Saturday, November 15, 2008

commentary...nov 15.08

www.lemetropolecafe.com

 

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.

-END-

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.

U.S. automakers are warning of a near collapse in demand because would-be buyers are unable or unwilling to get loans.

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 Summit in New York.

"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…

-END  .

 

Speak to you on Monday.

 

 

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Thursday, November 13, 2008

Nov 13.08 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and Gentlemen:

 

Today was quite a day.  For one half day, the Dow was heading into an abyss, with the Dow faltering by 325 points.  Then the Plunge Protection team came in full force and drove the Dow up by 552 points.

 

The gold shares followed the Dow as is the custom these days.  Gold rose to finish at  735.00 after the cartel whacked gold early in the session all the way down to 700.00 even.

 

Everybody phoned and asked what happened?  I will tell you.

 

Today was the auction for 30 year treasury paper and their needs were huge in the mega billions range.  Our manipulators always force the Dow lower to engineer a safe haven market for the bonds. The auction was over at 1 o’clock and then they just reversed course.

 

They used the excuse that they expect wonders from the group of 20 meeting set for tomorrow.  They do not even have an agenda.  I have my doubts that anything will come out of the meeting on the weekend.

 

You will note that Paulson has changed course on his 700 billion rescue plan.  The reason of course is that the bank losses are far greater than 700 billion and his initial plan would not accomplish anything.

 

In order to save the system, the usa government must nationalize all the banks.  This will free up lending throughout the world.

This means guaranteeing all the losses and all the derivative losses.  My guess is that the usa banks have around 6 trilllion in losses and Europe around 3 trillion.  All bank debts must be guaranteed in order of lending to continue.

 

This is why we have debt deflation as banks are afraid of loaning to another because they know they have considerable  undisclosed losses.  And to boot, we have no idea as to severity of loan losses for each bank.

 

This is why the following passage is so important:

 


Boehner Demands Fed Identify Recipients of Loans

Nov. 12 (Bloomberg) -- House Republican leader John Boehner called for the Federal Reserve to disclose the recipients of almost $2 trillion of emergency loans from American taxpayers and the troubled assets the central bank is accepting as collateral.

Boehner, in a prepared statement, also asked the Federal Reserve to comply with a Freedom of Information Act request seeking details about the loans…

http://www.bloomberg.com/apps/news?pid=20601087&sid=axpH4Qil0NT8&refer=home end

 

Boehner has now been joined by 4 other Senators and House representatives calling for the Fed to disclose recipients of the 2 trillion in emergency loans.

Paulson states that it may cause a run on a bank if we know the true extent as to how much they borrowed from the Fed.

 

However, banks refuse to loan because they do not know what is behind each bank.  If the Fed disclosed who borrowed from the window, it would probably  free up loaning from banks who did not go to the window.

By not disclosing, the Fed has clogged the loaning process and they are not in a hurry to correct it.

The Bloomberg lawsuit will bring an end to this nonsense.

On top of this, the Bloomberg lawsuit( Freedom of Information)  also is trying to shed light on the 29 billion dollar loan to JPMorgan to purchase the assets of Bear Stearns.

Ted Butler has revealed that JPMorgan assumed a huge short position in silver.  We also know that JPMorgan has been shorting massive amts of commodities.  We also know that JPMorgan is using fed money to carry out their shorts and raping individual investors.

 

There is no doubt that the materials from the Fed will reveal the extent of the manipulation and fraud perpetrated upon the investment community.

In economic news the following hit the tape early in the day:

U.S. posts record $237.18 bln October deficit

WASHINGTON, Nov 13 (Reuters) - The United States kicked off its fiscal year with a record $237.18 billion budget deficit in October as financial bailout costs began to pile up, the U.S. Treasury said on Thursday.

The Treasury said October's record outlays of $402.02 billion included $115 billion in purchases of equity in major banks and $21.5 billion in purchases of mortgage-backed securities from Fannie Mae and Freddie Mac
.

The largest monthly deficit ever was more than double the $101.5 billion gap forecast by Wall Street economists in a Reuters poll and more than four times the October 2007 deficit of $56.84 billion.
end

Oct is the first month of the year and already we have a 238 billion dollar deficit.

They have used up only 115  billion dollars of the 700 billion TARP program so we still have  585 billion dollars to go on that facility..  The average deficit for the month is now around 80 billion dollars so for the next 11 months expect  80 x 11  or  880 billion dollars. 

You must add additional dollars for the AIG bailout and that will be about 100 billion dollars.

The new stimulus pkg will be in excess of 300 billion dollars.

The bailout of the auto industry will be about 50 billion.

 

Total the above:   238 billion +   880 +  100+  300+  50  equals   1.56 trillion dollars.

Then add the Iraq war and Afghanistan of about 400 billion dollars and you get your 2 trillion dollar deficit.

 

These two news stories are worth printing:

Saudi Arabia buys $3.5bn of gold in two weeks

http://news.goldseek.com/PeterCooper/1226586450.php

-END-

IN LATE, direct from Hong Kong:

Bill
It is 6:30 am hong kong time and we woke up to this story which was on the front page and I wanted to get it off to you ASAP.
Carolyn

Gold Rush

http://www.thestandard.com.hk/news_detail.asp?pp_cat=30&art_id=74335&sid=21457716&con_type=1&d_str=20081114&sear_year=2008

Benjamin Scent

Friday, November 14, 2008

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves." End.

South Africa just released their production levels  for Sept.  They are down 17% year over year. They blamed the energy company.  Here is the link;

GOLD SECTOR BLAMES ESKOM

SA gold output falls 17.7% yr/yr in Sept

Gold output in South Africa fell 17.7% in September, when compared to the same period last year, due to Eskom’s power supply problems.

Posted: Thursday , 13 Nov 2008  end

We are going to experience much volatility for the next few days.  Today Libor rose a bit instead of falling.

The new 3 month libor usa rate was 2.15% from 2.13%.

Also the 10 yr Fannie and Freddie Bond saw their yield rise by 10 basis points today.  It looks like foreigners do not trust the Americans as to their guarantee.  Here is the link:

12:53 Agency spreads widening
10-year agency spreads (Fannie) are out more than 12 bp to a new historic wide of 138.5 bp. Spreads have blown out dramatically this week after narrowing in late-October/early-November. The recent move seems to be a function of renewed disappointment surrounding Treasury Secretary Paulson's reluctance to provide an explicit government guarantee on the debt. end

Finally, we heard that the auction for the 30 year bonds went very poorly today.  The yield received was high (price low) and the foreign participation was only 18% . Remember the usa will need to raise 2 trillion dollars in the form of bonds.

This will be impossible and thus we will see a run on the dollar

 

Speak to you on Saturday morning

Harvey.

 

 

 

 

 

 

 

 

 

 

Wednesday, November 12, 2008

Nov 12.08 commentary.

www.lemetropolecafe.com

I hope everyone read Ted Butlers’ paper yesterday. We now have 100% proof of official sector involvement in the shorting of gold and silver metals. The Fed was instrumental in the merging of Bear Stearns with JPMorgan and in providing huge capital to JPM which enabled the firm to rape individuals.

These gangsters together with the criminal fed orchestrated the shorting of massive amounts of commodities which caused hedge funds to go belly up. This caused massive deleveraging and the resultant deflation is what we are witnessing today.

We sent the Ted Butler paper to Enforcement of the CFTC. It is strange that they have not contacted us on our findings.

They generally respond to us in less than 24 hours.

Gold was hit today because the stock market got killed. The Dow fell by 414 points so the cartel whacked gold down by 15.20 and a further 10 dollars in the access market. It is now trading at 713.00 and silver is now trading at 929.

The open interest on gold comex fell to 292000 an all time low. The silver OI fell again to 93300. In the silver pits, the open interest on the December contract remain high at 43000. This does not include option holders.

It remains to be seen how many will take delivery of silver.

Over at the option silver desk, a total of 29 contracts have been delivered or approx 145,000 oz of silver. We do not know how many option holders for the November contract are standing but judging from the Oct numbers expect another 6.5 to 7 million oz to be delivered. It looks like our cartel members are having a tough time finding silver metal.

Libor fell another .05% to 2.135% from 2.175% for the 3 month contract. Lease rates have come down a bit for gold (1.75% for the 3 month). Gold is still very scarce on the physical side.

This has to take the cake:

10:31 Treasury Secretary Paulson says looking at ways to use TARP to help raise private capital
The comments confirm an article in the WSJ as reported earlier.
* * * * *

10:36 Follow-up: Paulson looks at ways to expand the TARP program
Paulson says the Treasury is considering to broaden access to TARP for non-banks and is considering how to help the consumer finance sector. Paulson says banks and non-banks likely are likely to need more capital and that the Treasury is considering ways to potentially use the TARP funds to encourage private equity to return to those markets. The Treasury is also still considering ways to help reduce foreclosures. Paulson says that Treasury's initial idea to purchase the illiquid assets of firms doesn't seem like it would be that effective. Paulson's prepared comments say: "Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether targeted forms of asset purchase can play a useful role, relative to other potential uses of TARP resources, in helping to strengthen our financial system and support lending."
end

It is totally amazing how Paulson works. He lied to congress and then he changes everything to help his banker friends. I will let you read what Bill H. said when he heard that Paulson was changing TARP:

They Lied!

To all; what a surprise! The TARP plan that was passed a month back will be undergoing changes. Congress was told that a financial collapse and martial law were a "fait a compli" if they did not pass TARP immediately. We are now 5 weeks out and Treasury only has $60 Billion left of the $350 Billion initial tranche, they will now need to go back to Congress for the second tranche. The original Bill was voted down because there was no assurances of how the money would be spent, now that there is a Bill, Mr. Paulson is basically telling us "I needed a Bill to be passed to get access to the money, now that I have access I will do as I deem fit [as per the original 3 page Bill proposed] AND THE CRANKY TAXPAYERS CAN EAT CAKE!!!" [The original plan of purchasing mortgages at above market prices from banks was suicide anyway since the purchases may have been above market values but certainly below the "marked" prices. If the banking system had to mark their assets down to the TARP purchase levels they would be admitting bankruptcy in black and white.]

Pure and simple, this is CRONY CAPITALISM. The system is collapsing and the ship is going down, the crony rats led by Paulson, Bernanke and the rest are trying to suck as much blood money out before the ship submerges. The Fed is currently being sued because they refuse to disclose what type of "collateral" they have taken onto their balance sheet to double it in less than 2 months. The CFTC continues to spew the pabulum that "our markets are not manipulated". Treasury pulls its "bait and switch" robbery while telling us they need the second tranche and probably more while the SEC is nowhere to be seen. As a side note CNBC ran a short piece "U.S. may lose its AAA rating", all I can say is ...well DUH???, where did you think this was going? The Treasury is trying to guarantee everything financial on the planet while trying to borrow every last crumb of available capital, did anyone think this would lead to "financial nirvana"? No, this cake was mixed, shoved into the oven with a padlock and is now on fire, this has set the entire world ablaze.

Notice I said "with a padlock", I said this for a reason. They lied. The only way for a lie to continue is to keep it hidden and keep people happy enough so they don't ask questions. The lie must remain "padlocked" or the truth comes out. Sorry to spill the beans here but IT WAS ALL A BIG LIE. Think about it, real estate prices were false, stock prices turned out to be wrong since the earning forecasts turned out to be a joke, inflation and unemployment numbers are horse kaka, AAA in many cases meant the equivalent burnt toast, all of the bailout plans have turned out to be buckets of money for friends of the "insiders", the corporate pillars [AIG, Fannie Freddie, GM, WAMU, Lehman, etc. and hundreds more to come] turned out to be overleveraged, bloated, greedy dinosaurs that marched to their deaths with huge smiles on their faces all the way to their graves. The whole system was false, it was one big Ponzi scheme up and down, start to finish. The whole thing was done with credit and credit alone.

No I didn't forget! The biggest lie of all was the reason "they" had to lie about everything else. Yes the biggest lie in the history of history is THE DOLLAR. Let's look at this for a second, if it has turned out that everything else was bull---- and the prosperity was false, then doesn't it stand to reason that "backed by the full faith and credit" of the U.S. Government is meaningless? Back in 1971 the U.S. told the world that Gold no longer would back the Dollar but these "Dollars" would remain strong and hold value, how can that be have been true? "We will issue pieces of paper that have value and never mind the man behind the curtain", these are DOLLARS and you will accept them and ask no questions"! Well the grandest lie in history is about to be exposed but good.

The scary part is that the worlds' entire financial system is built on the biggest lie in history. Regards, Bill H. end

Expect an extremely volatile day tomorrow. Please remember that these clowns have linked a sinking Dow to a hit on gold and silver. If the Dow rises, then they will allow gold to rise.

These guys are total crooks and the entire investment firms will be sued and probably charged with corruption with this thing ends.


This just came in:

http://www.bloomberg.com/apps/news?pid=20601087&sid=axpH4Qil0NT8&refer=home

Boehner Demands Fed Identify Recipients of Loans (Update2)

By Laura Litvan

Nov. 12 (Bloomberg) -- House Republican leader John Boehner called for the Federal Reserve to disclose the recipients of almost $2 trillion of emergency loans from American taxpayers and the troubled assets the central bank is accepting as collateral.

Boehner, in a prepared statement, also asked the Federal Reserve to comply with a Freedom of Information Act request seeking details about the loans.

The Fed ``should comply with this Freedom of Information Act request, and in the interest of full and fair disclosure, they must begin providing lawmakers and taxpayers all information about how they are using federal tax dollars,'' Boehner said.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, there is little disclosure about how the programs are being implemented.

Bloomberg News requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

A spokesman for the Federal Reserve didn't immediately respond to requests for comment.

`Oversight, Transparency'

Boehner said he is increasingly concerned that the government's actions to add stability to financial markets is moving into areas that were not the stated intention when Congress approved $700 billion for a Treasury-administered program to bail out the financial sector that is being weighed down by the housing crisis.

``During the bipartisan negotiations between Congress and the administration, members of both parties made clear that Congress must have meaningful oversight over the use of taxpayer dollars,'' Boehner said. ``Transparency is even more important now, given that the program appears to have been implemented in some ways that were given little to no discussion as Congress was being urged to pass the rescue plan.''

Senator John Cornyn of Texas, a member of the Republican leadership, said the lack of disclosure ``should trouble taxpayers and policymakers alike.''

``There cannot be accountability in government and in our financial institutions without transparency,'' he said. ``Many of the financial problems we are facing today are the direct result of too much secrecy and too little accountability.''

Representative Scott Garrett, a New Jersey Republican who serves on both the Financial Services and Banking committees, said ``it's impossible to get to the bottom of where we are because we don't have transparency.''

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net;

Last Updated: November 12, 2008 16:09 EST


Speak to you late tomorrow

Harvey.

Tuesday, November 11, 2008

Ted Butlers paper

Archives

TED BUTLER'S ARCHIVES

       TED BUTLER COMMENTARY

November 10, 2008

THE REAL STORY

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

There is compelling new proof of a silver (and gold) price manipulation. The evidence connects the investment bank JP Morgan Chase, the dominant force in world commodity trading, the U.S. Commodity Futures Trading Commission (CFTC), the primary commodity regulator, and the U.S. Treasury Department, the arranger of every conceivable bailout.

This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month’s report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver. Never before had there been a such a large concentrated position in any market, including every manipulation case in the CFTC’s history. Concentration and manipulation go hand in hand. You can’t have one without the other.

The letter was sent to me by a reader who had the foresight to write to his Congressman. Of course, the CFTC denied that a silver manipulation existed, as they always have. This proves that the Commission responds much quicker to a member of Congress than it does to hundreds of ordinary citizens and investors. In the future, should you decide to write to the CFTC, be sure to do so through your elected representatives.

What was remarkable (and disturbing) about the letter was that it strongly confirms an analysis I presented in an article dated September 2, titled, "Fact Versus Speculation" http://www.investmentrarities.com/09-02-08.html. In that article, I speculated that the shocking increase in the silver short position by one or two U.S. banks was related to the takeover of Bear Stearns by JP Morgan in March.

Here’s a quote from my article, dated September 2.

"I am going to speculate based upon the known facts. Maybe I will be proven correct, maybe not. However, the nature of this speculation is so disturbing, that I hope I am wrong. But I need to state it because if I am close to the mark, the implications for the silver market are profound.

I think the data in the COT and the Bank Participation Reports indicate that the U.S. Government may have bailed out the biggest COMEX silver short by arranging for a U.S. bank to take over their position. This coincides with JP Morgan’s takeover of Bear Stearns. In fact, it would not surprise me if the bailout was JP Morgan taking over Bear Stearns‘ short silver position, at the government‘s request. While this silver bailout (if it happened) was no doubt undertaken with financial system stability in mind, it has disturbing implications of legality and equity"

This is the relevant quote from the CFTC’s Oct 8 letter.

"In effect the increase [in the short position] reflected a one time acquisition of positions that were acquired through a merger in the industry, and not new trading by a bank. Thus, the assertion that there was new activity undertaken by the banks that led to a fall in silver prices is not correct since the "new" activity reflected in the CFTC’s report was in essence positions that had already existed in the market prior to July 1st."

The CFTC clearly confirms, in effect, that the big silver short position was related to JP Morgan’s takeover of Bear Stearns, since no other merger provides a plausible explanation. However, the Commission is not speaking truthfully about an increase in the concentrated short position. The CFTC’s own data, in weekly Commitment of Traders Reports (COT), show a sizable increase in concentrated short positions of some 12,000 contracts (60 million ounces) from levels before July 1st to the August Bank Participation Report.

More importantly, the real issue is not about when the one or two U.S. banks increased their short position, but how large that short position grew in the August Bank Participation Report. The CFTC is deceiving a U.S. Congressman by attempting to reduce the argument to when the short position was increased, not the obscene and manipulative size of the position. This is deception through omission and misrepresentation. What difference does it make when the manipulative position was established? The issue is how can a short position of 25% of the world production of any commodity, held by one or two U.S. banks, not be manipulative?

Bear Stearns held the largest concentrated short position in COMEX silver (and gold) futures at the time of its forced merger with JP Morgan in March. That position was not discovered until the publishing of the August Bank Participation Report followed by the October 8 letter from the CFTC to Congressman Miller. Furthermore, Bear Stearns had no legitimate backing to the short silver position, either in actual metal or cash. Otherwise it could have been delivered against or bought back, just as would have happened were it a long position.

The price of silver at the time of Bear Stearns implosion was $20 to $21 an ounce. A free market covering of a concentrated short position of this size would have driven silver prices to the $50 or $100 level and would have exposed the long-term manipulation. Rather than let the free market deal with the required short covering of such an uneconomic and unbacked short position, government authorities arranged to have the short position transferred to JP Morgan. This was undertaken by the U.S. Treasury Department, along with taxpayer guarantees against loss to Morgan worth billions of dollars. This was done, no doubt, to save the financial system from imploding. This was also patently illegal, as it aided and abetted the silver manipulation.

I’m sure the motive behind the illegal transfer of the silver short position was the mistaken assumption by Treasury that an explosion in the price of silver (and gold) would threaten overall financial stability. Well guess what - they succeeded in crushing the price of gold and silver, but to no avail, as financial stability has been shattered.

JP Morgan was not just an accommodative good corporate citizen in the illegal transfer of the manipulative silver (and gold) COMEX short position. In addition to undisclosed government guarantees against loss, JP Morgan was given free reign to liquidate the COMEX short position at their discretion, knowing full-well the regulators would look the other way, no matter what dirty tricks were necessary to cause the price to collapse. Nor was JP Morgan a neutral agent in the silver price collapse. Data from the Office of the Comptroller of the Currency (OCC) http://www.occ.gov/deriv/deriv.htm indicates that JP Morgan held a much larger Over The Counter (OTC) derivatives position in silver and gold than was transferred to them from Bear Stearns.

My analysis shows that Morgan has made many billions of dollars, perhaps tens of billions, from their downward engineering of silver and gold prices from their combined COMEX and OTC short positions. They have used that engineered price decline to buy back as many short positions as possible. If investors are wondering what caused the destruction of billions of dollars in gold and silver values, metal and share price alike, look no further than JP Morgan, and the government officials who enabled them.

There can be no question that the CFTC is complicit in all these illegal activities. Same with the CME Group, owner of the NYMEX/COMEX. It is not possible that they are not privy and an active party to this successful downward manipulation. To think that officials at the CFTC, from the top of the agency, to staffers and even the Inspector General, have taken oaths of office to uphold commodity law and then have allowed that law to be repeatedly violated is beyond repugnant. That they have knowingly participated in an organized cover-up of this manipulation and have taken to lying to a Congressman calls for criminal prosecution.

As bad as this is, it gets worse. The downward manipulation of the price of silver, initiated by the U.S. Treasury, undertaken by JP Morgan Chase and sanctioned and aided by the CFTC and the CME Group has proven so successful in destroying investment values that the low price of silver is now threatening to destroy tens of thousands of jobs of those who mine silver for a living, here in the US and throughout the world. Who do these people think they are that they can allow the artificial paper price to alter real supply/demand fundamentals? Those in charge of enforcing the law have enriched a few sleazy bankers who trade toxic paper derivatives at the expense of tens of thousands of innocent investors and now ordinary workers. This should make your blood boil.

While investors in silver will soon see a strong snap-back in silver prices, it is too late for those workers who have already lost their jobs due to the artificially depressed price of silver. At risk remain those jobs that will be lost if silver doesn’t rebound quickly. Silver mining is tough and dangerous for rank and file workers, much tougher than pushing paper derivatives. The fact that those who regulate our markets don’t see that distinction needs to be rectified.

One thing that I have never understood is why silver mine management has not taken a more active roll in pressing the regulators to more fully address the increasing evidence of a silver price manipulation. I suppose it has to do with fears of offending those Wall Street firms which may provide future financing and the false pride that goes with having denied in the past that a manipulation could exist. But surely those managers have now seen what a depressed price of silver has done to their stock prices and the fate of their companies. To still do and say nothing leaves their companies in grave danger.

I think it is time for the employees themselves, and the unions that represent them, to take some initiative to help themselves. Losing jobs due to crooked behavior by big banks and their regulators should be a lightening-rod issue for employees, unions and Congressional leadership in the districts affected. I’m certain that legal action against the parties responsible for the price manipulation would result in substantial financial damages awarded to rank and file workers hurt by the manipulation. To that end, I offer, as much as is reasonably possible time-wise and free of charge, any consultative advice to any union or Congressional representative interested in bringing action against those responsible for the manipulation.

For investors, conditions never looked better for the long-term merits of silver, precisely because of the recent crooked take down of the price. You should do two things. Buy as much silver as you can and write your elected officials to end the silver manipulation scam.

 

 

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       TED BUTLER COMMENTARY

November 10, 2008

THE REAL STORY

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

There is compelling new proof of a silver (and gold) price manipulation. The evidence connects the investment bank JP Morgan Chase, the dominant force in world commodity trading, the U.S. Commodity Futures Trading Commission (CFTC), the primary commodity regulator, and the U.S. Treasury Department, the arranger of every conceivable bailout.

This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month’s report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver. Never before had there been a such a large concentrated position in any market, including every manipulation case in the CFTC’s history. Concentration and manipulation go hand in hand. You can’t have one without the other.

The letter was sent to me by a reader who had the foresight to write to his Congressman. Of course, the CFTC denied that a silver manipulation existed, as they always have. This proves that the Commission responds much quicker to a member of Congress than it does to hundreds of ordinary citizens and investors. In the future, should you decide to write to the CFTC, be sure to do so through your elected representatives.

What was remarkable (and disturbing) about the letter was that it strongly confirms an analysis I presented in an article dated September 2, titled, "Fact Versus Speculation" http://www.investmentrarities.com/09-02-08.html. In that article, I speculated that the shocking increase in the silver short position by one or two U.S. banks was related to the takeover of Bear Stearns by JP Morgan in March.

Here’s a quote from my article, dated September 2.

"I am going to speculate based upon the known facts. Maybe I will be proven correct, maybe not. However, the nature of this speculation is so disturbing, that I hope I am wrong. But I need to state it because if I am close to the mark, the implications for the silver market are profound.

I think the data in the COT and the Bank Participation Reports indicate that the U.S. Government may have bailed out the biggest COMEX silver short by arranging for a U.S. bank to take over their position. This coincides with JP Morgan’s takeover of Bear Stearns. In fact, it would not surprise me if the bailout was JP Morgan taking over Bear Stearns‘ short silver position, at the government‘s request. While this silver bailout (if it happened) was no doubt undertaken with financial system stability in mind, it has disturbing implications of legality and equity"

This is the relevant quote from the CFTC’s Oct 8 letter.

"In effect the increase [in the short position] reflected a one time acquisition of positions that were acquired through a merger in the industry, and not new trading by a bank. Thus, the assertion that there was new activity undertaken by the banks that led to a fall in silver prices is not correct since the "new" activity reflected in the CFTC’s report was in essence positions that had already existed in the market prior to July 1st."

The CFTC clearly confirms, in effect, that the big silver short position was related to JP Morgan’s takeover of Bear Stearns, since no other merger provides a plausible explanation. However, the Commission is not speaking truthfully about an increase in the concentrated short position. The CFTC’s own data, in weekly Commitment of Traders Reports (COT), show a sizable increase in concentrated short positions of some 12,000 contracts (60 million ounces) from levels before July 1st to the August Bank Participation Report.

More importantly, the real issue is not about when the one or two U.S. banks increased their short position, but how large that short position grew in the August Bank Participation Report. The CFTC is deceiving a U.S. Congressman by attempting to reduce the argument to when the short position was increased, not the obscene and manipulative size of the position. This is deception through omission and misrepresentation. What difference does it make when the manipulative position was established? The issue is how can a short position of 25% of the world production of any commodity, held by one or two U.S. banks, not be manipulative?

Bear Stearns held the largest concentrated short position in COMEX silver (and gold) futures at the time of its forced merger with JP Morgan in March. That position was not discovered until the publishing of the August Bank Participation Report followed by the October 8 letter from the CFTC to Congressman Miller. Furthermore, Bear Stearns had no legitimate backing to the short silver position, either in actual metal or cash. Otherwise it could have been delivered against or bought back, just as would have happened were it a long position.

The price of silver at the time of Bear Stearns implosion was $20 to $21 an ounce. A free market covering of a concentrated short position of this size would have driven silver prices to the $50 or $100 level and would have exposed the long-term manipulation. Rather than let the free market deal with the required short covering of such an uneconomic and unbacked short position, government authorities arranged to have the short position transferred to JP Morgan. This was undertaken by the U.S. Treasury Department, along with taxpayer guarantees against loss to Morgan worth billions of dollars. This was done, no doubt, to save the financial system from imploding. This was also patently illegal, as it aided and abetted the silver manipulation.

I’m sure the motive behind the illegal transfer of the silver short position was the mistaken assumption by Treasury that an explosion in the price of silver (and gold) would threaten overall financial stability. Well guess what - they succeeded in crushing the price of gold and silver, but to no avail, as financial stability has been shattered.

JP Morgan was not just an accommodative good corporate citizen in the illegal transfer of the manipulative silver (and gold) COMEX short position. In addition to undisclosed government guarantees against loss, JP Morgan was given free reign to liquidate the COMEX short position at their discretion, knowing full-well the regulators would look the other way, no matter what dirty tricks were necessary to cause the price to collapse. Nor was JP Morgan a neutral agent in the silver price collapse. Data from the Office of the Comptroller of the Currency (OCC) http://www.occ.gov/deriv/deriv.htm indicates that JP Morgan held a much larger Over The Counter (OTC) derivatives position in silver and gold than was transferred to them from Bear Stearns.

My analysis shows that Morgan has made many billions of dollars, perhaps tens of billions, from their downward engineering of silver and gold prices from their combined COMEX and OTC short positions. They have used that engineered price decline to buy back as many short positions as possible. If investors are wondering what caused the destruction of billions of dollars in gold and silver values, metal and share price alike, look no further than JP Morgan, and the government officials who enabled them.

There can be no question that the CFTC is complicit in all these illegal activities. Same with the CME Group, owner of the NYMEX/COMEX. It is not possible that they are not privy and an active party to this successful downward manipulation. To think that officials at the CFTC, from the top of the agency, to staffers and even the Inspector General, have taken oaths of office to uphold commodity law and then have allowed that law to be repeatedly violated is beyond repugnant. That they have knowingly participated in an organized cover-up of this manipulation and have taken to lying to a Congressman calls for criminal prosecution.

As bad as this is, it gets worse. The downward manipulation of the price of silver, initiated by the U.S. Treasury, undertaken by JP Morgan Chase and sanctioned and aided by the CFTC and the CME Group has proven so successful in destroying investment values that the low price of silver is now threatening to destroy tens of thousands of jobs of those who mine silver for a living, here in the US and throughout the world. Who do these people think they are that they can allow the artificial paper price to alter real supply/demand fundamentals? Those in charge of enforcing the law have enriched a few sleazy bankers who trade toxic paper derivatives at the expense of tens of thousands of innocent investors and now ordinary workers. This should make your blood boil.

While investors in silver will soon see a strong snap-back in silver prices, it is too late for those workers who have already lost their jobs due to the artificially depressed price of silver. At risk remain those jobs that will be lost if silver doesn’t rebound quickly. Silver mining is tough and dangerous for rank and file workers, much tougher than pushing paper derivatives. The fact that those who regulate our markets don’t see that distinction needs to be rectified.

One thing that I have never understood is why silver mine management has not taken a more active roll in pressing the regulators to more fully address the increasing evidence of a silver price manipulation. I suppose it has to do with fears of offending those Wall Street firms which may provide future financing and the false pride that goes with having denied in the past that a manipulation could exist. But surely those managers have now seen what a depressed price of silver has done to their stock prices and the fate of their companies. To still do and say nothing leaves their companies in grave danger.

I think it is time for the employees themselves, and the unions that represent them, to take some initiative to help themselves. Losing jobs due to crooked behavior by big banks and their regulators should be a lightening-rod issue for employees, unions and Congressional leadership in the districts affected. I’m certain that legal action against the parties responsible for the price manipulation would result in substantial financial damages awarded to rank and file workers hurt by the manipulation. To that end, I offer, as much as is reasonably possible time-wise and free of charge, any consultative advice to any union or Congressional representative interested in bringing action against those responsible for the manipulation.

For investors, conditions never looked better for the long-term merits of silver, precisely because of the recent crooked take down of the price. You should do two things. Buy as much silver as you can and write your elected officials to end the silver manipulation scam.

 

 

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All Rights Reserved © 2002 Investment Raritie

 

Nov 11.08 commentary.

www.lemetropolecafe.com

 

I will forward to you Ted Butlers paper at the end of my commentary.

 

First of all, it is clear that Bear Stearns was short massive amounts of silver.  This was conveyed to a member.  The member received a letter from a Congressman who had called the CFTC.   The  CFTC official  stated that their was no increase in silver positions only the merger of two banks. The only merger a few months earlier was the marriage of JPMorgan with Bear Stearns.

 

The CFTC lied about no new sales from JPMorgan.  They added 20,000 contracts of shorts to go along with their short position.

That is why in the participation report they were short 25% of world production on silver and 10% on gold.

 

Regardless of the situation, the CFTC now categorically state that one bank is massive short 25% of worldly silver production.

And to boot:   JPMorgan received 29 billion in taxpayer money to offset any losses that they may endure on the derivatives put on by Bear Stearns.  The man who oversaw the bailout of Bear Stearns was none other than Timothy Geithner, the man touted to be the next Treasury-Secretary.

 

I urge you all to read carefully Butlers paper.

 

Today, he heard from the ECB and they decided to buy gold instead of selling any.  The only gold going into the market is that from the usa.

 

In economic news, we heard from Fannie Mae.  They have now stated that they may need greater than 100 billion dollars to fund them temporarily.  Here is the link;

 

This is beyond farce…

01:28 FNM Fannie Mae may need more than $100B Treasury has agreed to invest in it (0.72)
In a 10-Q filed concurrently with reporting results pre-open yesterday, the company says the amount it can draw under the credit facility and senior preferred stock purchase agreement may not be sufficient to allow it either to roll over existing debt when it needs to, or to continue to provide liquidity to the mortgage market at appropriate levels. FNM says it doubts it will be able to execute its current liquidity contingency plan, which relies on its cash and other investments, as well as its unencumbered mortgage portfolio. The company has $68.4B in short-term debt maturing by 30-Nov, and another $70.2B maturing by 31-Dec..   end

The stock market fell badly today.  The Dow closed down by 177 points and the Nasdaq fell by 37 points.

 

The banking shares also did not fare too good today.  Most were down.  Citibank broke 11 dollars and closed at 10.70.  The SKF banking index closed at 156.00 up from 148 yesterday.  General Motors broke 3.00 dollars and finished at 2 plus.

 

Libor ticked down a bit today with the 3 month libor at 2.23 from 2.27.  However banks still are afraid to loan to each other as the credit lanes are still clogged.

Earnings from everybody are down bigtime.  Nortel reported yesterday a big loss of 3.40 billion dollars.  Their stock is now trading just above 1.00. 

 

I will keep this short so you can read the Butler paper.

So first me and then Butler.

 

 

 

 


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