Saturday, October 4, 2008

Oct 4.08 commentary.

www.lemetropolecafe.com

 

 

Good Morning Ladies and Gentlemen:

 

Gold traded all over the map yesterday.  It  finished the day down by 13.40 to 827.00 .  However in the access market it recovered some lost ground and ended the day at 834.50.  Silver prices rose to 11.25.

 

The day started with news that the employment picture in the usa crumbled with 159000 new souls losing their jobs.  This report includes the famous B/L plug which adds spurious employment.

 

The dollar rose with such wonderful news and the Euro sank to its low for the day at 1.37 to the dollar.

Gold initially rallied and then the cartel used all its muscle to force gold down to a low of 816.00  It recovered to par and again it was hit.  The powers to be wanted the stock market to remain strong to show the world that the usa was fixing its financial problems.

 

At 1:20 pm the usa house passed the TARP bill.  At that point the Dow was up over 300 points. From that point on the Dow started a massive selling program and when all the dust settled, the Dow  was down 157 points breaking the all important 10400 level.

 

Over in Europe, Greece joined  Ireland in backing all bank deposits.  England is furious at Ireland as many Englanders are moving their accounts over to Irish accounts.  There is an emergency meeting of EU countries today.  Also the group of 8 are meeting to discuss what to do next.

 

 

On Wednesday, I told you that we were experiencing a massive debt spiral deflation as banks hoard cash.  During the last 30 years, leverage has built the worlds finance.   As more money was made, more leverage blew the credit balloon bigger and bigger.  The total derivatives as reported by the BIS is 1.14 QUADRILLION dollars.  I believe that the losses so far are in the 5-6 trillion area  and to cover derivatives blown up banks are hoarding dollars to cover up this black hole.  Here is a piece from “Dave” who explains this and the AIG fiasco:

 

Here's the what's booby trapping the system and it's why the Bailout Bill will have zero effect on the real economy and on bank lending. The fact is that the bank lending in all areas, but especially residential and commercial mortgages, is so leveraged up from derivatives, that the banks need all the cash they can get their hands on to make good on the cash demands from those who lent against bad assets (i.e. all those institutional investors and foreign investors who put up trillions to be invested in asset-back securities) and those who purchased credit default protection. When a bank has mortgages, investments in ABS trusts, and servicing rights sitting on its balance sheet, it is still obligated to make cash payments to the investors on the other side of those securities regardless of whether the underlying collateral goes bad or not. THAT right there is the source of the multi-trillion dollar financial black hole. Here's just a small slice of the problem as AIG faces it (please note that AIG has used up $61 billion of its $85 billion Fed loan, and I'm sure they'll receive a good portion of the Bill that just passed) :

http://www.nakedcapitalism.com/2008/10/devil-in-derivative-details-aig-fortis.html

During the day, we heard that Wells Fargo made a takeover bid for Wachovia.  The offer is 3 x the offer by Citibank.  However the FDIC wants Citibank to take over Wachovia and not Wells Fargo.

It looks to us that Citibank is in serious trouble and they need to rape Wachovia to stay alive.

However Wells Fargo is also not in good shape.  Please read what the Wall Street Journal is reporting on Wells Fargo:

21:14 Safe-haven banks still have risks - WSJ
In a "Heard on the Street" column, the Journal reports that both Wells Fargo (WFC) and US Bancorp (USB), which have rallied to lofty valuations on the back of the bifurcation trade in the banking sector, still hold large amounts of loans that could post higher-than-expected losses due to the spillover effects of the credit crisis to the broader economy. The paper adds that Wells Fargo (WFC) is particularly vulnerable to the paralysis in the credit markets, having increased its exposure to short-term borrowings earlier this year. The column also points out that both banks trade at multiples that would seem excessive even in good times. Wells Fargo trades at 3.9x tangible book, while the multiple for US Bancorp is 7x. Of interest, JPMorgan (JPM) trades at a much more modest 2.63x tangible book. The Journal goes on to discuss the significant potential credit losses in both banks' balance sheets, particularly in the form of restructured loans and HELOCs.
Reference Link (subscription required)

AIG has already used up 61 billion dollars of the 85 billion given to them by the fed.  And these guys insure just about everything throughout the world.

Look what “Dave” states on the AIG mess:

Dave from Denver

AIG has already drawn down $61 billion from the Fed

http://calculatedrisk.blogspot.com/2008/10/fed-aig-drawdown-rises-to-613-billion.html

dude, all this is doing is keeping a near-dead body on life support machines. when that money runs out, AIG will stop breathing.
I would bet A LOT of money that this funding is being used by AIG to fund credit default swaps in which AIG sold insurance on now-defaulted paper like Wamu and LEH bonds.
What makes this situation even worse is that AIG is ultimately going to default of real insurance claims. Anyone who keeps their insurance policy with AIG is a complete idiot.   end

As many of you know, Fannie Mae and Freddie Mac collapsed on Sept 6.08.  Lehman Brothers on Sept 12.08 etc and  Washington Mutual on Sept 1908.  Each of these parties had massive derivatives outstanding.  AIG underwrote many credit default swaps.  I was unaware that they had 30 days to settle the accounts.

On Oct 6.08 all derivatives associated with the Fannie and Freddie bust are due.

Lehman’s defaults are due on Oct 12.08 etc.

 

Here is a section written by Jessie which is very pertinent to the problem:

Here Comes a Wave of Credit Default Swaps

Have you wondered why the Treasury proposed the 700 Bn bailout package, with the full force of the Fed behind it, and gave the Congress less than a week to fully implement it?

We've been looking for some event, some timeline that would have created such an extraordinary set of actions as we have seen in the past few days.

This just might be it. Time to start settling those Credit Default Swaps for Fannie, Freddie, Washington Mutual, and Lehman Brothers.

http://jessescrossroadscafe.blogspot.com/2008/10/what-panicked-ben-and-hank-time-to.html

 

 

 

On Oct 1.08 the start of the new fiscal year for the Fed, an additional 99.5 billion dollars of debt was added.  The new Federal debt is now 10,124,500,000,000. The increase in the last 12 days has been 490 billion dollars or 40 billion dollars per day.

And this money continues to fall into a black hole.  The Libor rate went up to 4.33% from 4.20 instead of relaxing.  

We are now hearing that countries will start to default.  Spain and Greece will probably be the first to have a sovereign default.

I have still not heard from Bart Chilton on my letter to him.  I guess he has a lot of problems on his plate.

The gold at the GLD continues to rise and its total is now over 1200 tonnes of gold.

This quantity has been rising even though the price of gold fell.  This makes no sense.

The GLD still has about 25% shortfall from the number of shares to the amt of gold it must have.  My guess is that 25% of the gold supply is electronic gold in the same manner as the comex. In other words, GLD has 50% real metal, 25% shortfall in shares outstanding and no delivery of gold and 25% electronic gold from the comex.

When the music stops many are going to jail for perpetrating massive fraud on investors.  When the comex defaults, by definition all gold and silver trades are fraudulent.

Then the world will learn that the banks have used naked shorting of gold mining shares to collect needed dollars to fill their black spiralling vortex of derivatives gone bad.

 

Fasten your seatbelt.  Next week will be a doozy!!.

 

Harvey.

 

 

 

 

 

 

 

Friday, October 3, 2008

Oct 2.08 commentary.

www.lemetropolecafe.com

 

 

Gold closed down by 40.20 to 840.40.  Silver got slaughtered down by 1.04 to 11.17.

 

The open interest on gold rose a bit  up a 1000 to 337000.  Silver’s OI declined by 1100 contracts to 102600.

 

In the news today, we learned that Libor rose in all currencies today even though the senate approved the bailout bill yesterday.

The usa Libor rate is 4.21% a full 2.21 above spot.  The entire credit market has seized

As evidence, we saw commercial paper contract big time as banks refuse to accept other banks as counterparties.

 

If the usa house pass the bailout bill and libor refuses to relax, then panic will set in immediately.

 

Here is the article:

 

Libor Rises, Commercial Paper Slumps as Credit Freeze Deepens

By Bryan Keogh

Oct. 2 (Bloomberg) -- Interest rates on three-month dollar loans rose to a nine-month high, short-term corporate borrowing fell by the most ever and leveraged loans tumbled, exacerbating the credit freeze that's paralyzing businesses around the world.

The London interbank offered rate that banks charge each other for loans rose for a fourth day, driving a gauge of cash scarcity among banks to a record. The biggest drop in financial short-term debt outstanding since at least 2000 caused the U.S. commercial paper market to tumble 5.6 percent to a three-year low, according to the Federal Reserve.

The crisis deepened after the worst month for corporate credit on record. Leveraged loan prices plunged to all-time lows, short-term debt markets seized up and even the safest company bonds suffered the worst losses in at least two decades as investors flocked to Treasuries. Credit markets have frozen and money-market rates keep rising even after central banks pumped an unprecedented $1 trillion into the financial system.

``The credit window is closed,'' Jim Press, president of Chrysler LLC, the third-largest U.S. automaker, said today at the Paris Motor Show. The financial rescue plan must be approved because ``it's important for us to restore credibility in our banking system.''

The U.S. Senate passed the Bush administration's $700 billion bank-rescue package yesterday with inducements for the House of Representatives to approve the measure after an earlier version was rejected. The legislation, approved on a 74-25 vote, authorizes the government to buy troubled assets from banks rocked by record home foreclosures.

`Effectively Shut'

``It's going to get much, much worse,'' said Gregory Peters, head of credit strategy at Morgan Stanley in New York. ``The credit markets are effectively shut, the CP market, which there's not enough focus on, is under complete duress. That can't be sustained, as that's the lifeblood of corporations funding themselves.''

Commercial banks and bond dealers borrowed $348.2 billion from the Fed as of yesterday, an increase of 60 percent from the prior week amid the worsening credit freeze.

Companies with few or no ties to subprime home debt, such as Caterpillar Inc. and General Electric Co., are having less trouble selling commercial paper, which typically matures in 270 days or less and is used to help pay for day-to-day expenses such as payroll and rent.

Massachusetts canceled a sale of commercial paper this week, dipping into budget reserves to finance ongoing commitments, according to Treasurer Timothy Cahill.

Stocks Fall

Stocks dropped for a second day as reports showed a worsening economy, and Treasury yields fell as traders speculated central banks will have to cut interest rates to prevent a global recession. The Standard & Poor's 500 Index slid 46.78, or 4 percent, to 1,114.28. The yield on two-year notes tumbled 19 basis points, or 0.19 percentage point, to 1.62 percent, according to BGCantor Market Data.

The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, widened 26 basis points to 3.6 percentage points, the highest since Bloomberg began compiling the data in 1984.

Rates on three-month Treasury bills fell 20 basis points to 0.6 percent. The bills touched 0.02 percent on Sept. 17, the lowest since the 1940s, as the bankruptcy of Lehman Brothers Holdings Inc. sparked a run on the safest securities.

Interbank Rates

Interbank rates have soared as financial institutions hoard cash to meet future funding needs amid deepening concern that more banks will collapse. Governments in Europe and the U.S. rescued six financial institutions in the past week. Three-month Libor rose 6 basis points to 4.21 percent.

The Libor-OIS spread, the difference between the three-month dollar rate and the overnight indexed swap rate, widened to a record 260 basis points today. It was 197 basis points a week ago and 79 basis points a month ago.

Libor for euros advanced 3 basis points to a record 5.32 percent. Libor, set by 16 banks in a daily survey by the British Bankers' Association, is used to set rates on $360 trillion of financial products worldwide, from home loans to derivatives.

``We still see upward pressure on maturities from one week,'' said Patrick Jacq, a fixed-income strategist in Paris at BNP Paribas SA, France's biggest bank. ``The situation is still blocked and we're unlikely to see spreads decline before confidence has been restored.''

The market for commercial paper plummeted $94.9 billion to $1.6 trillion for the week ended Oct. 1 as banks and insurers were unable to find buyers for the short-term debt amid the worst U.S. financial crisis since the Great Depression. Financial paper accounted for most of the decline, plunging $64.9 billion, or 8.7 percent, to a two-year low.

`Urgency for Fixes'

The market dropped for a third straight week, losing a total of $208 billion, as money-market funds faced withdrawals from investors, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York.

``The purge is broad and is impacting issuers with far more predictable cash flows -- regular run-of-the-mill companies in need of working capital,'' Crescenzi wrote today in a note to clients. ``The declines add to the urgency for fixes to the credit crisis and bolster the case for a Fed rate cut.''

The U.S. market for short-term debt backed by assets including mortgages and car loans fell $29.1 billion, or 3.9 percent, this week to a seasonally adjusted $724.7 billion, according to the Fed.

Caterpillar, GE

While banks, brokers and insurers have struggled to issue commercial paper, other companies such as Caterpillar and Fairfield, Connecticut-based GE have had less trouble.

``In recent weeks, Caterpillar has continued to access the commercial paper markets as part of its normal business practices,'' company spokesman Jim Dugan said in a statement.

The market for non-financial issuers of the debt was little changed this week at $199.1 billion after rising to an almost seven-year high last week of $217.2 billion, the Fed data show.

GE borrowed overnight commercial paper today at a range of 0.25 percent to 0.75 percent, ``well below'' Libor, according to the company.

``Our CP funding continues to go smoothly,'' spokesman Russell Wilkerson said. `` We have overfunded every day for the past several weeks, including today, with good demand for our paper. We are seeing maturities extend at terms ranging from weeks to up to six months.''

Lenders are balking at offering cash for longer than a day even as central banks pump an unprecedented amount of money into the banking system. The European Central Bank today offered $50 billion of overnight funds at a marginal rate of 2.75 percent. The Swiss National Bank awarded $9 billion. The Bank of England sold $8.9 billion.

Rate Cut

Futures traders put the odds that the Fed will cut the target interest rate at least 50 basis points later this month at 98 percent, compared with none a week ago. The target rate is currently 2 percent.

Leveraged loan prices tumbled 8.57 cents in September to a record low of 79.8 cents on the dollar. Price declines will make it harder for junk-rated companies to borrow as investors may opt to buy existing debt at distressed levels and as capital- constrained banks restrict lending.

Corporate bonds with the highest AAA ratings lost 6.5 percent in September, the most since at least 1989, according to Merrill Lynch & Co.'s U.S. Corporates, AAA Rated index.

To contact the reporter on this story: Bryan Keogh in New York at bkeogh4@bloomberg.net

Last Updated: October 2, 2008 17:37 EDT

 

END

 

The Dow fell badly today because of key economic data was horrific:

 

1. Weekly jobless claims the highest in 7 years.    “Initial jobless claims were at 497,000 in the week ended September 27, the highest since 517,000 in the week ended September 29, 2001 and above Wall Street economists' forecasts of 475,000.”

 

2. USA factory orders fall 4%.  Autos dip badly as Ford leads the pack with a sales drop of 35% followed by GM with a 16%.

 

Rumours are abound that 2 fortune 500 companies will fail next week.

 

3.  Home Prices Fall in 24 U.S. Cities as Foreclosures Hurt Market

 

Oct. 2 (Bloomberg) -- Home prices dropped in 24 of 25 U.S. metropolitan areas in July from a year earlier as foreclosures depressed property prices.

 

Las Vegas had the biggest drop on a per-square foot basis, falling 33 percent, New York-based real estate data company Radar Logic Inc. said in a report today. Los Angeles, Phoenix, Sacramento and San Francisco each dropped about 28 percent. Three of the five worst-performing markets were in California.

 

``Buyers are increasingly reluctant,' Radar Logic Chief Executive Officer Michael Feder said in an interview. ``There has been an awful lot of talk about the declining of the housing markets.

 

end

 

 

Today, the fed announced its closing Federal date for the year ending Sept 30.08.  In a surprising announcement, the Fed stated that the debt in the last week of the year climbed to $10,024,724,896,912.49.  Not only that, but for the year for the first time in history the usa increased its Federal debt by over 1 trillion dollars. They increased the debt by 390 billion dollars during the last 15 days.  To give you an idea of how much this represents, the usa supposedly holds 8000 tonnes of gold and that equates to 180 billion dollars.  So the debt increase equates to double the inventory of gold at Fort Knox.

 

Tomorrow will be the vote on the bailout package.  Remember that all the house of Representatives stand for election.  In the senate only 1/3 stand.

 

Tomorrow’s vote will be close.

Speak to you on Saturday.

Harvey.

 

 

 

 

 

 

 

 

 

 

Thursday, October 2, 2008

FW: gold and silver manipulation


From: Harvey Organ
Sent: October-01-08 5:33 PM
To: 'Chilton, Bart'
Cc: don jack; Robert G. Hryniak
Subject: RE: gold and silver manipulation

Dear Mr Chilton:

I have been away in Europe so please forgive my late reply to your email to me informing us of the CFTC probe on the silver manipulation.

In my email to you in August, there was no doubt in my or anybody else’s mind, that collusion, manipulation and fraud were a major part in the shorting of silver by two major banks as published by the CFTC’s report on the Participation on Banks.

I asked for an explanation as to what happened. This is the first time I can ever recall that the crime is still being perpetrated on investors and an investigation has commenced. Generally, the crime stops the event and then the probe determines what happened. Yesterday, we saw silver fall in excess of one dollar as the collusive banks continued to short silver. Today they covered, and this process has been ongoing with the same modus operandi for the last 8 years.

Mr Chilton, we do not need a probe, we just need an explanation as to what happened . Two banks sold short 140 million oz of silver on July 6.08 ( 20% of worldly production) and then forced the silver price down to the low 10 dollar level. In the real world, we saw mints around the world run out of metal and the real physical price of silver was averaging approximately.15.80 to 18.00 per oz. The Canadian mint could not produce maple leafs. The South African mint could no longer produce Krugerrands, the worlds most popular gold coin as supplies of gold had run out.


I can tell you that my son Leonard was at the Bank of Nova Scotia vault and counted the amount of working supply of gold and silver. Amazingly, there was none or zero ounces of 1 oz, 5 oz, 10 oz, 100 oz silver bars and only 60 1000 oz bars that have since been sold. Further, there was only 84,000 oz of gold.

I have been informed that the Bank of Nova Scotia acts as a depository for all silver certificates issued by all banks in Canada.

A few days ago, the CFTC released data on 5500 contracts of silver leaving the comex. The amount of silver equated to I believe 26,500,000.000 oz of silver. I find the movement strange in that silver bars are exact weight and in 3 decimals. E.g. 26,500,003.03 oz.. It seems that the comex has now electronic silver instead of real silver which should help explain the massive fraud upon us.

It looks to me that we have 1 inventory of real silver covering both the SLV over in London and the comex in NY.

This is what needs to be explained . Billions of dollars have been lost by ordinary small investors and the dollars flowed criminally to the two banks in question. Mr Chilton, we are small investors compared to the giant banks. We need regulators to protect us from activities which seem suspect.

Mr Chilton, we need to now in an expedited fashion what happened.

It looks like there is a good probability of a default in December for the silver contracts as many physical dealers cannot get their metal. I guess all hell will break loose. The truth now will save your department a lot of grief.

Sir, I applaud your decision to commence an investigation. However, we do not need another whitewashing of the explanation of the manipulation.

I urge you to resolve these difficulties forthwith.

Harvey B Organ.


From: Chilton, Bart [mailto:BChilton@CFTC.gov]
Sent: September-25-08 11:03 AM
To: Harvey Organ
Subject: RE: gold and silver manipulation

I wanted to take a moment to send you a news article from today’s Wall Street Journal regarding an investigation that has been opened by the CFTC related to silver. This investigation was prompted by you and others who wrote to the Commission about the matter.

As I have said, the CFTC needs to do a better job. I think this investigation is a strong step in that direction and will allow a fresh and detailed look into the silver markets. It may interest you to learn that the individual in charge of the team effort is a veteran investigator who has handled many successful enforcement cases – including the largest settlement case in the CFTC’s history. I have tremendous confidence in the Division of Enforcement team that is beginning to look at the issues surrounding silver. Commissioners will be confidentially updated on the progress of the investigation as it goes forward.

Thank you again for your interest. I will try to contact you again when there is anything of significance that can be announced to the public.

B

CFTC Relents and Probes Silver Market

Persistent Complaints of Foul Play Draw the Still-Skeptical Agency to Investigate

Wall Street Journal – September 25, 2008

By CAROLYN CUI

With silver prices falling this past summer, silver bugs world-wide set out to prove that their metal was in short supply and market manipulation was at work. They bombarded federal regulators with hundreds of emails crying foul play and demanded answers.

Though such pleas proved futile in the past, this time the rousing chorus grabbed regulators' attention. On Wednesday, the Commodity Futures Trading Commission confirmed that there's an investigation into the silver market.

[Silver Futures]The CFTC isn't yet convinced there's systemic wrongdoing and in May published a report saying as much. But the agency decided to take a fresh look, in part to show critics that it checks out complaints, and also to make sure there isn't something new to uncover.

"We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it," said Stephen Obie, acting director of the agency's division of enforcement.

Silver investors have argued that a handful of U.S. banks have been controlling a large portion of silver's short positions -- or bets that prices will decline -- on Comex division of the New York Mercantile Exchange. Official data from the CFTC showed that two U.S. banks had increased short positions in the silver futures market between July and August by 450% and controlled 25% of the total open interest.

"The proof that this selloff was criminal lies in public data," wrote Theodore Butler of Cape Elizabeth, Maine, in August in a silver newsletter. "The concentrated sale of such quantities in such a short time" caused silver's fall, wrote Mr. Butler, who for many years has been vocal about purported silver-market manipulation. In September he reiterated to readers that they should email the CFTC.

The CFTC had argued in May that the large banks that people assailed for manipulating the market were instead acting appropriately as market makers, who take on futures positions to offset their exposure in over-the-counter markets. Therefore, these traders aren't "naked shorts" and won't benefit from long-term depressed silver prices. Many analysts agree with the agency's conclusion.

Silver stalwarts weren't persuaded. Jason Hommel, a newsletter writer based in Penn Valley, Calif., directed readers to visit their local coin shops at 2 p.m. on Sept. 2 to size up for themselves whether there was a silver shortage. From Michigan to North Carolina and beyond, he says, investors trekked to coin shops. Many reported no silver for sale.

Bart Chilton, one of the CFTC commissioners, said he has received about 700 emails from silver investors since August, far more than the estimated 100 he received from May to July. Mr. Chilton, a Democrat who has criticized the CFTC as doing a poor job communicating with consumers, says he has spent nights and weekends personally answering emails.

Historically, silver has been a volatile market. This year it saw a near-50% drop and remains down 9.5% on the year. Gold is up 6.5%. The agency has long heard from frustrated silver investors. In 2004, it published an open letter by Michael Gorham, then the agency's director of market oversight, after receiving more than 500 letters and emails from silver investors.

That the enforcement rather than oversight division is taking on the issue marks a difference from the CFTC's previous efforts regarding the silver market. The oversight division performs overall market surveillance. The enforcement division looks at activities in a specific time period.

Bart Chilton, Commissioner

Commodity Futures Trading Commission

Three Lafayette Centre 1155 21st Street, NW

Washington, DC 20581

Telephone: (202) 418-5060

Fax: (202) 418-5620

cftc.gov


From: Harvey Organ [mailto:harveyorgan@rogers.com]
Sent: Monday, August 25, 2008 8:26 PM
To: Chilton, Bart
Subject: RE: gold and silver manipulation

Dear Sir:

I would appreciate it very much if you read my complaint in full. Please note that there was an increase in silver short of 138 million oz and in gold of 7.8 million oz. With respect to silver there is only one source of silver on the planet that that quantity of silver and that is the SLV over in London England. There is no doubt that the two banks leased an additional 138 million oz on top of their 30 million oz short from the SLV.

The problem is that this inventory belongs to the owners of the SLV who bought the SLV as an investment thinking silver was going to rise. They would not take kindly if this paper short caused them irreparable harm.

I urge you to please read my complaint and not give me a `form` response.

Could you please investigate in detail my complaint and answer forthwith.

Harvey B Organ

298 Russell Hill Rd

Toronto Ontario

416 928 0898

Email: harveyorgan@rogers.com


From: Chilton, Bart [mailto:BChilton@CFTC.gov]
Sent: August-24-08 4:08 PM
To: Harvey Organ
Subject: RE: gold and silver manipulation

Dear Mr. Organ:

Thank you for your e-mail. I have been asking the professionals here to look at these things since last year. As you may know, there was a letter (it is on our web site) that looked at many of these issues this year. I think that letter is due to people like you who contacted me and my requests to the Chairman of the Commission to investigate these matters. As you know, I am one of five Commissioners and do not have discretion to instruct staff to perform certain actions by myself. I will, however, do all that I can to look into this again. If you have not already done so, you may wish to read the letter. It can be found at cftc.gov.

Bart Chilton, Commissioner

Commodity Futures Trading Commission

Three Lafayette Centre 1155 21st Street, NW

Washington, DC 20581

Telephone: (202) 418-5060

Fax: (202) 418-5620

cftc.gov


From: Harvey Organ [mailto:harveyorgan@rogers.com]
Sent: Sunday, August 24, 2008 8:42 AM
To: Chilton, Bart
Cc: don jack; don jack
Subject: gold and silver manipulation

Dear Mr Chilton;

I write to you today in anger that the CFTC has decided to ignore again the criminal manipulation in both silver and gold. I urge you to read Mr Ted Butler`s commentary released Friday night. I understand that he is in communication with you on a regular basis and that he has informed you of his findings.

I would like to point out that in silver (data from the participation report of banks) a total increase of 138 million oz of silver were sold short by only two unnamed banks. The data is from July 1 through to August 15.08. Other commercial banks remain on the short end but did not participate in any new purchases or sales of futures during this period.

The price of silver dropped from 19.55 to 12.22 at its low point. I strongly believe that there is a connection between the collusive action of these two banks and the fall in price of silver.

Throughout the past few months, silver was becoming scarce. Prices at EBay for silver averaged 2 dollars per oz higher than spot. When the price of silver collapsed, the mint has delayed shipments and totally stopped the production of gold coins. There is no plausible explanation for there being a shortage of metal and the price declines sharply. It defies economic logic. My broker has no explanation for this

As for gold, 3 banks increased their shorts by 7.8 million oz. Same logic as above.

The silver short of 138 million oz represents approximately 20% of worldly production which is around 500 million oz. The total quantity of silver metal represents an inventory greater than the total inventory at the comex.

In gold, world production is 72 million oz and the increase short is equivalent to 11% of world production. The 7.8 million oz is greater than the entire supply at the comex.

For silver, I gather that the two unnamed banks colluded to lease the silver inventory at the SLV. There is no other inventory large enough to lease. They would have leased that silver from the operator of the SLV fund. The leasee banks for some apparent reason, were paid a leesing fee of 3.5% per annum to carry out this horrific deed. The inventory belongs to owners of silver who invest in the SLV because they believe in the investment of silver. The owners would be shocked to see that the operators are going contra to their investment. My question to you is this:

Did you do a thorough analysis that the short position had REAL SILVER behind it..not leased silver that does not belong to the banks or operators of the silver fund.

Can you explain to me how the world benefited from this collusive and fraudulent transaction. How can two banks collude and decide together that they must short 20% of world production. What happens if they fail. Will taxpayers have to bail them out just like Fannie and Freddie are going to be bailed out with taxpayers money.

Right now, the short position by the banks are at record levels and yet the price of silver is very low. To me, it looks like we are heading into a total silver and gold default at the comex. I can just see foreign entities who see first hand the shortage of physical metal will bid for and take delivery of all remaining physical stocks at the comex. They can see this clearly, I am surprised that you do not see the problem.

The regulators must protect investors as that is your job. Your job is not to protect the banks. Your job is to protect the integrity of markets, free of manipulation, collusion and outright fraud.

I urge you to investigate this collusive fraud on the investing publc and report back immediately. I can see class action lawsuits developing rapidly.

Sincerely,

Harvey B Organ

298 Russell Hill Rd

Toronto Ontario

M4v2t6

416 928 0898

Wednesday, October 1, 2008

Commentary...Oct 1.08

www.lemetropolecafe.com

 

I am back from my trip to Europe but I have been keeping up with events.  Needless to say that September has been a volatile month for gold, silver and corresponding shares.

 

Manipulation has been rampant and the fraud continues unabated.

 

Gold closed up by 6.80 and silver rose by 53 cents.  

 

The open interest on gold fell dramatically by 21000 contracts to an all time low of 331000.  This is about the same OI that gold started its surge in 2002.  Silver’s Oi climbed by 1000 to 103000.

 

Many of the insiders believe that everyone will be taking delivery in December on gold and silver.  Physical silver dealers cannot get any supply so they are now being forced to take delivery on their December contracts.  I strongly believe that Russia is a large OI holder of gold comex and they will take delivery.  They wish a rouble backed by gold currency.

 

The collapse of 5 banks in Europe and the many bank failures in the USA in Sept has certainly caused the financial landscape to change.  

 

The bailout bill being discussed tonight will surely pass.  However it will have limited help.

 

The total losses of the usa banks will total approximately 3 trillion dollars when the banks finally recognize all their losses.  This will cause a massive deleveraging as the credit bubble bursts.

Europe too has considerable losses and many believe the losses from the Northern Rock to Fortis, B and B and others to total around 2-3 trillion dollars.

 

The massive deleveraging is causing havoc for the banks as they do not have funds on hand to cover pay rolls, and other financial activities.  This is why dollars are being hoarded.

Yesterday the Fed announced additional funding of 650 billion dollars with dollar swapping with  the Bank of Canada and the ECB.  The entire world is devoid of dollars as we are experiencing a horrific debt deflation.  Another way of saying the same thing is we are in a debt credit spiral as all loans are being called in.  Banks cannot lend.  The Libor rate yesterday on the usa side of things rose to 6.88% or a full 4.88% higher than treasury overnight yields. This portends a financial calamity.

 

The 700 billion bailout package is small potatoes to the massive contraction of debt.  The general rule of thumb is 60-100 x  the loss.  So the total derivative losses should be in the vicinity of 600 trillion dollars .

This is why the Fed is constantly supplying money into the system to banks and they refuse to lend.  They only hoard.  They need the cash to fund day to day operations.

 

Today, we learned that the nonborrowings of usa banks climbed to the unheard of level of 150 billion dollars.  At the beginning of Sept it was 120 billion negative.

 

It looks to me that we are heading for a total deflationary credit crash as dollars become scarce. A severe depression is certainly upon us shortly.

 

Harvey.

 

 

Search This Blog

Loading...