1. A curtailment of bank trading department’s activities will not impair the price of gold as the gold banks are not on the long side.

You can forget that foolish rumor. It is more likely if any bank regulation is passed that it will require short covering.

2. The propaganda that China will not buy IMF gold is back.

China already said the contrary but who listens to China when Reuters quotes some unknown as saying the opposite.

Jim Sinclair’s Commentary

This has been an interesting day. The gold websites that publish every kind of opinion are working feverishly to produce bearish material. The run of the mill money manager is yelling deflation as they come to realize a Jobless Recovery is a world class oxymoron.

Few understand that hyperinflation is a currency event, not an economic event.

After China decidedly and without any doubt said along with India that they will bid for IMF gold, Reuters published an article to the contrary so the sheeple went contrary.

When I read the articles of the new gold experts I want to yak. Gold is going to $1650 and quite possibly $5000. Asia will take it there without your help and over the dead bodies of shorts.

In between it is all noise and fury signifying nothing whatsoever.

China Prepares to Transform the Gold Market
March 10, 2010
Peter Cooper

The inscrutable Chinese are hardly likely to inform the world that they are on a gold buying spree for fear of sending the gold price through the roof before they can finished their acquisition plans.

China’s gold reserves amount to 1,054 tons, ranking fifth in the world, said Yi Gang, central bank vice governor on Tuesday. China is the largest gold producer in the world, with more than 300 tons of gold produced annually, all of it consumed locally and not exported.

Private gold reserves

China is the second largest gold consumer in the world, with a consumption of over 400 tons of gold a year, second only to India. And it has been conservatively estimated that there are far more than 3,000 tons of gold accumulated among Chinese people.

Indeed it was only at the start of last year that China suddenly announced to the IMF that it had doubled its official gold reserves to 1,054 tons from 2003. Nobody knew anything about it before then, although there must have been suspicions in the trade.

Ah but let me run that past sharp readers again. Yesterday the Chinese central bank announced gold reserves of 1,054 tons, exactly the same figure as it gave the IMF a year ago. Is that not suspicious? When will we see the true figure including whatever they bought last year?

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Jim Sinclair’s Commentary

It is open warfare. About that there is no question whatsoever.

Investment Banks are conducting themselves as if they were countries. Mark my word, they are going to pick on a country soon lead by someone that will not take it.

Investment banks are short on intelligence services. Somebody is going to sick the wet boys on them for sure.

They are so out of their league, driven there by egomania. Can you imagine if they ever put Putin in their cross hairs? That would certainly cure the problem in 24 hours.

Economic Warfare? Europe versus Wall Street
By Michael Collins

(March 10) Wall Streets is headed toward international pariah status thanks to two recent actions by the European Union (EU).

On Tuesday, the EU announced that it was banning Wall Street banks from the lucrative government bond business in Europe. They didn’t express official concern or fire off a warning shot. They simply banned Wall Street from financing government bond deals like the one Goldman Sachs sold to Greece. The Guardian pointed out that Wall Street bond business from European governments has gone down over the last two years. Now the business is gone period. In effect, the EU has labeled Wall Streets business tactics as too dangerous for their governments to handle.

Then on Wednesday, the President of the European Commission said that the EU was considering a ban on government debt speculation through Credit Default Swaps (CDS) President José Manuel Barroso announced that, "the Commission will examine closely the relevance of banning purely speculative naked sales on Credit Default Swaps of sovereign debt." While not an outright ban, the threat of banning CDS on national debt would be a major loss for the world’s financial speculators, particularly those in the United States and Great Britain.

These two hostile moves toward Wall Street by Europe were discussed by officials in the context of the current Greek debt crisis. Wall Street firm Goldman Sachs has been implicated in helping the Greek government hide the true nature and size of the debt. Discovery of this sleight-of-hand action exacerbated an already challenging crisis.

While the Greek crisis was presented as the proximate cause of the anti Wall Street actions, these announcements follow a March 6 national referendum in Iceland. Citizens voted overwhelmingly, 93% to 2%, to reject their government’s plan to have citizens to cover the losses of Iceland’s second largest private bank, around $6 billion.

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Jim Sinclair’s Commentary

The Western world is imploding. Gold is the only currency that carries no liability.

Wall Street and the media would have you throw your gold away for dollars.

Don’t!

Pimco’s El-Erian Says Public Finance Shock May Deepen (Update2)
By Garfield Reynolds

March 11 (Bloomberg) — Mohamed A. El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances around the world may affect the global economy more than is currently realized.

“The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is “at present being viewed primarily — and excessively — through the narrow prism of Greece,” he wrote.

Governments may have to raise taxes and slash spending to cope with swelling deficits after nations including the U.S. borrowed unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross. A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said.

Pimco has said debt strains in Greece, Portugal and Spain underscore its view that 2010 will be a year of slower-than- average growth, and predicts there will be a shrinking global role for the U.S. economy.

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Jim Sinclair’s Commentary

The dollar is not a safe haven.

US home value decline steepens in January – Zillow
* Home values fell 0.33 pct in Jan vs 0.27 pct Dec drop
* Values fell 4.8 pct yr-over-yr Jan vs 5.5 pct Dec/Dec
By Julie Haviv

NEW YORK, March 9 (Reuters) – Home prices continued to weaken in many U.S. markets during January as the impact of government tax credits on housing demand lost momentum, real estate Website Zillow.com said on Tuesday.

Nationally, while the annualized appreciation rate continued to rise, increasing from negative 5.5 percent in December to negative 4.8 percent in January, home values fell 0.33 percent from the prior month, a slightly larger monthly depreciation than the 0.27 percent recorded in December, according to Stan Humphries, chief economist at Zillow.

Humphries said that of the markets he focuses on, four stayed in positive or flat territory in terms of month-over-month appreciation: Los Angeles (0.2 percent), Philadelphia (0.2 percent), San Diego (0.0 percent) and San Francisco (0.3 percent).

Meanwhile, five markets stayed in positive territory in terms of year-over-year appreciation: Boston (1.7 percent), Denver (0.4 percent), Los Angeles (0.9 percent), San Diego (0.2 percent) and San Francisco (0.9 percent).

Additionally, the number of homeowners losing their homes to foreclosure remained unchanged in January from December, but was still pegged at the highest level seen in Zillow’s data, which began in 1996. In January, more than one in every 1,000 homes in the U.S. reached the final stage of foreclosure.

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Jim Sinclair’s Commentary

There is no such thing as a Jobless Economic Recovery.

Unemployment rises in 30 states in January
By CHRISTOPHER S. RUGABER, AP Economics Writer –2 hrs 51 mins ago

WASHINGTON – Unemployment rose in 30 states in January, the Labor Department said Wednesday, evidence that jobs remain scarce in most regions of the country.

The data is somewhat better than December, when 43 states reported higher unemployment rates, but worse than November, when rates fell in most states.

Still, five states reported record-high joblessness in January: California, at 12.5 percent; South Carolina, 12.6 percent; Florida, 11.9 percent; North Carolina, 11.1 percent; and Georgia, 10.4 percent.

Michigan’s unemployment rate is still the nation’s highest, at 14.3 percent, followed by Nevada, with 13 percent and Rhode Island at 12.7 percent. South Carolina and California round out the top five.

There were some signs of job creation. Thirty-one states added jobs in January, up from only 11 in the previous month. But the job gains weren’t enough, in many cases, to lower theunemployment rate.

More…

Jim Sinclair’s Commentary

The US dollar is not a safe haven.

Record monthly deficit for U.S.: $221 billion
By Annalyn Censky, staff reporterMarch 10, 2010: 4:19 PM ET

NEW YORK (CNNMoney.com) — The United States dropped a record $220.9 billion further into the red in February, the Treasury Department reported Wednesday.

The shortfall was up from the previous record $193.9 billion shortfall in February last year.

It’s the 17th straight month that the U.S. government has posted deficits. The last time the government posted a monthly surplus was in September 2008, when the government reduced the deficit by $45.7 billion.

The cumulative deficit for fiscal 2010, which started in October, reached $651.6 billion, up from $589.8 billion in the same period the year before. The Obama administration is forecasting that the deficit will hit $1.56 trillion this year.

Receipts totaled $107.5 billion, up from $87 billion in February last year and outlays totaled $328.4 billion, up from $281 billion.

Despite the government’s record losses, the year-over-year boost in revenue during February is at least one hopeful sign that the economy is faring better, said Robert Bixby, executive director for the Concord Coalition, a federal budget watchdog group. It was the first time since April 2008 that the government posted higher revenue when comparing monthly data year-over-year.

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Jim Sinclair’s Commentary

QE to infinity or the Fed is history.

Jobless claims bill OK’d by Senate
By Tami Luhby, senior writer March 10, 2010: 3:17 PM ET

NEW YORK (CNNMoney.com) — The Senate on Wednesday approved a wide-ranging bill that would push back the deadline to file for extended unemployment insurance until year-end and extends dozens of expired tax breaks.

The bill, passed by a 62-36 vote, is the latest job creation effort to go before lawmakers, though it contains virtually no new initiatives. Its price tag has wavered between $140 billion and $150 billion, which is partially offset. Its next stop is the House.

Lawmakers have come under pressure from both the White House and unemployed Americans to do more to spur hiring. But after many speeches, officials have enacted little to help the nearly 15 million looking for work.

The latest efforts — which include a $15 billion job creation effort that the Senate will take up next — have come under fire from both sides. Some say that more must be done to boost employment. Others, particularly Congressional Republicans, have voiced concerned about adding to the deficit.

While the House passed a comprehensive $154 billion job creation bill in December, the Senate has opted to address the unemployment issue with a series of smaller measures. Senate Majority Leader Harry Reid, D-Nev., has said he will soon unveil additional efforts, including those aimed at small businesses.

The bill passed Wednesday would push back the deadline to file for extended jobless benefits and the federal subsidy for COBRA health insurance until Dec. 31.

More…

Jim Sinclair’s Commentary

There is no such thing as a Jobless Recovery outside of economic propaganda.

No bottom yet
Big revenue source down 12th straight month
By BRIAN BARBER World Staff Writer
Published: 3/9/2010  2:23 AM
Last Modified: 3/9/2010  10:15 AM

Tulsa’s sales-tax revenue this month dropped 11.6 percent or about $2 million from March 2009, capping off 12 straight months of negative numbers.

That’s actually $122,000 above the revised budget projections for the month, Finance Director Mike Kier said.

Considering the city’s use taxes — those levied when products are bought from another state — were below estimate by $332,000, there’s still less money going out of than into the general operating fund.

But at this point, no additional cuts are planned, Kier said.

"We are going to hold for the moment," he said. "I think succeeding months are becoming more important, not just for the rest of this fiscal year (which ends June 30), but for expectations for next year."

April’s sales-tax check will be particularly telling because it was April 2009 when the city’s downward spiral began, Kier said.

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Jim Sinclair’s Commentary

The only improvement in the financial industry is FASB’s permission to lie and TARP.

We have been saying this for quite some time yet just now you are reading it in the New York Times.

Ailing Banks May Require More Aid to Keep Solvent
By STEVE LOHR
Published: February 12, 2009

Some of the nation’s large banks, according to economists and other finance experts, are like dead men walking.

A sober assessment of the growing mountain of losses from bad bets, measured in today’s marketplace, would overwhelm the value of the banks’ assets, they say. The banks, in their view, are insolvent.

None of the experts’ research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are federally insured. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.

But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department’s plan outlined this week.

The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets.

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Jim Sinclair’s Commentary

I do not consider economic statistic developed by the survey method to be indicative of anything. They do however influence transactions and expectations of the glib.

There is no such thing as a Jobless Economic Recovery in a consumption driven Western world.

Consumer Confidence Lowest Since March 2009: IBD
March 9, 2010

NEW YORK (Reuters) – U.S. consumer confidence fell in March to its lowest level in a year, as high unemployment and the ways in which the government is using taxpayer money draw mounting apprehension in households, a research group said on Tuesday.

Investor’s Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index slipped to 45.4 in March from February’s reading of 46.8.

It was the lowest level the gauge has hit since March 2009. Readings above 50 indicate optimism, while those below 50 point to pessimism.

"Confidence has been hurt by continued job declines and concerns about the economy’s lack of vigor," said Terry Jones, associate editor of Investor’s Business Daily.

"Despite the spending of trillions of dollars of taxpayer money on stimulus and ‘too-big-to-fail’ bailouts, the economy doesn’t appear to have entered into anything resembling a self-sustaining expansion," Jones said, adding that persistent attempts to pass a "wildly unpopular" health care bill has added to Americans’ apprehensions.

More…

Small business spirits downcast in February
Tue Mar 9, 2010 10:49am EST

(Reuters) – Optimism among the country’s small businesses slipped in February as entrepreneurs worried about repeatedly weak sales, the National Federation of Independent Business said in a survey released on Tuesday.

Small Business

The NFIB said its monthly small business optimism index dropped 1.3 points to 88.0 in February from January with the index below 90 for 17 straight months, and below 90 in all but four months since January 2008.

"Credit access is not a major factor holding up economic growth, at least the kind of growth we want," said William Dunkelberg, chief economist for NFIB.

The survey showed 34 percent of the small business owners said weak sales are their top business problem.

"Owners will borrow when expectations that sales will rise and generate new revenue to pay for investments and new hires become positive," Dunkelberg said.

Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stocks.

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Jim Sinclair’s Commentary

There are two considerations here:

1. Wall Street owns Washington and derivatives are their main source of income. That makes it doubtful that meaningful changes will occur.
2. The argument will be that they did not play the euro short via CDS pressure on debt. They are correct. They played the debt itself short.

CFTC Chairman Gensler urges end to derivatives secrecy
By Aline van Duyn
Financial Times, London
Wednesday, March 10, 2010

A leading US financial regulator on Tuesday called for the prices of derivatives trades to be disclosed in the same way as stock prices, saying only large Wall Street banks benefited from the current lack of transparency.

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), said standard credit default swaps and other privately traded over-the-counter derivatives needed drastic reform, reflecting their role in the financial crisis.

His call came as European leaders including Angela Merkel, German chancellor, called for a clampdown on speculative trading in sovereign credit default swaps, which offer investors protection against a government default.

"The only parties that benefit from a lack of transparency are Wall Street dealers," Mr Gensler told a New York derivatives conference. "Right now we have a dealer-dominated world, and that nearly drove us off a cliff."

Mr Gensler, a former Goldman Sachs executive, said: "To promote public transparency, standard over-the-counter derivatives should be traded on exchanges or other trading platforms." He also called for explicit regulation of derivatives dealers and the use of clearing for standard OTC derivatives.

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Jim Sinclair’s Commentary

The US dollar is not a safe haven. Stay the course!

Foreign versions of our coming crisis
Greece and the United Kingdom are suffering a dire funding problem that is headed for US shores.
By Bill Fleckenstein

Regrettably, these days it seems that ferreting out the right investment decisions is sort of all macro, all the time. The top-down economic overview is far more important, I think, than the bottom-up fundamental view of any company or stock.

Important pieces to that macro jigsaw puzzle are Greece and the United Kingdom, as the U.S. is headed for a variation of the funding crisis, though how severe ours will be remains to be seen. Without a money-printing press — because it uses the euro, not a currency of its own — Greece is forced to consider austerity measures to deal with its debt woes. The U.K., on the other hand, is not as bad off as Greece, and it does have a press.

For America: A Greco-Anglo scenario?

A crisis of confidence has invaded Greek and U.K. shores, and we can all learn a bit about what our future might look like as we watch developments there. (The U.K. may be the most useful example for us, since we also have a printing press.)

We will soon find out whether Bank of England Gov. Mervyn King will extend quantitative easing and, if he does, how the bond market will respond to a renewed effort to pump money directly into that economy. (The pound is already under a good deal of downward pressure.)

I would say that the U.K.’s funding crisis — to use my ballgame analogy — is probably in the third inning or so, even if we are still taking batting practice over here. (Read "Economy sinks as we save bankers" and "The next crisis has already begun" to brush up on that analogy.)

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Jim Sinclair’s Commentary

Wall Street owns Washington, making the advent of serious and effective new regulations questionable.

Financial reform tips toward bankers
So far in congressional debate, it’s lenders 1, consumers 0
updated 8:42 a.m. MT, Tues., March. 9, 2010

WASHINGTON – As Congress this week inches toward a new set of rules to avert another global financial collapse, it is focused on two conflicting goals: reforming the banking system to protect consumers while still giving lenders the freedom to take risks.

So far the score looks like: Bankers 1, Consumers 0.

More than a year after a wave of risky mortgage bets brought Wall Street to its knees, banks and other financial institutions are still playing by the same rules that got them into the mess.

Reforming the sprawling financial regulatory system ― a patchwork of federal agencies and state commissions ― is a tall task under the best of circumstances. It’s even tougher with Congress already polarized over the health care debate, an economy on a wobbly path to recovery, banks facing a wave of foreclosures and households licking their wounds from $7 trillion in lost home equity and near double-digit unemployment.

Proponents of comprehensive regulatory reform hope for sweeping measures to protect consumers from predatory lending, rein in high-stakes Wall Street trading in arcane derivatives, boost capital requirements for banks that want to bet big with depositors’ money and spread some regulatory sunshine on the dark pools of the “shadow banking system” that caught regulators flat-footed when the market spiraled into the abyss in the fall of 2008.

“We cannot afford to let the status quo continue,” Sheila Bair, head of the Federal Deposit Insurance Corp., told a meeting of business economists in Washington.

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Jim Sinclair’s Commentary

Effectively this means nothing. As long as the CDS market is anywhere in the universe and is quoted daily by F-TV as the ultimate common denominator of a sovereign debt it will impact that sovereign debt.

Wall Street will retain North Korea to launch a rocket to the moon and make the market from there if they have to.

Unless the CDS OTC derivative is made a capital crime in every country on the planet, it cannot be stopped.

Europe eyes ban on CDS contracts used against Greece
Europe’s leaders have launched a concerted attack on financial speculation, blaming the crisis in Greece on the use of debt derivatives by hedge funds.
By Ambrose Evans-Pritchard
Published: 6:00AM GMT 10 Mar 2010

German Chancellor Angela Merkel called on Washington to back proposals for a restrictions on credit default swaps used to target countries in trouble. "The US needs to make a gesture. We believe that the persistent speculation against the eurozone countries must be dealt with as soon as possible," she said.

Jose Manuel Barroso, the European Commission’s chief, said Brussels is examining a ban on "purely speculative naked sales" of CDS contracts where traders do not own the underlying collateral.

There is clearly a joint move across the EMU-system to rein in hedge funds. France’s Nicolas Sarkozy has been working with Eurogroup chair Jean-Claude Juncker to craft a joint assault on derivatives. Greek premier George Papandreous said in Washington that "unprincipled speculators" had brought his country to its knees, adding that he intended to lobby President Barack Obama for help in taming Wall Street.

Whether CDS swaps make much difference is questionable. The contracts are traded between banks or funds. They have little impact on the underlying debt, except to create mood music in the markets.

What matters is whether long investors continue to buy Greek bonds at tolerable prices, given the parlous state of Greek finances and debt compound risks. If they stay away, this will show up quickly in bond spreads, replacing CDS as a barometer.

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Jim Sinclair’s Commentary

The West debt-wise is imploding, and only gold is a currency with no liability attached to it.

All week EU states will be bailed out. All weak US states will be bailed out.

Only gold will bail you out.

Fitch Ratings warns UK about debt
March 10th, 2010
Author: Jeff Taylor

According to the Ambrose Evans-Pritchard in Times, the head of Fitch Ratings, Brian Coulton, has branded the British government’s response to its growing public debt as “pedestrian”. He said that Britain has “the most rapid rise in the ratio of public debt to GDP of any AAA-rated country” and that a clear plan of austerity is needed for us to maintain world-wide confidence.

This after hugely disappointing trade deficit figures and the pound sliding below $1.50.

With other nations biting the bullet with clear plans to cut deficits the danger is that the UK’s mountainous debt will soon overshadow every other countries’ with the clear risk that our AAA rating may be affected.

According to Fitch, the UK seems to be relying on a Korean model of recovery by hoping that increased output and tax revenues will eventually fill the gap. Fitch believes this to be optimistic and believe that Britain is more likely to be heading for a Japanese style ‘lost decade’ unless we change course soon.

Fitch also believes that, although Greece was in bad shape and not out of the woods yet, the danger of the Greek problem spreading around the globe has been overhyped. Whereas the dire position that Italy is in has been understated.

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Jim Sinclair’s Commentary

My experience tells me that the following says any Chinese bank and its banker that deals in an OTC derivative has not getting paid as the least of his worries.

Executive Pay at Chinese Banks to be Tied to Risk Management Performance
By Cheng Zhiyun
Published: 2010-03-10

Chinese bankers may find it a little harder to earn annual bonuses running into the millions of yuan at the end of this year, as, according to a source working in one of China’s commercial banks, the China Banking Regulatory Commission (CBRC) is currently considering a plan that will link executive pay to a banker’s ability to handle long-term risk management.

Under the proposed plan, the CBRC may even require banks to cancel any bonus payments made to executives that are later found to have engaged in business that exposed the bank to excessive risk.

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Jim Sinclair’s Commentary

Greece presents its case for the banning of the CDS market, and gets the following answer in Washington:

"The U.S. made clear it doesn’t believe Greece’s primary budget problems stem from market speculators."

That sounds like a rebuke of a request to ban the CDS market.

Greek PM meets with White House on debt reduction.
Greek Prime Minister George Papandreou met with Obama yesterday to discuss a European proposal to crack down on speculative trading (see details below) and to outline the steps his country will take to reduce its debt. Papandreou said he didn’t ask the U.S. for financial help, which is good because the White House says Greece’s problems "can and should" be resolved by the EU. The idea of curbing financial speculation will be discussed at the next G-20 meeting, though the U.S. made clear it doesn’t believe Greece’s primary budget problems stem from market speculators.

EU discusses ban on speculative trading.
The European Commission may ban "purely speculative naked sales on credit default swaps of sovereign debt," and will ask for a similar move globally at the G-20 meeting in June. European officials are pushing the U.S. to join in the crackdown on speculators, with Germany’s Merkel saying "quick action is needed" and the U.S. should "make a gesture" to curb the trades in question. Though he didn’t go so far as to recommend a ban, Commodity Futures Trading Commission Chairman Gary Gensler said in a speech yesterday that there should be new limits on credit-default swaps.

Are you prepared to be taxed into the next life? There is no escape moving from broken state to broken state

QE must go to infinity or the Fed will be history.

Jim Sinclair’s Commentary

It is happening everywhere. There is no way out that supports political expedience other than "QE to infinity." If the Fed doesn’t play ball they are history.

The shot caller is political expediency.

Top Bell aide says Toledo likely to face ‘fiscal emergency’
Potential strategy to secure labor concessions disputed
By IGNAZIO MESSINA

Unless there is a fundamental change in the way Toledo’s government operates, the city will likely be unable to pay its employees before the year is through, a top official in the Bell administration warned.

That looming financial disaster leads people such as Mayor Mike Bell and Councilman D. Michael Collins to throw out words like "bankruptcy" or "receivership," two feared terms but ones that are not likely to become reality.

The truth is that receivership or bankruptcy is probably not an option for the city anytime soon. But being slapped by the state as a "fiscal emergency" municipality is a real threat – a label some dislike but others advise Toledo to embrace given its $48 million deficit.

"If you cannot make payroll for 30 days, you are there. You are in fiscal emergency," said Deputy Mayor of Operations Steve Herwat, Mr. Bell’s right-hand man.

"If we don’t get this budget balanced, and the imbalance is enough, and yes it is, we are at risk," he said.

More…

Jim Sinclair’s Commentary

It is a US epidemic that will guarantee the jobless part of the illusionary recovery.

Cash-strapped LA County courts to begin layoffs
Updated: 03/08/2010 01:23:03 PM PST

LOS ANGELES—The Los Angeles County Superior Court is laying off 329 staff members next month and officials say more than 1,000 others may go in the next two years because of budget cuts.

A memo from Court Executive Officer John Clarke to employees says the first layoffs will begin on April 1.

Clarke says an additional 500 layoffs are planned for September followed by 530 in fall 2011. The court currently has 5,400 employees.

Clarke says civil rather than criminal cases will be hardest hit.

Clark says the court system’s budget deficit is expected to reach $140 million by the 2011-12 fiscal year that begins in July.

Presiding Judge Charles McCoy has said he’s looking at plans to close up to 180 courtrooms and lay off about a third of the staff.

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Jim Sinclair’s Commentary

States, counties, municipalities, cities, villages and hamlets are all broke or going to be soon.

The Fed either produces QE to infinity of the Fed is history.

Counties face more cutting as state income tax payments fall
By Larry Carson
March 9, 2010

The latest state income tax payments to local governments fell $61.8 million year over year, piling new fiscal woes atop budgets already reeling from state cuts, high snow removal costs and earlier revenue declines.

The declines in payments from the state to county governments at the end of February put an added $29.4 million burden on Montgomery County, which was already facing a projected $761.5 million shortfall by June 30, according to the Maryland comptroller’s office.

Prince George’s and Charles counties were alone among Maryland’s 24 jurisdictions to receive more in the fourth quarter of 2009 than in 2008.

Leaders of Anne Arundel and Carroll counties said they were prepared for the bad news and it won’t affect their budgets. Others said the declines will hurt.

"It’s very serious, but there’s been a lot of bad news this year," said Jennifer Barrett, Montgomery County’s finance director. "It makes the gap worse."

More…

Jim Sinclair’s Commentary

Clearly the EU knows what the weapon used by the Financial Reich to break currencies is.

What can be done when Wall Street owns Washington is debatable. We bailed out an industry so it can break the world.

EU, Merkel Urge Swap Regulation as Greece Takes Plea to U.S.
By Rainer Buergin and Ben Moshinsky

March 9 (Bloomberg) — The European Union’s top regulatory official said the bloc will consider banning “purely speculative” credit-default swaps as German Chancellor Angela Merkel called for a crackdown on derivatives trading to prevent a rerun of the Greek financial crisis.

European Commission President Jose Barroso said today the 27-nation region will “examine closely the relevance of banning purely speculative naked sales on credit-default swaps.” Merkel, speaking before Greek Prime Minister George Papandreou meets PresidentBarack Obama in Washington today, said the EU must take the lead in curbing derivatives.

“We’re of the opinion that a quick implementation of actions in the area of CDS has to happen,” Merkel told reporters in Luxembourg. Citing “ongoing speculation against euro-region countries,” she called for the “fastest possible” implementation of new rules.

European leaders are ratcheting up the pressure for global regulation of derivatives amid the Greek fiscal crisis. The commission, the EU’s executive arm, will also propose creating a lender of last resort to aid cash-strapped members such as Greece, a proposal that has divided the region’s leaders.

Papandreou said in a speech in Washington yesterday that “unprincipled speculators” threatened a new global financial crisis and said he’d press Obama to support EU efforts to target speculation.

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Jim Sinclair’s Commentary

Things are all good in this MOPE induced illusionary oxymoron of a Jobless Recovery. This is certainly true if you are glib and follow the mob with your future.

Nothing has been done to fix the major problem, which is OTC derivatives. In fact they have grown in size if you understand the computer cartoon called value to maturity which assumes everything will mature.

The Swaps That Swallowed Your Town
By GRETCHEN MORGENSON
Published: March 5, 2010

(Excerpt from article)

AS more details surface about how derivatives helped Greece and perhaps other countries mask their debt loads, let’s not forget that the wonders of these complex products aren’t on display only overseas. Across our very own country, municipalities, school districts, sewer systems and other tax-exempt debt issuers are ensnared in the derivatives mess.

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Jim Sinclair’s Commentary

Do what the Chinese do. Do not do what Reuters tells you they will do.

The best book on negotiations in China is "When Yes means No."

China says committed to U.S. debt, wary on gold

(Reuters) – China, the world’s biggest holder of foreign exchange reserves, renewed its commitment to the U.S. Treasury market on Tuesday but said it would be wary of substantially boosting its gold holdings.

China

The country’s chief currency regulator said China would attract more capital inflows this year, partly reflecting expectations of a stronger yuan, but he left the market none the wiser as to when Beijing might let the currency resume its rise.

"The U.S. Treasury market is the world’s largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us," Yi Gang, head of the State Administration of Foreign Exchange (SAFE), told a news conference.

The exact composition of China’s $2.4 trillion of reserves, the world’s largest, is a state secret and the subject of intense scrutiny by global investors aware that, with such large sums at stake, even marginal portfolio shifts have the potential to move markets. Global investors are equally attuned to any clues about the yuan, given its role in China’s trade with the rest of the world and the potential spill-over effect a stronger yuan would have on other currencies in Asia.

Speaking during the annual session of parliament, Yi expressed the hope that China’s presence in the U.S. Treasury market would not become a political football. China, he stressed, was not in the game of short-term currency speculation.

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The gold buzz today was CDS winners demanding payment in gold.

The major weakness of this thought is you can’t demand anything except what the contract calls for at inception.

Novation or unilateral changing or cancelling of a contract is against contract law internationally. This sounds good but lacks legality and functionality.

Nobody knows what collateral if any is required between counter parties trading CDS OTC derivatives.

Yes gold is good collateral for anything and accepted by some exchanges, but it is one hell of a reach to consider all CDS transactions to have gold as collateral. They simply do not.

Jim Sinclair’s Commentary

Factor this article into today’s assumption that the Fed was going reverse repo with the money market funds to drain excess liquidity.

Note the attention today of the Fed’s Sack to the important concept when discussing the sale of the junk the banks stuck the Fed with and how it "should limit any uptick in interest rates from the sales."

Today the Fed MOPEs about draining excess liquidity via reverse repos. If this was enacted it would send interest rates soaring regardless of the economic condition when initiated.

Another interesting point to consider is that if you add all the cash of all money funds together, less losses on inventory, there isn’t enough money there if you used reverse repos to drain the trillions in excess liquidity. Despite this fact, both professionals and public alike buy this illogical propaganda and run with it, making so many gold people question their commitment.

Fed’s Sack backs passive strategy for asset sales
By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) — The "crucial" message from the Federal Reserve to financial markets is that any potential asset sales from the central bank’s enormous holdings of mortgage-backed securities will come in a gradual and passive manner, the No. 2 official at the New York Federal Reserve Bank said Monday.

In a speech to the National Association for Business Economics, the New York Fed’s Brian Sack remarked that this go-slow approach would be easier for the market to digest and should limit any uptick in interest rates from the sales.

To assist frozen credit markets and keep long-term interest rates low, the Fed has amassed a balance sheet of $2 trillion though purchase of government securities and mortgage-backed securities

The central bank also has kept interest rates near zero for more than a year.

Now that financial crisis has eased, the Fed is looking for the exit. This cycle will be more complicated because the Fed wants to hike rates and reduce its balance sheet. Fed watchers are scratching their heads about which move will come first.

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Jim Sinclair’s Commentary

John Embry on Gold and Gold shares.

John Embry: As Confidence Returns, Gold Will Rise
Source: Interviewed by Gordon Holmes, The Gold Report  03/08/2010

The Gold Report caught up with John Embry, Chief Investment Strategist, Sprott Asset Management, to get his thoughts on gold and some mining stocks he favors. Embry, an industry expert in precious metals, has researched the gold sector for over 30 years. Read about why he thinks gold could gain another 30% this year as a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. He believes as confidence in gold returns people will seek an outlet in gold stocks, especially small-cap gold producers and junior explorers with solid projects.

The Gold Report: John, in Investors Digest of Canada you recently said you’re expecting gold to gain another 30% this year.

John Embry: I would say at least 30%. I said that I thought it would be the best year to date. We’ve had nine years consecutive higher year-end prices and the best year in that span for a year’s return was 31%. I think this will be the year that we exceed it in this, the 10th year of the bull market.

TGR: What’s driving this? Why is this year going to be the best year?

JE: I think we’re getting very close to the point when a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. And at that point, when you can’t depend on your government paper as a safe haven, I think that fact puts gold in a much better light in more people’s eyes.

TGR: You might say the first leg down were the individuals who couldn’t pay their mortgages and that caused part of the ‘08 collapse. And now it looks like it’s the government’s.

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Jim Sinclair’s Commentary

You might think that governments have caught on to the Blitzkrieg (CDS OTC derivative) utilized by today’s Financial Reich.

What difference does it make if you bomb Greece to its knees or just break them financially?

With Wall Street in possession of Washington, it will be interesting to see what, if anything, is done about OTC derivatives. Without exception, these are weapons of mass financial destruction.

OTC derivatives are the basis for the present crisis and nothing has been done to curtail them. Therefore, nothing has been done to correct the problem at all.

The crisis is not over at all.

Greece’s Leader Wants to Restrict Speculative Trading
By SEWELL CHAN
Published: March 8, 2010

WASHINGTON — The Greek prime minister on Monday called on the United States and the European Union to crack down on speculative trading, saying that exotic market bets had driven up Greece’s borrowing costs and threatened its effort to ease its debt crisis.

“We will have a very hard time implementing our reform program if the gains from our austerity measures are simply swallowed up by prohibitive interest rates,” the prime minister, George A. Papandreou, said in a speech at the Brookings Institution, at the start of a visit that will include a meeting with President Obama on Tuesday.

In a brief interview after the speech, Mr. Papandreou said he would not rule out turning to the International Monetary Fund for financial assistance, but he expressed hope that such aid, which would be unprecedented in the euro zone, would be unnecessary.

Mr. Papandreou said his meetings in the last few days with Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France showed that “there is a will for creating some ad hoc mechanism” that would help the country borrow at reasonable costs.

While Greece successfully sold 5 million euros in bonds last week, it has about 20 million euros worth of debt maturing in April and May.

“We haven’t asked for money,” Mr. Papandreou said. “We haven’t asked for a bailout.” What Greece wants, he said, is the ability to “borrow at somewhat similar rates” as other European Union countries, and particularly in the euro zone.

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Jim Sinclair’s Commentary

The up and coming central bank of central banks has spoken.

As long as the CDS market is wide open for business the Blitzkrieg of the financial Reich will continue.

Greek Debt Problems Unlikely to Spread: IMF Head
Published: Monday, 8 Mar 2010 | 3:00 AM ET

The crisis over Greece’s debt mountain is unlikely to spread to other euro zone countries with high levels of public debt, International Monetary Fund (IMF) managing director Dominique Strauss-Kahn said on Monday.

In an interview with Reuters in the Kenyan capital, Nairobi, Strauss-Kahn dismissed market speculation of potential default by other heavily indebted euro zone countries such as Portugal, Spain or Ireland as scare-mongering.

"You can add to the list all of the countries in the euro zone, to try to scare people about everything. I don’t think it will happen," he said. "We have a problem with Greece. We don’t have a problem with Spain to date. The euro zone has to deal with the Greek problem. They are doing this. No one knows what’s going to happen tomorrow morning but there’s no reason why the spillover to Portugal or to Spain will take place."

Separately, Strauss-Kahn, who is on a tour of Kenya, South Africa and Zambia to see how the poorest continent has bounced back from last year’s global economic crisis, said he was confident euro zone countries could handle the Greek debt maelstrom.

Greek Prime Minister George Papandreou said last week he might have to go to the IMF to meet debt obligations falling due in April if the European Union did not help with funds. It would be the first bailout in the history of the euro.

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Jim Sinclair’s Commentary

The major client for these has been the denizens of Wall Street with the FDIC sharing losses, or should I say functionally guaranteeing against losses.

Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash
March 08, 2010, 1:00 PM EST
By Dakin Campbell

March 8 (Bloomberg) — The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system, said people briefed on the matter.

Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets, the people said. They declined to be identified because talks with regulators are confidential.

Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures,” Jay Fewel, a senior investment officer at the Oregon State Treasury, said in a presentation at the fund’s Feb. 24 meeting. New Jersey’s fund may also participate, said Orin Kramer, chairman of New Jersey’s State Investment Council.

The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010. Regulators have avoided signing up private-equity firms as rescuers on concern that they might take too much risk. Pension funds, whose 100 largest members manage $2.4 trillion, could provide capital to acquire deposits and outstanding loans from collapsed banks, according to the people.

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Jim Sinclair’s Commentary

The US, state by state and most unfortunately, are going down according to the Formula of 2006.

No amount of media hype can prevent this.

Nevada lawmakers’ reliance on temporary fixes creates $3 billion hole
By Anjeanette Damon • March 7, 2010

In the nearly three years since Nevada’s economy crashed, lawmakers have scrapped together a patchwork of temporary fixes to the state budget, hoping an eventual recovery would rescue them from being forced to make permanent choices on how they tax and what they spend.

But the economy didn’t get better. It got worse.

The result: Lawmakers will now face a nearly a $3 billion hole in a roughly $6 billion budget when they return to Carson City next year. And the temporary fixes have all been used up.

"The stuff we just went through is easy compared to what we face in the next regular session," state budget director Andrew Clinger said of the special session that ended last week. "What we just did was not easy, but relatively speaking, the task we have in front of us is 10 times what we just did."

Some argue the enormity of the hole, coupled with cuts that will bite a wider swath of Nevadans will force lawmakers to face permanent reform, weaning the state from its dependence on a single industry for more than half of its revenue.

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Jim Sinclair’s Commentary

The hype today was that since the Chairman was approved to maintain his position, the Fed re-established its power.

The real story is QE to infinity or the Fed is history.

Battle Inside Fed Rages Over Bank Regulation
By JON HILSENRATH
MARCH 8, 2010

The worst of the banking crisis may be long over, but the political contest over the Federal Reserve is entering a crucial phase in which its personality and role will almost certainly be redefined.

The Fed has tried to fend off very public efforts in Congress to strip it of responsibility for regulating America’s banks, but a less-visible battle has been playing out inside the central bank. The Fed has undertaken a wrenching reorganization of its army of 3,000 bank supervisors, which has centralized more power in Washington and sometimes pitted officials at the 12 regional Fed banks against those in the capital.

Fissures at the central bank boiled over last year in a meeting in the boardroom of a Fed branch office in Memphis. The presidents of the regional banks, which dot the country from Boston to San Francisco, complained to Fed Vice Chairman Donald Kohn that the Fed’s Washington bank-supervision group was adrift and not providing the district banks needed guidance on how to navigate a worsening banking crisis. Soon, though, Washington was more involved than ever. In one example: The Atlanta Fed was subjected to an especially thorough critical review of its performance as a regulator because of the large number of bank failures in the Southeast.

"The stress level of the past few years has been pretty high," says William Estes, 60 years old, who retired as head of the Atlanta Fed’s bank-supervision group. The group has since been reorganized. "At a certain point you’ve just had enough."

Though partly a turf war, the fight over—and within—the Fed is much more than that. It is part of a broad battle over how America’s financial system should be regulated, still unresolved 18 months after it stood at the brink. The ultimate outcome could shape finance as much as anything since the 1930s, when the Federal Deposit Insurance Corp. was created, or the 1990s, when banks gained freedom to cross state lines and build trading desks to compete with Wall Street.

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Jim Sinclair’s Commentary

The plight of the states of the USA will guarantee the jobless part of the so called recovery.

Bleak future predicted for Michigan schools
By CHRIS CHRISTOFF
Posted: 12:06 p.m. March 8, 2010

LANSING – Michigan public schools will lay off thousands of employees and more than 100 districts could be insolvent if the state doesn’t find a way to plug a $400-per-pupil funding shortfall in funding next year.

That assessment comes today from a coalition of education groups that urged the Legislature to resolve what they call a school funding crisis by July 1, the start of a new fiscal year for schools.

Save Our Students (SOS), a coalition of 17 associations that represent school and school officials statewide, released results of a survey of 300 of the state’s 540 school districts that paints a bleak picture of 4,000 additional layoffs statewide next year, school closures and elimination of programs.

The survey indicates 47 school districts could deplete their fund reserves this year, and another 60 to 80 could do so next year, said David Martell, executive director of Michigan School Business Officials. Emptying reserves could result in insolvency, Martell said.

Tom White, SOS chairman, gave 50-50 odds that the Legislature will tackle the school funding issue in a timely manner.

More…

Thought For The Day:
When you see the CRIMEX operating the price of gold on the hogwash of draining excess liquidity from the system please recall the statement of our two CIGAs at the Toronto meeting.
One was from Poland and the other from Russia. They had not come together. Each stood up and said how it is possible that people do not see the signs everywhere.
The handwriting is on the wall. This is exactly what we saw in Russia and Poland before the great inflation.
Keep in mind that hyperinflation is a currency event, not an economic event.

Jim Sinclair’s Commentary
The US Treasury and Federal Reserve have guaranteed more than they can ever perform on at present dollar value. That is a trigger to QE to Infinity.
Frank retreats on debt
By PAUL THARP
Last Updated: 3:30 AM, March 6, 2010
Powerful lawmaker Barney Frank had to pull his foot out of his mouth yesterday.
The Massachusetts Congressman rattled investors when he said the US Treasury won’t be responsible for bailing out investors holding the more than $5 trillion of mortgage-linked securities issued by Fannie Mae and Freddie Mac — the ailing mortgage companies at the center of the junk mortgage crisis.
"Please don’t think this [debt] is federally guaranteed, I don’t think it is, I don’t think it should be, I don’t feel any obligation to bail you out," he said. In a restructuring of the firms, investors could expect a "whole range of options. . . from [being paid] nothing to a haircut to whatever."
Hours later, the Treasury rejected Frank’s views, saying it stands behind its unusual Christmas Eve pledge to back the securities with unlimited funds. After the rebuke, Frank, chairman of the powerful House Financial Services Committee, then backpedaled from his statement in hopes of cooling any possible volatility in trading next week.
But even in backtracking, Frank was defiant. "I have noted that Fannie and Freddie debt did not have the same legal standing as Treasury debt. This does not prevent the Treasury from treating the debt of Fannie and Freddie in the manner that it believes best supports the important goal of stabilizing the financial system."
More…
 
Jim Sinclair’s Commentary
Questions:
1. What exactly does the Fed wants to repo to money funds? The recent initiative was for the junk it had bought from the failing banks.
2. They might believe the jobless recovery and new normal, but any attempts to drain will be met by a surge in interest rates and a lower low in the economy. That makes draining impractical in a political sense.
In Conclusion:
There is no PRACTICAL means of draining the huge liquidity injected into the system.
Fed to Include Money Funds for Reverse Repos (Update1)
By Liz Capo McCormick
March 8 (Bloomberg) — The Federal Reserve Bank of New York said it will expand the number of counterparties used when the central bank begins to drain the record amount of cash added to the financial system to include domestic money market funds.
The additional firms to be used for reverse repurchase agreements are “intended to enhance the capacity of such operations to drain reserves beyond what could likely be conducted through” the use of the central bank’s 18 primary dealers, the New York Fed said in a statement today. The firms won’t be eligible to participate in other transactions conducted by the New York Fed.
“This is another step in the laying of the groundwork in what will eventually become policy normalization,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The private markets have long known the Fed would have to expand eligible counterparties. It’s a good thing in the respect that the Fed recognizes that they have to do this.”
Fed policy makers are debating how to withdraw the emergency programs aimed at reviving the economy without disrupting financial markets or bank liquidity as the recovery gains strength. Along with raising the overnight bank lending rate, Fed officials have said they may use reverse repos, pay interest on excess bank reserves and sell securities directly to investors to withdraw or neutralize cash in the banking system.
Counterparty Criteria
In a reverse repo, the Fed lends securities for a set period, draining cash from the banking system. At maturity, the securities are returned to the Fed, and the cash to the primary dealers.
More…

Jim Sinclair’s Commentary
When you buy on to the Fed doing reverse repos to drain excess liquidity utilizing money market funds, how practical can any draining be in the following circumstance.
U.S., China In Chess Game Over Debt
Expert: China ‘lacks the flexibility to wield any influence’
Gary Feuerberg
WASHINGTON—Last month, the U.S. Treasury Dept. revealed that China sold a record amount of Treasury bonds last December, raising a question over how China—a top hold of U.S. debt—could potentially alter the fortune of the U.S. economy.
Economists are increasingly worried over the nation’s dependency on China to finance its debt, and China’s recent signals that it may be shifting away from the U.S. dollar as a reserve currency. In addition, China is notorious for actively manipulating the value of its currency to sustain wide trade imbalances with developed nations.
“China has pursued mercantilist policies to promote its interests and increase our dependence on their production and their capital … China has emerged from the global recession stronger than ever, expecting its status as America’s banker to convey new political power,” said Michael Wessel in his opening remarks at the U.S.-China Economic and Security Review Commission last month. “The United States government … cannot easily extricate itself from its growing financial dependence on China.”
Wessel’s statement set the general tone for the hearing, but most of the experts who testified took exception to the notion that China is “America’s banker.”
“While the exact amount is not knowable based on publicly available information, a reasonable working assumption would be that China owns close to $1 trillion of U.S. Treasury securities,” testified Dr. Simon Johnson from the Peterson Institute for International Economics.
More…

OTC derivatives are themselves an ABUSE. They are the new Blitzkrieg of the Financial Reich.

CDS have declared war on the Greeks and in time will get around to everyone.

What makes you think Greece is the only country that utilized these venomous instruments? What do you think killed Iceland?

OTC derivatives marketed out of London killed Iceland so the big wigs of Iceland see no reason to pay back depositors. The vote was a plausible denial for those up top in Iceland.

Other than making these instruments a capital crime, as the Chinese have, there is no stopping them.

"Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
–Napoleon Bonaparte, 1815

Volcker Criticizes Greek Budget Derivatives ‘Abuse’ (Update1)
By Rainer Buergin

March 6 (Bloomberg) — White House adviser Paul Volcker said the “abuse” of derivatives to hide the size of Greece’s budget deficit highlights the need for regulation and European Central Bank President Jean-Claude Trichet said derivatives still pose risks to financial stability.

“Surely the recent revelations about the use (and abuse) of complex derivatives in obscuring the extent of Greek financial obligations reinforces the need for greater transparency and less complexity,” Volcker said in the text of a speech to the American Academy in Berlin, a transatlantic research institute. Speaking at the same event, Trichet said “what I fear really is that we are currently underestimating the systemic instability which is associated with” derivatives.

European and U.S. officials are examining the role that investment banks including Goldman Sachs Group Inc. may have played in Greece’s debt crisis, joining an outcry in the European Union over whether swaps contracts helped conceal the size of its deficit. Goldman Sachs helped Greek officials raise $1 billion of off-balance-sheet funding in 2002 through swaps, which EU regulators said they knew nothing about until last month.

German Chancellor Angela Merkel, who said on Feb. 18 it would be a “scandal” if banks helped Greece massage its budget, called for restrictions on derivatives to halt “speculators.”

“Credit-default swaps, where you insure your neighbor’s house just to destroy it and make money from it, that’s exactly what we have to curb,” she said yesterday at a press conference in Berlin with Greek Prime Minister George Papandreou.

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Jim Sinclair’s Commentary

Credit default swap OTC derivatives are weapons of real warfare. They are already operating against US state debt.

Soon states will be falling like bowling pins. The US dollar will follow as it drops below .7200.

Cash-Strapped States Delay Paying Income-Tax Refunds
On Friday March 5, 2010, 12:23 pm EST

This year, more Americans and businesses may be asking: Where’s my tax refund?

That’s because cash-strapped states such as North Carolina, Alabama and Hawaii have been forced to slow down issuing income tax refunds to individuals and businesses because of a lack of funds in their budget.

Kansas has hinted that a delay might be possible, and processing paper refunds in Iowa has slowed because the state doesn’t haven’t enough employees to get them processed faster.

Another state, New York, is still considering whether they’ll follow the likes of Hawaii and delay refund payments.

"States typically do this when they are tight and they don’t have a budget in place," said Karla Dennis, CEO of Cohesive, a nationwide tax preparation firm. Things are dire at many states: forty-one states are expected to have mid-year budget gaps totaling $37.7 billion, according to the Center on Budget and Policy Priorities.

Delaying the refund, Dennis says, "gives the state funds to work with in the interim to fill a gap in their revenues."

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Jim Sinclair’s Commentary

Breach of contract is what you would sue for when an OTC derivative fails to perform.

If Greece fails the credit default swaps on Greek debt would fail en masse.

Citi sues Morgan Stanley over CDS, claims $245 million

(Reuters) – Citigroup Inc (C.N) sued Morgan Stanley (MS.N) on Friday for breach of contract, saying the Wall Street firm owed it $245.4 million for protection it bought on a loan.

Citibank bought a credit default swap (CDS) from Morgan Stanley & Co International in 2006 on a $366 million revolving credit facility it provided to an issuer of collateralized debt obligations (CDO), according to the complaint filed in U.S. District Court in Manhattan.

The swap obliged Morgan Stanley to pay Citibank the money as a result of a payment default on the credit facility to the CDO, known as Capmark VI, it said in the complaint.

Liquidating the CDO collateral did not cover the entire amount, and Citibank said it exercised its right under the CDS to have Morgan Stanley make up for the shortfall, but it refused, according to the complaint.

Citibank paid Morgan Stanley about $750,000 for the CDS, according to the complaint.

Morgan Stanley could not immediately be reached for comment.

More…

Here is the mantra of OTC derivative credit default swap manufacturers:

"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
–Napoleon Bonaparte, 1815

Jim Sinclair’s Commentary

The US dollar is not a safe haven. The Chinese do not speak to hear their own voice.

China ready to end dollar peg
The head of China’s central bank has given the strongest signal yet that the country will move away from pegging its currency to the dollar, but he said any changes would be gradual.
By Garry White
Published: 5:31PM GMT 06 Mar 2010

At the annual session of the legislative National People’s Congress in Beijing, Zhou Xiaochuan, governor of the People’s Bank of China, said that the days of the “special yuan” policy were numbered. He described the dollar peg as a “temporary” response to the global financial crisis, but gave no timescale for any change in policy. The currency has been pegged at about 6.83 yuan per dollar since July 2008.

Many economists expect China to allow the yuan to appreciate slightly this year, but the cautious tone by Mr Zhou means that any change may not happen for some time. He said that the central bank would maintain the “basic stability” of the currency. So, despite the fact that the Chinese economy grew by 10.7pc in the fourth quarter of last year, the country’s loose monetary policy looks set to continue.

“If we are to exit from irregular policies and return to ordinary economic policies, we must be extremely prudent about our choice of timing,” Mr Zhou said. “This also includes the [yuan] exchange rate policy.”

China’s currency policy has been subject of fierce debate, particularly in the US and Europe, with the country’s central bank accused of keeping the yuan artificially low to promote a domestic exports boom. An artificially lower currency makes the country’s goods and services more competitive, leaving other exporters at a disadvantage. Jim O’Neil, Goldman Sach’s chief economist, thinks the Chinese should allow their currency to appreciate by as much as 5pc.

In recent week President Obama has been vocal on the issue of the artificially low currency. “China and its currency policies are impeding the rebalancing [of the global economy] that’s necessary,” Mr Obama told Bloomberg last month. “My goal over the course of the next year is for China to recognize that it is also in their interest to allow their currency to appreciate because, frankly, they have got a potentially overheating economy.”

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Jim Sinclair’s Commentary

Keep in mind that this is coming along with the IMF as the central bank of central banks.

Head of IMF Proposes New Reserve Currency
IMF’s Strauss-Kahn suggests IMF may one day provide global reserve asset
By HARRY DUNPHY Associated Press Writer
WASHINGTON February 26, 2010 (AP)

Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.

"That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now," he said in a speech on the future mandate of the 186-nation Washington-based lending organization.

Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF’s special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.

He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."

Strauss-Kahn, a former finance minister of France, said that during the recent global financial crisis, the dollar "played its role as a safe haven" asset, and the current international monetary system demonstrated resilience.

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Jim Sinclair’s Commentary

A jobless recovery is a world class oxymoron.

Economists: Another Financial Crisis on the Way
Nonpartisan Group Led by Nobel Winner Calls for Stronger Financial Reforms
By MATTHEW JAFFE
March 2, 2010

Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

In the report, the panel, which includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high-risk investing that precipitated the near-collapse of the U.S. economy in 2008.

The report warns that the country is now immersed in a "doomsday cycle" wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government.

"Risk-taking at banks," the report cautions, "will soon be larger than ever."

Without more stringent reforms, "another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable," Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.

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Jim Sinclair’s Commentary

This chart with input from my old friend Simon at Brooks Hunt tells the story of China.

Jim Sinclair’s Commentary

Here in CT you could cut an offering price by 50% and still not see a buyer.

There is no such thing as a "Jobless Recovery." That is a world class oxymoron only believed by morons.

Norwich-area foreclosures, delinquencies continue to mount
By JAMES MOSHER
Posted Mar 04, 2010 @ 11:49 PM

Mortgage foreclosure and delinquency rates in Norwich/New London rose in January, another sign economic recovery remains elusive for Eastern Connecticut.

The pattern is likely to persist, one market expert said.

Yet the Norwich foreclosure rate remains below the national average.

The rate of foreclosures in Norwich/New London was 2.35 percent in January, up from 1.61 percent a year earlier, according to First American CoreLogic, a California-based company that tracks home sales, price trends and foreclosures. The January national rate was 3.19 percent.

While he is relieved Eastern Connecticut’s most populated region remains below national foreclosure rates, John Bolduc, CEO of the Eastern Connecticut Association of Realtors, doesn’t expect the problem to lessen in the near future.

‘Not out of the woods’

“This is going to be a problem for the next year or so,” he said. “We’re not out of the woods yet.”

The issue likely will get plenty of discussion Saturday at the association’s Home Buyer and Seller Fair at the Holiday Inn. Norwich U.S. Rep. Joe Courtney, D-2nd District, is scheduled to make a 2:30 p.m. appearance and may speak about the foreclosure situation, Bolduc said.

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Jim Sinclair’s Commentary

The popular delusion of the dumbed down crowd is a "Jobless Recovery.’ That one will get filed with the 1931 "Plateau of Prosperity" or maybe the "Goldilocks Economy."

How do people buy these propaganda terms? What do you think the newest one, "PIGS" was created for?

Remember "Rear View Mirror Events" as applied to any economic statistic that might have suggested what we are going through now was coming?

Rise in Valley pre-foreclosures dulls hopes for recovery
Catherine Reagor,
The Arizona Republic – Mar. 2, 2010 05:25 PM

Pre-foreclosures in metropolitan Phoenix climbed in February, dashing hopes that the housing market is starting to recover from the crash.

In January, pre-foreclosures, known as notice-of-trustee sales, fell to their lowest level since late 2008. The significant drop had some housing-market watchers hopeful more lenders were working with borrowers on loan modifications early on and more borrowers could afford their monthly mortgage payments.

But in February, there were 7,604 pre-foreclosure notices filed by lenders in metro Phoenix, up from the 6,762 in January, the Information Market reports.

Foreclosures did fall last month, to 4,271 from 4,452 in January. But if the many struggling homeowners in pre-foreclosure can’t work out loan modification or short-sale deals with their lenders, foreclosures are bound to climb again in the next few months.

Home prices

Prices for both foreclosure homes and regular homes in metro Phoenix are ticking up, according to data from Phoenix-based NetValueCentral Inc.

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Jim Sinclair’s Commentary

Goldman Sachs executives have armed themselves according to media reports. Maybe Moody’s might consider it as their impact becomes international.

Moody’s Cuts Ratings On Seven Abu Dhabi Companies
Thursday, Mar 04, 2010
By Nour Malas

DUBAI (Zawya Dow Jones)–Moody’s Investors Service Inc. Thursday downgraded the ratings of seven Abu Dhabi-based companies by a notch or more saying there’s "no explicit formal" government guarantee to support them, after being prompted to put them on review in December because of restructuring at Dubai World.

In an emailed statement, Moody’s said it lowered Mubadala Development Co.; International Petroleum Investment Co., or IPIC; Tourism Development and Investment Co., or TDIC; Abu Dhabi National Energy Co., or Taqa; Emirates Telecommunications Co., or Etisalat; Dolphin Energy; and Aldar Properties.

The rating on Aldar, Abu Dhabi’s largest developer, moved from investment grade to speculative grade, or junk.

Moody’s said it placed "a moderate distinction" between the ratings of Mubadala, IPIC, TDIC and sovereign Abu Dhabi, describing the companies as "vehicles of government policy" that remain heavily funded by the government. All three companies previously held ratings in line with Abu Dhabi’s.

Moody’s placed a greater distinction between the ratings of Taqa, Dolphin, and Aldar and sovereign Abu Dhabi, citing a lack of either continued, regular, or expected support from the government.

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Jim Sinclair’s Commentary

One more added to the list.

Venezuela Central Bank to Increase Gold Purchases, Khan Says
By Corina Rodriguez Pons

March 5 (Bloomberg) — Venezuela’s central bank will boost its gold reserves this year and will buy more than half the estimated 20 metric tons of domestic production, bank director Jose Khan said today at an event in Caracas.

The central bank, which has about $16 billion of its $30.6 billion of reserves in gold, purchased 1.08 tons of gold from domestic mines in the first two months of this year after buying just 2 tons in all of 2009, said Khan, one of five directors at the country’s monetary authority.

“We’re going to increase our gold reserves and buy more local production,” Khan said today. “Our objective is to increase reserves and help develop the local gold industry.”

Venezuela’s central bank is planning to provide $250 million of financing for gold production this year in an attempt to boost non-oil exports. The bank, along with the Mining Ministry, plans to build a gold refinery, bank President Nelson Merentes told reporters March 3, without providing details.

Gold futures for April delivery rose $2.10, or 0.2 percent, to $1,135.20 an ounce on the Comex division of the New York Mercantile Exchange. The metal gained 1.5 percent this week.

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Jim Sinclair’s Commentary

Four bank closings so far this weekend. The sheeple simply sleep on.

Bank Closing Information – March 5, 2010

These links contain useful information for the customers and vendors of these closed banks.

Centennial Bank, Ogden, UT
Waterfield Bank, Germantown, MD
Bank of Illinois, Normal, IL
Sun America Bank, Boca Raton, FL

Jim Sinclair’s Commentary

A "Jobless Recovery" is an insult to the intelligence of those that possess this rare quality.

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

HOUSEHOLD DATA Table A-15. Alternative measures of labor underutilization Percent
Measure	Not seasonally adjusted	Seasonally adjusted
Feb. 2009	Jan. 2010	Feb. 2010	Feb. 2009	Oct. 2009	Nov. 2009	Dec. 2009	Jan. 2010	Feb. 2010
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force	3.7	5.9	6.0	3.5	5.7	5.8	5.9	5.8	5.8
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force	5.9	6.9	7.0	5.1	6.7	6.5	6.3	6.1	6.2
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	8.9	10.6	10.4	8.2	10.1	10.0	10.0	9.7	9.7
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers	9.3	11.2	11.1	8.7	10.6	10.5	10.5	10.3	10.4
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force	10.1	12.0	11.9	9.4	11.5	11.3	11.4	11.2	11.1
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	16.0	18.0	17.9	15.0	17.4	17.2	17.3	16.5	16.8

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%.

I had oral surgery this morning, and am feeling beat up. I will post more, if things improve.

If not, my comment on the Greek Bond Auction is today’s news, the rest is noise.

Respectfully,
Jim

Thought For The Day:

Morning news reported that the medium term bond offering by Greece was met with enormous demand. Greece is holding 25% back for Greek investors.

The euro immediately proceeded lower.

What the market is saying is that Greece was within days of running out of money and a small rescue by some central bank, not necessarily the ECB, offered a SMALL bailout to keep Greece funded for a very short period of time to prevent bankruptcy next week. If you issue IOUs or can’t pay your bills you are broke, period.

Now the inviting question is what central bank just made Greece a small loan against medium term bonds?

Listen to the market when such major issues are at hand, not to the fabricators that populate every government in the world without exception.

Jim Sinclair’s Commentary

Not one thing is reported as it is. This morning’s Greek report on the bond issue is a total set up.

Now read ShadowStats’ breakdown on the employment figures.

- Don’t Blame the Weather
"No. 283: Updated February Employment Outlook "
http://www.shadowstats.com/

Not one word we hear is truthful. Finance has been totally degraded, and the sheeple so far don’t really care.

The problem with this is that when the reckoning arrives, which it will, it will come like the Four Horsemen of the Apocalypse.

Truly MOPE is a set up for the end of financial days.

Jim Sinclair’s Commentary

The US is #3 on a debt to GDP basis compared to the weak EU nations.

Britain Grapples With Debt of Greek Proportions
By LANDON THOMAS Jr.
Published: March 2, 2010

LONDON — As Greece’s debt troubles batter the euro, Britain has done its utmost to stay above the fray.

Until now, that is. Suddenly, investors are asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.

The pound fell to $1.4954 on Tuesday, its lowest level against the dollar in nearly 10 months. The yield on 10-year government bonds, known as gilts, slid as investors fretted that Parliament would be too fragmented after a crucial election in May to whip Britain’s messy finances back into shape.

The slide in the pound followed a sharper decline on Monday after polls released over the weekend indicated that the opposition Conservatives had lost their clear lead in the election race.

Without a strong political majority to tackle Britain’s lumbering fiscal problems, investors could start to make it greatly more expensive for the government to raise funds, setting the stage for a potential double-dip recession, if not worse.

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Jim Sinclair’s Commentary

Prepare to see state and municipal debt crucified by the voices today screaming that hedge funds never forced the euro lower. Of course not, they forced the credit default derivatives market on Euro debt and were short thereof.

As they forced the CDS market higher and higher on US state debt they will be long the euro so that they can say they are not short the dollar, but instead long the euro. The US dollar will dive on the USDX.

U.S. Economy: Pending Sales of Existing Homes Unexpectedly Drop
By Courtney Schlisserman

March 4 (Bloomberg) — Fewer Americans than expected signed contracts to purchase previously owned homes in January, indicating the extension of a tax credit is doing little to lure buyers.

The index of purchase agreements, or pending home sales, dropped 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced in Washington. Other reports today showed factory orders increased and first-time jobless claims declined.

The drop in contract signings adds to evidence the housing market at the center of the worst recession since the 1930s is struggling to rebound after reports last week showed unexpected declines in purchases of new and existing homes. The market may get another blow this month when the Federal Reserve ends planned purchases of mortgage-backed securities.

“When you take away all the support from the housing market, the underlying demand for housing is a lot weaker than we thought,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We clearly pushed some demand forward, and there wasn’t that much demand to pull forward anyway. The housing recovery is going to be very, very slow.”

Builder shares fell after the report, with the Standard & Poor’s Supercomposite Homebuilding Index declining 0.7 percent at 11:52 a.m. in New York. The broader S&P 500 climbed 0.1 percent to 1,119.74.

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Jim Sinclair’s Commentary

This is a maturing epidemic which will only get worse as the Achilles’ heel of the USD.

Pennsylvania state revenue collections come up short of estimate – again
By JAN MURPHY, The Patriot-News
March 02, 2010, 10:28AM

State revenue collections for February once again showed no sign of the projected rebound that economists initially led Gov. Ed Rendell’s administration officials to believe would occur in the second half of the 2009-10 fiscal year.

The state collected $1.5 billion in February — which was $102.3 million, or 6.4 percent off the revenue target for the month, according to a news release from the state Department of Revenue about the monthly revenue collections.

Collections for the 2009-10 fiscal year — which began July 1 — now at $16 billion are $476.7 million, or 2.9 percent below estimate, the revenue report stated.

This is the eighth consecutive month in the eight-month -old fiscal year when revenues came up short of estimate.

But as big as that near half-billion dollar hole may seem, it is much smaller than the near $1.3 billion gap the state faced at the same point in time in the 2008-09 fiscal year.

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Jim Sinclair’s Commentary

CIGA JB Slear says, "Books Not Bombs protests are hitting all states."

Students, professors to protest education cutbacks
March 4, 2010 9:36 a.m. EST

(CNN) — A movement born of $1 billion in budget cuts to California’s state university system has blossomed into a nationwide protest, as students and professors in 33 states will challenge administrators and state lawmakers to ante up.

Most of Thursday’s demonstrations will focus on cuts to state-funded colleges and universities, which supporters say drive up tuition, limit classes and make higher education unobtainable to many.

A blog called Student Activism said in a Twitter update that 122 events are slated from coast to coast — most on campuses, and some at state capitals.

Dissatisfaction, anger and an uncertain future have led professors and students to call for a day of action to defend education.

State funding for the California State University system was reduced by nearly $1 billion for the academic years between 2008 and 2010. Schools have responded by increasing fees, canceling classes, cutting student support programs and furloughing professors. Fees have increased 182 percent since 2002.

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"American reliance on government at all-time high"–Washington Post

–Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion — more than four times the record $167 billion drop reported last month by the Commerce Department.

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Jim Sinclair’s Commentary

What totally disgusting, revolting crap.

If I was the supporting the Greek Central Bank and bond market, as say the Fed, I would overbid the auction at various interest return levels because you can only get what is offered so there is no risk of buying more than auctioned.

Use your brain. There is NO stampede to buy Greek bonds at the present time.

Who do these spinners really believe they are fooling? Clearly it is not the FOREX markets.

Greece says 5-yr bond 3 times oversubscribed
Greece passes key test with successful 10-year bond issue, a day after new austerity cuts
Nicholas Paphitis, Associated Press Writer, On Thursday March 4, 2010, 2:15 pm EST

ATHENS, Greece (AP) — Greece raised badly needed cash with a new bond issue Thursday, passing a key test of its ability to avoid a disastrous debt default and dig out of a financial crisis that has shaken the European Union.

The five-year bond was three times oversubscribed, with euro15 billion ($20.5 billion) in offers received, a Finance Ministry statement said. The government took euro5 billion ($6.8 billion), offering a 6.3 percent yield.

The ministry said the high level of offers "shows that despite the extremely difficult circumstances, investor confidence in the Greek economy remains strong."

But it added that the steep yield — compared to benchmark German bonds of equivalent maturity — stressed the need for Greece to accelerate its reform plans, "to restore market confidence and exit the crisis."

The sale, most of which was absorbed by international institutional investors, reflects on Greece’s ability to raise money to pay off expiring bonds and avoid the risk of default. Its announcement comes a day after debt-ridden Greece detailed a whole new round of painful austerity measures, including salary cuts for civil servants, pension freezes and tax increases on cigarettes, alcohol, luxury goods and gems.

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Jim Sinclair’s Commentary

As yes, the prosperity of the killing industry is assured.

Daddy Warbucks is very happy.

Demon vs. Phantom Ray: The World’s Deadliest Drones
By Gene J. Koprowski
Updated March 03, 2010

The U.S. is investing billions of dollars in drones, the unmanned aircraft that are key to the modern military. With names like Sky Warrior and Vulture, these radar-proof spy planes can stealthily track — and secretly kill — terrorist targets. The only problem: The enemy has them too.

Boeing

The U.S. is investing billions of dollars in drones, the unmanned aircraft that are key to the modern military. With names like Sky Warrior and Vulture, these radar-proof spy planes can stealthily track — and secretly kill — terrorist targets.

The only problem: The enemy has them, too.

No fewer than 44 other nations, from Israel to Austria, are developing their own squadrons of unmanned aerial vehicles (UAVs). The friendly skies may soon be getting crowded.

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Jim Sinclair’s Commentary

Nor will they as the Greek type financial decay is taking place so far in 39 states, not counting California.

State revenues again don’t live up to expectations
Lee Tafanelli
March 3, 2010

The news just keeps getting worse when it comes to the state’s budget situation. Last Friday we learned tax revenues for February were 27 percent lower than expected — about $71 million. This marks the third month in a row of lower than expected receipts. This news really throws the budget process under way at the Statehouse into chaos.

The current state budget — Fiscal Year 2010 that ends June 30 — is now $105 million short of what is needed to cover all budgeted expenses with just four months remaining in the fiscal year. Complicating things even further is the fact 2011 is already projecting a $416 million revenue shortfall. All total between the current year and 2011 the state is currently looking at a $ 521 million revenue shortfall, which is approximately 9 percent of the State General Fund budget.

I remain very concerned about the trend of our state tax revenues. We have already made cuts to the 2010 budget five times. And it appears our economy is not rebounding.

Legislature Approves Statewide Smoking Ban

The House voted to agree with the Senate’s smoking ban proposal, 68-54. Senate Substitute for House Bill 2221 bans smoking in private businesses, restaurants, bars, 80 percent of hotel rooms, in-home daycares, taxis and limos.

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Jim Sinclair’s Commentary

What is the difference between OTC CDS derivatives, and the Nazi Blitzkrieg of Poland?

Nothing.

Legal Briefing: Banks Suing Banks Over Credit Default Swaps
By ABIGAIL FIELD Posted 11:35 AM 03/03/10

A daily look at legal news and the business of law:

More Fallout from Exploding CDSs: Citigroup Sues Morgan Stanley

The big banks generally don’t sue each other, but that’s changing thanks to credit default swaps. Citigroup (C) is suing Morgan Stanley (MS) for $245 million, alleging Morgan failed to make good on credit default swaps held by Citi. Morgan claims that Citi engineered the underlying default that made the swaps come due, which was a breach of their CDS agreement. A big bank buying credit default swaps when it was involved in making the underlying debt obligation particularly risky … hmmm … where have we heard that before? Both sides have requested a ruling on the matter from District Judge Shira Scheindlin in New York.

Apple Sues Google’s Main Cell Phone Partner Over Patents

When Google’s (GOOG) Android cell phone operating system hit the market, it was seen as a potentially major rival to Apple’s (AAPL) iPhone. Apple is now trying to end the competition with a lawsuit charging that Android phones made by HTC Corp., including the Nexus One, which Google itself sells, infringe on 20 of Apple’s patents. Although the suit seeks an injunction that would shut down the sale of Android phones, that result seems unlikely. What’s more probable is a countersuit by HTC and/or Google, ultimately followed by a settlement.

More…

The US economy is driven by the levels of consumer activity.

For those that see a rosy economic future, explain this.

More consumers file for bankruptcy protection
By Christine Dugas, USA TODAY

The economic recovery effort has not slowed consumer bankruptcy filings. They surged 14% in February compared with a year earlier, according to the American Bankruptcy Institute.

The 111,693 cases filed last month also represented a 9% increase from January, the report said.

"The debt-stress overhang from years of consumer spending has a more acute impact now because of troubling economic times," says Samuel Gerdano, American Bankruptcy Institute executive director.

And that financial distress is driving more Americans to file for Chapter 7 bankruptcy, which — if approved — allows a court to discharge most unsecured consumer debt, including credit card bills.

When a stricter bankruptcy law took effect in 2005, a major goal was to require more families to rely on Chapter 13 bankruptcy, which requires filers with regular income to repay debts in full, or in part, over several years.

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Jim Sinclair’s Commentary

Jobs are the key to consumer activity.

No jobs means no consumers

IBM layoffs blamed on offshoring
As many as 2,000 workers may be hit in latest round of cuts
By Patrick Thibodeau
March 2, 2010 01:36 PM ET

Computerworld – After shrinking its U.S. workforce by as many as 10,000 employees last year, IBM this week may be on its way to cutting another 2,000 workers.

IBM isn’t commenting on its latest round of cuts and information about it comes from the Alliance@IBM/CWA Local 1701, which gathers its data directly from IBM employees. The Alliance, which has blamed offshoring for many of the layoffs, has been trying to win bargaining rights for employees.

"IBM is clearly offshoring things where they can," said one IBM employee who received his notice yesterday and spoke on the condition of anonymity because he didn’t want to jeopardize his severance. A 10-year veteran and UNIX administrator, this employee said his customer support team once had 15 U.S.-based workers. That staff was reduced over time to just three workers in the U.S., with other members of the customer support team now in Brazil, Argentina and India.

The employee said he was not given a good reason for his layoff. "Higher ups made a decision that a certain percentage had to be cut – it was not performance-based at all," he said. Although the employee said he’s uncertain about the job market, "my sense is that it is not horrendous [but] I’ll have to assume that I’ll have to take a cut in pay."

As of last October, IBM employed 105,000 workers in the U.S., compared to 115,000 in 2008. In 2007, IBM had 121,000 U.S. employees. It employs about 400,000 globally.

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Jim Sinclair’s Commentary

The Credit Default Swaps will attack state after state until the US dollar rolls under the previous lows as a result.

What the CDS gang takes no note of is what they are doing to the heartbeat of America or any of their other victims.

Up to 5,200 LA schools workers could face layoffs
By JACOB ADELMAN | Posted: March 2, 2010 5:25

The Los Angeles Unified School District’s board voted Tuesday to send notices of possible layoffs to nearly 5,200 teachers and other workers while urging union leaders to negotiate concessions that could make some of the cuts unnecessary.

The Board of Education members who spoke at the hearing stressed they were unanimously authorizing the notices to meet a state deadline and hoped many of the cuts to the nation’s second-largest school district’s work force could be avoided.

The state’s education code requires school districts to notify teachers by March 15 if they may not have jobs the following school year.

"What we’re voting on today can be reversed, can be mitigated, and we must do that," board member Richard Vladovic said.

The school board laid off more that 2,000 workers last year as part of a series of measures to address a persistent budget gap, which also included increasing class sizes and eliminating music and arts programs.

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Jim Sinclair’s Commentary

State and city bankruptcy is nothing to take lightly.

Greece is nothing compared to California. California is only the first. Many more state will be filing.

Municipalities will be filing the terrifying Chapter 9.

15,000 S.F. workers face layoffs, shorter weeks
Heather Knight, Chronicle Staff Writer
Wednesday, March 3, 2010

More than 15,000 San Francisco city workers across all departments will receive layoff notices Friday, and most of them will have the option of being rehired to work a shorter week, Mayor Gavin Newsom said Tuesday.

Newsom’s controversial plan to help reduce the city’s $522 million budget deficit for the 2010-11 fiscal year would shift the majority of the city’s 26,000 workers from a 40-hour week to 37 1/2 hours, cutting their paychecks by 6.25 percent.

The plan is expected to save $100 million – half in the city’s general operating fund and half in money-generating departments including the port and airport – but is being decried by unions and some supervisors as a slap at the rank and file.

They also pointed to the mayor’s inability to promise that the move would spare future layoffs. Newsom said not all workers who receive layoff notices Friday will be rehired but refused to specify how many that may be.

The mayor insisted, though, that it’s a smart way to spare several thousand layoffs and ensure that workers retain jobs as the city faces its biggest budget deficit. The move to a shortened workweek would not affect employees’ health benefits, vacation or sick time.

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Jim Sinclair’s Commentary

We as well as the entire Western World are falling off a cliff.

The CDS market is already decimating state debt.

Indiana puts 17th notch in revenue shortfall belt
By Eric Bradner
Posted March 2, 2010 at 11:45 p.m.

INDIANAPOLIS — Indiana now has had 17 consecutive months of bad fiscal news.

The latest revenue report on Tuesday showed the state took in $85.5 million less in taxes in February than was predicted less than three months ago.

That puts the state $869 million below what lawmakers expected when they passed the budget for the fiscal period beginning in July.

Gov. Mitch Daniels did not immediately order any budget cuts, but since it’s been 17 months since actual revenues met projections, he said further spending reductions might be necessary if revenues continue to sag.

"We’ll just have to keep looking at it. There’s not a state in the union that’s done as much as we have, and we’re not out of tricks yet," Daniels said.

Daniels in December ordered a 3.5 percent cut in K-12 education funding. The move came after he slashed state agencies’ budgets, reduced or eliminated funding for a series of programs and cut $150 million in higher education spending.

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Jim Sinclair’s Commentary

New York State’s reduction of their revenue estimate is a fairy tale. It is going much lower than this figure would indicate.

NY state cuts revenue estimate by $850 million
Tue Mar 2, 5:49 pm ET

NEW YORK (Reuters) – New York Governor David Paterson and the state legislature have agreed to reduce their revenue forecast by $850 million for the next 13 months, a state report said on Tuesday.

The Democratic governor in February cut $750 million from his revenue forecast for his proposed $136 billion budget for fiscal 2011, which starts on April 1.

"The national economy, and to a greater extent, the New York economy, will experience a weak recovery which will translate into slow receipts growth," said the report on the state economic and revenue consensus estimate.

Paterson, whose ability to lead has been called into question by a probe into whether he and state troopers tried to quash a domestic violence complaint against an aide, met on Tuesday with legislative leaders to discuss the budget.

On Monday, Paterson forecast that the deficit in the new fiscal year would grow to around $9 billion from his previous estimate of $8.2 billion because a number of payments will not arrive on time, including $300 million from a slot machine vendor for the Aqueduct Racetrack.

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Jim Sinclair’s Commentary

Remember the BS we were subjected to in December? How people can believe the F-TV and Wall Street Superstar crap beats me.

Economists: Another Financial Crisis on the Way
Nonpartisan Group Led by Nobel Winner Calls for Stronger Financial Reforms
By MATTHEW JAFFE
March 2, 2010

Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

In the report, the panel, that includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high risk investing that precipitated the near collapse of the U.S. economy in 2008.

The report warns that the country is now immersed in a "doomsday cycle" wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government.

"Risk-taking at banks," the report cautions, "will soon be larger than ever."

Without more stringent reforms, "another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable," Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.

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Jim Sinclair’s Commentary

Wall Street owns Washington so initiatives like this possess little hope for cleaning up the place.

They have to keep records for tax purposes so what is this anyway.

U.S. Said to Tell Hedge Funds to Save Euro Records (Update1)
March 03, 2010, 3:52 AM EST
By Katherine Burton and David Scheer

March 3 (Bloomberg) — The U.S. is asking hedge funds not to destroy trading records on euro bets, according to a person with knowledge of the requests, as Europe and the U.S. step up scrutiny of the funds’ role in the Greek debt crisis.

The Department of Justice sent requests to save the records to at least some of the hedge funds whose executives attended a dinner hosted by New York-based research and brokerage firm Monness, Crespi, Hardt & Co. on Feb. 8, said the person, who declined to be identified because the information is private.

“It is clear in the current environment, and likely for a long time going forward, any entity that profits from another’s misfortune, in this case hedge funds versus Greece and the euro zone, risks being the target of public backlash, or worse, government retaliation,” said Kirby Daley, a senior strategist in Hong Kong with Newedge Group’s prime brokerage business.

Aaron Cowen, an executive at SAC Capital Advisors LP, David Einhorn, head of Greenlight Capital LLC, and Don Morgan, who runs Brigade Capital Management LLC, attended the dinner, as did a representative from Soros Fund Management LLC, the Wall Street Journal said Feb. 25.

Greece’s Woes

Spokespeople for the hedge funds declined to comment or didn’t return calls seeking a comment. Neil Crespi, president of Monness Crespi, couldn’t be reached for comment. Gina Talamona, a Department of Justice spokeswoman, declined to comment. The requests were reported earlier yesterday by CNBC.

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Jim Sinclair’s Commentary

If the Fed fails to Expand QE to infinity then the Fed will be history.

Obama-fying The Fed?
Brian Wingfield, 03.02.10, 07:07 PM EST

Congress and K Street are the real threats to reshape the central bank, not the president.

WASHINGTON — With big changes afoot at the Federal Reserve, the nation’s capital is suddenly abuzz with chatter that President Barack Obama will have significant influence over the central bank’s future.

Not only is Congress considering shaking up the Fed’s regulatory duties, Obama will have the opportunity to appoint three new members of the bank’s Board of Governors, due to two vacancies and the recent announcement that Fed Vice Chairman Donald Kohn will step down in June.

But talk about the administration’s influence is overblown, says former Dallas Fed President (and Forbes.com contributor) Bob McTeer. "It’s been my experience that once somebody comes to the Board of Governors, they sort of become technocrats," he says, adding that most decisions by the board are made after much discussion by the governors and briefings by well-informed Fed staff. "I think the fact that Obama will be making the appointments will not make a lot of difference."

In fact, more influence over the central bank is likely to lie with lobbyists and lawmakers. Members of the Senate Banking Committee have been considering a deal that would establish a consumer protection division–headed by a political appointee–within the Federal Reserve. Such an agreement would keep financial products and banks under the same regulator, a position supported by the Financial Services Roundtable, an industry group whose members include heavyweights like Bank of America, Citigroup and Nationwide.

But K Street is also eyeing the compromise with caution, for a variety of reasons. Ryan McKee, senior director of the U.S. Chamber of Commerce’s Center for Capital Markets, says the chamber is concerned about overlapping authority with other regulators, no matter which agency houses the consumer protection agency. John Taylor, president and chief executive of the National Community Reinvestment Coalition, calls the plan a "waste of taxpayers’ money" since the Fed has a track record of laxity in enforcing its existing authority.

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Jim Sinclair’s Commentary

The US economy is consumer based.

Consumer confidence still struggling.
ABC’s Consumer Comfort Index came in at -49, just slightly better than last week’s -50. However, the individual components still aren’t pretty: Like last week, just 8% of Americans rate the national economy positively, and only 24% think it’s a good time to buy things. Those rating personal finances positively inched up to 44% from 43%

Jim Sinclair’s Commentary

CIT is the factor to middle American and middle/lower tier businesses.

If CIT lacks the means to make the factor then middle America is thoroughly screwed.

They do not, yet the equity guys are bulls forgetting the FASB gift of mark up.

CIT Emerges From Bankruptcy: Where to Next?
March 02, 2010

CIT Group (CIT) emerged out of bankruptcy yesterday. There is no balance sheet out yet. Heck, people don’t even know what the share count is – for that you need to read the bankruptcy filing 8-K.

Total share count = 200 mn

Share Price = $28

WSJ is saying that $11bn of debt has been wiped out. That is on top of $5bn of pref and equity interests that have been wiped out. So, in total $16bn has been wiped out on a book of $64bn.

The books have to be restated at fair value. Even if there is a 15% write off of the book so that $10bn of loans are written down, there should be tangible book value left. And after that, because there wont be any more provisions to take, CIT will report eye-popping earning numbers. This is like the Wells Fargo (WFC) – Wachovia (WB) situation from a year

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Jim Sinclair’s Commentary

Today we are going to bail out Greece. Let’s see what tomorrow brings.

IMF Welcomes Greece’s ‘Very Strong’ Fiscal Package (Update1)
March 03, 2010, 12:59 PM EST
By Sandrine Rastello

March 3 (Bloomberg) — The International Monetary Fund praised the Greek government’s 4.8 billion euros ($6.6 billion) of additional deficit cuts announced today and said it stands ready to share “technical expertise.”

“The authorities have put together a very strong fiscal package for 2010,” IMF spokeswoman Caroline Atkinson said in an e-mailed statement today. “The implementation of the fiscal program will be a crucial step forward in a multi-year process.”

Greek Premier George Papandreou is risking a backlash at home to meet European Union demands for more deficit cuts before allies would come to Greece’s aid. Greek bonds rose to their highest in three weeks on the measures, including higher fuel, tobacco and sales taxes.

The IMF, which sent a staff member to Athens last week at the request of European and Greek officials, stands ready to “support the implementation of the authorities’ plans by sharing our technical expertise in these matters,” Atkinson said.

IMF Managing Director Dominique Strauss-Kahn has expressed confidence the EU would resolve Greece’s fiscal problems without outside aid and reiterated that the IMF can provide financial help if it’s requested.

More…

Jim Sinclair’s Commentary

What a novel idea. A CEO should have his own money on the line, but realistically how many do currently or will ever?

How many good people were there in Sodom and Gomorrah?

Does the speaker have his own money on the line? It does not count if you got your stock from options. That is not money on the line. Money on the line is shares bought at or above market prices.

Buffett vents on financial fat cats
By Colin Barr, senior writerMarch 1, 2010: 11:55 AM ET

NEW YORK (Fortune) — Warren Buffett has an elegant solution for the thorny problem of too-big-to-fail banks: Put the bankers’ bank accounts on the line.

Buffett, the chairman of Berkshire Hathaway (BRKA, Fortune 500), lashed out at the damage wrought by overpaid, unaccountable finance-industry bigwigs in his annual letter to Berkshire shareholders, released Saturday.

Buffett has been criticizing overreaching corporate managers and complaisant directors for decades. But the question of how to motivate good corporate behavior has taken on new weight as Washington debates reining in the financial giants whose missteps brought the economy to its knees two years ago.

The Obama administration last month proposed separating banks’ proprietary trading activities from their federally subsidized deposit-gathering and lending ones. Other proposed rules would increase the amount of capital banks hold against losses and how much cash they carry to deal with a surge of withdrawals.

But Buffett said there’s a simpler way to cap risk-taking: Forcing lavishly compensated CEOs to take responsibility for assessing the risks at their firms — and putting their own wealth at stake, to boot.

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Jim Sinclair’s Commentary

Today we are going to bail out Greece. Let’s see what tomorrow brings.

IMF Welcomes Greece’s ‘Very Strong’ Fiscal Package (Update1)
March 03, 2010, 12:59 PM EST
By Sandrine Rastello

March 3 (Bloomberg) — The International Monetary Fund praised the Greek government’s 4.8 billion euros ($6.6 billion) of additional deficit cuts announced today and said it stands ready to share “technical expertise.”

“The authorities have put together a very strong fiscal package for 2010,” IMF spokeswoman Caroline Atkinson said in an e-mailed statement today. “The implementation of the fiscal program will be a crucial step forward in a multi-year process.”

Greek Premier George Papandreou is risking a backlash at home to meet European Union demands for more deficit cuts before allies would come to Greece’s aid. Greek bonds rose to their highest in three weeks on the measures, including higher fuel, tobacco and sales taxes.

The IMF, which sent a staff member to Athens last week at the request of European and Greek officials, stands ready to “support the implementation of the authorities’ plans by sharing our technical expertise in these matters,” Atkinson said.

IMF Managing Director Dominique Strauss-Kahn has expressed confidence the EU would resolve Greece’s fiscal problems without outside aid and reiterated that the IMF can provide financial help if it’s requested.

More…

Jim Sinclair’s Commentary

What a novel idea. A CEO should have his own money on the line, but realistically how many do currently or will ever?

How many good people were there in Sodom and Gomorrah?

Does the speaker have his own money on the line? It does not count if you got your stock from options. That is not money on the line. Money on the line is shares bought at or above market prices.

Buffett vents on financial fat cats
By Colin Barr, senior writerMarch 1, 2010: 11:55 AM ET

NEW YORK (Fortune) — Warren Buffett has an elegant solution for the thorny problem of too-big-to-fail banks: Put the bankers’ bank accounts on the line.

Buffett, the chairman of Berkshire Hathaway (BRKA, Fortune 500), lashed out at the damage wrought by overpaid, unaccountable finance-industry bigwigs in his annual letter to Berkshire shareholders, released Saturday.

Buffett has been criticizing overreaching corporate managers and complaisant directors for decades. But the question of how to motivate good corporate behavior has taken on new weight as Washington debates reining in the financial giants whose missteps brought the economy to its knees two years ago.

The Obama administration last month proposed separating banks’ proprietary trading activities from their federally subsidized deposit-gathering and lending ones. Other proposed rules would increase the amount of capital banks hold against losses and how much cash they carry to deal with a surge of withdrawals.

But Buffett said there’s a simpler way to cap risk-taking: Forcing lavishly compensated CEOs to take responsibility for assessing the risks at their firms — and putting their own wealth at stake, to boot.

More…

Jim Sinclair’s Commentary

The FDIC is to enter the OTC derivative business by securitizing acquired assets from bankruptcy. This is an interesting solution to a problem brought on by securitizing assets.

"FDIC sources confirmed to HousingWire in January a move to consider securitizing assets seized from failed banks and depository institutions. The Securities Industry and Financial Markets Association (SIFMA) called it “an attempt to restart the stalled securitization markets.”"

FDIC Guarantees $1.8bn of Structured Financing on Failed Bank Assets
by DIANA GOLOBAY
Wednesday, March 3rd, 2010, 2:11 pm

Guidance is out on a forthcoming issue of structured notes from the Federal Deposit Insurance Corp. (FDIC).

The issue, which is expected to be backed by private-label mortgage-backed securities (MBS) acquired through depository bank failure receiverships, is expected to launch and price this week.

One class of notes worth $1.33bn is said to be at 65bps over Libor, while the class of $480m of notes range at swaps plus 90 to 95bps, according to price guidance provided to HousingWire.

The issue bears a 100% FDIC guarantee, meaning it bears the full faith and credit of the US.

Sources confirm that Barclays Capital is lead arranger on the deal though the official release of information remains restricted.

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Jim Sinclair’s Commentary

The FDIC is going to cure the problem below by securitizing seized assets and selling them to the public. We are truly lost!

An Easily Understandable Explanation of the Derivatives Markets

Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi’s "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit.

By providing her customers’ freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics  as collateral.

At the bank’s corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don’t really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.

Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since, Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now, do you understand?

Jim Sinclair’s Commentary

Listening the heroes of Wall Street speaking right now of their patriotic belief in America is shocking. These wise men should be more interested in protecting people than simply talking their positions.

New ghost towns: Industrial communities teeter on the edge
By Rick Hampson, USA TODAY

RAVENSWOOD, W.Va. — When Henry Kaiser arrived 55 years ago, this place was no place — "a rural problem area," the government called it, so poor and isolated that the population had dropped 15% since 1940.

That all changed after Kaiser, the industrialist who’d turned out ships and planes at a record pace in World War II, built the nation’s largest consolidated aluminum works here on the banks of the Ohio River.

The plant paid Tim Shumaker his first living wage, and he won the right to keep it two decades ago after his union was locked out for 19 months.

Today, that victory seems hollow. Shumaker, 49, has been laid off. Part of the vast aluminum complex is closed, and the rest is for sale — its orders down, its workforce reduced, its future uncertain. Shumaker stands at the locked plant gate and, after a year without work, worries what’s next for him and his community. "The way things are going," he says, "there’s not going to be anything here."

Ravenswood, with 4,000 people and one big factory, is like many towns in the USA where things still are made: caught in a winter between recession and recovery, hoping the latter will arrive before the former kills the last decent blue-collar job.

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Jim Sinclair’s Commentary

Although many will dismiss this as extreme, please bear in mind that there is numerous historical precedent that supports the argument.

We must arm ourselves for a class war
The recession has increased the wealth gap to dangerous levels, and George Osborne does not seem serious about tackling it, says Edmund Conway.
By Edmund Conway
Published: 6:40AM GMT 25 Feb 2010

If you don’t work in the City or in economics, you may not have heard of the annual Mais lecture, which was delivered last night by George Osborne. But it’s a big deal, arguably the most important set-piece speech in the Square Mile calendar. And only once before has City University, the host, deigned to invite an opposition politician primed for election to deliver it.

On that occasion, the young thrusting pup at the lectern derided a government in crisis, its finances in a state, its economic reputation in tatters. He promised to cut the deficit, to intervene in markets where necessary, and laid out a "new framework" for running the economy. That man was Tony Blair.

Last night, George Osborne became the second opposition politician to deliver the lecture. His title? "A New Economic Framework". That aside, the difference could hardly be more stark. In 1995, the economy was in recovery. With the deficit past its peak, the great transformation in macro-economic management had already taken place, when the collapse of the Exchange Rate Mechanism forced Britain to start targeting inflation rather than exchange rates.

Today, the economy is in a far more damaging spiral. The first leg of the financial and economic crisis, which stemmed from excessive private borrowing and the subsequent collapse of the banking industry, is over. The second leg, characterised by a crisis of sovereign debt in even the richest economies, is only just beginning. The Bank of England’s inflation-targeting approach is under question from sources as authoritative as the International Monetary Fund. The world economy looks increasingly vulnerable to a "double-dip", tipping back into recession or stagnation rather than bouncing back to health.

More important, both political parties are committed to spending cuts of a scale never before experienced by the public. Ignore the fuss about economists’ letters: based even on Labour’s plans for public spending, the next half-decade will be the first time in modern history that a government has imposed five successive years of real spending cuts. The question is not about timing (the Tories would cut earlier and slightly more) but over who will push the cuts through. Labour perennially disappoints and misses its fiscal targets. What most recommends the Tories is the pedigree that suggests they will at least approach the task with some relish.

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Jim Sinclair’s Commentary

Which escalator did Wall Street, The City, and the Bahnhofstrasse take?

Trader Dan’s Commentary

Here is a typical government response to a spending crisis – conjure up trillions of dollars in new, unpaid for spending, but cut Saturday mail delivery. Yep – that ought to close the funding gap! After all, $3.5 billion will make a big dent in that 2 year projected deficit of $2.9 trillion!

Wait until it costs us $1.00 to mail a first class letter.

What makes this all the more idiotic is that the Administration is revealing their “Cash for Caulkers” program where the feds will pay homeowners to caulk their holes in their houses. The number that I am reading associated with this program is $6 billion!

Now that is government math if I ever saw a wondrous example. Cut Saturday mail and save $3.5 billion but spend $6 billion on caulk. Folks – we could not make this stuff up.

This is supposed to create all manner of green jobs. About the only jobs I see being created by this is “Honey Do” lists. You know what those are if you are married: “Honey, can you do the caulking on the house”?

Postal Service Seeks Permission to End Saturday Delivery
Updated March 02, 2010

Postmaster General John Potter said Tuesday that he intends to seek congressional approval to cut Saturday delivery as part of a wide-ranging plan to close a multi-billion dollar budget gap.

Postmaster General John Potter said Tuesday that he intends to seek congressional approval to cut Saturday delivery as part of a wide-ranging plan to close a multi-billion dollar budget gap.

Though the idea of cutting service from six to five days has gotten a cool reception on Capitol Hill, Potter said that the plan would include enough flexibility so that customers who need Saturday service can get it and that this and other changes need to be implemented for the Postal Service to survive. 

"We built a plan that we think is very reasonable. … We intend to pursue that," he said. "It’s a move that we simply have to make."

The financially struggling Postal Service is trying to find ways to get out of the red without resorting to taxpayer aid. Potter announced Tuesday that the service could lose a staggering $7 billion this year — losses attributed to a combination of the recession and the predominance of e-mail and other electronic forms of communication.

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Jim Sinclair’s Commentary

Don’t hold your breath. Transparency in this is its demise.

You cannot clear anything without standards and transparent immediate market related valuation.

Derivatives dealers agree on OTC updates
By Aline van Duyn and Gregory Meyer in New York
Published: March 2 2010 02:00 | Last updated: March 2 2010 02:00

Derivatives dealers have agreed to give regulators more information about over-the-counter derivatives trades in the credit, interest rate and equity markets and will continue shifting more trades towards central clearing, they said in a letter to the Federal Reserve Bank of New York yesterday.

Even as banks raised their target of clearing credit derivatives that can be cleared to 85 per cent from 80 per cent – a key measure that regulators are calling for to reduce the risks of a systemic collapse of the financial system in the event of a default by a dealer – derivatives investors have so far failed to sign up for similar specific clearing targets.

Extending clearing to large dealers as well as big investors is widely regarded as an important step towards reducing derivatives risks, but in practice it is complex to implement.

"Remaining impediments to the expansion of buy-side access to clearing include legal and regulatory, risk management and operational issues," the letter to the Fed said. They said "a meaningful amount of open interest in buy-side transactions will be cleared".

With continued concerns about transparency in markets such as credit default swaps, which have come to the fore amid the pressures on Greece and its creditworthiness, the industry is planning to analyse existing sources of data in OTC markets, with the first report due at the end of March.

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Jim Sinclair’s Commentary

This article by Huffington posses interesting questions.

Greece-Goldman Sachs Deals Were ‘Completely Scandalous’ – And Perfectly Legal: Martin Wolf (VIDEO)

Jim Sinclair’s Commentary

As our Polish and Russian CIGAs said, "Please read the handwriting on the wall."

States are falling like leaves in the fall. The CDS market, if you can call it that, will attack all the States of the US, just as it is attacking Greece now.

State mulls unpaid leave
Furloughs could be option for government agencies in Mississippi

State agency heads are readying plans to furlough employees or reduce staff if necessary as revenues continue to decline and lawmakers remain at loggerheads over a plan to help agencies through the remaining months of the fiscal year.

House and Senate budget negotiators traded jabs Friday morning and left the Capitol for the weekend without an agreement to offset cuts to the 2010 budget.

Last week, the State Personnel Board signed off on a request from the Department of Human Services to furlough employees for up to four days in the remaining four months of the fiscal year, said Deanne Mosley, the board’s chief of staff.

Julia Bryan, spokeswoman for DHS, said the request was put in as a "just-in-case." The department employs about 3,200.

"We have no plans at this time to furlough employees," Bryan said. "It’s strictly strategy or pre-planning in the event that more budget cuts come down. That’s the last thing we would want to do is have our employees off work."

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Jim Sinclair’s Commentary

See what snow storms can do when MOPE is involved?

Jobless claims up 12% in past 2 weeks
By Blake Ellis, staff reporter
February 25, 2010: 9:59 AM ET

NEW YORK (CNNMoney.com) — The number of Americans filing for initial unemployment insurance surged to just below the 500,000 level last week, and have climbed more than 12% over the past two weeks, the government said Thursday.

There were 496,000 initial job claims filed in the week ended Feb. 20, up 22,000 from a revised 474,000 the previous week, the Labor Department said in a weekly report. The prior week, there were 442,000 claims filed.

A consensus estimate of economists surveyed by Briefing.com expected new claims to fall to 460,000.

The 4-week moving average of initial claims was 473,750, up 6,000 from the previous week’s revised average of 467,750.

"This is certainly not surprising given the very adverse weather conditions for the eastern half of the country, especially in the major population areas," said Robert Dye, a senior economist at PNC Financial Services. "Weather has a huge impact, particularly with things like construction, which remains very soft."

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Jim Sinclair’s Commentary

Yet another example of MOPE.

Summers says weather may distort employment data
The Director of President Obama’s National Economic Council is preparing the markets for what could be an ugly employment report this Friday. In an interview with CNBC, Summers had this to say, "The blizzards that affected much of the country during the last month are likely to distort the statistics … it’s very important to look past whatever the next figures are.

Jim Sinclair’s Commentary

The entities providing this financing are dependent on Federal funds because they are broke.

FHFA Extends Refinance Program
Tuesday, March 02, 2010

Federal Housing Finance Agency Acting Director Ed DeMarco today announced the extension of the Home Affordable Refinance Program, (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, to June 30, 2011. … The HARP program expands access to refinancing for qualified individuals and families whose homes have lost value. The program was set to expire on June 10 of this year.

“FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed,” said DeMarco. “Accordingly, to support and promote market stability, and to encourage lenders and other mortgage market participants to fully adopt the HARP program, including the implementation of the October 2009 expansion of loan-to-value ratios (LTVs) to 125 percent, FHFA is authorizing the extension of HARP until June 30, 2011.”

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Jim Sinclair’s Commentary

I have no financial interest is this company yet I financed the purchase of the high tech equipment that can actually examine gold and silver regardless of the item size and determine the purity without error.

I did this because of my concern for the CIGA community and my knowledge that crooks have taken control of this world of finance in all forms.

To keep my intentions pure I have excused the debt, and will not accept repayment of any kind.

What I can tell you is that it works.

Click here to watch the video

Their email address is BullionAnalysis.com at info@bullionanalysis.com.

BullionAnalysis LLC has developed a technological application that is unique to the precious metals market, for the purpose of determining if your bullion has been counterfeited by including tungsten alloy. This technology is completely safe and non-destructive to the precious metal, and will be effective on everything from fractional ounce coins all the way up to the full size 100, 400 and 1,000 ounce COMEX bars of gold and silver.

Their technological application has been developed in response to the growing threat to the bullion community from tungsten/lead alloy adulteration. Tungsten (19.25 g/cm3 density) has a density nearly identical to gold (19.32 g/cm3 density), and lead (11.35 g/cm3) will have a density very close to pure silver (10.45 g/cm3). Lead can also be alloyed with lighter elements to match even closer the density of silver. The threat arises from unscrupulous individuals and possibly institutions that have been removing precious metal from the center of bullion bars and replacing it with tungsten or lead alloy. Modern computer-aided machine tools are then used to seamlessly re-smooth the surface of the bullion product to hide any trace of the theft that has just happened.

Traditionally, the use of a density calculation (mass divided by volume) has been the solution to verify the assay purity of bullion. Unfortunately the insidious use of tungsten and other alloys that match the densities of gold and silver make this test completely useless for this type of problem.

Their new detection technologies are unique to the bullion market. They can detect tungsten/lead and other impurities and cavities that are hidden at any depth inside the bullion product and it is 100% completely non-destructive and safe.

In addition, they are able to produce tamper-resistant holographic-sealed assay certificates with the analysis results for the bullion item, that bear a digital image of the bullion product and show the serial number and hallmark if present. These tamper-resistant assay certificates could then trade with the bullion product and give both buyers and sellers a sense of real security.

At the present time they are focusing their efforts on delivering this service to depositories and institutions and plan to expand their services to cover retail gold and silver investors in the near future.

If we could take a lesson from my dear departed friend YEKNOD, the gold would be under the floor of the garage covered by 3 feet of cement. I wonder if YEKNOD told anybody? That is the upside and downside of keeping your gold near.

Jim Sinclair’s Commentary

It appears as if Iran has played High Stakes Poker to the point of gaining a nuclear club membership.

Jim Sinclair’s Commentary

This is pure MOPE. OTC derivatives without standards and accurate means of valuation cannot be effectively cleared by any exchange no matter what the media tells you.

None of this has any application to the mountain of old OTC derivatives that was valued at one quadrillion, one hundred and forty four trillion before the BIS altered their means of computer valuation to "Value to Maturity," in order to reduce it to $600 trillion. The article did not even get that right.

Derivatives players agree to expand clearing-NY Fed
Mon Mar 1, 2010 2:34pm EST

NEW YORK, March 1 (Reuters) – Large participants in the $450 trillion, privately traded derivative markets gave new commitments to regulators on Monday, as part of efforts to expand transparency and central clearing of the contracts

Lawmakers are seeking to bring derivative markets under the oversight of regulators after the contracts added to concerns about financial companies when Lehman Brothers collapsed in 2008, due to the web of exposures the contracts create between large institutions.

Derivatives are based on underlying assets including bonds and commodities or can be tied to currency and interest rate moves.

Large market participants — including banks like JPMorgan Chase & Co (JPM.N), investment companies such as Pacific Investment Management Co and industry groups – said in a letter to the New York Fed they will expand the number of contracts that are deemed eligible for central clearing.

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Iran launches Saeqeh fighter-bomber squadron
Thu, 25 Feb 2010 10:19:41 GMT

The Iranian military has introduced a new squadron of domestically-manufactured Saeqeh fighter-bombers to the country’s Air Force to strengthen its deterrence power.

“This fleet is the first fighter-bomber squadron made up of domestically manufactured aircraft,” a top Air Force officer, Seyyed Mohammad Alavi, explained on Wednesday.

“The plane’s parts have all been produced inside the country in a joint project between the Defense Ministry and the Air Force,” he added.

Alavi did not elaborate on the number of aircraft in the squadron, but said that several new Saeqeh fighters would be added at a later date making a full fleet of 24 aircraft.

The senior Air Force officer also said that all the pilots that were to fly the planes had been trained in Iran.

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Japan offers to enrich uranium for Iran
Wed, 24 Feb 2010 13:16:31 GMT

Japan has offered to enrich uranium for Iran allowing access to nuclear power by the Islamic Republic, the Nikkei business daily reports.

The Japanese proposal is aimed to allay international fears that Iran might be seeking an atomic weapon, according to Wednesday’s edition of the report.

The uranium would be used at Tehran’s research reactor to produce medical isotopes, the report added.

According to the publication, the Iranian government has not yet responded to the proposal, but the issue was expected to be discussed Wednesday when the visiting Iranian Parliament (Majlis) Speaker Ali Larijani and Japanese Foreign Minister Katsuya Okada meet in Tokyo.

"Japan strongly hopes Iran’s nuclear issue will be resolved peacefully and diplomatically … and that Iran considers a related UN Security Council resolution seriously", a foreign ministry spokesman quoted Katsuya as saying in the meeting.

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Jim Sinclair’s Commentary

How can anyone not heed the writing on the wall as our Polish and Russian friends said?

1. The FDIC is broke.
2. Fanny and Freddie are on the rocks.
3. States (plural) are rolling over.
4. Hamlets, villages, towns and cities are broke.
5. Few commercial loans exist that are healthy.
6. According to debt versus GDP, the dollar is number three to be attacked by the CDS market.

Fannie Taps Treasury for $15.3 Billion More After a 10th Loss
By Dawn Kopecki

Feb. 27 (Bloomberg) — Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss.

The mortgage-finance company posted a fourth-quarter net loss of $16.3 billion, or $2.87 a share, Washington-based Fannie Mae said in a filing yesterday with the Securities and Exchange Commission.

Fannie Mae, which owns or guarantees about 28 percent of the $11.8 trillion U.S. home-loan market, has been hobbled by a three-year housing slump that wiped 28 percent from home values nationwide and led to record foreclosures. The company, which posted $120.5 billion in losses over the previous nine quarters, and rival Freddie Mac were seized by regulators in September 2008.

“Our financial results for 2009 reflected the continued adverse impact of the weak economy and housing market, which has resulted in record mortgage delinquencies and contributed to our recording significant credit-related expenses and net losses during each quarter of the year,” Fannie Mae said in the filing.

For the full year, Fannie Mae’s loss widened to $74.4 billion from $59.8 billion in 2008.

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Jim Sinclair’s Commentary

Can you imagine what the number would be if fair valuation was still required by FASB?

AIG posts $9bn loss in fourth quarter

Insurer AIG, which was saved by the US government in 2008, has posted a loss in the last three months of 2009.

The insurer said it made a net loss of $9bn (£5.9bn) in the fourth quarter, compared with a $62.6bn loss in the same period in 2008.

AIG made a loss following two quarters of profits. Boss Robert Benmosche had previously warned of more "volatility" in terms of profits.

The insurer made a net loss of $12.3bn for the whole of 2009.

In 2008, it lost more than $100bn.

AIG was bailed out by the US government in 2008 and is now 80% owned by it. In total, the firm has received $182.5bn of government funding.

The loss was primarily a result of the $25bn in credit that was available from the Federal Reserve Bank of New York.

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Jim Sinclair’s Commentary

Good luck. This will never happen. The lobbyists will throw all their power against it.

What ever happens that is in favor of the public?

Frank, Peterson Vow to Eliminate Provision Keeping Swaps Opaque
By Matthew Leising

March 1 (Bloomberg) — Congressional leaders are vowing to eliminate a provision in legislation passed by the House in December that would allow banks to keep the private derivatives market opaque, protecting billions in profits on swap trades.

Barney Frank and Collin Peterson, chairmen of the Financial Services and Agriculture Committees respectively, indicated they’ll remove a section of the bill that allows trades to be routed through systems that keep prices private, even though the legislation was touted as a way to make the transactions transparent.

The bill’s sponsors hadn’t intended to allow traders to use non-public confirmation systems, Peterson, a Democrat from Minnesota, said in an e-mailed statement in response to questions from Bloomberg News. “To the extent clarification of that language is needed, that will be pursued during the conference committee process.”

Congress is attempting to bring more oversight to Wall Street after largely unregulated bets tied to the subprime mortgage market helped spur the bankruptcy of Lehman Brothers Holdings Inc. and a $182.3 billion U.S. bailout for American International Group Inc. Private derivatives complicated efforts to solve the crisis by making it hard to know how interconnected banks had become.

Trades that don’t have to be done on exchanges or electronic-trading systems are more lucrative because when investors don’t have access to a range of prices, banks can preserve the gap between the price they pay to buy swaps and how much they charge to sell them. That so-called bid-ask spread boosts revenue for banks in the OTC market.

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Jim Sinclair’s Commentary

Greece is more dangerous than the Lehman flush was. Think of what it means to have the destroyers enriched by attacking currency after currency.

If Greece is not bailed out then the only rational conclusion is that a total Western implosion is being invited immediately. If Greece is bailed out then QE is alive and exploding.

Gold is the only asset that will survive this unprecedented state of affairs because it is a currency free of liabilities.

Greece Now, U.K. Next as Scots Ready for Pound Plunge
By Rodney Jefferson

March 1 (Bloomberg) — While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next.

Turcan Connell, which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt. Sterling slid to a 10- month low versus the U.S. currency today.

“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.”

Money managers in Edinburgh, where investment decisions have been made on behalf of insurers, pensioners and the wealthy for two centuries, are maneuvering to protect assets from the U.K. economy as it limps out of its worst recession on record.

Bruce Stout, whose Murray International Trust Plc in Edinburgh has doubled over the past five years, said the chance of a plummeting pound are “better than even” and his biggest holdings are in Asia and Latin America. He called sterling a “very vulnerable currency.”

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Jim Sinclair’s Commentary

This is absolutely outrageous and an example of total madness. This is a sign of the end of the Western empire.

RBS paid £1.3bn bonuses on profit of just £1bn
Royal Bank of Scotland paid its investment bankers £1.3bn in bonuses for making just £1bn in profit last year, not the record £5.7bn declared last week.
By Philip Aldrick
Published: 9:41PM GMT 28 Feb 2010

The state-backed lender’s results show that £4.7bn of the investment bank’s worst losses were hived off to the "non-core" division being wound down. Although the bank’s split into "core" and "non-core" units has been well explained, the separation generously flattered the investment bank’s numbers and allowed management to present it as a record year for the division.

Stephen Hester, chief executive, used the performance to justify the £1.3bn bonuses paid to investment bankers, at least 100 of which received more than £1m.

RBS’s numbers show that impairments in the "core" investment bank totalled just £640m, helping it produce £5.7bn of the £8.3bn of profits made by the bank’s ongoing businesses. By contrast, investment banking impairments dumped in the "non-core" bank totalled £4.7bn.

No other UK bank separates out its "toxic" legacy debt. Barclays’ investment bank, Barclays Capital, suffered £2.6bn of impairments last year, cutting profits to £2.46bn. However, analysts point out that RBS, now 84pc owned by the state, has taken more conservative marks on its assets than peers, which contributed to the size of the "non-core" writedowns.

Few rivals have removed the "toxic" assets from their investment bank. Credit Suisse has hived assets off but is linking bonus payments to the performance of the portfolio. Last week, Commerzbank, the German lender that was rescued by Berlin, said it was not paying any bonuses at all in its investment bank.

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Jim Sinclair’s Commentary

The drums of war can be heard.

Israel distributes new gas masks to civilians: army
Agence France-Presse
Jerusalem, February 28, 2010

Israel on Sunday began distributing new gas masks for civilians to use in a possible chemical or biological attack, the army said.

"The civil defence has asked the Israeli postal service to begin distributing gas masks on an experimental basis to the residents of Or Yehuda," a military spokesman told AFP, referring to an area near Tel Aviv.

"Gradually, based on the lessons learned in this operation and in accordance with the Israeli government’s decision, the distribution will be extended to the entire population," he added.

The government decided on January 5 to distribute some eight million new gas masks, one for each Israeli, by 2013.

Israel has long feared that chemical or biological weapons may be used against it in a future conflict involving Iran or Syria, but officials have insisted the distribution of the masks is not linked to any imminent threat.

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Jim Sinclair’s Commentary

1. Pakistan will go Taliban.
2. Israel will make a major miscalculation.
3. Turkey will become a victim.

That was a war council in Damascus
Last Updated: March 01. 2010 12:13AM UAE / February 28. 2010 8:13PM GMT

The three-party meeting [Syria, Hizbollah and Iran] that took place in Damascus on Friday gathering the Syrian president Bashar al Assad, the Iranian president Mahmoud Ahmadinejad and the Hizbollah chief Hassan Nasrallah was a war council to devise counterattack plans and assign tasks in the event of an Israeli offensive on one or all parties, wrote Abdelbari Atwan, the editor-in-chief of the pan-Arab newspaper Al Quds al Arabi.

“The timing of the meeting, the way it was undertaken and the ensuing press conference that was held at its conclusion, all point to a strategic coalition being reinforced. This is the build-up of a new front that will spearhead the confrontation with the US-Israeli alliance and whichever Arab countries that may, expressly or implicitly, be affiliated with it.”

The Iranian president said he expects war to break out somewhere between spring and summer of this year. Meanwhile, the Hizbollah chief vowed to strike the Israeli capital, its airports and power stations if Israel dared to attack Beirut’s critical infrastructure

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Jim Sinclair’s Commentary

Do you really believe that the Fed can drain anything?

I have assured you that there is no practical tool to accomplish this at this point in time or in the foreseeable future.

The operative word is "PRACTICAL,"

Senate leader predicts ‘massive layoffs’
Posted: March 1, 2010 – 11:10am
By Walter C. Jones

ATLANTA – Senate Majority Leader Chip Rogers announced Monday morning that “massive layoffs” will be one result in how the legislature copes with a roughly $1 billion shortfall in expected revenue for next year’s budget.

“I’m not going to sugarcoat the situation we’re in. Yeah, there will be massive layoffs,” said Rogers, a Woodstock Republican.

He wouldn’t say how many state workers could lose their jobs. One idea being investigated is offering an incentive for the 8,000 workers already eligible for retirement to give up their jobs.

Rogers met with reporters during his weekly press conference at the Capitol. Asked if last week’s round of hearings about the painful cuts possible for state agencies was a way to make tax increases politically palatable, Rogers said not from the Senate leadership’s point of view.

“We’re not looking at any tax increases at all,” he said. “We’re looking at cuts, cuts, cuts.”

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