Wednesday, February 1, 2012

Illinois' unpaid bills to reach $9.2 billion/Portuguese bonds fall in price,rise in yield/

Good evening Ladies and Gentlemen:

Gold closed up today up $11.10 to finish the session at $1747.10  Silver paid no attention to the knockdown yesterday and shot right back up to close at $33.78 gaining 70 cents on the day. The gold and silver shares were lagging the price again which suggests another raid tomorrow which of course is prior to the jobs reports.  These crooks continue to use the same modus operandi as they have no other way to orchestrate their collusive raid.  Let us head over to the comex and assess trading, inventory movements and amounts of physical metal standing.

The total comex OI fell by 1162 contracts from 426,295 to 425,133.  Gold had a pretty good day yesterday so a few bankers have decided to pack it in.  The front delivery month of February saw its OI fall from 7300 to 3458 contracts for a loss of 3842 contracts.  We probably had both some cash settlements and others rolled over without any fiat bonus.  The next front month of April saw its OI rise from 230,626 to 231,072 for a gain of only 446 contracts, so the decline was in the further ahead future months.  The estimated volume at the gold comex today was very very light at 117,439 compared to yesterday's confirmed volume of
175,152.  It looks like we are getting fewer and fewer gold players willing to take on the crooked bankers.

The total silver comex OI continues to trade in an extremely narrow channel.  Today's resting OI is represented by 101,747 falling by 895 contracts from yesterday's level of 102,642.  The OI in silver is held by extremely strong hands who will not succumb to the wishes of our bankers. The next big delivery month for silver will be March and here the OI rose by only 270 contracts to 47,300 from 47,030.
The estimated volume at the silver comex was a little better than usual coming in at 45,307.  The confirmed volume yesterday was 53,629.  It is quite conceivable that the HFT (high frequency traders) are having a big influence in volume here.




Now let us begin with February inventory movements opening balance in Gold


  February 1.2012                               :










Gold
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
1061 (Manfra)
Deposits to the Dealer Inventory in oz

nil
Deposits to the Customer Inventory, in oz
97 (Brinks)
No of oz served (contracts) today
1036 (103,600)
No of oz to be served (notices)
2422 (242,200)
Total monthly oz gold served (contracts) so far this month
1926 (192,600)
Total accumulative withdrawal of gold from the Dealers inventory this month
  nil
Total accumulative withdrawal of gold from the Customer inventory this month

31503

 The dealer so no gold deposits today nor did it see any gold withdrawals.

We had the following customer deposits to gold:

1. a small 97 oz of gold deposited into Brinks.

we had the following gold withdrawal from Manfra:

1.  1061 oz.

we had two adjustments:

1. A lease of 15,031 oz of gold from the customer to the dealer at HSBC for 15,031 oz
2.  A lease of 28,744 oz of gold from a customer at JPMorgan to a customer to JPMorgan the dealer..

The total registered gold at the gold comex tonight rests at 2.42 million oz or 75.27 tonnes of gold.



The CME reported that we had 1036 notices filed late last night for a total of 103,600 oz of gold.
The total number of notices filed so far this month total 1926 for 192,600 oz.  To obtain what is left to be served, I take the OI standing for February (3458) and subtract out today's deliveries (1036) which leaves us with 2422 notices or 242,200 oz left to be served upon.

Thus the total number of gold oz standing in this delivery month is as follows;

192,600 oz (served)  +  242,200 oz (to be served)  =  434,800 oz or 13.52 tonnes of gold.

this is why I like to wait for at least 2 notice days after first day notice to get a better handle on what will stand in gold( and silver.)

end


Now let us see inventory movements for silver and deliveries for the start of the February month:   Feb 1.2012





Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals fromCustomer Inventory687,566 (Brinks,Delaware,Scotia)
Deposits to theDealer Inventorynil
Deposits to the Customer Inventory999,973 (brinks,HSBC)
No of oz served (contracts)zero (zero)
No of oz to be served (notices)141 (705,000 oz)
Total monthly oz silver served (contracts)114 (570,000 oz)
Total accumulative withdrawal of silver from the Dealersinventory this monthnil
Total accumulative withdrawal of silver from the Customer inventory this month 1,121,328


No silver entered the dealer and no silver was withdrawn.

We had the following silver deposit by the customer;


1. Into Brinks:   400,000 oz (suspicious)
2. Into HSBC:  599,789

total deposit:  999,973 oz

we had the following silver withdrawal by the customer.

1.  Out of Brinks:  599,239  oz
2.  Out of Delaware:  36,407 oz
3.  Out of Scotia:  51,920 oz.

total withdrawal by the customer; 687,566 oz.
we had no adjustments.
The registered silver (dealer silver) rests tonight at 36.53 million oz.
The total of all silver rests at 128.98 million oz.




The CME reported today that we had zero notices of silver served.  Thus the total number of notices remain at 114 notices or 570,000 oz.  To obtain what is left to be served upon, we take the OI standing for February (141) and subtract out today's deliveries (zero) which leaves us with 141 contracts or 705,000 oz left to be served upon.

Thus the total number of silver oz standing in this non delivery month is as follows;

570,000 oz (served)  +  705,000 (oz to be served)  =  1,275,000 oz

already the silver oz standing are rising as compared to gold.


end


Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.


Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.



Feb 1.2012:






Total Gold in Trust

Tonnes:1,271.09

Ounces:40,866,777.14

Value US$:71,081,490,757.06







TOTAL GOLD IN TRUST

Tonnes:1,271.09

Ounces:40,866,777.14

Value US$:71,245,734,720.99






JAN 31.2012





TOTAL GOLD IN TRUST

Tonnes:1,271.09

Ounces:40,866,777.14

Value US$:70,633,511,714.31





we neither gained nor lost any gold at the GLD today. ( I take the data as of 6 pm
est)



And now for silver Feb 1 2012: 


Ounces of Silver in Trust308,935,049.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,608.95



Jan 31.2012:

Ounces of Silver in Trust308,935,049.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,608.95








we neither gained nor lost any silver today in the SLV.  I take the data at exactly 6:00 est pm.



end.




And now for our premiums to NAV for the funds I follow:



1. Central Fund of Canada: traded to a positive 4.4 percent to NAV in usa funds and a positive 4.5% to NAV for Cdn funds. ( Feb 1 2012.).
2. Sprott silver fund (PSLV): Premium to NAV rose  to  8.40.% to NAV  Feb 1.2012 2012:
3. Sprott gold fund (PHYS): premium to NAV fell to   3.07% positive to NAV Feb 1. 2012). 

It is great to see that the Sprott silver fund has returned to a decent premium.
Also notice that the central fund of Canada is also returning to a good premium to NAV.

The Sprott gold premium fell due to Sprott going after more gold.



end



I would like for you to read the following commentaries from Rob Kirby where he discusses the
German free lance writer, Lars Schall, who asked Paul Volcker why it was wrong for the USA not to engage in gold swaps.  Paul Volcker's wife responds.  It is interesting that immediately after the Kirby release, the USA-UK gold swaps were removed from the UN web site:

(courtesy Rob Kirby/GATA/Goldseek.com/)


US-UK gold swap treaty disappears from UN Internet site, reappears at GATA's

Submitted by cpowell on Wed, 2012-02-01 15:54. Section: 
10:56a ET Wednesday, February 1, 2012
Dear Friend of GATA and Gold:
The new essay by GATA consultant Rob Kirby of Kirby Analytics in Toronto, "Manifest Destiny Derailed: Treason from Within," which was published this week at three Internet sites --
GoldSeek:
24hGold:
And the German freelance journalist Lars Schall's:
-- cited the 1981 gold swap treaty between the United States and United Kingdom and included a link to the treaty document posted at a United Nations Internet site:
Apparently within hours of Kirby's reference to the treaty, the link was disabled at the United Nations Internet site. Whether this is more evidence of the gold price suppression schemers trying to cover their tracks or just coincidence or the result of ever-more-intense solar flares, the gold swap treaty has been posted at GATA's Internet site here:
Keep your tinfoil hats on tight.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end


Then a few hours later:


UN offers second link to US-UK gold swap treaty

Submitted by cpowell on Wed, 2012-02-01 17:26. Section: 
12:21p ET Wednesday, February 1, 2012
Dear Friend of GATA and Gold:
Our friend Jonathan Bier in Britain contacted the United Nations a little while ago to ask what became of its Internet site link to the 1981 gold swap treaty between the United States and United Kingdom. Bier says a U.N. representative could not explain the disabling of the link but offered a second link hosting the treaty:
Let's keep an eye on that one and hope that the U.N. will too.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end




Early this morning we see that Portugal has suffered a loss of confidence in their bonds as yields skyrockets northbound as the outlook for growth in this country dimmed considerably.  Their credit default swaps rose again as the Portuguese bonds are now considered junk:

(courtesy NY times)

Portugal Suffers as Loss of Confidence in Bonds Sends Yields Higher




By  and 

Published: January 30, 2012

Investors fled out of bonds of weaker European countries on Monday, sending yields on 
Portuguese government bonds to a record high over concerns that the euro zone debt 
troubles were spreading beyond Greece.

The fears of contagion spreading to other periphery countries in the zone that share the euro 
have grown more intense in recent months, with much of the latest focus on Portugal.

Yields on Portuguese 10-year government bonds closed at 16.58 percent, the highest they 
have been since the start of the euro currency and up from 14.645 percent on Friday.

The higher yields means that the Portuguese government has to pay significantly more 
interest than, for instance, Spain, whose yields on 10-year bonds were around 4.98 percent 
on Monday.

Bond yields in the United States fell to their lowest levels in more than a month as investors 
sought out the safety of United States Treasuries. On Wall Street, stock indexes fell slightly 
over the uncertainty in Europe.

Portugal, which is in a recession and has been lowered to junk grade by ratings agencies, has 
less debt than Greece but there was still a growing belief that the country would have to ask 
for a bigger bailout than initially expected.

“I think there is a growing belief that Portugal is the next Greece, and the market is slowly 
pricing that in,” said Anthony Valeri, a fixed-income investment strategist at LPL Financial.

But other analysts noted that Portugal was in far better shape economically than Greece. It 
has 100 percent debt-to-gross domestic product ratio compared with a ratio of about 160 
percent for Greece, said Charles Diebel, head of market strategy at Lloyds Banking in 
London.

“To a degree, yes, Portugal’s in trouble,” Mr. Diebel said. “But the problems there are 
nothing like in Greece.”

European leaders meeting in Brussels on Monday appeared poised to agree to tougher new 
measures to enforce budget discipline in the euro zone as Greece continues to try to reach a 
deal with its private sector creditors on how much of a loss they will be willing to accept on 
their bond holdings.

Yields were also pushed higher for Italian bonds, a reminder that much is necessary to 
address investors’ concerns even as European leaders try to work out a Greek aid package.

Still, the Italian government was able to pull off a bond auction on Monday, selling 7.5 billion 
euros ($9.9 billion) of long-term bonds. The yields on its 10-year bonds were set at 6.08 
percent — sharply down from the 6.98 percent it last paid to sell such debt.

It was the first test of market appetite since Friday, when Fitch Ratings cut Italy’s debt 
rating by two notches.

Investors also sought out German bonds, sending that nation’s 10-year yield down 0.06 
percentage points to 1.78 percent.

Investor demand for United States 10-year Treasuries was higher, sending prices up 13/32, 
to 101 12/32. The yield fell to 1.85 percent, the lowest level since Dec. 19, when it was 
1.81percent.
Stocks gave up some ground on European debt worries. The broader market as measured by the Standard & Poor’s 500-stock index shed 0.3 percent to 1,313.01, while the Dow Jones industrial average was down 0.05 percent at 12,653.72, and the Nasdaq was down 0.2 percent, to 2,811.94.
While European leaders were meeting, the sense of urgency has been dulled somewhat by policy action from the European Central Bank last month. The central bank introduced what it called longer-term refinancing operations, under which it offers financial institutions unlimited cash at the bank’s overnight interest rate, currently 1 percent, in exchange for a wide variety of collateral.
The stresses showed up in the cost of insuring sovereign debt.
Credit-default swap rates on the government debt of Italy, Spain and Portugal each widened, 

with the costs on Monday of insuring $10 million of Portuguese debt for five years increasing 
to $1.53 million annually, from $1.41 million on Friday, according to the data provider 
Markit.

In a sign of hope for the European economy, the European Commission reported a mild 
improvement in its monthly economic sentiment indicator for January, the first rise since 
March 2011. The commission said most of the increase came from the service sector, with 
smaller positive contributions from the consumer and construction sectors.
But new data showed Spain was sliding toward recession, with the economy contracting in 
the fourth quarter after a stagnant third quarter.

Gross domestic product shrank by 0.3 percent in the October-December period from the 
July-September quarter, when the economy marked time, the National Statistics Institute 
reported in Madrid. From a year earlier, the economy eked out fourth-quarter growth of 0.3 
percent.

“The G.D.P. outlook for Spain is pretty grim,” Ben May, an economist with Capital Economics 
in London, said. “We think it will continue to contract on a sustained basis.”



end




end



In the following commentary, the Europeans are now planning on backstopping the new ESM with 500 billion euros, along with the older EFSF fund for 500 billion euros.  The planning is now not to eliminate the EFSF but to have it receive the same funding as the EFSF.  Also the IMF needs  500 billion euros so the entire Europe will be backstopped with 1.5 trillion euros to bail out the sovereign debts.

Only one question:

who is going to fund the 1.5 trillion euros.  (They hoped that mighty Brazil and China will backstop the funding)  :

courtesy der Spiegel:


The permanent euro backstop fund ESM is due to replace the European Financial Stability Facility this year. But both 500 billion-euro funds could be merged and added to a third from the International Monetary Fund to create a super debt firewall, according to media reports from Davos.



Europe could have a 'super' €1,500 billion ($1,969 billion) debt firewall by the summer under plans to combine three funds of €500 billion each. The Financial Times Deutschland reported on Tuesday that the plan was discussed at a meeting on the sidelines of the recent World Economic Forum in Davos attended by US Treasury Secretary Timothy Geithner, International Monetary Fund (IMF) chief Christine Lagarde, German Finance Minister Wolfgang Schäuble and his French counterpart Francois Baroin.

The proposal would see the current temporary bailout fund, the European Financial Stability Facility (EFSF), combined with, rather than replaced by, the permanent European Stability Mechanism (ESM). The third €500 billion chunk would be provided by the IMF. In return, euro-zone countries have already agreed to €150 billion in bilateral credit for the fund. The other €350 billion would come from across the world from countries such as Brazil and the UK. The US, however, would not participate -- even though Geithner himself said in Davos that only an extremely large firewall would ensure financial security.
The massive fund will only become reality if Berlin agrees to it, and the IMF and the European Commission are hoping to secure Germany's approval at the next EU summit at the beginning of March.
Pressure on the Euro Zone
According to the newspaper, the timetable for putting into place what Lagarde called a "clear, simple firewall" is a short one. The second aid package for Greeceand the debt rescheduling agreement with private creditors should be agreed in the next week or two, and G20 finance ministers can then discuss the fund issue at their summit in Mexico at the end of February to once again put pressure on the euro zone to put up more money.
Senior figures in the European Commission believe that Chancellor Merkel will agree to a larger EU rescue fund, something which she has been under increasing pressure from other governments to do. With the ability to deposit €750 billion, a joint ESM-EFSF fund would be able to meet the previously-approved commitments for Ireland, Portugal and Greece, totalling more than €200 billion. Germany will need to make a €32 billion contribution to the ESM in the summer.
But Lagarde is hoping that the super-fund will never need to be used once it is in place, especially as the European Central Bank should be waiting in the wings to provide more liquidity into the financial sector.
dsk.

end



Here zero hedge explains what is happening with respect to the Portuguese bonds.  Hedge funds are now buying these "pieces of wallpaper" along with
credit default swaps.  The demand for the bonds is sending the basis 200 points lower despite the junk. The hedgies are banking on the idea that the Portuguese bonds are based on UK law and that a voluntary haircut would be close to impossible. They are paying pennies on the dollar for the bonds in the hope that they get 100 cents on the dollar due to their ownership of the credit default swaps.



(courtesy zero hedge)



Explaining Portugal's Disappearing Risk

Tyler Durden's picture
Submitted by Tyler Durden on 02/01/2012 10:50 -0500





Early Tuesday morning, the Portuguese 10Y bond was trading over 300bps wider than its close last Friday. Contagion from concerns in Greece and what that meant for a nation that while not in as dire a position as Greece economically was well on its way to totally unsustainable debt levels relative to what little and shrinking GDP they can garner. Market access is of course off the cards and there are reasonable chunks of debt maturing that will need to be funded. Since then the PGB has rallied an incredible 300bps, now trading a mere 5bps wider on the week as if nothing had ever happened. We know the ECB was active yesterday and it appears also today but what is also very notable and perhaps explains more of the compression is the huge drop in the basis between CDS and bonds for Portugal. The basis, as we have discussed before, was extremely wide for Portugal (a quite illiquid sovereign bond and CDS market) and we suspect at a spread between bonds and CDS of almost 850bps, it was just too tempting for hedgies not to buy the package en masse. This means they would have bought PGBs (bonds) and bought CDS protection to try and 'lock-in' the spread between the two. That demand for the basis has pushed it 200bps narrower and given the thinness of the PGB market, the marginal demand from basis traders has exaggerated that rally by the 300bps we noted above.
So Portuguese bond risk remains elevated (CDS around 1400bps and and 5Y PGB around 20% yield) but the drop in the last few days is not a risk appetite signal but reflective of an ECB-spurred risk transfer to basis traders who we assume are more confident in Portuguese bond contracts and CDS triggers than Greek bonds for now. It seems they have found another pivotal security to manipulate down to show 'improvement' as Portugal leaves the global bond indices but is mysteriously bid this week.

Portugal 10Y bonds blew over 300bps wider on Monday into Tuesday (above) - clearly well beyond the rest of its peers. There was plenty of ECB chatter early on Tuesday but it appears that basis traders (below) were also tempted back in to ride the ECB coat-tails and real-money exited. The chart below shows the spread between CDS and Bonds (Bond spread > CDS spread means negative basis) has improved by almost 200bps in the last two days as the spread was just too tempting for basis traders.
We just hope that the elite do not change their mind again on whether CDS help or hinder any sense of reality. We discussed this last year - again and again, basis traders are active and optically suggest spread compression in a virtuous circle - perhaps the proximity of a real test of CDS event triggers was enough to tempt them into the huge spread in Portugal.

end


Another great article from Wolf Richter on the huge rise in joblessness in Europe and also their youth.  The nation collapses when the youth leave to other foreign destinations to find jobs.

(courtesy Wolf Richter.www.testosteronepit.com)

Wolf Richter   www.testosteronepit.com
Unemployment is a staggering problem in those Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16 to 24-year-olds, it's an unimaginable 51.4%, up from 18% in 2008 when Spain’s crisis began with the collapse of its housing bubble. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%.
And optimism, that essential source of energy for the younger generation, has been replaced by pessimism. Gallup reported that 80% of the people in the EU had a negative outlook on their local job situation. Crisis countries were at the extreme end of pessimism: in Portugal, 84% thought it was a “bad time” to find a job; in Italy, 91%; in Spain, 92%; in Ireland, 93%; and in Greece, 96%.
These numbers convey a sense of utter hopelessness. For young people, the vision of a good life that their society has imparted on them has gone up in smoke. A bitter irony: it’s the best educated generation ever—and the most pessimistic.
People deal with it the best they can. Some retrench. Even 35-year-olds move back in with their parents. They delay plans and wait for the situation to turn around. But others, the most energetic and entrepreneurial, those that the country needs to rebuild the economy, they don’t have that kind of patience. They pack up and leave to find a job elsewhere. And they are doing it in massive numbers.
Spaniards are heading mostly to Argentina whose economy has been booming over the last few years, though troubles are everywhere. The exodus reversed the flow from Argentina to Spain following Argentina’s bankruptcy in 2001. For many years a magnet for immigrants, Spain registered a net emigration of 50,000 people in 2011.
Portuguese prefer their former colonies. Angola, whose official language is Portuguese, has a wealth of natural resources, particularly oil and diamonds. Since 2002, after a quarter century of civil war, the economy has grown in the double digits every year, and Luanda has become the most expensive city in the world. According to the Organization for Economic Cooperation and Development (OECD), 70,000 Portuguese sought their fortunes in Angola in 2010 alone. Similar numbers are expected for 2011. For Portugal, with a population of only 10.5 million, it’s significant.
Other Portuguese try their luck in Brazil whose economy is in need of engineers and experts of all kinds. Brazil recently softened its immigration restrictions to attract the educated elite—and others are have taken notice. For example, the number of Spaniards immigrating to Brazil jumped by 45% in 2011.
Ireland has had a net outflow of people since 2009. First, Polish immigrants who could no longer find work returned home, but then the Irish themselves set out mostly for Australia and New Zealand, which have favorable visa agreements with the EU. 40,000 left in 2011, many of them women.
Greeks head to Germany, an irony of sorts, given the bad will that mushroomed out of German efforts to impose proper accounting and strict austerity on Greece. Germany’s reluctance to do ever more to bail out the Eurozone has made it a global punching bag. Yet the numbers are already staggering. Read....Germany Frets As Bailout Risks Balloon.
When educated and entrepreneurial young people leave their country in massive numbers, it impacts the economy for the long term. Their country invested heavily in their education, an asset, and now they put this asset to work in another country. There, they earn money, pay taxes, consume goods and services, and rent or buy a home—the exact activities that their own country must have to get out of the economic quagmire. Sure, emigration reduces the expenses for unemployment compensation and other services, but it drains the economy of energy, entrepreneurial spirit, can-do attitude, and knowhow.
And it worsens the debt crisis. For national debt to remain “sustainable,” young people need to stick around, start a productive career, consume, build up assets, move into those vacant homes that banks are holding, and pay taxes. But the exodus underway now doesn’t bode well for a long-term solution of the debt crisis—assuming that a country like Greece, well....
"The case of Greece is hopeless," Otmar Issing said. He should know. He was on the Bundesbank and the ECB. Another substantive voice in an increasingly loud chorus. But it’s legally impossible to kick Greece out of the Eurozone. So he suggested a procedure—a procedure that has been happening all along. Read.... Kicking Greece out of the Eurozone.

end

There is still no deal with respect to the PSI.  In this latest zero hedge report,
Greece will enter absolute poverty:

(zero hedge)

Greece Warns It Will Soon Be In "Condition Of Absolute Poverty"

Tyler Durden's picture
Submitted by Tyler Durden on 02/01/2012 16:26 -0500




And while the bankers (on both sides of the table) haggle about how to best leech Greece even dryer (with a solution due anyhour, day, week now), the actual people are starting to wave the white flag of surrender. Because the opportunity cost of every additional coupon payment is having a direct, immediate and increasingly more dire impact on virtually every aspect of the economy. Kathimerini reports that "about 160,000 jobs will be lost this year in the commerce sector, according to the National Confederation of Greek Commerce (ESEE) as the constant decline in disposable income has led to a sharp drop in turnover and a steep rise in the number of enterprises shutting down." Indicatively, the latest Greek employment figures per the IMF, show  that 4.156MM people are employed. So commerce alone is about to lead to a 4% drop in total jobs. As the chart below shows, net of just this sector, Greek jobs are about to go back to 2010 levels. What this means for the Greek unemployment rate, and for GDP we leave to our readers, although the ESEE does a good job of summarizing what to expect: the "ESEE warns that soon Greece will be in a condition of absolute poverty." And that, ladies and gents, is how Europe slowly but surely reentered the Feudal age, and what every other country in the European periphery that has a massive debt load, and no surplus (actually make that every country in the world), has to look forward to: absolute poverty, aka debt slavery.
The jobs to be lost concern 60,000 employers and 100,000 employees in the sector, ESEE expects. Given the data for a 6.2 percent fall in household consumption in 2011 and the Eurostat forecast for a further decline by 4.3 percent this year, ESEE warns that soon Greece will be in a condition of absolute poverty.

With 60,000 enterprises having shut down since the start of the crisis to date, their number is set to double by the end of this year, ESEE estimates.
Once again, it appears that Chuck Palahniuk will be proven right when stating that it's only after we've lost everything, that we are free to do anything; and it will be up to the Greeks to prove him right.
end


In this next zero hedge delivery, Bill Gross of Pimco describes the ZIRP is doomed for failure as the public will sense that investors will be more concerned with a return of their money instead a return rate on their money.The ZIRP hastens that decision and thus an urge to purchase gold. As the world deleverages, credit disappears and thus growth disappears from the global stage. Governments collapse from the weight of entitlements.


(courtesy Bill Gross Pimco/zero hedge)


Bill Gross Explains Why "We Are Witnessing The Death Of Abundance" And Why Gold Is Becoming The Default "Store Of Value"

Tyler Durden's picture
Submitted by Tyler Durden on 02/01/2012 08:44 -0500





While sounding just a tad preachy in his February newsletter, Bill Gross' latest summary piece on the economy, on the Fed's forray into infinite ZIRP, into maturity transformation, and the lack thereof, on the Fed's massive blunder in treating the liquidity trap, but most importantly on what the transition from a levering to delevering global economy means, is a must read. First: on the fatal flaw in the Fed's plan: "when rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street." And secondly, here is why the party is over: "Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time." Yet most troubling is that even Gross, a long-time member of the status quo, now sees what has been obvious only to fringe blogs for years: "Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper." Let that sink in for a second, and let it further sink in what happens when $1.3 trillion Pimco decides to open a gold fund. Physical preferably...
From PIMCO's Bill Gross:





Life – and Death Proposition
  • Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
  • Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation.
  • We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration.
Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
             Virginia Woolf, “The Hours”
I don’t remember much of this life, and like Virginia Woolf, nothing of the herebefore. How then, could I expect to know of the hereafter? I know at least that we all exist at and ofthe moment and that we make up those moments as we go along. I became a grandfather for the first time a few months ago and proud son Jeff asked for some fatherly advice as to how to go about raising his baby daughter Caroline. “We all do it in our own way, Jeff, you’ll make it up as you go along,” I said. Parenting, and life itself, is one giant experiment. From those first infant steps, to adolescent peer testing, flying from and departing the parental nest, gene replication and family building of our own, maturity and acquiescence, aging, decay and inevitable death – we experiment as best we can and make it up as we go along. 
That death part though, oh where do we go after we have done all the making? There was another Jeff in our family, beloved brother-in-law Jeff Stubban who was as kind a man as there ever could be. Dying within three months of an initial diagnosis of pancreatic cancer, our family sobbed uncontrollably at his bedside as his breath, his spirit, his soul, departed almost on cue while a priest recited the rosary. Where had he gone, where is he now, what will become of him and all of us? Like many grieving families we look for signs of him and in turn for clues to our own destination. A lucky penny in the street, a random mention of his beloved New Orleans, an exterior resemblance of his shiny bald head in a mingling crowd. Where are you, Jeff? Tell us you are safe so that we might meet again. 
Having now matured to trust reason more than faith I offer not so much a resolution, but an alternative to the unanswerable question of Virginia Woolf and the departed souls of Jeff Stubban and billions of others. If we don’t meet again – up there – then perhaps we’ll meet once more – down here. After all, the one thing I know for sure is that we got here once – and because we did, we could do it again. Rest easy, dear Jeff, and welcome to this world, dear Caroline. We’ll all just have to make it up as we go along. 
The transition from a levering, asset-inflating secular economy to a post bubble delevering era may be as difficult for one to imagine as our departure into the hereafter. A multitude of liability structures dependent on a certain level of nominal GDP growth require just that – nominal GDP growth with a little bit of inflation, a little bit of growth which in combination justify embedded costs of debt or liability structures that minimize the haircutting of or defaulting on prior debt commitments. Global central bank monetary policy – whether explicitly communicated or not – is now geared to keeping nominal GDP close to historical levels as is fiscal deficit spending that substitutes for a delevering private sector. 
Yet the imagination and management of the transition ushers forth a plethora of disparate policy solutions. Most observers, however, would agree that monetary and fiscal excesses carry with them explicit costs. Letting your pet retriever roam the woods might do wonders for his “animal spirits,” for instance, but he could come back infested with fleas, ticks, leeches or worse. Fed Chairman Ben Bernanke, dog-lover or not, preannounced an awareness of the deleterious side effects of quantitative easing several years ago in a significant speech at Jackson Hole. Ever since, he has been open and honest about the drawbacks of a zero interest rate policy, but has plowed ahead and unleashed his “QE bowser” into the wild with the understanding that the negative consequences of not doing so would be far worse. At his November 2011 post-FOMC news briefing, for instance, he noted that “we are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people” – savers, pension funds, insurance companies and finance-based institutions among them. He countered though that “there is a greater good here, which is the health and recovery of the U.S. economy, and for that purpose we’ve been keeping monetary policy conditions accommodative.” 
My goal in this Investment Outlook is not to pick a “doggie bone” with the Chairman. He is makin’ it up as he goes along in order to softly delever a credit-based financial system which became egregiously overlevered and assumed far too much risk long before his watch began. My intent really is to alert you, the reader, to the significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic. When interest rates approach the zero bound they may transition from historically stimulative to potentially destimulative/regressive influences. Much like the laws of physics change from the world of Newtonian large objects to the world of quantum Einsteinian dynamics, so too might low interest rates at the zero-bound reorient previously held models that justified the stimulative effects of lower and lower yields on asset prices and the real economy.
It is instructive to mention that this is not necessarily PIMCO’s view alone. Chairman Bernanke and Fed staff members have been sniffin’ this trail like the good hound dogs they are for some time now. In addition, Credit Suisse, in their “2012 Global Outlook,” devoted considerable pages to specifics of zero-based money with commonsensical historical comparisons to Japan over the past decade or so. The following pages of this Outlook will do the same. At the heart of the theory, however, is that zero-bound interest rates do not always and necessarily force investors to take more risk by purchasing stocks or real estate, to cite the classic central bank thesis. First of all, when rational or irrationalfear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street. 
What perhaps is not so often recognized is that liquidity can be trapped by the “price” of credit, in addition to its “risk.” Capitalism depends on risk-taking in several forms. Developers, homeowners, entrepreneurs of all shapes and sizes epitomize the riskiness of business building via equity and credit risk extension. But modern capitalism is dependent as well on maturity extension in credit markets. No venture, aside from one financed with 100% owners’ capital, could survive on credit or loans that matured or were callable overnight. Buildings, utilities and homes require 20- and 30-year loan commitments to smooth and justify their returns. Because this is so, lenders require a yield premium, expressed as apositively sloped yield curve, to make the extended loan. Aflat yield curve, in contrast, is a disincentive for lenders to lend unless there is sufficient downside room for yields to fall and provide bond market capital gains. This nominal or even real interest rate “margin” is why prior cyclical periods of curve flatness or even inversion have been successfully followed by economic expansions. Intermediate and long rates – even though flat and equal to a short-term policy rate – have had room to fall, and credit therefore has not been trapped by “price.” 
When all yields approach the zero-bound, however, as in Japan for the past 10 years, and now in the U.S. and selected “clean dirty shirt” sovereigns, then the dynamics may change.Money can become less liquid and frozen by “price” in addition to the classic liquidity trap explained by “risk.” 
Even if nodding in agreement, an observer might immediately comment that today’s yield curve is anything but flat and that might be true. Most short to intermediate Treasury yields, however, are dangerously close to the zero-bound which imply little if any room to fall: no margin, no air underneath those bond yields and therefore limited, if any, price appreciation. What incentive does a bank have to buy two-year Treasuries at 20 basis points when they can park overnight reserves with the Fed at 25? What incentives do investment managers or even individual investors have to take price risk with a five-, 10- or 30-year Treasury when there are multiples of downside price risk compared to appreciation? At 75 basis points, a five-year Treasury can only rationally appreciate by two more points, but theoretically can go down by an unlimited amount.Duration risk and flatness at the zero-bound, to make the simple point, can freeze and trap liquidity by convincing investors to hold cash as opposed to extend credit. 
Where else can one go, however? We can’t put $100 trillion of credit in a system-wide mattress, can we? Of course not, but we can move in that direction by delevering and refusing to extend maturities and duration. Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper. 
Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time.
end



Illinois by July of 2012 will have unpaid bills of 9.2 billion dollars as they face a decline in tax revenue of around 2.6 billion dollars.  They have expended 2.6 billion dollars thinking that the state would receive that in tax revenue.  Their deficits are skyrocketing as this state is probably in the worse financial shape than any of the other 49 states:



(courtesy Bloomberg)

Illinois Faces ‘Potentially Paralyzing’ $35 Billion Unpaid Bill Backlog


By Tim Jones - Jan 30, 2012 10:01 AM ET



Illinois'  unpaid bills may more than triple to $34.8 billion by 2017 unless lawmakers and Democratic Governor Pat Quinnimmediately bring Medicaid and pension spending under control, said a research group.
The “potentially paralyzing” backlog, projected to reach $9.2 billion when this fiscal year ends June 30, would be fueled by an “unsustainable” increase in Medicaid spending, according to the Civic Federation, which calls itself a nonpartisan government research organization.
“Failure to address unsustainable trends in the state’s pension and Medicaid systems will only result in financial disaster for the state of Illinois,” Laurence Msall, president of the Civic Federation in Chicago, said in a press release today.
Illinois had its general-obligation bond rating reduced Jan. 6 by Moody’s Investors Service to A2 from A1, making it the company’s lowest-graded U.S. state. Moody’s revised its outlook because the state “took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.”
To contact the reporter on this story: Tim Jones in Chicago at Tjones58@bloomberg.net

end.



This is a biggy!. It looks like the Treasury is going to issue negative yielding bonds.  If this occurs, the
you must pay the treasury money to buy the bonds.  I guess Bill Gross with ONE TRILLION in bond holdings will now switch to gold:



(zero hedge)

"Supercommittee That Runs America" Urges End To The "Zero Bound", Demands Issuance Of Negative Yield Bonds

Tyler Durden's picture
Submitted by Tyler Durden on 02/01/2012 09:40 -0500





One of the laments of the uberdoves in the world over the past several years has naturally been the fact that interest rates are bound by Zero on the lower side, and that the lowest possible rate on new paper is, by definition, 0.000%. Which is what led to the advent of QE in the first place: in lieu of negative rates, the Fed was forced to actively purchase securities to catch up to a negative Taylor implied rate. This may be about to change, because as the just released letter from the Treasury Borrowing Advisory Committee, or as we affectionately called theJPMorgan/ Goldman Sachs Chaired committee, the "Supercommittee That Runs America", simply because it alone makes up Tim Geithner's mind on what America needs to do funding wise, demand, "It was broadly agreed that flooring interest rates at zero, or capping issuance proceeds at par, was prohibiting proper market function. The Committee unanimously recommended that the Treasury Department allow for negative yield auction results as soon as logistically practical." And what JP Morgan and Goldman Sachs want, JP Morgan and Goldman Sachs get. And once we get the green light on negative yields at auction, next up will be the push for the Fed to impose negative rates on all standing securities, which means that coming soon savers will be literally paying to hold cash. And that will be the final straw.
Not only that, but beginning in just 4 short months, the Treasury may launch a brand new product: a Floating Rate Bond. From the TBAC:
The second charge was to explore the viability of Treasury issuing floating rate notes (FRNs). In particular, the presentation [attached] assessed potential client demand, optimal maturity, reference index, and reset frequency. The structural decline in the stock of global high-quality government bonds, coupled with an increase in demand for non-volatile liquid assets, should make U.S. government issued FRNs extremely attractive. Pricing for a hypothetical two year FRN was estimated to be in the arena of 3 month Treasury bills plus 8 basis points.

A discussion then ensued over whether 3 month Treasury bills or Fed Funds Effective was the more appropriate floating rate index. In conjunction with fixed-rate issuance, FRNs give Treasury an attractive alternative to increase the average maturity of its debt. While more analysis on the specifics of the program must be done, the Committee was unanimously in favor of Treasury issuing FRNs.
As a reminder, this is what Treasury's Mary Miller said earlier:
Treasury continues to study the possibility of issuing Floating Rate Notes (FRNs).  The Treasury Borrowing Advisory Committee suggested in its February 2012 charge that FRNs could complement Treasury’s current suite of products.

Treasury recognizes that FRNs may provide a number of benefits to government finance, and plans to announce a decision regarding whether or not to introduce an FRN product at the May 2012 Quarterly Refunding.
Ealier we were kidding about that PIMCO gold fund. Now that we look at tit, it may not have been a joke...

From the just released TBAC letter:
Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association

see www.zerohedge.com for the complete letter
end.




Now and behold zero hedge reports that Bill Gross will probably not endorse Obama any more.  He is thinking of Ron Paul.   Can you imagine his power with 1 trillion dollars under his control:


(courtesy zero hedge)





 I'm Bill Gross And I Endorse Ron Paul For President"

Tyler Durden's picture
Submitted by Tyler Durden on 02/01/2012 15:02 -0500




As a follow up to today's must read letter from Bill Gross, the PIMCO head explains what was the thinking behind the conclusion that is slowly leading him to become a gold bug, the potentially erroneous assumption that the Fed can not drop rates below zero (not if Goldman and JPM have their way), why Bernanke has no choice but to write checks when the Twist ends in June which will lead to bond buying for the next 12-24-36 months. Nothing new. What is new, and absolutely stunning, is Gross' endorsement for president: 'I'm a little Ron Paulish." (6'24" into the clip)... That's right. The bond king endorses Ron Paul for president, apparently on the realization that very soon he will have to pay Tim Geithnerfor the privilege of holding hundreds of billions in US paper. And now we've heard it all. 

And with that statement, can we assume that all the cash that Gross donated to Barack Obama (see below) will flow toward "Ron Paul-ish" this time around?




Friday is the jobs report.  We were reminded that January always sees a negative adjustment in the B/D plug so expect a weaker number.  Also remember that the bankers generally raid gold and silver the day before the jobs report which would be tomorrow. Today the gold and silver shares lagged the rise in metal price which is good indicator of a raid.  A bad number tomorrow will also cause a temper tantrum by the bankers to raid gold/silver hard.


(courtesy zero hedge)



Why Non-Farm Payrolls Will Be Weak

Tyler Durden's picture
Submitted by Tyler Durden on 02/01/2012 09:34 -0500




end




Following today's sizable miss and significant revision to the ADP data it is perhaps worth taking a step back and looking at some independent research on the adjustments and seasonality issues in forecasting jobs around this time of year and furthermore, why one of the pillars of this extended rally and US decoupling story (a substantially improving jobs market) could be made of salt. Bloomberg's consensus for Friday's NFP at +145k (from +200k prior) and a 30k standard deviation, there is plenty of uncertainty among the economic elite (with 125k to 150k the sweet spot for their guesses) and our favorite outlier Joe LaVorgna near the top at +210k. So while the trend is supposedly improving (though expectations are slightly off December's exuberance), Stone & McCarthy (SMRA) point out a disturbing trend of sizable forecasting errors for the January payroll print with 7 straight years of estimates overshooting by an average of 64k - strangely consistent post the BLS switch to a probability-based sample. But its not just forecasting error, TrimTabs takes a deep dive into the actual daily income tax deposits from all salaried employees (which are historically more accurate than BLS initial estimates) sees theUS economy added only 45,000 jobs in January, nearly unchanged from the 38,000 in December. Noting similar forecasting errors as SMRA, TrimTabs points out that thedecline in seasonal adjustment factors and the reality of the underlying tax data suggest "It appears that the economy has hit stall speed due to lackluster demand and a deleveraging consumer who would rather save than spend." as wage and salary growth (net of inflation) weakened further to -2.1% YoY in January from -0.5% YoY in December. "The weak job market has us concerned" seems like a truer reality than theestablishment trying to keep the dream alive.
"The weak job growth in January has us concerned," says Madeline Schnapp, Director of Macroeconomic Research at TrimTabs.  "It appears that the economy has hit stall speed due to lackluster demand and a deleveraging consumer who would rather save than spend."

"We see nothing on the horizon to knock the economy out of its slow growth mode," notes Schnapp.  "The economy faces substantial headwinds from negative real wage and salary growth, high unemployment, waning government support, expiring tax incentives, contracting state and local governments, elevated fuel prices, and a sluggish housing market."
SMRA - Why Can't Forecasters Get It Right?
There are clear indications that labor market conditions are improving, including the general behavior of initial unemployment claims.
BUT we have notice a disturbing pattern of January payroll forecasting errors that we might want to reflect upon when thinking about next week's payroll release.
January payrolls have been weaker than the median estimate in each of the last 7 years. Ever since the BLS switched to a probability-based sample, forecasters have consistently overshoot on January payrolls. Is this because forecasters have not fully appreciated the impact of the large net subtraction stemming from the January birth/death adjustment? Or is this because the BLS has published the annual benchmark revisions since 2004 with the release of the January data, and these revisions add a degree of uncertainty to the change between December and January?
Can't tell. But 7 straight over-shooting may be more than a coincidence. There may be something inherent in the January data that forecasters simply don't understand.
During these 7 years the average overshoot was 64,000, the smallest was 35,000 in 2011, and the largest was 92,000 in 2008. These misses are not especially large, but the uniformity of the overshoot is odd.

end






Yesterday we highlighted the Case Shiller index  (CSI) showing the deterioration in housing prices over 20 major cities surveyed.  The index was dreadful and since the banks hold these homes as collateral you can sense the true pulse of the economy through these figures.

Now comes the following Lee Adler report who says that the CSI is really worse than what is reported due to their methodology in collecting the data:


(courtesy Lee Adler/zero hedge)




The Trouble With Case Shiller, Again

ilene's picture
Submitted by ilene on 02/01/2012 12:25 -0500






The Trouble With Case Shiller, Again

The Case Shiller housing price index was released this morning and, as usual, it's getting lots of media attention. I have no problem with that, except for one minor detail. It is a worthless and misleading indicator of current housing market conditions. Back in 2010 I wrote a public article called The Trouble With Case Shiller, pointing this out.
Here are the key excerpts from that piece which tell you why Case Shiller should be ignored. 
The mainstream media wasted hours reporting on and analyzing the Case Shiller Housing Index today. Did even one pundit mention what's wrong with the Case Shiller data? If Dow Jones used the methodology to report the Dow Industrials that Standard and Poors uses to construct the Case Shiller Index (CSI) the Dow would be reported as being at 10,650 when, in reality, it's at roughly 10,800. 10,650 is where the Dow's 3 month moving average was at the end of May.
.
"What does that have to do with now?" you ask. I say, "Absolutely nothing!" The fact that the numbers aren't too far apart is coincidental.  The same is true of the housing market. The CSI doesn't remotely represent the current state of the housing market, which is, in fact, much lower than where the CSI shows it to be, and it has been trending drastically lower when the CSI shows it being relatively flat recently.
.
Why is the Case Shiller data both inaccurate and misleading relative to current market conditions? Let's see. The data is collected from a month ended two months ago, in today's case, July. That data is from public sources for CLOSED sales, NOT then current contracts. So the currently reported data represents sales that happened mostly in two months before that, which would be May. Then that data is aggregated with the data collected in the two previous months, for sales contracts from the 2 months before that (March and April), and reported as an average price for the 3 months. The theoretical midpoint of the data reported now is from 3½ months ago, representing the average contract price from roughly 5½ months ago. In other words, today's CSI represents average selling prices as of the MIDDLE OF APRIL when the homebuyers' tax credit was still skewing the market upward.
As soon as that distortion was removed from the market, prices collapsed. CSI isn't showing that. Other data, such as the Commerce Department's new home sales price data is. Still more current data than that is also showing a sharp drop which is continuing right up to today.
.
The media and its captive economist pundits treat the CSI as somehow being a good indication of current market conditions. It's anything but. It's wrong, and dangerously misleading.
.
The National Association of Realtors knows the real story. They track current contract prices in their MLS databases. But they choose not to share this information with the public. It is not in their industry's interest to do so. If you want to know the real story, you need a few friends in the business around the US. Or you could use some of the tracking services whose data sources are current listings, and which have proven to be highly reliable trend indicators when compared with the closed sales data released months later.
.
The closed sales information doesn't reach the public until after the sales are reported in the public records of each county. That's usually a month after the sale closes, hence the 3 month lag between the time the property goes under contract and the time the public has first news of that sale. It takes S&P another month to collect and assemble the data into the CSI indexes. That's why they are so late. Case Shiller's methodology of then reporting only a 3 month moving average as if it were the most recent prices further compounds the misimpression. The goal of smoothing the data only serves to slow it down and render it even more inaccurate.
A good real time market indicator is the data from Housingtracker.net. It reports current listing prices from 55 large US metros. I have compared that data with subsequently released actual closed sales data and the listing prices have proven to be a good indicator of the market's direction in real time. Naturally, listings prices are higher than sales prices, but a measure of listings versus sales prices published by Zillow.com shows a remarkably consistent spread that hovers around 10%. The Housingtracker data thus shows both the trend, and with the subtraction of 10%, a reasonable indication of current price level. 
Housingtracker indicates a current median asking price for the 55 US metros of $218,886 as of January 30. That's a month to month increase of 0.5% and a year to year increase of 3.8%. That's the real state of prices. It's a far cry from Case Shiller's ancient history showing prices down 1.3% month to month, and 3.7% year over year. As far as representing the current market, those numbers just are not true. 
I ignore Case Shiller in my work, but here's a chart of several indicators which I do track which will give you some idea of where housing prices really have been and where they are now. 
The Housingtracker.net median listing price is the purple line in the upper part of the chart. For the first time since the housing collapse got under way it is now clearly showing a higher seasonal low than the previous year. This suggests that the bottom is in, at least in terms of price. All that's needed for confirmation is a higher high this summer. 
Meanwhile, the Case Shillers are shilling that the market is still weakening. But clearly, that's just not the Case.
____________________________________________________________________
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end

I want to leave you tonight with this great piece from Bruce Krasting on the CBO report.
Here the CBO states that the GDP growth will not be 2.8% in 2013 but only 1.1%.
The CBO goes on to explain what will now happen with a low growth rate.  This is a very very important read to all:

(courtesy Bruce Krasting/zero hedge)


CBO REPORT - OMG!

Bruce Krasting's picture
Submitted by Bruce Krasting on 01/31/2012 21:47 -0500






The Congregational Budget Office (CBO) is out with its annual report. It’s a blockbuster. This 165 page monster is filled with dozens of charts, graphs and detailed projections. It will be talked about for weeks. The report provides a dismal outlook for the economy. There is one data point I'd like to focus on.
Here is the CBO forecast for real GDP for 2012 and 2013:



The 1.1% Real GDP number for 2013 surprised me. The CBO’s expectations are way under those of both the “Blue Chip” economists and the Federal Reserve:


What does it mean if the economy is going to slow, as CBO now thinks? Some consequences:

.
.

The CBO now forecasts Social Security to run into trouble in just a few years. This is a very substantial change in the outlook for SS. Changed fortunes make it certain that America’s favorite entitlement program will be on the table for a significant re-vamp.
The CBO has answered two critical question:

1) In what year does SS first goes into deficit (including interest)?
2) What is the size of the SS Trust Fund when #1 has been achieved?
Key data is here:


Using this information, we can estimate the Trust Funds (TF) balances over time, and compare them to what SS forecast in its report to Congress ten-months ago:

 
SSTF's "Intermediate" (Base) case:

The bottom line is that the SSTF is going to top out three years ahead of “schedule” and be $800B shy of what it was “supposed” to be.
I think the CBO report has created a big headache for a good number of folks in D.C. Most of them are running for office this year. They certainly won't be able to wave the CBO report as a measure of how well they are doing.
.





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