Saturday, March 29, 2008
First of all, for the first time ever, the lease rate on gold fell to negative levels. The bullion banks now must resort to paying you for leasing gold. We now have both silver and gold in negative leasing arrangements.
With the OI declining big time on Wednesday, and with premiums on puts falling, a raid seemed out of the question. However, the Fed made a startling announcement that they were going to make another 100 billion dollars available to the commercial banks. I have kept score on this front: the total infusion of dollars announced by the Fed is now up to 360 billion dollars. In addition, they have made available 100 billion to the brokerage criminals and a further 30 billion dollars to JPMorgan to purchase the toxic debt of Bear Stearns. In essence then, a total of 490 billion dollars of freshly minted federal notes will have been minted and used by the banks . All of these banks are insolvent as their reserves have been depleted. Depositors money have been lost(they will be saved by the Federal Insurance accounts) as the banks are operating solely on the infusion of Fed advances. The total deficit of all banks which the Fed records stands today at minus 60 billion dollars.
The reason for the raid Friday, was no doubt the above announcement of $100 billion additional infusion of capital. Long ago, I would wait on a Friday afternoon for the money supply figures. An increase of 1 billion dollars would send bonds down by 2 full points (200 basis points) and cause gold to rise as the world smelled monetary inflation which would in turn lead to price inflation.
The cartel wish to show the world now that everything is OK despite the huge ½ trillion usa dollar infusion. (For those doing the math, if we assume the usa have their entire 200 million oz of gold, the value of this gold is about 180 billion dollars..the usa is printing 2 and ½ times the value of gold in their vaults).
The gold shares did not fall for yesterdays attack. Gold shareholders and
gold mining shareholders purchase their securities because of the massive printing of paper money. If I was a betting man, I will make a bet with you that almost all of Friday’s gold comex offerings were short.
What is even more intriguing is the COT report:
In silver we saw the large specs reduce their longs by 11000 contracts. However the commercials abandoned ship. The commercials increased their longs by 9000 (the smaller commercials) and the larger commercials reduced their shorts by a whopping 10000 contracts. All 3 categories reduced their shorts so it is difficult to see who supplied the paper!!
In gold, same story: the large specs reduced their longs by a whopping 17700 contracts. They reduced their shorts by 1500 contracts.
The commercials were busy little beavers: they reduced their longs by 5000 contracts but reduced their shorts by a whopping 38000 contracts.
And get this... the small specs for some reason reduced their longs by 4500 contracts and went short by 12,200 contracts.
The small specs, then supplied the paper gold as a backdrop for the commercial short covering. This was as of Tuesday night.
Strangely, the small specs in a short run are ahead. However they are now short the paper gold going into next week. If they do not cover quickly they will be annihilated!
When I went to sleep early this morning the Dow was up. I told my wife that the Dow would end in the crapper and that is exactly what happened. The Dow fell by 86 points as many players are exiting this mess. Yields are too low for Europeans to support the usa economy and dollar. With such a massive raid on gold , silver, oil and just about all commodities had no effect on the usa dollar. It rose a paltry .10 in the usa index. It is now 71.67.
My Number 2 son checked in with me last night and reported that the open interest on gold going into the first day delivery stands at a huge 45500 contracts or 4.5 million oz of gold. Normally around 2 million oz stand every two months. This may be one of the reasons for the raid to punish holders who take delivery.
The university of Michigan sentiment report was released at 10 am and it came in at 69.00 level. Anything below 100 means recession.
ABN Amro in a stunning article yesterday postulates that Bernanke is studying the possibility of a zero interest rate usa policy in an attempt to avoid the devastating effects of deflation.
The race to zero is certainly in the usa cards. Europe for now do not want to play. They are intent in letting the usa dollar enter into a freefall. IN Japan the jobless rate increases to 3.9% and inflation
is at decade highs.
Silver is now commanding a 50 cent premium over spot to those wishing to sell their silver. This shows a big disconnect btw the paper silver market and the real physical market.
As the lease rates on gold fall into negative territory, expect the same for physical gold to rise over paper gold.
In summation, the Bearn Stearns implosion is similar to the Long Term CAPITAL affair 10 years ago. Long term capital went bust having shorted mega tonnes of gold (anywhere from 300 to 1000 tonnes). Central banks came to rescue where all banks except one came to the rescue. Believe it or not, Bearn Stearns refused to go along with the central bank scheme a decade ago. The paid for this last week
With their life!!!
We are about to land in Shanghai China where I will be heading for the ancient city of Xian to see the Terra Cotta warriors. I will not bring my computer however, I will report to you on Sunday night when I get back.
Over and out
Thursday, March 27, 2008
good evening to you. We are now on our way to Shanghai China.
Quite a volatile day on the markets. Gold closed down by a small 30 cents to 948.80 and silver rose by 17 cents to 18.49.
Most of the silver rise came in the last 20 minutes . The cartel were hell-bent on moving both metals down yesterday but they fought back to end the trading at very respectable price levels.
The open interest on both metals really surprised me to the positive. The open interest on gold comex declined by a huge 23000 contracts to a new low of 429000. This was done with gold rising the past few days. It is quite obvious that many shorts are running for the hills. Midas suspects that the specs did not roll and just excited as they did not want to play with the commercials. I do not think so. I believe that the lower level commercials have abandoned ship and it is these guys who are exiting.
In silver comex , the Oi hardily moved (29 contract increase) . The OI remains at 150000. We are hearing that refiners are working triple shifts to make standard bars. We are also aware that the Cdn refiners are sending all their available silver down to the comex.
There still remains 400,000 0z of silver to be delivered upon at the comex. There is considerable strain on the delivery boys but these longs will get their silver.
We are now witnessing oil hit 108.00 a barrel again and we are seeing copper rise to 3.89 a lb. What is more fascinating in that arena is the total amt of copper in the London warehouses hit an all time low of 118000 metric tonnes or about 6 hrs of supply. We are now below the 1 day level.
China is purchasing all the commodities it can with its huge supply of usa dollars.
The Dow fell by 120 points as there were credit concerns on Citibank and Lehman brothers. As far as I am concerned they are all bust (the entire usabanking system).
As you all read Willie, you have learned that all the banks have a negative reserves of 60 billion dollars. They have depleted citizens deposits and the only thing that keeps these guys going is the "temporary" money from the Fed. We are witnessing the Libor rates in all 3 currencies remain high.The usa libor rate is increasing meaning tremendous stress among banks. Nobody wishes to loan to another.
The huge South Korea pension fund announced today that it will stop investing in usa treasuries because of their lousy yield. I guess pretty soon all will depart from the usa dollar for safer and higher returns from other currencies.
Home prices in California dropped by 26 per cent in Feb. The two hardest states hit with the subprime mess is California and Florida. This huge fall in prices means that collateral on all the banks becomes less and less. More and more people walk away from the homes. The mess just gets bigger and bigger and the derivatives are sputting out lava like there is no tomorrow.
There is such a massive systemic margin call on all financial institutions that it is impossible to get their houses in order.
Even the Wall Street journal reports that the fed has probably run out of bullets. Their balance sheet is beginning to look like the bankrupt banks.
After the market closed we heard that the ECB is preparing to inject additional liquidity. In the usa , the Fed released data on the auctions for money and a record 88 billion bid for the 50 billion. They stated that they will continue auctioning money to these defunct banks . They state that the loans are temporary. Investors around the world know it is not temporary money as this money will be rolled over every month.
In the commentary, Barrick states that it closed its 9.6 million oz of gold. I will not comment on this until I see how they did it. I have my doubts. However , if it is true, they must have done a deal with Morgan as they are their counterparty.
Is Barrick preparing for the end game?
Speak to you tomorrow
Wednesday, March 26, 2008
Gold closed up by 14.30 to 949.10 where as silver rose further in comparison to 18.32 up 62 cents.
The open interest on gold contracted a huge 9000 contracts to 452000. Silver fell a few contracts. In both cases we are seeing commercials covering like there is no tomorrow as they sense the end game is being played out. The Dow sank big time yesterday but gold and gold shares rose. I can now safely say that gold and the Dow are behaving properly. The physical market for gold and silver is at an all time high. Refiners and mints around the world are recording record purchases. Many are moving their unallocated physical metal on their balance sheet to allocate. (in English it means registering the certificate).
Meanwhile we are seeing oil rise to 106.00 a barrel and the dollar tank once more as I have promised you. The dollar sank overnight (Toyko time) where it sits at 71.2 as I write this. (it closed last night at 71.40) Gold is up a further 5 dollars to 954.00 as today is first day notice on the gold. Judging from the huge rise, many must be standing for delivery. My Number 2 son will report to me on the front open interest on gold and we will see if the commercials have a problem this month. I have a strong hunch that sovereign wealth funds are standing for April l.08 gold. Lets see if this develops.
The 10 yr bond rate fell to an unbelievably low 2.47%. The yield on 3 monthmoney is .38% per year.
I guess the citizens of the usa must pay for government to borrow their hard earned money. Go figure!!
The dollar is heading into an abyss.
I also believe that the takedown in gold was there to assist Anglo and Barrick . However the takedown did not encourage the longs to liquidate so they could not take advantage of the price drop. They are doomed.
They trotted out Sec Paulsen on CNBC yesterday and a question on derivatives was asked on the implosion of Bearn Stearns . Paulsen stuttered and answered in a incomprehensive fashion. He knew the usa was in trouble. I saw this on the TV screen and I can assure you many saw the same.
To see the Sec Treasurer stutter and utter sentences which made no sense has got to have many on Wall Street worried.
Pension funds have initiated court proceedings to block the Bear Stearns deal. Congressman and Senators are beginning to ask the Fed questions about the deal. This is the last thing that Bernanke needed.
Wall Street is reporting that the FDIC is asking to increase the number of employees to 380 from 220. These guys are expecting major bank failures. Banks are still hoarding cash as they are basically insolvent. The libor rates are still very high vs overnight rates. In London Libor sterling is 6.% whereas overnight sterling is 5.25% . The ECB allocated a huge 216 billion in Euro funds on 7 day temporary money to help bail out brokers stuck with subprime garbage there.
That is all for today. I will report to you tomorrow morning Toyko time.
After I send this report I will email you the James Willie paper which I urge all to read. He is 100% correct.
Gold rose big time yesterday rising by 16.50 to 934.50. Silver rose huge to a value of 17.70 up 70 cents. The big news was the decline in open interest on gold and silver. The gold OI dropped a massive 9500 contracts as the cartel knew the noose was around their necks. The short sales accomplishednothing.
The Oi on silver continues to decline despite silver's rise. The cartel know that silver supplies around the world are basically out. The two big shorters Scotia Macotta and HSBC must be sweating bullets this week.
The open interest on the front gold month remains strong at 179000 contracts with today being the last day as tomorrow options will have expired and we have first day notice. There still remains a full 1 million oz of silver to be delivered upon.
The 3 month treasury rate is still trading at .38% signifying stress in the credit markets. The fallout in the Bear Stearns fiasco is still to be played out.
Hedge funds are seeking the legal arena to stop the Fed assisted buyout by Morgan.
I will repeat to you what I told you yesterday: the buyout did not rescue Bear Stearns, it rescued JPMorgan from a derivative financial meltdown.
All base metals rose big time as did Platinum which rose a huge 109.00 per oz. It is clear that the raid on commodities was nothing but a short orchestrated by the Fed and brokers with newly minted dollars through the repo route.
The news from South Africa is not good as they are not supplying electricity greater than 90%. Mines have to be shut down because there is no way they are going to send workers down a shaft 1 mile deep and then the power goes off.
Today, is option expiry for the gold month. If gold rises today, you can bet tremendous stress on the cartel. Generally gold falls during the last day of options expiry.
Anyway, I have got to go. We just finished our trip from Kobe to Kyoto. We are now sailing to Hiroshima, Japan.
Sorry for the delay as Kobe has an interference with all internets. Our ship reported that we would experience difficulty.
Speak to you tomorrow
Monday, March 24, 2008
The open interest on gold comex declined by a very small 4000 and the new Oi is 470000 with gold declining by over 100.00 in the week.
The gold price is low as compared to the OI on the comex. The entire volume on the comex was basically short selling by the cartel banks on orders from the Fed. They orchestrated all commodities down and the freshly minted dollars was the vehicle used to short.
Silver comex again saw its Oi decline by a further 4000 contracts to 152500 as the commercials continue to bail out. You will see silver rise faster than gold in the coming weeks.
The big news of the day was Bear Stearns. With the help of the Fed and tax payer money, both Bear Stearns and JPMorgan were bailed out of a fatal derivative blowup, if Bear Stearns would have been allowed to go into bankruptcy protection. The entire 511 trillion dollars of derivatives would have imploded the financial system of the usa.
In the deal, the Fed bank of NY provides 30 billion dollars of guarantees to Morgan to purchase Bear. Morgan assumes liability on the first 1 billion dollars of assets if they fail. The Fed initially balked at the 10 dollar figure as they claimed that they did not want the world to perceive this as a taxpayer funded bailout. In the end the Fed caved in and the deal was announced at 9:30 thismorning.
Fannie Mae announced that delinquency rates climbed by 1.06% in Jan.
The new problem on wall street will be the prime mortgages as the ARM resets reach a peak by Oct of this year. House prices will continue to fall plaguing the banks once more.
The Fed is beginning of auction 50 billion dollars of freshly minted dollars. The rate of interest is set at 2.19% minimum bid. The bidding will be frantic.
Later today, I will download an article written by James Willie explaining in detail that the entire usa banking system as melted. He uses Federal Reserve figures which shows that all the banks deposits (net of loans fromthe fed) have fried. If you remove these borrowings, the banking systemhas now minus 60 billion dollars in reserves.
Ladies and Gentlemen: I repeat...
The usa has just received a massive system margin call by the banks on the banks. We have a massive insolvency problem at the usa banking sector and the only way out is a massive printing of dollars to raise these asset prices. This is what you are witnessing.
Gold premiums on puts have narrowed considerably so a further raid on gold is not in the cards.
Look for continual accumulation of metals and oil by sovereign wealth funds as they know the dollar will tank.
Greetings from my ship as we head to Kobe Japan.