Friday, November 7, 2008

Nov. 7.08 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and Gentlemen”

 

I am giving you the report tonight as I am travelling to Washington DC tomorrow for a wedding.

 

Gold closed up by 3.30 to 733.50.  Silver fell by 9 cents to close at 9.97.

 

Libor fell to 2.29% where it is still 1.29 above the Fed Funds rate.  In Europe all the banks deposited billions of Euros in excess funds as they refuse to loan it out.  It seems that the only safe place to keep money is the ECB and the Fed.

 

This is why the credit balloon is contracting.  It has already hit Main Street.  Just look at the jobs report released at 8:30 today:

 

U.S. October job losses worse than feared

WASHINGTON, Nov 7 (Reuters) - U.S. employers cut payrolls by 240,000 in October, much more severely than expected, while September registered the biggest monthly loss in jobs in nearly seven years, according to a government report on Friday that showed U.S. labor markets were sharply deteriorating. The Labor Department said the national unemployment rate shot up to 6.5 percent from 6.1 percent in September, the highest since March 1994.

October's job cuts were much worse than anticipated by Wall Street economists who had forecast 200,000 would be lost. Even more strikingly, the department revised September's losses to 284,000 - the highest since November 2001 just after the September terror attacks - and also revised August losses
higher to 127,000.

That meant 179,000 more jobs were cut in August and September than previously had been thought. In total over the three months through October, 651,000 jobs have been slashed from payrolls.

In manufacturing alone, a whopping 90,000 jobs were cut in October - a period when 27,000 Boeing Co. assembly workers were on strike. That followed a loss of 56,000 factory jobs in September.

-END-

Please note that they revised Sept and August numbers higher.  In addition to the 240,000 lost jobs in Oct you must add 179000 further losses from previous months.  The total losses for the 3 months came to 651000 jobs slashed from payrolls.

This means less revenue for governments and less money floating around the economy.

I promised you that 2 trillion dollars will be needed.  Noriel Roubini agreed with me.

Today, treasury came out and stated that new moneys needed in 2009 will be 1.4 trillion:  here is the link

Net new Treasury issuance in '09 estimated to be $1.4 trillion:

"While the gross issuance of Treasury securities has to be netted against redemptions to calculate the net increase in Treasury borrowing, $2 trillion is a lot, and net of redemptions represents about $1.4 trillion in new money. That is unlikely to come from foreign central banks, the principal source of Treasury funding in the last few years. Net foreign purchases of U.S. securities in the 12 months to August 2008 totaled $543 billion, and it was about the same in the previous year. That means $800 billion to $900 billion of new money for Treasury purchases has to come from domestic sources."

http://www.moneymorning.com/2008/11/07/treasury-bonds/ end

The estimates are based on a shallow recession.  Not in a heartbeat.  This is what another café member comments:

Please note that this estimate includes the assumption of a shallow recession, no new bailout programs and no new fiscal stimulus programs. I think we have a better chance of seeing space aliens next year than any of those assumptions working out. Given that Treasury debt increased by roughly $1 trillion from Sept 15 to Oct 15 this year, I think the safer assumption is that net new Treasury issuance in fiscal '09 will be multiples of Goldman's estimate above.

Get ready for mind-numbing hyperinflation. Got gold?

http://www.moneymorning.com/2008/11/07/treasury-bonds/

 

Then we have three stories on General Motors, Ford and GMAC.:

 

GM Says It May Not Have Enough Cash to Operate This Year

Nov. 7 (Bloomberg) -- General Motors Corp., seeking federal aid to avoid collapse, said it used $6.9 billion in cash in the third quarter and may fall below the minimum it needs to operate before the end of this year.

GM said it will be near its minimum threshold for operating cash for the remainder of 2008 and will be ``significantly short' of that level by the end of June without an improvement in market conditions, a major asset sale or access to new loans or cash support. GM has said it needs at least $11 billion in cash to pay its bills each month…

-END-

Ford Has $2.98 Billion Operating Loss as Sales Plunge

Nov. 7 (Bloomberg) -- Ford Motor Co., with U.S. sales shredded by the worst financial crisis since the Great Depression, posted a third-quarter operating loss of $2.98 billion and said it used up $7.7 billion in cash.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Ford said it would trim more salaried jobs by January, deepen its fourth-quarter production cuts and shrink capital spending by as much as 17 percent….

-END-

GMAC Leaves Individuals Holding Car Lender’s Junk

Nov. 7 (Bloomberg) -- GMAC LLC may leave thousands of individuals on the hook for about $15 billion of junk-rated debt unless the auto and home lender finds a way to pay its bills.

GMAC, the largest lender to car dealers of General Motors Corp., issued more than $25 billion of debt called SmartNotes over the past decade to retail investors. While GMAC has paid off the debts as they matured, five straight unprofitable quarters raised doubt about GMAC’s survival, and SmartNotes due in July 2020 have lost about two-thirds of their value.... end

I close with this passage from BILL H:

The world has changed, no one will admit it.

To all; the news today centered on the horrible jobs report early http://biz.yahoo.com/ap/081107/financial_meltdown.html then the news from both Ford and General Motors. http://biz.yahoo.com/ap/081107/earns_ford.html To really understand the situation with the auto companies one only has to look at their market capitalization's. Ford and GM have a combined market cap under $8 Billion, they have just about shrunk to zero. The president of GM was on CNBC and said it was imperative that the government loan the industry $ Billions to survive.

It is clear that the entire global economy has gone into free fall over the last 30-60 days. What has happened can be best described as a light switch. It has been turned "off". The world has become accustomed to running on credit, cheap abundant easy credit. The interruption in credit has set off chain reactions that spread to the four corners of the earth. The world has completely changed yet no one wants to talk about it. Every industry in every country wants and needs a "bailout" to get them through until things return to normal. I've got news for the society of ostriches with their heads buried in the sand, WE'RE NOT EVER GOING BACK TO THE WAY THINGS WERE!

Everything was built on credit and this entire convulsion of panic has been about lack of credit, quality of credit, and the resulting [in]solvency of credit. The credit system grew and grew until it reached "debt saturation". It grew solely by the use of additional credit that was based on a currency that was based on absolutely nothing. These recent bailouts are predicated on saving or continuing the present system. Let's take a look at the auto industry and after reading this piece apply the same logic to other industries. The car makers have spent literally 60 years building a white elephant, and not because cars are out of mode or the public doesn't want new cars. No, the auto industry has spent years embedding fixed overhead. They negotiated contracts with the UAW locking in salaries, health, and retirement benefits that are not competitive globally. They've borrowed and mortgaged all their assets betting that the credit system would continue forever. They gave $10,000 discounts, 0% loans, 6 and 7 year loans etc. constantly trying to stay ahead of where they are now, BANKRUPT! A system has been put in place that cannot possibly make a profit if the world lives within it's means.

In a bankruptcy the company or industry [in this case the entire world] reorganizes. They reorganize to change contracts, debts, and other obligations so that they are affordable and make sense economically. Globally, the US is no longer competitive with the rest of the world in scores of industries. The upcoming Bretton Woods II will be about the restructuring of the entire global financial system. The status quo, the one that we have been enduring for the last 15 months was "voted" out beginning in September.

EVERYTHING needs to be "revalued" so that the global economic system can go forward with values that make sense. Currencies, real estate, interest rates, incomes, insurance costs, taxes, equity and bond prices, commodity prices, energy, labor prices, EVERYTHING.

The world has changed and no one in the US wants to admit it, that should have been the title. The rest of the world understands the changes that have happened and must happen. The rest of the world understands that it makes no sense at all to have the unbacked fiat currency of a bankrupt nation as their "reserve" currency. The rest of the world has discontinued their purchases of Dollars as reserves since August because they understand that the music has stopped and it's game over. We know it [we don't want to admit it], they know it [they are calling us on the carpet], and either a revaluation is agreed to by all parties at Bretton Woods II or Mother Nature will do her work. It will be painful either way, but if left to Mother Nature we have over sixty years of trying to fool her [and ourselves] to atone for. Regards, Bill H.  end.

He is right.  Pay attention to what he is saying.

They just released the Federal Debt.  It is now 10.625 trillion dollars or an increase of 58.73 billion dollars in one day. My goodness, the printing presses have been working overtime this week.  The total increase for the week has been  125 billion dollars.

Have a great weekend.

Harvey.

 

 

 

 

 

Thursday, November 6, 2008

November 6th commentary.

www.lemetropolecafe.com

 

Good evening Ladies and Gentlemen:

 

Gold closed down by  15.00 to 730.50 and silver  was down by 36 cents to 10.09

 

The open interest on the gold comex fell another 1000 contracts to rest at around 303,000.  The silver OI again fell and its new Oi is at 94000.  This reduction occurred with both metals rising yesterday.    There is no doubt that some commercial entities do not want to wait around until the December delivery month on both metals.

 

In economic news, the Bank of England lowered its discount rate by a startling 1.5%.  The new discount rate is 3%.  The ECB as expected lowered its lending rate to banks by ½%.  It is now clear that central banks are lowering rates as fast as they can as the global economy grinds to a halt.

 

Libor continues to take baby steps downwards.  Today the Libor rate lowered at the 3month usa level to 2.38.  It is still 1.38 above normal levels.  What is even more disturbing is the refusal of banks to lend.  It is clear that they have huge holes in their balance sheet and they just cannot lend.  This is contracting the money supply globally.  As the credit balloon is deflating so is the economy.  It is also clear that it is the unknown credit default swaps that banks around the world fear.  These banks do not fully comprehend how much toxic credit default swaps on sovereign governments and companies are out there.

 

 Expect tomorrow to see a job loss somewhere in the 300,000 area.  The mortgage mess created by the bankers is spreading to Main StreetUS productivity slowed badly in the 3rd quarter:

US business productivity growth slowed in Q3

WASHINGTON, Nov 6 (Reuters) - U.S. non-farm business productivity grew at the slowest pace this year during the third quarter as output fell at the sharpest rate in seven years, a Labor Department report on Thursday showed.

Productivity increased at an annual rate of 1.1 percent, less than a third of the second quarter's 3.6 percent rate and down from 2.6 percent in the first quarter. That was still ahead of forecasts by Wall Street economists who had expected only a 0.8 percent annual rate of productivity growth for the third quarter.

 

 This is bad news that the usa could ill afford:

 

Retail sales worst in decade; shoppers cut back

NEW YORK (Reuters) - Retail chains posted the worst monthly sales data in this decade as consumers stunned by a financial crisis that has derailed the U.S. economy cut spending sharply in October.

The results darkened prospects for what was already expected to be one of the worst holiday sales seasons in up to 20 years.

Wal-Mart Stores Inc stood out as one of the few bright spots. It posted a better-than-expected increase of 2.4 percent in October sales at U.S. stores open at least a year. Analysts had expected a 1.6 percent rise, according to Thomson Reuters data.

Wal-Mart's results were a sharp contrast to other discounters like Target Corp and Costco Wholesale Corp , which both reported larger-than-expected same-store sales drops. Department store chains like Nordstrom Inc and specialty clothing retailers like Abercrombie & Fitch were among those hit hardest.

Shoppers have clamped down on buying discretionary items like clothes or computers and in some cases are carefully planning purchases of the most basic necessities, like baby formula….

-END 

 

Michael Bloomberg announced layoffs in NY.  Here is the story:

 

City Room: Bloomberg Announces Layoffs and Tax Increase

N.Y. / REGION | November 5, 2008

Mayor Michael R. Bloomberg announced plans on Wednesday to save $1.5 billion this fiscal year and next, by trimming 3,000 jobs from the city's workforce, rescinding a popular 7 percent property tax cut and suspending the annual $400 property tax rebate checks that homeowners have come to rely upon…

-END. 

Expect another volatile day tomorrow due to the release of the job numbers.  They generally have a phoney B/L plug number inserted to help soften the blow.

 

If the number is greater than 300,000, the market will probably fall by 500 more points as there will be fewer and fewer people purchasing goods and fewer and fewer people paying taxes.

 

We are heading for a huge, and monstrous credit deflation coupled with rising prices because of the 2 trillion deficit.

These twin forces are colliding head on and will result in a hyperinflationary depression.

 

Speak to you tomorrow night.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wednesday, November 5, 2008

Nov.5 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and gentlemen:

 

This will be short due to the fact that there really no news to report.

 

First of all, gold fell by 15.00 to 740.50.  Silver refused to go down and it closed up by 33 cents to 10.43.

 

The open interest on the gold comex fell by 1200 contracts to 303000 and silver’s OI rose by 1000 to 94000 as buyers of comex silver are taking the position that in December we will have a failure to deliver.

 

Today the Dow fell by 486 as the Republicans  were trying to send a message to the investing community that the Democrats are bad for the economy.  Gold was hit after 12 noon once London was put to bed and all the physical buying  had already taken place.

 

The big usa ISM report was released at 10 am and it was a doozy:

 

10:00 Oct ISM Non-Manufacturing Composite reported 44.4 vs. consensus 47
Sept. reading was 50.2.
* * * *
*

Services sector shrinks sharply in October: ISM

NEW YORK (Reuters) - The U.S. service sector shrank unexpectedly sharply in October, according to a report released on Wednesday.

The Institute for Supply Management said its non-manufacturing index came in at 44.4 versus 50.2 in September.

The level of 50 separates expansion from contraction.

Economists expected a reading of 47.5, according to the median of 75 forecasts in a Reuters poll which ranged from 42.0 to 50.5.

The services sector represents about 80 percent of U.S. economic activity, including businesses such as banks, airlines, hotels and restaurants.

-END-

Oh my gosh!!  I just checked the Federal Debt.  Yesterday it was 10.530 trillion.  Today it is 10.66 trillion.  The gain for the day, an astounding .13 trillion dollars or 130 billion dollars.  No bad for a days work.

 

Here is the link if you do not believe me:

 

The Debt to the Penny and Who Holds It

Debt Held by the Public vs. Intragovernmental Holdings )

Current

Debt Held by the Public

Intragovernmental Holdings

Total Public Debt Outstanding

11/04/2008

6,302,535,948,012.36

4,263,610,248,478.22

10,566,146,196,490.58

 

 

This is really bad:

 

 

 

07:30 Oct Challenger Job cuts reported +19% m/m to 112,884
Planned job cuts were near a 5-year high in Oct and were led by cuts in financial and auto sectors.   end
* * * * *

 

Get a load of this:

 

 

 

 

 

 

 

 

07:03 MBA mortgage purchase applications index (13.9%) in 31-Oct week
Compares to +8.5% in prior week. The refi index was (27.8%) vs. +28.5% in the prior week. The 30-year fixed rate rose 21bp to 6.47%   end

 

Mortgage applications continue to collapse.  Remember that banks hold properties as collateral and they are shrinking on a daily basis.

 

The independent ADP just released their projections on the job losses:  They believe payrolls fell by 157000 for the month of Oct. instead of 100,000 . Here is the link:

 

8:16 Oct. ADP Employment payrolls (157K) vs. consensus (100K)
Sep. was revised to (26K) from (8K). end

 

In the commentary, Bryant gives his interpretation as to the amount of coin melt.   We know that the entire 1933 and 1932 years were melted in full and that total is 2 million oz.  The usa  kept huge amts of gold coins on deposit for many years from 1860 onwards.  The 1880-1910 era were huge mintages.

It is our belief that 6900 tonnes of gold is of coin melt. (not 1200 tonnes).  However Bryant is correct in that it was never published so we do not know for sure.  Reg Howe is of the belief that most of the usa official gold is coin melt.

Today, there were strange events at the silver comex.  At around 2 o’clock, we noticed that 6.6 million oz of silver was delivered.  This was very strange indeed.  One hour later, the site went down and the old number of 35000 oz of silver delivered remained.  However the  individual  DEL’s and individual  ACCEPTANCE were removed.  No explanation was given by comex officials.  However, it is most unusual that only 7 contracts have been accepted for options exercise on a Nov. contract.  Explanation?  They have no silver!!

 

 

 

 

Speak to you tomorrow

Harvey

Tuesday, November 4, 2008

Nov.408 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and gentlemen:

 

Gold rose by 30.10  to 755.00.  Silver rose by 31 cents to 10.12.

 

The open interest on both gold comex and silver comex fell.  For gold the new OI fell to 305000 and for silver a new record low of 92500.

 

The usa dollar fell badly today on election day.  The Euro climbed 4% and the usa index fell by 1.80.

However the long bond rose in price  (yield fell).  And this occurred with the Dow rising by 302 points and the financials rising all day.  It just does not add up.  The cartel will probably attack again tomorrow.

 

The Libor rate fell a bit on the 3 month basis to 2.71%. It is still a full 1.71% above normal levels.  The banks are still loathe to loan again. 

 

In other economic news: The ECB announced a sale of gold.  The sum total was .09 of a tonne or 2 million dollars worth of gold.  They are not interested in selling any gold.  The only gold coming to the market are the coin melt bars.

 

US factory orders collapsed last month:

 

US Sept factory orders drop sharply again

WASHINGTON, Nov 4 (Reuters) - New orders received by U.S. factories took a surprisingly steep tumble for a second month in a row during September, according to a Commerce Department report on Tuesday underlining an accelerating decline in manufacturing activity as the economy heads into recession.

Overall factory orders dropped 2.5 percent to a seasonally adjusted $432 billion - much steeper than the 0.8 percent decline that Wall Street economists had forecast. That followed a revised 4.3 percent plunge in August orders that previously was reported as a 4 percent decline.

The picture was even grimmer when transportation orders were excluded, with orders down a record 3.7 percent in September after a 3.6 percent August drop.

Orders for motor vehicles and parts rose 3.3 percent after an 8.9 percent drop in August, but that is unlikely to continue given a dramatic decline in October sales reported by new-car dealers whose lots are full of unsold vehicles. end

Yesterday I told you of the huge funding needs of the usa.  I also on many occasions told you to expect a deficit of around 2 trillion dollars for the coming year.

This came out of Washington tonight:

US Treasury to expand debt arsenal as deficit rises

WASHINGTON, Nov 3 (Reuters) - Facing the need to borrow up to a staggering $2.1 trillion in the current fiscal year to fund economic rescue programs, the U.S. Treasury is expected to significantly expand its debt securities arsenal.

Analysts anticipate that the Treasury on Wednesday will announce the return of the 3-year note and adopt more frequent
offerings of 10-year notes and 30-year bonds. It may also consider more reopenings of shorter maturities.

"They are going to pull out all the stops. There's a good chance they'll come back to a quarterly 3-year note, monthly 5-year (note) auctions and increase issuance pretty
subtantially across the board," said Kim Rupert, head of global fixed-income analysis at Action Economics in San Francisco.

The Treasury Department said on Monday it would need to borrow a record $550 billion in the October-December quarter, including a likely $300 billion in financing for Federal Reserve liquidity operations.

The total was $408 billion higher than previous estimates announced in July 2008 due to outlays for economic assistance programs, lower tax receipts and lower issuance of non-marketable debt securities to state and local governments.  end

Certain banks today issued warnings that the financial crisis will be worse than expected;

JPMorgan, UBS, RBS Foresee Further Pain From Financial Crisis

Nov. 4 (Bloomberg) -- JPMorgan Chase & Co., UBS AG and Royal Bank of Scotland Group Plc, three of the world's biggest banks, said they expect further pain from the global financial crisis.

JPMorgan Chief Executive Officer Jamie Dimon, speaking to employees in Hong Kong yesterday, said the company faces ``highly challenging conditions' next year. UBS of Zurich predicted today that ``difficult conditions' will continue to weigh on fee income. RBS, based in Edinburgh, scrapped a profit goal for 2008.

Financial institutions worldwide have reported $687 billion of credit losses and writedowns since the start of last year as the worst U.S. housing slump since the Great Depression battered credit markets. UBS, RBS and New York-based JPMorgan have all been forced to take state funds as governments seek to replenish ca

http://www.bloomberg.com/apps/news?pid=20601087&sid=ar_SP8yKkHoE&refer=home   end

I will now watch the election.  See you tomorrow.

Harvey.

 

 

 

 

Monday, November 3, 2008

November 3.08 commentary.

www.lemetropolecafe.com

 

 

Good evening Ladies and Gentlemen:

 

Gold closed up by 7.40 to 725.30  Silver was up 6 cents to 9.81

 

The open interest on gold comex fell by 1300 contracts.  The silver comex OI continues to fall with an additional  630 contracts  contracting.  The new Oi is another record low of 92779.

 

There are strange events occurring at the silver comex pit.  First Bryant noticed that as soon as silver metal enters the comex it leaves the same day.  On top of this, 95% of all silver contracts are supplied by JPMorgan.  He reasons that this is very unusual and it either means that:

 

  1. the 130 million of silver is not there  or
  2. the owners of the 130 million oz do not wish to sell.

 

On the first day notice, I saw that only 2 contracts were fulfilled.  We have no idea as to the total of silver options standing for delivery.

 

Today, at 4 o’clock in the afternoon, the comex decided to give their update on the days events.  Usually, we get the data no later than 11:30.   In another strange development a further 2 contracts of silver were hit.  So the total for the first two days is 4 contracts or 20,000 oz of silver.  Usually, the first two days we get at least 50% of the total for the month hit.   Judging from the activity in the options for the November contract, we estimate that 7 milllion oz are standing.  Yet only 20,000 have been hit so far.

This is getting very ominous for JPMorgan and his cartel buddies.  Here is the passage that a fellow Café member, Bryant commented on the silver comex deliveries:

 


Below are COMEX silver warehouse flows for last Thursday:

METAL WAREHOUSE STATISTICS
As of the Close of Business: 10/30/2008

SILVER

 

 

 

 

 

 

 

Troy Ounce

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEPOSITORY

PREV TOTAL

RECEIVED

WITHDRAWN

NET CHANGE

ADJUSTMENT

TOTAL TODAY

 

 

 

 

 

 

 

 

BRINK'S, INC.

 

 

 

 

 

 

Registered

 

7,623,896

 

 

0

 

7,623,896

Eligible

 

1,118,802

599,997

599,997

0

 

1,118,802

Total

 

8,742,698

599,997

599,997

0

 

8,742,698

 

 

 

 

 

 

 

 

SCOTIA MOCATTA

 

 

 

 

 

 

Registered

 

25,762,251

 

48,100

-48,100

 

25,714,151

Eligible

 

5,592,064

 

 

0

 

5,592,064

Total

 

31,354,315

0

48,100

-48,100

0

31,306,215

 

 

 

 

 

 

 

 

HSBC BANK, USA

 

 

 

 

 

 

(NEW YORK)

 

 

 

 

 

 

 

Registered

 

46,126,337

 

 

0

 

46,126,337

Eligible

 

32,905,246

 

 

0

 

32,905,246

Total

 

79,031,583

 

0

0

0

79,031,583

 

 

 

 

 

 

 

 

DELAWARE DEPOSITORY

 

 

 

 

 

 

Registered

 

3,442,104

 

 

0

 

3,442,104

Eligible

 

7,919,794

 

 

0

 

7,919,794

Total

 

11,361,898

0

0

0

0

11,361,898

 

 

 

 

 

 

 

 

TOTAL REGISTERED

82,954,588

0

48,100

-48,100

0

82,906,488

TOTAL ELIGIBLE

47,535,906

599,997

599,997

0

0

47,535,906

COMBINED TOTAL

130,490,494

599,997

648,097

-48,100

0

130,442,394

I have looked at these reports for years and they used to show silver deposits coming and going with no correlation to each other. Then for the last couple of months I noticed that a volume of silver would be received and the next day the exact same amount would be withdrawn. Thursday’s data shows that 599,997 ounces was received and then withdrawn on the same day. COMEX silver stocks have become a revolving door. It appears that the 130 million ounces of COMEX silver either does not exist or is not for sale at these prices. JP Morgan used to have nothing to do with silver and I doubt they hold significant stocks of it at the COMEX warehouses. JP Morgan is however forced to deliver all most all of the silver contracts taken for delivery because of their effort to manipulate the silver price. It appears that they are selling these contracts naked and bringing silver into COMEX for delivery after the fact. If significant amounts of silver are purchased in December at these prices, I do not know if JP Morgan will be able to source the silver. Regards,

In economic news today, I would like to highlight many developments.

 

First, the ISM manufacturing index.:

 

10:00 Oct ISM Manufacturing reported 38.9 vs. consensus 41.0
Prices Paid reported 37.0 vs. consensus 48.0. Prior readings were 43.5 and 53.5, respectively. End

 

This is the usa as a country and it details how strong the manufacturing sector is behaving.

 

Anything over 50 is positive, anything less than 50 is bearish.  As you can see 38.9 is horrific.

 

Then this from Chicago:

 

Businesses expect sharp downshift in U.S. economy

CHICAGO, Nov 2 (Reuters) - U.S. business conditions took a sharp downturn in the third quarter and the near-term outlook is even more gloomy, according to a quarterly survey conducted by the National Association for Business Economics.

For the first time since 2001, more respondents pointed to declines rather than growth in demand for their firms' goods and services. That measure has been a reliable indicator of a looming recession since 1982.

"Respondents were considerably more negative than they were in July, suggesting that the ongoing financial crisis is pulling down the overall economy," Ken Simonson, chief economist at the Associated General Contractors of America, said in summarizing the results.

"The survey's measure of demand growth fell by the largest amount in the history of the survey," Simonson said.

Some 90 percent of panelists said their outlook for 2009 growth had slipped since July, and falling profit margins outpaced rising margins by three to one, the worst reading since 1982.

As profits stagnate or fall, more U.S. companies suggested they would cut payrolls in the next six months through a combination of attrition and significant layoffs. The most dramatic job cuts were foreshadowed in goods-producing companies…

-END.

 

I thought that banks were relaxing on their lending restrictions.  Guess again:

 

4:05 Federal Reserve says banks tighten lending standards on commercial and industrial loans
Comments are from the US Senior Loan Officer Survey. Banks also reported reducing credit card limits and that demand for loans has weakened. Nearly all of the banks increased the spread on borrowing rates over the cost of funds on loans to large and mid-sized firms versus July.

 

This news stunned Wall Street.  The entire auto sector is in disarray:

 

U.S. Auto Sales Tumble; Month Was Worst Since 1945, GM Says

Nov. 3 (Bloomberg) -- U.S. auto sales plummeted in October in what General Motors Corp. called the worst month since 1945, as reduced access to loans and a weaker economy kept consumers off dealer lots.

GM said in a statement today that its sales of cars and light trucks tumbled 45 percent from a year earlier. Ford Motor Co. reported a 30 percent decline and Toyota Motor Corp. posted a 23 percent drop. Honda Motor Co.'s were down 25 percent and Nissan Motor Co.'s slid 33 percent.

``If you adjust for population growth, it's the worst sales month in the post-World War II era' for the industry, said Mike DiGiovanni, GM's chief sales analyst, on a conference call. ``Clearly we're in a dire situation.'

Industrywide U.S. auto sales fell for the 12th straight month in October, extending the longest slide in 17 years. Tight credit, falling consumer confidence and the weakening economy, the same forces that suppressed buying in September, hurt automakers again last month…

-END-

 

All 3 auto companies are in severe decline posting huge declines in auto sales.  Only  a merger can save them.  However  thousands will be unemployed and the sector that supplies auto parts will be devastated.

The usa economy is contracting big time.

 

The 17th bank to fail was reported on Saturday.  The bank is the Freedom Bank of Florida in Bradenton.  Here is the passage:

Florida's Freedom Bank Is 17th in U.S. to Be Closed This Year

Nov. 1 (Bloomberg) -- Freedom Bank of Bradenton, Florida, became the 17th U.S. bank seized by regulators this year as the deepest housing slump since the Great Depression triggers record foreclosures and mounting losses.

Freedom, with $287 million in assets and $254 million in deposits, was shut yesterday by the Florida Office of Financial Regulation and the Federal Deposit Insurance Corp. was named receiver. Fifth Third Bancorp of Cincinnati will assume the deposits and buy $36 million of assets, the FIDC said. Freedom's four offices will open Nov. 3 as Fifth Third branches…\ end

I hope everyone caught this.  The quarterly funding for the usa treasury for the Oct to Dec period is expected to total  550 billion dollars.

15:03 US Treasury to borrow record $550B in Oct-Dec quarter - wires
Headlines. Jan-Mar '09 borrowings are expected to total $368B. Treasury borrowed $530B, including the Fed program, in July-Sept quarter. Treasury's survey of primary dealers sees $988B in '09 deficit. End.

If all 4 quarters are 550 billion then the deficit will reach 2.2 trillion dollars.

 

My goodness:  the authorities are starting to question the sheer size of the bailout of AIG?  Here is the passage.

Effectiveness of AIG's $143 Billion Rescue Questioned

By Carol D. Leonnig
Washington Post Staff Writer
Monday, November 3, 2008; A18

A number of financial experts now fear that the federal government's $143 billion attempt to rescue troubled insurance giant American International Group may not work, and some argue that company shareholders and taxpayers would have been better served by a bankruptcy filing.

The Treasury Department leapt to keep AIG from going bankrupt on Sept. 16, and in the past seven weeks, AIG has drawn down $90 billion in federal bailout loans. But some key AIG players argue that bankruptcy would have offered more structure and greater protections during a time of intense market volatility.

AIG declined to comment on the matter.

Echoing some other experts, Ann Rutledge, a credit derivatives expert and founding principal of R&R Consulting, said she is not sure how badly the financial system would have been rocked if the government had let AIG file for bankruptcy protection. But she fears that the government is papering over the problem with a quick fix that was not well planned.

"What we see now are a lot of games by the government to keep these institutions going with a lot of cash," she said. "This is to fill holes in companies' balance sheets, and they're trying to hold at bay the charges that our financial system is insolvent."..

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/02/AR2
008110202150.html?nav=rss_world

I have been alerted to .899 gold showing up in Europe. Actually it is .91 gold and this gold is generally coin melt.

There is only 1 official gold in the world that is not .999 gold and that is the usa’s gold.  They confiscated all of citizens gold in 1933 and melted the gold coins into bars.  They did not purify the gold and this gold was moved into Fort Knox in 1937.  This gold is suppose to be all there and in total should be 6900 tonnes.  Somehow in 1968, Lyndon Johnson moved some gold into West Point , and the Federal Bank of NY secretly.  It is this gold that is surfacing now throughout Europe.

It looks like the American authorities did not have time to purify the gold to 999.  They are in a hurry to sell the gold in its present form.  This is very ominous.  Here is the passage:

Recently we have been hearing of ".899" Gold turning up all over the world. Believe it or not, Gold has its own fingerprint or "DNA" so to speak. The speculation is that this .899 Gold is actually metal received from the confiscation back in 1933. Back then the government made it illegal to hold Gold personally, recalled Gold coins and melted them into bars that were stored in West Point, N.Y.. If it turns out that this .899 Gold is in fact from West Point there will be hell to pay. Already on a global basis, Gold is becoming scarce and difficult to obtain physically. If the world perceives that coin melt Gold is being dishoarded we could witness a global panic into the metal. For over 60 years the US has been thought of as having the largest Gold holdings on the planet, can you imagine the ramifications if the world began to believe that we were selling Gold from the bottom of the barrel? end

This is true:  I bought a lot of these Russian Czar Nicholas II gold 10 and 5 rouble coins.  Two years ago the price was basically spot.  Today they are triple in price above spot due to their scarcity:  here is the passage:

Hi Bill, I just had a "thought from the past" that was buried deep. I don't know if you remember this or not but back in 1990 or '91 about 1 month before the Soviet Union fell, gold with the Czar's stamp started turning up worldwide. The Soviets were dumping "unpure" Gold similar to the coin melt for use as hard currency. I told my wife at the time that the jig was up as soon as I had heard this news. I think the same thing is now happening with the coin melt bars. They are down to the bottom of the barrel! Regards, Bill H  end

 

This is absolutely huge:  Greek shipping is in serious trouble as measured by the Baltic Dry goods Index.  Please read Ambrose Pritchard Evans:

Investors shun Greek debt as shipping crisis deepens

Freight rates for shipping are crashing at the fastest pace ever recorded as banks shut off credit lines to the industry, precipitating a sudden crunch in world trade.

 

By Ambrose Evans-Pritchard and Rowena Mason
Last Updated: 5:20PM GMT 03 Nov 2008

Comments 31 | Comment on this article

Investors shun Greek debt as shipping crisis deepens

Investors shun Greek debt as shipping crisis deepens

The Baltic Dry Index measuring rates for coal, iron ore, and grains, and other dry goods plummeted below 1000 yesterday, down 92pc since peaking in June.

The daily rental rates for Capesize big ships have dropped $234,000 to $7,340 in weeks, leaving operators stuck with heavy losses on long leases. Empty ships are now crowding Singapore and other global ports.

"It is extremely serious, " said Jeremy Penn, president of the Baltic Exchange. "Freight rates have never fallen this steeply before. It is telling us that world trade in raw materials has slowed dramatically. Shippers are having genuine difficulty obtaining letters of credit from banks," he said.

The shipping crisis is another blow to the City of London, which earned £1.3bn in foreign receipts from the industry last year. Maritime services employs 14,500 staff in the UK.

It is also beginning to cause strains in Greece, where the yield spread between Greek 10-year bonds and German Bunds rocketed to a post-EMU record of 123 basis points yesterday.

The upheavals on the bond markets came as Iceland was forced to raise interest rates 6 percentage points to 18pc by the IMF as a condition for its $2bn (£1.3bn) rescue package.

The draconian terms raise fears that the IMF will apply the same medicine to Hungary, Ukraine, Belarus, Serbia, as well as Pakistan and a long list of other countries that may soon need a bail-out. Critics says the Fund risks repeating errors it made in Asia's 1998 crisis when it imposed a one-size-fits-all contraction policy on the region, causing bitter anti-Western feelings and arguably making matters worse.

A deflationary strategy of this kind could prove counterproductive –or worse – if applied in enough countries simultaneously. It would defeat a key purpose of the rescues, which is to stabilise the global financial system.

The Icelandic krona traded for the first time in a week, but dealers said it was changing hands at roughly 240 to the euro compared with the rate of 152 to the euro fixed by the central bank.

Ominously for Greece, this is the first time its debt has broken its tight linkage with Italian bonds – which traded at spreads of 100 yesterday. The markets are now clearly singling out the country as the most vulnerable of the EMU members.

"This shipping slowdown is a worry for Greece, " said Chris Pryce, a director of Fitch Ratings, which downgraded the country's credit outlook last week. Fitch warned that Greece has a public debt of 92pc of GDP, leaving it no safe margin for fiscal stimulus in a downturn.

"Shipping has overtaken tourism to become the country's biggest industry. They get their finance from other countries, so I think there are going to be a lot of worried bankers in London," he said.

Shipping specialists say the Royal Bank of Scotland and HSBC provide the lion's share of loans for both the bulk goods and tanker fleets, exposing these two banks to further potential losses.

Greek shipping families control a third of the global freight market for bulk goods, with operations split between London and Pireaus.

Mr Pryce said Greek banks had expanded rapidly in the Balkan region and Turkey, with heavy exposure to Serbia and Macedonia. "They saw this as a growth region, but they may be thinking differently about it now," he said.

Michael Klawitter, a credit strategist at Dresdner Kleinwort, said the market flight from Greek bonds marked a dangerous moment for the euro. "There has been a massive widening of spreads. We are no longer having a theoretical discussion about the viability of monetary union. People are really concerned for the first time," he said.

"It is not surprising that they are looking closely at Greece. Greek banks have been buying all kinds of assets across the Balkans and they are heavily exposed to the housing market," he said.

Greece has a current account deficit of 15pc of GDP, the highest in the eurozone. Investors were willing to turn a blind eye to this during the credit boom, but they have now become wary of any country with a deficit in double digits.

Mr Klawitter said Greece is not the only country in the eurozone that is coming under the microscope. "The spreads on what was once rock-solid Austrian debt have reached 90. Investors have started to look at the numbers and they realise that cross-border loans by Austrian banks to Eastern Europe are over 80pc of GDP, and that is really worrying in this turmoil. They have seriously begun to think that one – or several – East Europe an countries are going to fail to get their act together and go the way of Iceland," he said.   END

Shipping is the mainstay of the Greek economy.  Greece is now a candidate for bankruptcy.   The Ukraine looks like it is in serious trouble.  Pakistan was put on high alert by the IMF.  Bankruptcy looks imminent for this Muslim country and a friend of the usa

 

That is all for today.

Speak to you tomorrow

Harvey.

 

 

 

 

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