Dear CIGAs,

The theme concerning the recent market drop and involving Monday morning’s Fed action is that the Federal Reserve cut rates significantly assuming a freefalling equity market to be a product of panic. This theme suggests panic is capable of producing more panic and therefore furthering the potential of the fall.

In the timeframe leading up to and during the freefall of equity values, a major French bank was having a just recently discovered significant problem liquidating a hidden position of equities in some form or another. This liquidation by the major French Bank, although unsaid, implied that action has taken the market down significantly in the week preceding the Fed action.

Consequently, there really is no economic or derivative problem that was at the heat of the extreme drop of equity values, nor does it mean anything that the major drop took place on the news of AMBAC bond downgrading, a major player in default derivatives.

As such, the Fed acted somewhat in error as a result of not knowing the French bank’s activity as the root of the plunging equity values. The assumption since the bank reported a complete loss is that the French bank has completed its liquidation, all is well and the future is rosy.

This really quite beautiful effort of plausible denial requires some critical examination:

Question: Could a junior trader have entered into a position of such magnitude that it could make or lose $7,000 million?

Answer: It is most unlikely as personalities making transactions of this proportion are few and far between. They know each other. At minimum, the other side or sides would have inquired with the Senior Trader if the Junior Traders knew what he was doing.

Question: Could a transaction of this magnitude be successfully hidden for months?

Answer: After the Warburg/Rogue trader experience, major trading entities have tightened up their accounting and audit processes to prevent just this type of act.

It is a strain on the imagination to think that this could have been accomplished as transactions are confirmed between trading houses electronically. That confirmation process then goes to the trading entity to again confirm. Risk control in major houses then factor that into overall positions.

How a junior trader could have short cut that procedure is hard to imagine.

The thesis that a junior trader hid a gargantuan trade confirmation under his desk or that a procedure missed it is extremely unlikely to be factual.

Question: What was the form of the transaction?

Answer: By not specifically stating the media and the public would assume the trader somehow held a long position of shares that were being liquidated into the market.

That strains one’s imagination as well because such a position would be so visible that it would glow in the dark.

This leads one to assume the position was either a derivative on equity indices or mathematical equivalents derived by algorithms, not the world’s largest long position in US equities.

This leads one to assume that one side of the trade, the side which was called on to perform, could not or in the case of the bank in question selected not to perform.

As such, the loss was on a structured investment vehicle either structured by the bank in question or another.

Rarely do these special performance contracts called OVER THE COUNTER DERIVATIVES actually perform, but rather are bought out by the losing side when called to perform on.

Conclusion:

The USD $7,000 million loss reported as an action of a junior trader hiding a losing position for a considerable amount of time as stated is total bull.

You would have to be totally IGNORANT of market mechanics to buy that plausible denial.

The public and much of the media are.

The reported loss was a buyout of a failed to or chosen not to perform derivative.

The world’s equity markets broke for their own reasons and not because a large French bank was selling common shares into the marketplace as the newest and rather well done SPIN would have you think.

Click here for today's hourly action in Gold as of 6:30pm CST with commentary from Trader Dan Norcini

Click here for today's action in Gold in various currencies, the US Dollar Index, HUI, Canadian Dollar and Barrick Gold

Jim Sinclair’s Commentary

We just witnessed a PROFESSIONAL PANIC driven by the derivative meltdown and the sheer size of that mountain of fraudulent garbage.

What really scared Bernanke into action
With global investors running scared, he had to protect Brand America, says EDWARD HELMORE

The Great Depression is the subject of US Fed Chairman Ben Bernanke's considerable scholarship. "If you want to learn about seismic activity, you study earthquakes, not tremors," he is apt to say. But as an expert on how to prevent crises from spinning out of control, his emergency rate cut of three-quarters of a point before breakfast on Tuesday was puzzling.

With no new economic data to act on, it looked to many like a purely political manoeuvre designed to reduce volatility in the market. Yet Bernanke prides himself on being an academic above the fray of politics. So why send such panicky signals just as world leaders gather at Davos?

The answer is he had no choice. Few believe that President Bush's $150bn economic stimulus package will have a long-term effect. Nor is it likely the US economy (70 per cent of which is domestic consumer spending) can be tricked into higher gear: consumers who propelled growth during Bush's war-spending, tax- cutting presidency, are tapped out. The Dow Jones, some believe, could drop 5,000 points to 2001 levels over the next 18 months.

What unnerved Bernanke was that Monday's global sell-off was driven not by small and retail investors but by investment banks and hedge funds. Faced with what amounted to a wholesale depreciation of US foreign-held assets, Bernanke and Treasury Secretary Henry Paulson Jr simply abandoned decades of monetary fiscal policy that preached fighting inflation foremost, and decided to protect Brand America.

More…

Jim Sinclair’s Commenatary

• Whatever economically needs to be done will be done in order to keep the DJII at or return it to 12,000.
• There will be no limits to Fiscal Stimulation
• There will be no minimum target for interest rates at the Fed.
• Whatever level that is in their mind required, even zero bound, will occur.
• All of this is because the meltdown of the $450 trillion dollar mountain of over the counter derivatives will be resisted with no thought to the consequences.
• Because the Fed and the Treasury really believe that perception is and makes economics, the Dow level is more important than any other economic statistic.
• The President's Working Committee on Markets (PPT) did one hell of a job, but the consequences will take the US dollar to hell in a hand basket.

Stimulus deal struck
Compromise could send $600 rebates to most taxpayers in effort to spur spending and head off recession. Those earning more than $75,000 reportedly could be left out.
By Chris Isidore, CNNMoney.com senior writer
January 24 2008: 12:47 PM EST

NEW YORK (CNNMoney.com) -- Congressional leaders and Bush administration officials have reached a deal on an economic stimulus package that would send $600 to more than $1,200 to most taxpayers in an effort to keep the economy from falling into recession.

Sources told CNN that the deal would pay most taxpayers $600 and two-wage-earner households as much as $1,200. A Democratic aide and a Republican aide said the deal will include an additional amount per child amounting to about $300.

The main exception will be higher income taxpayers - individuals earning $75,000 or more or couples earning $150,000 or more, would not get the rebate checks, sources told CNN.

Earlier proposals to increase food stamps and extend unemployment benefits are not part of the agreement. But some low-income taxpayers who owe no income tax will get rebates, although they could be for less than $600.

An announcement on the plan could come Thursday afternoon, sources told CNN.

More…

1. Exactly how will the $150 billion dollar tax refund be accounted for?
2. Will it be properly recognized as a reduction of Federal Income?
3. The attendees of the Davos non-official World Economic Summit knows the implications regarding inflation, the dollar and a an attempt to utilize short term solutions to fix a long term problem.

U.S. in role of wounded giant at Davos
By Mark Landler
Published: January 23, 2008

DAVOS, Switzerland: The United States has filled various roles at the World Economic Forum over the past decade: dot-com dynamo, benevolent superpower, feared aggressor, and now, wounded giant.

On the first day of this conference, a parade of bankers, economists, and political officials expressed deep fears about the faltering American economy, peppered with blunt criticism of its institutions, chiefly the Federal Reserve, which some accused of sowing the seeds of today's crisis.

George Soros, the financier who made a fortune betting against the pound, went so far Wednesday as to say that the downturn would put an end to the long status of the dollar as the world's default currency.

"The current crisis is not only the bust that follows the housing boom," Soros said. "It's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency."

Signs of a new economic order abounded in this Swiss ski resort: the minister of commerce and industry of India, Kamal Nath, noted that China had overtaken the United States as India's largest trading partner - buttressing his view that India could largely sidestep an American recession.

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Jim Sinclair’s Commentary

Einstein said that the definition of insanity is doing the same thing and anticipating different results.

These fellows are not crazy therefore here it comes again.

Now here is a great way to provide fiscal stimulus.

U.S. to Step Up Training of Pakistanis
By Ann Scott Tyson

The U.S. military plans to significantly expand and accelerate its counterinsurgency training and provision of equipment for Pakistan's armed forces this year as part of a five-year, $2 billion U.S.-Pakistani effort to help stabilize the country, senior U.S. and Pakistani officials said.

The enhanced cooperation will include U.S. military assistance toward counterinsurgency training, technical gear and assistance to improve the Pakistani military's intelligence gathering and its air and ground mobility, the officials said. If requested by Pakistan, it could also involve U.S. Special Operations Forces working with the Pakistani military as it launches "more aggressive" actions against insurgents in northwest tribal areas, said Ambassador Dell L. Dailey, the State Department's counterterrorism coordinator.

The plan will involve about $150 million from the United States each year, Dailey told defense reporters Tuesday, and will emphasize development assistance. In turn, Pakistan will contribute $1.25 billion to the plan over five years, according to State Department figures.

The effort comes amid criticism from Congress that the billions of dollars the Bush administration has already spent on Pakistani security efforts have produced poor results. Since the Sept. 11, 2001, terrorist attacks, the United States has poured about $10 billion in aid into Pakistan -- more than $6 billion of it for military financing and reimbursement to Pakistan for counterterrorism operations.

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Jim Sinclair’s Commentary

I smell a rat. Rogue trader sounds a lot better than SIVs. The rogue takes the hit, does one year at a country club lock-up and then gets retirement pay. To assume a trader had a position that could have made or lost 7,000 million and no one knew is raving BS.

Rogue trader to cost SocGen $7bn

French bank Societe Generale says it has uncovered "massive" fraud by a Paris-based trader which resulted in a loss of 4.9bn euros ($7.1bn; £3.7bn).

The bank said the fraud was based on simple transactions, but concealed by "sophisticated and varied techniques".

It also announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US.

The losses are four times greater than those made by Nick Leeson, the rogue trader who brought down Barings Bank.

Leeson was sentenced to six-and-a-half years in jail.

Societe Generale's shares, which were suspended in the morning, lost 3.6% when they resumed trading.

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Jim Sinclair’s Commentary

You expected something different?

Existing Single-Family Home Sales Drop
Sales of Existing Single-Family Homes Drop in 2007 by Largest Amount in 25 Years
Thursday January 24, 11:04 am ET
By Martin Crutsinger, AP Economics Writer

WASHINGTON (AP) — Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades.

The National Association of Realtors reported that sales of single-family homes and condominiums dropped by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units.

For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982. The median price for a single-family home dropped 1.8 percent to $217,000.

That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors' chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.

The new figures underscored the severity of the slump in housing, which has been battered for the past two years after enjoying a boom in which sales set records for five consecutive years.

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Jim Sinclair’s Commentary

China bashing never stops on financial TV amongst the experts of questionable cranial capacity. Simply put, if your children do not speak Mandarin they will not be able to communicate with their bosses as the West sells their Assets to the East. The picture below is of the new owners of Citi Corp and Bear Stearns, amongst many others.

China GDP Expands 11.2%, Supporting Global Growth (Update3)
By Nipa Piboontanasawat and Li Yanpin

Dear CIGAs,

Linked below are a selection of charts for today. I have included a yield curve to give you all a view of the reason we had a rally in the financial stocks today along with the plummeting cost of three month money to show how the Fed is attempting to liquefy the system. Barrick Gold, the stock indices and finally a chart of GLD showing the first increase in holdings in five days is also included.

Your friend,
Dan

Click here for today’s charts with commentary from Trader Dan Norcini

Dear CIGAs,

Data driven and gradualism died Monday.

Ask yourself where the data-driven Bernanke Federal Reserve rate decision went as the last rate drop was clearly and without any doubt stock market driven.

Ask yourself where the Bernanke Federal Reserve interest rate change gradualism went as you see a 3/4 point cut in the discount rate with more to come later.

The answer is that both were thrown into the circular file on the floor because the Fed and the PPT know something you do not.

The knowledge possessed by the Federal Reserve and the PPT is fragile and is the size of the Mount Everest pile of over the counter derivatives.

All that stands between a total meltdown of what the BIS says is $450 trillion dollars nominal value of over the counter derivatives and financial armageddon is the equity market.

Nominal value of a derivative becomes real value when the derivative fails to perform. That is an axiom.

Tonight the PPT and Fed are giving each other high fives, but the game is far from over.

The Formula states the equity market would trigger this action because it would remain strong UNTIL earnings cratered. Certainly the early meltdown of credit and default derivatives helped.

Anything and everything will be done to hold the Dow Jones above or return it to the 12,000 level. There is NO level of liquidity or minimum interest rate number that will not be utilized as required and absolutely without restraint.

Big money in the spec and investment world of Asia is recognizing this as the PPT and Fed pass around their high fives. Asia will unleash its terrific economic power, taking the price of gold to $1050 and onward to $1650.

I don't think it, I know it.

All the ingredients for the next chapter in the super bull market are now in place.

I have been speaking to many of you for 37 years, others for 6. You must see that every item we have discussed for all that time has gathered at one spot, here and now.

It is common that at the inception of such a condition many who have long awaited and anticipated this get themselves run out of their positions. In truth, there is nothing that can be done about this as it is simply a market reality. These investors have my empathy.

Dear CIGAs,

The following is my new assistant helping me handle the now 1600+ emails.

Jim,

I read your blog avidly, probably because I agree with your logic.

Something you said persuaded me to send this summary of newsletters from 1929 onwards from what is now Citibank. It has been said that "history would not repeat itself if mankind didn't keep making the same stupid mistakes over and over again." Today the crowd is saying that the "fundamentals" are sound, hoping that what they 'want' is what will happen and refusing to look at any negative view to that. There are none as blind as those that will not see.

CIGA JustamereBear

News Letters of the National City Bank of New York. (Now CitiBank or CitiCorp)

November 1929; The collapse of stock speculation has overshadowed all other events in business during the past month. We do not believe the fundamentals of the business situation have changed. The countries farms, mills and factories are intact. All over the country, general business is proceeding in a healthy and orderly fashion in marked contrast to the chaotic conditions in the stock market.

December 1929; The essential fact is that business itself is healthy and has not been involved in over expansion as in the stock market. There is no collapse of commodity prices. There is no inventory problem. There is no breakdown of the banking system. There are no great business failures, nor are there likely to be.

July 1930; Since the stock market collapse of last fall, the average business man has been more inclined to question his faith in the recuperative power of the country. From most other quarters of the globe come reports of similar difficulties besetting trade and emphasizing the widespread character of depression.

November 1930; We do not believe that business will go much lower, and we think the next important movement will be upwards.

June 1931; The country is in the midst of a severe business depression and there is relatively little demand for money for either speculative or business purposes.

October 1931; Excess caution on the part of bankers in making loans is one of the reasons why business is slow to climb out of depression. Everyone seems to have a story of a worthy borrower who is unable to obtain a loan.

January 1932; Of all the markets, the decline in bonds has been most severe. Amid the confusion of the times, those who would buy bonds have been plainly uncertain as to what debts are good and what are not. This continues to make financing, and even refinancing virtually impossible.

Note, in fact the October 1931 statement was exceptionally valid. Bankers were losing money all over the place, and called loans in abandon. They were trying to save themselves, were frightened, and did not care what damage they did to others, only that they saved themselves. Just get the money back. A major reason for the depression.

Dear CIGA JustamereBear:

Today's situation is infinitely more dangerous than that of 1929. A financial Armageddon is possible due to the size (BIS Quarterly) of the OTC derivative mess. It is for just this reason that there is no limit to the monetary and fiscal stimulus that will be applied to prevent it. It is that attempt to prevent a total meltdown that will take the price of gold to and above $1650. I wish the Fed and PPT good luck because no one could possibly want to see what is coming in 2011.

Regards,
Jim

Dear CIGAs,

Pictures speak a thousand words.

Federal Reserve Board Chairman Ben Bernanke pauses while discussing the near-term economic outlook during testimony before the House Budget Committee on Capitol Hill in Washington in this Thursday, Jan. 17, 2008 file photo. (AP Photo/Dennis Cook. File)

Jim Sinclair’s Commentary

Almost?

The Fed cannot do anything to correct a problem that has nothing to do with interest rates as they have to do with over the counter derivatives that simply cannot perform as contracted to do so. Lower rates, if they have any impact on business at all (which is debatable) in present conditions is quite delayed.

Everything anticipated in the Formula will occur but now in multiples of what one would have anticipated. We heard all the same recession talk and gold in the 70s. They are so, so wrong. Gold is going to $1050 and onward to $1650 based on just what is occurring now!

Fed is in 'an almost impossible place’
By Sue Kirchhoff, USA TODAY

WASHINGTON — Damned if they do and damned if they don't.

Wall Street analysts and traders for months have pounded Federal Reserve Chairman Ben Bernanke and his colleagues for being too slow to respond to a growing financial crisis.

After cutting a key rate by an emphatic three-quarters of a percentage point Tuesday — following Monday turmoil on foreign stock exchanges — the Fed now faces charges that it caved in to short-term market concerns.

As Richard Yamarone of Argus Research put it, the Fed engendered "additional fear" with its surprise rate move.

"They're in an almost impossible place," says Vince Reinhart, a former top Fed staffer, now with the American Enterprise Institute. Even though the Fed has tried to make it clear its goal is to bolster the economy, not protect individual investors, it couldn't ignore the carnage in overseas markets and possible loss of wealth if U.S. stocks followed suit. "It raises the question, 'Was it about markets or was it about the economy?' " Reinhart says.

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Jim Sinclair’s Commentary

In the heat of fear has the gold trader totally forgotten this? The problem in Pakistan will go from a serious potential problem to an event of earth-shattering proportions. Crude will trade well over $100 as a result of this event. It is not if, but when this will occur.

U.S. policy on Pakistan a disaster: Jaswant

KOCHI: The former External Affairs Minister, Jaswant Singh, has said that it is time India woke up to the disaster it faces on account of the U.S. policy on Pakistan and Afghanistan.

Interacting with a group of journalists on the sidelines of an international conference on ‘’The India-China-U.S.A-Triangle’ on the SCMS campus here on Tuesday, Mr. Singh said the U.S. had absolutely no option left but to continue support for the regime of Pervez Musharraf.

“The U.S. policy in the region is a policy for disaster. It is necessary for the Indian government to recognise that,” he said.

Pointing out that the U.S. had a considerable presence in Pakistan and Afghanistan, Mr. Singh said that India did not even have direct land access to places such as Kabul. “India today is a large supporter and provides a lot of trade to Afghanistan. We cannot send goods for example from Amritsar to Kabul by land yet now,” he said.

India’s relationship with China should not be built on dreams, Mr. Singh said and added that there was a deficit of understanding and a surplus of suspicion in the relations.

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Jim Sinclair’s Commentary

You think Pakistan will not go Fundamentalist? Have you ever considered that is the most effective way for Musharraf to stay in charge; by placating the fundamentalist, not US interests? Do we need another war to keep the economy from cratering?

Pakistan expresses concern over situation in Gaza
www.chinaview.cn
2008-01-23 19:55:20

ISLAMABAD, Jan. 23 (Xinhua) -- Pakistan is deeply concerned about the deteriorating situation in Gaza, the Foreign Office said in a statement on Wednesday.

The Israeli blockade and attacks on the Palestinian territory resulted in the deteriorating situation in Gaza, the Foreign Office spokesman Muhammad Sadiq said at a news briefing on Wednesday.

"These excessive acts constitute a flagrant breach of international norms and humanitarian law. The increased Israeli hostilities have exacerbated the humanitarian suffering and economic hardship of the Palestinian people," Sadiq said.

He pointed out that the situation would lead to an escalation of tension in the region and undermine efforts for promoting a peaceful resolution of the Palestine issue.

"We call upon the international community to ensure an urgent and complete lifting of Israeli blockade on Gaza and the resumption of fuel, food and other humanitarian supplies to the suffering Palestinian people," said Sadiq.

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Jim Sinclair’s Commentary

Litigation is now as much of a risk as the credit and default derivatives are. It is only logical as all the financiers pushed that impossible to perform fraudulent paper down the throats of widow and orphan money market funds, saving societies and retirement accounts as well as anything else with money. Anyone that lost anything will be going to court to take back their losses from the strip suits. What goes around comes around.

OHIO VS. FREDDIE MAC
Mortgage lender hid big risks, suit alleges
Wednesday, January 23, 2008 3:16 AM
BY JAMES NASH
THE COLUMBUS DISPATCH

The giant mortgage financer known as Freddie Mac swindled an Ohio pension system out of as much as $27 million by concealing its heavy investments in the battered subprime lending industry, Attorney General Marc Dann alleges in a lawsuit.

Dann said the Federal Home Loan Mortgage Corp. "secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times."

The lawsuit, filed Friday in federal court in Youngstown, alleges that Freddie Mac downplayed its investments in subprime lenders before its stock nosedived in November on news that it lost $2 billion in the third quarter, largely because of the collapse in the subprime market.

The Ohio Public Employees Retirement System, which represents nearly 900,000 current and retired government employees and their beneficiaries, lost up to $27.2 million in the crash, the lawsuit alleges.

More…

Jim Sinclair’s Commentary

Next comes more cuts, followed by the Bush New Deal, then the dollar plumbs the depths.

Regardless of short term help, as Trader Dan and a few friends have pointed out, plumbing the depths of value for the dollar cannot be avoided as fiscal and monetary caution is, as presently, thrown into the wind.

Dear Extended Family,

To save the international banking sector from being obliterated by derivative litigation and the lack of derivative deals which provided 50% of their earnings, laws have been enacted in anticipation of this inevitable meltdown. More legislation is on its way.

How about a moratorium on litigation complaints based on derivative injury and punitive damages, with a RICO claims , as an emergency measure to keep the largest financial contributors to politics over many administrations, the international investment banks alive..

Take a look at the following heads up from JB Slear:

Title II: Monetary Policy Provisions- (Sec. 201) Amends the Federal Reserve Act to: (1) authorize payment of interest on funds maintained by a depository institution at a Federal Reserve bank; and (2) authorize the Federal Reserve Board to reduce to 0% the reserves required to be maintained by a depository institution against its transaction accounts. (The current requirement ranges from 3% to 14%.)

S.2856 Title: An original bill to provide regulatory relief and improve productivity for insured depository institutions, and for other purposes.
Sponsor: Sen Crapo, Mike [ID] (introduced 5/18/2006) Cosponsors (None)
Related Bills: H.R.3505
Latest Major Action: Became Public Law No: 109-351 [GPO: Text, PDF]
Senate Reports: 109-256

SUMMARY AS OF:
10/13/2006--Public Law.(There are 4 other summaries)

(This measure has not been amended since it was passed by the House on September 27, 2006. The summary of that version is repeated here.)

Financial Services Regulatory Relief Act of 2006 - Title I: Broker Relief - (Sec. 101) Amends the Securities Exchange Act of 1934 to require the Securities and Exchange Commission (SEC) and the Board of Governors of the Federal Reserve System (Board) to: (1) jointly adopt a single set of rules or regulations implementing statutory exceptions to the definition of "broker" within the context of specified banking activities; and (2) seek the concurrence of the federal banking agencies prior to jointly adopting such rules or regulations.

States that such jointly adopted rules or regulations supersede any proposed or final rules issued by the SEC on or after the enactment of the Gramm-Leach-Bliley Act with regard to the exceptions to the definition of broker.

Title II: Monetary Policy Provisions - (Sec. 201) Amends the Federal Reserve Act to: (1) authorize payment of interest on funds maintained by a depository institution at a Federal Reserve bank; and (2) authorize the Federal Reserve Board to reduce to 0% the reserves required to be maintained by a depository institution against its transaction accounts. (The current requirement ranges from 3% to 14%.)

Declares October 1, 2011, as the effective date for the amendments made by this title.

Title III: National Bank Provisions - (Sec. 301) Amends the Revised Statutes of the United States to allow cumulative voting by shareholders for directors of a national bank only if authorized by the bank's articles of association (thus repealing the current requirement of cumulative voting).

(Sec. 302) Repeals the statutory formula for determining when lawful national bank dividend declarations may be made. Allows national bank directors to declare a dividend of so much of the bank's undivided profits as they judge to be expedient.

Link to article (copy and paste): http://thomas.loc.gov/cgi-bin/query/... ::

Dear CIGAs,

First the Fed makes a big slash then the President’s Working Committee on Markets (PPT) sits back to see how the market takes it. The Fed and President’s Committee on Markets (PPT) are totally focused on the equity markets and this morning is terribly disappointing to both. Anticipate more significant rate reductions with the Bush New Deal on the scheduled meeting day. The Fed will increase liquidity exponentially, taxes will be slashed and wars will stimulate fiscal spending. The US legislature will create spending on a bi-partisan basis and the President will not veto it. This is all very bullish for gold. The Formula will make it so.

I believe all of the above will occur. Such actions simply strengthen the foundations of this generational bull market in gold on the road heading into 2011.

Maybe you should breathe deeply, drink some cold water and take a walk next time you panic. If you insist on being a client of a major internet broker it will be good as you will not be able to panic and throw away your shares because orders will not be executed. That is good news for gold and gold shares, a sector that has the highest number of weenies professing to be members.

Everything discussed amongst us has happened. Now the consortium of US and European central banks will have to blast untold amounts of liquidity into the world market or witness here and now a financial meltdown of hundreds of trillions of dollars worth of derelict OTC derivatives. I do not believe that this is the proper action but it is the only action that politicians and their central bank political flunkies can do. Expect a new deal a la Roosevelt to go along with it. It worked for the present Administration in 2002 so to expect the same thing along with other dramatic action is reasonable. This is what the Formula anticipates.