Dear CIGAs,

Nothing has changed. Operation “White Noise” failed. Operation “Overwhelm” was a non-starter. The downward spiral is moving like a tornado through the financial world.

This is it. Are you prepared?

Operation “White Noise” worked well until major institutions needed international investments in order to survive. Since the first strategy could no longer function, plan “B” was put into action utilizing the Goldman Report, the Paulson presentation and the presentation of Paulson’s speech by President Bush with a few wrinkles.

If I was to point out one glaring mistake it would be negations with Citicorp on means and methods to rescue the inevitable bankruptcy. Was not Citicorp recently in serious financial trouble limiting their client’s ability to bank wire transfer client’s deposits? Citicorp, if they maintain their dividend, will burn 70% of funds they received by selling themselves to any bidder. This is a party Citi would invite Iran to as long as they sent money, any kind of money, preferably euros.

Now what is Citicorp going to do for the inevitable bankruptcy? Nothing meaningful will occur but a meaningful lot of window dressing.

Have you ever heard of re-foreclosure? If you have not, get ready as that is the only product of Plan B that has significant long term prospects.

Price controls have a really poor history of doing anything but making a bad situation FUBAR. If you freeze interest rates of any kind you have implemented a price control.

The next problem coming down the highway is one you have been informed of here. It is a total collapse in auto debt, total meaning more than 50% of all outstanding auto debt. If you are amazed at how mortgage companies gave money away wait until you hear about auto loans. All you had to have to get a loan was a body temperature above 70 degrees F.

The give away of money came from securitization of debt instruments. Securitization is a first derivative of debt. The lending arms of all auto companies are up to their headlights in bad debt and even worse, derivatives.

Another area of growing concern is the derivatives of debt that supported the huge takeover craze that is to a degree still in action.

Nothing has changed except for the worse. To promise relief but simply put off the inevitable will make people quite a bit more upset when they finally feel responsible for their condition. An indication by government that they will give hope but instead of hope, more pain comes, will come.

Please understand that circumstances financially are worse than they were a month or even many months ago. The downward spiral is moving. Today’s action was no real intervention, having the same chance of stopping the economic downward spiral as a snowball has in hell.

Gold is going to $1050 and then to $1650. The US dollar is going to .7200 then .6200 and nothing can stop that.

All the un-dollars of merit will go much higher in dollar terms. This includes the Swiss, the Euro, the Cando and the Down-Under.

You can throw all the insults you wish at me with your tomes of economic reason but you are WRONG. There is one reason for all of the above mentioned to appreciate against the US dollar and that is because they are the “UN-DOLLAR.”

Bush Touts Subprime Plan That May Be Too Late to Stop Crisis
By Alison Vekshin and Christopher Anstey

Dec. 6 (Bloomberg) -- President George W. Bush today announced a freeze on some subprime home-loan rates that Democrats said didn't go far enough and Standard & Poor's warned may lead to lower ratings on some mortgage bonds.

Bush said the plan, negotiated by Treasury Secretary Henry Paulson and other regulators with mortgage lenders, may help as many as 1.2 million Americans keep their homes. The agreement is aimed at helping borrowers who can't afford their mortgages after they reset higher from low starter rates.

``I don't think it will stop price declines but it will help,'' said Robert Shiller, chief economist at MacroMarkets LLC in Madison, New Jersey, and a professor at Yale University. ``We are embarking on what might be the biggest decline since the Great Depression.''

Bush spoke hours after the Mortgage Bankers Association said homeowners fell behind on their mortgage payments at the highest rate in more than two decades last quarter. S&P said later that, by fixing rates at lower levels, the agreement will hurt the value of securities backed by mortgages.

``We face a difficult problem for which there is no perfect solution,'' Paulson said at a news conference in Washington. ``The current system for working out those problem loans would not be sufficient to handle the anticipated 1.8 million owner- occupied subprime mortgage resets that will occur in 2008 and 2009.''
$1 Trillion

More…

Jim Sinclair's Commentary

The dominos are falling. If you fail to protect yourself you are a domino and fall you will.

1. Get your paper certificates.
2. Pay off all the debt you can or hold un-dollar short term treasuries or fully paid gold equal to that debt.
3. Avoid Internet financial entities of any kind.
4. Be wary of frauds in the gold field. Do not send your gold to some depository you never heard of even if a gold guy says to.
5. Nothing has changed. Operation “White Noise" failed. Operation overwhelm was a non- starter. The downward spiral is moving like a tornado through the financial world.

This is it. Are you prepared?

U.S. Mortgage Delinquencies Rise to 20-Year High (Update3)
By Kathleen M. Howley

Dec. 6 (Bloomberg) -- The number of Americans who fell behind on their mortgage payments rose to a 20-year high in the third quarter as borrowers were unable to refinance or sell their homes.

The share of all home loans with payments more than 30 days late, including prime and fixed-rate loans, rose to a seasonally adjusted 5.59 percent, the highest since 1986, the Mortgage Bankers Association said in a report today. New foreclosures hit an all-time high for the second consecutive quarter in a survey that goes back to 1972.

The surge in foreclosures is expanding the inventory of unsold homes and contributing to the decline in housing demand. Sales of new and previously owned homes probably will drop to 5.09 million next year, 32 percent below the 2005 peak of 7.46 million, according to Frank Nothaft, chief economist of Freddie Mac, the second largest U.S. mortgage buyer. About 40 percent of lenders have increased standards for their most creditworthy borrowers, according to a Federal Reserve study in October.

``These are the first numbers we've seen that combine the meltdown of the credit markets with the drop in home prices,'' said Jay Brinkmann, vice president of research and economics for the Washington-based bankers trade group.

More…