Author: Jim Sinclair
Mr. Sinclair’s response to the market reaction to the Federal Resrve’s 1/4% cut in the Fed Funds rate and discount rate on December 11th, 2007.

Dear Extended Family:

Don’t be fooled by today’s market. The Fed is running a BLUFF as they are out of aces. There is simply no possibility, way or means of being HAWKISH in the face of a meltdown wherein major financial entities of all kinds are simply going too broke to be rescued. These losses are the largest in my life of 66 years. This is the worst financial crisis in modern history and the degree of liquidity that has to injected into the world monetary system is without precedent. Soon the US FEDERAL BUDGET DEFICIT WILL EXPLODE UPWARDS, THE TIC WILL GO NET NEGATIVE AND THE DOLLAR WILL DROP LIKE AN F-16 IN A FREEFALL WITH AFTERBURNERS FLAMING.

I feel compassion for those that did today fall for the Fed Bluff by throwing away gold, throwing away good gold shares and even worse, maybe buying the dollar or covering the short. Today’s Fed action in the great scheme of things is a scheme doomed to failure by the reality of the meltdown.

When business is scared to death that things might be falling off a cliff the failure to cut 1/2 to a full point is going to bite the Fed in the ass. As more and more poor business reports come in the dollar will swoon. Gold will rocket and the shares that participated well even to today’s morning will be the unquestioned leaders of the pack.

Don’t let Ben the poker player BLUFF you out of a pot of gold, your only insurance policy possible which will protect you from the problem that has NO PRACTICAL SOLUTION.

We are on an Express Train to Armageddon in the financial sense. Don’t let Ben the Great Fooler, make a fool out of you. Hang tight using fishing lines to buy and Rhino horns to sell if you must trade.

Gold is going to $1050 and onward to $1650.

Regards,
Jim

Visit Mr. Sinclair’s website.

Paulson, Banks in Talks to Stem Surge in Foreclosures

By Alison Vekshin and Craig Torres

Nov. 30 (Bloomberg) — U.S. Treasury Secretary Henry Paulson is negotiating an agreement with banks to stem a surge in foreclosures by fixing interest rates on loans to subprime borrowers, according to people familiar with a meeting he led yesterday.

Paulson, who will address a housing conference on Dec. 3, presided over a one-hour gathering at the Treasury Department in Washington with federal regulators, bankers and lobbyists. Citigroup Inc., Wells Fargo & Co. and Washington Mutual Inc. executives attended, said a person present, who spoke on condition of anonymity.

The Bush administration cut its forecast for economic growth yesterday, reflecting a deepening housing recession that’s roiled financial markets since August. The Commerce Department reported the same day that the median price of a new house fell 13 percent in October from a year earlier, while fewer homes were sold than economists anticipated.

“One of the roles of Treasury is to say `come on, let’s get together and see what we can do,”’ said Wayne Abernathy, executive director of financial-institutions policy at the American Bankers Association in Washington and a former Treasury assistant secretary. “You’re likely to come up with something that will work both in the marketplace and honor the sanctity of the contracts involved.”

Stocks Advance

Stocks climbed today on speculation Paulson’s efforts may help slow credit losses. They also gained after Federal Reserve Chairman Ben S. Bernanke said “renewed turbulence” in financial markets may hurt growth, reinforcing investors’ expectations for an interest-rate cut next month. The Standard & Poor’s 500 stock index rose 0.8 percent to 1,481.14 at the close in New York.

Paulson was joined yesterday by Federal Deposit Insurance Corp. Chairman Sheila Bair, Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Reich.
(more…)