THE BIG TIME GLOBAL BAILOUT BEGAN OFFICIALLY ON FRIDAY, MARCH 14, 2008.
That is the day that the U.S. Federal Reserve announced that it will make capital available to loan J.P. Morgan any amount of money, and accept Bear Stearns' bonds (including mortgage bonds and other bonds which have no relation to the conservative kinds of securities the Fed used to take in) as collateral. Then, J.P. Morgan will loan this money to Bear Stearns and be guaranteed against losses by the U.S. Federal Reserve.
THIS WAS A MASSIVE BAILOUT AND IT WILL BE REPEATED IF ANY OTHER BIG FIRMS GET INTO TROUBLE
Let us call a spade a spade. This is a FULL ON...OPEN FOR ALL TO VIEW...NOTHING HIDDEN...BAILOUT...and one which must be continued in the coming days and weeks when government authorities do this for as many big financial institutions as need it.
By the end of Sunday, March 16th, Bear Stearns had been acquired by J.P. Morgan Chase for a small fraction of the stated book value.
THE SUNDAY NIGHT, MARCH 16 FEDERAL RESERVE ANNOUNCEMENT IS MOST IMPORTANT POINT IN THIS LETTER, AND THE MOST IMPORTANT THING THAT HAS HAPPENED TO WORLD FINANCIAL MARKETS IN DECADES. THE FED WILL PROVIDE SUPPORT FOR ALL PRIMARY DEALERS.
The U.S. Federal Reserve has just announced that they will provide capital to all primary dealers in U.S. Government securities, and will take any kind of collateral available. With this statement the Fed announced loud and clear that they understand the magnitude of the problem, and that they will bring all of their resources to bear to stop a meltdown of the world financial markets and a global depression. The International Monetary Fund (IMF) is trying to wake up all the global central banks with very strong pronouncements. Unless a nation has a desire to bring down the world financial system they should heed the IMF and watch the Fed. It is not too late, but action must be taken now. We expect announcements from many central banks that they are joining with the Fed to provide concerted action.
Next, the political functionaries in every well-meaning nation should act quickly to legislate repurchase programs for mortgage debt so that the financial markets can unfreeze and normal global financial functioning can return. At this stage, delay is a major mistake.
THE BIG BAIL OUT WAS BROUGHT ABOUT BY..."THE BIG GREED OUT"
It began, in our opinion, several years ago when financial institutions worldwide sold massive amounts of derivative securities...with huge commissions for the salesmen...to many buyers across the globe. When the math behind these securities failed to correctly take into consideration factors like illiquidity, problems began. The problems are culminated in the current recession, and the current "BIG TIME BAIL OUT."
A LOT OF PEOPLE SQUAWKED WHEN JIM SINCLAIR CALLED THIS. HE CALLED IT CORRECTLY AND COURAGEOUSLY. It is only fitting to praise his foresight. He convinced us years ago about the derivatives mess and we joined in communicating his prediction. In our opinion, this prediction by Jim is the best call of the new century.
Jim is humble about it, he does not brag about his correct predictions. As the old Indian saying goes "a tree heavily laden with fruits bows down."
Coming next is something that we have been pounding the table about for a number of months..."THE BIG INFLATION"
It is easy to see that a big bailout will create massive liquidity...numerous unwise misplaced government programs...plus a few wise government programs. The most important visible and fast acting side effect of these efforts will be inflation...and lots of it.
PREPARE FOR INFLATION
For out clients and ourselves we own gold related, agriculture related, base metals and energy.
Thanks for listening.