Saturday, June 7, 2008

June 6.08 commentary...D Day


Good morning Ladies and Gentlemen:


I am going to be quoting from two sources this morning:


1 Willie’s paper on Pressure Points in the Economy.

 2. The Midas commentary  at


In late 2007 S and P cut the ratings on  34 billion of debt  tied to Alt A’s. These securities have already a 6.6% rate of delinquency at 90 days late. Dr Willie now believes that S and P downgrades will force many banks to move 5 trillion dollars of debt  from off balance sheet to on balance sheet.  This is going to cause massive bank failures as their non performing loans exceed their  equity capital.

We now have two papers stating the removal of 5 trillion off balance onto banks balance sheets;  1. The Citibank report that I sent you on Wednesday and 2.  the Willie report of today.

The big banks have set up private Resolution  Business Segments  entrusted with the duty to liquidate credit related assets.  The reason that the banks have done this is to avoid the regulators and avoid proper accounting and thus, preventing a cascading default in the bond markets.


Willie also comments on the new  Variable  Interest Entity  (VIE) have been set up by the banks.  These entities are nothing but a   shell game for the insolvent banks avoiding proper accounting.


Willie then discusses the impact of the downgrading by  S and P of Ambac and MBIA. He believes that this will push the regulators to remove off balance sheet losses to on balance sheet at banks.


Municipal bonds will be hurt badly and Willie states  that this will be worse than the mess in Japan that commenced in 1989.  Japan is still shaken from that mess!!


He then comments on further writedowns  necessary for UBS, the largest bank in Switzerland.  Rumours are swirling around England that Barclays   are poised to takeover either UBS or Lehman Brothers.  The Credit Derivative balloon just gets bigger and bigger until it bursts  He also states that the Countrywide takeover by Bank of America  looks dead in the water.  If that is the case,  Countrywide will the largest bankruptcy of a bank in American history.  Ripple effects could be enormous and contagion across the banking sector will be evident!!


I urge you all to read the Willie article in depth.  Press on the blue  : gold-eagle .com editorial at the beginning of my commentary.


And now I would like to comment on  Fridays events.  I will be quoting from Midas.


Gold closed up by 23.30 to close at 1:30 pm Friday at 895.50,  It continued in the access market to 902.30 as the Dow continued to decline.  Silver rose by 30 cents to 17.37.  It finished in the access market at 17.42.


The day started at 8:30 with the release of the non farm payrolls.  It showed a loss of jobs of 49000.  They expected 60,000 so the number was supposedly better. Even stranger than that was the announcement that the unemployment rate went up from 5.% to 5.5%.  


On closer examination of the report, one sees a job creation of 216000 from the phoney B/D stat.  In reality over 250000 have lost their jobs last month.  You also have many discouraged workers who give up looking for  work.  They are not counted in the figures.


There are about 100 million workers in the usa.  If you take the ½% gain in the unemployment rate one would get ½ million  of workers who lost their jobs in May.  I believe that this is the correct figure.


Regardless of methodology, Wall Street figured out the mess and knew that they were in big trouble.  With many unemployed workers, the coffers at the Fed  trickle down as does State and Municipality income. The Dow plummeted down by 393 points.


The second big event of the day was the rise in oil at 138.54. per barrel.  The CRB index rose  to an astonishingly high 441.51 up a huge 15.35.  Needless to say that this is an all time record.


Part of the reason for the price rise was comments by an Israeli minister who stated that Israel cannot afford to wait and let Iran build their nuclear facilities.

Morgan Stanley came out yesterday to state that they feel that oil will hit 150 dollars per barrel. Morgan has now joined Goldman Sachs in that category and thus they are long in oil contracts as far as the eye can see.

Morgan Stanley comments that Asia is the recipient of much of the oil as opposed to the Atlantic region  basin which is hitting rock bottom in demand.


July Gasoline  rose by 41 cents to close at 3.55 per gallon.  Heating oil went limit up!!


With the huge advance in commodity prices one would have expected the long bonds to tank.  Nope!  They rose.  The cartel had two many balls to keep in the air.  They abandoned supporting the stock market (the Dow),  the dollar (the USA index fell to 72.38), and the shorting of gold and silver  (they rose by 23 dollars and 37 cents ).   Instead all of new money created went to support the long bond.


The ECB has consensus for an increase in their short term interest rates.  Inflation is running rampant over there.  It looks like Spain and Portugal will be an immediate casualty if this happens.

Watch for these two sovereign nations to exit the Euro pact.


In the gold market, we saw that the open interest on Thursday rose a scant 1500 contracts to 402000.  Silver rose by  a small 882 contracts.  Remember on Thursday, they raided gold and silver big time.

Gold on Thursday fell by 8.00 so a rise in open interest means all the sales were short sales.  In silver, the commercial banks covered as fast as their little feet would carry them.


As a matter of fact, after the market closed we received the COT report and we saw that the commercials were bailing out of both silver and gold comex.  The event magnified yesterday with all commercials covering quickly as they did not want to be short over the weekend.


On Friday, there was a big gas explosion  in the Varanus Island gas facility in Western provincial area of Australia. Western Australian premier  Allen Carpenter called an emergency conference between Government, utilties and industry to tackle this major problem.  Alinta Gas, the government gas utility spoke that the supply to the grid will be down by 30%.  Western Australia is the home for most of Australia’s mining operations.


In summary then, we are witnessing huge increases in commodity prices around the globe.  China  has to repair itself from the earthquake and they are piling up huge supplies of oil and base metals.  They also have the Olympics so they are spending huge dollars on infrastructure.

The Banks on this side of the pond are broke and will not be fixed until they remove all their collaterized debt from its balance sheet.  However if a Resolution trust is set up to handle this, you can bet the farm that hyperinflation will be upon us. It will not be pretty.



Speak to you on Monday



Thursday, June 5, 2008

FW: The China gold standard theory

Here is the link to the China storey at the end of my commentary.

From: Mark Organ
Sent: June-05-08 8:53 PM
Subject: The China gold standard theory

I think that the Chinese may be planning on moving their currency to a gold standard when the dollar crisis hits epic proportions in 2010/2011; if not a gold standard, I believe that at a minimum, they will attempt to attain some level of reserve currency status by backing a global currency nominally managed by the IMF. The Chinese government does love to spend money and may find a gold standard too restrictive. Perhaps they would do as the US did, go to limited gold convertibility then move off it when politically expedient.

The Chinese have been working reguarly with Robert Mundell, a Canadian nobel prize-winning economist who is an expert on the gold standard and floating exchange rates. He is a regular on Chinese television and speaks some mandarin.

He recently had this to say:

China is worried about its pile of about $1.6-trillion in foreign reserves, built up during years of U.S. trade deficits, which loses value as the greenback depreciates.

“What you need to have is an International Monetary Fund that's going to take some of these excess dollars, put them into a substitution account inside the IMF or some other institution and then use that and create what is a new international currency,” said Mr. Mundell.

“This kind of proposal would be very acceptable inside China. The Chinese are thinking in terms of this,” he said.

Mr. Mundell, awarded the Nobel Prize for Economics in 1999 for his work on exchange rates and optimum currency areas, travels regularly to China, where he has advised senior government officials.

For years, China has come under pressure from U.S. and European authorities to allow its currency, the yuan, to appreciate, in order to make Western goods more competitive. But Beijing has resisted.

“They don't have many pre-conceptions. They don't have a belief obviously that floating is a good idea, whereas the European Central Bank and the Americans think that floating is the best of all possible worlds,” Mr. Mundell said.

Bank of China chairman Zhou has spoken favorably about the Bretton Woods I system of fixed exchange rates quite a bit lately, and apparently made the Group of 30 economic leaders quite annoyed by proposing a system like this with Chinese leadership, driven by their humongous treasury reserves.

Zhou is quite pissed at the Americans for what he sees as their repudiation of debt owed to the Chinese:

The Chinese top political leadership are very financially savvy. Jim Rogers talks about his meeting with Zhu Rongji, ex-premier of China, in his Adventure Capitalist book - Zhu joked that if people don't believe him about yuan revaluation, they should go buy puts on the currency. I believe that it wouldn't take them long to understand how western central banks are controlled, and how having the reserve currency would enable them to win the game. They are sufficiently outside the "globalist system" to go their own way.

They've also had sufficient experience with paper currency and debasement to understand its properties, and they've been known now to be accumulating physical gold.

With a huge and young population, the most scientists & engineers, the largest military in the world, deep culture, powerful diaspora, it's enough for China to be a superpower. If they end up with the only strong currency in the world, they may end up as powerful on the global stage in 2025 as the US was in 1960.

We should be looking for great Chinese companies to buy so that when gold and silver achieve their full value in around 2010-2011, and BRIC assets are cheaper, we can invest in growing assets. My favorite sector is the insurance sector. China is one of the most under-insured nations in the world, contrast this with Japan as the most penetrated with insurance; considering the Confucian ethos underpinning both nations, and the horrendous Chinese earthquake where people and businesses lost everything, it's going to be an incredible growth business. Buffett has apparently already invested in China Life.

Also, Chinese collectibles would be an excellent investment. The Chinese love their history and the wealthy are already spending tons of money on Chinese art and antiques.



June 5.08 commentary.

Good evening Ladies and Gentlemen:

Today was quite a day. First of all gold closed down by 8.30 to 872.30 but silver rose by 23 cents to 17.07

The open interest on gold climbed a small fraction to close at 400700 from 398100 on Wednesday. Silver’s Oi remained relatively constant for the 5th straight day.

On the trading side of things, there were big developments. We learned today that our illustrious buffoon, Dennis Gartman announced that he went short gold and then announced a double short as gold fell below 872 !!!

Gartman always gets a sell right. Why? Because the cartel tells him that they are raiding. We knew last night from Bill King that a currency/gold manipulation was on. Bernanke spoke twice of a strong dollar policy. The Fed Governor never ever talks about the dollar as protocol always has the Sec Treasury handle the dollar. This was the first time ever that a Fed Chairman talked about the dollar.

This signified that there must have been a serious deterioration in a financial entity and that support would come from the Fed and other allies. This message was sent to Gartman who joined forces with the cartel members to further exasperate the decline in gold.

As it turned out during the day, gold was the only commodity to fall in price. Oil rose by 5.60 per barrel, silver, rose by 23 cents, and all base metals were up strongly. Natural gas was up well above the 12.00 level. Corn hit a new record closing up by 29 cents to 6.43 per bushel.

I guess European, and other players were waiting in the wings and started to buy massive contracts of silver. Silver went positive at around 10 am and never looked back. Gold climbed back from a loss of 18.00 to a loss of only 8.20 In the access market gold continued to rise and it sits at 880.00 right now at 9 10 pm .

The Euro ended its slide when Trichet announced that he would raise interest rates over on that side of the pond. The dollar then tanked.

At around 3 pm today, S and P announced that they were lowering the ratings of both Ambac and MBIA two notches. Normally, this would have sent the stock market into total chaos. However, because of massive new printing of dollars as the Fed has introduced 225 billion of fresh TAF auction money for June, the newly created money found its way into the stock market which recorded a gain in excess of 200 points.

I am going to list the wonderful headlines we got today:

Mortgage Foreclosures Rise to New Heights

FDIC: Bank Failures May Get Bigger

Fuel Prices Spark Continental Air Layoffs, Cutbacks

Home foreclosures set first-quarter record, expected to rise
Why Our Surging Credit Card Use Is 'A Time Bomb'

Household net worth drops by $1.7 trillion

UBS drops muni business

These headlines were created before the MBIA and Ambac news.

And the stock market rises by 200 points?

Yesterday, I gave you a heads up on the 5 trillion dollars that must be put back on the balance sheet of banks.

I will now give you the link:

you can read the passage at your convenience.

At 11 am this morning, the hawkish Fed Governor from Richmond stated:

11:02 Richmond Fed Pres Lacker says recent Fed lending runs moral hazard risk - wires
Lacker also says that the Fed's authority must be better aligned with the scope of lending it is now being called on to perform. Regarding the inflation outlook, Lacker says that while some inflation expectations worsened in Feb/Mar, they have since stabilized. end

Moral hazard is another term for derivative risks are increasing and may cause the entire banking sector to melt.

It looks to us that the sovereign nation of Argentina has defaulted on its bonds. Even though it has 50 billion dollars of foreign reserves, its inflation is running at 24% and its bonds are paying only 8%. They are supposedly linked to inflation but of course they are lying to the world on the inflation figures. So the world is liquidating all Argentinian bonds and there is nobody left to buy them. I guess then you can state that they have a defacto default.

You can expect the same for the sovereign nations of Iceland, Spain, Greece, Turkey and maybe Italy. Inflation is getting out of control everywhere.

In Zimbabwe, one American dollar now fetches 1 billion Zimbabwe dollars. It costs 600millionZ for a loaf of bread. Their unemployment rate is now 80% as Mugabe threw out the white farmers and now there is nobody to harvest or grow food. There is nobody to mine the rich resources that this country has in its crust.

Tomorrow, you can bet the farm that gold will rise. The raid on gold and silver was futile because of the low open interest. As I pointed out both metals have extremely low OI and no matter what price the cartel drive the metal to, the “good guys” will not give up their longs and this was proven today.

Tomorrow, cartel members will try to buy back their shorts and they will come in competition from buyers wishing to purchase gold and silver. There will be few sellers.

It looks to us that China wishes a currency regime similar to Bretton Woods except that it replaces the usa. By definition then, China has been accumulating massive amounts of gold and silver.

I will keep you up to date on this very important development.

I will give you a comprehensive review on Saturday morning


Wednesday, June 4, 2008

June 5.08 commentary.

Good evening Ladies and Gentlemen:

Gold closed down by 1.80 to 880.50 Silver rose by 5 cents to 16.84.

The open interest on gold comex collapsed by 6000 contracts and the new OI stands at 398000. There are still another 1 million oz standing or 10,000 contracts. The OI on gold is in strictly powerful hands and any selling by cartel members will not cause these guys to pitch their longs.

Silver’s OI remained comatose again with the OI remaining at 123000. I am now going to state that the silver Oi is all in strong hands. For two days straight, we saw silver fall at the comex into the low 16.60’s only to rebound both days to trade in the green. Also remember that July is the delivery month in silver so the cartel are paying special attention to it. There are massive shortages of silver all around so the cartel may be trying to stall investors from taking delivery of silver by depressing its price.

Bill King, a well noted gold analyst correctly stated yesterday that Bernanke talked about a strong dollar and how important it was to the USA. He is correct as the job of talking up the dollar always is in the hands of the Secretary Treasurer (Paulsen). This breaks protocol and seems to signify some massive intervention is underway as the financial crisis is getting worse.

Speaking of the Treasury it has now been 7 months and we have not received anything from them on our Freedom of Information Request.

As for the Fed, we have filed in April our appeal and we are waiting for a reply.

The Fed cannot keep secrets, so there response is going to be fascinating. However we still expect to be stonewalled and this will force us into court. This is when the fun will begin.

All bankers from around the globe will watch these proceeding in earnest.

Today, crude oil fell by 2 dollars and the CRB fell badly by 2.98. The cartel is doing everything in their power to raid commodity prices.

At 3 pm with the Dow up by 90 points and gold shares rising to par we got this announcement:

The DOW was roaring right along, making up most of yesterday’s losses when this news surfaced…

MBIA, Ambac Aaa Credit Ratings Again Under Threat at Moody's

By Emma Moody

June 4 (Bloomberg) -- The Aaa insurance ratings of MBIA Inc. and Ambac Financial Corp. are again under threat by Moody's Investors Service after the companies reported deepening losses from the mortgage-market slump.

MBIA Insurance Corp.'s insurance financial strength rating may fall to the Aa range, although a drop to the A category is possible, Moody's said in a statement today. Ambac's Assurance Corp.'s ranking would probably be lowered to Aa, Moody's said in a separate statement….


The market started to tank and got to the minus 50 point mark where it rebounded to go minus 12 points when this announcement came at 3: 15

Bernanke Says Inflation `Significantly Higher' Than Fed Wants

June 4 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said an increase in indicators that the public expects prices to rise is a ``significant concern' for the central bank.

``Some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve,' Bernanke said today in a speech during a Class Day ceremony at Harvard University in Cambridge, Massachusetts. end

Gold shares were attacked and the XAU contract fell from 179 to 175.00 for no reason. Gee! I thought gold was a good hedge against rampant inflation.

The Dow again fell to go minus 50 points but another Hail Mary saved the day and the Dow finished off by 12 points.

Early in the session with all the negative news on Lehman Brothers we expected the Dow to be down by 200 points but miraculously the bankers bought the indices and lo and behold the Dow was rescued.

The news from Moodys of a possible rate cut of MBIA and Ambac is devastating to the economy. This will mean all the municipalities debt will automatically lose their triple A status and this will have a domino effect on the economy. This is the single most important financial disaster that could strike the usa at one fall swoop.

However I am going to leave you with another dandy that everyone missed. ( This will annihilate the entire banking financial system. Five trillion dollars which must be put back on the balance sheet means 5 trillion dollars of losses and derivative losses at one bank kills all other banks. The whole system implodes!!!):

20:56 Banks may have to take trillions of dollars back on to their balance sheets - FT
Citing an analysis by Citigroup, the FT reports that accounting changes could force US banks to take trillions of dollars back on to their balance sheets in the coming months. According to Citi, a planned tightening of rules surrounding off-balance sheet vehicles could result in up to $5T in assets coming back on the books.
Reference Link (subscription required) end.

I hope I have not disturbed your sleep tonight. I am only the messenger.

Have a great evening


Tuesday, June 3, 2008

Commentary June 3.08


Good evening Ladies and Gentlemen:


Gold closed down by 11.20 to 882.30 and silver fell by 8 cents to 16.79.


The open interest on gold fell by 5000 contracts to 403900.  The silver OI lost 1600 contracts to fall to 123000.

We still have another reduction of around 10000 contracts from deliveries in gold so I put the real OI at around the figure I originally thought we would get :  around 391000 at the start of deliveries.


The cartel has its hands full trying to raid gold with such a low OI.  These are all in strong hands and they will not budge with the antics of a temper tantrum thrown by cartel members.


Today the raid was  coinciding with the speech from Bernanke in Spain.   Bernanke reiterated for the umpteenth time the usa’s position of a strong dollar policy.  The bankers got their fingers on the sell button on gold and on the Euro right at 9 am.  Gold was tagged for a net 20 dollar loss from high to low.  Silver was at one point down to 16.43 but recovered nicely as the cartel members covered their shorts.


The big news of the day is Lehman Brothers.  First their stock tanked by 3.00 dollars to close at 30.30  It is now lower than the day Bear Stearns was liquidated.  On that day Lehman Brothers traded at 39.00 and today it is 30.30 .  News from analysts reported that Lehman will report of quarterly loss of btw. 50-75 cents and that they will need to replenish its balance sheets with reserves as many of its assets are illiquid.  (Actually most of its assets are now level 3 and are basically worth 10-15 cents on the dollar instead of Lehman’s value of par).


The ECB today announced a sale by one captive bank of .94 of a tonne.  This is the 9th straight week of low sales by European banks.  Usually, the ECB banks will monetize that which they had already leased 2 years prior.  However they are not doing this.  Why?


  1. Maybe they are sending the message to the usa to stop their nonsense by selling gold
  2.  Maybe we want they leased gold back.


Regardless, no bank anywhere in the last 2 months has come out and announced a gold sale.  However, the usa is reporting record exports of gold to the tune of 4 billion dollars a month or 150 tonnes of gold.  The usa produces around 20 tonnes a month.


The Fed has stonewalled us from receiving documents relating to any gold transactions that it has done.  It looks like we will need a court action to get the documents we need.


Turkey has resumed importing massive amouts of gold.  Today it released figures showing gold imports of 21 tonnes.

We have also heard the South African production has fallen by 16%.  It looks to us that they will produce no more than 240 tonnes this year down from 275 tonnes in 2007.


In other news, Toll Brothers announced a big loss of 94 million dollars as revenue fell, as well as house prices.  These guys are in serious financial trouble.


And finally, news came from RESCAP,  which is owned by GMAC that the residential giant will be propped up  by GMAC and its owner Cerberus Capital to the tune of 2.88 billion dollars.  On three separate occasions, cash infusions have been injected into RESCAP by their parents and all of the money has gone into a sink hole.  The entire housing sector of the usa economy is in a serious state of financial ruin.


It is getting late, so I will bid you adieu


Political Cartoons

I thought you may enjoy these:

Monday, June 2, 2008

June 2.08 commentary:

Good evening Ladies and gentlemen:


First of all more news on the plight of European nations:  from the UK Telegraph:  (the ALL means the European countries within the EU)


“All have suffered a relentless loss of competitiveness since EMU was launched. The deficits have reached 10pc of GDP in Spain and 14pc in Greece. None has begun to narrow the gap in unit labour costs with Germany, ensuring that the inevitable adjustment will be more severe when it comes.

Indeed, Spain's inflation surged to a record 4.7pc in May. The country now faces the most acute "stagflation crisis" in the developed world. House prices have fallen 15pc nationwide since September, according to the developers' association (APCE). Madrid University warned this week that Spain's property slump could throw 1.1m people out of work”.  End.

Europe is now being thrown into a quandary:   the spread between German bonds and Spanish, Italian, and Greece bonds skyrocket as the world sees that these countries cannot print the Euros to stave off deficits.  All of these countries are in a severe financial strain.  The whole article can be viewed either in Midas or you can read it from the UK Telegraph authored by Ambrose Pritchard Evans.


Gold closed up by 6.80 to 893.50.  Silver limped along with a gain of only  4 cents as the cartel seemed to pick on silver.  The comex defended gold throughout the day but to no avail.

It refused to buckle under like silver.


The open interest on gold fell by 408000 but that was because ½ million oz of gold was delivered or 5000 contracts.  So far over 1 million oz has been delivered and there will be another 1.5 million  oz to go.

The OI on silver  fell by 1300 contracts to a new level of 124000.


In financial news, we heard today  that European financial stocks were hit hard because of the continuing crisis in subprime, altA prime and prime losses in London and other places in Europe.

The big operation Bradford and Bingley  tumbled 25% this morning as the UK’s largest lender  to landlords cut the price of its rights offering by a third and stated point blank that the housing market in Europe is deteriorating!!,  HBOS, the UK’s largest mortgage bank dropped the most in 2 months.  In Europe before the NY opening, JPMorgan Chase and Merrill Lynch fell  in sympathy with the HBOS and Bradford and Bingley situation.


By the time NY started to trade, the financials were poised to suffer a further retreat. Only a Hail Mary saved the Dow.  At one point it was down 212 points but it closed down only 135 points.


On this side of the pond, Wachovia fired their CEO because of big losses and losses that have not been disclosed yet.  As I have pointed out to you many times, I watch for fire and smoke in Charlotte NC.

And today, the smoke is billowing!!


On the weekend, our good friend, Reg Howe released his preliminary paper on the gold derivatives.  He makes his final submission when he gets a detailed account of all the banks in the BIS semi annual report in June.  He rarely publishes anything in May on this matter, but on the weekend he thought it best to release his preliminary findings.

The total gold derivatives rose from 412 billion to 595 billion dollars, even though GoldFields Mineral Services wrote that total derivatives have declined in the latter half of 2007 because of mine dehedging.

I guess these guys got it wrong!.  Reg questions:  for what purpose does this extra derivatives on gold trading serve? He also questions which central bank is hiding its gold sales.


He finished his short paper with  our Freedom of Information inquiry to the Fed.  In light of the derivatives increase pointed out by the BIS,  it will be interesting to see their response.  We will wait a few weeks and if we get no response, we will be off to court to get our required information.  Should be an interesting summer.


I urge you all to read the paper and the letter of appeal to the Freedom of Information Officer.  You can find it at:


first article  June 1.08.


Late in the day, we heard that S and P cut the ratings of  Morgan Stanley, Merrilll Lynch , and my favourite, Lehman Brothers.  Lehman Brothers   totally lied to regulators about their balance sheet.

It seems that S and P are also not happy with their findings.


Credit Default Swaps are rising on all  3 banks, signalling problems with their debt.  I stake my reputation that Lehman is bankrupt.  Merrill Lynch and Citibank are close behind.


Today, I was thoroughly annoyed at the regulators for allowing the banks to “report profits” from their own falling bond prices.  I have pasted this for you to read:

This is why you should never purchase any financial companies as their balance sheet is totally bogus!!!

Wall Street Says -2 + -2 = 4 as Liabilities Get New Bond Math

June 2 (Bloomberg) -- Leave it to Wall Street to profit from its own distress.

Merrill Lynch & Co., Citigroup Inc. and four other U.S. financial companies have used an accounting rule adopted last year to book almost $12 billion of revenue after a decline in prices of their own bonds. The rule, intended to expand the ``mark-to- market' accounting that banks use to record profits or losses on trading assets, allows them to report gains when market prices for their liabilities fall.

The new math, while legal, defies common sense. Merrill, the third-biggest U.S. securities firm, added $4 billion of revenue during the past three quarters as the market value of its debt fell. That was the result of higher yields demanded by investors spooked by the New York-based company's $37 billion of writedowns from assets hurt by the collapse of the subprime mortgage market.

``They can post substantial gains as a result of a decline in their own creditworthiness,' said James Cataldo, a former director of treasury risk management for the Federal Home Loan Bank of Boston and now an assistant professor of accounting at Suffolk University in Boston. ``It's completely legitimate, but it doesn't make sense by any way we currently have of thinking of net income.' …


As many of you know, I follow Barrick like a hawk.  These guys have filed a 2 billion dollar shelve meaning they wish to offer either debt or new shares to retire debt.


Barrick’s forwards are greater than 5 billion so a 2 billion dollar debt reduction would be welcome news for shareholders.  It would also mean that Pasqua Lama will not get regulatory approval.

I do not think Barrick is going after any company  with a small 2 billion offering.  Most of the good ones like Goldcorp and Angico Eagle need  in excess of 7 billion dollars for AEM and more for Goldcorp.


I have to go now and help my wife with her gardening.

See you tomorrow




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