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Dear President Obama,
You think you have problems now?
Present challenges, economic or political, are nothing compared to when this one lands on your desk; the implications of which are generational in nature.
Respectfully yours,
Jim
Pakistan ‘bigger problem’ than Afghanistan: US diplomat
LONDON (AFP) — The top US diplomat in Kabul warned that Pakistan posed a bigger security problem for the rest of the world than Afghanistan, in a newspaper interview published Thursday.
Christopher Dell spoke after Tuesday’s attack on Sri Lanka’s cricket team as they travelled to a Test match in Lahore which left eight people dead, and has raised doubts about the government’s ability to tackle Islamic militancy.
"From where I sit (Pakistan) sure looks like it’s going to be a bigger problem," Dell told the Guardian newspaper.
"It is certainly one of those nuclear armed countries the instability of which is a bigger problem for the globe.
"Pakistan is a bigger place, has a larger population, it’s nuclear-armed.
"It has certainly made radical Islam a part of its political life, and it now seems to be a deeply ingrained element of its political culture. It makes things there very hard," he told the British daily.
Pakistan, a key US power in the "war on terror", is battling Taliban and Al-Qaeda militants along its rugged and lawless border with Afghanistan in the northwest.
More than 1,600 people have died in attacks in Pakistan in the last 22 months and analysts say its security agencies are failing to provide adequate security against militants, who could challenge the rule of President Asif Ali Zardari.
Fundamentalist Islamic law expands in Pakistan
Pakistani officials agree to 17 steps as part of a peace deal with extremists, alarming human-rights groups and others. Also, a bomb exploded at a Peshawar mausoleum where women came to pray.
By Mark Magnier
8:06 AM PST, March 5, 2009
Reporting from Lahore, Pakistan — In an apparent expansion of Islamic fundamentalists’ authority in the picturesque Swat Valley, local Pakistani officials have agreed to close shops at prayer times and crack down on prostitution and drug dealing as part of a proposed peace deal, according to media reports today.
The steps were among 17 points that emerged following a Wednesday meeting involving provincial government officials and supporters of a pro-Taliban cleric mediating the talks, according to the Associated Press.
Although Sharia, or Islamic law, has been in practice in many parts of Pakistan’s North-West Frontier Province and its tribal areas, its official expansion into a region less than 100 miles from Islamabad, the capital, last month has unnerved secular groups, human-rights activists and Western officials.
In a separate development underscoring the debate in Pakistan over religious extremism, a bomb exploded today at the mausoleum of a 17th century Sufi poet in the northwestern city of Peshawar after its management received a letter complaining that women were coming to pray there.
The predawn blast damaged a corner of the monument commemorating Sufi poet Rehman Baba, but no one was injured. The bomb appeared aimed at practitioners of the mystical Sufi form of Islam opposed by more hard-line Muslims
Jim Sinclair’s Commentary
Here is another statement on the condition of government affairs.
Scandal at Treasury: Official Quits Amidst Fraud Scandal
Darrel Dochow Allowed IndyMac Bank to Cook Its Books, Investigators Say
By BRIAN ROSS, JUSTIN ROOD, and JOSEPH RHEE
March 5, 2009
The man at the center of a fraud scandal at the Treasury Department has been allowed to quietly quit and retire from his job as a government regulator, despite allegations that he allowed a bank to falsify financial records and amidst outcries from investigators who say the case shows how cozy government regulators have become with the banks and savings and loans they are supposed to be checking on.
Darrel Dochow, the West Coast regional director at the Office of Thrift Supervision who investigators say allowed IndyMac to backdate its deposits to hide its ill health, quit last Friday. Prior to his leaving, Dochow was removed from his position but remained on the government payroll while the Inspector General’s Office investigates the allegations against him.
Jim Sinclair’s Commentary
Not very long if you are a legislator whose pension fund is run by a subsidiary of AIG.
Pension Plans: How Long Can We Sweep the Problems Under the Rug?
March 05, 2009
Despite the influx of fiscal stimulus money, the governor of Arizona is appearing Thursday afternoon before a joint session of the legislature to lay out the sobering facts about the fiscal condition of the state. The stimulus money only plugged the current hole. It does nothing to address the systemic hole that Arizona has dug for itself.
According to the Goldwater Institute, the state faces a $4 billion funding shortfall for its proposed $10.5 billion fiscal year 2010 budget. To put that another way, in fiscal year 2004 the state’s spending was $6.5 billion and the budget was largely in balance. Arizona is now generating revenues at 2004 levels thus the challenge is to get expenditures right-sized.
Not an easy task and one that most likely is not going to be accomplished by cutting programs exclusively. A tax increase is sure to be on the table. A dire situation but there is probably one item that won’t be discussed this evening even though it may represent the biggest time bomb of all. The state’s pension funds.
The dirtiest little secret in government finance has to be the sorry state of the state and municipal pension plans. Leaving aside the promises of rich retirement benefits that were from inception mathematically impossible to deliver the schemes and deception that the various governments are employing to delay the day of reckoning are stunning.
An article in Bloomberg a couple of days ago shined a much needed light on them.
Jim Sinclair’s Commentary
As long as you do not see the reinstitution of the uptick rule in the USA and the USA and Canada do not enforce the up tick rule, there is no criminal fraud indictment of naked short sellers. The inviting conclusion is that the equity disaster is wanted, desired and engineered. Citi as a penny stock is a disgrace to the USA, its Administration and regulators.
This disaster now exceeds 1929.
Japan to extend curbs on short-selling – Nikkei
Thu Mar 5, 2009 1:54pm EST
NEW YORK, March 5 (Reuters) – Japan’s Financial Services Agency plans will retain restrictions on selling stocks short because the market remains unsettled, financial daily Nikkei said in its Friday edition.
The curbs include a ban on naked short-selling, or shorting a stock without first borrowing the shares, and call for reporting requirements for large short positions, the paper said. Short-sellers with positions of 0.25 percent of a company’s outstanding shares or more must file reports.
The regulations had gone into effect in October, as the global financial crisis deepened, and have been due to expire at the end of March. U.S. measures similar to Japan’s are scheduled to last through July, and Europe also has short- selling restrictions in place.
Short-selling, or betting that stocks will go down, has been blamed for deepening drops in stock prices.
(Reporting by Gerald E. McCormick; Editing by Andre Grenon)
Jim Sinclair’s Commentary
"As Goes Motors So Goes the USA"
–Bert Seligman (1958)
‘Going-concern warning’ raises spectre of GM bankruptcy filing
Kevin Krolicki, Reuters Published: Thursday, March 05, 2009
General Motors Corp on Thursday said its auditors had raised "substantial doubt" about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.
The "going concern" warning from the struggling U.S. automaker had been expected, but underscored the stakes for GM as it seeks up to $30 billion in U.S. government aid to restructure outside a court-supervised bankruptcy process.
GM had warned late last month that it expected its auditors would question its viability at the same time that it reported a loss of nearly $31 billion for 2008.
The automaker faces an end of March deadline to complete concession talks with the United Auto Workers and bondholders to reduce its debt load as part of a bid to convince the autos task force assembled by U.S. President Barack Obama that it can be made viable with a new round of government help.
Jim Sinclair’s Commentary
We shall suffer from the sins of our Financial Fathers.
This is so bad!
Fed Refuses to Release Bank Lending Data, Insists on Secrecy
By Mark Pittman
March 5 (Bloomberg) — The Federal Reserve Board of Governors receives daily reports on loans to banks and securities firms, the institution said in response to a Freedom of Information Act lawsuit filed by Bloomberg News.
The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral.
The bank provides “select members and staff of the Board of Governors with daily and weekly reports” on Primary Dealer Credit Facility borrowing, said Susan E. McLaughlin, a senior vice president in the markets group of the Federal Reserve Bank of New York in a deposition for the Fed. The documents “include the names of the primary dealers that have borrowed from the PDCF, individual loan amounts, composition of securities pledged and rates for specific loans.”
The Board of Governors contends that it’s separate from its member banks, including the Federal Reserve Bank of New York which runs the lending programs. Most documents relevant to the Bloomberg suit are at the Federal Reserve Bank of New York, which the Fed contends isn’t subject to FOIA law. The Board of Governors has 231 pages of documents, which it is denying access to under an exemption under trade secrets.
“I would assume that information would be shared by the Fed and the New York Fed,” said U.S. Representative Scott Garrett, a New Jersey Republican. “At some point, the demand for transparency is paramount to any demand that they have for secrecy.”
Jim Sinclair’s Commentary
For Your Information, VALIC are subsidiaries of American International Group (AIG).
AIG VALIC Expands Independent Advice Platform to Serve Participants in Retirement.
HOUSTON — AIG VALIC, a national leading provider of retirement plan services to for-profit and not-for-profit education, healthcare and government organizations, today announced that Guided Portfolio Services(SM) (GPS), its independent advice and managed-account platform offered through VALIC VALIC Variable Annuity Life Insurance Company Financial Advisors, Inc., has been expanded to offer comprehensive capabilities to clients entering the income distribution phase of retirement.
Launched in January 2003, GPS delivers comprehensive investment advice and discretionary managed accounts services to individual participants in employer-sponsored defined contribution retirement plans – principally in the accumulation and transition phases of retirement planning. Entering 2007, GPS has been expanded to service clients entering the distribution phase of retirement by providing personal wealth forecasts, comprehensive portfolio construction and ongoing portfolio optimization.
AIG VALIC is one of the leading retirement plan services providers in the United States. For more than half a century, it has specialized in providing retirement programs and related investment, recordkeeping and administrative services to a variety of employer types, including for-profit and not-for-profit elementary and secondary education institutions, hospitals and healthcare organizations, higher education institutions and governmental entities. VALIC serves 28,000 client groups and more than two million participants. AIG VALIC is the marketing name for the group of companies comprising VALIC Financial Advisors, Inc.; VALIC Retirement Services Company; and The Variable AnnuityVariable Annuity
An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio.
Fed’s Kohn Says Risks of Not Rescuing AIG ‘Unacceptably Large’
By Scott Lanman and Hugh Son
March 5 (Bloomberg) — Federal Reserve Board Vice Chairman Donald Kohn said that while the decisions to rescue American International Group Inc. have been “difficult,” the costs of withholding aid to the insurer would be “unacceptably large.”
“The disorderly failure of systemically important financial institutions during this period of severe economic stress would only deepen the current economic recession,” Kohn said today in remarks prepared for a hearing of the Senate Banking Committee. “We have been and will continue to work alongside the Treasury and other government agencies to avoid this outcome.”
Kohn’s comments, building on remarks this week from Fed Chairman Ben S. Bernanke, indicate the government may commit more funds to avoid an AIG failure. Bernanke told another Senate panel on March 3 that AIG’s collapse “would be devastating to the stability of the world financial system” and jeopardize taxpayer investment in the firm, now totaling $163 billion.
The government provided a revised rescue this week, adding a $30 billion line of capital, as the New York-based company reported a $61.7 billion fourth-quarter loss. The Fed warned that AIG may need more aid if markets don’t recover.
“Extreme financial and economic conditions have greatly complicated the plans for divestiture of significant parts of the company in order to repay the U.S. government for its previous support,” Kohn said. The new plan will “provide longer-term stability to AIG” while “maximizing likelihood of repayment to the U.S. government,” Kohn said.
Jim Sinclair’s Commentary
Destruction (negative basis crime) is the moving principle of the dollar demons in today’s markets.
Someday they will hurt the wrong people.
They cannot remain immune to their damages of life and fortune.
Darth Wall Street Thwarting Debtors With Credit Swaps
By Caroline Salas and Shannon D. Harrington
March 5 (Bloomberg) — Amusement-park operator Six Flags Inc. and automaker Ford Motor Co. may be pushed toward bankruptcy by bondholders trying to profit from credit-default swaps that protect against losses on their high-yield debt.
By employing a so-called negative-basis trade, investors could buy Six Flags bonds at 20.5 cents on the dollar and credit- default swaps at 71 cents. If the New York-based chain defaults, the creditors would receive the face value of the debt, minus costs. In a Feb. 27 note, Citigroup Inc.’s high-yield strategists put that profit at 6 percentage points, or $600,000 on a $10 million purchase.
Investors who bet on the collapse of a company are pitting themselves against traditional debt holders at a time when Moody’s Investors Service projects defaults will more than triple this year and exceed the level during the Great Depression. The clash may stall restructuring efforts to prevent bankruptcies, as basis traders may be less inclined to participate in distressed debt exchanges, said Matthew Eagan, an investment manager at Boston-based Loomis Sayles & Co., with $7 billion in high-yield assets.
“Before, you really had to worry mostly about where you were in the” company’s capital structure, he said. “Now, you have to consider the possibility that you might have this large holder of CDS incentivized to see it go into bankruptcy. It’s something that’s going to come up more and more.”
Six Flags Debt
Six Flags debt is rated Caa3 by Moody’s and CCC+ by Standard & Poor’s, three and five levels above default. Both rankings were put on “negative outlook” last year. Sandra Daniels, a spokeswoman for the New York-based company, didn’t return a phone call seeking comment.
Jim Sinclair’s Commentary
This could give some naked shorts a new rear end. You have to beat them to death by spectacular successes.
China’s spending spree likely to include Canadian companies
Duncan Mavin, Financial Post Published: Wednesday, March 04, 2009
HONG KONG – Asia’s dealmakers say a Chinese resource spending spree will accelerate throughout the next 12 months, with Canadian mining and energy companies likely on the shopping list.
Chinese buyers have already scooped up US$70-billion worth of global resource assets so far this year, as Beijing looks to secure its energy and resource future by spending some of its US$2-trillion in foreign exchange reserves.
The overseas buying trend will pick up steam in the months ahead, according to China and Hong Kong-based corporate dealmakers, investment bankers and private equity players surveyed by Royal Bank of Scotland and Mergermarket.
The report comes as expectations soar Beijing will deliver another stimulus package on Wednesday to add to the 4-trilion yuan (US$586-billion) in spending announced late last year. Further stimulus measures will be announced at the National People’s Congress – the climax of the country’s political calendar that features 3,000 delegates from across the country – according to government officials quoted in Chinese state media. Reuters reported, citing an unidentified official at the country’s top economic planning agency, that China will spend more on infrastructure and to boost manufacturing in addition to the stimulus package announced in November.
Details of Beijing’s previously announced spending plans are still sketchy although much of it is directed toward resource-intensive infrastructure projects in the transport and energy sectors.
Jim Sinclair’s Commentary
Pakistan is over. It is a process, not a specific event. The Taliban are in control of this process.
Pak facing six critical threats to its survival
Islamabad/London, Mar.4 (ANI): The militant assault on cricket tourists in Lahore puts sharp focus on a fragile democracy that is at risk of disintegration and international isolation in Pakistan.
Whole provinces run beyond the writ of the state.
According to The Guardian, security is not the only problem of a country that the United States now considers a greater threat than neighboring Afghanistan.
With the economy teetering, political tumult building and social conditions ripe for extremists, nuclear-armed Pakistan faces six critical threats to the rule of law and governance of the state.
The current violence started in summer 2007, when security forces routed armed militants at the Red Mosque in Islamabad.
That event turned militant groups that were focused on India or Afghanistan inwards, to Pakistan itself.
