Tao Economics

Dear CIGAs,

More tax cuts and more voodoo economics, a replay of the Mugabe/Zimbabwe approach to manufacturing paper and the dropping of tax revenue produce at best a double dip depression and more fiscal spending. It is simply more of the same. Doing the same produces the same, nothing else. Any other opinion is madness while grabbing at political solutions to real problems.

The fix was engineered by the Comex guys as they handed you your daily screwing yet again today at 7:02am in the NYC morning. Apparently the Comex guys got up a tad late today - perhaps still suffering from weekend hangovers.

Minus $23 in gold and a three cent change in the euro are simply more signs of the madness that is virulent in the mind of markets. As the fat shark eats the fat shark we end up with very few fat hedge fund sharks running markets. Nobody can do business when major trading currencies change 2.7% in five minutes. No major business on earth is smart enough to be able to maintain profit margins as the payment currencies change with such levels of violence.

Ignore the madness. Ignore the manipulators. Focus on the real. More of the same by a different personality will not produce different results. The dollar is dead. That is reality.

Let the paper tigers of the Comex pound the paper while you take delivery out of the warehouse and the big physical buyers just keep cleaning up and weak hand selling. I went to the Krugerrand and RSA gold factory between Johannesburg and Pretoria. All I heard was this great sucking noise as demand across the globe continued to take whatever the mints were able or willing to produce.

It is a total joke to assume that printing more paper money and spending what you do not have will strengthen that currency and set all that is askew right.

It simply will not, cannot, never has done and never will do anything but deepen the problem.

Let the nit-wits play in their in their boxes made on sand foundations. Let the media howl as they add only to their Tower of Babble.

Join me in this grand battle to end white collar crime and the white collar criminals. Take delivery of Comex gold, move it out of the Comex warehouse, sell it in the open market with a profit or even break even and do it all again and again and again. 1000 of us doing that by buying breaks like today will slice the Comex warehouse inventory in half in six months, maybe a lot sooner. War requires warriors.

Please join myself, Harry, Bill M , Jim P, Semper Fi # 321 and all the good guys, regardless of disagreements that come from time to time, in this great battle to protect our people.

Stop the rape! Stop the manipulations. Stop the takers, the users and the destroyers in gold. Stop paper money by getting the paper guys off gold. Stop those who believe they have dominion over you. I have had it, haven’t you? Where is your rage? You can borrow some of mine as I have plenty to spare. Let today be the day they screwed with the wrong people.

Your weapon is simple: 100 ounces out of the Comex warehouse bought when the paper guys beat it all to crap. Hold it and sell into the next rally in the cash market away from the Comex. Do it over and over again.

Take a stand please. It can get lonely out here from time to time.

The following is total nonsense and insanity according to Einstein’s description. The absolute best it can deliver is the bear market rally after the 1929 break, leading to the double dip depression and then on to the secondary (and more serious) market and phycological break of the awful 32 bottom.

All this strategy will do is spark the greatest inflation in the dollar’s history. Right now in reality, it is not worth a Continental.

You either fix the entire system, or there is no fix at all. This is why Obama’s team will never call me.

This is what a Canadian, Dr. Reuven Brenner, could do for them.

Dollar Rises Against Euro, Yen on Obama Plan for U.S. Stimulus
By Anchalee Worrachate and Stanley White

Jan. 5 (Bloomberg) — The dollar rose against the euro and the yen on speculation President-elect Barack Obama’s fiscal stimulus will help the U.S. economy recover from the recession.

The dollar climbed to the highest level in almost three weeks against the European currency and gained against 15 out of the 16 most actively traded counterparts monitored by Bloomberg. Obama crafted a package of infrastructure spending and tax cuts to create three million jobs. The euro fell after European Central Bank Vice President Lucas Papademos said further interest-rate cuts may be needed should inflation keep slowing.

“Obama’s stimulus package came in at a higher end of expectations, and is skewed more towards tax cuts than has been expected,” said Adam Cole, London-based head of global currency strategy at Royal Bank of Canada Ltd., the nation’s largest lender. “That’s positive for dollar sentiment. Moves might be exaggerated a bit because trading volumes in the market are still quite thin.”

The dollar strengthened to $1.3644 per euro at 7:02 a.m. in New York, from $1.3921 on Jan. 2. One dollar bought 93.32 yen, from 91.83 yen. The U.S. currency will strengthen to 98 yen by the end of June, according to Cole. It traded at $1.4515 to the British pound, from $1.4548.

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Obama Said to Push for Tax Cuts in Stimulus Plan (Update1)
By Brian Faler and Ryan J. Donmoyer

Jan. 5 (Bloomberg) — President-elect Barack Obama’s economic stimulus package will include hundreds of billions of dollars worth of tax breaks for individuals and businesses, according to a transition official and Democratic aides.

Obama is asking that tax cuts make up 40 percent of a stimulus package, the people say. The measure may be worth as much as $775 billion, a Democratic aide says, meaning tax cuts may constitute more than $300 billion of the legislation.

The dollar today rose to the highest level in almost three weeks against the euro and also surged against the yen on speculation that the Obama plan would help the U.S. economy recover from recession.

Making tax cuts such a large part of the stimulus may help win support from congressional Republicans. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said his party would support an immediate middle-class tax cut as part of any stimulus package.

“Republicans, by and large, think tax relief is a great way to get money to people immediately,” McConnell said yesterday on ABC’s “This Week.”

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Click here to read about Dr. Brenner…

Dear CIGAs,

Ok, I am not shy. Mugabe move over, here comes the US Federal Reserve.

Zimbabwe will happen in the US. The dollar is going to tank like never before!!!

Consequences, consequences, consequences. They are unavoidable.

The US dollar is not worth a Continental. This is just how Zimbabwe today started!

Fed has abandoned monetary policy, critic says
Sat Jan 3, 2009 9:58pm EST

SAN FRANCISCO (Reuters) - The Federal Reserve has embarked on a campaign of unsupervised industrial policy to end the country’s financial crisis, a move that could undermine its independence, a former top U.S. official said on Saturday.

John Taylor, who was under secretary of treasury for international affairs from 2001 to 2005, said the explosive growth of the Fed’s balance sheet since September was "unbelievable."

"This doesn’t really seem like quantitative easing in the sense of finding a growth rate in the money supply," he told a panel discussion during the annual meeting of the American Economics Association.

"What you are looking at now is really being determined by other considerations. How much should we buy of mortgage-backed securities? How much should we loan to foreign central banks? This is really more like an industrial policy," he said.

The Fed’s balance sheet has more than doubled in size to over $1.2 trillion in recent months as it has tried to shield the U.S. economy from the worst financial crisis since the Great Depression by supporting key credit markets.

This has included direct purchases of mortgage-backed bonds by the Fed and support for top-rated non-financial borrowers in the crucial commercial paper market, as well as hundreds of billions of dollars lent to banks on the basis of collateral.

"If you have a situation where the Fed is borrowing to invest in all these sectors it seems to me you have a huge governance issue…that demands a lot of thought," Taylor said.

Taylor said the U.S. Congress has a legitimate right to demand a say in who the Fed lends money to. The outcome would be "radical reform" that would risk monetary policy independence, he said.

This concern was echoed somewhat by the president of the St Louis Federal Reserve Bank, James Bullard, who also took part in the panel discussion. He said the close collaboration between the Fed and U.S. Treasury in fighting the crisis could have unintended consequences.

"We are blurring the institutional arrangements a little," Bullard said. "I am concerned about independence. Fed independence is very important," he told reporters.

(Reporting by Alister Bull, editing by Leslie Adler)

Link to article…

Jim Sinclair’s Commentary

The following reasons offered at a press conference of the NY Fed (not really) assure us that Zimbabwe/Mugabe economics will never occur in the USA.

1. There was no theft of funds here.
2. The use of the trillions of dollar of bailout money is totally transparent.
3. Those that caused the problems have been dealt with severely.
4. The Balance Sheet of the US Fed is pristine.
5. The Fed will of course mop up all the excess liquidity as soon as they get set up as the Miraculous Hedge Fund, retaining goofy Madoff as their manager floating $5 trillion in the internal US credit market as China opts out.

Zimbabwe’s money man plans to keep on printing
January 1 2009

The activists print anti-Gono fliers in English and Shona and target people standing in line at banks to withdraw money. They feature cartoons of Gono loading Reserve Bank money into the back of cars or gulping down feasts, usually with his foot on a child’s skeleton.

"IT’S YOUR MONEY — TAKE IT NOW!" screams one flier.

"IF GONO STAYS WE WILL ALL DIE!" bellows another.

"Gono is the weak link in the Mugabe regime because he’s become incredibly powerful and incredibly bloated, and he’s got very few friends in the system," said one activist involved in the project, who spoke anonymously for fear of reprisals. "No ministry can get access to cash without going to Gono. He controls everything. He’s become this power-mad individual who’s loathed by the whole country."

He said other members of the group regarded the GonoGoNow project as their most dangerous anti-regime activity. "They think Gono would kill over this," said the activist.

Gono recently launched his book, "Zimbabwe’s Casino Economy," dashed off in 60 days. In an economy where most U.S. dollar transactions are banned, his book is priced at $40.

Tony Hawkins, an independent Harare-based economist whose citation awarding Gono an MBA distinction is appended, these days describes Gono’s performance as "disastrous."

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Jim Sinclair’s Commentary

Pakistan today!

India Set to Show Pakistan Links to Mumbai Attacks, Times Says
By Jay Shankar

Jan. 4 (Bloomberg) — India will release evidence next week of Pakistani involvement in the terrorist attacks on Mumbai, the Times of India reported, citing officials it didn’t identify.

A detailed confession by the lone surviving terrorist, Ajmal Kasab, will highlight a report to be delivered to India-based diplomats of the U.S., U.K., China and other countries, as well as to officials in foreign capitals, the newspaper reported. A copy will also be given to Pakistan, it said.

The report includes photographs and identities of all 10 terrorists, phone logs, data from a global positioning system device and call intercepts, the paper said.

Other evidence includes a logbook recovered from the vessel that carried the terrorists from Karachi, records of satellite phones used by the attackers and transcripts of conversations between the terrorists and their “handlers” in Pakistan during the Nov. 26-29 attack, the Times reported, quoting government sources it didn’t identify.

The U.S. Federal Bureau of Investigation was granted “unprecedented” access to all the evidence and intelligence collected by India, according to the newspaper.

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Jim Sinclair’s Commentary

Remember the comparative interest rate gang that declared that to be the sole determinant of a currency’s value? Where have those bulls all gone?

Evans says Fed needs to mimic below-zero rates
Sat Jan 3, 2009 9:37pm EST
By Ros Krasny

SAN FRANCISCO (Reuters) - A grim economic outlook highlights the need for the Federal Reserve to step up quantitative measures to boost growth, with official interest rates already effectively at zero, Charles Evans, president of the Chicago Fed, said on Saturday.

Evans said that based on the outlook for rising unemployment, falling industrial production and a wider output gap, economic models suggest rates should be below zero.

"If it were not constrained by zero, those models would want to push it below zero, but that’s not possible," Evans told reporters after a panel at the American Economic Association’s meeting in San Francisco.

Quantitative easing, a way to flood the banking system with large amounts of money, "is a way to mimic below-zero rates and provide support to the economy," he said.

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Dear CIGAs,

The following is breaking news from CIGA Tom.

http://www.youtube.com/watch?v=sxBl9BXLom4

Dear Jim,

Just one little spark could blow this whole thing sky high and gold and oil with it!

Best,
CIGA BT

‘Light the fire’ order set Mumbai ablaze

Evidence is growing that the bombings were orchestrated by militants in Pakistan

TENSIONS between India and Pakistan, the rival nuclear powers, are on a knife edge this weekend as Islamabad refuses to admit that the Mumbai terrorist outrage was planned and carried out by Pakistanis.

Zarar Shah, a leading commander of the Lashkar-e-Taiba group, has admitted under interrogation in Pakistan that he advised the terrorists by telephone as the attack unfolded.

Controllers in Pakistan watched live television and warned the gunmen of the arrival of Indian commandos, according to evidence amassed by the FBI and handed over to the Pakistani government.

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Dear Big Tatanka,

Yes, in a big way.

Regards,
Jim

Dear Jim,

It looks like a longer drawn out conflict with Israel. Barak says "it won’t be short and it won’t be easy." Tens of thousands is not a week long incursion! Freezing in Ukraine, Europe soon, bombs in the Middle East, Tanzania looks pretty good right now!

Israel okays call-up of tens of thousands of IDF reservists
By Barak Ravid, Haaretz Correspondent, and Reuters

Israel’s government has approved the call-up of tens of thousands of reservist soldiers, it was annnounced Saturday, almost simultaneously with the launch of a Gaza ground incursion aimed at halting rocket fire on Israel’s southern communities.

Prime Minister Ehud Olmert’s office said in a statement that, in accordance with a secret cabinet discussion Friday, the government ordered the armed forces "to draft the necessary reservists, on a scale of tens of thousands of troops."

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IDF soldier killed, another seriously wounded in Gaza ground operation
By Amos Harel, Yoav Stern and Yanir Yagana, Haaretz Correspondents, and News Agencies

An Israeli soldier was killed in a clash with Gaza militants on Sunday, the first fatality suffered by Israel since it launched a ground operation on Saturday night against the coastal territory’s Hamas rulers.

The soldier, from the Israel Defense Forces Golani infantry brigade, was killed in the densely populated Jabalya refugee camp in the northern Gaza Strip.

More…

Best,
CIGA Big Tatanka

Dear BT,

Looking your way today from Africa, it certainly looks that way.

a. Israel makes a serious mistake in judgment.
b. Pakistan goes nuclear.
c. Terror returns to major international centers.

There is potential for something terrible looking your way.

Regards,
Jim

Dear CIGAs,

A misjudgment by Israel, Pakistan goes nuclear and 2012 is tomorrow. If this is not it, it is close.

Israeli tanks roll into Gaza strip as ground invasion begins
BY ERICA SILVERMAN in Ramallah, West Bank and CHRISTINA BOYLE in New York
DAILY NEWS WRITERS
Updated Saturday, January 3rd 2009, 7:18 PM

Israeli troops and tanks crossed into the Gaza Strip under the cover of darkness Saturday, signaling the start of a bloody ground offensive that military leaders warned would not be short.

Hamas, which seized control of Gaza a year and a half ago and has been attacking Israel with rockets, responded with defiant threats.

"We will fight till our last breath. Your invasion of Gaza will not be a cakewalk. Gaza will be your cemetery," Hamas spokesman Ismail Radwan said.

Israeli officials called up tens of thousands of reservists and warned the incursion would not end quickly.

"It won’t be easy and it won’t be short," Defense Minister Ehud Barak said in a televised address. "We do not seek war, but we will not abandon our citizens to the ongoing Hamas attacks."

More… 

Israel’s Worst Fears
Its U.S. ambassador says the big threat is that Iran has almost enough fuel for its first nuclear weapon.
Published Jan 3, 2009
From the magazine issue dated Jan 12, 2009

Sallai Meridor has been Israel’s ambassador to the United States since 2006. During that time, his government’s main strategic worry has been Iran, and that remains so today despite the fighting in Gaza. Israel warns that Iran is making rapid progress toward a nuclear bomb—Meridor calculates that Tehran should have enough fuel for its first bomb sometime in 2009—and that Israel will take military action unless the United States and other allies step in. A former intelligence officer, Meridor recently met with NEWSWEEK editors in New York to discuss Iran and how best to deal with it. Excerpts:

NEWSWEEK: Is there a timetable on Iran’s nuclear program? The CIA is saying they could have a weapon by 2015.
MERIDOR: Look, this is the most critical issue for America and the Western world. The major concern is instability and the potential for nuclear weapons to escape the region, which is not necessarily going to wait until Iran has a nuclear warhead on a missile. The closer they get to having a bomb, and the closer they are perceived to be, you can expect Iran’s neighbors to start acting on the assumption that Iran is going to have a bomb.

How close is Iran?
The last IAEA [International Atomic Energy Agency] report, some weeks ago, indicated that the Iranians already have 630 kilograms of low-enriched uranium. The previous report found 480 kilograms. At that pace they are producing close to 2.5 kilograms a day. And over the past few months they have had a technological breakthrough. Experts differ on how much low-enriched uranium you need for a first bomb. But even if you took the more conservative assumption, sometime in 2009 they will have enough. That nobody would argue against: no intelligence service, no experts.

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Jim’s Formula:
September 1, 2006

1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.

2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella - Goldilocks situations.

3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.

4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.

5. Lower profits leads to lower Federal Tax revenues.

6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.

7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.

8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).

9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.

10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.

11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.

12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.

U.S. Debt Expected To Soar This Year
$2 Trillion Increase May Test Federal Ability to Borrow
By Lori Montgomery
Washington Post Staff Writer 
Saturday, January 3, 2009; Page A01

With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world’s appetite for financing U.S. government spending.

For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world’s mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.

But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.

With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.

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Jim Sinclair’s Commentary

This is one way to cut down on public assistance. Starve our fixed income retirees out of the equation.

Savers facing accounts with no interest
Millions of savers are braced for zero per cent accounts within days as the Bank of England is poised to cut interest rates to the lowest level in its 315-year history.
By Edmund Conway and Myra Butterworth
Last Updated: 1:44PM GMT 03 Jan 2009

Experts have warned the return on savings could plumb new depths with the Bank expected to take unprecedented steps to regain control over the economy.

They widely believe the Bank will reduce borrowing costs to below their 2 per cent level - and possibly all the way down to 1 per cent - in its first meeting of the year next week.

More than 7 million people have saving accounts which already pay interest of 1 per cent or less. If a cut is passed on in full by banks, these accounts will dive towards negative territory for the first time on record.

Many elderly people who rely on the income from savings have found themselves struggling in recent months as returns fall.

Just 18 months ago average interest rates on savings accounts were as high as 6 per cent. But consecutive cuts by the Bank’s Monetary Policy Committee have led to banks slashing their savings rates, with the current average rate being just 2 per cent.

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Dear Jim,

What? There is a bottomless pit of money? Unbelievable!

Regards,
Green Hornet

(Click images to enlarge)

U.S. governors seek $1 trillion federal assistance
Fri Jan 2, 2009 5:48pm EST
By Jon Hurdle

PHILADELPHIA (Reuters) - Governors of five U.S. states urged the federal government to provide $1 trillion in aid to the country’s 50 states to help pay for education, welfare and infrastructure as states struggle with steep budget deficits amid a deepening recession.

The governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin — all Democrats — said the initiative for the two-year aid package was backed by other governors and follows a meeting in December where governors called on President-elect Barack Obama to help them maintain services in the face of slumping revenues.

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Dear Green Hornet,

No, there is no bottomless pit of money!

There is a bottomless pit of worthless PAPER. This is the thesis of Mugabe/Zimbabwe economics, and will have the same results as applied by Mugabee/Zimbabwe.

The reality is that yes, the Zimbabwe paper pit is quite possible in the US dollar scenario. It is not only possible but getting closer to probable with each event as discussed below. Wake Up!

Break the "illusion" and see the "real" situation. It is just that SIMPLE.

People believe the Illusion to be real and the real to be an illusion until they WAKE UP!

I have only one agenda here.

WAKE UP!

Jim

Jim,

I’m slipping under the radar this month. We’re buying January Comex gold for delivery and removal from the Comex warehouse. We found this little tidbit out when Trader Dan told me about his November delivery, so we are taking the gold out as fast as possible. Hope this helps

CIGA JB Slear
Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Dear JB,

"When COMETS Unite"

I have a small story for you. I used to keep fish in my office as a hobby. In the Asian tradition, having an Arawanas is very good luck. This type of fish looks like a WW2 landing craft. It has a snake like body and an landing craft mouth.

You feed Arawanas little fish. The entire procedure is rather gross, but hey, for good luck the gross might be worth it.

One day I brought home the usual little plastic bag full of wiggling Arawanas food.

These little wiggling guys actually organized and attacked the Arawanas all at once. Together they ate off his fins. Now I had a fin-less Arawanas floating helplessly upside down.

It did not take long for the Arawanas to perish for his sins against the little wiggling guys.

The name of the food that an Arawanas eats is "COMETS." I am not joking.

I was so impressed by these courageous COMETS that I let them live long and prosper in the dead arawanas’s 150 gallon tank. They had earned their good life. They eat harmless dead dried flies.

The moral of this TRUE story is that when COMETs unite they can kill anything of any size, no matter how dreadful looking it is.

For an Arawanas to be good luck, they cannot be exposed to united Comets. Comets are better luck than any Arawanas. This is certainly true for my COMETS!

The ugly Arawanas is a COMEX paper gold manipulative short seller. We are the COMETS!

Jim

Jim Sinclair’s Commentary

The following was sent in courtesy of CIGA Carey:

Forrest Gump Explains Mortgage Backed Securities

Mortgage Backed Securities are like boxes of chocolates.
- Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds.
- Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates.
- These boxes were then sold all over the world to investors.
- Eventually somebody bites into a turd and discovers the crime.
- Suddenly nobody trusts American chocolates anymore worldwide.
- Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal.
- Mama always said: "Sniff the chocolates first Forrest".

To our friends at the Comex, I say:

"Utinam barbari spatium proprium tuum invadant!" (May barbarians invade your personal space!)
–Complimentus Via CIGA Rusty Bayonetium

Jim Sinclair’s Commentary

The ABSOLUTE END of the hedge fund era is spelled "MADOFF."

SEC Said to Probe More Ponzi Schemes After Madoff Disclosures
By David Scheer

Jan. 2 (Bloomberg) — U.S. regulators working to untangle Bernard Madoff’s alleged $50 billion Ponzi scheme are probing other money managers suspected of using similar tactics, two people with knowledge of the inquiries said.

The U.S. Securities and Exchange Commission is pursuing at least one case in which investors may have been cheated out of as much as $1 billion, according to one person, who declined to name the manager and asked not to be identified because the probe isn’t public.

Regulators may discover additional Ponzi arrangements as declining stock markets prompt investors to withdraw their cash and they question how their money is being managed. This week, the SEC said it halted what the agency described as a $23 million scam targeting Haitian-Americans, and said the Florida- based operators had tried as recently as last month to bring in more investors.

Investigators haven’t found evidence the suspected frauds are of the same magnitude as in the Madoff case, which would be the biggest of its kind in history, the people said. In a Ponzi scheme, early investors are typically paid with money from later participants.

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Madoff Mess Is Nothing New
William P. Barrett, 12.18.08, 06:00 PM EST
Forbes Magazine dated January 12, 2009

The scope of the unfolding Bernard L. Madoff scandal– $50 billion and counting–is breathtaking. But aside from the extra zeros, little about it is new. In fact, the ploys and plays on human nature that Madoff used to pull off his brash heist have a long, infamous history.

The Reputation Ruse
Madoff was the former chairman of Nasdaq and thus a trusted Wall Street wheel. Investors counted on his reputation, rather than on diligent inspection of his audits, to safeguard their money.

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Biggest Bums Of 2008
Robert Lenzner
12.24.08, 03:38 PM EST

It’s hard to surpass Bernie Madoff for being a bum, but several executves and highly placed officials come awfully close.

The biggest bum of 2008 (and for decades prior) is Bernard Madoff, whose knavish duplicity betrayed the trust of small and large investors across the globe. The Madoff Ponzi scheme is a criminal act that has decimated important foundations like the Picower and destroyed the wealth of widows and orphans.

Our bums list should include those conspirators in this scheme (family or otherwise), the handful of investors who claim they knew it was a scam but did not inform the government (they know who they are), the greedy fools behind the feeder funds that facilitated Bernie at his cheating (our sympathy to the family of Rene-Thierry Magon de la Villehuchet, the investment manager who lost more than $1 billion with Madoff and took his own life two days before Christmas).

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L’Oreal Family Mixed In With Madoff
Javier Espinoza, 12.24.08, 10:40 AM EST

Fortune of billionaire heiress Liliane Bettencourt may have been exposed to Wall Street fraudster Bernard Madoff.

Liliane Bettencourt, the billionaire heiress to the L’Oreal cosmetics empire, may have become the latest victim of Bernard Madoff’s Ponzi scheme. Bettencourt entrusted part of her $22.9 billion fortune to the alleged Wall Street fraudster through a fund managed by New York-based Access International Advisors, press reports said on Wednesday. It is the second time this month Bettencourt has hit the headlines for financial reasons, having earlier provoked ire from her daughter for offering part of her fortune to a photographer friend.

According to French market regulator Autorite des Marches Financier, a total 500.0 million euros ($699.5 million) from approximately 100 French funds were exposed to Madoff’s fraud, out of which 40.0 million euros ($55.9 million) came from private individuals.

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Madoff Investor Reportedly Kills Self
Andrew Farrell, 12.23.08, 04:50 PM EST

French aristocrat who managed money in New York dies, apparently by his own hand.

The fallout from Bernie Madoff’s alleged massive Ponzi scheme is far more than financial. Thierry Magon de La Villehuchet, a fund manager who invested with Madoff, apparently committed suicide at his office.

De La Villehuchet, found dead this morning, was co-founder and chief executive of Access International Advisors, which had invested $1.4 billion with Madoff.

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Could SEC Have Stopped Madoff Scam In 1992?
Liz Moyer, 12.23.08, 03:22 PM EST

An investigation into a feeder fund could have led the agency toward unearthing the fraud.

In the unfolding tale of Bernard Madoff’s alleged $50 billion Ponzi scheme, feeder firms have grabbed much of the focus.

They get their name because they marketed the funds that held the assets ultimately managed by Madoff. Lawsuits are filling the courthouses as burned investors attempt to recoup at least some of their losses from the firms. Last week New York Law School sued Ascot Partners, run by GMAC Financial Services Chairman Ezra Merkin, for losing $3 million of its money to Madoff. Other Ascot investors, including Mort Zuckerman, are expected to follow. Ascot reportedly steered $1.8 billion of client money to Madoff.

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Blumenthal May Investigate Charities Ripped Off By Madoff
Carrie Coolidge, 12.22.08, 06:30 PM EST

Connecticut’s attorney general is looking at whether trustees did required due diligence.

The list of victims who have fallen prey to Bernie Madoff’s alleged $50 billion Ponzi scheme is growing longer by the day. Among its victims are countless nonprofit organizations, ranging from Yeshiva University and Tufts University to the North Shore-Long Island Jewish Health System Foundation.

Now at least one attorney general is asking for records to determine if trustees sitting on nonprofit boards failed to perform their fiduciary responsibility to do proper due diligence.

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Jim Sinclair’s Commentary

Hey, if Enron can shred the trades why pick on goofy Madoff?

Fund Manager Ordered Not to Destroy Madoff Documents
DECEMBER 25, 2008, 11:50 A.M. ET

At a hearing Wednesday in New York state court, J. Ezra Merkin, the chairman of lender GMAC who runs funds that were invested with Bernard Madoff, was enjoined from concealing or destroying any documents related to Mr. Madoff.

Mr. Madoff was arrested for allegedly carrying out a massive fraud scheme that stretched back for decades and …

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Jim Sinclair’s Commentary

Axiom = Keep in mind that it is impossible to have a loser without either a CASH winner or a winner in position value.

QUESTION = Where have all the Trillions gone? The world according to Tarp!

WISDOM = As Forest Gump says, "That is all I have to say about that."

Jim Rogers: $700 Billion Banking Bailout is ‘Horrible Economics’
By William Patalon III
Executive Editor
Money Morning/The Money Map Report

Ask investing icon Jim Rogers about the $700 billion U.S. banking bailout, and he’ll tell you that it’s nothing but “horrible economics.”
And with good reason: Most of the major U.S. banks are already bankrupt.

“Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt,” Rogers said in a recent teleconference at the Reuters Investment Outlook 2009 Summit. “What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent. What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics.”

A long-time China bull, Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

It was after Rogers “retired” in 1980 that the investing masses first really got to see him in action. Rogers traveled the world (several times), and penned such bestsellers as “Investment Biker” and the recently released “A Bull in China.” He also made some historic market calls: Rogers predicted China’s meteoric growth a good decade before
it became apparent to everyone else, and he subsequently foretold of the powerful updraft in global commodities prices that’s fueled a year-long bull market in the agriculture, energy and mining sectors.

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Jim Sinclair’s Commentary

With one exception, energy, I agree with every point made. Think hyper - inflation and energy in dollars. Think Pakistan and energy. Outside of that - spot on!

Ten Major Threats Facing The Dollar in 2009
By: Eric deCarbonnel   Friday, January 02, 2009 11:12 AM

Ten major threats are facing the dollar in 2009.

1) Foreign central banks selling US assets

Most of the nations which have been financing the US’s massive current account deficits in recent years have either begun to sell their dollar reserves last year or are planning on selling them this year in order to support their currencies. These nations generally fall into three categories:

A) Oil Producing Nations

Oil producing nations have built up lavish spending habits and large dollar reserve in recent years as a result of profits from rising oil prices. Now that commodity prices have crashes, those profits are gone, and those Oil producing nations will have to bankroll their spending by selling their accumulated dollar assets. Saudi Arabia, for example, is projecting a 2009 Budget Deficit, which it intends to finance by selling off its US holdings. Russia, meanwhile, has already sold over 20% of its $598.1 billion reserves, and it can be expected to continue doing so this year.

B) Emerging markets that have been relying on capital flows to fund their trade deficits

Many emerging markets around the world have been running trade deficits in recent years financed by capital flows. The most prominent example from this group is India.

India’s strong capital flows from tourism, software services, and remittances not only financed its trade deficit, but also increased its foreign reserves to an all-time high of 316.2 billion in May of 2008. However, due to the global slowdown and selloff of emerging markets, those capital flows have now reversed. India’s central bank, for example, has been forced to sell off its US holdings to curb its currency’s decline, and its total reserves have decreased by $62.2 billion. The central bank’s dollar sales in October alone exceeded purchases by a record $18.7 billion. India now has $254 billion foreign reserves left, the majority of which will be sold this year to protect its currency.

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Jim Sinclair’s Commentary

Are the shorts listening? Will you be left behind or lose your behind?

Don’t Miss the Coming Gold Bull

With the massive monetary expansion experienced in recent months and the promise for unprecedented levels of money and credit supply increase in coming months, the United States Federal Reserve looks on paper to be sending America straight into hyperinflation. Germany’s post-World War I Weimar Republic, post-World War II Hungary, 2001 Argentina, and present day Zimbabwe are all analogous examples of massive debt monetization, which all led to hyperinflationary disaster. Never before has the entire world’s economy been linked to one nation’s, however, as is the case today with the United States.

In a case of economic mutually assured destruction, foreign creditor nations and their central banks can’t afford to spark a run on the US Dollar, because it would kill their own export-based economies, as well as devalue their debt repayments and foreign exchange reserves. But the United States has been financing consumption through debt for decades and has resorted to monetary expansion to finance its debt and deficit spending, which is only going to increase with Barack Obama’s infrastructure and social programs. The Troubled Assets Relief Program (TARP) itself amounts to $700B, all of which will essentially be "printed." Foreign demand for US debt is all but gone, as creditor nations are now attempting to unwind their USD positions. Huge creditor nations like China and Iran were net sellers of US Treasuries in recent months, attesting to the weakening of the American debt bubble. So where’s all this excess liquidity go?

The answer is gold, and it is the only way to prevent the hyperinflationary scenarios referenced above from materializing in the United States.

The Fed has been on a money printing binge of unprecedented proportions, but has been able to thus far "trap" the excess liquidity from reaching the consumer level, which is what causes price inflation. It started a massive foreign currency sale this summer through the Exchange Stabilization Fund (ESF) that led to a supply increase of Euros and suppression of dollar usage. It has been liquifying troubled banks by issuing them T-bills financed through monetization in exchange for toxic assets by utilizing reverse repurchase agreements. And it has used the recent deleveraging and commodity collapse (partially caused by credit defaults in many of the overleveraged institutions that were supporting the commodity bull) to supply the temporary demand for US Dollars and feeding its own foreign exchange reserves.

But the excess liquidity thus far is trapped in time-sensitive and manipulated instruments now, and without a demand for American debt, it has to go somewhere. As T-bills expire and the stock market descends further, actual currency is going to be released out of sequestration into the economy. The Fed cannot allow the market to breach below its November lows, unless it wants widespread insolvency in insurers and banks, which are legally required to halt operations in the event of insolvency. I’ve heard estimates of 7500 and 8000 in the Dow as being minimum support levels that, if broken for an extended time, would lead to economic collapse in America as financials would all go under. To prevent this and to finance Obama’s deficit spending, actual dollars will have to be injected into the system and they will be.

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Jim Sinclair’s Commentary

Law & Order - Special Victims Unit.

Paper gold has NO LIMIT, unless YOU and I limit it.

Join me in the Good Fight. Reduce the Comex warehouse holdings by 50%. Stop the daily price theft.

They did it this Africa morning again, yet they are paper tigers

More money, less Gold to push gold price to $2000
2009-01-02 10:55:00

Is more money chasing less and less gold every day? Yes, it is true. And that should be one reason why gold prices could zoom to a record $2000 levels in 2009!

According to a 2009 forecast from Mumbai-based Commtrendz Risk Management Services, all over the world broad money supplies in developed nations generally have an average growth rate of around 7% annually, while world gold supplies have hardly gone up by 1-2% over years.

In 2008, central banks around the world have acted in concert to lower interest rates to such levels that low interest rates themselves start to stimulate economies. The ECB, BOE has cut short-term interest rates by 0.75% to 2.5%, 1% to 2% respectively of late.

Japan and the US Interest rates are just about at zero. The fiscal spending programs of US could expand into multi trillions.

of dollars. The above efforts coupled with monetary stimulations in the form of direct injections into the money system, if happen to get the world out of deflationary grip could leave explosive inflationary situation on the back of high crude oil prices.

Nominal paper money increase will lead to inflationary push to whole commodities complex and crude oil should not escape from it.

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Jim Sinclair’s Commentary

Remember that thing called Jim’s Formula?

Cash-poor states eager for a piece of Obama plan
By BETH FOUHY

NEW YORK (AP) — President-elect Barack Obama’s plan to jolt the economy by overhauling the nation’s roads, bridges and transit systems has local officials clamoring for their share despite questions as to whether the program will actually work.

"California’s fiscal house is burning down," state Treasurer Bill Lockyer declared recently after a California regulatory board halted financing for some 1,600 infrastructure projects because of the state’s nearly $15 billion deficit.

California’s woes are far from unique, as the deepening economic crisis has wreaked havoc on state budgets across the country. At least 40 states are running deficits, forcing governors to raise taxes and trim spending while postponing urgent repairs to roads, bridges, hospitals and ports.

"Because of the downturn in revenues, we’re all starting to delay construction projects that are clearly maintenance. That risks public safety," said Maryland Gov. Martin O’Malley in an interview.

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Dear CIGAs,

I just watched Martin Feldstein on TV. He is head of the National Bureau of Economic Research and a highly respected economist. He is worried about the politicians ignoring inflation.

He says the US economy will bottom at best in early 2010. Like many rational non political economists, he is concerned about inflation as a result of a change in the makeup of the US political structure. I concur with him completely. We will be lucky to have an economy bottoming at the end of 2009. It may not bottom until mid 2010 or later. Much depends upon when and how much liquidity returns to the banking system.

In my opinion, the only highly visible market for appreciation at this time is foreign currencies and gold. World stock markets are getting a rally which we have expected and which may continue for a time, but the only visible long term bull market is in gold and foreign currencies.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

Jim Sinclair’s Commentary

What a disaster has befallen on the financial industry thanks to OTC Derivatives manufacturers, 158 year old Lehman and 95 year old Merrill. We are yet to witness the final chapter of this horror story which is the death of the US dollar with America’s permanent fall from grace.

Thank you to the army of geeks who still do not know what all the fuss is about, to management that counted their bonuses but knew nothing about derivatives and regulators that were not at home.

Merrill 95-Year Run Ends as Bank of America Buys Firm
By Zachary R. Mider

Jan. 1 (Bloomberg) — Merrill Lynch & Co.’s 95-year run as an independent company is coming to an end as Bank of America Corp. completed its acquisition of the broker for about $33 billion in stock.

Bank of America, the biggest U.S. home lender, closed the purchase today, the Charlotte, North Carolina-based company said in a PRNewswire statement. Scana Corp., South Carolina’s biggest utility owner, will replace New York-based Merrill Lynch in the Standard & Poor’s 500 Index.

Merrill Lynch was founded by Charles E. Merrill in January 1914 and evolved into the world’s biggest brokerage, with an army of 17,000 financial advisers. After more than $50 billion of losses and writedowns tied to the collapse of the U.S. subprime mortgage market, Merrill agreed in September to a sale, escaping the fate of bankrupt Lehman Brothers Holdings Inc.

Bank of America, led by Chief Executive Officer Kenneth Lewis, 61, plans to cut 30,000 to 35,000 positions from the combined companies in the next three years because of the merger and a weak U.S. economy. Merrill CEO John Thain, 53, will remain as president of investment banking, trading and brokerage.

Bank of America rose 84 cents, or 6.3 percent, to $14.08 yesterday in New York Stock Exchange composite trading, valuing Merrill shares at $12.10 in the stock-for-stock exchange. That’s 88 percent less than their high of $97.53 in January 2007.

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Jim Sinclair’s Commentary

There is something so obviously wrong with all this, yet the public remains quiet.

Government aid could save U.S. newspapers, spark debate
Wed Dec 31, 2008 6:50pm EST
By Robert MacMillan - Analysis

NEW YORK (Reuters) - Connecticut lawmaker Frank Nicastro sees saving the local newspaper as his duty. But others think he and his colleagues are setting a worrisome precedent for government involvement in the U.S. press.

Nicastro represents Connecticut’s 79th assembly district, which includes Bristol, a city of about 61,000 people outside Hartford, the state capital. Its paper, The Bristol Press, may fold within days, along with The Herald in nearby New Britain.

That is because publisher Journal Register, in danger of being crushed under hundreds of millions of dollars of debt, says it cannot afford to keep them open anymore.

Nicastro and fellow legislators want the papers to survive, and petitioned the state government to do something about it. "The media is a vitally important part of America," he said, particularly local papers that cover news ignored by big papers and television and radio stations.

To some experts, that sounds like a bailout, a word that resurfaced this year after the U.S. government agreed to give hundreds of billions of dollars to the automobile and financial sectors.

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Jim Sinclair’s Commentary

Who dun it?

Pakistani Militants Admit Role in Siege, Official Says
By RICHARD A. OPPEL JR. and SALMAN MASOOD
Published: December 31, 2008

ISLAMABAD, Pakistan — Pakistani authorities have obtained confessions from members of the Pakistani militant group Lashkar-e-Taiba that they were involved in the terrorist attacks in Mumbai in November that killed more than 160 people, a Pakistani official said.

The confessions are sure to put pressure on Pakistan’s leaders; senior Pakistani officials have repeatedly complained in recent weeks that India had not provided them evidence of Pakistani complicity.

American and British officials — and Indian investigators — have said for weeks that their intelligence clearly points to the involvement of Lashkar in the Mumbai attacks. That evidence has been deeply uncomfortable for Pakistan, whose premier spy agency, the Directorate for Inter-Services Intelligence, helped create, finance and train Lashkar in the 1980s to fight a proxy war against Indian forces in the Indian-controlled portion of Kashmir.

But now, after weeks of stonewalling, it also seems clear that Pakistan may use its investigation to make the case that the Mumbai attackers were not part of a conspiracy carried out with the spy agency, known as the ISI, but that the militants were operating on their own and outside the control of government agents.

The most talkative of the senior Lashkar leaders being interrogated is said to be Zarrar Shah, the Pakistani official said. American intelligence officials say they believe that Mr. Shah, the group’s communications chief, has served as a conduit between Lashkar and the ISI. His close ties to the agency and his admission of involvement in the attacks are sure to be unsettling for the government and its spy agency.

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Jim Sinclair’s Commentary

Happy New Year Pakistan. Obama plans a massive troop increase?

Afghanistan and Pakistan take center stage in 2009
Under Obama, the US may send 20,000 more troops and encourage talks with the Taliban in an effort to reclaim the upper hand in Afghanistan.
By Anand Gopal | Correspondent of The Christian Science Monitor
from the January 2, 2009 edition

Kabul, Afghanistan - At times in 2008 Afghanistan eclipsed Iraq in levels of violence, and international attention is returning to the country for the first time since 2001. With the Obama administration planning a massive troop increase, Afghanistan and Pakistan look to be at the center of the administration’s foreign policy for 2009.

What is at stake?

In 2008, violence reached record levels across the country – there were 50 percent more insurgent attacks in the first seven months of 2008 than in the same period in 2007, according to Agency Coordinating Body for Afghan Relief (ACBAR), a Kabul-based aid organization. Insurgents are "conservatively estimated to be active in over 35 percent of the country," says Nic Lee of the Afghan NGO Safety Office, a Kabul-based nongovernmental organization. The Taliban and its allied movements effectively control large parts to the Pashtun-dominated south and east, including many districts close to Kabul. Nearly as many international troops have been killed in Afghanistan this year as in Iraq, despite the fact that almost twice as many soldiers are deployed in Iraq.

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Jim Sinclair’s Commentary

There is no moral will to face the problem and revamp the system therefore there is no possible chance of avoiding hyper-dollar-inflation. Simply NO chance!

Treasury Opens Door to Aid for Broad Array of Firms, Industries
By Rebecca Christie

Jan. 1 (Bloomberg) — The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry.

The Treasury’s guidelines, published yesterday, would let officials provide funds to any company they deem important to making or financing cars. That leaves room for the government to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC.

“There are going to be other industries that are going to have just as good a case,” as the auto companies, former St. Louis Federal Reserve Bank President William Poole said in an interview on Bloomberg Television. “We don’t know what those other industries are going to be. Where does this process stop?”

Shares of auto suppliers including American Axle & Manufacturing Holdings Inc. and Lear Corp. jumped yesterday after Treasury announced the guidelines. The Motor & Equipment Manufacturers Association has been lobbying for the use of federal funds as a backstop in case parts makers can’t collect money the auto manufacturers owe them.

Analysts have speculated that companies such as GM’s bankrupt former parts unit Delphi Corp., might be eligible for assistance. The Treasury guidelines may encourage more guessing on what companies and industries are next, said Vincent Reinhart, resident scholar at the American Enterprise Institute in Washington.

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Dear Jim,

It seems Iceland, Hungary, Ukraine, Latvia, and Pakistan and now Belarus have all gotten loans from the IMF. What happens when there is no money left at the IMF?

Best,
Ciga Big Tatanka

IMF agrees $2.5bn for Belarus
Belarus has secured an emergency loan of $2.5bn (£1.74bn) from the International Monetary Fund.
By Ambrose Evans-Pritchard
Last Updated: 8:48AM GMT 01 Jan 2009

It becomes the sixth country after Iceland, Hungary, Ukraine, Latvia, and Pakistan to need a rescue since the crisis began.

The ex-Soviet state - still run by strongman Alexander Lukashenko - has suffered a run on its foreign reserves as the economic downturn engulfs Eastern Europe. The country’s key exports are potash fertilizer and oil products, both hit hard by the commodity crash.

The IMF’s chief, Dominique Strauss-Kahn, said the tough terms of the bail-out include "strict public-sector wage restraint" and cuts in state spending. Russia has pledged a further $2bn.#

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Dear CIGA BT,

The answer is quite simple. The US Fed will buy the 6 or more worthless loans and print more US dollar paper to re-paper the papered out IMF.

The Fed is the largest hedge fund in town and is loaded to the gills with worthless paper. Who knows, the Fed then issues bonds and buys more crap. The dollar has already gone wacko in tune with the Fed’s whacked out inventory, turning the dollar into a spinning wheat fly in the fall season that goes 9000 rpm in a blurred circle and dies, totally worn out by making its central bank a toxic land fill.

Even a nit-wit has to see where all this is going.

There is now no way out of the web of messes our masters have woven.

Happy (?) New Year,
Jim

Click here to view today’s Gold Year End charts in various currencies with commentary from Trader Dan Norcini

Dear CIGAs,

2008 IS BEHIND US…MANY ARE THANKFUL

We would like to take this opportunity to wish you a very happy, healthy, prosperous New Year.

OUR OUTLOOK FOR 2009

A) The U.S. dollar will decline in 2009.  This is a lynchpin for several investments.

B) Precious metals and grain commodities have bottomed.  These are priced in dollars…as the dollar declines their prices will rise. 

The above predictions are strongly held views.  The next prediction depends upon events that are still unfolding, therefore we are waiting to establish the timing for this prediction.

C) Many stock markets will bottom in 2009, due to the fact that they have become very cheap.  We will watch them and gauge their attractiveness based upon a number of fundamental and technical variables.  We believe that when the bottoms do occur, they will be followed by rallies, which will carry many markets much higher.  We do not believe that the time has arrived for most markets, but some markets may soon be ready for purchase.  We plan to keep our readers updated on our views about the proper time to buy.

A) WHY THE U.S. DOLLAR WILL DECLINE IN 2009

We have been pointing out in our recent letters that a huge increase in the supply of U.S. bonds is necessary to finance the U.S. budget deficits, the bail out of world banking system, and president elect Obama’s plan to create jobs for three million people within two years.  If the dollar weakens as we predict, foreign currency bonds denominated in strong currencies will be good investments.

Argument 1: THE U.S. NEEDS TO ATTRACT BUYERS FOR THEIR BONDS.

To attract buyers for the huge supply of bonds, the U.S. will have to either cut the value of the dollar, or raise the interest rates the bonds pay.  Because the Federal Reserve and Treasury Department’s plan to bailout the banking system relies on low interest rates, rates will stay low.  Thus, the U.S. dollar will again be under pressure.

Argument 2: THE CHINESE ARE SENDING A STRONG SIGNAL …THEY BELIEVE THAT THE U.S. DOLLAR WILL DECLINE.

Recently, we have been hearing general disbelief in the future value of the U.S. dollar from China, the holder of the largest amount of U.S. bonds (and the expected buyer for most of the new bonds to be sold).  In recent weeks, several key Chinese officials have made negative comments about the U.S. dollar.  The first official comments were that China will not make new investments in U.S. banks, because they wanted to spend the money on growth within China.  A second senior official said that the U.S. should not get complacent, and continue to believe that dollar would stay high just because it had been rising for a few months.  The third comment was made this past week in Hong Kong’s largest newspaper, the South China Morning Post.  It was made by Chinese Central Bank governor Zhou Ziaochuan.  He said, "The U.S. dollar is unlikely to be stable next year and later…and the likelihood of the United States issuing more money in the near future adds to the depreciation risk in the U.S.-dollar-denominated assets and trade settlement."

This is typical Chinese behavior.  They repeat the message in different media through different senior officials.  China obviously believes that the recent rally in the U.S. dollar will not continue, probably because they will be buying less U.S. dollar debt.  I believe all investors should face the fact that China, who has been the largest buyer of U.S. debt, will be buying less of it in the future.  If they do buy U.S. debt, they will want a cheaper dollar before making any commitment.  This adds strength to our view that the U.S. dollar will fall in 2009.

Argument 3. RESTARTING THE ECONOMY IN THE U.S. WILL STRESS THE U.S. BUDGET FURTHER

A suggestion for President elect Obama:
If you want your program of revitalization to have quicker effects…employ tax cuts.  Cuts in withholding taxes will immediately stimulate economic growth.  Of course, tax cuts will mean more bonds will have to be floated to cover budget deficits, but many new bonds are being floated anyway.  In our opinion, tax cuts will work better.  Business will recover more quickly, and people will get more productive jobs. 

Although infrastructure projects would fill a national need, they have historically been slow to effect economic growth.  Much of Japan’s "lost decade" of stagnant economic growth (which really lasted over 13 years), has been blamed on placing too much dependence on infrastructure projects to stimulate the economy.  By our estimation, it will take at least three years to employ three million people with steady paychecks.  It will probably take one year just to identify and begin implementing the truly good projects, and to avoid the useless projects proposed by local officials.  It could take two additional years to plan and ramp up employment for those projects that are approved.  Every state, county, and city will have their own pet projects.  Each must be vetted to avoid pork barrel projects such as building golf courses, and local swimming pools, instead of roads, schools, energy infrastructure, and information superhighways.

B) PRECIOUS METALS AND GRAINS HAVE BOTTOMED IN PRICE

PRECIOUS METALS-Precious metals provide some security in periods of war, economic hardship, and financial folly.  Currently, all three are part of the landscape. 
· War:  Israel, Palestine, Iraq, Pakistan, Afghanistan, maybe Iran, and…India?
· Economic Hardship:  Currently, we are experiencing the worst economy since the Great Depression in the developed world.
· Financial Folly:  Here are a few candidates; the banking system collapse, the mortgage loan scandals, the mortgage derivatives crisis…we could go on and on.

In addition, the U.S. dollar will weaken, which raises the price of gold in U.S. dollar terms even if the gold remains constant in price against other currencies.  Gold acts as a currency.

GRAINS-The world’s growing population needs to eat, and grain stockpiles are low.  Expected global grain production will be moderate this year, and grain stockpiles will be even lower in a few months.  Grains are also priced in U.S. dollars and will benefit as the dollar falls in buying power.

C) STOCKS ARE GETTING CHEAPER ALL OVER THE GLOBE

The long bear market that global stocks have been experiencing, have made them much cheaper and more attractive for long term investment.  Based solely on current valuation, many are good values.  However, the backdrop of a weak world banking system, and a severe global economic slowdown makes judging value and timing purchases more difficult.

We must be sure that companies and countries have adequate capital and access to liquidity to continue to finance their ongoing activities.  The managements of the companies must be capable of operating in a challenging environment, and their products or services must have visible and enduring markets.  Fundamental economic variables, technical, and psychological variables will also enter into the valuation/timing question.  Some opportunities will be identified; we will wait patiently and review the evidence frequently.

In our opinion, 2009 could be regarded by history as a wonderful time to buy, certainly the psychology of fear today is the same psychology found at all major market bottoms.  We plan to continue our active portfolio management style; looking for and evaluating opportunities, investing when we find acceptable reward/risk, and managing the portfolios’ exposure.

Guild Investment Management is a service business.  We encourage our readers to contact us if you have questions about your investment portfolio, we will be happy to perform a portfolio evaluation for you at no cost.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Marty’s thought for 2009

"Doing more than is expected is what makes the difference between the exhilaration of achievement, and the acceptance of mediocrity."

Jim Sinclair’s Commentary

The "M" word has no place in the CIGA dictionary.

Jim Sinclair’s Commentary

Compliments of CIGA Ken:

Busted and Bloated Paradigms and New Paradigms to come, thoughts from Ciga Ken Drees with certs in hand

Busted
The stock market is where you need to be for the long term.
Just use an Index Fund.
Housing always goes up.
Get as much house as you can afford.
Just put that on the Home Equity Loan.
Big gas hog vehicles.
McMansions.
Flip this house.

Bloated and Soon to Bust
Just toss it out, it’s cheaper to buy a new one.
Just get a divorce.
I can’t move back in with Mom and Dad.
I can’t move in with my kids and burden them.
I thought money markets were safe.
You can always trust cash.
At least I can use my credit card if things get bad.
Gold, what’s that?
Don’t worry, Washington will fix it.
Driving habits, eg., people driving to and from work with no riders.
High Paid athletes.
Pro Sports.
The Pro Sports revenue model itself.
Obesity everywhere.
Food TV.
I eat what I want, when I want.
If you don’t like it, just toss it.
Undecided majors in college.
College affordability/high priced schools.
Just charge it.
My job is safe.
Our country can fight a war anywhere, anytime.
Just Bail em out.
Retail Consumerism.
Vacations.

NEW Paradigms to come
Understanding money and economic basics.
You cannot trust Wall Street (well underway)
Political scrutiny from the people.
I talk with my congressman at least once a month.
Taking an interest and getting involved in Government.
Caring about your Government.
Anger/frustration about the state of the nation.
The dollar is not worth very much.
Gold is where you want to be or should have been.
Prices are going up all the time (underway)
Shortages of food, gasoline, etc.
Spend the dollar quick before the price of that item goes even higher.
I never eat fast food.
Eating out is a luxury.
Wasting food is a no-no.
Making homemade bread.
Frugal is in.
Bling is out.
Owning a home is not smart.
Renting is the way to go.
No, we don’t have cable TV.
Small Local newspapers make a comeback.
Who can afford college?
I am lucky and blessed to be employed.
Going to church/temple is good to do for many reasons.
Gardening. (well underway)
Saving money in a safe medium.
3 meals a day, snacks anytime — those were the good old days.
Save the money first, then buy it.
We cannot afford to keep troops all over the globe.
It’s hard to get a credit card.
Yes, I know my neighbors, don’t you know yours?
Able to make basic plumbing and electrical repairs.
Going to the library.
Mechanical knowledge is very handy.
At least baseball is cheap again.

Dear CIGAs,

Gold closed out the year here in the US on an impressive note recouping nearly all of its intraday losses as trading neared the 11:00 AM hour. From that point on, it moved steadily higher. It should be noted that volume was so low you could have swung the turret of an Abrams tank around the trading floor and not hit a soul. Granted, that is a bit of an exaggeration but much of the usual crowd was not even on the floor today and were probably not even looking at the screens.

With the Dollar stronger and crude oil tending to the downside, it was pretty much a given that selling pressure was going to show up – that plus the fact that a particular well known newsletter writer decided to buy gold yesterday – alas for the bulls, that is generally good for a sell off as it occurs with predictable regularity. Dip buyers, who were watching the price action near the 10 day moving average, saw it hold and then moved in driving prices up nearly $30.00 off that level! The intraday recovery shows that buyers are in control of the gold pit for now.  It did not hurt matters any that crude oil began moving higher pushing well off its session lows.

Looking back over the past year gold performed remarkably well. With the exception of the bonds, it was one of the few if only markets that showed a gain. So much for the dire predictions of the gold bears including one warning about the feds knocking it all the way down to $400 based on some cockeyed entrails reading of Federal Reserve data. Such seem to forget or are unaware of gold’s role as a currency. When the de-leveraging trade and dollar repatriation that occurred as a result of that began to subside, the Dollar immediately ran out of steam and with that downward pressure on gold subsided. While gold can move independently of the US Dollar, it is still a given that the two are inseparably tied to one another in an inverse fashion.

By the way, on the continuous gold chart it closed out 2007 at $838.00 and ended 2008 at $883.60.  Once again another up year for ol’ yeller. The mining shares did not fare as well – the HIU closed last year (2007) at 409.37. As I write this it is trading near the 302 level. The XAU closed 2007 at 173.32. It is near 124 right now.

On the delivery front – we began the delivery process for the thinly traded January contract. While not as impressive as how December started off, (it should not be expected to be) a respectable 1,138 deliveries were assigned. The Bank of Nova Scotia was the big seller with 1,067 while J P Morgan Futures was the big buyer taking 1,072.

Open interest nudged back above the 300,000 level yesterday which is a good sign of returning speculative interest. Keep in mind that unless enough of these paper buyers will actually stand for delivery and take the gold out of the warehouse, the bullion banks will continue to plague the Comex market.

Technically gold is consolidating its last leg up while it waits for a full contingent of traders to return on Monday of next week. Resistance near the $880 level gave way right before the pit session closed with the next level of resistance above that near $888-$890. The breach of $880 was no mean feat. Support surfaced at today’s low near $860. Below that is $850 and then $838 - $835. Downsloping trendline resistance on the monthly chart comes in near the $910 level which gold will have to best in order to convince sideline sitters that a trending move to the upside is going to occur. If this month’s performance is any clue to gold’s price action as the calendar changes to 2009, it should start off on a solid footing with the technicals favoring the bulls especially with it being able to muster a close above $880.

I think it safe to say that those of us who have been trading 2008 will not forget this one. Memorable is an understatement. I do not ever recall seeing price swings and volatility of such extreme magnitude in my entire trading career. More than a few hedge funds are now history and they will not be back to plague the markets as they have done for so long. Some of the players involved in that industry seem to more closely resemble the famous Hydra of Greek mythology. Cut off one of its heads and two of them grow from the wound so it would not be unexpected to see them surface running another fund under a different name.

Bonds actually got whacked pretty good today. It is hard to say whether it is just longs booking gains for 2008 or a definitive top has formed. It is generally not a safe bet to make too many assumptions based on price action in these thinly-traded holiday markets. I watched the pork belly pit hit limit up today on a measly 10 lot buy order so take that as a bit of a caveat when looking at price action today.

I hope all our readers have a Happy, Healthy and Prosperous New Year in 2009.

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

Jim Sinclair’s Commentary

A hint for the market "Wise Guys."

We are so very close to the geopolitical event that will not be faded into the marketplace.

Definition: To "Fade" is to trade counter-trend.

1. Israel makes a miscalculation.
2. Pakistan goes nuclear.
3. Both of the above are 5th column operations, not in control of those in control.

Jim Sinclair’s Commentary

In a generic sense, and under no circumstances referring to the company below:

Is it paper gold, OTC derivatives written on gold by Lehman, Bear, UBS, or Gold as in the stuff that is heavy, shiny and .9995 pure or better?

Have you read the prospectus? If not, please do.

Only the Shadow knows!

Biggest Gold ETF Holds Its Weight
‘Positive Sign That Demand Is Firm’
By ALLEN SYKORA

Holdings in the world’s largest gold exchange-traded fund are at a record level as 2008 winds down, providing some healthy optimism for the market in coming months.

Metal held by SPDR Gold Shares (trading symbol GLD) climbed to 705.90 metric tons on July 11, before backing down to 614.35 in mid-September amid a liquidation selloff throughout the commodities complex. Since then, holdings are on the rise again.

The SPDR Web site shows the holdings at a record 775.33 metric tons each business day since Dec. 17. This represents an increase of 23.5% from 627.88 metric tons at the end of 2007.

Holdings in the world’s main silver ETF, iShares Silver Trust (SLV), are near their all-time high. They stand at 6,792.99 metric tons, not far below the peak of 6,901.41 in late September.

Rising ETF holdings are generally described as supportive for a commodity such as gold or silver, because it generates actual physical demand, analysts say.

More…

Jim Sinclair’s Commentary

Hamas is a side show compared to Pakistan. A fresh offensive against the militants? Who are you kidding?

India to Pakistan: Shut down terror camps
Tue, 30 Dec 2008 18:41:17 GMT

India calls on Pakistan to dismantle terror infrastructures on its soil and take an immediate action against those behind the Mumbai siege.

Foreign Minister Pranab Mukherjee on Tuesday demanded Pakistan to dismantle about 30 terrorist camps situated on the Line of Control in divided Kashmir.

Mukherjee also rejected Islamabad’s claim that New Delhi had mobilized its army and air force in the aftermath of November’s attacks, saying Indian forces had only conducted a routine annual winter exercise.

The minister also emphasized that India and Pakistan will exchange information and take confidence-building measures over the two neighbors’ nuclear capability on January 1.

Mukherjee insisted that India would continue to put pressure on Pakistan through diplomacy.

More…

Pakistan kills 3 in Afghan supply route operation
By RIAZ KHAN Associated Press Writer © 2008 The Associated Press
Dec. 31, 2008, 8:56AM

PESHAWAR, Pakistan — Pakistani troops killed three militants in an operation to secure the major supply route to U.S. and NATO troops in Afghanistan, an official said Wednesday.

The route through the famed Khyber Pass remained closed for a second day because of the operation but will hopefully reopen soon, said Fazal Mahmood, a local official.

The U.S. military has praised the campaign and said the temporary closure of the road was not a problem.

Western forces in landlocked Afghanistan rely on the winding, mountainous road for delivery of up to 75 percent of their fuel, food and other goods, which arrive in Pakistan via the port city of Karachi.

Militants have staged repeated attacks on supply convoys heading along the pass across Pakistan’s western border to Afghanistan, where fighting is escalating seven years after a U.S.-led invasion toppled the Taliban regime.

More…

Jim Sinclair’s Commentary

Beanno works. Happy New Year. Maybe I should say good night, and stop posting?

Russia-Ukraine gas talks ‘fail’

Talks to resolve a gas supply row between Ukraine and Russia have failed, the chief executive of Russian gas giant Gazprom has said.

Alexei Miller said gas supplies to Ukraine would be cut on Thursday but that Russia would do its best to guarantee supplies to Europe.

Russian PM Vladimir Putin earlier claimed that Ukraine would block supplies to Europe if no deal was done.

Ukraine denies owing money to Gazprom, and says it has guaranteed gas transit.

Russia said they would "fully, 100%" cut Ukraine’s supply from 0700 GMT.

There was no immediate comment from Ukrainian state energy firm Naftogaz.

More…

Jim Sinclair’s Commentary

The revenge of the blue collar backbone of nations.

Power to the people.

Vote NO to unbridled greed and white collar CRIME.

Buy ONE Gold coin, and take it home!

Investors dumping dollars, going for gold
12/31/2008
by Max Marbut

British poet George Gordon Noel Byron included that line in “Don Juan” early in the 17th century. That same sentiment is ringing true today for investors all over the world. As currency markets become unstable and projections head for the cellar, gold — one of the oldest measurements of wealth — is heading up in all forms.

The devaluation of the U.S. dollar has had a significant impact on the demand for, and therefore the price of, gold. A common way to invest in gold is to buy solid gold coins, which are struck by the U.S. Mint (part ot the U.S. Treasury Department) in West Point, N.Y. The Mint manufactures a variety of platinum, gold and silver coins in various denominations and weights up to the one-ounce American Eagle coins.

Each coin weighs 34.1 grams, with 32 grams (or 1 Troy ounce) of pure gold and an alloy metal which allows the metal to be durable enough to manufacture the coin.

The demand for the coins reached such a point in 2008 that those who sell gold coins were notified in November by the Mint that with the exception of the American Eagle Gold One-ounce and American Eagle Silver One-ounce bullion coins, all 2008-dated bullion coins have been depleted. Introduction of some new 2009 coins has also been pushed back.

The Mint can’t currently get enough of the “blanks” which are used to “strike” the coins, said U.S. Mint spokesperson Michael White. He described the 2008 demand for precious metal coins as “unprecedented.” In fact, after years of decreasing demand for the coins, demand tripled in 2008 compared to 2007 (see chart).

More…

Jim Sinclair’s Commentary

White collar crime is not the only cancer that GOLD fights.

Gold Nanoparticles Don’t Just Look Pretty, They Fight Cancer
Jason Mick (Blog) December 31, 2008 1:20 PM

Gold has fast become one of the most promising materials for building devices on a nanoscale level thanks to a number of favorable properties.  Among the applications of gold nanodevices is the use of gold particles to deliver drugs.  Gold nanoparticles range from small nanoclusters up to larger, more complex nanostructures.

MIT researchers used the latter to create one of the first examples of atwo-drug delivery system.

Frequently, medical problems such as AIDS or cancer are best combated by a mix of drugs; however, drugs typically have different intervals they have to be taken on.  Thus, merely injecting a mix of nanoparticles coated in or containing drugs would not be sufficient.  A more complex delivery system was needed.

The MIT researchers decided to make use of an important property of gold nanoparticles.  Gold nanoparticles, based on their size and shape melt when exposed to certain wavelengths of infrared light.  In the case of drug-carrying hollow gold nanoparticles, the melting process can release drugs at specific locations in the body.

To implement a two drug delivery, researchers used two types of large hollow nanoparticles — longer ones, which they nicknamed "nanobones", and shorter ones, which they nicknamed "nanocapsules".

More…

Dear CIGAs,

As I watch from Africa, I see the gold market set to open down $20 from what was the trading high a few moments prior to the Comex gang’s morning coffee and first computer entry. This happens between 1:30 and 2:30pm (5:30 to 6:30am in NYC).

How long are you going to remain the price property of the Comex as their “Pleasure Slaves,” getting your daily price raping before you bring in Bruce Willis in the pawn shop scene of the cult classic movie, “Pulp Fiction.” Remember, the visual theme of "Pulp Fiction" was the briefcase of unseen gold.

I have had it. Haven’t you? Where is your rage?

I do not support BUSTING anything. Any such statement is a blatant misunderstanding.

The Comex holds the rights to their game until you join me financially in the Final Challenge before the Golden Bull roars. Let the better players win!

I do support the reduction of the Comex warehouse by 50%. That is all we need to do to level the playing field.

Is there no Sheik or Scrapper out there tired of seeing the apple tree shaken, as I am? Poli-Poli and there will be no notice.

As long as you do not do your part then you are just leaning back and enjoying their having their way with you, day after day.

Will you not fight the good fight with me?

Jim

Jim Sinclair’s Commentary

Hamas is a side show compared to Pakistan. A fresh offensive against the militants? Who are you kidding?

India to Pakistan: Shut down terror camps
Tue, 30 Dec 2008 18:41:17 GMT

India calls on Pakistan to dismantle terror infrastructures on its soil and take an immediate action against those behind the Mumbai siege.

Foreign Minister Pranab Mukherjee on Tuesday demanded Pakistan to dismantle about 30 terrorist camps situated on the Line of Control in divided Kashmir.

Mukherjee also rejected Islamabad’s claim that New Delhi had mobilized its army and air force in the aftermath of November’s attacks, saying Indian forces had only conducted a routine annual winter exercise.

The minister also emphasized that India and Pakistan will exchange information and take confidence-building measures over the two neighbors’ nuclear capability on January 1.

Mukherjee insisted that India would continue to put pressure on Pakistan through diplomacy.

More…

Pakistan kills 3 in Afghan supply route operation
By RIAZ KHAN Associated Press Writer © 2008 The Associated Press
Dec. 31, 2008, 8:56AM

PESHAWAR, Pakistan — Pakistani troops killed three militants in an operation to secure the major supply route to U.S. and NATO troops in Afghanistan, an official said Wednesday.

The route through the famed Khyber Pass remained closed for a second day because of the operation but will hopefully reopen soon, said Fazal Mahmood, a local official.

The U.S. military has praised the campaign and said the temporary closure of the road was not a problem.

Western forces in landlocked Afghanistan rely on the winding, mountainous road for delivery of up to 75 percent of their fuel, food and other goods, which arrive in Pakistan via the port city of Karachi.

Militants have staged repeated attacks on supply convoys heading along the pass across Pakistan’s western border to Afghanistan, where fighting is escalating seven years after a U.S.-led invasion toppled the Taliban regime.

More…

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

Dear Jim,

Once again you’ve given us vital information months before there are whispers of it in the mainstream press. I give the AP a lot of credit for this unblinking look at the Taliban’s rise in Pakistan, several passages of which frankly gave me chills.

A good candidate for understatement of the year: "the regional government made a mistake in May when it struck a peace deal with the militants."

God help them (and us).

Best regards,
CIGA Richard B.

Scenic Pakistani valley falls to Taliban militants
By NAHAL TOOSI, Associated Press Writer
(Key paragraphs excerpted from article)

ISLAMABAD, Pakistan – Taliban militants are beheading and burning their way through Pakistan’s picturesque Swat Valley, and residents say the insurgents now control most of the mountainous region far from the lawless tribal areas where jihadists thrive…

The 3,500-square-mile Swat Valley lies less than 100 miles from the capital, Islamabad…

Most of the insurgents are easy to spot with long hair, beards, rifles, camouflage vests and running shoes. They number at most 2,000, according to people who were interviewed.

In some places, just a handful of insurgents can control a village. They rule by fear: beheading government sympathizers, blowing up bridges and demanding women wear all-encompassing burqas…

Several people interviewed said the regional government made a mistake in May when it struck a peace deal with the militants. The agreement fell apart within two months but let the insurgents regroup…

On Friday, Pakistani intelligence officials said thousands of troops were being shifted toward the border with India, which blames Pakistani militants for terrorist attacks in Mumbai last month that killed 164 people. But there has been no sign yet of a major buildup near India.

"The terrorists’ aim in Mumbai was precisely this — to get the Pakistani army to withdraw from the western border and mount operations on the east," said Ahmed Rashid, a journalist and author who has written extensively about militancy in the region.

"The terrorists are not going to be sitting still. They are not going to be adhering to any sort of cease-fire while the army takes on the Indian threat. They are going to occupy the vacuum the army will create."

More…