Saturday, May 3, 2008

May 2.08 commentary.


Good Morning Ladies and Gentlemen:


gold closed up by 7.80 to 856.10 and silver rose by 26 cents to 16.38


There were several notable events yesterday which I would like to highlight:


First of all at 8:25 am the Fed announced an increase in the TAF auction for funds that the Fed will swap.  The increase is  from 50 billion to 75 billion dollars.

They are including in this swap student loans and other asset backed  credit like credit cards and car loans.  The Fed also arranged a swap with the ECB and the Bank of Switzerland.   Generally  announcements of this type occur after the market but this time it occurred 5 minutes before the job report. The biweekly auctions automatically induces liquidity from 100 billlion to 150 billion dollars.  This smacks of desperation.


Many thought that the jobs report must be terrible.  For 5 minutes there was panic on Wall Street.  Rumours surfaced that the swaps were to prevent UBS from failing.


Then at 8:30 we heard the jobs report and it came in at a very mild loss of 20,000 jobs.  However on closer examination which pundits never look at, the B/D report added a ficticious 267,000 jobs and most in the construction and finance sector of the economy???  Thus if you remove that figure that total loss of jobs is around 287000 which makes sense.


In financial news, oil shot up a full 3.20 to 116.32.  Copper rose by 13.24 cents back to 3.85 per pound.

Corn after consolidating over the past few weeks, broke to to the upside.  Strangely the dollar rose by .34 despite all the advances of the commodities.

I guess banking intervention never works.


The gold open interest fell by 4000 contracts to 427835 which was the result of some specs leaving the fray but not much.  Silver's Oi  fell by a further  1063


contracts. No further deliveries were hit and approx. 33 million oz stands.


There is a new problem surfacing on Wall Street.  We heard for the first time "Pension Deficiency Notices" were sent out by various companies.  The law was signed into effect in March of 2006 which created definitions for deficiencies in pension plans of companies.  Most of the provisions went into effect for  2008 and this is why we are now starting to hear about this next major bombshell.  The basic definitions:

1. Endangered Status….80% funded

2,Seriously Endangered Status…70% funded.

3. Critical Status…65% funded.  The law addresses how to correct these deficiencies.


We will watch this development closely.  Suffice it to say, that many companies have considerable subprime, CDO's and other illiquid assets in the pension fund and this must now be addressed.


Many felt that the increase in the TAF and the inclusion of other asset backed debt to be swapped by the Fed is the result of the increase in the Libor rates.

It rose again on Friday.



Also the Bank of America came out late in the day and stated that they may not guarantee the debt of Countrywide.   Countrywide has 38 billion dollars in debt and many CDO"s and other toxic junk on its balance sheet.


In perhaps the biggest statement by anyone, former Fed Governor William Poole who retired from the Fed in March  (just before the Bearn Stearns debacle).came  out and stated that  the Bearn Stearns and the new bailout of the student loans by the Fed is nothing but a "Rogue Operation".

Yup!! you heard this from a just retired Fed Governor.


On Friday, we heard that the Japanese banks have now lost 14 billion usa dollars from the credit crunch.  The mess is spreading around the globe.


There is no doubt that considerable official gold has been flooding the market to subdue gold's price.  One commentator stated that in 2006 it took 400-500 tonnes of gold to knock it down from 730 to 570.

He states it probably took much more to knock gold from 1030 to 860.00

With the refiners working overtime, is the USA  first refining their coin melt gold at the refiners and then leasing it over in England?


Is this what a strong dollar policy means?


Have a great weekend





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Thursday, May 1, 2008

May 1.08 commentary.

Gold closed down by 13.80 to 848.90.  Silver fell big time down by 38 cents to 16.12.

At one point, silver was below 16.00.


The open interest on gold rose astonishingly by 3800 contracts to 431900 despite gold's huge fall yesterday by the time comex closed.

Midas also states that the silver OI declined by 2000 contracts in contrast to gold's big rise.  Mr Murphy forgot to look at the silver comex delivery.

On the first day delivery 4200 contracts were  hit but only notices on 600 were sent out.  There still remains another 2000 contracts to be hit. So in reality open interest on the silver contract rose by 2000 if you count the 20 million oz of silver delivered upon.


The total silver that is standing for delivery remains at 33 million oz..a record level.  On top of this another 4000 contracts on May silver traded which is totally unusual.  It looks like we may have queque jumpers.  This occurs when the front July month fears that there will not be enough silver in the delivery month, so it sells its long July silver and buys the front May silver.


The cartel  raided gold and silver today because they did not like what happened yesterday after the announcement at 2: 15 that the Fed was lowering interest rates to 2% and the discount rate to 2.25%.  Paulsen was not enthralled that the stock market plummeted after being up by 170 points. He orchestrated the raid with most of Europe closed because of the May day holiday.


It looks like French  bullion banks are preventing the imports of gold into Turkey and other Gulf States.   I guess that physical is not allowed to go where it is suppose to go. Physical must be getting a little scarce for jewellry.

In financial news, layoffs are up 68% in April. Planned job cuts in April total 90,000 up from 53000 in March.


Jobless claims for the week ending  april 26. 08 saw a big increase from 365000 to 380000 .


In perhaps the biggest news  of the day, we have learned that commercial paper is still on the decline falling a further 21.2 billion for the week just ended.

Asset back commercial paper continues to decline  by a further 17.7 billion dollars.

In a nutshell, the economy is contracting!!!


We now get word that the .6% GDP figure was bogus.  They used an inflation figure of 2.% for the year.  The official figure is 4% and the Williams Shadow Statistic shows inflation at 12%.  If they used the official 4% then the economy contracted by .8%.  If they used the correct 12% the economy contracted by a full 4-5%.

Basically it means that Fed coffers will not be brimming with tax dollars.  Deficits will continue to rise.

Home Depot announced today that they were going to close 15 stores as sales have plummeted.

GM announced sales down by 22.7%.  Ford April sales declined by 12% and Toyota the star of the car industry was also down by 4.5%


In other news, Kuwait stated that the gulf states ought to unpeg themselves from the usa dollar as inflation is running rampant throughout their countries.

This would be a killer to the usa dollar if implemented.

Gold should start its rally tomorrow judging from the gold shares rising despite the massive hit today.

However the cartel are ever mindful of the continuing rise in OI.  This has them very worried.

I will speak with you on Saturday.



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Wednesday, April 30, 2008

april 30.08 commentary.


Good evening Ladies and Gentlemen:


gold closed down by 12.00 in normal trading at the  comex to  862.80 and silver fell by 7 cents to 16.50.  Right now in Japan gold is trading at 880.50 and silver is now at 16.97.


The  big move in both precious metals began after the Fed announcement of a quarter point cut in the fed funds rate and a further cut in the discount rate.  The Fed funds rate is now 2% and the discount rate is 2.25%.  The language in the fed report does not indicate a pause.

The market correctly interpreted what I told you yesterday, that the market is very ill and that the mortgage problem just will not go away.

 The usa announced that it is in need of new financing as it is reintroducing the 52 week Treasury Bill.  They need 21 billion dollars to  refund 10 year bonds and it is in need of 53 billion dollars to pay down existing debt maturing this week.  The treasury stated that they must find new ways to help in deficit financing.

It looks to me like Asian nations are cashing in on their inventory of treasury bills and bonds.  Foreigners hold 3 trillion dollars and after today, I will bet that they are not going to be excited holding usa dollars.


In a rather shocking development, the open interest on gold rose by 10,000 contracts after a huge drubbing yesterday and early today.  Silver's Oi basically remained the same.

This must set a record.  I have been watching this for many years and I have never seen open interest rise in a huge downfall.  And gold continued to fall this morning  and yet these clowns added  to their short position in  gold comex.   Boy they must be desperate!


The dollar tanked after  the news and closed at 72.57 with the Euro rising to 1.5633.  Oil is trading today at 114.00.


On March 16.08 the day of the big raid, gold was trading at 1030.  The Euro was trading at 1.563. Oil was at 108.00 and copper was at 3.60. Copper today is 3.94.

And gold is trading tonight  at 880. and silver at 16.97.  (Silver was trading at 21.20 just before its collapse). It just shows you the damage that the cartel inflicted upon the precious metals market.


I would also like to point out that 33 million oz of silver are now standing for delivery.  This is an all time record.  The exchange has about that quantity in registered silver.  It is going to be tough for these guys to deliver that quantity.


The Dow , which was up by 170 points early in the day tanked big time on the news from the Fed. It closed down by 12 points.  The Nasdaq also fell by 13 points after being up big time early in the day.


In other financila news, General Motors lost 3.6 billion dollars and Citibank announced another financing of 4.5 billion.  They have completely blown out their  last 30 billion of Arab financing.  I do not think that current Citibank shareholders are too excited about todays events.


Late in the day, the usa business index was released and it showed  a big contraction for the 3rd straight month.


There is now ample evidence that the current price of silver is either:


1. spot plus 12%


2. spot  plus 2.50 per oz.


all silver dealers are quoting the above.  Physical silver is becoming extinct.!


We also learned that the SLV over in England has not changed its inventory in over a month.  This is strange in that silver has fallen badly by 5.00 over this month and a half.  Generally this means that silver is expected after the vault in England. 


We also learned that the big contraction in silver was the calender spreads being removed by both commercials and non commercials.  Generally this is not allowed in both Canada and usa as a tax deferment.  It thus has no commercial use. 

It looks to us that this calender spread was nothing but a camoflage hiding the huge commercial short by the banks.  With the spreads off, the 8 largest commercials are now short 82% of silver or 510 million oz of silver out of 635 million oz.

The regulators are in a constant 24 hour siesta.


speak to you tomorrow




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Tuesday, April 29, 2008

april 29.08 commentary.


good evening:


gold and silver were raided today as I promised you yesterday.  When you see gold shares fall off with gold rising on Monday, the raid orchestrated by the cartel was on.


Gold closed down by 18.20 to 874.20 and silver fell by 45 cents to 16.57.


The open interest on gold fell by 1000 contracts with gold rising on Monday.  No real change.  Silver OI remained the same.


Tomorrow, we will probably see some liquidation but not much. 


The cartel whispered the story that the Fed is basically  all done with interest rate cuts and that they will pause with the next move a rise in interest rates.


With JPMorgan having 61 trillion of credit swaps and having a one sided forever bet that interest rates will remain low, you can bet the moon the usa will never raise rates.  If they did then Morgan implodes.


On the financial scene we got news on the following  major stories:


1.  The big home builder KB  Home stated that  home prices will probably drop another 20%.  They have already dropped 15%.  A drop of that magnitude would put the usa in a deep depression.  The collateral for the banks would be worthless and there would be no way to get them off bankers balance sheets.

This is very big news.


2. Libor rates which is the rate at which banks loan money to each other continues to rise.


3. Starting May 1.08 credit card interest rates are rising at Washington Mutual to 31%.  The consumer is continually getting squeezed.


4. President Bush stated that tomorrow the first quarter  GDP will come in soft at .5%.  If they report .5% you can bet the growth is really a contraction  (Williams Shadow)


5.  One ECB captive bank sold 18 million dollars worth of gold or .95 of a tonne.  Europe is not the seller plaguing the markets.


6. US home foreclosure filings rose in the first quarter by 23%.


7.  The Shiller home price index fell to a low of 175.9.  This represents the price of single family homes in the various areas surrounding the usa. In Feb. the index fell to 190.58 for an annual decline rate of 13.6%.  The new index of 175.9 translates into a fall in price of somewhere around 20-22% from the outset,.


In a key statement, the chairman Mr. David Blitzer stated that he sees  no sign  of a bottom in the numbers.


6.  The Conference Board Consumer Confidence  Index continues to deterioate. The index now stands at 62.3, down from 65.9 in March.


7.  In perhaps, the biggest news of the day, the US treasury announced a sharp cut in the April-June debt paydown.  April 15.08 is the big payday and only 40 billion dollars went towards the reduction of debt.  They expected 120 billion dollars  to have reduced debt.

The reasons cited were:  the increase in borrowings,  LOWER RECEIPTS, redemptions of portfolio holdings by the Federal Reserve…( I guess the subprime guarbage is generating zero income for the Fed).


Also please remember that the fed is now going to write 160 billion dollars in cheques starting next week to help in the mortgage foreclosure problems plaguing the usa.

Also the end of the month will have the monthly deficit of 150 billion dollars which will add to the debt.


They are getting close to their debt ceiling again.


I would like to emphasize that the usa economy is not producing income tax receipts.  The banking sector is generally the big contributor for revenue and they are in the doldrums.  The usa is not generating enough revenue which will have a devastating outcome on the dollar.

Mark my words, the dollar will head south.


8.  Vincent Reinhart the former Fed  director of Monetary affairs has come out and criticized his former boss for the Bear Stearns bailout.  He states:

"this is the worst policy mistake  in a generation".  He also stated that this event would be compared to the "great contraction" of the 1930"s.

quite a statement from a former Fed official.


9.  Today, Bloomberg reports of a big criminal investigation  of JPMorgan into its "anticompetitive  conduct in municipal finance"  The target is Doug McFaddin who was fired by Morgan when the criminal probe began in March. MacFaddin is one of three who may be indicted into this affair.

And guess what?  In March we had the Bear Stearns fiasco and the criminal boys are backing off this?  JPMorgan et al asked the SEC to allow puts on Bear Stearns stock to be initiated at 50 dollars below its then trading price with five days left in the option cycle.  The SEC granted their wish and when they collapsed no-one says anything.  And they go after someome on misconduct on municipal finance?


10. Morgan Stanley sees banking woes as just beginning.   They reduced aggregate earnings for the banks by a full 17 billion dollars. They expect higher loan losses and expenses.


11.  Barclays states that there is going to be considerable trouble in the ALt A arena.  They expect losses in the 800 billion area.  Other commentaries have stated that the mess will be in excess of 1.2 trillion dollars.  You can add 10 x that loss in derivative credit swaps.


12.  The Bank of England had decided not to publish the data on the money given to the bankers.  They have decided that no information will go to the public for at least 30 years.  Yet the English taxpayer is paying for this!  Go figure.


13. James Turk blames the rise in commodity prices to monetary inflation. He claims that copper, oil, potash and some foods are being monetized.  In other words they are becoming money.  Just like in World War II where cigarettes were monetized. (medium of exchange)


The usa will do everything in its power to "will the dollar higher".  It will not work.  The usa finances are weak.  Fewer dollars inflow into the Fed coffers means higher deficits which will cause the dollar to fall.

The usa is inventing a story that interest rates will fall faster in Europe than the usa.  Do not bet on it.

See you tomorrow





Monday, April 28, 2008

april 28.08 commentary.

Good evening:


Gold closed up by 5.70 to 892.70.  Silver rose by 17 cents to 17.02.


The open interest on gold declined by a few thousand and the new Oi rests at 420,000 which is low relative to gold's price.

Silver's OI collapsed a further 3700 contracts and its new OI is 127,400.


Gold and silver  rose on Friday so there was some short covering but not much.  The silver Oi contraction is astonishing.  On top of this, we go into the first delivery on Silver on April 30.08.  It is expected that 25-30 million oz of silver are standing so an additional 5-6000 contracts will be removed from open interest.

Are commercials sensing danger in the silver arena and vacating?  We will know in a few days!!

The  gold/xau ratio is now over 5.11 .  It rarely trades above 5 which indicates that shares are cheap versus gold price.


Also OIL/gold is now below 8 barrels per oz of gold for the first time ever.  It is trading at 7.51 .  It has only twice before traded around 8.00 barrels per oz and both times bounced off of these levels.


The way gold shares traded today, expect another gold raid.  However with  open interest so low, it is difficult to understand why they are raiding if there are no specs long to raid.  I guess they will be wash trading with themselves to get the price down.  It would not surprise me as the markets are turning to flagrant criminal action as the regulators remain silent at the margins.


However John Brimelow came out with a statement that alarms me greatly:


Stories are circulating of abrupt and objectively unwarranted contractions of credit lines in the physical bullion trade: some say precipitated by American banks. These stories come from Turkey to India.

Join the dotted lines…Something is brewing.




It looks like the usa boys want to engineer a scenario that they are going to raise interest rates and give a boost to the dollar.  They need to alleviate the rampant inflation facing the world.  However the raising of interest rates will absolutely implode all of JPMorgan and its 61 trillion dollars of credit swaps.  The usa will never raise interest rates; however they can voice that they WILL raise but NEVER DO!


have a great day.






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