Good morning Ladies and gentlemen
Yesterday was quite a day. Gold closed during regular hours at 791 up 41 dollars, and it continued to rise in the thinly traded access market to finish the day at 801.00. Silver rose by 49 cents to 9.49.
The open interest on gold comex fell big time to 285000 despite gold`s rise on Thursday. Silver``s Oi remain flat at 92000.
We also saw a very small drop in the silver December to March contracts. It is still looking good for a default there.
The news of a fall in comex OI and a small roll from December to Feb has caused gold to go into semi –backwardation.
Another way of stating the same thing is that the lease rate on silver is higher than the libor rate that one could get from selling the metal. Yesterday the lease rates for gold were recorded at 2.13% and the libor was at 2.15%. Probably lease rates are much higher as you cannot really trust the data. However, the values on the future trading on gold did confirm that prices on gold in the future were similar to the spot price.
Generally this indicates a scarcity of the metal. However when you speak of gold which is the ultimate money, it is impossible to have gold or real money, higher now than in the future. Here is the relative important passage:
From Lance Lewis this am re gold backwardization:
8:50 EST: Gold Officially Goes Into Backwardation
This morning, gold officially went into backwardation for the first time since the announcement of the Washington Agreement in 1999, which sent gold shorts scrambling to find physical metal after the world's major central banks agreed to limit sales of gold going forward and ended the one-way trade to the downside in gold that had been in place in the late 1990s.
We know gold is now in backwardation because the gold forward offerred rate (GOFO) has now gone negative. The 3M GOFO has fallen 12 bps to -0.07%, and the 1M GOFO has fallen 20 bps to -0.1167%.
Unlike other commodities, gold very rarely goes into backwardation, and only when 1) the market fears a collapse in the currency, and/or 2) the market is worried about counterparties making good on their promise to deliver gold (which was briefly the case in 1999, when the
Translation: Gold is about to meltup, and the dollar is about to have an accident.
Buckle up, gold bulls. Gold is set to blow its top soon in my humble opinion.
Yesterday, we heard that the
Mint suspends orders amid rush to buy bullion
FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.
With retail and wholesale clients around the world stocking up on the precious metal, the
As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.
Now for economic news:
The Dow which retreated for most of the day, rose by 485 points in a Hail Mary play. Wall Street announced that Timothy Geithner would become the new Sec. Treasurer of the
To tell you the truth, if they announced Donald Duck to be the new Sec. Treasurer or even Al Capone, the market would have responded in identical fashion. Yesterday was options expiry and generally you get big moves like that on this day.
Prior to the goosing of the market we saw major hits in the financial sector. The big three pillars in the financial world are collapsing. JPMorgan saw its price fall to a low of 19.69 only to recover in the last hour to 22.70 It is down from 38.00 in July. Citibank saw its share price plummet to 3.05. It still closed down by 94 cents to 3.70. The Bank of
The Bank of
With foreclosures popping faster than newly roasted popcorn, it bewilders me why they merged. They have a fiduciary duty to the shareholders, not the Fed.
Libor rates remained flat on Friday at 2.16% in the 3month
We are hearing that 100,000 factories in
Goldman Sachs is in the news again. These two stories are newsworthy:
Goldman Slashes U.S. Growth Forecasts, Says Recession Deepens
Nov. 21 (Bloomberg) -- Goldman Sachs Group Inc. increased its recession estimates, saying gross domestic product is declining at a 5 percent annual rate in the current quarter and will drop 3 percent and 1 percent in the next two quarters.
Unemployment will reach 9 percent by the fourth quarter of 2009, Goldman economists led by Jan Hatzius wrote in a research note today.
Loan investors accuse Goldman Sachs of naked shorting
Submitted by cpowell on 09:27PM ET Thursday, November 20, 2008. Section: Daily Dispatches
By Pierre Paulden and Caroline Salas
Monday, November 17, 2008
NEW YORK -- Investors in the $591 billion high-yield, high-risk loan market are accusing Goldman Sachs Group Inc. of naked short selling to profit from record price declines.
At least two fund managers complained verbally to officials of the Loan Syndications and Trading Association, saying they believe Goldman helped drive down prices by using the technique, according to people with knowledge of the objections. New York-based Goldman is acting against its clients by trying to profit at their expense, the investors said.
A $171 billion drop in the value of the loans in the past year is pitting banks against investing clients on assets once considered so safe they typically traded at par. The drop exposed flaws in an unregulated market where trades can take from several days to months to settle and banks may have information unavailable to investors. In a naked-short transaction, a firm would sell debt it didn't already own, betting the price will fall before it purchases the loan and delivers it to the buyer.
I am going to highlight what one member Bill H. had to say about the banking crisis. I could not have said it better:
To all; WOW is my description of the last 3 days. I left for two days and got back to very high winds that took cable and internet down for about 24 hours. I got up this morning and went to a satellite internet location, pulled up some quotes and PRESTO, a new world? In just 3 days the banks and previously investment banks have completely imploded!
I took a look at Citibank and and refreshed the quote twice thinking it was wrong [$3.83]. This gives them a $20 Billion market capitalization! This is PEANUTS, last year Warren Buffet had a net worth of $50 Billion. Citi has a balance sheet of something close to $2 Trillion or roughly 100 times what the market says they are worth. While perusing the other financials such as GE, Bank of America, Goldman and Morgan Stanley, and even the Treasury Bank [JP Morgan], I got the feeling that game over has finally arrived. The reflation that I've have talked about for quite a while now must begin or there will be nothing left to reflate. If we were to have similar action again next week then market closures will surely domino around the world.
Think about what has happened in just 2 weeks time, most financial stocks have shed 50% value or more, this has been a crippling event. There are no options left, Every kitchen sink has been thrown and every rabbit pulled. Now surely the Treasury and Fed will come under the global financial microscope. This cannot go on without serious money asking serious questions about the solvency of the
All the spin, all the PPT support, all the Gold suppression, all the borrowed and printed money, all of the accumulated BULLCRAP for years and years are now coming home to roost. Low inflation, low unemployment, low interest rates, strong Dollar policy, fiscal stimulus, monetary stimulus, Warren Buffet is buying, Sovereign cash infusions, the Fed's balance sheet, Treasury's TARP, etc. etc., nothing has worked. It couldn't work. No matter how hard they tried, Humpty Dumpty couldn't be prevented from falling and cracking his head wide open. He accumulated ar too much baggage. No Ponzi scheme can ever go on forever and forever has arrived.
At this point YOU MUST OWN GOLD. The sentiment has changed metal has disappeared across the globe and a force majeur looks to be a lock. The day of financial reckoning that had to come because of pure mathematics has arrived and all that remains is the final act of a failed 30+ year Ponzi scheme. The last thing to fail is the money and the final act always involves the money. In fact come to think about it, the Dollar and Gold are truly the only two assets left still standing. Handicapping this fight from here is so easy as the Dollar has "ball and chain" encumbrances all over it while Gold has no liabilities whatsoever. "The last man standing" will be the foundation of worlds' banking system for many years to come. Choose your fighter wisely as backing the loser in this fight will certainly be financial death. Regards, Bill H. end
Argentinians are getting ready to riot on the streets as passage of the confiscation of private pension plans passed the house yesterday:
Argentine Stocks Threatened as Biggest Holders Seized
Nov. 21 (Bloomberg) --
The Argentine Senate last night approved President Cristina Fernandez de Kirchner’s plan to nationalize about $24 billion in private pensions, a move opposition parties called a cash grab and the government said is a way to protect retirees from the worst financial crisis since the Great Depression.
For the Buenos Aires Stock Exchange, the government’s decision underscores the growing irrelevance of a market whose listed stocks dropped to 82 from a record 669 four decades ago and is discouraging outside investment because of capital restrictions…
The key event for me is seeing the complete collapse of JPMorgan stock in a matter of a few weeks.
The question of course is what has caused this firm with direct ties to the fed to implode so quickly.
JPMorgan has the dominate share of the trillion dollars of interest rate swaps, gold and silver leases and credit default swaps. JPMorgan is the garbage can of the derivatives consuming everyone to satisfy their voracious appetite. However at its outer end comes flatulence and this is becoming glaring for everyone to see. There is now no doubt that the Citibank and General Motors meltdown has caused serious damage to its balance sheet and off balance sheet. This is probably why we have not seen these bandits whack gold for a week, they must address their huge off balance deficits. The credit default swaps must total in the megatrillions.
There are also rumours that the PPT have losses of .5 trillion - .75 trillion dollars. They are now in a mad rush to cover these losses.
In a nutshell, the world is imploding faster than a speeding bullet. Either we inflate or we will suffer a massive depression. The debt default spiral is gaining momentum, faster than the momentum to print currency to stave off depression.
I guess we have to pick our poison.
Speak to you next week