Saturday, April 26, 2008

April 26.08 commentary...extremely important

http://www.lemetropolecafe.com/hemingway_table.cfm?pid=6842

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6846

________________________________________

 

Good morning Ladies and Gentlemen:

 

I am going to quote areas from the above two commentaries on the Midas site.

 

First of all, gold closed up by 1.40 to 887.20 and silver rose by 19 cents to 16.85.

 

As for the open interest numbers, they are simply mind-boggling.  The gold OI fell marginally by 300 contracts to 422000 despite gold's constant pounding. Silver's OI contracted by a huge 23000 to 130000. (It looks like the silver contraction is simply calender spreads unwinding ). In gold OI , the price of gold has fallen from$ 950 to$ 887 with few contracts fleeing.

I strongly believe that I am correct in saying that strong hands are holding the gold comex contracts.  When the front month comes due, all of these players will simply roll.  They are not frightened that the usa will raise interest rates and cause the dollar to rise and gold to fall.  The answer why is in the two commentaries above :

 

1. the Murphy commentary at the James Joyce table

2. The Ron Kirby presentation at the Hemingway table.

 

During the night we witnessed massive turmoil in Japan. Japanese long bonds tumbled  causing the biggest jump in yields in over 5 years, after inflation accelerated at its fastest pace in decades. Bond futures fell as much as 1.8% causing the Toyko stock market to suspend trading for 15 minutes. The government announced prices rose by 1.2% in the month and causing speculation that the Bank of Japan will have to raise interest rates. This will completely collapse the dollar yen carry trade.  Investors short on yen will have to buy back yen at higher prices.  This will force investors to sell usa denominated assets as this is what was purchased with the borrowed yen.

 

We also learned that a usa ship fired on an Iranian ship in international waters.  No explanation was given but that caused oil to skyrocket up by almost 3.00 to 119.00.  Also a North sea pipe line is being shut down for repairs and Nigerian rebels have basically stopped the exporting of Nigerian oil.

 

All of the above, caused long bonds in the usa to fall.  The long bond fell to 115.56 down from 119./00 earlier in the week.  The world is now getting ready for long term rates to rise and this will be the death knell of the cartel.

 

Switzerland, sensing danger in the financial environment stated unequivocally, there will be no more gold sales by it after its current program of 250 tonnes have been finalized.  At the end of Dec 31.07 ,  145 tonnes out of 250 tonnes have been sold.  During the first two months  of 2008 only 11 tonnes for each month were sold. They have not announced any figures for March yet.  The program ends in Sept 2009.  It looks like Switzerland is loathe to supply any more metal, now or in the future.

 

In Kirby's commentary, he talks about the huge growth in notional derivatives at JPMorgan.   It is extremely difficult for laymen to understand.  So I will try and explain in plain English what is going on so you could fathom the gravity of the situation.

 

JPMorgan at Sept 2007 had 91 trillion dollars of notionals on its books.  Of that 65% of that was swaps or  61 trillion dollars.  Swaps are simply a trade with a broker that must be reversed say every 18 months.  In essence, JPMorgan is swapping its 3 month paper (borrowed from the Fed) for 5 - 10 year paper from the brokers.  The brokers cash these short term treasuries and buy  stocks to kingdom come and short gold and gold shares.  They have massive amounts of dollar infusion to do the above.  On top of this amount of dollars, the Fed itself gives money to the brokers called repo pool money.  However this money is temporary and occasionally, the brokers have to pay this money back to the Fed.  However the first set of dollars remain in the system and this is the reason that the derivative pool continues to expand.

 

And now the problem:  generally, when you do a swap, you hedge your bets.  However Kirby determined that JPMorgan did not hedge their bets.  In other words, they are continuing to bet that long term rates will continue to fall.  If long term rates rise, or if Asia and other nations sell their USA holdings of treasuries, then  JPMorgan will have astronomical losses on the bonds that it holds.  You see as long term rates rise, bond prices fall and when each swap transaction is terminated losses will mount to the heavens.

 

In other words, JPMorgan is the Fed in that it is their policy to lower and keep rates low.  The instrument of this action was Morgan.

 

So now, you can see the problem the usa is facing.  The Fed has toxic waste from the brokerages with all the subprime stuff.  They will receive more toxic junk in the weeks to come when all the ALT A's go.  We are looking at an minimum of 1.2 trillion in that arena.  Then the prime stuff will go and finally credit card defaults will mushroom.  The Fed will purchase all of this toxic junk, printing massive dollars back to the brokerage boys for this low quality junk.

 

And now, JPMorgan will be in trouble as the world senses danger in the usa, with rising commodity prices  and they start to bail out of USA assets especially bonds.  We already witnessed Japan in trouble in the bond market, as citizenry over there saw food and other commodities rise.  Long- Bond prices must now  fall and yields rise.  This will be the final derivative implosion.  Your long awaited "banking holiday" will  commence.

 

This will explain why Paulsen and team needed to suppress gold.  It was the canary in the coal mine.  They had to keep long term rates low to keep the game going.  The game will go on until long term rates blow up JPMOrgan, or the last oz of gold is leased out by the iMF.  My guess is that both will happen simultaneously!

 

Have a great day

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Re: April 21.08 commentary.

http://www.lemetropolecafe.com/hemingway_table.cfm?pid=6842

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6846

________________________________________

Good morning Ladies and Gentlemen:

I am going to quote areas from the above two commentaries on the Midas site.

First of all, gold closed up by 1.40 to 887.20 and silver rose by 19 cents to 16.85.

As for the open interest numbers, they are simply mind-boggling. The gold OI fell marginally by 300 contracts to 422000 despite gold's constant pounding. Silver's OI contracted by a huge 23000 to 130000. (It looks like the silver contraction is simply calender spreads unwinding ). In gold OI , the price of gold has fallen from$ 950 to$ 887 with few contracts fleeing.

I strongly believe that I am correct in saying that strong hands are holding the gold comex contracts. When the front month comes due, all of these players will simply roll. They are not frightened that the usa will raise interest rates and cause the dollar to rise and gold to fall. The answer why is in the two commentaries above :

1. the Murphy commentary at the James Joyce table

2. The Ron Kirby presentation at the Hemingway table.

During the night we witnessed massive turmoil in Japan. Japanese long bonds tumbled causing the biggest jump in yields in over 5 years, after inflation accelerated at its fastest pace in decades. Bond futures fell as much as 1.8% causing the Toyko stock market to suspend trading for 15 minutes. The government announced prices rose by 1.2% in the month and causing speculation that the Bank of Japan will have to raise interest rates. This will completely collapse the dollar yen carry trade. Investors short on yen will have to buy back yen at higher prices. This will force investors to sell usa denominated assets as this is what was purchased with the borrowed yen.

We also learned that a usa ship fired on an Iranian ship in international waters. No explanation was given but that caused oil to skyrocket up by almost 3.00 to 119.00. Also a North sea pipe line is being shut down for repairs and Nigerian rebels have basically stopped the exporting of Nigerian oil.

All of the above, caused long bonds in the usa to fall. The long bond fell to 115.56 down from 119./00 earlier in the week. The world is now getting ready for long term rates to rise and this will be the death knell of the cartel.

Switzerland, sensing danger in the financial environment stated unequivocally, there will be no more gold sales by it after its current program of 250 tonnes have been finalized. At the end of Dec 31.07 , 145 tonnes out of 250 tonnes have been sold. During the first two months of 2008 only 11 tonnes for each month were sold. They have not announced any figures for March yet. The program ends in Sept 2009. It looks like Switzerland is loathe to supply any more metal, now or in the future.

In Kirby's commentary, he talks about the huge growth in notional derivatives at JPMorgan. It is extremely difficult for laymen to understand. So I will try and explain in plain English what is going on so you could fathom the gravity of the situation.

JPMorgan at Sept 2007 had 91 trillion dollars of notionals on its books. Of that 65% of that was swaps or 61 trillion dollars. Swaps are simply a trade with a broker that must be reversed say every 18 months. In essence, JPMorgan is swapping its 3 month paper (borrowed from the Fed) for 5 - 10 year paper from the brokers. The brokers cash these short term treasuries and buy stocks to kingdom come and short gold and gold shares. They have massive amounts of dollar infusion to do the above. On top of this amount of dollars, the Fed itself gives money to the brokers called repo pool money. However this money is temporary and occasionally, the brokers have to pay this money back to the Fed. However the first set of dollars remain in the system and this is the reason that the derivative pool continues to expand.

And now the problem: generally, when you do a swap, you hedge your bets. However Kirby determined that JPMorgan did not hedge their bets. In other words, they are continuing to bet that long term rates will continue to fall. If long term rates rise, or if Asia and other nations sell their USA holdings of treasuries, then JPMorgan will have astronomical losses on the bonds that it holds. You see as long term rates rise, bond prices fall and when each swap transaction is terminated losses will mount to the heavens.

In other words, JPMorgan is the Fed in that it is their policy to lower and keep rates low. The instrument of this action was Morgan.

So now, you can see the problem the usa is facing. The Fed has toxic waste from the brokerages with all the subprime stuff. They will receive more toxic junk in the weeks to come when all the ALT A's go. We are looking at an minimum of 1.2 trillion in that arena. Then the prime stuff will go and finally credit card defaults will mushroom. The Fed will purchase all of this toxic junk, printing massive dollars back to the brokerage boys for this low quality junk.

And now, JPMorgan will be in trouble as the world senses danger in the usa, with rising commodity prices and they start to bail out of USA assets especially bonds. We already witnessed Japan in trouble in the bond market, as citizenry over there saw food and other commodities rise. Long- Bond prices must now fall and yields rise. This will be the final derivative implosion. Your long awaited "banking holiday" will commence.

This will explain why Paulsen and team needed to suppress gold. It was the canary in the coal mine. They had to keep long term rates low to keep the game going. The game will go on until long term rates blow up JPMOrgan, or the last oz of gold is leased out by the iMF. My guess is that both will happen simultaneously!

Have a great day

Harvey.

Sent: Monday, April 21, 2008 10:56 PM

Subject: April 21.08 commentary.


Good evening Ladies and Gentlemen

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6827

____________________________________

Sorry for being a little late tonight.

Gold closed up by less than 2.00 after being up by about 9.00 in Europe. Silver did not have a good day being down by 46 cents to 17.34

The open interest on gold fell by only 900 contracts to 433000 despite gold's big fall of 28 dollars yesterday. Silver's OI also fell slightly. There is no doubt that the attack by the cartel solved little as short selling was widely evident on both precious metals.

Today, the usa dollar tanked to 71.62 and the price of oil climbed to 117.68 per barrel. It appears that the investing community are flocking to oil as a hedge against inflation. They are well aware of the cartel's move to thwart gold's advance in this hyperinflationary environment. It is difficult for the cartel to short oil.

In our Freedom of Information on gold sales etc, the Fed is about to give us 400 out of 537 pages of documents. Some pages are redacted. One hundred and thirty seven pages are withheld because of security reasons.

I find this fascinating. Gold has not been audited since 1955. Supposedly the usa has not sold one oz of gold in 35 years. So why 537 pages? Why some of the pages are redacted? This is getting to be very interesting!

I guess our good friend Dennis Gartman for the umpteenth time got blown away again. Gartman was long gold and short the stock market. He got blown apart on both fronts. I wish this clown would shup up and not appear on CNBC. Now that he got blown out, gold should advance nicely here.

In other news, the Bank of England has to provide 50 billion British pounds to bail out ailing British banks. Bank of America suffered a big 77% decline in profits.

Citibank after suffering a huge 5 billlion dollar lose, has found a further 60 billion dollars of potential writedowns. It just goes on and on.

Russia announced that it has purchased gold for its reserves. The quantity will be announced shortly.

Got to go now

See you tomorrow.

Harvey.

____

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

Friday, April 25, 2008

Thursday, April 24, 2008

april 24.08 commentary.

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6840

 

Good evening Ladies and Gentlemen:

 

quite a day today.  Gold closed down by 19.40 to 886.80 .  Silver fared worse trading down by 50 cents to 16.66.

 

There is no question that the action for the past few weeks was options related.  As  commentators on Midas explain, the raid saved the cartel banks over 200 million dollars that would have been lost if gold closed at 950.00 and silver at 18.00.

The liquidation of the longs just did not occur as the pundits on wall street stated over and over again.  The open interest went up by 4000 contracts to 428000 despite yesterday's huge drubbing.  Silver's OI also went up by a few contracts.  Thus the sellers were short sellers and not longs liquidating their accounts.

It looks like nobody wishes to leave the gold/silver arena.  They see butter disappearing from shelves in Japan.  They see rice restrictions in the usa.  They see armies of the world guarding shipments of rice.  They see people  "borrow copper" from people's housing infrastructure.  They see gasoline in Canada at 1.22 a litre or in the usa at 5.00 a gallon.  The low value of the dollar is causing massive hyperinflation throughout the world.

 

The news today was horrendous.  First, we heard that Credit Suisse announced a huge loss on derivatives of 5 billion dollars and their net loss in the first quarter translated to 2.65 billion usa dollars. This is their first loss ever recorded.

 

Then we heard the housing starts.   It came in an a rate of 526000 starts  instead of the expected 585000.  If you recall last year, housing starts per month were in the 1 million range per month.  Remember that this represents 70% of the economy so this is certainly hurting the economy bigtime. The medium price dropped by 6.8%.  So far prices have dropped by 15% and Shiller reports that he expects prices to drop by greater than 30%.  The banks collateral become toast and this will set off the deflationary spiral that only a massive hyperinflationary printing of dollars can save.

 

However the big news is the Ambac, MBI story.  I reported to you yesterday that Ambac lost 1.66 per share or over 3 billion dollars.  It has reserves of only 1 billion.  This company is a monoline insurer and they insure all the municipalities. If one were to look at its balance sheet, you would think that these guys are worse than junk.  It boggles my mind that they are still graded AAA, even with their big loss of yesterday.  If there is a downgrade, then the entire banking  and counter party derivatives implodes.  There is no question that Paulsen ordered the ratings agencies not to touch Ambac and MBIA.

 

On that note, there were rumours flying around wall street that Bush is ready to orchestrate a modified banking holiday.  He is alarmed at the amount of usa dollars leaving the country.  The rumour is that he will allow only a limited amt of paper dollars to be removed from your bank at a time.

 

We are now getting close to my closing scenario of " a banking holiday".

 

Robert Shiller, the respected economist and author of the housing shiller report came out with a gloomy report today.  He stated that  the long predicted housing bubble and the resulting  slump in the housing sector will cause house prices to fall further than they did in the great depression.   During that period house prices dropped a full 30%. Shiller reports that since 2006 house prices have dropped by 15%.

 

In other news, commercial paper continues to fall for the 4th straight week.  It fell by 21 billion dollars last week which reinforces the banking deflationary dilemma the financial boys are experiencing.  The collateral continues to decline and more and more casualties are claimed every day.  This mess is not going away.

 

Perhaps, the most alarming news comes from China.  It is reported that they have only 12 days supply of coal.   I was in China and all their plants use coal.  They do not use nuclear power and that is the reason for the huge pollution facing the country.  Now we hear that they cannot get enough  supply of coal which is the energy they need to power their plants and produce the goods that the world needs.  This may set off a global depression.  I will keep you alerted on this one!!

 

I will report to you on Saturday.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wednesday, April 23, 2008

April 23.08 commentary.

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6837

 

Good evening Ladies and Gentlemen:

 

gold today closed at 906.20  down by 15.90.  Silver closed at 17.16 down by 45 cents.

 

The open interest on the gold comex fell slightly by 3000 contracts to 424000 despite gold's fall.  Silver had its OI rise by 2000 contracts to 153000.

As I pointed out to you on previous occasions, the strong hand position in gold comex is around 400,000 and the strong hand silver is around 145000.

Generally, when OI hardly falls with a huge fall in the metal, then you can put the sales as short sales. This is what happened yesterday.

There is strong evidence of physical silver shortage.  This Friday is the last day of trading for the silver contract.  It is quite possible that the Presidents Working Group are working overtime in that they do not want the physical silver options exercised. 

 

It looks to us that the cartel are trying to engineer a sell based on the 100 day gold moving average being violated.  The 100 day moving average tonight is 901.00 per oz and the 50 day is somewhere around 940.00 per oz.  On many occasions, the cartel try and penetrate the 100 day moving average.   The 100 day moving average is the base line resistance.  This line rarely is penetrated in a bull market.  It was penetrated one in the last 6 years and that was when the cartel knocked gold from 720 down to 560.00 in a few trading sessions.  It took quite a while for gold to be nursed back to health because of that violation of the 100 day moving averages.
Today, the early morning fix was 916.00 even though gold was trading at 920.00 .  This suggests that a physical official seller was  present with a lot of physical gold to unload.  This is what startled the market and gold fell big time.  However it crossed its 100 day moving average over 14 times today.  Each time the cartel moved the gold price lower (below the 900 dollar mark )  and each time buyers came in and drove gold above its moving average.  Gold closed at 906.20 but again was hit in the access market where it is trading right now at 904.00.

 

It would be interesting if we see another attempt at breaking the 100 day moving average if the  open interest remains the same or slightly less.  It means that the owners of the contracts will not relinquish their hold on the metal at these prices.  They believe the hits on gold  are artificial and gold and silver will rebound.

Lets see what happens tomorrow.

 

In financial news, the Comptroller of the Currency, John Dugan warned about bank failures . He warns that there could be  higher than normal bank failures becauses of the  economic slowdow and poorly written loans,

 

Ambac who is a monoline insurer, reported a huge first quarter loss of 1.66 billion usa dollars,  after losing 3.1 billion on subprime losses.  It amounted to a  per share loss of 6.93, more than 3 times estimated loss of 1.82.

 

WalMart reported today that they are going to restrict rice sales in the USA  as many were hoarding bags of rice. Rice rose to record levels today as the World bank warned of Thai Export risk.

 

Speak to you tomorrow

Harvey.

Tuesday, April 22, 2008

april 22.08 commentary.

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6830

 

Good evening Ladies and Gentlemen;

 

Gold closed up by 7.40 today to close at 922.10.  Silver rose by 27 cents to 17.61.

 

Today, all commodities were on fire except silver and gold.  Oil closed at 119.20 up 1.72 a barrel.  The usa dollar closed at its all time low of 71.33 although interday it hit 71.00 a few weeks back. The Euro set an all time record of 1.60 18 and closed at 1.5996.  The CRB set an all time record of 422.11 up 6.51.

Copper closed at its alltime  high of 4.00 dollars per lb. Rice and soybeans set all  time price records. Soybeans rose 60 cents while rice went limit up on the comex.

It will continue its northernly trajectory tomorrow.

 

The open interest on gold fell marginally by 5700 contracts to  427300.  As I told you on previous occasions, the rock bottom solid hand situation in comex gold is around 400,000 so it will be futile for the cartel to raid.  Strong hands will not relinquish their longs at any price.  If need be they will just roll and pay the premium to stay in the game.  The silver OI rose  154 contracts.  My guess is that all the silver is in strong hands now.

 

The ECB are now very worried about inflation and they are contemplating raising interest rates.  Also the German PPI came in very strong at 4% which will give underpinning strength to the Euro at 1.60.

 

The ECB announced its weekly gold sales and it came in at a paltry 1.89 tonnes.  The gold sales are coming from somewhere else and the only place I know that has gold is the IMF.

 

There is a wonderful video from Midas on the Alt A crisis which will hit the usa by the end of the year.  It is the you-tube video and you can click on to this video when you click on the midas commentary.

However I can give you the pertinent details:

 

the total ALT A mortgages that are under water right now is around 1.2 trillion dollars out of a market of 2.7 trillion.

You can also bet a 10 fold derivative play on that.  That means total bank exposure of around  13 trillions in the Alt A arena. This is on top of the 1 trillion subprime mess.  And guess what?  We have not got to the prime mortgage stuff and also the credit card mess.  The entire usa credit quagmire is engulfing the financial world.

 

Goldman Sachs is now saying to go short on 30 year British gilts or bonds.  This is very scary!! As I have stated many times, the game is over when long bonds fall in price around the world.  Basically all the derivatives which have not blown up already will  finally succumb.

 

The increase in Libor rates are playing havoc to central bankers as it nullifies 1/4 to 1/2 point cuts.  The Fed is contemplating lowering rates to zero like 1989 Japan and  flood the market with paper currency. I have told you that this is probably the avenue that Bernanke will take.

 

Today, we learned that Japan  is totally out of butter.  They are short 2 months worth of wheat.  Japan imports most of its food from abroad.

 

We still have to wait and see what documents that Fed gives us on our Freedom of Information on gold trading.  However it doesn't look good for the Fed.  How could they supply us with 537 sheets of physical gold trading in the usa when the usa is not allowed to trade one oz?.  This is going to be very interesting  indeed.

 

The Fed has a problem.  All commodities are rising.  The world is bidding up the price of oil as it perceives hyperinflation is upon us.  Yet gold and silver are the only two metals that refuse to rise.   I cannot wait to see next months CPI and PPI numbers.  I wonder how the powers- to- be will fudge these numbers.

Gold has been hit on 4 days in a row.  I can only recall one time that they hit the metal for 5 days in a row.  So expect gold to finally break from its shackles tomorrow. 

 

speak to you tomorrow.

Harvey.

Monday, April 21, 2008

April 21.08 commentary.

Good evening Ladies and Gentlemen

http://www.lemetropolecafe.com/james_joyce_table.cfm?pid=6827

____________________________________

Sorry for being a little late tonight.

 

Gold closed up by less than 2.00  after being up by about 9.00 in Europe.  Silver did not have a good day being down by 46 cents to 17.34

 

The open interest on gold fell by only 900 contracts to 433000 despite gold's big fall of 28 dollars yesterday.  Silver's OI also fell slightly.  There is no doubt that the attack by the cartel solved little as short selling was widely evident on both precious metals.

 

Today, the usa dollar tanked to 71.62 and the price of oil climbed to 117.68 per barrel.  It appears that the investing community are flocking to oil as a hedge against inflation.  They are well aware of the cartel's move to thwart gold's advance in this hyperinflationary environment. It is difficult for the cartel to short oil.

In our Freedom of Information on gold sales etc, the Fed is about to give us 400 out of 537 pages of documents.  Some pages are redacted.  One hundred and thirty seven pages are withheld because of security reasons.

I find this fascinating.  Gold has not been audited since 1955.  Supposedly the usa has not sold one oz of gold in 35 years.  So why 537 pages?  Why some of the pages are redacted?  This is getting to be very interesting!

I guess our good friend Dennis Gartman for the umpteenth time got blown away again.   Gartman was long gold and short the stock market.  He got blown apart on both fronts.  I wish this clown would shup up and not appear on CNBC.  Now that he got blown out, gold should advance nicely here.

In other news, the Bank of England has to provide 50 billion British pounds to bail out ailing British banks.  Bank of America suffered a big 77% decline in profits.

Citibank after suffering a huge 5 billlion dollar lose, has found a further 60 billion dollars of potential writedowns.  It just goes on and on.

 

Russia announced that it has purchased gold for its reserves.  The quantity will be announced shortly.

Got to go now

See you tomorrow.

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

____

Click here to view my daily commentary:

http://harveyorgan.blogspot.com

 

Search This Blog

Loading...