The US dollar/euro intervention by the Forex Stabilization Fund to prevent the Chairman from looking bad so far is anaemic.

Click chart to enlarge in PDF format

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Jim Sinclair’s Commentary

Remember December’s BS? Keep this in mind as you hear more of the same.

The US dollar is no safe haven. Gold will reach $1650 and more.

Fed to Keep Rates Low for ‘Extended Period’
By SEWELL CHAN
Published: March 16, 2010

WASHINGTON — The Federal Reserve left its benchmark interest rate near zero on Tuesday, affirming its view that job growth and other economic indicators remained weak as the United States slowly pulls itself out of recession.

The Federal Open Market Committee, the Fed’s chief policy-setting arm, left the fed funds rate at zero to 0.25 percent, where it has been since December 2008. As it has said since March 2009, the committee said the rate would probably remain “exceptionally low” for “an extended period.” Most economists have taken that language to mean that the Fed will not begin tightening monetary policy until later this year at the soonest.

“Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit,” the committee said in a statement. “Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.”

With interest rates unable to go any lower, the Fed has had to turn to other instruments of monetary policy to help stimulate economic growth. Chief among those tools has been the purchase of enormous sums of assets, which has had the effect of placing downward pressure on long-term interest rates.

The Fed on Tuesday confirmed its intention to end its purchase of $1.25 trillion in mortgage-backed securities by the end of this month. While some economists fear that the termination of the program could lead to an increase in mortgage rates and hamper the recovery of the housing market, the gradual winding down of the purchase program so far has not had a major effect, which the Fed has taken as an encouraging sign.

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Thoughts For This Morning:

Do you think the present revelations about Lehman are plausible denial for having flushed it?
Do you really believe that Lehman was the only entity to play outside the rules?
Do you think Lehman was attending to all the details and ethics of finance when securitizing mortgages it bought?
Did your mortgage pass through Lehman’s hands?
Do you want to buy the Brooklyn Bridge?

Jim Sinclair’s Commentary

Please watch the factual BBC documentary, the Last Days of Lehman Brothers. which is a free download at the link below.

Click here to watch the video…

Jim Sinclair’s Commentary

Note that the US is first in line, not alphabetically.

Moody’s fears social unrest as AAA states implement austerity plans
The world’s five biggest AAA-rated states are all at risk of soaring debt costs and will have to implement austerity plans that threaten "social cohnesion", according to a report on sovereign debt by Moody’s.
By Ambrose Evans-Pritchard
Published: 6:48PM GMT 15 Mar 2010

The US rating agency said the US, the UK, Germany, France, and Spain are walking a tightrope as they try to bring public finances under control without nipping recovery in the bud. It warned of "substantial execution risk" in withdrawal of stimulus.

"Growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion," said Pierre Cailleteau, the chief author.

"We are not talking about revolution, but the severity of the crisis will force governments to make painful choices that expose weaknesses in society," he said.

If countries tighten too soon, they risk stifling recovery and making maters worse by eroding tax revenues: yet waiting too is "no less risky" as it would test market patience. "At the current elevated debt levels, a rise in the government’s cost of funding can very quickly render debt much less affordable."

Moody’s said Britain has been slower than Spain to "rise to the challenge" and may be at greater risk of smashing through buffers of AAA creditiblity if rates suddenly rise. Spain made errors at the outset of the crisis but has since become a model pupil, pledging to cut the budget deficit from 11.4pc of GDP to 3pc by 2013.

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Jim Sinclair’s Commentary

The criminals stay on the payroll, the victims get thrown out.

OTC derivatives are not a victimless crime.

Pink slips sent to thousands of Calif. teachers
By ROBIN HINDERY, Associated Press Writer
Monday, March 15, 2010

California’s budget crisis could cost nearly 22,000 teachers their jobs this year.

State school districts had issued 21,905 pink slips to teachers and other school employees by Monday, the legal deadline for districts to send preliminary layoff notices.

Not all the threatened layoffs will be carried out. The final tally depends on the state budget to be adopted for the coming fiscal year.

Last year, 60 percent of the 26,000 teachers who received pink slips ended up losing their jobs.

State Superintendent of Public Instruction Jack O’Connell expected this year’s actual job losses to be high, given the state’s persistent budget problems and the smaller pool of education stimulus money available from the federal government.

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Jim Sinclair’s Commentary

A Jobless Recovery? This is the jobless side of the statistical recovery.

State tax collections drop; Gov. Bobby Jindal plans for more budget cuts
By Jan Moller, The Times-Picayune
March 15, 2010, 7:56PM

An unexpected drop in state tax collections has created a mid-year budget deficit that could be as high as $400 million, adding dark new clouds to the state’s bleak financial forecast as lawmakers prepare for the start of their annual session in two weeks.

The news, delivered to Gov. Bobby Jindal’s administration late last week by state economists, comes less than three months after the governor cut $248 million from the 2009-10 budget to adjust for shrinking state tax collections.

Those cuts have led to hundreds of layoffs in state government and fell particularly hard on health care and higher education programs.

Timmy Teepell, Jindal’s chief of staff, said it’s too soon to know how big the latest shortfall will turn out to be, but that the governor already has asked Commissioner of Administration Angele Davis to plan for a fresh round of budget cuts.

"It’s safe to say that we will see a further reduction in revenues this year, and most likely it will be significant," Teepell said.

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Jim Sinclair’s Commentary

The epidemic of the Formula spreads. The first victims here are children’s health clinics and nursing homes.

The first victims should be those that got us into the problem.

OTC are not victim-less crimes.

Montgomery, Prince George’s slash budgets
By Michael Laris and Jonathan Mummolo
Washington Post Staff Writers
Tuesday, March 16, 2010

Maryland’s two largest counties outlined spending cuts Monday that would reach from children’s health clinics to nursing homes, slice tens of millions of dollars in education spending and furlough thousands of public employees.

Drop-offs in revenue and in expected state aid are forcing officials in Montgomery and Prince George’s counties, home to nearly a third of the state’s population, to confront some of the same unforgiving math that has caused governments across the Washington region to propose cuts to popular programs and safety-net services.

Counties across Northern Virginia, from Arlington west to Loudoun, face a patchwork of deep cuts and tax increases. Officials in Fairfax County are pushing layoffs, school cuts and a property tax increase. The District is facing an estimated $500 million budget gap in fiscal 2011 while continuing to grapple with $200 million in spending pressures for the current fiscal year.

On the state level, Virginia leaders agreed on a budget late Sunday that cuts millions out of core services, including education, health care and public safety. In Maryland, Gov. Martin O’Malley (D) has proposed near equal parts budget cuts and one-time transfers and other financial maneuvers to close an estimated $2 billion budget gap.

In Montgomery, one of the nation’s richest counties, officials who had become accustomed to managing rising budgets are overseeing a painful and unfamiliar reversal. County Executive Isiah Leggett (D) proposed a $4.3 billion spending plan that cuts the total government budget for the first time in more than 40 years. It calls for cuts across government operations, furloughs of many employees and a budget for schools that is $137 million less than they requested, which comes in below state requirements.

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Jim Sinclair’s Commentary

History calls this an unusual amalgamation of interest.

Little is a coincidence. Japan looks to Asia and away from being a state of the USA.

China, Japan Reduced Holdings of U.S. Treasury Debt in January
By Vincent Del Giudice

March 16 (Bloomberg) — China and Japan, the two biggest foreign holders of Treasuries, reduced their positions of U.S. government debt in January as a measure of demand for American financial assets fell to a six-month low.

China remained the biggest owner abroad of Treasuries, even as its holdings dropped by a net $5.8 billion to $889 billion, according to Treasury Department data released yesterday in Washington. Japan cut its holdings in January by $300 million to $765.4 billion, the report showed.

China has been a net seller of Treasuries for three straight months, the longest such stretch since the end of 2007. Chinese officials have questioned the dollar’s role as a reserve currency and recently sought assurances about the safety of U.S. government debt as the budget deficit widens to a projected record $1.6 trillion this year.

“Foreign central banks stopped buying Treasuries in January,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “If this were to continue, if China were to stop recycling its dollars into U.S. Treasuries, it could have dire implications for Main Street America in that mortgage rates could move higher.”

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Jim Sinclair’s Commentary

The "Jobless" portion is real.

The "Recovery" portion is illusionary.

Obama Aides See Jobless Rate Elevated for ‘Extended Period’
By Rebecca Christie and Mike Dorning

March 16 (Bloomberg) — U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today.

The proportion of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, said in a joint statement. The officials said unemployment may even rise “slightly” over the next few months as discouraged workers start job-hunting again.

“We do not expect further declines in unemployment this year,” the officials said in testimony prepared for the House Appropriations Committee. They predicted the economy would add about 100,000 jobs a month on average — not enough to bring the jobless rate down substantially.

Today’s projections are in line with the 10 percent average unemployment forecast for this year in last month’s budget plan. Christopher Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York, said the administration’s language risks damping expectations for a recovery.

“They need to work on the message, and right now the message is that there is not a lot to be hopeful about,” Rupkey said. “Warning about a slow jobless recovery can help make it a reality.”

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Jim Sinclair’s Commentary

Goodbye America.

I apologize to all those who gave their life for the Constitution, Freedom and due process.

House may try to pass Senate health-care bill without voting on it
By Lori Montgomery and Paul Kane
Washington Post Staff Writers
Tuesday, March 16, 2010

After laying the groundwork for a decisive vote this week on the Senate’s health-care bill, House Speaker Nancy Pelosi suggested Monday that she might attempt to pass the measure without having members vote on it.

Instead, Pelosi (D-Calif.) would rely on a procedural sleight of hand: The House would vote on a more popular package of fixes to the Senate bill; under the House rule for that vote, passage would signify that lawmakers "deem" the health-care bill to be passed.

The tactic — known as a "self-executing rule" or a "deem and pass" — has been commonly used, although never to pass legislation as momentous as the $875 billion health-care bill. It is one of three options that Pelosi said she is considering for a late-week House vote, but she added that she prefers it because it would politically protect lawmakers who are reluctant to publicly support the measure.

"It’s more insider and process-oriented than most people want to know," the speaker said in a roundtable discussion with bloggers Monday. "But I like it," she said, "because people don’t have to vote on the Senate bill."

Republicans quickly condemned the strategy, framing it as an effort to avoid responsibility for passing the legislation, and some suggested that Pelosi’s plan would be unconstitutional.

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Jim Sinclair’s Commentary

This is a hair to the left of a bailout!

This is very European to discuss everything to death. Now how about California and the many states to follow?

Eurozone ready to help Greece.
Eurozone leaders said yesterday that they’re prepared to help Greece, should that be necessary, by creating an emergency financial support facility for the first time in the euro’s history. However, they didn’t promise any specific sums to Greece and provided few details on their plan aside from the fact that it would likely be based on bilateral loans.

Jim Sinclair’s Commentary

1. Pakistan goes Taliban.
2. Israel makes a major miscalculation.
3. Turkey is a victim.

Thanks But No Thanks: Biden came offering a deal; Bibi balked.
By Aluf Benn | Newsweek Web Exclusive
Mar 15, 2010

Vice President Joe Biden’s visit to Israel last week was rightly hailed as a catastrophe—but not because of settlements. After a tense year in which Washington had failed to stop Prime Minister Benyamin "Bibi" Netanyahu from settling more occupied land, Biden had come to shore up the relationship. Instead, officials in Netanyahu’s government caught both men off guard by announcing plans to build more in contested East Jerusalem. True, that was a snafu. But the real disaster was what it may cost Israel. Biden had come to offer not just friendship, but support (and protection) against Iran—Israel’s greatest bogeyman—in exchange for a few concessions from Netanyahu. Instead, he got a finger in the eye.

When President Barack Obama and Netanyahu took office last year, consensus opinion expected a confrontation between the United States and Israel. It was almost a no-brainer—America was moving left as Israel was moving right. Obama’s grand design for a new, peaceful, and pro-American Middle East (featuring a new Palestinian state) stood in stark contrast to Netanyahu’s long-held support for Israel’s control of the West Bank and East Jerusalem. But Netanyahu thought that if he tacked between his rightwing coalition—committed to expanding settlements in the West Bank and moving more Jews into East Jerusalem—and Obama’s desire for peace talks, he could keep U.S. support against Iran and even start from scratch with the Palestinians. And until last week, Netanyahu seemed to pulling it off: he got indirect talks with the Palestinians in return for a limited and temporary settlement freeze that excludes East Jerusalem. His coalition survived intact. And his public popularity skyrocketed to 50 percent in February—which Israelis knew only in the Ariel Sharon period (while Obama’s approval ratings plummeted).

Then Biden came to town. On the face of it, this was just about assuring Israelis, directly and in their own country, about America’s love and support. It seemed like good politics in a tough election season back home, and Biden was a natural choice as messenger: alone in the high echelon of the Obama administration, the veep—an old-line Zionist—has come to consider "Bibi" as a close personal friend over a three-decade acquaintance. If anybody could reach out to Netanyahu, it was the former senator from Delaware.

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Over the past seven years I have told you many things that have not been too wrong. Here is the top of the heap of strange goings on in finance.

How many of your mortgages have been securitized multiple times? What if your servicer folded? The real owner of the mortgage might just knock on your door demanding payment.

It has been held now by many recent court cases that only the party which made the loan has the right to foreclose.

How would you like to find out that even though you have paid your mortgage, the real party of interest says screw you, pay again or it’s foreclosure time!

Please, those of you with mortgages on your homes track down the real owner of your paper, and fast.

Regards,
Jim

Hi Jim,

I just read CIGA 503’s comments on Fannie Mae mortgage recording.  Here is a new related question to ponder :

I recently initiated Identity Theft coverage and in the course of that work, I was asked to review my credit report. I discovered that my refinanced mortgage, paid in full in July 2005, has been retained as current and OPEN with a last payment of July 2005. The account is listed on the credit report as current, not paid and closed as were other previously listed mortgages. That mortgage was paid in full and closed (at least I thought it was closed) when I rolled into a new mortgage (refinance) in July 2005. All was done with the same financial institution (which closed and became Chase). The punch line is that the paid and supposedly closed mortgage is owned by TA DA: Fannie Mae. How many billions are being carried on the books that DO NOT EVEN EXIST? The plot thickens, the whole episode sickens.

CIGA Harley

Hi Jim,

With respect to the failure of Lehman Brothers, the release last week of the Bankruptcy Examiner’s 2,200 page report exposes the financial fraud perpetrated by Lehman and its colluders, most notably with respect to its repurchase agreements dubbed “Repo 105s” named as such because the value of the assets it transferred were worth at least 105% of the cash Lehman received in exchange.

However, this is only the tip of the iceberg… not just for Lehman, but for the vast majority of Wall Street Investment Banks that securitized mortgage loans over the last decade.

I believe that Lehman-like balance sheet accounting fraud is inherent within the nature of the securitization process; that “true sales” never took place and the transfer of assets to and from the participants in the securitization paradigm were book-entry financing deals; that consideration was never paid by the participants; that the funding came from outside sources; that the complexity of the structure was designed to cloak money laundering; that the trusts never achieved their tax free REMIC status; and that loans were purposely designed to fail so that the participants in the securitization could control both the cash flow and the real estate assets arising from these mortgage transactions when the bubble inevitably burst.

If I am correct, this would have serious implications for consumers whose loans were securitized because the participants in the securitization would be unable to prove that they legally conveyed the loans into the trust fund. Essentially, U.S. Bank and Wells Fargo had this opportunity in the Massachusetts Land Court cases last year and they could not produce the evidence of ownership. They produced the Notes, but not the proof of how they purchased the loans from the originators. The evidence also showed conclusively that the mortgages were never assigned from party to party according to the Pooling and Servicing Agreement and into the trusts.  This, in large part, is why Judge Long overturned two out of three foreclosures.

Much of the fraud is buried in the opaque OTC derivatives trading. I know I am preaching to the choir on this topic!

Respectfully,
CIGA Marie

Marie McDonnell, CFE
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analysts
Marie.McDonnell@truthinlending.net
P.O. Box 2760, Orleans, MA 02653
Tel. (508) 255-8829  Fax (508) 255-9626

Author Michael Lewis On Wall St’s Delusion
Author Tells "60 Minutes" What Led to Wall Street Collapse and Who Predicted It

Watch CBS News Videos Online

RE: Lehman Said to Return to U.S. Mortgages Through Unit (Update1)
BY: Jody Shenn, Bloomberg, October 21, 2009

Dear Ms. Shenn,

In doing some research on Lehman Brothers Bank I just came across your article referenced above and I am wondering if you would be kind enough to use your sources to research some questions I have about what became of a number of super-jumbo residential mortgage loans that Lehman made prior to its failure.

Specifically, I want to know how Lehman securitized its super-jumbo loans, especially in or about December 2004. I subscribe to Bloomberg Professional and have attempted to identify issuing entities that Lehman might have used for this purpose. None of them contain super-jumbo loans in the amount of $2,000,000 plus. I suspect Lehman dealt with a number of hedge funds who acquired these loans and would like to know who they might be.

The problem for consumers is that Aurora Loan, who services the Lehman-originated loans, will not disclose the identity of the legal owner and holder of the mortgage obligation where a “private investor” is concerned. Somehow, Aurora feels that it is exempt from Section 131(f)(2) of the Truth In Lending Act and the recent amendment enacted into law on May 20, 2009 under Section 404(a) of the Helping Families save Their Homes Act of 2009 codified as Section 131(g) of the Truth In Lending Act.

This effectively deprives consumers of knowing whom to serve a Notice of Rescission pursuant to the Truth In Lending Act, or otherwise, communicate about a loan modification.

Lehman/Aurora are not the only entities attempting to “hide the ball” with respect to revealing the identity of the owner of securitized mortgage loans; and I find that failed institutions such as Washington Mutual, IndyMac Bank, Bank United, AmTrust Bank, etc. are the worst offenders.

I very much appreciate your response and I am happy to answer any questions you may have about my inquiry.

Sincerely,
Marie

Marie McDonnell, CFE
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analyst
Certified Fraud Examiner
Marie.McDonnell@truthinlending.net
P.O. Box 2760, Orleans, MA 02653
Tel. (508) 255-8829  Fax (508) 255-9626

Fed holds rates at record lows to foster recovery
CIGA Eric

The Federal Reserve on Tuesday repeated its pledge to hold interest rates at record lows to foster the U.S. economic recovery and ease high unemployment.

Pledge to keep interest rates low? That certain has been implied as stocks, gold, silver, commodities and anything not nailed to the floor have rallied into the announcement. Can you believe that the miracle of liquidity will foster the U.S. economic recovery and ease high unemployment? Two words – jobless recovery. The best liquidity will do is encourage a little more leveraged-based consumption from people unaware that the economic landscape has changed.

U.S. Dollar Index (ETF):

The U.S. dollar index is toying will critical up trend support. The setup in the COT diffusion index suggested a transition. Turns usually take time. Usually, 1-2-3, or three drive to a top.

Source: finance.yahoo.com

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Jim Sinclair’s Commentary

A sort of Gresham’s Law.

Change needed as Argentina coin shortage grows
CIGA Eric

The Argentina coin shortage is growing as inflation makes a coin’s metal worth more than its face value.

Despite Argentine President Cristina Fernández de Kirchner’s promise more than a year ago to introduce electronic bus tickets in Buenos Aires, the vast majority of the capital’s bus lines still only accepts coins. This would not be such a big deal if not for the fact that Argentina has had a coin shortage for more than three years. The crisis has turned normally mundane tasks – like buying a newspaper or a snack – into a big hassle.

We talked about this for some time. When the intrinsic value of a coin’s composition exceeds its face value, they tend to disappear from circulation. A problem for not only Argentina but also Canada, the United States or any other nation that devalues it currency.

Source: csmonitor.com

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Dear CIGAS,

Track down who owns your mortgage. It could be very helpful to you in the future.

Regards,
Jim

Hello,

I wish comments were turned "on" on your website.  I would have made the following comments on the posting today on the ‘quiz’…

I don’t have to call – I already know who owns my mortgage.  I received a letter a while back from Fannie Mae. It was informing me that although my mortgage had been sold to Fannie, the same old servicer would continue to service my loan. Further, the most puzzling part was that the letter went on to tell me that there would be no documents recorded at my county recorder’s office showing the change in ownership. I couldn’t believe that the quasi-governmental entity that owned my mortgage wasn’t interested in recording their interest in my property for all to see.

My other questions, which I’ve never asked Fannie, included how much did Fannie (aka the US taxpayers) pay the ‘old’ mortgage holder to ‘own’ my mortgage?; how much additional did/does Fannie pay the ‘old’ mortgage holder to now be the servicer?; if I default, who would ultimately receive the proceeds from a sale of the property – Fannie (who has an unrecorded interest) – or the ‘old’ mortgage owner? If the answer to the last question is the old mortgage owner, then how many trillions or quadrillions are the banks ripping off the US taxpayers in this scheme?

CIGA 503

Breakdown of commercial bank credit

In case this one got buried.  The trends in commercial bank credit are brutal.

Breakdown of commercial bank credit

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Jim Sinclair’s Commentary

If this is not Orwellian then tell me what is.

Cross a lobster with a tomato and you have a red hand grenade

Rising food prices may start with seeds
CIGA Eric

Farmers say consolidation in the industry means they’re forced to buy more costly seeds. But Monsanto, the world’s largest seed firm, says competition ‘is alive and flourishing.’

Competition to one is monopoly to another. It’s all a matter of perspective.

Today the Leakes have little choice: There are four seed companies in their area, and all sell seeds that include genetic traits patented and licensed by Monsanto Co., the world’s largest seed firm.

"There’s basically nothing else available," said Leake, 48. "You have to use their seeds and pay their prices."

For those MBA types, this is five star industry using Porter’s model. It is also a byproduct of authoritative free enterprise and devaluation.

Source: articles.latimes.com

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Gold Prices Rise in N.Y. on Demand for Alternative to Currency
CIGA Eric

“Gold is a good spot to be parking your money for the time being,’ said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Gold has that flight-to-safety aspect to it. It’s going to hold its value.”

Demand for alternative to currency and flight-to-safety aspects to it. You don’t see that combined with gold to often in printed media. Keep this up and spin that labels gold holders as gold bugs (implied a little crazy and fanatic) get as many laughs as in the past. In the end, gold will go mainstream in terms of demand and general acceptance within the investment community.

Source: businessweek.com

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As bull market turns 1, is it time to party, or worry?
CIGA Eric

It is hard to kill a bull market in its first year of life. The last time a baby bull was buried on Wall Street before celebrating its first birthday was during the Great Depression.

Ah, the desperate need to be in a bull market. Depressionary boxes are characterized by bull and bear markets to nowhere. Gen-Xer’s can draw the analog from the Karate Kid, 1984. Leverage on – leverage off, Danielson!

1929-1944 & 2000-Present Comparison: S&P 500 (Nominal):

Source: usatoday.com

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Hartford Financial selling $3B in securities
CIGA Eric

Hartford Financial Services Group Inc. said Tuesday it will sell $3.05 billion in securities as part of its plan to repay the $3.4 billion it received under the federal financial bailout.

Here’s the model for all recipients of federal funds. Bailout, devalue/boost the stock market, issue equity to repay, devalue/boost the stock market more. Everyone wins, right?

It’s an illusion. Eventually the temporary boost fades, as the price of gold accelerates relative to stocks and other financial assets. While the government is certain to cite the terrific returns made on TARP as a great success, they are unlikely to hear much applause from a largely public without devaluation hedges.

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to Gold Ratio

Source: finance.yahoo.com

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Today was another case of “Buy Europe” as traders reacted to further rumblings out of Brussels that the EU finance ministers were finagling a way around the original Euro treaty of 1991 which supposedly prevents bailouts of countries that screw up their own fiscal house. The idea, best that I can understand it, is that the member countries would pool some funds and provide direct loans to Greece. Germany apparently did not like the idea.

Traders did however and began buying up the European currencies as the Euro, Swiss Franc, and the British Pound were all higher today after getting whacked yesterday. Seems like the Yo-Yo model is still intact. Tomorrow- who knows?

Regardless, today was “what risk – there ain’t no risk” and with that, everything that moved and was not nailed down to the ground was purchased. Crude oil, copper, grains, cotton, you name it – the only exceptions that I could see were natural gas and sugar. Yes sirree bob – the algorithms are alive and well as the weakness in the Dollar triggered them to buy today after triggering them to sell yesterday.

I think I have found a solution to the world’s search for plentiful and cheap energy – I read somewhere that some clever inventors are trying to use the motion of the ocean’s waves to produce energy. Forget that – how about harnessing all the motion that is generated and then wasted from these damn algorithms and funnel that into some device that can crank out electricity and crude oil would become obsolete overnight.

As I said yesterday, there is no trading fundamentals anymore in these markets, it is all about money flows from hedge funds and those are all cranked out by machines. The machines are running the markets in what seems like a “Terminator” movie. Skynet is probably not far behind. By then it will decide to get short the grains and decide that to really make a lot of profits, it needs to eliminate demand sources so it will generate another order to kill off the carbon-based humanoids that eat the stuff. Once demand is then curtailed, prices will fall and Skynet can clean up on those shorts. Honestly, that is what it feels like at times sitting here watching the money being crammed into markets and ripped out the next day only to be stuffed back in the following day.

Skynet is obviously long the equity markets as the S&P 500 made a yearly high in today’s trading session negating a potential double top near the 1150 level. The day is yet young so it remains to be seen whether or not John Conner can take it down. It could be I actually have the wrong movie in mind as the entire rally might be part of “The Matrix” and its imaginary world of illusion. I certainly have no idea what they are trading in there as the stock market has priced in one helluva recovery. Even the Administration was forced to admit the obvious today that the unemployment rate is going to stay elevated for an extended period of time so I am a bit confused as to where all the “demand” from this consumer demand driven economy is supposed to be coming from. But that is just a case of the “market” being far wiser than any of us. I am sure they have that all figured out.

Back to gold – the bounce back up and away from $1,100 confirms that level of support and the bottom of the trading range. With the push through $1,120 short covering was triggered among the weaker shorts taking price up into the region where the stronger-handed shorts once again emerged near their former level of defense near $1,130. Bulls will need to jam price through their selling to get the market on track for a test of the high from 2 weeks ago. That level, centered near $1,145 is what stands between them and a push to $1,160.

The bullion banks will attempt to stymie the move higher here at $1,130 and then try to take price back down to the lower end of the trading range. Interestingly enough, gold has been making a series of higher lows over the past 6 weeks with the result that while it is still in a consolidation period or range trade, the range is tightening or constricting. The longer it can hold above the $1,100 level, the higher the odds are that the breakout move will be to the upside.

The HUI is following the pattern seen in the gold today. It is higher moving away from support near the 409 – 410 level but it too is meeting overhead selling as it works in its range trade. The top of the range is 429 – 431.

The Dollar continues to flirt with a technical breakdown as it inches ever lower towards the bottom part of its recent trading range. It came within a mere few points of taking out the bottom of the range and inducing some stop loss sell orders from being activated but the bulls were able to muscle price away from the danger level – for now. Volume just seems to dry up as it moves toward 80 on the downside but this could get quite interesting if the bears show more conviction and attempt to make a concerted effort to pick off those swelling stops. Just like gold, although in the inverse, the Dollar’s range is tightening but it has been making a series of lower highs that show up more on the hourly chart rather than the daily. The jury is still decidedly out on this thing but as close as it is to critical support, one would have to give the slight edge to the bears at this point. Once again, it all depends on how traders/investors react to the developments coming out of Europe in relation to Greece. That situation is so fluid and traders are so fickle that predicting anything in advance is a fool’s errand.

It is probably also not helping the Dollar any when we read that the President has nominated Janet Yellen, current head of the San Francisco Federal Reserve, to the position of Vice Chair of the Federal Reserve. She is as dovish as dovish could be. Traders would interpret such a choice for that position as a signal that the Dollar will be sacrificed and that inflation is in the cards. Yellen is another Academic with ZERO private sector experience whose entire resume can be summed up as “perpetual university student”. There is certainly nothing there to inspire the least bit of confidence when it comes to supporting the currency.

Bonds are strangely higher today when one considers a yearly high in the S&P 500 and a general reflation trade. I have given up attempting to figure that market out as it is undoubtedly so heavily intervened in by the monetary authorities that the signals it gives off are dubious. One would think that with gold moving higher today and the Dollar lower that the last thing that would be moving higher is the bond market. After all, if the economy is so damned good that the equities can put in a yearly high leading one to believe the chatter that the Fed is moving towards draining excess liquidity because things are so peachy-keen, then why would money be flowing INTO and not OUT OF bonds.

In the meantime, don’t worry about a single thing – bankrupted states, financially impoverished towns, townships, counties and cities, falling tax revenues, chronically high underemployment rates and federal government spending that can only be described as a treacherous betrayal of the next generation of citizens – none of this is important – the only thing that matter is that the stock market is higher so all is well. Let the good times roll baby!

Personally it looks to me like America has been bewitched.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Following is a chart depicting the reported holdings of US Treasury debt by some of the largest creditor nations.

Each month the Treasury reports this data and each month we plot it to attempt to gain some insight into who is financing the continued profligacy of the US. Last month the numbers reported out showed the Chinese selling $34.2 billion worth of Treasury debt in December 2009. That was enough to drop them into second place behind Japan as the largest holder of US Treasuries. That obviously caused quite a stir at the time.

This month, Treasury revised the holdings data and while they show China still selling that same $34.2 billion from November to December 2009, they made an upward adjustment to the overall holdings number, increasing it by a substantial $139.4 billion. That was more than enough to kick them back up into first place once again as the largest holder of US Treasury debt ($894.8 billion).

The Treasury reported that China did sell another $5.8 billion worth of US debt from December through January 2010, dropping them down to $889 billion as of the most current data.

It appears that a large chunk of those Treasuries that were moved over into the China column came off of the reported holdings of the UK. Their number was adjusted downwardly by $124.4 billion. Also, the Caribbean Banking Centers were downwardly revised $56.5 billion. It is not unusual to see a significant adjustment to the UK with most of that moving over to China. It just tells us that some Chinese are buying through London money centers.

The last chart shows the relation of the US Trade deficit in relation to both long term and short term money flows.

Click charts to enlarge in PDF format

Following are a few charts detailing the release of this month’s Treasury International Flows data for the month of January 2010.

A few salient points –

Every asset category saw a drop in purchases from the previous month whether it was debt or equities. What strikes me however is the continued sell off of US Agency Debt (think Fannie and Freddie) as well as US Corporate debt. While the rate of sales of US Agency debt has declined (although there continues to be net divesture of US Agency debt which no doubt is related to the woes in the housing sector), the rate of selling of US Corporate Debt seems to be accelerating.

While this data is dated by two months, and a lot can happen during such a time interval, it is evident from this data that foreign investors are losing their appetite for US corporate debt. If that is indeed the case, then it is difficult to see how talk of a “jobless” recovery is going to continue with emphasis on the word “recovery” this time around. I fail to see how one can paint the picture of a healthy recovery when foreign investors want no part of providing capital for US corporations. Maybe they are not as prone to being manipulated by the Spin and BS that comes out of Wall Street as US based investors apparently are. Who knows? But either way, this is something that bears continued monitoring. If US Corporate debt is not finding a home outside of the US, it could be that these foreign lenders want a higher rate of return on their capital before they are willing to part with it. That comes right off the bottom line of US corporations.

Investors are still buying US equities but at a reduced rate. Purchases were at an eight month low. Apparently, Treasury Debt is still being taken although purchases were the lowest in three months. They are still at respectable levels however. It seems as if the only US securities that have much interest from abroad are this Treasury debt. That is telling.

I will get some info on the trade balance and the country ownership of Treasuries up a bit later.

Click here to view today’s Foreign Treasuries and Notes Purchases, Foreign Agency Debt Purchases, Foreign Purchases of US Corporate Bonds, and Foreign Net Stock Purchases charts from Trader Dan Norcini…

I would like you to take a quiz. I am sure 90% of you will be shocked by the results.

Call the servicer of your mortgage and ask them to identify who owns it. You will be stone walled like you have never been in your life.

Continue up the line of supervisors directly to the office of the president, then think securitization.

Jim Sinclair’s Commentary

The bailout of Greece:

It is on.
It is off.
It is on.
It is a maybe.

It is amazing how we got to the "It is a maybe" right at the euro breakout from a downtrend line.

That is not TA. That is painting TA. You are facing investment banking houses who behave like rogue nations in markets trading today.

Jim Sinclair’s Commentary

I believe that when it is all said and done, the unfunded massive guarantee of the US government being accumulated daily will be the undoing of the US dollar.

Jim Sinclair’s Commentary

This is what makes for a bull market in lobbyists. Wall Street will not like this at all.

Right now and due to FASB capitulation to political pressure, all financial instruments are marked to whatever the hell the bank wants them to be marked to.

To carry a loan today at full value is the essence of a capital crime. This initiative will more than likely fail.

Mark-to-market back in the spotlight.
The Financial Accounting Standards Board is likely to propose an expansion of mark-to-market to include assets such as loans. At present, banks hold loans at their original costs and create reserves based on their own view of potential losses. If the proposal moves forward, it will mean major changes for banks’ balance sheets; looking at JPMorgan (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC), the proposal could affect $2.8T of loans, or around 40% of their total assets. Smaller banks would see an even bigger impact.

Jim Sinclair’s Commentary

Playing hardball with China over the Yuan and trade is a very dangerous exercise in economic diplomacy.

Note the standard procedure MOPE in this article.

China trims holdings of Treasury securities
China trims holdings of US Treasury securities for third month as US federal deficit soars
Martin Crutsinger, AP Economics Writer, On Monday March 15, 2010, 9:05 am

WASHINGTON (AP) — China retained its spot as the biggest foreign holder of U.S. Treasury debt in January although it trimmed its holdings for a third straight month. The string of declines are likely to underscore worries that the U.S. government could face much higher interest rates to finance soaring budget deficits.

The Treasury Department said that China’s holdings dipped by $5.8 billion to $889 billion in January compared to December. Japan, the second largest foreign holder of U.S. government debt, also trimmed its holdings but by a much smaller $300 million to $765.4 billion.

Net foreign purchases of long-term securities, a category that includes both government and corporate debt, totaled $19.1 billion in January, as net purchases of private corporate bonds fell by $24.8 billion, the biggest drop on record.

A month ago, Treasury initially reported that China had cut its holdings so sharply that it had lost its top spot as America’s largest foreign creditor, a position it had held since it’s holdings overtook Japan in September 2008.

However, 10 days later, Treasury released its annual update of the figures. The revised data showed that China, while reducing its holdings, still retained the top spot.

More…

Jim Sinclair’s Commentary

As reasonable as it seems, pushing China on Iran does carry extreme risks.

China has now sold US Treasury instruments for 3 months.

Newly powerful China defies Western nations
Analyst: ‘This is a fundamental shift … It’s a change in national attitude’
By John Pomfret

BEIJING – China’s government has embraced an increasingly anti-Western tone in recent months and is adopting policies across a wide spectrum that reflect a heightened fear of foreign influence.

The shift has accelerated as China has emerged stronger from the global financial meltdown, with a world-beating economic expansion rate and a growing nationalist movement. China has long felt bullied by the West, and its stronger stance is challenging the long-held assumption shared among Western and Chinese businessmen, academics and government officials that a more powerful and prosperous China would be more positively inclined toward Western values and systems.

China’s shift is occurring throughout society, and is reflected in government policy and in a new attitude toward the West. Over the past year, the government of President Hu Jintao has rolled back market-oriented reforms by encouraging China’s state-owned enterprises to forcibly buy private firms. In the past weeks, China announced plans to force Western companies to turn over their most sensitive technology and patents to Chinese competitors in exchange for access to the country’s markets.

Internally, it has carried out more arrests and indictments for endangering state security over the past two years than in the five-year period from 2003 to 2007, according to a report released Friday by the Dui Hua Foundation, a San Francisco-based human rights organization.

China has also reined in the news media and attempted to control the Internet more vigorously than in the past. This month, it announced regulations designed to make it harder for China’s fledgling community of nongovernmental organizations to get financial support from overseas. In foreign affairs, after years of playing down differences, it has reverted to a tone not heard in more than a decade, condemning recent U.S. decisions to sell weapons to Taiwan and to have President Obama meet the exiled Tibetan leader, the Dalai Lama.

More…

Jim Sinclair’s Commentary

The dollar is no safe haven.

U.S., U.K. Move Closer to Losing Rating, Moody’s Says (Update1)
By Matthew Brown

March 15 (Bloomberg) — The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.

The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.

Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.

“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”

The pound fell against the dollar and the euro for the first time in three days, depreciating 0.8 percent to $1.5090, while the dollar index snapped a four-day drop, adding 0.3 percent to 90.075.

More…

Jim Sinclair’s Commentary

There is a rule among thieves that if you steal, do it big enough so you can buy a dream team to get you off.

Click here to watch the video…

Jim Sinclair’s Commentary

This is but a start. Now the snowball meets gravity.

This is a creative way to cull the gene poll.

Still no money for Prichard pensioners
City given two months to figure out payments
Updated: Thursday, 11 Mar 2010, 3:12 PM CST
Published : Tuesday, 09 Mar 2010, 9:38 PM CST

PRICHARD, Ala. (WALA) – A bankruptcy court judge has given the City of Prichard two more months to figure out how they will pay retired city workers. Prichard pensioners have gone six months without a pension check.

Prichard is operating under the protection of Title IX Bankruptcy, and for many people, that means no promised pension payments.

After six months with no pay, Prichard pensioners put their faith into the courts. They hoped a judge would force the city to pay some, if not all, of the pension money it owes. However, the bankruptcy court judge said the city is not obligated to pay the retired workers just yet. The judge gave the city two more months to restructure the budget and present it to the courts.

The city got more time, but unfortunately reality has already set in for Bobby Holifield and his family.

"You can’t begin to know the stress of this. My daughter is in college right now, my son just graduated from high school, he wanted to go to college. My daughter had to miss last semester in college and she will have to miss this semester. I can’t afford to pay it. My son wants to go to technical school; I can’t afford to pay for it. It makes me feel like a failure more than anything, when I did my part. I worked 32 years to get my pension. They owe it to me, it’s not something I’m asking them to give me," Holifield said.

More…

It appears that we are back to the old familiar pattern of strength in the Dollar bringing in algorithm selling of commodities and by connection, gold. Friday was a bit of a break from that norm as it now appears that we had a bout of pre-weekend short covering in the European related currencies during which gold was sold lower on ostensibly easing fears concerning Greece. I say “ostensibly’, because it was evident that the take down in gold was a bear raid.

Today, copper is getting knocked down as is crude oil, which has seen its gains from last week completely erased. As said many times here ad infinitum, ad nauseam, these markets are not really trading fundamentals all that much on any given day but rather fund order flow. If the funds buy, locals buy. If the funds sell, locals sell. That is all that these markets have become.

We now have cases in which there is so much managed money coming into certain commodity markets at times, that it is chasing out commercial hedging interest. The result is large air pockets above the market which causes markets to shoot sharply higher on up days. There are simply no sellers on those days. The flip side occurs when these same funds are not buying or actively selling – the market then falls into a void as there are no bids to be found. The commentary usually calls this “volatility” but what it really is in my opinion is a sign that these funds are far too large for the markets and that we need to see the CFTC rein them in.

The commodity markets came into existence to provide a risk management tool for bona fide Producers or Users. When they are unable to use the markets for that purpose, then it has become evident that something is seriously out of whack. I read far too many reports of commercial hedgers incurring damaging margin calls because these huge hedge funds are driving prices to extremes unwarranted by the fundamentals. Eventually the market will correct such an occurrence but in the interim, underwater hedges can wreak havoc with risk management programs. The problem is not so much with the mega commercial firms which are well capitalized as a general rule or can at least secure financing enabling them to meet margin calls and ride out their hedge until it is time to lift it. It is the smaller or mid-sized commercial entities which do not have such access or the financial wherewithal to deal with a short hedge that goes deeply underwater due to a barrage of algorithm buying, that get the short end of the stick. More of these guys are trying to move their business to private contracts off the exchange but apparently the exchanges do not care as they love the increased volume of trading and fees associated with the business of the big boys. Besides, the exchanges have also figured out a way to make lots of money renting computer server space to high frequency traders. Some call this “progress”. It looks to me more like a case of short-term sightedness versus long term health of the markets. Enough of my soap box pontificating for one day however.

Even though the Dollar is fairly strong this AM, gold is managing to hold above unchanged, not too bad of an accomplishment considering the extent of the selling hit the broad equity markets. That is no doubt related to the strong showing of gold when priced in terms of the various European related currencies. It is going to be insightful to see if gold can maintain a foothold above the €800 Euro level and the €730 level in British Pound terms.

Gold is continuing to attract buying above the $1,100 level which is becoming more significant from a technical perspective. It’s range trade continues with the bears having the short term advantage. Bulls need to push it back over $1,120 to force a bit of minor short covering. The 10 day moving average has turned lower which is near term bearish but I want to add that markets in ranging or consolidation patterns do not generally pay much attention to moving averages but more so to those particular technical indicators such as the Stochastics which are designed for that pattern.

As far as the Dollar goes, it continues its ranging trade with the bears simply unable to take out the support level under the market and force a bout of long liquidation which would feed on itself as the froth in the market just keeps foaming. The problem for the bears is that Europe just will not cease occupying the minds of currency traders and that keeps sellers coming into the Euro, the Pound and Swissie which then begets more buying in the USDX. This is going to be resolved one way or the other fairly soon but for now, the 6 week long trading range continues.

The mining shares as evidence by the HUI are succumbing to the broad equity market weakness. So far they have been able to hold last week’s low but they are dangerously flirting with that level. A breach of that would allow sellers to take the index down towards 405, which is the 40 day moving average. They will need to hold that level or run the risk of a move towards 390. From what I can see of the HUI, it too looks like it is stuck in a trading range like so many of these other markets.

The long bond is also stuck in its range bouncing off the low end of the band that has contained it for the last 2 months.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Volume continues to shrink as it markets time at support. This bullish tape awaits a technical trigger.

Japanese Yen (FXY):

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Quick Note on Gold Wave Analysis
CIGA Eric

Please do not confuse my Gold Wave Analysis with Elliot Wave analysis. It is completely different.

Cycles, energy of the trend, and movement of the leveraged money flows.

ABCD is merely a designation of the natural cycles within the gold trend. It also considers the energy within the tape to forecast both duration and magnitude. In other words, it produces a time based forecast that is consistent with the energy of the previous cycles and direction of the leveraged money flows.

The Gold Wave Analysis suggests a mean, average window, bottom around May (plus or minus a few months). Cycles influence the money flows, and the money flows can slightly modify the cycle timing. This feedback loop is important, so they must be watched together.

Further Comments and Charts:
US dollar Diffusion Index
Gold Diffusion Index

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Gold’s cross-currency strength signals its evolution
CIGA Eric

Gold’s rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal’s broadening insurance appeal, as sovereign debt fears shift to the fore.

Absolutely nothing new here. Jim, Dan, and I, as well as others have recognized rising global gold prices for years. What’s interesting is that Reuters, a conduit, is recognizing it. Always watch for subtle changes.

Source: reuters.com

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Gold to Silver Ratio
CIGA Eric

Gold to Silver Ratio (GSR) represents on of the oldest measures of risk aversion to risk.

The GRS is illustrating the depressionary chop. Liquidity trade on, F-TV scream bull market, liquidity trade off, and the wheels fall off with everyone milling around in disbelief.

I characterize this chop with stocks trading within a depressionary box. Lots of drama, arm waving, but overall its nothing more than directionless chop.

Did a new down trend, liquidity trade on, start in 2009? Time and leverage flow support that conclusion. Most likely we’ve enter a consolidation range shaded green. A break of the orange up trend line would provide more clarity.

Gold to Silver Ratio (GSR) And Gold to Silver Ratio:

More…

Please click the chart to enlarge in PDF format.

There an old Irish proverb that says,

If you’re not strong you’d better be clever.

When you’re fighting the paper monster, you better be clever.

The time window has closed on the C-wave advance. The duration of the run was a bit longer than the mean estimate, but it did not produce expected gains.

The relatively weak C-wave advance should produce a weaker D-wave decline since the energy within the tape is largely proportional. The DIWA1 column indicates the Gold Diffusion Index has at 77% has already exceeded the mean average of the previous waves. This high reading, like basketball players battling to maintain position for a rebound, reflects the intensity of flows before the next advance.

Will the Diffusion Index post a higher reading or a double spike, as price chops toward the projected mean of $983? Maybe the paper monster will have to be satisfied with $1,058. There’s huge support around $1025. Whatever it’s going to do, it better do it fast because time is watching and waiting.

Time is the most important indicator. When time is up the market must change trend. W.D. Gann.

The mean window for time is early May, which by no accident comes very close to the projected dates provided by Martin Armstrong.

Gold Waves Analysis:

Gold London P.M. Fixed and the Commercial Traders COT Futures and Options Gold Diffusion Index (DI):

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Jim Sinclair’s Commentary

CIGA DGC sends us his thoughts.

M O P E
Management of Perspective Economics
+
H O P E
Helping Our Ponzi Exchanges
=
D O P E
Destroying Other Peoples’ Equity