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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."
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 …
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.
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.
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."
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.
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.
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.
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.
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.
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.
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.
