In The News Today

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December 27, 2009 12:28 PM

Dear CIGAs,

The Green Hornet asks if there isn’t something wrong with the combination of government QE of agency debt combined with huge bonuses.

He calls attention to the timing of the release so as to cause the least dislocation in the foreign exchange markets as the perfect application of MOPE.

It is presented as a humanitarian act to save the average guy’s house and keep home owning a viable American dream, not a major nail in the coffin of the US dollar, an unavoidable act and a guarantee of QE to infinity.

Fannie and Freddie to Get Unlimited Aid…and Huge Executive Bonuses
Sunday, December 27, 2009

Michael J. Williams has been with Fannie Mae sice 1991

The Obama administration made like Santa Claus just before the Christmas holiday, enlarging the potential bailout of mortgage giants Fannie Mae and Freddie Mac—and approving Wall Street-like compensation packages for their leaders. On Thursday, President Barack Obama unilaterally raised the $400 billion cap on emergency aid to the companies, which were heavily criticized for helping bring about the housing crisis.

Prior to the announcement by the White House, the Federal Housing Finance Agency approved $42 million in salaries and bonuses to the top 12 executives at Fannie Mae and Freddie Mac. Fannie Mae chief executive Michael J. Williams and Freddie Mac chief executive Charles Haldeman each will receive a base salary of $900,000 and bonuses and incentive payments of up to $5 million for running companies that might have collapsed had it not been for the federal government’s rescue in 2008.

“The Obama administration’s decision to write a blank check with taxpayer dollars for the continued bailout of Fannie Mae and Freddie Mac is appalling,” said Representative Scott Garrett (R-NJ), a member of the House Subcommittee on Financial Institutions and Consumer Credit that oversees the two companies. “Not only is this a continued bailout of failed entities that need to be privatized to protect the taxpayer, the timing of the announcement is clearly designed to try and sneak the bailout by the taxpayers.”

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Jim Sinclair’s Commentary

How exactly do you have a recovery of an economy that cannot reasonably employ its citizens?

A booming equity market does not mean a booming main street.

Recovery from negative growth to zero real growth (minus inflation) is not a recovery in the accepted economic terms.

Even as the US economy recovers, a decade of joblessness and flat wages could lie ahead
By Jeannine Aversa (CP) – 19 hours ago

WASHINGTON — The decade ahead could be a brutal one for America’s unemployed – and for people with jobs hoping for pay raises.

At best, it could take until the middle of the decade for the nation to generate enough jobs to drive down the unemployment rate to a normal 5 or 6 per cent and keep it there. At worst, that won’t happen until much later – perhaps not until the next decade.

The deepest and most enduring recession since the 1930s has battered America’s work force.

The unemployed number 15.4 million. The jobless rate is 10 per cent. More than 7 million jobs have vanished. People out of work at least six months number a record 5.9 million. And household income, adjusted for inflation, has shrunk in the past decade.

Most economists say it could take at least until 2015 for the unemployment rate to drop down to a historically more normal 5.5 per cent. And with the job market likely to stay weak, some also foresee another decade of wage stagnation.

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Jim Sinclair’s Commentary

The reverse of this is the dollar ready to be denominated in Asia.

Renminbi set to replace US dollar for trade in Asia Pacific
Author: Georgina Lee
Source: Asia Risk | 27 Dec 2009

Hong Kong moves to position itself as clearing hub for renminbi-based transactions

The Chinese renminbi is taking on an increased role in the Asia-Pacific region, and is expected over time to replace traditionally dominant currencies such as the US dollar and the euro for certain transactions.

Chinese government policy changes have enabled Asian corporates to settle trades with their Chinese counterparts in renminbi. And increased intra-Asian trading volume may lead Beijing to also consider allowing other trade-related insurance and derivatives denominated in renminbi to be done offshore, according to bankers and regulators in Hong Kong

Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority (HKMA), said Beijing is studying the idea of introducing more renminbi-denominated investment products in Hong Kong, expanding on the authorities’ approval for renminbi-denominated bonds issued by mainland financial institutions being made available for Hong Kong investors.

Currently, the renminbi is not fully convertible, but the Chinese government has made a number of arrangements with various countries so that trades between China and these countries could be settled directly in renminbi, instead of US dollars.

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Jim Sinclair’s Commentary

This sounds like the final word, at least for the next few years..

Wen resolute on exchange rate
By Geoff Dyer in Beijing
Published: December 27 2009 12:52 | Last updated: December 27 2009 12:52

Chinese Premier Wen Jiabao said on Sunday that Beijing would not give in to foreign demands for its currency to strengthen, taking an increasingly defiant tone amid mounting international pressure for China to shift its exchange rate policy.

In an interview published by the Xinhua news agency on Sunday, Mr Wen said some of the demands for China to let its currency appreciate were an effort to contain the country’s development.

“We will not yield to any pressure of any form forcing us to appreciate. As I have told my foreign friends, on one hand, you are asking for the renminbi to appreciate, and on the other hand, you are taking all kinds of protectionist measures,” he said.

By keeping the Chinese renminbi stable against the US dollar, China was contributing to the recovery in the global economy, he said. “The purpose [of these calls for appreciation] is to hold back China’s development,” he added.

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Jim Sinclair’s Commentary

Come on now. This is the work of the god of greed.

Goldman Sachs and Others Investigated for Betting Against Securities They Created
Sunday, December 27, 2009

Betting against their own securities has prompted numerous investigations of Goldman Sachs and other Wall Street institutions. Prior to the financial collapse, Goldman and others figured out a way to package risky securities, such as subprime mortgages, and sell them to investors who were told they were buying sound investments. Little did the investors know that the firms selling the synthetic collateralized debt obligations (or CDOs) turned around and bet that the CDOs would fail—costing pension funds and insurance companies billions of dollars.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, toldThe New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

In addition to Goldman, CDOs were sold and bet against by Deutsche Bank, Morgan Stanley and Tricadia Inc.—an investment company whose parent firm’s CDO management committee was overseen by Lee Sachs. Sachs is now a special counselor to Treasury Secretary Timothy Geithner

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Jim Sinclair’s Commentary

This is the preparation for increased aid to the Saudis.

Two weeks ago the West fired cruise missiles into Yemen as the Saudis were making no headway. That sounds like a joint Western- Saudi operation may be on the horizon.

Yemen, a crucial country to Al Qaeda according to experts
27 December, 2009 03:48:00

PARIS – By claiming to have been equipped and trained in Yemen, the apprentice Nigerian terrorist who tried to blow up an Airbus over the United States last Friday, illustrates the importance of this country for Al-Qaeda, experts say.

According to a U.S. federal quoted by CNN, Abdul Farouk Abdulmutallab (or Oumar Farouk Abdulmutallab), 23, would immediately after his arrest, say acting on behalf of Osama bin Laden and that he had gone for equipment and instruction in Yemen.

For Bernard Haykel, a specialist in the Arabian Peninsula at the American University of Princeton, "it is indisputable that Yemen has become increasingly important for Al-Qaeda".

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Jim Sinclair’s Commentary

When stimulation is monetarily and fiscally aimed at business and not finance, something might actually happen.

It might also help to novate the OTC derivative poison – not provide the funds to make the winner whole while bankrupting the two main losers.

China likely to overtake Germany as world’s largest exporter in 2009: official
www.chinaview.cn 2009-12-27 22:20:01

BEIJING, Dec. 27 (Xinhua) — China is likely to replace Germany to be the world’s largest exporter in 2009, said a senior Chinese commerce official.

Zhong Shan, vice minister of Ministry of Commerce (MOC), made the forecast during an economic forum held at the University of International Business and Economics in Beijing on Sunday.

Zhong said 2009 has been the most difficult year for China’s foreign trade, featuring weak demand on the international market and rising trade protectionism.

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Jim Sinclair’s Commentary

Look who is providing energy for Kenya.

Tanzania power link to ease energy crisis
By WALTER MENYA
Posted Monday, December 28 2009 at 00:00

Attempts by Kenya to avert an energy crisis have received a boost with the announcement of plans to set up a power link with Tanzania.

Already, preliminary studies are underway to pave way for the interlinking, according to Desire Nzayanga, the power sector specialist at the Nile Basin Initiative (NBI) at a recent workshop in Arusha.

The workshop’s theme was Providing Energy for Africa’s Growth.

It was one of the four held to mark the 10th anniversary of NBI.

Mr Nzayanga said that the line linking Nairobi to Arusha was one of a series of interconnections lined up for countries in the Nile Basin.

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Jim Sinclair’s Commentary

Although generally ignored by myopic Wall Street and silent media attention, this problem is getting very close to going DEFCON 5.

Maverick Iraqi politician claims Iran could go nuclear within weeks
By HEATHER ROBINSON, SPECIAL TO THE JERUSALEM POST 
Iraqi parliamentarian Mithal al-Alusi is warning that Iran is much closer to attainingnuclear capability than most sources, including the International Atomic Energy Agency and the US State Department, believe. In fact, he predicts the Iranians could have anuclear capability – and may announce that they have it – as soon as next month.

"We are receiving information whichsays Iran is so close to producing an atom bomb," Alusi said in an interview earlier this month, the latest in a series of interviews conducted since September. "All the international community, they don’t realize how close [the Iranians] are to the goal… The Iranians will surprise us one day [soon] and say, ‘We have it.’"

Alusi said he cannot reveal his sources of this information, because that would place in grave and imminent danger individuals within the Iranian "establishment" who risked their lives to share it with him.

"I am talking about Iranian insider information. Very clear, from inside Iran," he said. "There are people within Iran who want to be normal… They know this is a dangerous regime. You see how they treat their own people… Iran is terrorizing the world already. What will they do once they have the bomb and they are stronger?"

Asked whether his sources are members of the Iranian government, or Iranian nuclearscientists, Alusi said he could not be more specific, but that they are "people who are part of the system in Iran, but [who] do know how dangerous it will be if the fascists are in control. They are wanting a normal situation to live, and they know this might be their last chance."

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Jim Sinclair’s Commentary

Prepare for reprisals. If a strike is coming they would follow anywhere.

Israel summons envoys from all over the world
Sat, 26 Dec 2009 01:59:39 GMT

Israel’s ambassadors and consuls generals from all over the world have been summoned to attend a conference to be held over global challenges facing Israel.

The meeting to be attended in Jerusalem Al-Quds on December 27-31 is hosted by the Ministry of Foreign Affairs, headed by Deputy Prime Minister and Foreign Minister Avigdor Lieberman, the ministry reported on its website.

"The idea is to facilitate direct dialogue with the country’s leaders, mutual updates on major diplomatic issues, and a discussion of action plans to deal with the challenges awaiting Israel in the international arena in the coming year, including the Iranian threat," it said.

This is while Israeli Prime Minister Benjamin Netanyahu has called a report by the UN Human Rights Council’s Gaza commission a real threat to Israel.

The UN Special Rappoteur for the occupied Palestinian Territories has also urged western powers to push Israel to end its blockade of the Gaza Strip immediately. Richard Falk also called for economic sanctions against Israel.

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Jim Sinclair’s Commentary

If I was in Yemen, I would dig a cave.

Incident Reported on Another Amsterdam-to-Detroit Flight
By MICHELINE MAYNARD and ELISABETH BUMILLER
Published: December 27, 2009

DETROIT — The pilots of Northwest Airlines Flight 253 from Amsterdam to Detroit — the same flight involved in Friday’s terrorism attempt — requested emergency assistance Sunday upon landing in Detroit, an airport spokesman said.

The crew had requested police assistance on the ground because a passenger was “verbally disruptive,” according to a statement from Delta Airlines, which acquired Northwest last year.

The Transportation Safety Administration said in a statement that it had been alerted to a “disruptive passenger on board” Flight 253. The T.S.A. said that the flight landed safely at Detroit International Airport at approximately 12:35 p.m. Eastern “without incident.”

“ The aircraft has been moved to a remote location for additional screening,” the agency said. “T.S.A. and law enforcement met the aircraft upon arrival, the passenger is now in custody.”

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Jim Sinclair’s Commentary

Today in Pakistan.

The fellow with the beard is the good guy. Can you imagine what the bad guy looks like?

Six killed in militant attack in northwest Pakistan
Javed Hussain
Sun Dec 27, 2009 3:06am EST





PARACHINAR, Pakistan (Reuters) – Pakistani militants blew up a government official’s house in the Kurram region on the Afghan border on Sunday, killing him and five other people, local government and security officials said.

The attack in the Sadda area, which killed junior local official Sarfraz Khan, as well as his son, appeared to be part of a bloody campaign waged by al Qaeda-linked militants battling the civilian government of President Asif Ali Zardari, seen as pro-American.

Security has been beefed up across the country for Ashura, the biggest event on Shi’ite Muslims’ calendar and a flashpoint for deadly attacks by Sunni militants in recent years.

The pre-dawn attack on Khan’s home was not related to sectarian violence in predominantly Sunni Muslim Pakistan, and could be a reaction to an ongoing military crackdown on Taliban militants in the region, officials said.

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Jim Sinclair’s Commentary

The Toronto Sun says:

"Now Washington is getting the Democracy it has been calling for in Pakistan — and it’s the mother of all backfires."

U.S. turbulence buffets Pakistan
Corruption and anti-American fury unravels troubled country
By ERIC MARGOLIS
Last Updated: 20th December 2009, 5:58am

On my office wall hang photos of yours truly with Pakistan’s last four leaders. Two — Zia ul Haq and Benazir Bhutto — were murdered. Former prime minister Nawaz Sharif was ousted in a military coup led by photo number four, Gen. Pervez Musharraf, who was deposed by Pakistan’s military in a slow-motion coup.

Either I’m a jinx, or leading Pakistan is a job with poor career prospects.

Now, Washington is finally getting the democracy it has been calling for in Pakistan — and it’s the mother of all backfires.

I’ve not met Pakistan’s current president, Asif Ali Zardari, the widower of Benazir Bhutto. But I’ve written for decades about corruption charges that relentlessly follow him. Zardari, known as "Mr. 10%" from when he was in his wife’s government, was in charge of approving government contracts.

In 2008, Washington sought to rescue Musharraf’s foundering dictatorship by convincing the popular but exiled Benazir Bhutto to front as democratic window-dressing for continued military rule. Her price: Amnesty for a long list of corruption charges against her and her husband.

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Jim Sinclair’s Commentary

Back to the Future from the NYT.

Officials Point to Suspect’s Claim of Qaeda Ties in Yemen
By ERIC SCHMITT and ERIC LIPTON
The Nigerian man charged in a failed attack on a jet told investigators that he had obtained the explosives from an expert in Yemen linked to Al Qaeda. The suspect’s father had warned the U.S. about his son.

Passengers’ Quick Action Halted Attack
By SCOTT SHANE and ERIC LIPTON
Despite the billions spent on counterterrorism efforts since 2001, something simpler averted disaster on a Christmas Day flight.