The End of a Powerful Week in Finance

The End of a Powerful Week in Finance Author: Jim Sinclair Posted On: Friday, January 18, 2008, 6:29:00 PM EST

 

Thursday the Chairman of the Federal Reserve expressed his support for a significant fiscal and monetary stimulus as a preemptive strike against a U.S. recession. The market answered by dropping over 300 points. Today  the President of the U.S. broadly outlined a non-specific plan for economic stimulation. After the Administration's plan for $150 billion of economic stimulation was made public, the DOW closed almost 60 points lower. The result of the Bernanke/Adminstration fiscal and monetary stimulus is a total Dow decline of 479 points, according to my calculations. Nothing said by either luminary addresses the problem, including those that developed this afternoon by the downgrade of the debt of Ambac, one of the four major bond insurers, MBIA, MGIC and similar companies dealing in OTC Default Derivatives. Should S&P and Moody take similar action, which is expected,  two trillion in debt should also be downgraded. The downgrade of the debt of the guarantor must impact the debt they have guaranteed. So the two trillion is debt that may well and should be downgraded now is another domino of titanic size. This afternoon's problems are new and their size says both Kings Are Wearing No Clothes" with respect to their presentations of Thursday and today. The general equities market must be calmed. Should the Dow crater, another major domino falls. Let's see how the PPT (Price Protection Team) brings the Dow in Tuesday morning in pre U.S. trading and then how Tuesday closes. The DOW better be higher each day than the indices are before U.S. trading or as the last two days demonstrated, the PPT has lost its tight control of the equities markets.  Watch the pre-open indices and closing Dow very closely. If the equity markets cannot be calmed then:    Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated. Gold will rise to $1650 as an almost immediate effect of what will be done to attempt to fend off a total panic starting to take place in general equities, therein threatening to be followed by all credit markets of all kinds. The funds and hotshot short term traders in gold shares will be killed by the upward explosion of the gold price about to occur. The PPT and the Fed will step out of gold's way because gold is one of the tools used in 1930 by Roosevelt and in 2000 by Bush. It will be used again now on the upside. Gold is the only insurance there is against what all this means because a panic in equities will blow the financial system, already coming apart, to smithereens. All country funds would shut down on any further investments in "at the wall" financial institutions. The rollover in credit and default derivatives would exceed the entire foreign debt of the USA. The rest of the $450 trillion dollar mountain of derivatives would start a disintegration like nothing you have every seen in your lifetime. Consumer demand would slam shut. The auto industry might as well go into liquidation this coming Monday, avoiding the June 2008 rush. The US dollar would burn a hole in the floor going directly to .5200 or lower. As the dollar disintegrates gold would rocket to and through $1650 in days. The markets for general equities would all have to institute total trading halts every 100 points on the downside for 30 minutes each. All commercial call loans would be called. All debtors one day late on any payment, lacking grace period, would be liquidated. All debtors over one day of the grace period would be liquidated. It is clearly visible to anyone with eyes or a mind to think that the PPT has lost all semblance of control in the equity markets and will soon in all remaining markets. The commercial paper credit market which is almost dead will die totally. Should no emergency action take place soon, you will see an old fashioned panic of the 1929 variety. Just as emotional fools sell gold and gold shares, be assured that more emotional general equity fools will unload and bring the averages down more than ever in history in one day. Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated. Emergency action will be all splash and theatrics but truthfully the cat is out of the bag. It buys some time but corrects nothing. It makes the Formula 100% correct. There now must be EMERGENCY ACTION because the Chairman of the Fed has BOMBED OUT PUBLICLY and a PANIC is about to occur. Expect EMERGENCY ACTION in days, not weeks. If you have not protected yourself, you may only have days to do so. Protection amounts to a simple act: As much as possible eliminate financial agents between you and your assets. Own gold or equivalents equal to one half of your liquid net worth. Then you insure your entire net worth. Do not have margin debt. If you have debt you must own gold fully paid equal to that debt to insure it.

http://www.jsmineset.com/

http://www.jsmineset.com/cwsimages/Miscfiles/5704_Dan18-01-08Fin.pdf Excellent charts from Trader Dan Norcini

Wall St. in trouble as dollar reaches all time lows

Citigroup & Merrill Lynch At Risk Of Bankruptcy?

Major Wall St. Banks LOSSES Exceed ASSETS

Merrill Lynch Under SEC Investigation

Citigroup and Merrill Lynch take drastic steps over subprime fallout

Tears on Wall Street

Examining the nature of the assets being written down suggests that we are not close to the end of Wall Street's bad news. Subprime mortgages and the asset-backed derivatives thereof form a large part of the write-offs, but even in this area we do not appear to be approaching the bottom of the cycle. If, as seems likely, my own August 2006 forecast of a 15-20% decline in house prices and a $1 trillion write-off from the $11 trillion in mortgage debt is close to accurate, Wall Street should still have several hundred billion to go, even in that area - total write-offs so far, including the new Citigroup and Merrill Lynch announcements, only just top $100 billion.

Merrill Lynch targetted in share investigation

We've run out of bubbles

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Revealed: a new bank rip-off

Some of Britain's biggest banks have unscrupulously exploited last month's base rate cut by failing to pass on the benefits to mortgage holders, yet at the same time imposing even bigger cuts on interest accruing to savings accounts.

http://money.independent.co.uk/personal_finance/invest_save/article3318006.ece

Customers may be able to win payouts of hundreds of millions of pounds from banks again this year.

http://money.independent.co.uk/personal_finance/loans_credit/article3318008.ece

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Fed pumping money, food crisis, taxpayer bailout of housing bubble

Forget oil, the new global crisis is food

the Fed is increasing its 'special auctions' to $30-billion to keep the banksters in the black

Citibank has instituted new ATM withdrawal limits

What will we do if big two go bust?

They don't know it, but taxpayers stand to lose billions as the housing bubble bursts. And in a bipartisan effort to "do something" to save the housing market, President Bush and the Democratic Congress appear set to put taxpayers on the hook for billions more.

IMF says dollar losing ground in global forex reserves

Loonie's rise may continue in '08, say experts

Record Oil, Dollar Fear

OIL HITS $100; FALLS BACK...


Single trader behind oil record!


Wall St start worst in 25 years...

Dollar fear...

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New Years News

http://www.reuters.com/article/ousiv/idUSL3013544320071230
Bin Laden remarks make Gulf dollar peg likelier

The NSA-Crypto AG Sting

The home page of the company Web site says, "Crypto AG is the preferred top-security partner for civilian and military authorities worldwide. Security is our business and will always remain our business."

http://www.recombinomics.com/News/01010805/H5N1_Egypt_Spike.html Last season there was a spike in cases in March, but those cases were mild and there were no reported fatalities. In contrast, the current outbreak has a high frequency of reported cases couple with a high case fatality rate.

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Saxo grim 2008 forecast

A forecast made by Denmark-based Saxo Bank, chaos will take a grip on the world in 2008. Oil prices will skyrocket to 175 dollars per barrel, the Chinese market will collapse by 40 percent, whereas the U.S. will suffer a 25-percent setback. All this will happen because of the mortgage crisis in the USA which already slows down the U.S. economy.... http://english.pravda.ru/world/americas/25-12-2007/103144-economy-0

Crisis may make 1929 look a 'walk in the park'

Section 13 (3) allows the Fed to take emergency action when banks become "unwilling or very reluctant to provide credit". A vote by five governors can - in "exigent circumstances" - authorise the bank to lend money to anybody, and take upon itself the credit risk. This clause has not been evoked since the Slump.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/23/cccrisis123.xml

Fatwa against the dollar

Fatwa against the dollar?

Posted by Ambrose Evans-Pritchard on 17 Dec 2007 at 14:38
Tags: oil, dollar, Saudi Arabia, Fatwa

To all intents and purposes, the Wahabi religious establishment of Saudi Arabia has just issued a fatwa against the US dollar. This bears watching.

Ali al-Naimi, Saudi Arabia's oil minister
Anti-dollar clerics have lobbied Ali al-Naimi, the Saudi oil minister

A message issued by 26 leading clerics warns that inflation has reached intolerable levels in the Gulf kingdom.

While it does not vilify the dollar explicitly, the apparent political aim is to undermine the country's dollar peg.

"The rulers should seek to try to remedy this crisis in a way that would ease people's suffering."

"We direct this message to the rulers and officials: we remind you of Prophet Mohammad's words that you are shepherds who are responsible for your flock," it said.

The statement was posted across the Islamic world. The background to this has been a raging debate in Gulf religious and economic circles about the destructive effects of the sliding dollar.

Among the lead-authors is Sheikh Nasser al-Omar, known for his fatwa against US-led forces in Iraq.

He has long preached the collapse of American-led capitalism, and now sees a perfect moment to plunge the knife. We can guess that al-Qaeda Inc is thinking along the same lines.

My own hunch is that the next al-Qaeda strike will not be a symbolic blow to a great building or city, but rather a carefully-timed economic blow: either by cutting – or trying to cut - the oil jugular, or by trying to precipitate a run on the dollar.

The Gulf pegs are preventing the region from taking action to stop the oil boom spiralling out of control.

Half the Mid-East is now overheating. Property booms have reached unstable extremes in almost all the oil states. Construction has become maniacal.

CPI inflation is 5.35pc in Saudi Arabia, the highest in over ten years. It has reached 10.1pc in the United Arab Emirates and 12.2pc in Qatar.

The dollar pegs – designed to anchor the currencies – are now forcing the Petrodollar economies to import US devaluation and monetary stimulus.

What has been a simmering problem for over a year, has become untenable since the Federal Reserve began slashing interest rates.

The Gulf has roughly $3.5trn under management in wealth funds and central banks, so a dollar shift makes waves.

Qatar has already slashed the dollar holding of its future generation fund from 40pc to 98pc.

Stephen Lewis, global strategist at Insinger de Beaufort, said the Fatwa was ominous.

"The Saudi government has been the one institution in the region battling to preserve the oil link with the dollar. If these clerics are able to wear down Saudi resistance, this could breach the bulwark. The dollar would quite likely be abandoned as the chief currency for pricing oil in world markets," he said.

If the Mid-East breaks the pegs, a chain reaction threatens to follow across Asia. China now has 6.9pc inflation. It may have to ditch its cheap yuan policy soon enough anyway, or face the sort of double digit rises that destroy regimes.

The Saudi royal family rules by a delicate compromise. Although pro-Western in military and economic alliances, it relies on the endorsement of the Wahabi clerics as a key source of legitimacy.

Reluctance to confront this menacing bloc is the main reason why Riyadh tolerated - and helped – the Bin Laden network for so long.

The statement called on the Saudis to take action to stop food price soaring to fresh highs, if necessary with subsidies on key staples.

For now, the dollar is bouncing back. Speculative flows have swung back from euros to dollars after America's CPI inflation shock of 4.3pc released last week.

One week's data mean nothing. As the Fed cuts rates ever further to the cushion US property crash bites, Mid-East inflation will go from bad to seriously ugly with the policies now in place.

The Saudis, Qataris, and Emirates have all said they will preserve the pegs. But fatwas tend to up the ante.
Posted by Ambrose Evans-Pritchard on 17 Dec 2007 at 14:38

http://blogs.telegraph.co.uk/business/ambrosevanspritchard/december07/fatwa.htm

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