Saturday, August 2, 2008

commentary August 2.08

 

www.lemetropolecafe.com

 

james Joyce Table

 

Good Afternoon Ladies and Gentlemen:

 

Gold closed down by 5.20 to 908.30.  Silver fell by 22 cents to 17.50.

 

Early in the session, gold was beaten down by 11.00, seconds after a phoney jobs report was released.  In that report, the unemployment rate came in at 5.7% and 52000 people lost their jobs.

The street was expecting 75000 so Wall Street rejoiced and the futures indicated that the Dow was going to rise by 100 points. Gold by 12:00 noon reached positive by 2.00 but fell when London closed, to its final resting price of 908.30.  The Dow eventually succumbed down by 52 points as the Fed announced that the boys went to the begging bowl in record numbers.

 

With respect to the jobs report,  many saw through the number and realized that many full time workers moved over to part time.  The broad measure of unemployment called U 6 came in at 10.8% unemployed.

John Williams of ShadowStatistics revealed that by his calculations, unemployment hit 13.7% last month.

 

The chain stores are closing fast and furious, from  Ann Taylor, Disney stores, Levitz Furniture, Foot looker..etc. you name it many are closing and throwing many out of work.

 

California is a disaster case and will only get worse in the coming few days.  The state cannot even pay interest on its debt.  The yearly deficit is running at 20 billion dollars and interest on its debt is over 5 billion.  The housing sector in the state of California is a disaster scene and it is the epicentre of the housing crisis and the centre of the subprime, AltA and prime mortgages.

 

The Democrats wish to raise taxes on businesses.  Republicans are stating  “what business?””

Our famous actor turned politician , Arnold S.  told the comptroller that all state employees will now be paid minimum wage.  They number in the range of 200000.  He also fired 20,000 workers.

The comptroller told Arnold that it is illegal to reduce wages for some many workers..  Stay tuned to this one!!

 

The open interest on the comex gold fell by 10,000.  The open interest is now 430,000 with 10,000 contracts to be delivered.  It looks like 420,000 is now the rock bottom OI where it is impossible to fleece anyone.

 

Silver’s Oi is now around 132000 and it too is at rock bottom.

 

The COT report released after the market showed commercials buying huge quantities of both silver and gold.  This is also a good time that we reached bottom.

 

I emailed you earlier yesterday another bank failure…First Priority of Bradenton.  Sun Trust took them over .  Due to the speed of this, this must have been in the works for quite a while.

This bank is very small, with assets of only 200 million or so.  The FDIC need to pony up 75 million dollars.

 

A few hours ago we heard that Iran has rejected the usa proposal for uranium enrichment.  The  Israeli Defence Minister has indicated to the world that Iran has already gone to the “next step” in uranium enrichment.  I feel that an attack is eminent.

 

Early in the session we heard from GM and they came in at a loss of 15.50 billion dollars of$ 27.00  per share.  They have about 350 days of cash left as their burn rate is around 5 billion a quarter.

 

The following is very important :

07:22 UBS raises loss estimates for industry-wide, securitized option-ARMS
Firm's U.S. securitized products research team raised its cumulative loss estimates for industry-wide securitized option-ARMS for '05/'06/'07 vintages. UBS adds that performance for later vintage option-ARMs is much worse than earlier vintage and that the vast majority of borrowers utilize the negam feature. Firm sees BAC (with $25B in exposure), WB (with $122B), and WM (with $53B) as having the largest exposure to option-ARMs.

 

End

 

Wachovia has 122 billion of option ARMs  (adjustable rate mortgages) that are starting to come due.  Washington Mutual has 53 billion of the stuff and Bank of America has 25 billion.  Countywide which it owns 100% but not as a merged company has the largest subprime, prime mortgages on the planet.

 

Then this:

 

09:26 C Follow-up: Citi says SEC has issued a formal order of investigation (18.69)
The order relates to whether various provisions of the federal securities laws have been violated in connection with the sale of ARS. In addition, the company is responding to subpoenas from various state agencies, including those in New York, Texas and Massachusetts. The disclosure was made in C's 10Q. Separately, Citi discloses in an email that it was counterparty on the Ambac (ABK) CDO squared transaction

 

It seems now that many states are starting civil fraud proceedings against all of the players of asset backed commercial paper.  These companies have no cash to settle so they are going to go through the rigorous process of the law.  It is going to be interesting.

 

The gold shares fell badly as the shorters  continued with reckless abandon.  The  gold/XAU is at an all time high of 5.60.  The ratio was only 5.0 when gold was trading at 250.00.  The XAU contract was at a low of 48.00.  Remember at 250.00 gold it was impossible for any miner to make money.

It looks like it is hard for any miner to make money with gold at 900 because of the high cost of oil.  It looks like the cartel need to have gold go to higher ground.  The cartel need the miners to supply the gold so they can cover their gold forwards.

 

Speak to you on Monday.

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

commentary.

My commentary will be presented later today at around 3:30 edt

Friday, August 1, 2008

bank failure

Just a little note that a bank has just failed in Florida;  (First Priority Bank,  Bradenton Florida)

 

Here is the link:

 

Bingo! - First Priority Bank, Bradenton, Florida 

(SeattleSun)

Aug 01, 19:41

 




First Priority Bank, Bradenton, Florida, was closed today by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with SunTrust Bank, Atlanta, Georgia, to assume the insured deposits of First Priority....


....Customers with accounts in excess of $100,000 should contact the FDIC toll free at 1-800-837-0215 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m. EDT; on Saturday from 8:00 a.m. to 8:00 p.m. EDT; and on Sunday and thereafter from 8:00 a.m. to 6:00 p.m. EDT.

 

Thursday, July 31, 2008

July 31.08 commentary.

Good evening Ladies and Gentlemen:

 

www.lemetropolecafe.com

 

James Joyce table.

 

 

Tonight, I will be joined by Lenny to give you this special important report.

 

My dad usually starts with OI #s so I will do the same.  OI in gold fell 6000 contracts which is a low # considering the record setting volume on the comex of 270,000 contracts.  GATA is confused by such a small reduction given yesterdays events.  Perhaps, the 21,000 in the money call options rolled to December which would increase OI by 21,000 and combined with the massive liquidation of 28000 contracts would cause a net 6000 loss, this is possible explanation.

 

Gold rose today to close at 913 up $11 and silver performed beautifully and at17.72 up $.37.  XAU did not have the greatest day down to 169.  Gold/XAU is at a historic extreme of 5.41 which is unsustainable and gold shares are extremely oversold.  XAU is trading at the same level as Sept 2006 when gold was $680.

 

The news in the morning was gold friendly to say to least.  4th quarter GDP was revised down to -.2% and this quarter came in at a bogus 1.9%.  However if you read the fine print as we like to do you will notice the following:

Real GDP = Nominal GDP(output without consideration for prices) – prices. So if we adjust prices we adjust Real GDP.

As reported:

4Q 07 1Q08 2Q08

Nominal GDP (4) 2.6 (1) 3.5 (2) 3.0  (The number in brackets are quarters)
GDP Price Index (4) 2.8 (1) 2.6 (2)1.1

So with CPI at a 15 year high, CRB at an all time high, oil at an all time high these goofballs claim that inflation is decreasing and claim that inflation is 1% per year.  If we are to use the governments own bogus CPI #s of 5%, GDP would be -4.0.   In essence rather than growing by 1.9% we are contracting by 9% per year.  This is deadly in a debt based economy because you need to issue new debt to survive.  It is so bad that right now $1 of new debt only increases GDP by 15 cents.  In the 1950s $1 got you 70 cents of GDP growth.

When the market closed we got this beauty.

Gov. Arnold Schwarzenegger eliminates 22,000 part-time and temporary government jobs, and orders that 200,000 state workers receive the federal minimum wage because of California's fiscal crisis. End.

 

200,000 workers who normally make 50k-100k per year just hit the poverty line with this news and 22,000 jobs eliminated increase govt welfare costs.  Amazing the comptroller has stated he will not live up to Arnold’s executive order and will still pay out the prior salaries which sets up a conflict with the government.  For every job cut you affect a family of four.  So 200,000 pay cuts effects 800,000 people.  This will create a massive deflationary force as unpaid workers don’t purchase anything and the US economy is built on the consumer.  California is estimated to have a deficit of $20B in 2009 and it is likely that they are not earning enough to pay the interest on this debt that they have already incurred.  The housing crisis and forest fires have devastated the state economy.  What confuses my dad and I is: Why isn’t California issuing new debt to cover their costs as opposed to screwing these workers.  Also bond yields are low therefore an imminent bond failure is not likely.  So the only explanation we can come up with is they cant cover the interest payments and as such California will declare chapter 9 shortly.

Euroland inflation rose higher than expected to 4.1% and are likely to raise interest rates on the next meeting, which will put tremendous downward pressure on the dollar.  Expect the dollar to start falling now as it is close to its 200 DMA.

Alan “the donk” Greenspan came on the air today and said, “we are likely in a recession” DUH and Fannie and Freddie need to be nationalized something my pops said would happen for over a year.

Jobless claims rose to a huge 448,000 for the week.  It was the highest reading since Apr 2003.  This should be reflected in tomorrow’s payroll report unless the government fudges these #s like they did with the GDP numbers (B/D model).

Commercial paper is still contracting big time which is indicative of banks not trusting each other and not lending to each other.

The Financial Accounting Standards Board postponed a measure, and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their book to Nov 2009.  So besides fudging government #s, banks balance sheets will continue to be misrepresented.

This is great paper for you all to read:

 

Washington Mutual In a Death Spiral?

Washington Mutual, America’s largest savings and loan, is unfortunately, also one of the nation’s largest subprime lenders.

A direct consequence: It appears to be in a death spiral, losing $3.3 billion in the second quarter … admitting to losses of as much as $19 billion this year … and probably on its way to losses of an estimated $26 billion.

That estimated loss is over four times its total market value as of Friday’s close … twelve times its yearly earnings in the best of times.

Can it get a new capital infusion to stave off failure?

Perhaps. But on April 8, Washington Mutual already got an injection of $7 billion from private equity firm TPG Capital. And now, less than five months later, an amount equivalent to TPG’s entireinvestment has been more than wiped out with the plunge in Washington Mutual’s shares — to a meager $3.82 on Friday.

What’s worse, the TPG deal restricts Washington Mutual’s ability to raise new, desperately needed capital going forward. And further impairing its ability to raise capital, Moody’s announced that it is reviewing the thrift for a downgrade to junk status.

Here’s the big problem: As of the latest reckoning, Washington Mutual has $214.6 billion in residential mortgages on its books. And among those, more than three-quarters are in non-traditional categories — option ARMs, subprime loans, home equity loans and multi-family mortgages. Less than one-quarter is of the traditional, single-family prime variety.

Washington Mutual: Nonperforming loans surge!

Just in option ARMs alone, Washington Mutual has $52.9 billion, one of the biggest such portfolios in the industry. Moreover, 62.5% of its option ARMs are in two of the hardest hit states — Florida and California.

Nonperforming assets are growing by an average of 36% each quarter. If they continue to grow at that rate, they could reach a whopping 6.7% of total assets by year-end.

Investors are pulling out. Rumors are swirling that creditors may be doing the same. Bankruptcy looms.

Wachovia Also Suffering Huge Losses

Wachovia, the nation’s fourth largest bank with nearly $800 billion in assets, is also in danger. Its staggering $8.9 billion loss reported last week may be just the tip of the iceberg.

Its big blunder: The acquisition of subprime lender Golden West Financial for $24 billion at the very peak of the real estate market in 2006.

The net result for the bank: It’s now stuck with option ARMs valued at $122 billion concentrated in California, the state with one of the worst mortgage default rates.

Net result for shareholders: Over $55 billion of their wealth has been wiped out since the acquisition — more than double the total purchase price of Golden West.

The big problem going forward: Wachovia has $231 billion in residential real estate loans on the books. But only 22% of these are classified as “traditional mortgages.” Most of the rest are higher risk.

Source: Weiss Research - Unthinkable Truth; Undeniable Reality

 

END.

 

Should WAMU fail, 320 billion total assets will be marked down to 5 cents on the dollar (recent marked to market by Meryll Lynch.)  The total loss would be 280 billion which would blow up FDIC’s 50 billion and would cause Americans to lose confidence in all banks and the dollar.

Harvey speaking now:

 

Anglo gold reported today that they cannot as promised cover their hedges which now stand at 6.5 million oz.  I reported to you last quarter than Anglo got down to 5.5 million oz.  They somehow had to delta hedge upwards and they added an additional 1.0 million oz to the forwards.

 

Also many mining companies have reported in and so far gold production is down 12%.  It looks like total gold from all mines this year will approximate 2,300 tonnes of gold or 72 million oz of gold.

 

Goldcorp earnings were less than expected.  Even low costs producers are getting squeezed from higher operation costs.  The cartel needs these mines to survive and supply gold to the world.  Expect the cartel to allow gold to rise to keep these mines above water.

 

Good night all, my dad’s next commentary will be on Saturday

 

 

 

 

 

 

 

 

Wednesday, July 30, 2008

july 30.08 commentary.

www.lemetropolecafe.com
  James Joyce table.

 

Good evening Ladies and Gentlemen;

 

Gold closed down by 14.00 to 906.40.  Silver on the other hand rose by  5 cents to 17.35.  It had been down to 16.82 early in the morning.

 

The open interest on gold closed down by 6600 contracts to 446000.  The volume yesterday on comex gold was around 216000 .  Today, we saw an astronomical volume of 265000 contracts as the cartel threw everything but the kitchen sink to raid gold and silver.  They failed.

 

In another strange development, we have not been hit on our 3 contracts of silver.  The comex has 25 contracts that remain to be hit  (125000 oz).  Mocatta seems to be the supplier of the silver metal this round.  I will report to you if we are hit by tomorrow.

 

In the gold front the total amt of gold contracts that are standing for delivery total 35000 contracts.  A total of 715 contracts are standing from the July option.  We will have to wait and see how many calls for contracts are standing.  We must also wait and see how many pitched the last day.

 

Number 2 son, thinks we will have anywhere between 2.5 -3.0 million oz of gold  that are to be delivered.  Lets see how this transpires.

 

As for the economy, everyone is now on top of the Merrill Lynch story.  Yesterday, I goofed.  I told you that Temasek was the purchaser of the toxic bonds of Merrill Lynch.  It was wrong.  It is Lone Star and these guys are borrowing from Merrill Lynch 75% of the purchase price or 5.1 billion dollars.   Lone Star is paying 1.6 billion for the 30.6 billion face value of the bond. 

 

In other words, Lone Star is paying 5 cents on the dollar or they have a call on the total bond.  If these bonds improve in liquidity then the winner is Lone Star.  If the  value of the bonds decline in excess of 5 cents on the dollar, then Lone Star hands back the bonds to Merrill Lynch.  In  other words, there is no way that these guys can get these bonds off their books.

 

Many saw the light and reported on this tonight.

 

The market rejoiced on news from ADP that 9000 new jobs were created.   Somehow the financial centre saw miraculous improvement in the last week to see such a rise.

 

When questioned on this, the person in charge stated that they haven’t changed their metrics yet.  This figure was a total phoney as everything else that is reported on Wall Street.

 

I was so happy to see that Dennis Gartman sold his gold contracts.  Now I know for sure that gold will rise tomorrow.  This buffoon always gets clobbered.

 

I am rather excited seeing Adrian’s analysis on the TOCOM gold contracts.  Goldman Sachs has steadily lowered its short exposure at Tocom from a high of 55000 to a low today of around 5200 contracts.

 

I noticed as did Adrian, the massive buildup of Dec gold comex  calls.   Is Goldman the owner of these calls?  

Adrian has extrapolated the date for Goldman Sachs to be completely out of their short position by Nov 25.08. 

 

If Goldman is the owner of massive calls, then they are taking delivery of these contracts for Dec.  The comex has until Dec 31.08 to deliver.

The new President of the USA takes over Jan 20.09.

 

Remember this:  when the new President lowers his hand after taking his oath, the new administration takes over from that second on.

Does Goldman know something?

 

We heard from the Fed the following announcements:

 

8:45 Federal Reserve extends securities dealer loan programs through 30-Jan
* * * * *

08:47 Follow-up: Federal Reserve extends securities dealer loan programs through 30-Jan
Actions taken by the Federal Reserve today include:

Extension of the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) through January 30, 2009.
The introduction of auctions of options on $50B of draws on the TSLF.
The introduction of 84-day Term Auction Facility (TAF) loans as a complement to 28-day TAF loans.
An increase in the Federal Reserve’s swap line with the European Central Bank to $55B from $50B.

 

The Fed is increasing its dollar creation:

 

U.S. Fed expands liquidity-boosting measures

WASHINGTON, July 30 (Reuters) - The Federal Reserve on Wednesday said it was extending a credit facility that it provides for primary dealers in one of several steps to boost liquidity in stressed financial markets.

The U.S. central bank said its Primary Dealer Credit Facility (PDCF) and its Term Securities Lending Facility (TSLF) will be extended through Jan. 30. The PDCF was initially launched as a six-month measure in March in the wake of the near bankruptcy of Bear Stearns.

The Fed said it extended the PDCF "in light of continued fragile circumstances in financial markets," and said it would withdraw it once it determines that conditions in the financial markets are no longer "unusual and exigent."

It also said that it will introduce 84-day Term Auction Facility (TAF) loans, which it said will complement its existing 28-day TAF loans. The Fed introduced the loans program to try to ease a credit crunch that policy-makers feel has shown only limited signs of easing.

-END

 

The price of oil rose by 5.00 dollars.  Also most commodities rose as money saw the hyperinflation risk as the Fed is continually supplying the paper.

Yesterday came news that the Federal deficit is expected to climb to 484 billion dollars for fiscal 2009. Already for the first quarter, Bush is in need of 187 billion dollars in quarterly needs.

With the TIC showing negative inflows from foreigners, who on Earth is going to buy these bonds?  Who would buy bonds at 4% when you are inflating at 12%?

 

Friday is going to be an interesting day.  Will the FDIC take down Washington Mutual?

 

I will keep you posted on all of these events.

Gold should rise by 20.00 tomorrow as the cartel try and cover some of their shorts.  The open interest will be around 400,000 (after the deliveries) which is rock bottom.  There is no one else to fleece so the cartel must retreat to higher ground and let the gold price rise.

I would like to remind everyone that all markets are manipulated daily so please use extreme caution when you play with these crooks.

See you tomorrow

Harvey.

Tuesday, July 29, 2008

July 29.08 commentary.

www.lemetropolecafe.com

 

James Joyce table

 

Good evening Ladies and Gentlemen:

 

Sorry for being a little late.

 Tonight, I am only going to mention one event today and that is the Merrill Lynch announcement that they have “sold”  6.7 billion dollars worth of CDO”s.

They have not.

 

Please let me explain:

 

The tranche of CDO’s that Merrill Lynch reported today was originally sold to them at 30.6 billion dollars.  They have already written this down to 6.7 billion.  Today Merrill Lynch announced that it sold to Temesak , a Singapore wealth fund,   these bonds  at 22 cents on the dollar based on the original 30.6 billion face value, or 6.7 billion dollars

 

These mortgage backed CDO’s are the superior AAA rated bonds/

 

On closer examination of the deal, it was announced that Merrill Lynch is providing 75% of the financing for the deal  i.e. .75 x  6.7 billion  or 5.1 billion dollars.   All losses greater than 1.6 billion  (6.7-5.1) fall to Merrill Lynch.

 

And the street rejoices?   At best the street should “price”  these bonds at less than 10 cents on the dollar.

 

What does this mean for the banking sector?

 

Basically all subprime, alt a, and prime garbage must now be priced mark to mark  and that standard has been met.  It means that all level 3 debt is worth 10 cents on the dollar.  The banks must now absorb 1 trillion in loses.

 

This will  bankrupt Washington Mutual.  They now have retained earnings of negative 200 billion dollars.   With Wachovia you can multiply the losses quadruple to WaMu.  Citibank is also bust and you can surely say that Lehman Brothers have no prayer of surviving.

 

This will set off derivative losses which will cascade into a full fledged  financial implosion.  Nobody will be spared as all financial paper vaporizes.

 

No doubt there will be many criminal proceedings against many of our banker friends.  The losses to many will be staggering and the storming of the bastille will be the order of the day. People will flock to banks trying to secure /buy physical gold  or silver.  None will be found as our banker friends leased it all out.  Judges will not be very sympathetic to them for their folly.  They may even  share a game of gin rummy  with Conrad Black.

 

The end is near.

 

Harvey.

 

 

 

Monday, July 28, 2008

July 28.08 commentary.

www.lemetropolecafe.com

   James Joyce  table.

 

Good afternoon Ladies and gentlemen:

 

Gold closed up by 1.30 to 927.70.  Silver rose by 8 cents to 17.40.  Today is the final day  for the August contract on gold and for options.

First day settlement will by July 31.08 and that is the day that money can change hands.

 

Sept is the delivery month for silver.   It will be the last delivery month until we reach the big month of Dec which is traditionally the largest for both metals.

 

The open interest for the entire comex gold fell slightly by 1000 contracts to 448000.  The OI for the front month of August fell as expected to 156000 contracts.  This is as of Friday since they are always 24 hrs behind.  Expect around 40,000 contracts to switch.  The calls on gold continue to remain stationary.  The “in the money” calls on gold remain at a  record high 21000 contracts.  We will have to wait until Thursday to see how many of these contracts stand for comex gold delivery.

 

The options for the July gold that are now standing for delivery rose to 645 contracts or 645000 oz of gold (2 tonnes of gold).

The action at the comex suggests 4-5 million oz of gold will stand.  My number 2  son thinks that they will roll to Oct or Dec because we haven’t seen any scarcity of gold like we have seen in silver.

Lets wait and see how gives in the next few days.  The  last delivery month  (June) saw only 1.2 million oz stand.

 

I  posted to you on Sunday,  the article in the UK Telegraph concerning the rescue of HBOS  (the Halifax bank of Scotland).  There is no doubt that this bank will join its brother  (Northern Rock)  at the bank of England.

 

The Dow fell badly today, down by 239 points with most of the financials leading the downdraft.  Merrill Lynch fell over 3.20 to $24.33 eclipsing its July lows.  Other bank losses were seen in Fannie Mae   which closed down by 1.74 to 10.31.  Freddie fell 55 cents to 7.72.

 

Washington Mutual which opened strong on the day closed up a few cents at 3 92.  However in the aftermarket, it fell to about 3.78.

 

The big news of the day is the  expected deficit for 2009 :

 

US deficit seen near $490 bln in fiscal 2009-source

WASHINGTON, July 28 (Reuters) - The Bush administration on Monday plans to project the U.S. budget deficit will soar to a new record of nearly half a trillion dollars in fiscal 2009 as the economic outlook darkens.

The White House is expected to raise its forecast to almost $490 billion in the fiscal year starting Oct. 1 -- up from $407 billion predicted in February -- because of the slowing economy and an economic stimulus plan approved this year, an administration official said.

"The fiscal year 2009 deficit will be nearly $490 billion due to the bipartisan economic stimulus bill and slowing economy," the official said on the condition of not being further identified. However, the official cautioned that "a lot can happen" between now and then.

Congress approved and U.S. President George W. Bush signed into law a $168 billion, two-year economic stimulus plan that included tax rebates to millions of Americans and business tax breaks in an effort to ward off a recession.

The U.S. economy has been hobbled by the collapsing housing market and soaring food and energy prices. The government is due to report an initial estimate of second quarter gross domestic product on Thursday followed by the July jobs figures on Friday.

The grimmer budget picture and slowing economy will be inherited by Bush's successor in January 2009, either Republican Sen. John McCain of Arizona or Democratic Sen. Barack Obama of Illinois.

The budget has been sapped by the prolonged wars in Iraq and Afghanistan and experts have been warning about an expected rise in health care spending as the baby boom generation's retirement looms and other entitlements are likely to expand.

-END-

Reuters announced today in New York the state of affairs with respect to  corporate bonds.  The amount of  USA investment grade bonds trading at distressed levels has reached an all time high.

This is a sign that mega-bankruptcies are coming into full force.

 

I expect to see the FDIC take over Washington Mutual this Friday and then next week Wachovia.

If Merrill Lynch and Lehman continue to plummet expect a bailout here as well.

 

After the bell, we got this from Governor Paterson, of NY:

 

THAT '70S WOE IN RERUN

By FREDRIC U. DICKER, State Editor

July 28, 2008 -- ALBANY - Gov. Paterson, convinced the state faces its worst fiscal crisis since the mid-1970s, will deliver the grim news in an unprecedented special address to New Yorkers as soon as tomorrow night, The Post has learned.

The governor's address - which his aides hope will be televised by public and cable news stations - will say that plunging state revenues will force painful cuts in state services, necessitate a reduction inthe state work force, possibly through layoffs, and require other difficult economic measures, source said.

Paterson is also expected to announce that he's ordered state agencies to slash spending beyond the relatively modest 3.3 percent cuts he ordered in late spring.

He may also call a special session of the Legislature to propose reducing some of the record-high levels of spending that were approved as part of the state's new budget in April.

"The situation is worse than anyone realizes," said a source close to Paterson.

"The governor has said he's tired of the state going from deficitto deficit, spending like it has a credit card that never has to bepaid, and that he's prepared to take action," the source said.

Paterson in recent days has huddled with budget planning officials from the administrations of former Govs. Mario Cuomo and Hugh Carey "toget their ideas on how to manage a fiscal crisis," the source said.

To make his concern even clearer, Paterson will hold a private meeting today with Columbia University's Nobel prize-winning economist Joseph Stiglitz, the former head of the World Bank, who has called thecurrent worldwide financial crisis the worst since the Great Depression.

"The governor has been impressed with Stiglitz's work, and there have been staff discussions leading to the meeting Monday," said an administration source.

Paterson warned last week that Wall Street bonuses - a major source of state tax revenue - will likely drop by 20 percent or more this year…

-END-

This bothers me:

:55 Wall Street expects the SEC to expand short selling rules reports the WSJ
It is expected that the SEC will extend the temporary limits it placed on short-selling and that it will expand them to include additional stocks. The limits are set to expire this Tuesday and sources say groups have been meeting all weekend to come up with ideas for asking the SEC to reconsider expanding the rules. Sources said a call on Friday gave the industry people 'a fair degree of certainty' that the SEC will seek an extension of the temporary rules. The sources say the regulators said the extension could be as short as 60 days and include insurance, housing and a wider range of financial stocks.
Reference Link (subscription required)

It looks like the cartel members are running out of ammunition.  They are even performing their criminal activity in broad daylight for all to see.

They want to extend the naked shorting ban for all banking entities but allow the illegal naked shorting for everything else.   What a bunch of crooks!!

 

Expect gold to rise tomorrow  as the August month on gold comex has gone.  The cartel may still try to exert some muscle and try to force some of the longs to roll instead of standing for delivery.   They have a habit of doing this.  Let’s see the long’s resolve in this matter.

 

Speak to you tomorrow.  (it will be late tomorrow as I am going to a concert…more culture shock!)

Harvey.

Sunday, July 27, 2008

FW: This is very serious and will have lasting effect

This is also very serious.

-----Original Message-----
From: Robert G. Hryniak [mailto:hryniak@attglobal.net]
Sent: July-26-08 9:01 PM
To: D F
Subject: This is very serious and will have lasting effect

FW: (GATA) British Treasury planning huge rescue for mortgage lenders

This is big. As I promised you HBOS is in trouble and will be bailed out by
the Bank of England like its brother Northern Rock.

London central bank is now burning and all eyes will now by focused on the
Feds rescue of its captive banks. Enjoy the article.

-----Original Message-----
From: LePatron@LeMetropoleCafe.com [mailto:LePatron@LeMetropoleCafe.com]
Sent: July-27-08 4:59 PM
To: harveyorgan@rogers.com
Subject: (GATA) British Treasury planning huge rescue for mortgage lenders


Le Metropole Members,

British Treasury planning huge rescue for mortgage lenders

Submitted by cpowell on 08:27AM ET Sunday, July 27, 2008. Section: Daily
Dispatches
Treasury Plan to Rescue Mortgage Lenders

By Edmund Conway
The Telegraph, London
Sunday, July 27, 2008

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/27/cnplan127.
xml

The Treasury is preparing a radical rescue plan for the housing market which
may involve pumping billions of pounds into the stricken mortgage markets.

Alistair Darling, the Chancellor, has asked his leading advisers to
investigate a plan to provide government support for lenders until the
financial crisis has abated. The proposal is being investigated ahead of the
completion of Sir James Crosby's report into the funding struggles faced by
UK banks.

Crosby, the former HBOS chief executive, will present his interim report to
the Treasury on Tuesday, and is expected to warn that banks are facing a
massive "funding gap" caused by the collapse of the securitisation markets
which previously provided around 40 per cent of backing for home loans.
Experts think the gap to be filled by the Treasury could amount to L40
billion to L50 billion a year.

Sir James will warn that the mortgage famine, which is pushing prices up
significantly for both buyers and homeowners who are renewing their deals,
could persist for years, with painful consequences for the housing market.
Although he will not provide cast-iron recommendations until his final
report in October, he is expected to warn the Government that some form of
intervention is necessary to lessen the eventual economic pain.

In advance of his recommendations, Treasury officials have been working hard
to formulate a rescue plan based on his interim findings. Under this plan,
the Government would offer to swap new mortgage debt with banks for
gilt-edged government securities. The scheme is very similar to the Bank of
England's Special Liquidity Scheme in which the Bank swaps treasury bills
for old mortgage debt, except in this case the scheme would cover new
mortgages issued this year. It remains unclear as to what role the Bank
would play in the new scheme, although Governor Mervyn King is thought to be
reluctant to have a direct role in what many would regard as a bail-out for
the UK mortgage market.

In reality, the scheme would be designed to support the wider housing market
and economy. According to Peter Spencer, economic adviser to the Ernst &
Young Item Club, the faster the Government acts, the less it will ultimately
have to spend supporting the economy.

"I would be opening my chequebook to the banks and building societies to try
to stop the [housing market] slide," he said. "If there are people out there
prepared to borrow money from the Government through banks and building
societies then that's what we need at the moment. The sooner the Government
spends the money the less it will have to spend eventually. Once these
markets collapse and confidence disappears, there are all sorts of
consequences in terms of job losses, which will be even more costly for the
wider economy."

In 2006 total net mortgage lending amounted to just over L100 billion, with
around L60 billion of that funded by banks' deposits and the remaining L40
billion by securitisation. The demise of the securitisation markets, in
which banks package and sell on the mortgages to investors, left lenders
with a L40 billion hole if they intend to lend as much as previously. They
are also having to pay back investors of the existing mortgage backed
securities around L20 billion a year, so the hole is as large as L60
billion.

Experts warned that although the nationalisation of Northern Rock and
subsequently the special liquidity scheme helped support the market
temporarily, this effect is now wearing off.

Many analysts have warned that the number of new mortgages being issued
could drop to almost zero by the end of the year. The British Bankers'
Association reported this week that the number of mortgages approved for
home purchase dropped by more than two thirds in the year to June, hitting
just over 21,000 last month. Although the Government is highly wary of being
seen as risking taxpayers' money on a rescue operation of the mortgage
market, there are precedents for providing such support. The Labour
Government of 1974 did so with a L500 million loan, and the current crisis
is regarded as far more pressing. It will also ensure that the loans are
accepted only with a major "haircut" and on such terms that they will only
be at risk if house prices plunge by unprecedented and entirely
unanticipated rates.

It can also point to actions being taken by the US administration to shore
up its own housing market. As well as taking radical action to support
Fannie Mae and Freddie Mac, which support its domestic mortgage market,
Congress yesterday passed a major package of housing legislation including
tax relief for homeowners, a new regulator for Fannie Mae and Freddie Mac,
and a $300 billion anti-foreclosure programme.

Another plan being considered by the Treasury is to multiply the amount of
cash it is providing to local authorities to buy up homes from developers.

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