Saturday, April 19, 2008

April 19.th commentary

Good morning Ladies and Gentlemen:

 

http://www.jsmineset.com/home.asp

 

gold closed down by 23.00 to 916.20.  Silver fell in sympathy down to 17.84 as options expiry almost always causes the cartel to raid the precious metals arena. I cannot recall ever the cartel abstaining from raiding on option expiry Friday.

 

The open interest on the gold comex rose to 434000 despite Thursday's fall in gold price.  Again short selling is evident.

 

During yesterday's session gold was trading at 947.00 when the cartel and the banking interventionists  decided it was time to act.  They forced the Euro down to 1.5718 after that currency hit 1.593 earlier in the morning session.  The usa index rocketed to above 72. as gold, silver, oil and just about every commodity were hit.

 

However in the afternoon,  oil rebounded from its lows to close to 116.40.  The long bond continues to tank.  Platinium went from negative 25 dollars to positive 2.00 dollars. And the USA index sank below the 72 mark.

 

Intervention never succeeds.

 

Wall Street rejoiced with news that Citibank's losses may not be as large as anticipated.  They revealed a loss of 5 billion dollars but announced a further 60 billion dollars of toxic subprime garbage.  Citi then reported that it has a further 18.3 billion exposure in the Alt A arena. The market rejoiced because at the end of 2007 it stood at 22 billion dollars.

 

There was  considerably commentary on the misinformation on the Libor pricing.  Because of this it looks like the banking problems are getting worse by the minute.

 

I guess the biggest news came from Barrick vs  the CIBC.  It seems that Barrick deposited 65 million dollars of short term money in the Asset Backed Commercial Paper market.  They got the green light from the bankers the CIBC.  This is the same fund that Martin Goldfarb deposited 33 million dollars after he got the green light from the Bank of Nova Scotia chairman.

In the restructuring of the ABCP pool,  one of the conditions is that one cannot sue a bank for wrongful information.

The CIBC expressly told Barrick that the ABCP paper was void of subprime stuff.  They were mistaken and now Barrick went to court in order for them to be allowed to go after the bankers.  This will be worth watching!

 

Midas will resume on Monday when everyone is back from the Washington conference.

Have a great weekend

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

________________________________________

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Thursday, April 17, 2008

April 17.08 commentary.

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6822.

 

Good evening Ladies and Gentlemen:

 

gold closed down by 5.30 today to a value of$ 939.80.  Silver fell in sympathy to $18.18 down by 13 cents.

 

The open interest on gold rose by a substantial amount.   Yesterday, there were 10,142 new contracts added, so the new OI is now 432841.  Silver added  a relatively small 682 contracts and its new OI stands at 149800.

 

With gold up by 17.00 $ yesterday, one can see the will power of the cartel.  They provided the paper(short sale) and the specs bought big time driving gold up on Wednesday.  Today, with options expiry being tomorrow, the cartel raided gold again in the same manner as all previous option's expiry.  I guess, the cartel felt that 632000 open interest was also a bit to high and thus the raid. They were hoping that the specs would relinquish their new found( and bought ) longs on the raid.

 

What is interesting is that the OI on silver hardly moved northwards despite the huge price advance.   There is no question that the cartel are having a terrible time in the silver arena.  It looks like all the silver OI are in strong hands.

 

Today, oil hit 115.20 a barrel on news that Nigeria is cutting production by a third.  Gasoline continues to rise and it set another record advancing a further 2 cents. The Chinese announced that they have purchased a huge amount of potash from Canada and the price is triple to what they paid in 2007. Commodity prices continue on a tear!!

 

Bond yields continue to rise especially in the long end.  The 30 yr note closed down by 1/3 to 117.61 as the world perceives that interest rates are on the rise.

 

Merrill Lynch reported that they are going to report a huge loss in the 1st quarter and that they are going to lay off at least 4000 workers in the City of London.

 

There are some very disturbing economic news that I would like to point out to you:

 

the TED spread which is the spread btw the 3 month treasury bill rate and the 3 month libor rate widened to a huge 160 basis points by the end of March. The spread is usually 35 basis points so a move this great signifies continued stress in the banking sector.

 

Then we heard that Bankers are rigging the Libor rate by not supplying correct data.   Considerable derivatives are written using Libor.  The banks are supplying faulty data because they do not want to alert the public that they are in distress!! So many derivative plays are offside because of faulty data.  The report was in the Wall Street Journal today.

 

There is no doubt that the next story is the biggest  of the day.  The Royal Bank  of Scotland stated today that they may need to raise 12 billion pounds to repair its balance sheet.

 

I would like to point out that the Royal Bank of Scotland is one of the world's oldest banks.  It received its royal charter in 1673 around the same time as the Bank  of England.  At first, these two were rivals  but  eventually, the Bank of England became the big central bank and  Royal Bank of Scotland morphed into a huge commercial bank and it takes its orders from the B of E.

This will send shock waves reverberating throughout the financial world if they are forced to fix their balance sheet.

It looks like they suffered big damage in the takeover of ABN amro, the huge Dutch bank.

The City of London is the financial centre of the world.  Most of the physical silver and gold transactions are conducted in London England. Today, we learned that the loss of jobs at Merrill and the huge problems at the Royal Bank of Scotland is causing big problems in the  "City". The British Government is showing huge deficits as it relied too much on the financial sector for funds.

Government borrowing is around 40 billion pounds and the total trade deficit is around minus 87 billion pounds. The only countries that England had any surplus was with the USA and Ireland and they were tiny.  The "City" is responsible for 25% of the country of England's revenues!!

 

So it looks like the two financial centres, New York and London are spiralling out of control.

 

The next big news story came from the  Office of the Comptroller in the usa. We learned that the  total notional derivatives for all the banks declined by 8 trillion dollars.   We learned that the overall decline was caused by a decline in the interest rate  contracts.  They declined by 9.2 trillion dollars mostly swaps with less than 1 year.  THE NOTIONAL DECLINE IN THE FORTH QUARTER REFLECTS LESS WILLINGNESS FOR COUNTERPARTIES TO TRADE WITH EACH OTHER GIVEN CONTINUED ILLIQUIDITY AND MARKET TURMOIL, DECLINING DEBT ISSUANCE AND THE UNWINDING OF SIZEABLE DERIVATIVE TRADES.

 

This is the reason for the Libor rate rises that I have reported to you over the past week.  Banks have many skeletons in the closets and many refuse to deal with one another.  This is another reason why the Libor rate is fudged by the banking sector.

The report is in Midas today written by  Peter Taylor .  The article is titled:  " Libor  Creditibility Questioned as Credit Crunch Deepens".

 

This will also explain why the contraction occurred only  at the short end of the treasury curve. As Taylor comments:

 

"the buggers have corrupted the bench mark which these trades are hedged against. Short term interest rate swaps are all hedged against 3 month  Eurodollar futures..a Libor based product."

 

This is the first time in recorded history that notional derivatives have declined.  This is the reason we are experiencing massive deflationary pressures in the banking sector today.  As I pointed out to you on many occasions, the only way out is for the massive printing of paper money in the hope that the collateral rises in price so it could be moved off everyones balance sheet.

The problem will linger on until this happens.

Generally speaking, on the  the last trading day of options (tomorrow), the cartel like to  continue to pound gold and silver and their corresponding cousins, the gold mining companies.  However, my son pointed out tonight that put premiums declined big time with the fall in gold and silver price  today which generally portends a huge rise in the metals tomorrow.  If so, this will be a first.

I am excited to see if this transpires and if so I will explain on the weekend its significance if it comes to pass.

Lets see what happens tomorrow.

 

 

 

I will speak to you all on Saturday.

over and out

Harvey.

 

 

 

 

 

 

 

________________________________________

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Wednesday, April 16, 2008

April 16.08 commentary.

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6820

 

Good evening Ladies and Gentlemen

 

gold closed up 17.80 to 945.10 .  Silver rose by 54 cents to 18.31.

 

The open interest on gold rose a further 3100 contracts and it now rests at 422699.  Silver OI rose by 1100 contracts and its new OI is  149199.  As I have stated before, it looks like the rock bottom strong hand position for gold is 400,000 and for  silver that level is 145000.

 

In news today, the dollar sank badly with the usa index finally levelling out at 71.41 down almost 71 basis points.  The Euro closed at 159.46.  The price of oil closed above 114.00 at 114.36 dollars per barrel.

 

The Dow and Nasdaq for some unexplained reasoning skyrocketed.  The Dow finished up by 257 points and the Nasdaq was up over 64 points.  The earnings from Intel and IBM enthused wall streeters.

 

However other disturbing details continue to be  unnoticed . The yield on the 2 yr treasury note has now risen by 70 points in the past few weeks.   The long bond continues to rise in yield.  Today the  long bond fell a full 2 points as a signal to future inflationary pressures.  On top of this the 2 yr over 3 month note known as the "2 yr interest rate swap" widened for the first time in 5 weeks on Libor concerns.   The spreads are rising with the growth of risk aversion.  Banks just do not want to lend to one another. The spread widened to 100.25 basis points…the highest since March 10. 

 

This morning we head that the CPI rose by .3% or (3.6% annual).  Nobody believed them.  Commodity prices rose and the dollar sank on the news.

 

US home starts fell badly by 11.9% in March, while  building permit activity fell another 5.8% a sign of future construction spending.

 

ON Friday we have options expiry so expect gold and silver to be hit.  Same drill as on previous occasions.

 

Speak to you on Thursday

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

________________________________________

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Tuesday, April 15, 2008

april 15.08 commentary.

Good evening Ladies and Gentlemen":

 

gold closed up by 2.70 to 927.80.  Silver rose by

2 cents to 17.79

 

The open interest on  gold rose by 4100 contracts and the new OI is a touch south of 620,000.  The silver OI also rose  by

1200 contracts to 148000.  It is clear that commercials are supplying the needed paper on both gold and silver and the specs have started to enter the arena again.

 

Today we saw oil hit a record 113.79 dollars per barrel. Gasoline hit a record 2.88 $ per gallon. The CRB set a  record of 415.36 up a full 5.44 points.

 

The big news of the day was the release of the Producers Price Index.  It is a forerunner of price inflation.  It rose a huge 1.1% for the month or annualized it is 13% year over year.  The cartel boys had the fingers on the buttons at 8:30 and as soon as these figures were announced, gold was sent down.  It had risen by 10 dollars earlier in the day.  He had to shoot the messenger even though word is getting out on food riots around the world.  Bush has decided to sent 200 million dollars aid to poor countries hit with food riots.

 

The second biggest news came from the ECB.  Again for the 4th straight week, all banks under the direction of the ECB decided to sell very little gold.  This week it was 1.99 tonnes or (38 million euros worth).  Last week it was nil.

 

The TIC report was released and it showed that 64 billion dollars of inflows of capital came into the usa.  Since the trade deficit is minus 63. billion they covered that section.  However there is still the 15 billion dollar deficit in the service sector.

 

In other news, UBS is cutting its labour force by 10%.  The  usa has announced a big 57% increase in foreclosures for the month of

March. Also usa bankruptcies are  accelerating as the economic slowdown continues.  There are many retail chains going the insolvency route such as Levitz Furniture and  electronic dealer:  Sharper Image.

 

It was reported today that food costs have risen the fastest in 17 years.

 

Copper is still at its lowest in inventory level.  It is below 120,000 tonnes which is less than a days supply.

 

This week is options expiry and generally the cartel try and keep a lid on gold and gold shares.

 

Have a great day.

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

_________________________________

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Monday, April 14, 2008

April 14.08 commentary...

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6817.

 

Good evening Ladies and Gentlemen:

 

Sorry for being a little late tonight as I am still a little jet lagged.  My body still thinks it is in Beijing.

Gold closed up by $1.80 to 925.40.  Silver rose by 10 cents to 17.77.

 

The G7 had their meeting over the weekend and gave a communique indicating that they would rally behind the weak dollar.

That was the signal for gold to be hit in Japan and  all corresponding USA index currencies were hit with the dollar rising.

 

Then news came that Merrill Lynch and Citibank were going to report greater losses on its subprime mortgages.  The dollar was whacked and gold started to rebound

 

At around 9 am we heard about the earnings at Wachovia.  It was reported that this bank was going to report a loss for the first time.  The loss was in excess of 300 million dollars.  They then decided to omit their dividend to save 2 billion dollars.

We all expected the Dow to tank.  But no, the PPT showed up supporting the Dow and knocking gold down at every opportunity.

Then it was announced that Wachovia was going to have  a cash infusion.  By whom?  Nobody knows!.   Who would give them money with all this turmoil?  Wachovia is the 4th largest usa bank and this bank is the major lender to all the hedge funds.

 

Oil closed today at $111.70 a barrel.  Most oil stocks were up on the day big time. The dollar finished down by .38 to 71.78 on the usa index.  It's low was 71.50.

 

The gold open interest rose a scant 700 contracts to 415366 despite huge volume  on the comex.  It seems that 400,000 is the rock solid "strong hands" that my son and I have been telling you.

 

Silver's OI also remained constant.  Its OI rose marginally up by 400 contracts to 146,831.  The strong hands in the silver market is around 145000.

 

I guess one of the big stories on Wall Street today was the unloading of senior debt by Goldman Sachs at 65 cents on the dollar for AAA paper.  So we now have a mark that  analysts can use in assessing debt:  65 cents for AAA subprime stuff and now probably  15 cents for anything below that in investment grade.  In other words, for level 3 assets a pricing model has been introduced and this mark to mark pricing has got to have Wall Street shivering!!

 

Goldman Sachs investnment gurus came out today and stated that first quarter earnings are going to be dreadful.  Instead of rising a scant 4% on a yearly basis, they now predict a fall of 12.5% in first quarter earnings.  Dreadful earnings from Alcoa, UPS and General Electric have stunned wall street.

 

The Wall Street journal is talking about food riots in major countries as rice, wheat, corn and just about every commodity has reached record levels.  The Group of 7 gave a communique to suggest that this was their greatest fear…rising food prices and a stagnant economy caused by the banking crisis.  The IMF director Kahn stated that food price inflation could lead to starvation in the third world.

 

There is talk that the once hot property markets have cooled.  Properties in Spain, Ireland,  Britain, and Eastern Europe have cooled.  Collateral to our bankers around the world have declined which will further exasperate the credit crunch.

We are hearing that some commercial bankers are  freezing their home equity lines of credits to good clients as  bankers reserves melt.  If one were to look at the Fed Reserve's balance sheet, you would see that all the banks yesterday had  a negative  99 billion of reserves at the Fed.  The entire  banking reserves have disipated!! Its looks like citizenry deposits have disintegrated.

The London times reported that the banking sector will shed 200,000 jobs. 

This will lower government coffers from income.  Bankers provide huge revenue and now this has gone by the wayside.

Expect deficits to increase dramatically in the usa as the usa is hit with the twin atomic blasts:

1.  downfall in the number of working Americans.

2.  increase in the trade deficit and service sector deficit.

 

Both of these will cause the usa to have a 1 trillion dollar deficit in its current account sector with an economy of 13 trillion dollars.

The resulting 7.8% current asset deficit ratio is the highest on record ever for a reserve currency.   Generally, when this occurs, you can expect catastrophic events to occur.

 

In other news, we learned that John Thain is having great difficulties over at Merrill.  Its Credit Default Swaps are now trading equal to Lehman Brothers.  The financial world is having nightmares studying the balance sheet at both of these companies.

 

John Browne, a former MP for the British government gave a great paper on gold.  He believes the shackles are now off gold.

You must read this in the midas commentary.

 

Also Hugo Chavez,  stated that he would love to buy the gold offered by the IMF.  I can assure you there will be a huge lineup starting with China and then Russia standing in line to purchase the yellow stuff. 

 

Got to go,

speak to you tomorrow

Harvey.

 

 

_______________________________________

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Sunday, April 13, 2008

April 12.08 Commentary...Important

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6812

Good morning to you all. Today I will comment on the events of yesterday and then give a summary as to what I believe will happen in the next few weeks.

Gold closed down by 4.70 to 923.60 and silver fell as well down by 34 cents to 17.67.

Yesterday, we saw the dollar fall as the usa index hovers near its low. It closed at 71.84 with the Euro closing up 66 basis points to 158.23 to the dollar. Crude oil basically finished unchanged at 110.40 a barrel and copper continues to bang against the all important 4.00 dollar per lb barrier. Gasoline however hit its record of 2.80 per gallon. Around the world gasoline prices are rising at the pumps. In Canada we saw gasoline hit 1.14 per litre.

The open interest on the gold contract rose marginally by 3400 contracts to 414601 basis Thursday. The silver OI declined by 900 contracts to 146000.

Judging from the see-saw action on gold on Thursday( with gold at one point climbing to $940.00 only to be hit by cartel selling once the afternoon fix was settled.) the increase of only 3400 contracts can only be short selling.

On Fridays action, again gold was all over the board as the cartel needed to calm the markets in the face of the lousy earnings at General Electric. General Electric reported a drop in earnings to 44 cents instead of the market expectation of 52 cents. The Dow fell badly down by 256 points and Nasdaq fell by 61 points.

Financial news of the day:

Early in the session we learned that import prices rose by 2.8% instead of market consensus of 2.0%. Import prices are rising by 14% year over year.

We then learned that the Michigan April Consumer Confidence fell badly to a 26 year low of 63.2, Most were expecting a reading of 69.00. The previous low 26 years ago was 62.5 in 1982 at a time when the usa was experiencing stagflation on low growth and high inflation. If you remember that period interest rates were at 16% and the economy was in the doldrums.
Today, the Michigan consumer confidence is echoing in the same scenario.

The earnings at GE were frightening. Approximately 40% of GE's earnings are financial and it seems that their OTC derivatives are getting wacked. Before, these derivatives were smoothing out GE's earnings. Not now!!

However, the big news of the day was not GE even though Wall Street thought it was the main story. The real story is the largest municipal bankruptcy in usa history is looming. It looks certain that Jefferson County, Alabama, will declare bankruptcy this week as they are in peril with their huge derivative loss. Jefferson county entered into a derivative arrangement with bankers involving a $3.2 billion interest rate swap to clean up their sewage problem. The interest rate swap was done to save them interest in the first few years. However the derivative trade went against them and they cannot pay. On top of this, MBIA lost its triple rating AAA status thus throwing Jefferson which houses Birmingham into peril. They are going to enter Chapter 9 bankruptcy which is identical to chapter 11 for commercial companies. Chapter 9 is designed for municipalities to stall for time as creditors seek compensation for their investments. It will be messy. The Orange County fiasco of 1994 will be relived!!

This will be the start of many municipalities going into Chapter 9 as their bond yields rise into the statosphere. We are seeing many municipal bonds trade near 20%. There is no way that these bonds can be:
1. redeemed.
2. rolled over with the higher interest rate.

the usa will see a plethora of munis go under.

On Thursday, we saw that the trade figures released by the Government showed a deficit of minus 63 billion. If you include the correct oil price the deficit was in reality 70 billion dollars. Stated another way, the total trade deficit for the usa is heading for 840 billion dollars.

The trade figure is just one half of the equation. You must add the service sector deficit which is running at 15 billion dollars per month to get at the total deficit. The trade and service sector deficit is called the current account deficit and it is heading for a yearly deficit of 1.02 trillion dollars. The GDP of the usa is 13 trillion dollars so, the ratio of current account deficit to GDP is running at an alarming 7.8%. Anything over 3% is cause for concern.

We are now witnessing many countries with current account problems. Iceland has a current account deficit /GDP of 16%.
Turkey and Greece have a deficit ratio of around 12%. Spain with no reserves at all, has a current account deficit ratio of 9.1%.
These countries are seeing their sovereign bonds trade at double digit figures. This cannot continue and eventually we will see a collapse of their sovereign debt.

As we speak, the world has not bid the interest rates for usa bonds up yet, but they will. The usa is inflating at 12% (Willliams Shadow Government figures) so a yield of 4% is suicide for bond holders. They will dump their bonds and seek gold and silver instead of financial assets.
There is no way, that bond holders will risk holding these securities.

The other big event of the week was the jobs report which showed the usa lost 80,000 jobs. The economy is weakening badly and the government coffers will not fill up with tax dollars. Deficits will continue to pile up as the economy suffers. However the usa must continue to spend on the war and other areas they deem as important.

At the Fed we are seeing a huge 50% of their assets being held in the toxic variety courtesy of their captive banker friends.
The Fed is now exploring ways to increase their reserves so as to take on more toxic junk. This will increase the debt ceiling as the money supply increases.
We are heading for hyperinflation and a huge global financial meldown.

The game ends when:

1. US bond yields spike northwards as everyone realizes that bonds are a bad bet. Then, all the financial assets not already imperiled will be blown up.

2. the last oz of gold is handed in through the leasing game. Then the gold derivatives held by the bankers implodes as well.

We will experience both.

Have a great weekend.

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