In The News Today

View the original post at jsmineset.com...
December 28, 2009 10:00 AM

Dear Friends,

The gold bears are out today as the aired 2010 predictions are being issued by talking heads.

Some pro-gold stars like Mark Faber and Jim Rogers are being interviewed every day and are predicting a dollar rally. That is scary to those that have followed them and is making them emotional.

This is the end of the year and there isn’t a market for much right now. There is profit taking on gold spreads as taxes on commodity trades as regular income are anticipated to rise meaningfully in the near future.

The ease in the US dollar is being considered as yearend as most predictors are friendly to the dollar short term.

The London markets are closed today

In the grand scheme of things this period is quintessence in its meaningless nature. Stay the course.

Respectfully yours,
Jim







Jim Sinclair’s Commentary

Get those electronic printing presses prepared for "QE to Infinity."

There is no other alternative from the political standpoint. 2008 and 2009 stand witness to that fact.

Once started QE cannot end until it moves to its hyper-inflationary implications.

Stay the course and ignore the Fabers, Rogers, Buffets and Soros PR hounds baying at the moon.

Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold… Or Else
By: Tyler Durden** Saturday, December 26, 2009 12:52 PM

As everyone is engrossed by assorted groundless Christmas (and other ongoing bear market) rallies, and oblivious to the debt monsters hiding in both the closet and under the bed, Zero Hedge has decided it is about time to present the ugliest truth faced by our ‘intellectual superiors’ and their Wall Street henchman who succeeded in pulling off Goal #1 for 2009 – the biggest ever bonus season (forget record bonuses in 2010… in fact, scratch any bonuses next year if what is likely to transpire in the upcoming 12 months does in fact occur).

If someone asks you what happened in 2009, the answer is simple – two things. There was a huge credit and liquidity crunch, and then there was Quantitative Easing. The last is the Fed’s equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy. It worked for a while, but now the zombie is about to go back into critical, followed by comatose, and lastly, undead (and 401(k)-depleting) condition.

In 2009, total supply of all USD denominated fixed income, net of maturities, declined by $300 billion from $2.05 trillion to $1.75 trillion. This makes sense: the abovementioned crunches stopped the flow of credit from January until well into April, and generally firms were unwilling to demonstrate to the market how clothless they are by hitting the capital markets until well into Q2 if not Q3. What happened was a move so drastic by the Fed, that into November, the worst of the worst High Yield names were freely upsizing dividend recap deals (see CCU) – the very same greed and stupidity that brought us here. Luckily, so far securitization and CDOs have not made a dramatic entrance. They likely will, at which point it will be time to buy a one-way ticket for either our southern or northern neighbor, both of which, in the supremest of ironies, transact in a currency that will survive long after the dollar is dead and buried.

Back to the math… And here is the kicker. Accounting for securities purchased by the Fed, which effectively made the market in the Treasury, the agency and MBS arenas, but also served to "drain duration" from the broader US$ fixed income market, the stunning result is that net issuance in 2009 was only $200 billion. Take a second to digest that.

More…



Jim Sinclair’s Commentary

Add Yemen to this equation.


*

Jim Sinclair’s Commentary

A hand for the Saudis. Where is the front?

Wars cost fortunes but are great business.

Yemen: the new front in the fight against terror
Posted : Mon, 28 Dec 2009 18:16:09 GMT

Cairo/Sana’a – The trail of the foiled terrorist attempt to blow up a packed Northwest Airlines flight to Detroit on Christmas Day appears to lead to Yemen. At least the suspected attacker, Umar Farouk Abdulmutallab, 23, of Nigeria, has said in initial interrogation that al-Qaeda had trained him in Yemen and provided him with the explosive device.

The poorhouse of the Arab world has suddenly come to the centre of international media attention. Will Yemen become the next front in the so-called "War on Terror?"

With its impenetrable mountain ranges and rocky deserts, its tribes and clans following ancient laws of honour, Yemen does indeed provide an ideal terrain for terrorist training camps.

Corrupt government agencies, undermined by Islamists, hardly control more than the capital Sana’a. They are overburdened by the armed Shiite Houthis rebels in the north-west part of the country, and a growing secessionist movement in the formerly Socialist south. On top of this comes the diminishing oil and water supplies, glaring poverty, and the absence of modern infrastructure.

The father of Osama bin Laden got his start in Yemen’s Hadhramaut region, eventually becoming a billionaire in the building industry in neighboring Saudi Arabia.

More…

*



Jim Sinclair’s Commentary

When the longer bonds fall due to dollar/currency reasons, it becomes bullish for gold as the last pillar. In 1968 to 1980 the 10 year return rose from under 3% to 14 7/8% as gold went from $40 to $887.50

Morgan Stanley Sees 5.5% Note as U.S. Faces Deficits*
By Oliver Biggadike and Daniel Kruger

Dec. 28 (Bloomberg) — If Morgan Stanley is right, the best sale of U.S. Treasuries for 2010 may be the short sale.

Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.

Investors are demanding higher returns on government debt, boosting rates this month by the most since January, on concern President Barack Obama’s attempt to revive economic growth with record spending will keep the deficit at $1 trillion. Rising borrowing costs risk jeopardizing a recovery from a plunge in the residential mortgage market that led to the worst global recession in six decades.

“When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after yourself,” Greenlaw said in a telephone interview. “Market signals will ultimately spur some policy action but I’m not naive enough to think it will be a very pleasant environment.”

Yields on the 3.375 percent notes maturing in November 2019 climbed 4 basis points to 3.84 percent at 11 a.m. in London today, according to BGCantor Market Data. The price fell 10/32 to 96 5/32. They have risen 65 basis points this month, the most since April 2004, as government efforts to unfreeze global credit markets lessened the appeal of the securities as a haven.

More…



Jim Sinclair’s Commentary

So much for jawboning increasing lending by the financial industry.

Home equity lines have dried up across U.S.
As home prices collapse, banks cut off credit, further souring the economy
updated 10:04 a.m. MT, Sun., Dec . 27, 2009

Borrowing on the home for quick cash is a lot harder than it used to be in the United States, and it’s causing headaches for homeowners, banks and the economy.

During the housing boom, millions of people borrowed against the value of their homes to remodel kitchens, finish basements, pay off credit cards, buy TVs or cars, and finance educations. Banks encouraged the borrowing, touting in ads how easy it is to unlock the cash in their homes to "live richly" and "seize your someday."

Now, the days of tapping your house for easy money have gone the way of soaring home prices. A quarter of all homeowners are ineligible for home equity loans because they owe more on their mortgage than what the house is worth. Those who have equity in their homes are finding banks far more stingy. Many with home-equity loans are seeing their credit limits reduced dramatically.

The sharp pullback is dragging on the U.S. economy, household budgets and banks’ books. And it’s another sign that the consumer spending binge that powered the economy through most of the decade is unlikely to return anytime soon.

More…



Jim Sinclair’s Commentary

Many states have simply run out of funds for unemployment.

Cash-strapped US running out of unemployment money
Sun, 27 Dec 2009 18:59:15 GMT

Twenty-five US states are running out of federal funds to pay unemployment benefits to jobless Americans.

According to The Washington Post, currently 25 states have been forced to borrow USD 25 billion from the federal government to keep their unemployed a float.

The Department of Labor estimates that by 2011 some 40 states will have run out of employment money and will be in need of borrowing USD 90 billion from the federal government.

State authorities currently have two options: Raising taxes or shrinking aid payments.

However, government consultant Leonard Simon says the federal government must create jobs at the state level. "It is surprising to see how wide spread it is" he said.

More…



Jim Sinclair’s Commentary

The 2006 Formula marches on.





Jim Sinclair’s Commentary

The US dollar has no fundamental legs outside of MOPE.

The dollar will support gold on its way to $1650 and beyond.

Asia’s Central Bankers Say It with Gold
By David Roman
The Wall Street Journal
Monday, December 28, 2009

Strong dollar equals falling gold price, right?

Except, perhaps, when Asia’s central bankers are involved.

Three-quarters of the region’s $5 trillion in foreign-exchange holdings are parked in U.S. dollars. A desire to diversify away from the greenback, though, has become evident. The dollar’s share in reserve accumulation dropped to less than 30% in the third quarter, Barclays Capital estimates.

Admittedly, knowing exactly what is in central bank reserves takes guesswork, but analysts think most diversification in 2009 favored the euro.

Recently gold has turned up as a second alternative. The Reserve Bank of India stirred markets when it revealed it purchased 200 tons of gold from the International Monetary Fund in October, increasing gold’s share of central bank reserves to 6.4% from 3.6%.

Even if other central banks don’t start making large purchases like India’s, they will likely remain a substantial buyer as reserves continue to pile up. In the 12 months through November, the banks added around $800 billion to their foreign-exchange holdings, a side effect of their efforts to slow the appreciation of local currencies.

More…



Jim Sinclair’s Commentary

When you hear about problems with some Euroland nations, think California with many states to follow behind them.

Small-business bankruptcies rise 81% in California
With credit tight and consumers still pinching their pennies, many business owners find they can’t go on.
By Nathan Olivarez-Giles
December 22, 2009

The Obama administration’s new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation’s economy is stabilizing.

As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration’s office of advocacy.

"While bankruptcies are up, overall, small-business closures are up even more," Headd said.

California has been particularly hard hit. The latest data show small-business bankruptcies up 81% in the state for the 12 months ended Sept. 30, compared with the previous year. Filings nationwide were up 44%, according to the credit analysis firm Equifax Inc.

The actual number of small businesses in trouble is probably higher, experts said, because many owners file for personal bankruptcy rather than seek protection for the business.

More…



Jim Sinclair’s Commentary

Asia is going to lead the world in growth on any period of recovery.

This has implications for gold.

How China Might Buy More Gold Than America Owns
Vincent Fernando | Dec. 23, 2009, 2:02 PM

China has a long way to go before coming anywhere near America’s gold reserves.

Yet apparently it’s on their to-do list and a must, at least according to the country’s China Gold Association.

Commodity Online: In 1981, China had 395 tonnes of gold holdings; it increased to 500.8 tonnes in 2001, and 600 tonnes in 2002. In April 2009, China officially announced that it has increased its gold holdings to 1054 tonnes. Since then, Chinese officials and People’s Bank of China have been meticulously chalking out plans to build up gold reserves in the next one decade.

According to Zhang of the China Gold Association (CGA), India’s decision to buy IMF gold has been the real boost for China’s recent spirited moves to step up gold reserves.

“In view of the declining US dollar value, it is paramount that China steps up gold reserves. How to do this is the only question that China is debating these days. The possible steps include opening up new gold mines, aggressively going for gold mining, buying gold from the open market etc. All said and done, it is imperative that China needs to buy more gold,” Zhang points out.

More…



Jim Sinclair’s Commentary

Today in Pakistan:

Deadly blast targets Shiite procession in Pakistan
December 28, 2009 — Updated 1613 GMT (0013 HKT)

Islamabad, Pakistan (CNN) — Thirty people were killed and more than 50 others were wounded Monday in a suicide blast targeting a Shiite procession in Pakistan’s financial capital of Karachi, officials said.

Fifteen of those injured were in critical condition, Sagheer Ahmed, minister of health for Sindh province, told CNN.

The blast took place on M.A. Jinnah Road where thousands of Shiite devotees were commemorating Ashura, a major religious observance, said police Inspector Mahmood Ahmed.

Ashura marks the death anniversary of Imam Hussein, grandson of Prophet Mohammed. Hussein, who was killed in battle in Karbala in 680 A.D., is regarded as a martyr — and the battle is one of the events that helped create the schism between Sunnis and Shiites, the two main Muslim religious movements.

Religious mourning during Ashura is characterized by people chanting, beating their breasts in penance, cutting themselves with daggers or swords and whipping themselves in synchronized moves.

Shias are a minority in Pakistan.

A day earlier, a suicide bomber blew himself up at the entrance to a mosque in Muzaffarabad in northeast Pakistan.

More…


Jim Sinclair’s Commentary

Accordingly China is buying up Africa while the West directs its deficit spending to bailout the OTC derivative winners.

When you have no plan, you are the most unsuccessful because you get absolutely nothing done. China has a 100 year ongoing plan.

China’s commodity imports continue to soar
China is set to become the world’s largest consumer of platinum this year.
G. Chandrashekhar

With its voracious appetite for a whole range of commodities including energy products, base metals and precious metals, as well as agriculture, China continues to amaze the global commodity market participants.

In no small measure has the Asian major’s import demand for a wide variety of commodities to meet its internal consumption requirement been a key driver of the remarkable recovery the markets have witnessed in recent months.

Latest data confirm the dominant role China plays in the marketplace.

No doubt, there have been concerns expressed from time to time about the possibility of China importing excessively, which may result in slowdown that could affect prices adversely.

However, consumption as reflected in macro-economic data and expanding domestic output suggest that domestic demand continues to strengthen despite brief periods of weakness and doubt.

This raises the expectation that China’s import and consumption demand for a wide range of commodities would continue to expand or in any case remain strong in 2010. When taken together with wide spread anticipation of demand recovery emerging in major OECD economies, the China story assumes greater significance for commodity producers and consumers.

More…