Saturday, July 26, 2008

Commentary July 26.08. ..extremely important.

www.lemetropolecafe.com   James Joyce table  Ron Kirby’s Paper.

 

Good morning Ladies and Gentlemen:

 

Gold had a good day yesterday closing up by $4.20 to 926.40 and silver rose by 10 cents to 17.32.

 

The volume at the comex yesterday, was estimated to be 212000 contracts  The switch effect was around 35000 so the net gold comex purchases were around  177000. The volume at comex was absolutely huge.  To give you an idea of size:   212000 contracts means 21 million oz of gold.  The last 4 days saw volume in excess of 200,000 each day or 84 milllion oz of gold for the last 4 days.  The world only produces 75 million oz of gold per year.  And the comex is not the largest in gold trading.  The LBMA trades  75 million oz of gold contracts and the OTC market is even greater in size on a daily basis.

The front month of August saw its OI decline slightly to 155000 contracts with one day left.  There are 18000 contracts of calls on comex gold in the money.  There is 550 contracts standing for delivery from calls exercised for contracts in May.  Total OI rose by 4000 contracts with the rise in gold on Thursday.

 

My number 2 son Lenny, my chief statistician tells me that roughly 45000 contracts will switch on Monday and again on Tuesday.  July 31.08 is the first day for contracts to be hit.  Judging from previous switches, it looks like we may have over 4000 of contracts standing or 4 million oz of gold.

 

That will be unbearable pressure on the comex.  We extremely doubt that they have owners of gold wishing to part with 3.0 million oz.  I will be watching this and comment on this every day next week.

Monday, is the last trading day for the August contract and for options.  Expect more criminal activity by the cartel as they try to  stop the 18000 contracts from taking delivery from the options side of things.

I would like to comment on Ron Kirby’s Paper at Lemetropole.

 

Last week, we saw a huge price escalation in the shares of the financials after the SEC  commissioner Cox outlawed the shorting of 19 financial stocks. I have appended the list for you (with the loss of each up to the outlawing of short selling).

 

 

Company

Ticker Symbol(s)

YTD % change

BNP Paribas Securities Corp.

BNPQF or BNPQY

-15.8

Bank of America Corporation

BAC

-33.4

Barclays PLC

BCS

-36.8

Citigroup Inc.

C

-34.3

Credit Suisse Group

CS

-26.1

Daiwa Securities Group Inc.

DSECY

-2.0

Deutsche Bank Group AG

DB

-31.1

Allianz SE

AZ

-16.7

Goldman, Sachs Group Inc

GS

-15.0

Royal Bank ADS

RBS

-54.6

HSBC Holdings PLC ADS

HBC and HSI

-5.7

J. P. Morgan Chase & Co.

JPM

-8.3

Lehman Brothers Holdings Inc.

LEH

-70.8

Merrill Lynch & Co., Inc.

MER

-42.4

Mizuho Financial Group, Inc.

MFG

10.7

Morgan Stanley

MS

-27.4

UBS AG

UBS

-47.5

Freddie Mac

FRE

-73.1

Fannie Mae

FNM

-66.5

End

 

Kirby noted that  15 out of the 19 were members of the LBMA.  Some are not even domiciled in the usa.  (Royal Bank of Scotland, Daiwa, Mizuho Securities UBS, HSBC)

What is even more intriguing is that two banks were not on the list and their financial situation was deteriorating faster than these 19.  The two who were not on the list were  Washington Mutual and

Wachovia.  The 4 members who are  not LBMA members are Fannie, Freddie, Royal Bank of Scotland and  Allianz SE.

 

It is now obvious that the 15 members needed protection because of their exposure to their huge gold shorts.  They were seeing the abyss as their stock was plummeting. Commissioner Cox, the SEC watchdog allowed criminal activity to occur in which  Banks bought calls and/or stock with the Fed TAF money and routed the shorts..  Fannie and Freddie needed help because their stock had deteriorated by over 66%.  The Royal bank of Scotland needed help because the problems with their takeover of ABN  Amro and exposure to the west’s subprime and mortgage mess.

 

I guess the powers to be felt that Washington Mutual and Wachovia  could not be saved. We will probably see funeral arrangements for these two.

 

As for Washington Mutual , they have a total of 261 billion dollars of mortgage assets out of a total of 320 billion dollars.  They have only 7 billion in cash.  The total ARMS held by the bank total 107 billion dollars and these escalate in terms beginning next month.

 

Last month we saw Goldman Sachs unload these same type of assets at 44 cents on the dollar.  If we were to take the mark to mark value as placed by Goldman then Washington Mutual would have a negative retained earnings of 129 billion dollars.  In other words, they are totally bust.

 

What is worse, is that the huge loss will totally obliterate the FDIC when these guys knock on the front door of WM.  The FDIC would need over 60 billion dollars to bail out depositors at Washington Mutal.

 

You can also use the same analysis for Wachovia and come to the same conclusion.  They have negative retained earnings.

 

ON Thursday, I reported to you that the Fed has negative non borrowings of 122 billlion dollars meaning that all of depositors money have vaporized.  I give it 3 weeks until we see the entire financial scene vaporize.

 

Here are the closing prices of some of the financials yesterday:

 

Washington Mutual fell 19 cents to $3.84.
Lehman Brothers lost $1.47 to $17.05.
Fannie Mae gave up 47 cents to $11.55.
Freddie Mac sank 54 cents to $8.27. end

 

It is going to be extremely difficult for Washington Mutual to raise capital with such a low stock price.   We are witnessing unsecured creditors abandon these guys big time.  Even secured depositors are leaving and going to other institutions.  (My number 4 son Stephen is wiring money from his account in WM over to Wells Fargo).

 

Perhaps the biggest news of the day re the shape of the financial scene can be summed up by this:

 

 

US foreclosures rise 14 pct in 2nd qtr -RealtyTrac

NEW YORK, July 25 (Reuters) - U.S. home foreclosure filings rose 14 percent in the second quarter, the eighth consecutive quarterly climb, and more than doubled from the same period a year-earlier, real estate data firm RealtyTrac said on Friday.

Home foreclosure filings during the second quarter were reported on 739,714 U.S. properties, up 121 percent from a year earlier, RealtyTrac, an online market of foreclosure properties, said in a report.

The figure is a total of default notices, auction sale notices and bank repossessions between April and June.

"Although much of the fallout from foreclosures is being driven by rampant activity in a few states, such as Nevada, California, Florida, Ohio, Arizona and Michigan, most areas of the country are seeing at least some increase in foreclosure activity," James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.

Indeed, 48 of 50 states and 95 out of the nation's 100 largest metro areas experienced year-over-year increases in foreclosure activity in the second quarter, he said.

The surge in foreclosures indicates an increasing number of homeowners are struggling to make mortgage payments amid the worst U.S. housing market downturn since the Great Depression.

RealtyTrac, based in Irvine, California, said the national foreclosure rate in the second quarter was one foreclosure filing for every 171 U.S. households….

 

The banks are in severe distress and their collateral sinks daily.  Banks cannot and will not lend because of the gaping hole in the balance sheet.  They only have one way to repair their balance sheet and that is trading.  They will trade in the oil.  They will trade in the own stock.  They will short their own stock.  And…they do not have to worry about any watchdog.  The SEC watchdog  Christopher Cox is giving his full blessing to this criminal activity.

 

When the financial scene finally vaporizes, Cox and his cronies will share a cell with the banking presidents.

 

 

I would like to comment on the bank of America situation with respect to Countrywide.  On Friday, the Bank of America announced that Countrywide has taken a hit of 8.9 billion dollars on its mortgage portfolio and that it investment with the firm has declined in value to only $100 million.  On July 1.08 the Bank of America closed the deal by purchasing Countrywide for 4.2 billion.

There is now zero chance that these two will be merged.

 

I can see only two scenarios:

 

1. create a new vehicle and move the mortgage junk onto them.  The bond holders  would  use the same collateral that they had in Countrywide.  This would be criminal activity but who cares, nobody is watching.

2.  go bellyup.

 

 

 By bet:  no. 2.

 

Have a great weekend

Harvey.

 

 

Thursday, July 24, 2008

Commentary July 24.08.

www.lemetropolecafe.com

 

  James Joyce table.

 

Good evening Ladies and Gentlemen:

 

Gold closed down by 50 cents to 922.20 and silver fell by 16 cents to 17.22.

 

Yesterday, the comex blew its OI figures.  The correct OI for gold was 475200.  Silver was accurate.  Today we learned that the OI basis Tuesday fell by  13000 contracts to stand at 463000.  The silver OI fell by a few thousand contracts and its new Oi is 138000,

 

It is obvious that we saw considerable spec liquidation.  No doubt Dennis Gartman was among the specs who pitched their longs to the hungry commercials.

 

I would like to give you details on the comex gold deliveries and open interest for the front month:

 

The front month of August has open interest at an extremely high 192000.  I asked my chief statistician  (who doubles as my son Lenny)  to check on the size of OI with two days before it goes off the board and  6 days before the beginning of the august contract.  He reported that the size is unprecedented.  Not only that but we must add 550 contracts that are already standing re the May option for gold.

 

The calls on gold contracts continue to show record levels with 1800 contracts in the money with calls from 700 gold all the way to 920 gold.

 

It looks from my vantage point that the cartel got spooked at the high volume of the front month and high volume of calls in the money.  We may have greater than 4 million oz standing and that will cripple the comex.  I will keep you informed on this important development.

 

This evening, the Fed at its web site, showed that the non-borrowings  have increased from the last time I reported to you.  The new non borrowings are negative 122 billion dollars.  In essence, the entire securitity of depositors have been wiped out and to boot, 122 billion of dollars have been exchanged through the TAF auctions.  The Fed gets worthless junk and the banks get fresh paper treasuries.

 

And the banking sector is getting better?

 

I had a look at the balance sheet of Washington Mutual.  It has 15 billion dollars of liquid cash and  total assets of 320 billion dollars.  It has total liabilities of 297 billion dollars.

I would guess that the total mortgages are around 280 billion dollars and  half of these mortgages are either level 2 or level 3.

 

If 10% of these mortgages are impaired then  28 billlion will be wiped out and Washington Mutual will have deficit retained earnings.  Today it was reported that many are taking all accounts greater than 100,000 out of the bank.

 

My bet to you:  these guys are going down either this week or next.

 

In other news, the jobless claims for the week came in and it was terrible.  The jobless number increased to 406000 from a revised 376000.  The economy continues to weaken.  This means that revenue to the treasury declines.  The deficit for 2008 will rise to an amt greater than 1 trilllion dollars.

 

Ford motor company lost 8.9 billion dollars for the quarter as Detroit is as close to a basket case as one can imagine!!

 

However the big news for the day is this:

 

Pace of US existing home sales falls to 10-year low

WASHINGTON, July 24 (Reuters) - U.S. existing home sales fell more sharply than forecast in June and dragged the annual sales pace to a 10-year low, the National Association of Realtors said on Thursday.

Home resales fell 2.6 percent from May to a 4.86 million-unit annual rate. Economists polled by Reuters were expecting sales to fall to a 4.93 million-unit pace, from the 4.99 million rate initially reported for May.

The June rate was the lowest since a 4.83 million rate in early 1998, the Realtors said.

The inventory of homes for sale held steady at 4.49 million homes or an 11.1 months' supply at the current sales pace. The median national home price declined 6.1 percent from a year ago to $215,100.

U.S. Treasuries, which benefit from signs of economic weakness, slightly extended gains after the data while the U.S. dollar declined and stock prices fell.

Sales were off in three regions while the West saw a 1.0 percent increase. In the Northeast, sales were off 6.6 percent while they were down 3.4 percent in the Midwest and off 3.1 in the South.

While the sales pace hit a decade low, the Realtors said that the figure held steady in the range seen in recent months.

"This is consistent with a stable sales pace," said Lawrence Yun, the Realtors chief economist.

-END-

This is the collateral that banks use.  And please remember, we are still in the 3rd inning.  Next month we have the ARMs resets and many more ALT-a ‘s  come due.  Alt’a  is a trillion dollar mortgage market and the ARMs resets in another 2 trillion dollars.  No wonder Paulsen had to act fast and get the rescue Fanny and Freddie.

 

Now congress basically has given  a green light to a blank check  to fund these two illiquid GSE’s.  These two entities will now exchange with the Fed treasuries for junk.

 

So instead of gold and silver backing the dollar, we have worthless paper backing the dollar.   It looks like Kuwait is no longer supporting Fannie and Freddie as they announced their displeasure with these instruments.

 

The Dow today was tagged for a loss of 283 points with the financials getting creamed.

 I highlighted to you some of the closing prices:

 

 

 

Fannie Mae (FNM), down $2.98 to $12.02
Freddie Mac (FRE), down $1.99 to $8.81
Lehman Brothers (LEH), down $2.58 to $18.52
Washington Mutual (WAMU), down 60 cents to $4.01

 

End.

 

Bloomberg announced late tonight that unsecured creditors  were pulling out of Washington Mutual.  If there is a run against this bank watch out.

 

It looks like the top 4 banks in trouble are as follows:

 

  1. Washington Mutual
  2.  Wachovia
  3.  Halifax Bank of Scotland

.    4.      National Bank (OHIO).

The top investment houses in trouble are as follows:

 

 

1,  Merrill Lynch

2.  Lehman Brothers.

 

It is going to be difficult for the Fed to absorb all of this waste.

 

Yesterday, in Canada we saw investors sue the CIBC.  Investors purchased CIBC stock for over a year after the bank thought that the subprime mess was small.

 

Today we learned that Los Angeles city has sued the rating agencies MBIA and Moody’s for collusion, and fraud.  Bloomberg also reports that the state of California will also launch a class action suit in sympathy with LA.

 

Today, we have learned that mainstream investors are flocking into their brokerage firms and asking for them to register their shares.  They have been spooked by the massive reports of all the naked shorting that is prevalent in both Canada and usa.  Investors are not sure if their shares are real or counterfeit.

 

Last weekend, in Jim Willie’s paper, it was reported that  both countries have a massive counterfeit problem because of the naked shorting.  The back rooms of the trading desks have seen a mountain of “failure to deliver” slips against brokerage houses.  Their only penalty is a name on a list.

 

Late this afternoon, another lawsuit commenced:

 

 

New York sues UBS over auction rate securities

By Greg Morcroft

Last update: 11:56 a.m. EDT July 24, 2008

Comments: 34

NEW YORK (MarketWatch) -- New York Attorney General Andrew Cuomo on Thursday filed a lawsuit against Swiss banking giant UBS (UBS:

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UBS 21.00, -1.60, -7.1%) , alleging that the firm deceived investors in auction rate securities by telling clients the investments were cash equivalents. He also claimed senior executives at the firm divested themselves of $21 million of auction rate securities as the market collapsed, but they continued to encourage customers to buy them. Cuomo released transcripts of subpoenaed emails that he said backed up the charges. "Not only is UBS guilty of committing a flagrant breach of trust between the bank and its customers, its top executives jumped ship as soon the securities market started to collapse, leaving thousands of customers holding the bag," Cuomo said in a press release. End of Story

 

 

In other words:  investors thought they were buying money market funds and in reality they got junk.

 

Agnico Eagle announced their earnings and it came in at 8 cents instead of 15 cents.  However they are putting 4 mines into production.   Their mine in the Arctic is having a little overruns because of the low usa dollar and high energy costs.  This was to be expected.

Their reserves are increasing and their production is increasing.

 

There is absolutely nothing wrong with this gem.

 

Speak to you tomorrow

Harvey.

 

 

 

 

Wednesday, July 23, 2008

commentary July 23.08

www.lemetropolecafe.com

 

  James Joyce table:

 

Good evening Ladies and Gentlemen:

 

As I pointed out to you last week, we are approaching comex option’s expiry.  August is the third biggest delivery month in gold’s calendar, after December and June.

The number of open interest for the August contract remains extremely high at 218000.  On top of this, the call options on a gold contract are at record levels.

 

The cartel do not like to see many calls in the money so they will always exploit the longs and try and shake the tree and hope the “leaves” fall and  allow it to be swept away.

 

Gold closed down today in a huge raid as the ancient metal of Kings lost  25.50 to 922.70.  Silver also lost big time down by 55 cents to 17.38.

 

There are quite a few details that I would like to point out to you so you may want to take advantage of the situation tomorrow, Friday or Monday.

 

First of all the 100 day moving average for gold is 918.00.  The 50 day moving average is 921.  On Monday,  the 100 day moving average will rise above the 50 day moving average and that is extremely bullish as many Europeans follow these technicals.

 

The 200 day moving average for gold is now 881.00 and it is the rock strength on gold.  It will be very hard to pierce this level on a downward raid.

 

The gold/XAU ratio hit today 5.22.  Generally this means that stocks are cheap with respect to gold and it is a good time to buy gold stocks. Also our good friend Dennis Gartman got stopped out on all of his 3 contracts.  How they call this man a guru in gold is beyond me.  He has not made a penny for any of his clients. However everytime he gets stompted out, gold rises.

 

The open interest on gold comex remained high at 495000 despite gold’s hit yesterday. Today, the estimated volume on the comex was 211000 and probably the real number will be 250,000 with only 20,000 switches.  The dominant month was the front month of August.  If I see that the OI on the front month of August remains at a relatively high number then I will be quite excited as it means that someone may be taking on the comex banks.  I will keep you informed on this.

 

In silver the OI lowered by only 1000 to a relatively high 140,000.  On a side note, my two boys have not been hit on their 3 contracts for silver.  It means that the silver metal is scarce.

 

And now for the economic news of the day:

 

 

In stunning fashion, we learned today, that the big private oil company SemGroup filed for bankruptcy protection.  It suffered 3.2 billion dollars of losses speculating in oil.   It has a 500,000 barrel a day business and it sought to hedge its oil.  They hedged themselves out of business!!

 

Yesterday, we learned about the big loss from Wachovia of 8.9 billion dollars of losses.

Late yesterday we also learned that Washington Mutual reported a huge 3.3 billion dollar loss or about 6 dollars per share.   That wipes out just about all of its retained earnings.

 

It is rumoured today, that the big retail chain Mervyns may file for Chapter ll.

 

There is considerable talk about the problems with Fannie and Freddie and the huge costs that the taxpayer will have to fork over to rescue these insolvent institutions.

I have highlighted the related passages for you:

 

 

Long ARM of the law

The CBO is totally lying claiming a paltry 25 billion will reconcile Fannie and Freddie's woes. They know that wouldn't even remotely do the job. But, as is the case for all publicly financed cons, this is the phony number needed to get the bailout door open. Any frank discussions of REAL costs will come after the deal, and probably after a new presidency. The following chart shows how phony the CBO claim is. As you can see beginning in 2009, and continuing into 2011, the option ARM, Alt-A, and Agency mortgages absolutely explode upwards. It's just ludicrous for the CBO to ignore what's coming over the nest 4 years. 25 billion could very well be needed for a single MONTH. In light of over 1/2 trillion dollars of ARM resets yet to come any talk of Fed rate hikes is just blustering. Raising rates anytime during the next 4 years could implode millions of additional ARM mortgages. Wall Street also conveniently ignores this chart when cheerleading for a bottom in the financials.

Look at the huge spike in Option ARM's and Alt-A's from 2009 to 2011!

Also buried in this garbage housing legislation is an 800 BILLION increase in the statutory limit on the national debt, to 10.6 trillion. If they're lucky that'll be enough for the next 6 months, or until after the election, whichever comes first. You would think THAT little tidbit alone would have gold up $100, instead of it getting pounded into submission. The SEC and CFTC already have all the information they need to investigate illegal gold and silver manipulations. Any further evidence will be equally ignored. The phrase ""to serve and protect" has a whole new meaning when it comes to law enforcement in financial regulatory agencies. They (SEC, CFTC) serve banking, and protect banking interests.
James Mc

James Mc is not alone in casting aspersions at all this madness……

Fannie, Freddie Rescue Plan May Cost $1 Trillion, Bunning Says

July 23 (Bloomberg) -- A government rescue of Fannie Mae and Freddie Mac would require taxpayers to pay ``way' more than the $25 billion estimated by the Congressional Budget Office, potentially as much as $1 trillion, Senator Jim Bunning said.

Treasury Secretary Henry Paulson ``hasn't told us the truth about this bill,' Bunning, a Republican from Kentucky, said in an interview with Bloomberg Television today. ``Why would you put in a backstop of unlimited amounts of money if you weren't going to need it.'

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ_PxvWbq4z0&refer=home

-END-

Where is the serious talk about who is going to pay for all these bailouts?

Please note the huge number of Arms   (Adjustable rate mortgages) that are coming due starting next month and rising throughout 2009-2010.  This is what will bankrupt Fannie and Freddie.

 

In other related news, the long bond fell in price  (yield rose) to 113.6    As the long bond falls in price,  you will see the cartel try and support the bond which means they will abandon the stock market and bank shares.  As the long bond falls, mortgages rates rise and this  intensifies the housing problem.

 

Many ask  is the housing –banking crisis almost over.   My answer:  we are just in the 3rd inning.  In order to see improvement, banks must sell these entities to someome.  They need a resolution trust to oversee their sales.  However they probably need in excess of  2-3 trillion dollars and the usa is not ready for this yet.

 

As my number 2 son pointed out to you yesterday, we are seeing strange things over at Bank of America.  On the 1st of July they announced that they have completed the deal and bought Countrywide but they have not merged Countrywide with itself.  B. of America has a problem:

 

  1. if they negated the deal, Countrywide goes belly-up and the whole financial derivative scene blows up.
  2.  if they completed the deal and merged with CFC  then they may go belly-up  as the subprime, Alt A and Prime mortgages default.

They decided to buy time and keep CFC in bankruptcy mode.   They like the retail outlets but  cannot use them because of the bondholders. They are keeping Countrywide separate from itself.

Bank of America announced that it is contemplating moving CFC into a new entity called Red Oak Merger Company. CFC’s assets, the mortgages would flow to the new entity.  The bondholders would move over to the entity that they have as collateral.

The deal smells fishy.  It looks to me like a fraudulent conveyance  but I will appeal to my learned lawyer friends for answers.  I will be back to you on this one.. Suffice it to say, this is an epi centre waiting to erupt.

 

The other issue is that of naked shorting.  To my surprise, naked shorting has penetrated Canada and many of our back stock offices cannot distinguish between counterfeit paper and real paper.

 

In a naked short, the shorter never borrows an owners stock, he just sells a stock he does not own.  He fails to deliver the security and all the SEC records is a “failure to deliver” slip .

No penalty.  Zippo.  And guess what?, they use the proceeds to buy stocks like banking shares. It is like free financing.

 

I have scent numerous requests to Mr Chris Cox SEC director outlining this fraudulent practice.  He has now been bombarded with millions of requests to investigate/and or eliminate the practice.

Again, our requests are falling on deaf ears.

 

It will be extremely difficult for our brokerage people to distinguish real paper from counterfeit.  Lets say that I bought 100 shares of Agnico Eagle from a naked short seller and that seller  got  a failure to deliver slip.  My purchase is counterfeit.

 

It has now been estimated that 2/3 shares purchased in both Canada and USA are counterfeit.

 

It is time for us to act and put these criminals behind bars.!!

 

Speak to you tomorrow

Harvey.

 

 

 

 

 

 

 

 

 

 

Tuesday, July 22, 2008

Re: July 21.08 commentary

Hello all,
 
My pops car died and he is stuck in the hammer.  So I am filling in today.  There are three things I would like to highlight
 
1)  Today was a total farce.  Wachovia reported a loss of 8.9 billion ($4.20 loss per share, they gained $1.22 / share for all of last year) cut its divident to 5 cents and cut 10,000 jobs and this stock rises 20%.  It seems like Paulson is on TV everyday now saying everything is fine.  To me this means he is shitting bricks and is quite nervous of what is to come
 
2) WaMu annouced earnings this evening and it is bad...real bad.  WaMu reported a loss of $3.33 billion, or $6.58 per share, compared with a profit of $830 million, or 92 cents per share, in the year-ago period. Results include a previously disclosed, one-time reduction of $3.24 per share related to the company's $7.2 billion capital raise in April. Excluding the reduction, the loss per share was $3.34.   Analysts on average expected a loss of $1.05 per share. Analyst estimates typically exclude one-time, unusual charges.  There is no way the cartel can intervene again with news like this.  Gold is rising and Banks are falling tommorrow.
 
3) This is the kicker.  On Jul 1 Bank of America supposedly acquired Countrywide.  However if you read the fine print this is what BAC wants to do.  BAC intends to keep the crippled thrift holding company "bankruptcy remote" by merging CFC with a new vehicle, called Red Oak Merger Corp in the merger plan, and that BAC does not intend to consolidate the entity or take full responsibility for the CFC debt.   So BAC wants to keep the good stuff and dump the bonds to a new vehicle and have the new vehicle blow up.  This is called fraudulant conveyance and the bond holders will not go for this.   Basically, BAC new that if countrywide failed the game would be over.  So they said, "We'll buy countrywide" with no intention of absorbing their debt to keep the game alive until the market recovers.  Its now 1 year later and still no market recovery.  They now have to step up to the plate but if they absorb countrywide's liabilities they blow up.  You can bet the wife and kids that one of 3 following things occur:
 
a) the deal does not go through because BAC can not support CFC's junk => CFC then blows up and is bailed out by the fed = hyperinflationary Gold goes to the moon
b) the deal goes through, BAC dumps bonds to Red Oak => billions of bonds then fail and is bailed out by the fed = hyperinflationary Gold goes to pluto.
c) the deal goes through, BAC absrobs CFC's debt.  BAC blows up and is bailed out by the fed = hyperinflationary Gold goes to alpha centauri.
 
My money is on c.  Either way stay the course buy gold and have a great evening.
 
 

Monday, July 21, 2008

FW: Insightful take from Mike Whitney

A very important paper on Fannie and Freddie:

 



Subject: Insightful take from Mike Whitney

 

http://www.marketoracle.co.uk/Article5532.html

July 21.08 commentary

www.lemetropolecafe.com   (James Joyce table.)

 

 

Good evening Ladies and Gentlemen

 

 

Gold closed up by 7.00 to finish the comex session at 963.40.  Silver rose by 25 cents to close at 18.37.

 

The open interest on gold climbed by 700 contracts and the new OI  is 497000.  Silver’s OI retreated by 1000 contracts and its new OI is 142000.

 

The usa dollar index fell below 72.00 where tonight it sits at 71.97.  Oil rose by $2.16 a barrel on fears of a USA/Israeli assault on the nuclear facilities in Iran.

 

Even though Bank of America reported better earnings, the banking sector retreated.  I watch the SKF and it rose from the bottom this morning at 130 to close at 138.00 It continued to rise in the aftermarket where it now trades around 142.00. (It trades as a reciprocal…the higher the index, the lower the banking stocks)

 

After the bell, the market got a triple dosing of bad news:

 

  1. American Express  saw its quarterly number fall by 38% and if refused to give guidance for the remainder of the year.

 

      2,    Apple reported a better than expected quarter with income of 1.16 instead of .84 cents.  However they guided the street lower for 3rd and 4th quarters down to 1.00 per share.

 

             Apple shares tanked 10.00 in the aftermark where it trades now at 154.00 per share instead of 166.00.

 

 

    

3          Merck reported lower expected earnings and guided the street lower on its vaccine and vytorin sales.  Merck fell by 5.00 in the aftermarket.

 

Expect the market to have a terrible day tomorrow.

 

In other news, HBOS  (The Halifax bank of Scotland) reported today that only 8.8% of its rights offering was accepted by shareholders.  This is the UK’s second largest mortgage bank after Northern Rock which was consumed by the Bank of England.

 

Expect this bank to join its brother at the B of E.

 

In other disturbing news, its was announced that Ken Wilson a senior executive at Goldman Sachs was asked to help Paulsen with its banking mess. It is quite obvious that they expect fireworks shortly.

 

Many have phoned me on this:

To all; the recent news that Wells Fargo and Washington Mutual are not accepting Indy Mac/FDIC checks is beyond belief. These actions carry ramifications that could not appear in a sci-fi movie. Are we to believe that 2 major US banks do not trust the federal government? If this policy is not reversed almost immediately, then the fuse is lit. This is, as far as I know the first time [other than dishoarding of $s] that the credit quality of the US government has come into question other than in the CDS markets. 8 weeks to clear a check? Third world countries clear US personal checks in 30 days! If this goes unchecked, how long will it be before the entire system refuses checks and accepts only Fed fund wire transfers? The epileptic siezures in the credit markets was like oil pouring out of the engine. Failure to accept/clear FDIC checks is akin to shoving a lit rag into the gas tank. They both have the same results more or less, only one explodes much faster and will even melt the tires to the ground.

Indy Mac's failure will consume between 7-14% of FDIC's current available funds. A run on two or three midsized banks will use over half of what is remaining. Bottom line, the Fed will try to create Dollars upon Dollars to bail out everything. I don't think they can create Dollars fast enough or in sufficient quantity to keep banks and markets open. I do however think that in their failure to "save the system", they will destroy the international value of the Dollar. Possibly overnight. The ultimate bank run will not be Citigroup, Bank America, or Wells Fargo. It will be foreigners "standing in line" to get their Dollars out. It will be the failure of confidence in the US govenment. When US checks can no longer be cleared overseas, those banking systems will then have been dragged into the banking abyss with us. This is global.

The simplest solution to all of this is to add a minimum of 3 zeros to the price of Gold. That puts 1000 times more capital into central bank coffers. Those that still have their Gold. Regards, Bill   end.

For the life of me I cannot understand banks not accepting FDIC cashier cheques.  I cannot understand Washington Mututal as it may be their turn shortly.

 

 

There are two articles that I would like for you all to read:

 

1, Ambrose Prtichard  Evans in his daily commentary at the UK Telegraph, sounded the alarm bells today.  His paper is entitled  “   The Global Economy is at the point of Maximum  Danger”

 

 

I have highlighted the passage for you to read:

 

 

 

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/21/ccview121.xml/

 

2.      a letter from Mr Rodriques to the CFTC on the gold manipulation.  It is at  the lemetropolecafe ….Little Bear table.

 

Inflation is running fierce throughout the usa.   Sara Lee and Kelloggs have to raise prices has their commodity  components have risen exponentially.

 

 

See you tomorrow.

 

Harvey.

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