"It feels so good to be in gold"
–CIGA JB Slear & accomplice

Jim Sinclair’s Commentary

There is no question that we are headed for a second lock up in credit.

We are headed for a second round of bail outs.

When CIT stops middle America stops. It makes you wonder if the second round is not actually wanted and desired.

Gold is your only answer. There is no safe haven in the US dollar.

Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash (Update3)
By John Gittelsohn and Thomas R. Keene

Oct. 30 (Bloomberg) — Billionaire investor Wilbur L. Ross Jr., said today the U.S. is in the beginning of a “huge crash in commercial real estate.”

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate — the return that investors are demanding to buy a property — are going up.”

U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to property research firm Real Capital Analytics Inc. The Moody’s/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.

Billionaire George Soros, speaking today at a lecture organized by the Central European University in Budapest, said a “bloodletting” may be coming for leveraged buyouts and commercial real estate.

“The American consumer will no longer be able to serve as the motor for the world economy,” said Soros, 79.

More…

Jim Sinclair’s Commentary

The key to this has never been whether or not CIT would go bankrupt, but rather would the ZOMBIE CIT as many big companies are today be able to meet the demands of Middle America for factoring at reasonable costs in the necessary volume.

I would say the answer is NO.

Mr. Icahn will simply execute his normal business plan. Middle America is about to experience a total collapse.

Report: CIT to File Bankruptcy on Sunday
by CalculatedRisk on 10/30/2009 02:08:00 PM

From the WSJ: CIT, Icahn Reach Tentative Deal Over Lender’s Restructuring

As part of further discussions with CIT, Mr. Icahn has agreed to back down while the company restructures in bankruptcy court. …

The company plans to file for bankruptcy in New York as soon as Sunday night or early Monday, said people familiar with the matter. CIT is poised to enter bankruptcy with enough creditor support to approve its reorganization plan and shorten its stay in Chapter 11 …

… CIT asked bondholders to vote on a prepackaged bankruptcy plan, which would give most bondholders new debt it values at 70 cents on the dollar, and all the equity in a restructured company.

This debt-for-equity swap makes the most sense and would allow CIT to continue to operate.

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Jim Sinclair’s Commentary

Here are a few things to keep in mind:

1. The move from 1.5025 in the Euro to the present level of 1.4752 is a product of modest intervention and a great deal of verbal intervention.

2. There is a monetary consequence of intervention that adds liquidity to liquidity.

3. Nothing in monetary action has a worse track record than intervention.

4. Intervention is extremely short term.

Jim Sinclair’s Commentary

There are two types of intervention in the foreign exchange markets, sterilized and unsterilized. Unsterilized just intervenes whereby the intervention directly impacts the intervening country’s money supply. In today’s situation, unsterilized intervention would cause rates to rise in the euro if continued, certainly impacting the ability of Euroland to maintain the illusion of recovery.

If unsterilized intervention were to occur, more than likely at this time it would be very short term and therefore ineffective.

"Conventional academic wisdom holds that "sterilized" interventions have little impact on the exchange rate and are a waste of time and of the government’s foreign exchange reserves. In a sterilized intervention, the central bank offsets the purchase or sale of foreign exchange by selling or purchasing domestic securities so as to keep the domestic interest rate at its target. Since the domestic interest rate usually is considered the main determinant of the value of the domestic currency, many argue, it must change in order to influence the exchange rate."

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Either way, both unsterilized and sterilized intervention in the economic condition the world is facing now are absolute wastes of time that will not establish a maintainable currency level. There is no currency market SUSTAINABILITY to all the talk impacting markets today.

We are witnessing the death of the dollar as the reserve currency of choice this winter and a major bull market in gold that will go to $1224, $1650 and then on to Alf’s numbers.

Jim Sinclair’s Commentary

George Soros, speaking in Budapest today, asserted that the global economic recovery is “liable to run out of steam” and a “double dip” may follow in 2010 or 2011.