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Thought For The Day:
"MOPE may encourage you to whistle past the graveyard, but eventually too many people sneak a peak. Soon the whistling has stopped because everyone is running. I fear that this is what will become of the bond market. Too many coincidences are showing up as critical long-term support approaches."
–CIGA Eric
Jim Sinclair’s Commentary
Watch out California, here comes New York on the bankruptcy trail.
You will not see much of this as it impacts the dollar but you will hear tomes on Greece and Spain versus the euro.
Propaganda is the battle cry of our esteemed leaders.
Wall St. Revenue Falls, So State’s Deficit Rises
By DANNY HAKIM
February 3, 2010, 1:35 pm
ALBANY — New York State’s revenue collections keep coming up short.
The state’s budget division said Wednesday that lower than expected tax revenue from Wall Street and rising Medicaid costs are driving up the state’s deficit. For the coming fiscal year, which begins on April 1, the deficit is now $8.2 billion, up from $7.4 billion when Gov. David A. Paterson laid out his proposed budget.
Robert L. Megna, the state budget director, said in comments to reporters Wednesday morning that revenue collections from Wall Street banks came in well below expectations and that personal income tax collections over all were about $1 billion below expectations.
“We know that big guys typically pay us at the end of January,” Mr. Megna said, referring to large banks like Goldman Sachs and JPMorgan Chase. “Last week, after the budget came out, they didn’t pay us.”
He offered a number of theories that might explain why the payments were delayed — more bonus payments made in stock, payments being spread out over a longer period — but added that the state was not expecting the lowered payments to be fully made up in the coming weeks.
Spending on Medicaid also continues to rise faster than expected as the economic crisis has driven more people to enroll. Costs are $400 million higher than expected in the coming year, the budget office said.
Jim Sinclair’s Commentary
If Tishman can simply return the collateral on the largest commercial loan to go under, ever, what is there to stop anyone from simply returning the collateral? The house equals nothing!
MOPE can backfire. MOPE presented the Tishman deal not as a historically high property loan default but simply a return of collateral like the lender really wants it. That broadcasts a message of "walk away" to people struggling to meet their obligation as an acceptable business way to end the pain and suffering.
The lessons we communicate today are dreadful. Another example is all the governments lining up to buy stolen data from low level Swiss Bank thieves. Maybe they ought to do a statue in bronze of the thief and place it in front of their revenue buildings.
Dollar strength is predicated on a strong and sustainable US economic recovery. It’s too bad no such recovery exists.
No help in sight, more homeowners walk away
About 5.1 million will own a home valued below 75 percent of what is owed
By David Streitfeld
updated 10:25 p.m. MT, Tues., Feb. 2, 2010
In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.
“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?”
After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.
New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.
In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.
Jim Sinclair’s Commentary
Ron Paul lays out the future economic events correctly. I hope he is not, but fear he is right on point number 3.
Jim Sinclair’s Commentary
Today the US dollar moved into its rally high range on the basis of an improvement in the jobs situation.
Read this bomb from Bloomberg before you get too blissful on the US dollar. Let’s see how much media coverage this one gets.
U.S. May Lose 824,000 Jobs as Employment Data Revised: Analysis
Feb. 3 (Bloomberg Multimedia) — The U.S. may lose 824,000 jobs when the government releases its annual revision to employment data on Feb. 5, showing the labor market was in worse shape during the recession than known at the time.
Click http://www.bloomberg.com/insight/birth-death-model.html for a Bloomberg Multimedia interactive visual analysis of the economy’s job losses.
Jim Sinclair’s Commentary
Stratfor on Iran. Think oil and gold market as you read this snippet.
Iranian Proxies: An Intricate and Active Web
February 3, 2010
By Scott Stewart
For the past few years, STRATFOR has been carefully following the imbroglio over the Iranian nuclear weapons program and efforts by the United States and others to scuttle the program. This situation has led to threats by both sides, with the United States and Israel discussing plans to destroy Iranian weapons sites with airstrikes and the Iranians holding well-publicized missile launches and military exercises in the Persian Gulf.
Much attention has been paid to the Iranian deterrents to an attack on its nuclear program, such as the ballistic missile threat and the potential to block the Strait of Hormuz, but these are not the only deterrents Iran possesses. Indeed, over the past several years, Iran has consistently reminded the world about the network of proxy groups that the country can call upon to cause trouble for any country that would attack its nuclear weapons program.
Jim Sinclair’s Commentary
The US economic recovery cannot stand any shocks and for that matter neither can Australia or Euroland.
"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country."
–Edward Bernays, Propaganda, P.37
Jim Sinclair’s Commentary
Shadow Stats reports on today’s MOPE. This is a by subscription service and the best means of seeing through the MOPE.
- Revisions Allow for Unusual January Jobs Reporting
- Meaningful Payroll and Unemployment Deterioration Ahead
"No. 275: Employment Outlook Update, New Site Feature"
http://www.shadowstats.com
The next scheduled Commentary is for Friday, February 5th, following the release of January 2010 employment and unemployment. It will include details of the benchmark revision to payroll employment.
– Best wishes to all, John Williams
Jim Sinclair’s Commentary
Correct on every point!
Gold – China’s End Game?
China… A riddle wrapped in a mystery wrapped in an enigma?
Not really, especially if you know your history.
Fact #1: China knows all about the long term instability of make believe money – after all they invented it and have more experience with it than anyone else. (They called it "fly away" money.)
Fact #2: China is the longest continuously running culture on the planet. Its historical memory is calculated in the thousands of years.
Fact #3: No county suffered more profoundly in the last 100 years than China. Weakened by corruption, it was for all practical purposed torn limb from limb by the Japanese during WW II. The Nazis in Europe were timid gentlemen by comparison.
In China, you have the combination of an incredibly sophisticated culture, with a long memory, that has recently been horrifically traumatized.
Anyone who thinks China is just hacking around without a plan is either ignorant or just stupid (i.e. the entire US news media and political structure.)
China is ENCOURAGING its citizens to buy gold. The government is even producing educational television programs on the subject.
Jim Sinclair’s Commentary
Yes, killing Toyota seems to be the rally cry of US officialdom.
Toyota’s Troubles Deepen
Probe Not Over as Car Maker May Face Penalty; Earlier Pedal Fix Failed
FEBRUARY 3, 2010
By KATE LINEBAUGH, JOSH MITCHELL and NORIHIKO SHIROUZU
Toyota Motor Corp.’s quality crisis deepened Tuesday, as U.S. regulators accused the company of dragging its feet on fixing defective gas pedals and threatened civil penalties and further reviews of Toyota products.
The move means that Toyota’s efforts to address its biggest-ever safety and public-relations mess are far from over. Last week, the administration indicated it had no issues with how Toyota had responded to the sudden-acceleration reports, which led the company to recall about six million vehicles and have been linked to at least five fatalities.
"While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point," Secretary of Transportation Ray LaHood said Tuesday in a statement. "We’re not finished with Toyota and are continuing to review possible defects and monitor the implementation of the recalls."
Mr. LaHood said Transportation Department officials flew to Japan in December to meet with Toyota executives and remind the company "about its legal obligations." The agency, he said, "followed up with a meeting at DOT headquarters in January to insist they address the accelerator pedal issue."
Another DOT official said the agency is considering a civil penalty against the auto maker. Manufacturers that don’t issue a timely recall of defective vehicles can receive a penalty of up to $16.4 million.
Jim Sinclair’s Commentary
Where is this type of thinking and planning in the West?
It breaks my heart to see what has become of great countries at the hands of the banksters and their Washington employees. So many gave their lives, so many put it all on the line, and the money grubbers gave it all away via OTC derivatives for profit.
Those that signed the Declaration of Independence put their lives and their fortunes on the line for their beliefs. Now no one believe in anything, but filthy luck to be obtained any way based on the ends justify the means, which they do not.
Emulating The West
On the corner of Xu’s desk sits a stack of books about famous American medical innovators. “I want to see how this country built up biomedical research,” he says, looking for a template for potential reforms in China.
In the field of medical research, Xu sees parallels between pre-World War I America and today’s China. A century ago, while the United States was becoming a world power, its universities and biomedical research lagged behind Europe. Thousands of young Americans went to Britain, Germany, and France for their graduate or medical studies and to learn the research techniques of the great European masters.
Eventuall y, American university innovators—including pathologist William H. Welch, who built the Johns Hopkins University School of Medicine into a research powerhouse, and Abraham Flexner, whose 1910 report led to fundamental reforms of U.S. medical schools—combined lessons from Europe with their own ideas to create what has become the world’s leading biomedical research complex.
“Like America in those years, China is on the cusp of great advances in science and technology,” says Xu. “One of my dreams is to set up a new university in China that would teach innovation and would be modeled on some of the most effective research institutions in the West.”
Jim Sinclair’s Commentary
How does Moody’s feel about US bank bad debt, or is that subject a mine field?
Banks’ bad debts to rise for another year, says Moody’s
Bad debts at Britain’s banks will not peak for another 12 months, according to credit-rating agency Moody’s, in a warning that the UK’s emergence from recession is a "false dawn for credit".
By Philip Aldrick
Published: 6:15AM GMT 02 Feb 2010
Robert Thomas, Moody’s senior vice-president, said "banks remain fragile" and there are "reasons to remain concerned about bank asset quality and earnings in 2010 and 2011".
He added that lenders are likely to push "more companies into a wind-up" as they grow "less willing to continue forbearance measures such as extending repayment periods or relaxing covenant rules".
Mr Thomas’s bleak outlook comes despite the UK’s emergence from its longest and deepest recession on record. He cited the prospect of higher interest rates as a reason for concern.
"Many households have benefited from a significant reduction in mortgage interest costs over the past 18 months," he said. "This has helped defer a portion of the banks’ arrears as borrowers have not felt the full impact of the economic downturn."
Jim Sinclair’s Commentary
Compare this to our morning address that said all is well and the danger has been averted.
Baltic Dry Index Collapses Signal Further Worldwide Economic Weakness In 2010
New York, NY – The Baltic Dry Index has collapsed by 40% over the last 10 weeks further signaling economic weakness.
Chart: www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND
The dry bulk shipping vessel order book is so massive over the next two years that even huge cancellation estimates would have trouble making it manageable, and thus saving the Baltic Dry Index (a measure of spot rates for bulk shipping).
FTAlphaville highlights that broker Icap expects 1,400 vessels to be delivered in 2010, which equates to 120 vessels per month on average. (Even if in reality they won’t be spread out evenly) How bad is 120 ships per month relative to what the market has had to deal with so far?
Jim Sinclair’s Commentary
Greg Hunter says it all on the deficit front:
"So, it looks like higher inflation or higher interest rates or both are coming. This will be the consequence of a ballooning deficit and out of control federal spending. Plan your financial defenses accordingly."
Real Deficit Numbers and Real Consequences
3 FEBRUARY 2010 NO COMMENT
By Greg Hunter
We just finished 2009 with a record federal deficit of $1.4 trillion. Let’s think about that for a minute. The U.S. government says it is $1,400 billion in the red at the end of 2009. But is that the “real” deficit number? The reason why I ask is the government uses accounting gimmicks to make just about every number it puts out look better than what it really is. For example, the most recent Consumer Price Index for inflation was officially 2.7%; but if you compute inflation the way Bureau of Labor Statistics did it in 1980, the inflation rate would be 9.7%. The same goes for unemployment. Officially, it stands at 10%; but if computed the way BLS did it prior to 1994, it would come out to 21.9%. (source: shadowstats.com)
I asked economist John Williams of shadowstats.com to weigh in on last year’s record $1.4 trillion of red ink for the “real” deficit number. Williams told me, “It was closer to $2 trillion because they knocked off $500 billion with accounting gimmicks.” Just because the government knocked off a half trillion bucks using an accounting gimmick, doesn’t mean we owe any less. The reduced number just doesn’t look quite as ominous. Another way to state the $2 trillion of red ink from last year is $2,000 billion! It is a very big number, even for the U.S.
In its latest budget, the White House is projecting $1.56 trillion in red ink, and that is another new record! What will the “real” deficit be when the year is over? Williams says, “With a weaker than expected economy, the 2010 deficit likely will top $2 trillion…” So, according to Williams, the government probably understated the “real” red ink this year by another half trillion bucks. If this analysis turns out to be correct, then the government will have understated the red ink by at least $1 trillion in the last 2 years alone!
Jim Sinclair’s Commentary
How China conducts itself with its African partners.
Tanzania to complete natl fibre-optic link in June
Tue Feb 2, 2010 9:15am GMT
ADDIS ABABA (Reuters) – Tanzania expects to finish building a $300 million fibre-optic network linking its major urban centres in June, its communications minister said on Tuesday.
Peter Msolla said the project would benefit several of the east African nation’s landlocked neighbours like Zambia, Malawi and Burundi, which can access broadband from across the border.
Tanzania itself is connected to an undersea cable, SEACOM.
"We are determined to become an ICT hub within the region," the minister told Reuters on the sidelines of an African Union summit in Ethiopia focused on the ICT sector.
The project is funded by the government and a soft loan of $170 million from China. Its second phase, costing about $100 million, will take broadband connectivity to villages in a country with a mobile phone penetration rate of 33 percent.
Jim Sinclair’s Commentary
While you are MOPED into a bull dollar on today’s to be significantly revised job report, consider the pension problem that is coming down on the States and therefore onto the US dollar.
I encourage you to think independently.
Click here to watch today’s CNN video on pensions…
Jim Sinclair’s Commentary
This is an excellent review of the potential developments at the Fed, their reaction and the implications where the dollar is concerned.
This is extremely important as we transit this period of economic numbers subject to extreme revision and the daily declaration by F-TV of a bull market in the US dollar.
What’s Next for the Dollar?
Source: Axel Merk 02/02/2010
"So if the Fed pauses, should investors wait before taking action? As far as we are concerned, gold has risen from about $250 an ounce to over $1000 an ounce; the dollar has been in a decline versus the euro since briefly after the euro’s inception. The dollar’s recent rally may provide an opportunity to diversify out of the dollar, given the risk that the scenarios we describe play out"
The Federal Reserve’s Open Market Committee (FOMC) is sticking to its course for phasing out the additional purchases of Mortgage Backed Securities (MBS). Notably however, in its statement released January 27th, reference to an improving housing market was omitted after recent bad news about the sector.
The Fed rarely puts much weight on a month’s worth of data, be they good or bad; few have ever accused the Fed of being "ahead of the curve." Indeed, there was one dissenting vote, Kansas City Fed President Thomas Hoenig, who argued the Fed should no longer commit to "exceptionally low levels of the federal funds rate for an extended period."
But what if the housing market does not recover? In our assessment, Fed Chairman Bernanke has made it abundantly clear that he believes a recovery in the housing market is key to putting the economy back on a sustainable growth path. With millions of homeowners "under water" in their mortgage, i.e. owing more on their homes than they are worth, we believe he has a keen interest to push home prices higher. In the past, he has testified in Congress that going off the gold standard during the Great Depression allowed the price level to rise to the pre-1929 stock market crash level and was instrumental to get economic growth back on track.
