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Barrick and its OTC Short of Gold Derivative Obligations:
I am asked constantly how Barrick can cover all their hedges.
The answer is quite simple. Barrick does not have to buy one ounce of gold. You buy your way out of hedge contracts with paper money.
The simple question is what does the long side want to release the obligation in light of future possible profits on the position?
What a hell of a needlessly expensive mess.
The following is an advertisement I had published in the Mining Journal out of London on July 7th, 2000. It was designed to warn about the dangers of these so called “hedges.”
Jim Sinclair’s Commentary
It is not enough to keep CIT out of bankruptcy. It must be capitalized to perform as an effective factor and loan company operating profitably to meet both its past and new obligations.
That is not going to happen.
Jim Sinclair’s Commentary
More good news from General Motors, now owned and operated by our esteemed leaders.
Wait to hear the sound "BOOM" which will be made by the VOLT bombing out.
GM kills Saturn after Penske ends deal
Auto dealer terminates agreement with General Motors, citing concerns about supplies of the vehicle after GM stops producing Saturns.
By David Goldman, CNNMoney.com staff writer
Last Updated: September 30, 2009: 7:44 PM ET
NEW YORK (CNNMoney.com) — Car dealership operator Penske Automotive Group announced on Wednesday that it has cancelled plans to acquire General Motors’ Saturn unit. As a result, GM said it will wind down the brand and dealer network, potentially putting 13,000 Saturn dealership jobs at risk.
The announcement comes nearly four months after Penske agreed to buy the rights to the 19-year old brand from GM when the automaker was in bankruptcy.
As part of the deal, GM would have continued making Saturn’s three best-selling models — the Aura sedan, as well as the Vue and Outlook cross-over SUVs — for the rest of this year and next. Penske, which is an auto distributor and not a manufacturer, would have sold the cars on behalf of GM. Penske said it would find another third-party manufacturer to make new Saturns in 2011.
But negotiations with another, unnamed manufacturer fell through after an agreement was rejected by that manufacturer’s board, according to Penske. According to a report in the Wall Street Journal, the manufacturer in question is Renault.
"Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction," the company said in a statement.
Jim Sinclair’s Commentary
The Formula of 2006 implies this will not only apply to Federal Tax revenues in 2009- 2012 but to states, cities and hamlets.
The effect is an arithmetic drop in revenues that causes a geometric rise in deficits. The end result will be a collapse of currency confidence.
Nobody cared then, and right now only a few care.
47% will pay no federal income tax
An increasing number of households end up owing nothing in major federal taxes, but the situation may not be sustainable over the long run.
By Jeanne Sahadi, CNNMoney.com senior writer
September 30, 2009: 12:55 PM ET
NEW YORK (CNNMoney.com) — Most people think they pay too much to Uncle Sam, but for some people it simply is not true.
In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.
Some in that group will even get additional money from the government because they qualify for refundable tax breaks.
The ranks of those whose major federal tax burdens net out at zero — or less — is on the rise. The center’s original 2009 estimate was 38%. That was before enactment in February of the $787 billion economic recovery package, which included a host of new or expanded tax breaks.
The issue doesn’t get a lot of attention even as lawmakers debate how to pay for policy initiatives like health reform, whether to extend the Bush tax cuts and how to reduce the deficit.
Jim Sinclair’s Commentary
The reality of "No Retirement Possible" is suspected by many, but believed by only a few.
It will dawn on many that retirement is a concept of the past later this year as confidence implodes.
Social Security will enter a deficit in 2010 due to early retirement. Hyperinflation will flatten all retirement programs in the most practical sense.
We all are going to work until we drop while there are no jobs for our kids. We will have to carry the entire family one more time.
It may be that the only way to have joy is to face the fact that joy has ended. The only way to have peace is not to seek it.
Retirement? Good luck with that
The stock market’s crash has revealed the US retirement system’s holes with painful clarity — and middle-class Americans may be forced to make some big adjustments.
By MarketWatch
The destructive effects of the financial crisis may be waning, but your retirement account won’t soon forget. Savers lost 40% or more in the downturn — a collective $2.1 trillion disappeared from 401k and IRA assets in 2008 alone — and while the recent stock market recovery may feel good, it’s done little to stem a mounting crisis in the retirement system in the United States.
It’s not just investments that are the problem: Social Security needs financial resuscitation, and the bursting of the housing bubble that helped spark the financial crisis vaporized the home equity many people were counting on to fund their golden years. Corporations are curtailing traditional pensions, and older Americans are being forced to work longer to make up the difference.
Where does this leave our retirement plans? Ask a middle-class American when he plans to retire, and more often than not you’ll get a wry chuckle and "I’ll be working until I die." The attempt at humor masks what may be close to reality for some people.
The retirement-savings system in the U.S. is "a failed experiment," said Teresa Ghilarducci, the Bernard Schwartz professor of economic policy at the New School for Social Research in New York.
Jim Sinclair’s Commentary
It is simply going to happen. All this worry and concern that breaks over me like a wave of despair will in retrospect be nonsense.
There is no fix to anything. The problems driven by unbridled greed are in fact bigger.
Once you have opened the QE box any real attempt to close it will meet with economic disaster.
It is the US Fed that is dollar bound in its monetary action. If Bernanke tried to do the right thing it will be the end of the Fed as we know it in one month’s time
Byron King: Peak Gold + Weak Dollar = $2,000
September 30, 2009
A highly regarded resource sector expert who discusses his field fervently whenever possible and whose writings include the top-ranking Outstanding Investments, Byron King brings his views direct to The Gold Report audience in this exclusive interview. Unconvinced that the recession is behind us, he is equally sure that the "bottomless pit" mentality of stimulus spending will wreck the dollar. Those are among the reasons he sees $2,000-per-ounce gold on the not-too-distant horizon.
The Gold Report: We’ve seen quite a rebound in the markets since we spoke in May, and governments across the world have begun releasing some positive economic news. Are we out of the recession as Bernanke has told us?
Byron King: I don’t agree with that all. It’s like at the funeral home where they put really good makeup on the corpse and people walk in and say, "Oh, he looks so good." Then you think to yourself, "Wait a minute. If he looks so good, why is he dead?" That’s where we are now, I think, with our economy. We’re still in the recession, it has been well-masked.
Let me digress and say that yes, the stock market rebounded. The "sell in May, go away" thing didn’t work this year. So if you stayed in the market, you probably benefited very well from the market recovery. But it was a recovery not rooted in fundamentals. Part of it is that we’ve had a banking recovery, too. But that was because of massive infusions of new liquidity out of the Federal Reserve and the Treasury Department into the financial sector. That’s not the prescription for long-term health.
As with someone really sick in the hospital, the problem isn’t putting him on life support; the problem is getting him off the respirator. Now the question is how to stop hemorrhaging public money into the system, and in fact, begin pulling some of it back out.
TGR: Let’s assume for now that the government isn’t prone to taking the patient off the respirator. Do you expect diminishing returns in terms of less recovery seen for every dollar the government puts into the system?
BK: That’s a great point. We’re there, at the point of diminishing returns in terms of what it takes to get another dollar of real GDP. It doesn’t matter how much green ink they use down at the Bureau of Engraving and Printing or how many ones and zeros they create in the Federal Reserve. At the end of the day, how much have we improved? How much have we built our economy? Look at numbers like new business formations, numbers that indicate the health of growing businesses—hiring, recalls, overtime—certain types of gross output figures, job creation. You’re not seeing healthy numbers for those things in the economy.
Jim Sinclair’s Commentary
Questions:
1. How many of the contributing banks have repaid TARP?
2. Would it not be a correct assumption that if TARP has not been repaid then it is TARP money that is funding the FDIC?
3. What happens when those funds are consumed? Reliable opinion has suggested 100 to 500 more rescues will be required.
Banks to Prepay Assessments to Rescue F.D.I.C.
By STEPHEN LABATON
Published: September 29, 2009
WASHINGTON — Acknowledging that they had greatly underestimated the problems plaguing the nation’s banks, federal officials on Tuesday proposed a $45 billion plan financed by the industry to rescue the ailing insurance fund that protects bank depositors.
They also announced that the fund, which had more than $50 billion before the crisis began last year, had been so battered by bank collapses that it would be in the red this week.
The plan proposed by the Federal Deposit Insurance Corporation would, in effect, have the industry lend money to the insurance fund by ordering banks to prepay their annual assessments that would otherwise have been due through 2012.
If adopted, the proposal, the agency’s third restoration plan for the fund in a year, would raise $45 billion from the banks to replenish the fund.
That would almost certainly wipe out the industry’s earnings for this year — in the first half of the year the banking industry reported $1.8 billion in income.
Jim Sinclair’s Commentary
If you were at the Treasury and the Fed would you not pray for even one day without some new challenge walking through the door?
Fannie and Freddie Delinquencies Move Into Uncharted Territory
By Nick Timiraos
Home prices have posted six straight months of increases, but few housing analysts are prepared to give a clean bill of health to the housing patient. (There are exceptions.) One big reason: Borrowers continue to miss loan payments.
Rising delinquency rates point to an eventual increase in homes that will go into—and sell out of—foreclosure. Finding a bottom for the housing market gets a bit easier once the market can adjust and absorb that distressed inventory. Fannie Mae and Freddie Mac, the two state-backed mortgage-finance giants, both showed that serious mortgage delinquencies (those that are three months or more late) continue to reach into uncharted territory.
The serious delinquency rate on single-family home loans backed or held by Fannie Mae crossed 4% in July for the first time ever, to 4.17%. One year ago, the rate was at 1.45%. Freddie Mac reported that its serious delinquency rate reached 3.13% in August, up from 2.95% last month and 1.11% one year ago.
Fannie’s worst performing loans are “Alt-A” loans, a step between prime and subprime, that were made in 2006 and 2007. Delinquencies on the Alt-A book of business reached 11.9% at the end of June, compared to 3.94% for all loans. Serious delinquencies on Alt-A loans originated in 2006 and 2007 hovered around 17%.
Jim Sinclair’s Commentary
Politics trump needs as form has for years trumped substance.
The Fed raised rates, and it will be audited the next day. The market for bonds be damned.
Officials: Fed will need to move quickly when time comes to boost rates, battle inflation
By Jeannine Aversa, AP Economics Writer
On Tuesday September 29, 2009, 7:00 pm EDT
WASHINGTON (AP) — To prevent inflation from taking off, the Federal Reserve will need to start boosting interest rates quickly and aggressively once the economy is back on firmer footing, Fed officials warned Tuesday.
"I expect that when it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity" to when the Fed was slashing rates to battle the recession and the financial crisis, said Richard Fisher, president of the Federal Reserve Bank of Dallas.
Although Fisher has a reputation for being one of the Fed’s toughest inflation fighters, it marked the second such warning by a central bank official in recent days. Fed member Kevin Warsh on Friday said the central bank will need to move swiftly when the time comes to raise rates.
Charles Plosser, president of the Federal Reserve Bank of Philadelphia and also a hawk against inflation, waded into the debate in a speech Tuesday in Easton, Pa., saying the Fed may need to act "well before" unemployment — now at a 26-year high of 9.7 percent — returns to normal. The Fed, he said, will need to be on guard "to prevent the Second Great Inflation."
It’s all part of a high-wire act that the Fed has to perform as the economy transitions from recession to recovery.
Jim Sinclair’s Commentary
The State does not own our bodies, what a radical idea! Should these health care workers be labeled terrorists?
N.Y. Health Care Workers Revolt Over H1N1 Vaccine Saying They Should Be Given A Choice, Employees Rally In Albany, Around State, Chant "No Forced Shots!"
Protesters Hold Signs That Read: "The State Doesn’t Own My Body’"
Sep 30, 2009 6:09 am US/Eastern
STONY BROOK, N.Y. (CBS) ― They’re upset over an ultimatum from the health department.
Workers are being told to either get the swine flu vaccine or lose their jobs.
New York is the first state in the country to mandate flu vaccinations for its health care workers. The first doses of swine flu vaccine will be available beginning next week. Much of it is reserved for state health care workers, but there is growing opposition to required innoculations.
Health care workers in Hauppauge screamed "No forced shots!" as they rallied Tuesday against the state regulation requiring them to roll up their sleeves.
"I don’t even tend to the sick. I am in the nutrition field. They are telling me I must get the shot because I work in a health clinic setting," said Paula Small, a Women, Infants and Children health care worker.
Jim Sinclair’s Commentary
Apparently this closing was not covered on the FDIC website.
The inviting conclusion is that as other agencies close down financial institutions, that institution will migrate to the FDIC. It seems that FDIC statistics of closure might not apply in such a situation if the FDIC did not affect the closure, only the cost of the closure. We shall see.
Venture Bank Closed
Published:2009-09-28 State
The Washington Department of Financial Institutions (DFI) closed Venture Bank, citing inadequate capital and severe loan losses. Immediately following the closure, DFI named the Federal Deposit Insurance Corporation (FDIC) as receiver of Venture Bank.
The FDIC immediately entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company of Raleigh, N.C. First-Citizens Bank & Trust Company will assume all deposits and assets of Venture Bank, except brokered deposits, which will be paid out by the FDIC. Ventures capital has been depleted by large loan and investment losses, Brad Williamson, Director of DFIs Division of Banks explained.
"Like many banks across the country, Ventures real estate construction and development portfolio has suffered as real estate values have fallen." "However, Ventures demise was hastened by very large losses associated with FNMA/Freddie Mac preferred stock and Collateralized Debt Obligations," Williamson continued.
"The combination of loan and investment losses created capital problems that couldn’t be overcome without an immediate capital infusion, which hasn’t been forthcoming." "While we are disappointed in Venture Banks inability to continue safe and sound financial operations, DFI Director Scott Jarvis said, "we are pleased to see the negotiation of a whole bank purchase, insuring the deposits and loans of individuals, businesses and public entities throughout Washington. The only change customers should see is a new name and logo, services will continue as before.
Jim Sinclair’s Commentary
What was our musing of yesterday? If you merge a mess with a bankrupt you get a messy bankrupt.
If CIT goes under so does the real economy with one large flushing sound! Without the ability to easily factor inventory and receivables there is no real economy.
Report: CIT Group again on brink of collapse
NEW YORK — CIT Group Inc. shares plunged Wednesday as the commercial lender is reportedly trying to craft an exchange that would cut its debt and offer bondholders an equity stake in the company in a bid to avoid bankruptcy.
Shares of the New York-based financial firm, one of the nation’s largest lenders to small and midsize businesses, fell 85 cents, or 38.6 percent, to $1.35 in morning trading.
CIT Group is preparing an exchange offer that would eliminate as much as 40 percent of its more than $30 billion in outstanding debt, The Wall Street Journal said, citing anonymous sources. The exchange would hand control of the company over to its bondholders and wipe out common stockholders, according to the report.
A spokesman for the company declined comment on Wednesday.
CIT Group spent the summer trying to stave off a potential collapse amid mounting loan losses and rising funding costs. It has been devastated by the downturn in the credit markets and is attempting to restructure its operations to remain in business. CIT in the past relied heavily on cheap, short-term debt to fund its operations — a type of funding that essentially evaporated during the peak of the credit crisis last year.
Jim Sinclair’s Commentary
When a state is known for corruption, non military aid is the cornucopia of that vice. What a state of affairs.
US set to finalize Pakistan aid
By Shaun Tandon (AFP)
WASHINGTON — The US Congress was set Wednesday to take the final step to triple non-military aid to Pakistan, hoping to bring stability to a critical nation in the US-led fight against extremism.
Wrapping up months of sometimes divisive talks, the House of Representatives scheduled a vote for Wednesday on the bill to ramp up aid to Pakistan to 1.5 billion dollars per year through 2014 focusing on education and infrastructure.
The package then needs only the signature of President Barack Obama, who has enthusiastically supported the bill as a long-term investment to end the allure of extremism in the Islamic world’s only declared nuclear weapons state.
Richard Holbrooke, the US special envoy on Pakistan and Afghanistan, hailed the bill as a sign of a bedrock US commitment, saying that five-year funding promises were "very unusual in the modern world."
"Pakistan is a huge and important country," Holbrooke told reporters last week in New York after talks on Pakistan on the sidelines of the United Nations.
Jim Sinclair’s Commentary
While the US Federal Reserve talks out of both sides of their mouth China stays the course.
China to Stick to Moderately Loose Monetary Policy (Update2)
By Bloomberg News
Sept. 29 (Bloomberg) — China will stick to a “moderately loose” monetary policy and guide reasonable loan growth to further cement its economic recovery, the central bank said.
The country will continue to implement stimulus measures to boost domestic demand, the People’s Bank of China said after its quarterly monetary policy meeting today. China’s economic rebound isn’t solid, and the country still faces weak external demand, the bank said.
Growth in China’s new lending has slowed in the past two months after the government increased scrutiny over loans and bank assets to prevent bad debt from building up and head off asset-price inflation. A credit boom and a 4 trillion-yuan ($586 billion) stimulus package spurred economic growth to a 7.9 percent annual rate in the second quarter.
“The central bank is unlikely to indicate a policy change and will monitor economic recovery and the trend of inflation for the rest of this year,” said Peng Wensheng, head of China Research at Barclays Capital in Hong Kong. Today’s statement “indicates that the bank is comfortable with the slower loan growth over the past couple of months.”
Jim Sinclair’s Commentary
The recovery that wasn’t
The Conference Board Consumer Confidence Index® Dips in September
September 29, 2009
The Conference Board Consumer Confidence Index®, which had improved in August, dipped in September. The Index now stands at 53.1 (1985=100), down from 54.5 in August. The Present Situation Index decreased to 22.7 from 25.4. The Expectations Index declined to 73.3 from 73.8 last month.
The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for September’s preliminary results was September 22nd.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer Confidence, which had improved in August, retreated slightly in September. The Present Situation Index decreased, as consumers viewed both current business conditions and the labor market less favorably than last month. While not as pessimistic as earlier this year, consumers remain quite apprehensive about the short-term outlook and their incomes. With the holiday season quickly approaching, this is not very encouraging news."
Consumers’ assessment of current conditions was less favorable in September. Those claiming business conditions are "bad" increased to 46.3 percent from 44.6 percent, while those claiming conditions are "good" increased to 8.7 percent from 8.5 percent. Consumers’ appraisal of the job market was also less favorable. Those claiming jobs are "hard to get" increased to 47.0 percent from 44.3 percent, while those claiming jobs are "plentiful" decreased to 3.4 percent from 4.3 percent.
Jim Sinclair’s Commentary
Are we really supposed to believe that housing prices are firming? Where?
Report: Nearly 1M bank foreclosures in process
South Florida Business Journal – by Brian Bandell
Nearly 1 million homes nationwide are in the process of foreclosure, according to a U.S. Department of the Treasury report covering banks and loan servicers that make up 64 percent of all outstanding mortgages.
As of June 30, there were 992,554 homes in the process of foreclosure, up 15.3 percent from March 31 and up 79.4 percent from the same period a year ago.
While the rock-bottom sales of foreclosed properties are dragging real estate prices down, what’s on the market now is the just tip of the iceberg. The report said that 106,007 foreclosures were completed as of June 30. For every bank-owned property, there were nine more homes in the process of foreclosure.
There were 23,102 short sales in the second quarter, up 34.8 percent from the first quarter.
The report found that 5.3 percent of all mortgages were more than 60 days past due as of June 30, up from 4.8 percent as of March 31. The worst categories for delinquency were subprime loans, at 17.8 percent, and payment option adjustable-rate mortgages, at 15.2 percent.
