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Dear CIGAs,
Here is a question for you, sort of a test.
Do you know, without Google reference, what the difference is between the Yuan and Renminbi?
Jim Sinclair’s Commentary
Setting aside $74 billion for bonuses and raises while even the official US unemployment figures put approximately one out of every ten people out of work is looking for real trouble.
This illustrates the rank madness of the sociopath financial industry when the final cost of bailing out the super-rich is going to be $17 trillion to some official estimate of $27 trillion tax payer dollars. This is the stuff history says revolutions were made of.
Wall St. Jacks Up Pay After Bailouts
Lawmakers Warn Against Return to Pre-Crisis Levels
By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, July 23, 2009
NEW YORK, July 22 — Wall Street’s biggest banks are setting aside billions of dollars more to pay their executives and other employees just months after these firms were rescued with a taxpayer bailout, renewing questions about compensation practices in the aftermath of the financial crisis.
The recent outcry over bonuses at bailed-out firms prompted public alarm and promises of reform from financial leaders, who acknowledged that pay and bonuses should not reward risky short-term business decisions — such as those that contributed to the meltdown — but instead longer-term financial performance.
But Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.
The increase in set-asides for employee pay has raised the ire of Washington, where lawmakers denounced financial leaders for returning to old habits and vowed to enact measures governing executive compensation.
"It strengthens our commitment to getting legislation passed," Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview Wednesday, adding that a committee vote on a bill to increase oversight of Wall Street pay has been scheduled for Tuesday. "The amounts are troubling."
Jim Sinclair’s Commentary
You have heard that commercial real estate is the next major problem to hit the financial industry.
Well it is here.
I wonder if how our friend who thought "this is it and it is now" months ago was stupid Pollyanna’s this away as well. That type of talk can hurt so many people, most certainly when it is posted by a gold merchant. That really ticks me off.
I work to protect you, and some glib fellow works to take you out of your protection. Sure he has a right to his opinion, but the damage these people can do even to one person is unforgivable.
Commercial real estate prices in freefall
Boston Business Journal – by Katherine Conrad San Jose Business Journal
Thursday, July 23, 2009, 9:14am EDT
Commercial real estate values around the country have dropped 35 percent from their peak in October 2007, according to Moody’s REAL Commercial Property Price Indices.
The decline appears to be accelerating as the index dropped more than 15 percent during April and May. Transactional volume also fell along with value, which is showing signs of effects from distressed sales.
“May marked a new low for both counts,” the report said.
Along the lines of kicking a sector when it’s down, a rise in interest rates caused several deals to unravel, hitting apartment sales the hardest.
To calculate the index, Moody’s used 52 repeat sales, which had a dollar value of $400 million in April 2002.
Dan Fasulo, managing director of Real Capital Analytics, said Moody’s report is beginning to reflect true market pricing conditions “well ahead of any other indicators” and noted that commercial property values have fallen more than residential prices in annual terms.
Jim Sinclair’s Commentary
This is an extremely dangerous approach when the chances of having to make good on this commitment are very high.
This will not appease Israel. In a practical sense it does not stop a first strike. That is a big, big mistake when such a large toll on human life is concerned.
Clinton Speaks of Shielding Mideast From Iran
By MARK LANDLER and DAVID E. SANGER
Published: July 22, 2009
PHUKET, Thailand — Stiffening the American line against Iran, Secretary of State Hillary Rodham Clinton warned Wednesday that the United States would consider extending a “defense umbrella” over the Middle East if the country continued to defy international demands that it halt work that could lead to nuclear weapons.
While such a defensive shield has long been assumed, administration officials in Washington acknowledged Wednesday that no senior official had ever publicly discussed it. Some of the officials said the timing of Mrs. Clinton’s remarks reflected a growing sense that President Obama needed to signal to Tehran that its nuclear ambitions could be countered militarily, as well as diplomatically.
It also signified increasing concern in Washington that other Middle East states — notably Saudi Arabia and Egypt — might be tempted to pursue their own nuclear programs for fear Iran was growing closer to realizing its presumed nuclear ambitions.
Mrs. Clinton later clarified her comments on Iran, delivered in advance of a regional meeting here, saying her warning that the United States might create such an umbrella did not represent any backing away from the Obama administration’s position that it must prevent Tehran from obtaining a bomb capability. But her words suggested that the administration was developing a strategy should all efforts at negotiation fail.
Her statement also came as Iran’s internal divisions and crackdown on post-election protests have complicated Mr. Obama’s pledge to “engage” Iran directly. Iranian officials have hinted that they will present new proposals on the nuclear program, and American officials have said their offers to negotiate stand.
Jim Sinclair’s Commentary
When the bailout door was opened for the super rich Wall Street gang it could not be closed for the public.
The legislative concerned about their own tenure are now getting itchy. Here is an example of much more to come in the near future.
House scrutinizing how auto dealerships selected for closure
updated 11:28 p.m. EDT, Tue July 21, 2009
STORY HIGHLIGHTS
Two days of hearings looking at how and why certain dealerships chosen for closure
Bill would reverse Obama administration, Chrysler, GM decisions on closings
Representative: "The administration is declaring war on capitalism"
House members press for details on criteria used to determine closures
(CNN) — A controversy over the way the Obama administration, General Motors and Chrysler decided to shutter more than 3,000 auto dealerships has reached Congress, with a House subcommittee now taking a closer look and a bill under consideration that could reverse the decision.
A House Judiciary subcommittee is holding two days of hearings to scrutinize how and why the dealerships were chosen for closure. Also at issue is the bill, called the Automobile Dealer Economic Rights Restoration Act, which is supported by more than half of all House members, according to several subcommittee members. The bill would essentially overturn dealership closures.
Ron Bloom, head of President Obama’s Task Force for the Auto Industry, testified on the first day of hearings Tuesday, saying the decision to close the dealerships was critical in getting the two auto companies restructured and streamlined.
But subcommittee members said there are many more unanswered questions.
"Mr. Bloom tried to assure us, I think, to the best of his knowledge that it was all done on an objective basis. There were point scores, as far as sales and service and performance and customer satisfaction. And that it was all done in a transparent manner," said the chairman of the commercial and administrative law subcommittee, Rep. Steve Cohen, D-Tennessee.
Jim Sinclair’s Commentary
More and more of this is coming out of the legislative and will in time pass in both houses.
Chrysler says dealer legislation could force liquidation
Wed Jul 22, 2009 8:59pm EDT
By John Crawley
WASHINGTON (Reuters) – Chrysler Group could again face the prospect of liquidation if legislation aimed at reversing its decision to terminate contracts with 789 dealers becomes law, a company executive said on Wednesday.
Louann Van Der Wiele, a senior company lawyer, told a House Judiciary subcommittee that Chrysler faces a "tough road ahead" and efforts to restore dealer franchise rights "will simply take Chrysler back to the future" without the same options for survival that it had this spring.
"Complete liquidation, with all of its dire consequences" could follow," Van Der Wiele said.
Chrysler was on the brink of extinction when it entered bankruptcy on April 30, emerging a month later in an alliance with Italy’s Fiat (FIA.MI) and billions in U.S. government financing to help it retool its product lineup and better compete with leaner rivals.
General Motors Corp sought court protection on June 1, also emerging several weeks later with lower debt, new labor concessions, billions in government aid and a plan to shave 1,300 dealers from its retail network. Automakers say they will save money and streamline retail operations with fewer dealers, who are separate businesses that purchase the vehicles they sell directly from the manufacturers.
Jim Sinclair’s Commentary
The nightmare rolls on and on.
Let’s have a be round of applause for those pesky little enormously bonused and outrageously salaried OTC derivative dealers who are still pounding out those Weapons of Mass Human Destruction. Now they are focused on the flavor of the month, naked credit default swaps.
CIT must be bailed out otherwise derivatives and middle America implodes.
CIT on the Verge
July 23, 2009
A funny thing happened last week. After the government refused a second bailout for the CIT Group — the ailing lender to small and midsize businesses — CIT’s bondholders realized how much they could lose if the firm filed for bankruptcy and agreed to provide $3 billion in emergency financing. The agreement, finalized Monday night, averted what would have been the fifth-largest bankruptcy filing in the history of corporate America.
The reprieve is likely only temporary. CIT needs $7 billion just to pay debt that is coming due over the next year. Even if it comes up with the money, the firm’s longer-term viability is still in doubt. That’s because the bondholders currently propping up CIT are apparently counting on regulators to provide more government support in the future. That’s far from assured.
The government’s decision not to offer a second bailout to CIT is defensible. The lender had not satisfactorily restructured its operations since receiving a $2.3 billion bailout late last year. Since then, financial markets have calmed down, building confidence among regulators that the system is strong enough to withstand at least CIT-sized problems.
While CIT may be too small to rescue, its problems hold big lessons for the Obama administration on how to manage through the ongoing recession and how to judge the system that is emerging from the wreckage.
For starters, forcing CIT to fend for itself does not mean that its business customers should be cut adrift. In today’s tight credit markets, many small businesses cannot simply switch lenders at will. In a CIT bankruptcy filing, retailers could be especially clobbered, since the firm provides short-term financing to some 2,000 vendors that supply hundreds of thousands of stores. And yet, last week, when the government refused to rescue CIT, it had no apparent plan to make sure those businesses would continue to have access to the financing needed to stay in business.
Jim Sinclair’s Commentary
This is a total financial soap opera.
Yesterday they get tighter regulations on rating companies. The day before they downgraded certain debt instruments.
Today they say oops and upgrade the same instruments they just downgraded.
Mr. Fred can figure this one out. You can’t have rating agencies screwing up MOPE.
S&P Shift on Ratings Unsettles Investors
JULY 23, 2009
BY LINGLING WEI AND ANUSHA SHRIVASTAVA
A surprise ratings flip-flop by Standard & Poor’s cast a cloud of uncertainty over the $700 billion market for commercial mortgage-backed securities and further tarnished the ratings firm’s credibility.
The unusual move unsettled the battered CMBS market at a time when losses in the commercial real-estate industry are a concern as a drag on the economy. S&P’s actions have added confusion. As it has zigged one way, then zagged the other, the ratings firm owned by McGraw-Hill Cos. has faced criticism for fueling difficulties investors, banks and regulators have been having in valuing debt.
"In the course of implementing our …
Jim Sinclair’s Commentary
Phase two of China’s growth is to use its advanced technology and cheap labor to found its next growth spurt.
China Set to Become World’s Cleantech Leader
July 23, 2009
By Rob Day
That big sucking sound you hear… is the sound of China deciding to become a big player in solar project installations, overnight.
It’s clear that China is going to be a dominant force in cleantech in the coming decades, starting immediately. But what that will mean for cleantech VCs remains very much unclear. What is clear is that cleantech VCs need to start getting smart about that factor, asap. And thus, so should their LPs.
But should cleantech VCs start investing in China? It’s not apparent that US-based investors do very well investing in China, at least without having a local presence on the ground. Since most cleantech-specialist VCs don’t have that, are they vulnerable to being left out? There are specialist funds (albeit very few) focused on cleantech in China, are they better-positioned? Or are the markets themselves so specialized (US firms having trouble selling into China, Chinese firms having trouble selling into the US) that they really are totally separate questions?
It will be fascinating to watch how this dynamic continues to develop. Solar and coal-related techs will be where it gets felt first. Every coal-related startup CEO I know is paying a huge amount of attention to China. Many solar CEOs already are, too. Wind and LEDs and industrial efficiency techs will also need to pay close attention.
Jim Sinclair’s Commentary
Very bad thinking on the part of these bailed out firms. One out of ten in the US is out of work and it is getting worse. What are these people thinking?
Morgan Stanley sets aside 72% of revenue to pay bonuses
guardian.co.uk, Wednesday 22 July 2009 19.23 BST
Morgan Stanley is setting aside a huge sum to pay out bonuses despite posting its third consecutive quarterly loss and admitting it is disappointed with key departments.
The US bank’s latest results show it is allocating $3.9bn (£2.36bn) for paying out to staff, 72% of its net revenues. That dwarfs the percentage of revenue set aside by arch rival Goldman Sachs, where workers are on track for large bonuses after record results last week.
Morgan Stanley extinguished the tentative flames of optimism among US banks today when it posted a loss of $159m for April to June and said it was not satisfied with its performance in fixed income trading and in asset management.
News of the bank’s loss unsettled traders on Wall Street, whose view of the banking sector’s prospects was brightened last week by Goldman’s surge in profits and further upbeat news from JP Morgan, Citigroup and Bank of America.
Goldman said last week that it was dedicating 49% of its revenue to paying its staff, amounting to a compensation fund of $6.65bn.
Jim Sinclair’s Commentary
Here is the passing of a celebrity that Mr. Fred says he is going to really miss.
Famous Taco Bell Chihuahua Dead at 15
Wednesday, July 22, 2009
The famous Taco Bell Spokesdog – who charmed audiences with the catchphrase “Yo Quiero Taco Bell” – has died.
Gidget, the 15-year-old Chihuaha, suffered a fatal stroke Tuesday night, according to a report from People magazine.
The “mostly-retired” canine also appeared in the film “Legally Blonde 2,” starring as Bruiser’s mom. In addition, she appeared in a commercial for the ‘90s edition of Trivial Pursuit.
When she wasn’t starr ing in films and commercials, Gidget enjoyed taking hikes, sunning her fur and sleeping for 23 hours, her trainer Sue Chipperton told People.
“She made so many people happy,” Chipperton said. “Gidget always knew where the camera was.”
Jim Sinclair’s Commentary
Think about the difference between the worker in Detroit and the hedge fund manager and GS employee in Greenwich, CT.
This is the type of situation that historically leads to civil disorder and rebellion.
Americans: 3X More Miserable Than Previously Calculated
Jul 23 2009, 11:55 am by Derek Thompson
Economists like to call their profession "The Dismal Science," so you’d think they would have a monopoly on, or at least competence in, measuring dreariness. But it turns out they’re not even measuring our misery properly. So claims the Huffington Post, which recently debuted its own Misery Index — the sum of unemployment and inflation — to account for the millions of Americans who’ve been pushed to part-time, or simply given up looking for jobs altogether, but don’t appear in the official unemployment rate.
Let’s take a look:
As you can see, the Misery Index isn’t a very good indicator of actual economic misery, because it puts June 2009 about thirty percent below June 1991, and economists agree that the ‘91 recession was mild compared to this. One reason for that discrepancy is that MI was designed in the 1970s, during a period of stagflation — that’s the rare occasion when we experience stagnant growth and inflation. But inflation is a strange factor to consider during recessions. During most serious downturns, falling employment doesn’t hold hands with rising inflation, because falling wages means less demand, which can push prices down. That’s one reason why, for example, Paul Krugman warns about a deflationary cycle these days, even with Fed interest rates scraping the ocean floor.
Jim Sinclair’s Commentary
Cold Northern style MOPE.
Bank of Canada, in shift, sees recession ending now
OTTAWA (Reuters) – Canada’s economy will pull out of its worst recession since the early 1990s this quarter, the Bank of Canada said on Thursday, and the world economy has likely averted a worst-case scenario and is bottoming out.
"With the economy supported by better financial conditions and higher levels of business and consumer confidence than anticipated, the downturn in activity in the first half of the year has been less severe," the bank said in its Monetary Policy Report. "And growth is now projected to turn positive in the third quarter."
In April the bank had projected a turnaround in the fourth quarter. It now sees third-quarter growth of 1.3 percent on an annualized basis, rather than the 1 percent decline it forecast earlier, ending three straight quarters of decline.
It also projects stronger-than-expected quarterly growth through the first half of 2010, but weaker-than-expected growth through 2011, when its current forecasts end.
Jim Sinclair’s Commentary
You can buy them but not sell them. Sounds exactly the same as always to me when you buy crap.
That is certainly a roadmap. It would be nice if they were a tad more specific as to the function of buy side only.
ICE Lays Out Plans for Buy-Side Clearing of Credit Default Swaps
Solution will allow buy-side participation in CDS clearing facility and provide segregation of customer funds and positions.
By Ivy Schmerken
JULY 23, 2009
IntercontinentalExchange (ICE) said it plans to introduce a buy-side solution for credit default swap clearing. The solution will enable buy-side participation in credit default swap clearing, and is expected to rollout in October 2009, pending regulatory approval.
According to the exchange, ICE’s solution offers a roadmap for the industry’s transition to clearing based on participants’ specific risk management needs, allowing firms to retain trading relationships and a range of competitive execution models.
Jim Sinclair’s Commentary
How do we deal with the pervasive F-U world we live in? No real solutions are sought, just sly ways to get to tomorrow and other methods to feed the unlimited greed of Wall Street.
More than 180 California cities vow to sue state if budget is passed
5:42 PM | July 22, 2009
More than 180 California cities have passed resolutions threatening to sue the state if lawmakers approve a budget plan that would seize $4.7 billion in local funds to help close the state’s massive deficit, according to the League of California Cities.
Judy Mitchell, mayor of Rolling Hills Estates and president of the League of California Cities, described the budget proposal as a “ponzi scheme that passes off responsibility to future governors, legislators and to our taxpayers.”
The plan announced Monday by Gov. Arnold Schwarzenegger and legislative leaders uses a variety of means to essentially shift part of the state’s $26.3-billion budget deficit to city and county governments. The prospect of losing $313 million in redevelopment funds and $109 million in gasoline taxes prompted the lawsuit threat from Los Angeles County supervisors Tuesday. The cities and league would join the L.A. County lawsuit.
