Good morning Ladies and Gentlemen:
Yesterday, we learned that the Fed balance sheet exploded northbound to reach 2.25 trillion dollars. And the Fed has nothing but toxic assets to its credit. It increased by 241 billion dollars in one week.
The open interest on gold comex rose to 293000 still historically low. Silver went the other way falling by 722 contracts to go down to 93000.
Libor rates went up on the 3 month level to 2.25%. It was the second day in a row that the rates went up. It looks like the arteries on the loaning process are clogging up again. There is no doubt that Paulson`s about change in the use of TARP funds caused the rate to rise again.
We also learned that it would be highly doubtful if anything meaningful would come out of the G20 meetings ending today.
The banks still have toxic assets on the balance sheet and thus we are witnessing massive deflationary debt spirals as banks just refuse to lend to one another. However central banks around the world print massive amts of money to these banks. The money just covers gapping holes in their balance sheets.
In economic news, retail sales faltered badly last month.
US retail sales fall by record 2.8 pct in October
WASHINGTON, Nov 14 (Reuters) - Sales at U.S. retailers suffered a record decline in October, government data on Friday showed, as shoppers took fright over falling home prices and a widening credit crunch pushing the economy toward recession.
Sales slumped 2.8 percent last month to a seasonally adjusted $363.7 billion, the largest decline since the series began in 1992, the Commerce Department said. This compared with a revised 1.3 percent fall in September, previously reported as a 1.2 percent decrease.
Economists polled by Reuters forecast a 2.0 percent fall in October retail sales as an escalating financial crisis forced consumers into a defensive crouch. Sales excluding autos also notched a record 2.2 percent drop versus a forecast for a 1.2 percent decline.
However, this news was earth shattering:
Freddie Mac Posts Record Loss, Asks for $13.8 Billion
Nov. 14 (Bloomberg) -- Freddie Mac, seized by the government two months ago, asked the Treasury for $13.8 billion after a record quarterly loss caused its net worth to fall below zero.
The third-quarter net loss widened to $25.3 billion, or $19.44 a share, after writing down tax assets and providing for bad mortgages and securities, McLean, Virginia-based Freddie said in a regulatory filing today. The losses forced Freddie to request government funds and the company said it expects to receive the money by Nov. 29… end
You must read this:
US households teetering on $14 trillion debt pile
WASHINGTON, Nov 14 (Reuters) - Free-spending U.S. consumers who bought everything from homes to groceries on borrowed money are running out of credit, and paying the bills will cost the world's biggest economy and its trading partners dearly.
The housing bust has exposed just how much Americans were relying on rising home values to pad spending and replace traditional savings. During the five-year real estate boom that ended in late 2006, household wealth expanded, retail sales grew faster than income, and savings dwindled.
But as banks restrict access to mortgages, auto loans and credit cards, consumers are altering their spending behavior so rapidly that companies cannot adjust fast enough.
Banks that eagerly handed out credit cards during the good times are reducing credit limits and setting aside billions of dollars to cover losses as customers miss payments.
Stores are bracing for the worst holiday season sales performance in at least 18 years.
Meredith Whitney, the Oppenheimer & Co analyst who was among the first to warn that banks needed to raise huge amounts of money to offset mortgage losses, worries that cuts to credit limits will constrain already cautious consumers, reinforcing a vicious cycle of bank losses and economic decline.
"If you lose your job, if you get sick, if any unforeseen event happens, that's your slush fund," Whitney said at the Reuters Global Finance
"If all of a sudden you lose your slush fund (or it) gets cut dramatically -- and it will -- everything about you changes, and you become more guarded as a consumer. You could be absolutely fine in every other area of your life, but getting your credit line cut changes your whole outlook."
Over the past decade, American households have piled on $8 trillion in debt, an increase of 137 percent, twice the gain seen in the size of the economy. At $14 trillion, the debt load is now roughly equal to the entire economy's annual output…
Speak to you on Monday.