10-year federal budget deficits that seriously threaten its bond market, exchange rate, economy, and the economic future of every American worker and family. Those risks are exacerbated by the context of those deficits: a low household-savings rate, even after recent increases; large funding requirements for federal debt maturities every year; heavy overweighting of dollar-denominated assets in foreign portfolios; worsened fiscal prospects in the decades after the current 10-year budget period; and competing claims for capital to fund deficits in other countries.

The conventional concern here is that private investment will be crowded out, which would result in a reduction of productivity, competitiveness, and growth. In addition, the very early 1990s showed that unsound fiscal conditions can have a symbolic effect that broadly undermines business and consumer confidence. But finally, and far more dangerously, our bond and currency markets could react with severe distress to fears about imbalances in the supply and demand for capital in the years ahead or about the possibilities of inflation. Those effects have been averted so far by a number of factors: large inflows of capital from abroad into Treasury securities; concerns about other major currencies; the low level of private demand for capital; and the psychological state of the market. But this cannot continue indefinitely, and change can occur with great force—and unpredictable timing.

Of course, he is correct. However, this isn’t the first time an insider has warned about the debt. Obama, himself, has done so.

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Jim Sinclair’s Commentary

Pimco has established its first equity fund, so where is the connection unless it is serious inflation?

Pimco Cuts U.S., U.K. Bonds as Borrowing Increases (Update3)
January 03, 2010, 10:24 PM EST
By Wes Goodman

Jan. 4 (Bloomberg) — Pacific Investment Management Co., which runs the world’s biggest bond fund, is cutting holdings of U.S. and U.K. debt as the two nations increase borrowing to record levels.

Pimco is “more cautious” on corporate bonds and holds fewer mortgage-backed securities than the percentages in the benchmarks it uses to gauge performance, wrote Paul McCulley, a portfolio manager and member of the investment committee, in his 2010 outlook. The company is also underweight Treasury Inflation Protected Securities, according to the report on Newport Beach, California-based Pimco’s Web site.

“This all leaves us with portfolios that appear, more than at other times, to be hugging the benchmarks with no bold positioning,” McCulley wrote. “We’re making a very active decision to run light on risk.”

Yields, which move opposite to prices, will rise in the U.S. and the U.K. this year, according to Bloomberg surveys of economists. Treasuries fell 3.7 percent in 2009, the most in more than three decades, according to indexes compiled by Bank of America’s Merrill Lynch unit, as the U.S. increased debt sales to snap the biggest economic slump since the 1930s. U.K. gilts fell 1.3 percent last year, the indexes show.

The yield on the benchmark 10-year note rose four basis points to 3.87 percent as of 12:22 p.m. in Tokyo, according to BGCantor Market Data. The 3.375 percent security dropped 9/32, or $2.81 per $1,000 face amount, to 95 31/32. Yields advanced to 3.91 percent on Dec. 31, the highest level in six months.

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Jim Sinclair’s Commentary

This is a classic "Do not blame me, blame the other Chairman behind the tree" scenario.

Bernanke deflects blame, calls for stronger regulation.
Lax regulatory oversight, rather than low interest rates, helped inflate the housing bubble, said Fed’s Bernanke yesterday, although he admitted that Federal Reserve efforts to rein in the bubble were " too late or were insufficient," and future regulatory actions "must be better and smarter." Speaking at the annual meeting of the American Economic Association, Bernanke concluded that low interest rates were responsible for around 5% of the change in housing prices, while increased global capital flows were responsible for 30%. Speaking at the same meeting, Fed’s Donald Kohn said raising interest rates now to prevent a commodity price bubble would be both ineffective and potentially dangerous.

Jim Sinclair’s Commentary

The Yearend Luncheon Produced Dollar Rally has run into trouble and has a great deal more of that in front of it.

Business loan defaults keep rising.
Businesses may be hoping for a fresh start in 2010, but bad news from 2009 continues to trickle in. Severe delinquencies on business loans rose to 0.91% in November from 0.87% in October, reported PayNet Inc. today, marking the 22nd consecutive monthly increase in loans unlikely to be paid. Moderate delinquencies rose to 4.33% from 4.19%. In a small sign of improvement, the Small Business Lending Index fell just 11% Y/Y, the smallest decline in the index since the recession began.

Jim Sinclair’s Commentary

The West slaps tariffs on China as China’s largest export market discusses dropping tariff barriers. Now which of these actions makes more sense to business people and which of these actions makes more sense to government bureaucrats?

With governments so involved in ever growing participation in the business arena and assuming Ayn Rand to be correct, we are in one hell of a mess.

Let’s hear another round of applause for the OTC derivative manufacturers and distributors that converted a normal modest recession into the disaster of our lifetimes.

China and Asean free trade deal begins
By Andrew Walker

A new free trade area comes into effect on Friday, incorporating China and the six founding members of the Association of South East Asian Nations (Asean).

These countries include Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand.

They plan to eliminate tariffs on 90% of imported goods.

This will reduce the cost of trade and is likely to lead to an expansion of cross border commerce between the countries concerned.

In terms of population it will be the largest trade area in the world, with nearly 1.9bn people and it includes some of the leading export driven economies.

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Jim Sinclair’s Commentary

Exactly how do you declare victory over this when these guy’s grandchildren are obligated by tradition to avenge them?

Where is terrorism exactly?

Low tech communication (face to face conversations only – no cell phone) and primitive spy craft (drop spot – written instructions) will defeat high tech approaches.

What a mess and now Yemen.

Death toll hits 99 at volleyball bombing
Sun, 03 Jan 2010 11:14:41 GMT

More bodies have been pulled from the rubble of a sports complex in northwestern Pakistan, raising the death toll in Friday’s attack on a volleyball game to at least 99.

The number of victims is likely to increase as recovery efforts moved through their second day, authorities said Sunday.

A bomber drove up to a crowd of spectators watching a volleyball match in Lakki Marwat on Friday and detonated his explosive-laden vehicle. Many women and children were among the victims.

Police have reportedly arrested 41 suspects and are interrogating them, as funerals are held for the victims of one of Pakistan’s bloodiest bombing in recent years.

Some 87 other victims of the attack are being treated in three different hospitals. There has been no claim of responsibility for the blast in Bannu district yet.

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Jim Sinclair’s Commentary

"Moon Walking" initiated by Mr. Farber

Marc Faber’s Favorite Currency
by Jitendra Kumar Gupta

The only near-term factor in support of the US dollar is the fact that bearish sentiment is widespread, and that other paper currencies are also subject to their central banks’ printing machines, which on renewed economic weakness would also go into overdrive. As a result, my favourite currency remains gold, whose supply is extremely limited. In fact, I am wondering if gold, which is now at around $1,100 per ounce, is less expensive than when it sold for less than $300 per ounce. How could this be? I suppose that, in the same way that a company’s stock could be less expensive at $100 than when it was selling for $10, because earnings growth has outpaced the appreciation of the shares and therefore its P/E has declined, gold could be cheaper at the current price than when it was at less than $300 because of the explosion of foreign exchange reserves in the world, zero interest rates, the huge debt overhang, and the expectation of further money printing. International reserves have grown from about $1 trillion in 1995 to over $7 trillion.

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Jim Sinclair’s Commentary

Improvised explosive devices are now being used in Pakistan.

These can be, and are often detonated at a distance from a select target.

I would take this as an escalation of Talibanizing.

Roadside bombs kill six in Pakistan (2nd Roundup)
Jan 3, 2010, 17:08 GMT

Islamabad – Two roadside bombings in Pakistan’s restive north-western region on Sunday killed at least six people, including a former lawmaker and an anti-Taliban tribal elder, officials said.

Separately, a suspected US drone targetted a Taliban hideout in Pakistan’s tribal badlands, killing two people.

Ghani-ur-Rehman, a former minister in the North West Frontier Province (NWFP), and three of his guards died when their vehicle was struck by a bomb near Hangu, a town located 100 kilometres south-west of the provincial capital Peshawar.

‘It was a remote-controlled explosion and Ghani-ur-Rehman was the target,’ local police official Iqbal Khan said. The blast injured five people, Khan added.

Hangu adjoins Pakistan’s restive tribal region, where security forces have been battling militants from al-Qaeda and the Taliban for several weeks.

Elsewhere in the north-west, a roadside bomb tore through a vehicle in the Bajaur tribal district near the Afghan border, killing two people and wounding four.

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Dear CIGAs,

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini.

Hello Jim,

Again, appreciated seeing the 10-year charts from Dan, his contributions are always interesting, and these especially so.

However, I write this cold, cold winter’s morning to acknowledge further evidence of your accuracy: that of your warning several years back about money markets. The author of Jesse’s Cafe American cites the Zero Hedge article on the proposed changes effecting the fund manager’s power to cut off a member’s right to withdraw his money.

Based on your discussion about this possibility, which I thought remote at the time, I did liquidate two IRA’s in 2008, paid the penalty and bought additional bullion, which is now well up and on its way.

Reading your web site has been the best education. Throughout the years I always found great value in your lessons, but now as the hard and terrible Beast hunts for every last morsel, I am bowled over by the great good fortune of my path having crossed yours.

Thank you, sir,
CIGA Alex

Dear Alex,

Many thought my warning of money market funds was a tad over the top.

I wonder how many were as wise as you.

Regards,

Jim

Notes From Underground: Questioning the Taylor rule
Yra Harris | January 3, 2010 at 9:54 pm

The biggest story from the weekend is Federal Reserve Chairman Ben Bernanke’s speech at the American Economics Association in Atlanta. Bernanke calls for more regulation for the banking system, rather than using the hammer of interest rates to prevent the onset of bubbles, especially in the real estate market. Calling for greater "systemic regulation" is a way for the FED to claim that it was not Fed policy that led to the current crisis, but rather the lax oversight of regulators. The FED chairman utilizes the Taylor rule to disallow FED responsibility for the housing bubble.

Many FED critics point to the sustained low rates in the early part of the decade that made the housing bubble inflate to such detrimental levels that affected the entire financial system. Bernanke defends the prolonged low rates as based on the Taylor rule. It is interesting that the Fed chairman uses this veil of inflation policy in the low rates policy of 2002-2004 but then goes on to take credit for the FED overriding the strictness of the Taylor rule during the present credit crisis. In a Bloomberg.com article on the FED chairman’s speech, Bernanke goes out of his way to say that the Taylor rule would have recommended the FED raise rates to a range of 7-8% through the first three quarters of 2008. Mr. Bernanke says that this would have been “a policy decision that probably would not have garnered much support among monetary specialists.” He goes on to explain that the FED focused on anticipated rates of inflation and not actual rates. So here we have spelled out that the FED has an asymmetrical bias that lends itself to being a serial bubble blower. The FED utilizes the models we have when they fit our preconceived view, but override them when we need a different outcome.

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Jim Sinclair’s Commentary

Here is the real economy. The backbone of a nation as it filters.

This is where social contribution occurs via business, not paper shuffling that produces nothing whatsoever and has destroyed not only an economy but also a system and way of life.

Nobody will bail out CIGA Marc 77 if he should need it, yet those that killed the Golden Goose have been bailed out more than whole.

Dear Mr. Sinclair,

Much of my weekend has been spent going over the 2009 year end numbers for the hardware store as well as establishing new initiatives to hopefully boost sales in what I expect to be a relatively dismal environment.

Please note that these numbers are near final but will adjust mildly as I make final updates in the coming weeks.

Total Year over Year Annual Sales were down 13.9%

The quarterly breakdown is as follows:
1Q09 Sales were down 0.6%
2Q09 Sales were down 20.3%
3Q09 Sales were down 6.7%
4Q09 Sales were down 27.4%

3 out of 12 months showed sales increases (March 13.1%, August 1.0% and September 11.3%)

The 3 worst months were June (-33.0%), July (-27.6%) and December (-34.1%)

Business clearly decelerated going into the 4th quarter after picking up mildly toward late summer.

Generally speaking traffic until late in the 4th quarter was near 2008 levels. We have yet to reduce personnel due to this but the average transaction size is down dramatically. Inventory turns are also far more limited with a much smaller proportion of total inventory making up the majority of revenue. What we find is that a customer who normally may have purchased 6 cases of a particular item is now purchasing only 2.

Our overall cost of goods declined 11.4%, mildly less than revenue. To some extent the big box stores required us to lower prices on the most sensitive items which prevented us from expanding margins. Overall gross profit was off 17.8%. For the most part goods costs remained relatively constant through 2009 but certain categories (lumber, sheet rock) showed price declines and a few showed increases (mainly sealants and some paints and solvents). We found that manufacturers and distributors were very willing to discount prices at our request.

Categories leading the sales declines were lumber, general hardware and tools, and power tools.

Paint and paint sundries were the best performing core categories with some specialty categories such as winter products.

Our 3 largest vendors are two national hardware wholesalers both with sales over $1 billion per year and a major nationwide manufacturer of paint. Of the two national wholesalers, one with which I have a much closer relationship, they have informed me that same store sales have been weak and are very similar to my store’s experience. Their sales are expected to be roughly flat for the year but that is due primarily to the acquisition of new business, some of which was due to the failure of the 2nd largest independent distributor of hardware in the country earlier this year.

Our customers which represent a broad number of industries (handymen, contractors, hotels, hospitals, car rental services, property managers and assisted living), have nearly all been purchasing less in terms of volume of goods and gross sales. A number of large general contractors with whom we have close relationships have informed us that the competition in the bidding process for large projects is substantial in that there are more bidders and fewer projects to go around. A number of companies have unfortunately been forced to lay off workers.

In our discussions with customers we expect 2010 to remain challenging and in all probability become increasingly more difficult unless the stimulus efforts are targeted specifically at the construction and infrastructure sectors. Without this we feel that no meaningful business pick up can be expected.

It is also my personal opinion that we may start to see more consolidation in the industry specifically at the manufacturer and wholesaler level. There are simply too many suppliers when hardware stores are purchasing less and in some cases closing their doors altogether. Unfortunately consolidation generally leads to additional layoffs as cost saving synergies are generally at the root of consolidation efforts. I would also expect some companies who cannot find suitors to potentially have to close down.

I truly wish I had a more upbeat assessment to share with you but unfortunately this is what our little microcosm of "Main Street" is experiencing.

All the best,
CIGAMarc

Jim Sinclair’s Commentary

CIGA Buz brought this to our attention. For the somnolent Sheeple there is a surprise in the offing.

Only gold saved wealth in Argentina. Only gold will secure your financial position.

You can be sure OTC derivative will not.

Cry for Me, Argentina

In the early 20th century,  Argentina was one of the richest countries in the world. While Great Britain ’s maritime power and its far-flung empire had propelled it to a dominant position among the world’s industrialized nations, only the United States challenged Argentina for the position of the world’s second-most powerful economy. It was blessed with abundant agriculture, vast swaths of rich farmland laced with navigable rivers and an accessible port system. Its level of industrialization was higher than many European countries: railroads, automobiles and telephones were commonplace.

In 1916, a new president was elected. Hipólito Irigoyen had formed a party called The Radicals under the banner of "fundamental change" with an appeal to the middle class. Among Irigoyen’s changes: mandatory pension insurance, mandatory health insurance, and support for low-income housing construction to stimulate the economy. Put simply, the state assumed economic control of a vast swath of the country’s operations and began assessing new payroll taxes to fund its efforts.

With an increasing flow of funds into these entitlement programs, the government’s payouts soon became overly generous. Before long its outlays surpassed the value of the taxpayers’ contributions. Put simply, it quickly became under-funded, much like the  United States ‘ Social Security and Medicare programs.

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Will latest jobs bill really produce jobs?
CIGA Eric

When the Senate takes up a jobs bill later this month or early in February, the debate will center on whether it really will create jobs and be worth plunging the government tens of billions of dollars further into debt.

Dubbed the "Son of the Stimulus," if passed, will be thrown onto ever-growing debt pile. A debt pile that only days ago was attracting bipartisan support to stabilize. Government spending does little to spur investment, which is the critical component to future sustainable growth. More important, this New Deal style spending will not support the U.S. dollar.

Source: finance.yahoo.com

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Breakdown of Total Bank Credit
CIGA Eric

"Why don’t we just put everyone in the United States on the federal government payroll and call it a day?" counters Rep. Jerry Lewis, R-Calif.

A breakdown of total bank credit for U.S. commercial banks illustrates the reluctance to lend and propensity to hoard cash. Government spending/programs cannot support the economy without the participation from the private sector.

The deterioration in consumer loan and credit card and other revolving plans is most concerning. Personal consumption expenditures account for more than 70% of GDP.

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Dear Jim,

Thanks, but the Fed passes the baton to the Treasury with the caps being lifted on Fanny and Freddie. Like George Washington (the Chairman) crossing the Delaware on Christmas Eve, this was the second greatest stealth in US history.

Yra Harris

Jim Sinclair’s Commentary

This article says it all.

If you read this extremely well written and easily understood piece you will see the inherent message. Form will not overcome substance. MOPE will fall to economic law in 2010.

The means do not justify the ends especially when the ends are an illusion in the first place.

I see my mission as one to protect you from the increasing weak economic structure insured by the rescue of financial firms (privileged paper shufflers) temporarily at the cost of real business that creates something tangible for society.

This is the reason that I label the 2009 dollar rally as a pimple on the ass of an elephant, a sucker’s rally created by luncheon agreements on the carry trade (unknowable as to volume) concluded by hedge fund managers.

Prepare for a Keynesian Hangover
Our government’s spending orgy will haunt us in 2010.
DECEMBER 28, 2009, 8:49 P.M. ET
By BENN STEIL

In 2008, as the U.S. economy teetered under the weight of years of reckless credit expansion, the Bush administration decided against proposals to sweep out the bad debts from the banking system and then fix the regulatory structure—an approach based on tried and tested models from the S&L crisis and other financial crises.

We will pay the price for this decision in 2010. That’s because the Obama administration and the Federal Reserve are plowing forward with Plan B: Nationalize credit creation and "stimulate" the private sector by spending in its stead.

Richard Nixon’s famous line, "We’re all Keynesians now" never seemed more apropos. With the budget deficit at an eye-popping $1.4 trillion, and on track to stay above $1 trillion indefinitely, Berkeley economist Brad DeLong writes breezily in his Nov. 30 blog that "anything that boosts the government’s deficit over the next two years passes the benefit-cost test—anything at all."

On the monetary side, the fireworks have been even more spectacular. Since the financial crisis of late 2008, the Fed has flooded the globe with newly conjured dollars in an unprecedented no-holds-barred effort to prod private credit expansion. Watching the booms in the markets for distressed debt, junk-rated corporate bonds and poor-country sovereign bonds since the summer, one might be forgiven for concluding that the Fed had succeeded well beyond its expectations, and that the market’s flight to safety had given way to a flight to Vegas. Yet "the truth is that policy should be piling on," Princeton economist and New York Times columnist Paul Krugman writes in his Nov. 25 blog, "not looking for the exit."

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TA Spotlight – Royal Gold
CIGA Eric

The swing high was broken on increasing volume and cumulative volume (REV) has surged to new highs. This confirms the recent breakout. Technical measurements suggests a minimum of $70 and a good probability that the upper trading band will be tested.

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Eric,

You might recall before this entity went above $20, I felt $80 was where it was going.

You also might recall a major job was done on this by a popular financial publication that sent it from $11 to $6 after which it went quite nicely into the $40s.

Respectfully yours,
Jim