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
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
At 1:20 pm the
Over in Europe,
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) :
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
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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:
AIG has already drawn down $61 billion from the Fed
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
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,
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.
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!!.