Jim Sinclair’s Commentary

Generally when an entity is at the level shown on the chart caution would be in order. On the longer term however I am in agreement with this article.

The Loonie Looks Ready to Fly
March 04, 2010

The rebound over the last year in the Canadian dollar has left the Bank of Canada in a bit of a quandary. The strong Canadian dollar has proven to be a challenge for Canadian exports as it has made Canadian goods and services more expensive. This leaves the policy makers at the Bank of Canada between the proverbial “rock and a hard place”.

If it decides to raise interest rates aggressively and the U.S. Federal Reserve decides that it can afford to wait to raise interest rates in the U.S., it is likely that the Canadian dollar could be in for a prolonged period of appreciation. The implication for Canadian exports is clearly negative.

The central bank knows that it has to be mindful of preventing inflationary pressures from taking root. On the other hand, Canadian interest rates can only go so far ahead of U.S. interest rates. If the spread between the two countries’ interest rates widens too far in Canada’s favour, then the Canadian economy could be hit with the sledgehammer combination of high interest rates, a surging Canadian dollar and by extension a slumping export sector. Not to mention the fact that many consider the Canadian housing market to be overheated – which is yet another concern for Canadian monetary policy makers.
One other variable that Canada would have to consider is that as the Canadian dollar has become increasingly popular amongst investors around the world, foreign inflows of capital are likely to stay strong – again putting upward pressure on the “loonie”.

As exports tend to slow down with a strong Canadian dollar, imports and spending by Canadians abroad is rising. The number of Canadians doing their shopping in the U.S. has been steady and rising as they take their newfound purchasing power to get bargains on lower-priced U.S. goods. For Canadian retailers, this has to be an area of concern. We can also look to the Paper and Forest sector to be severely impacted by the dollar’s strength.

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Jim Sinclair’s Commentary

Here is more reasons why China is so interested in Nickel.

Three Reasons the Nickel ETF Is Soaring
March 04, 2010

Since the most recent global recession began (and the subsequent stimulus measures took effect), many of the relationships between asset classes that have historically guided investment decisions have weakened considerably. The correlation between US equity and bond markets has gone through the roof, an indication of an increasingly liquidity-driven market.

Commodities, which have traditionally been embraced for their low correlation with stocks and bonds, have frequently moved in lockstep with equities, as demand for many resources is now dependent on the health of the global manufacturing industry (see Five Ways To Give Your Portfolio Much Needed Diversification) .

So far in 2010, many metals have moved in response to changing outlooks for demand in emerging markets, which now account for a significant portion of global demand (copper, which is primarily derived from Chilean mines, has obviously been impacted by some unforeseen circumstances).

To this point in 2010, one metal has distanced itself from the pack, boosted by increasingly strong demand. Nickel prices have skyrocketed this year, as the iPath Dow Jones-UBS Nickel Subindex ETN (JJN) has gained more than 20% to date in 2010 and is up about 40% since early December. The metal’s impressive run-up has investors wondering just how long the nickel rally can last. A look at the three primary factors driving prices sheds some light on the issue:

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Jim Sinclair’s Commentary

Note the comments in this article regarding bank losses when given TRUE value. That implies Freddie and Fanny are not giving a market value to these loans that either failed or are improperly written.

Fannie, Freddie Ask Banks to Eat Soured Mortgages (Update1)
By Bradley Keoun

March 5 (Bloomberg) — Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co.and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.

That’s the estimate of Oppenheimer & Co. analyst Chris Kotowski, who says U.S. banks could suffer losses of $7 billion this year when those loans are returned and get marked down to their true value. Fannie Mae and Freddie Mac, both controlled by the U.S. government, stuck the four biggest U.S. banks with losses of about $5 billion on buybacks in 2009, according to company filings made in the past two weeks.

The surge shows lenders are still paying the price for lax standards three years after mortgage markets collapsed under record defaults. Fannie Mae and Freddie Mac are looking for more faulty loans to return after suffering $202 billion of losses since 2007, and banks may have to go along, since the two U.S.- owned firms now buy at least 70 percent of new mortgages.

“If you want to originate mortgages and keep that pipeline running, you have to deal with the push-backs,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, and former examiner for the Federal Reserve. “It doesn’t matter how much you hate Fannie and Freddie.”

Freddie Mac forced lenders to buy back $4.1 billion of mortgages last year, almost triple the amount in 2008, according to a Feb. 26 filing. As of Dec. 31, Freddie Mac had another $4 billion outstanding loan-purchase demands that lenders had not met, according to the filing. Fannie Mae didn’t disclose the amount of its loan-repurchase demands. Both firms were seized by the government in 2008 to stave off their collapse.

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Jim Sinclair’s Commentary

You have to know that what I told you on the Greek bond sale is 100% correct.

Their first try to sell bonds two weeks ago was withdrawn due to the lack of buyers. The second try got a little help not from real investors, as the article says, but even those were a central bank or two.

The US banks were dropped because of CDS utilization to cover their actually short Greek bond positions.

I have been told there was a $9.9 billion dollar profit in this transaction that has been closed.

Banks shut out of Greek bond sale
guardian.co.uk, Thursday 4 March 2010 20.52 GMT
Elena Moya

Greece, which has said it will not succumb to "speculators", shut the door on banks and hedge funds in its latest bond sale, and dropped Goldman Sachs and other US investment banks as transaction managers.

"We targeted real money investors, like insurance companies, mutual funds, instead of banks and hedge funds – we directed the transaction away from them," Petros Christodoulou, the new head of Greece’s debt management office, told the Guardian. "I felt that real money investors are more long-term players, whereas [the others] are more short-term."

Leaving out hedge funds and banks is "very unusual", said Ashok Shah, chief investment officer at London & Capital. "You need to have a fluid market, and you can rarely place an issue with bond investors who don’t trade, they do need the market, and they need the market to be a bit calmer than what it has been."

The last bond sale three weeks ago included US banks such as Goldman Sachs and Morgan Stanley. Goldman Sachs has been criticised for a derivatives trade at the start of the decade that helped Greece reduce its debt figures. Goldman Sachs officials have said it should have been more transparent.

Greece wants long-term investors to bring stability to its finances. Hedge funds and other institutions have been betting the country could be near to a default. In the past two months, they have bought credit default swaps, or protection against a potential default, pushing its price higher. These instruments are seen as signs of market sentiment, ultimately putting more pressure on Greece. The EU is conducting an investigation of this market, and Spanish President José Luis Rodríguez Zapatero said he hoped to see new CDS regulation during his country’s EU presidency, which expires in June.

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Jim Sinclair’s Commentary

This excellent report is much more than a few bullet points, it is a complete discretion of each in report style.

I find it a must so I understand the real condition being misreported.

"No. 284: February Employment and Unemployment "
http://www.shadowstats.com

- Payroll Drop of 36,000 was 51,000 Net of Census Hiring 
- Broader February Unemployment Measures Rose: 
U.6 at 16.8% (up 0.3%), SGS at 21.6% (up 0.4%) 
- Economy Remains Headed into Deepening Downturn

Jim Sinclair’s Commentary

When thinking about employment stats, also look to the release of A-15 Alternative Measures of Labor Underutilization.

Economic News Release
Current Employment Statistics – CES (National)

Table A-15. Alternative measures of labor underutilization

NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data.

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Jim Sinclair’s Commentary

The media looks upon raiders as investors. Maybe that is the new definition.

Speculators Eye Next Prey
How Safe Is Britain’s Proud Pound?
By Carsten Volkery in London

First the euro, now the pound. Britain’s currency is coming under massive pressure as speculators bet that the UK’s national debt will soon get out of hand. Like Athens, London has its share of problems — and the Brits don’t have any euro zone partners to back them up.

Schadenfreude may be a German word, but it has never been a foreign concept in Great Britain — particularly in recent months as the British watch the trials and tribulations of the European common currency, the euro. The budgetary and debt problems facing Greece, Portugal, Italy, Ireland and Spain have merely reinforced their conviction that staying out of the euro zone was the right decision. Unlike Berlin, London is not under pressure to come to the aid of Athens.

But speculators have not just taken aim at the euro in recent days. The British pound, too, has become a favored target — showing Brits how vulnerable their own currency may actually be. At the beginning of the week, the pound slid to a 10-month low of just $1.4781. Since then, the pound has staged a mini-recovery, moving back above $1.50 on Wednesday. But market pressure on the British currency is not likely to disappear overnight.

Alarm on the Markets

The most immediate trigger for the recent currency swoon came in the form of political surveys which indicated that a Conservative victory in general elections (which will likely be held in early May) may not be a foregone conclusion. Markets were alarmed out of fear that a close election could make it difficult for parliament to pass a strict package of savings measures.

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Jim Sinclair’s Commentary

If FASB blesses lies concerning the inventory of banks and financial institutions why should the FHA tells the truth?

FHA understates risk exposure.
The Federal Housing Administration has understated how much risk it has taken on, according to a group of economists from the New York Federal Reserve and New York University. The FHA is overlooking factors that could signal higher losses, said the group, making it more likely that the agency will have to ask for taxpayer funds. As many as 40% of FHA-insured mortgages are worth more than the homes that secure them, and as many as 14% of the mortgages may be for more than 115% of the home’s value. The FHA’s calculations put the latter figure at 6%.